[OPEN-ILS-GENERAL] Details of fiscal sponsorship agreement for Evergreen & Conservancy

[Mike Rylander]

On Wed, Nov 10, 2010 at 11:51 AM, Lori Bowen Ayre <lori.ayre at galecia.com> wrote:
> I am in favor of moving forward with the Software Freedom Conservancy
> membership to protect our Evergreen assets under their umbrella 501(c)3.  I
> suggest we appoint an interim contact person (or two).
> Over all of our discussions in the Governance Committee, I have seen nothing
> but benefit from this approach.  If there are any drawbacks to using the
> SFC,  this needs to be brought to our attention now.
> I would love to hear from others to ensure we have community buy-in. Just a
> "hear hear" or a ++ would be nice so we know people are aware of the plan.
> If there are no objections (and even if no one responds affirmatively)  I
> think we should feel free to move forward with membership in the SFC at the
> next opportunity.

Speaking only as a community member and individual Evergreen
developer, I support moving forward with the SFC with all due speed.

--miker

> Lori Ayre
>
> On Wed, Nov 10, 2010 at 8:24 AM, Dan Scott <dan at coffeecode.net> wrote:
>>
>> The Conservancy has added one new member organization since we
>> received the draft agreement, and it's not us!
>> (http://sfconservancy.org/news/2010/nov/10/pypy-joins/).
>>
>> Based on the lack of comments, I'm wondering if anyone has looked at
>> the Software Freedom Conservancy draft agreement that I posted to the
>> open-ils-general list on October 21? At the time, I had suggested that
>> we try to collect a list of questions together by October 28th, a date
>> that has come and gone.
>>
>> On the governance list, we've been doing some soul-searching about
>> whether to establish a small, focused foundation or a very broad
>> foundation. In principle, I'm not opposed to a foundation that
>> includes a users' group, various committees, membership fees, etc, but
>> I worry that getting it right will take a long time - and when dealing
>> with a scope that broad, I would much rather get things right and take
>> a long time, than get things done fast but fatally flawed at the
>> outset.
>>
>> However, we don't have to exist in the mean time without the benefit
>> of being part of a 501(c)(3); based on the draft agreement, the
>> relationship with the Conservancy can be as lightweight as a temporary
>> home that we can leave in 60 days if another 501(c)(3) can receive the
>> assets. I've checked with Bradley Kuhn to ensure that would be okay,
>> and he said "I really don't get why people don't just use as that:
>> Keep debating the other issues while having a Conservancy membership,
>> and even move in forming the new org in parallel."
>>
>> So, based on that, would it be possible to move forward on the
>> governance front in two tracks?
>>
>> 1) Short-term (e.g. next month?): establish an agreement with the
>> Conservancy that enables us to take advantage of the benefits of being
>> part of a 501(c)(3) and provides a neutral place for holding the
>> Evergreen collateral (trademarks, logos, domain names...). We would
>> work directly with the Conservancy to establish the ground rules for
>> our agreement (as Bradley offered when he sent us the sponsorship
>> agreement - and which we have not as of yet used).  Some projects
>> simply nominate one person to act as the point of contact with the
>> Conservancy; it could be as simple as that. If we get set up before
>> the end of year, then Americans would be able to make tax-free
>> donations to Evergreen as a Christmas present!
>>
>> 2) Longer-term (e.g. in time for the next Evergreen Conference):
>> establish the complete set of rules of governance, including standing
>> committees, membership rules & fees, meeting rules, compensation,
>> possibly setting up a standalone 501(c)(3)?
>>
>> Dan
>>
>> On 21 October 2010 17:00, Dan Scott <dan at coffeecode.net> wrote:
>> > Please find below the explanation of and attached PDF & Tex documents
>> > concerning the Evergreen / Software Freedom Conservancy agreement that
>> > we will need to sign in order to move forward with establishing the
>> > Evergreen Software Foundation as a member project of the Software
>> > Freedom Conservancy.
>> >
>> > In recognition of Bradley's time, I recommend that we discuss the
>> > agreement on the list, and compile a list of questions that come up
>> > during the course of the discussion. Perhaps we can try to pull together
>> > any major questions by the end of next week (Friday, October 28th)?
>> >
>> > ----- Forwarded message from "Bradley M. Kuhn" <bkuhn at sfconservancy.org>
>> > -----
>> >
>> > Date: Thu, 21 Oct 2010 08:32:17 -0700
>> > From: "Bradley M. Kuhn" <bkuhn at sfconservancy.org>
>> > To: Dan Scott <dan at coffeecode.net>
>> > Subject: Details of fiscal sponsorship agreement for Evergreen &
>> > Conservancy
>> > User-Agent: Gnus/5.13 (Gnus v5.13) Emacs/23.1 (gnu/linux)
>> >
>> > I'm glad that you are considering joining the Conservancy and I am
>> > pleased to extend an invitation to Evergreen.  Attached is a draft of
>> > the fiscal sponsorship agreement that representatives of Evergreen will
>> > need to sign in order to join the Conservancy.  (Both LaTeX source and
>> > PDF are included.) Please read this agreement and share and discuss it
>> > with all of the key people involved in Evergreen.
>> >
>> > As mentioned in my previous email, generally, we leave it for the
>> > Evergreen community to decide how you'd like to discuss the document, as
>> > signing such an agreement is a big step for the project and you should
>> > consider the agreement in whatever forum is most appropriate for your
>> > community.  I'm happy to answer questions from the community as you
>> > consider the document, and you should feel comfortable cc'ing me on any
>> > threads you think I should comment on.  (However, before doing so,
>> > please make sure I can post back to any lists included in the Cc without
>> > being formally subscribed.)  Meanwhile, you are also welcome to batch
>> > questions into one group as well and email them to me directly, and just
>> > repost my responses.  Basically, whatever works well for you works fine
>> > for me.
>> >
>> > I strongly suggest that you share the agreement draft as wide as
>> > possible throughout the community, and make sure anyone who has ever
>> > been a serious contributor to the project in the past or currently is
>> > made aware of your plans to join Conservancy.  We very much rely on you
>> > to make sure that your entire community is in agreement with joining
>> > Conservancy, so please make efforts to be sure everyone has had their
>> > say.
>> >
>> >
>> > Regarding the agreement, some of the more complex provisions of the
>> > agreement reflect the special considerations necessary to support the
>> > Conservancy's tax exempt status.  However, on the whole, I believe that
>> > this agreement fairly and clearly sets out an advantageous relationship
>> > for the Conservancy's member projects.  As some of the paragraphs
>> > specifically indicate, the agreement can be tailored to reflect
>> > Evergreen's particular needs.  To help you in your review, below is a
>> > section-by-section walk through, giving an explanation of the
>> > significance of each provision.  If there are any sections that seem
>> > confusing or that you feel should be changed to reflect Evergreen's
>> > needs, please let me know and we can discuss them.
>> >
>> >
>> > Introductory Paragraph
>> >
>> > This paragraph identifies the parties to the contract.  It's more
>> > thoroughly explained in paragraph 6, but the point of this paragraph is
>> > to name the people who sign the agreement.
>> >
>> > Recitals (the "WHEREAS" section)
>> >
>> > These paragraphs set forth the basic understandings of the parties.
>> > Similar to the "preamble" found in the GPL and other Free Software
>> > licenses, these are *not* operative provisions of the document.
>> > Instead, they give the context of the agreement.
>> >
>> > In this specific case, the key points of understanding are that the
>> > purpose of Evergreen is to forward Free, Libre and Open Source Software
>> > (FLOSS) and that both the Conservancy and Evergreen want Evergreen to
>> > join the Conservancy.  The Conservancy's mission (and charitable
>> > purpose) is to advance only FLOSS development, documentation, and usage,
>> > so it is important that this context be stated clearly.
>> >
>> > Paragraph 1 - Term of Agreement
>> >
>> > This paragraph says that Evergreen is part of the Conservancy as of the
>> > signing date of the agreement.  It cross references the terminations
>> > provisions in paragraph 7 (which is explained in greater detail below).
>> > Note, though, that Evergreen can choose to leave the Conservancy at any
>> > time.
>> >
>> > Paragraph 2 - Project Management and Activities
>> >
>> > a) Both parties agree that Evergreen will be FLOSS.  As noted above,
>> >   this is the fundamental goal and charitable purpose of the
>> >   Conservancy.  The Conservancy will not and cannot sponsor proprietary
>> >   projects.
>> >
>> > b) This clearly sets out the limits of the Conservancy's management over
>> >   Evergreen.  Due to requirements connected to Conservancy's tax exempt
>> >   status, the ultimate legal control of the projects must be with the
>> >   Conservancy.  From the IRS's perspective, the projects are part of
>> >   the Conservancy, and the purpose of its tax exemption is to forward
>> >   the FLOSS mission of those projects.
>> >
>> >   However, the Conservancy does not want to interfere with the
>> >   successful software development, documentation and advocacy work
>> >   already underway in member projects; such activity should continue
>> >   after the agreement without interruption or interference.  This
>> >   paragraph delegates some of Conservancy's legal authority back to the
>> >   developers, so that Evergreen can run itself in day-to-day matters.
>> >
>> >   The only limitations that we must place are to prevent Evergreen from
>> >   producing non-free software (as per Conservancy's charitable purpose)
>> >   and from spending money or conducting activities that would
>> >   jeopardize the Conservancy's tax exempt status.  All the ordinary
>> >   activities of FLOSS projects come well within these limitations.
>> >   Some specific activities that are restricted include lobbying
>> >   activities and spending money in ways other than consistent with the
>> >   charitable purposes of the Conservancy (i.e., forwarding FOSS).
>> >
>> >   Note that developers of Evergreen in their capacity as individuals
>> >   (when not representing Evergreen still may engage in for-profit
>> >   service businesses related to their FLOSS work.  The work of
>> >   Evergreen itself must fit the guidelines, but individuals are free to
>> >   act in their own capacity in other endeavors, as long as they clearly
>> >   state that they are not acting on behalf of the project when they do
>> >   so.
>> >
>> >   If you are ever concerned that a particular activity -- be it one
>> >   carried out for Evergreen or one that an individual developer engaged
>> >   in independently -- might be a problem, you can always ask the
>> >   Conservancy for clarification.
>> >
>> > c) As discussed above in (b), this section describes the corporate
>> >   relationship of the project and the Conservancy.  For clarity, it
>> >   refers to section (b), which delegates the actual management of
>> >   Evergreen to the relevant developers.  Conservancy, when acting as a
>> >   fiscal sponsor, must have the legal authority to manage Evergreen
>> >   even though section (b) delegates the day-to-day operations to the
>> >   developers.
>> >
>> > d) This section clarifies that Evergreen can't represent the Conservancy
>> >   without getting written authorization first.  If you'd like to
>> >   represent the Conservancy at a conference or other such event, you
>> >   can always talk to us about it.
>> >
>> > Paragraph 3 - No Fees
>> >
>> > It's just as it sounds.  The Conservancy provides services to projects
>> > to benefit the FLOSS community and does demand member projects to bear
>> > the overhead costs.  Projects are encouraged to make donations to the
>> > Conservancy as a percentage of their funds to assist the Conservancy
>> > with its operating expenses.  Please note, though, that Conservancy is
>> > only able to provide its services to member projects because there is a
>> > reasonably healthy general fund available.  Donations from our member
>> > projects are not the only source of general fund revenue, but it is a
>> > substantial component in Conservancy' sustainability plan.
>> >
>> > Therefore, if you choose to do so, this section provides suggested
>> > wording in brackets for donating a percentage of the Project's income to
>> > be used towards keeping the Conservancy up and running (10% is a very
>> > common rate that many umbrella organizations require for their fiscal
>> > sponsorship services).
>> >
>> > Paragraph 4 - Project Fund/Variance Power
>> >
>> > This sets out the financial structure in connection with the
>> > relationship described above in paragraph 2. Conservancy will separately
>> > account for Evergreen's revenue (and Evergreen will have its own bank
>> > account at the Conservancy once its balance reaches $3,500).  For tax
>> > purposes, Conservancy will report all of the income to Evergreen in its
>> > IRS and state filings.  Evergreen therefore will not need to file any
>> > separate tax documents with the IRS.  Conservancy will keep the
>> > financial books for Evergreen, sending periodic reports to the project's
>> > developers.
>> >
>> > The developers will direct the Conservancy to spend the money on behalf
>> > of Evergreen within the limitations imposed by the tax laws and
>> > Conservancy's 501(c)(3) mission.  Conservancy will receive any checks on
>> > behalf of Evergreen, and it will also write checks on behalf of
>> > Evergreen.
>> >
>> > Paragraph 5 - Project Fund Management/Performance of Charitable Purposes
>> >
>> > This paragraph clarifies that all assets will be devoted to the
>> > project's purposes, as those purposes are a subset of the Conservancy's
>> > purposes.  Assets cannot be used in connection with activities that
>> > would jeopardize the Conservancy's tax exempt status.  As discussed
>> > above, in practice, most typical expenses of FLOSS projects will come
>> > well within these limitations.  Activities that are restricted include
>> > lobbying activities and spending money in ways other than consistent
>> > with the charitable purposes of Conservancy (i.e., forwarding FLOSS).
>> >
>> > Paragraph 6 - Representation of the Project in the Conservancy
>> >
>> > As the note in this section indicates, we understand that each project
>> > will have its own management structure that it has developed to reflect
>> > its size and community.  This paragraph requires that certain
>> > representatives be named as the individuals that can officially
>> > communicate decisions on behalf of Evergreen.  This can be a single
>> > maintainer, a committee of developers or a few specified
>> > representatives.
>> >
>> > To the extent that it makes sense for Evergreen to have a committee of
>> > representatives, we should indicate how decisions can be made by that
>> > committee.  For example, should all decisions be communicated to the
>> > Conservancy by all members of the committee or would a simple majority
>> > suffice?  Can any one representative communicate official decisions on
>> > behalf of all?  Evergreen should also consider adding a mechanism here
>> > for adding and removing representatives over time.  We're happy to
>> > discuss methods that have worked for other projects with you to help you
>> > select the solution that is right for you.
>> >
>> > We generally find this is the most difficult provisions for projects to
>> > work out, as it does require that your project consider the form and
>> > type of leadership structure it wants to have, and that structure will
>> > be legally formalized in this document for perpetuity.
>> >
>> > Paragraph 7 - Outstanding Liabilities
>> >
>> > In this section, Evergreen confirms that it has told the Conservancy
>> > about any liabilities that might be outstanding prior to joining the
>> > Conservancy.  This gives the Conservancy some assurance that its due
>> > diligence process has been complete and that the Conservancy's Board
>> > received all of the information it needed to properly evaluate the
>> > project.  Liabilities include, for example, financial obligations, such
>> > as any debts or outstanding bills, or any legal claims that could be
>> > outstanding against Evergreen.
>> >
>> > If you believe some liabilities exist, or that something may be a
>> > liability and aren't sure, please err on the side of letting Conservancy
>> > know about it.
>> >
>> > Paragraph 8 - Termination
>> >
>> > Projects can leave Conservancy at will.  This section sets out the
>> > mechanisms for termination to make sure that when a project leaves the
>> > Conservancy it does so without jeopardizing the tax exempt status of the
>> > Conservancy (and, consequently, the status of all of the other projects
>> > in the Conservancy).
>> >
>> > There is a 60 day notice requirement so that a new tax exempt non-profit
>> > can be found for Evergreen to join.  If there isn't another fiscal
>> > sponsor or other tax exempt non-profit to take over Evergreen, Evergreen
>> > can incorporate as a separate entity and apply for tax exemption
>> > recognition.  If there is no separate entity -- for example if a project
>> > loses momentum and has been abandoned by its developers -- the
>> > Conservancy must be left with the assets for use by the Conservancy for
>> > other FLOSS-related charitable work.
>> >
>> > These restrictions would also apply to any separate tax exempt entity,
>> > so if Evergreen were to incorporate and achieve tax exemption outside of
>> > Conservancy, it would have to deal with the same considerations upon any
>> > wind-up or distribution of assets.  Members of the Conservancy's board
>> > are familiar with non-profit wind-down situations, and can assist in the
>> > unlikely event that this unfortunate outcome occurs.
>> >
>> > Paragraph 9 - Miscellaneous
>> >
>> > These provisions are standard agreement boilerplate - they clarify the
>> > enforceability of separate provisions, specify that the contract be
>> > governed by New York Law and state that any amendments to this agreement
>> > need to be agreed to in writing by all of the parties.
>> >
>> > Paragraph 10 - Counterparts/Facsimile
>> >
>> > Although it's good to have original signatures in the corporate records,
>> > this allows you to simply scan a copy for the contract to take effect.
>> >
>> >
>> > We hope this explanation document has made it clear why the agreement is
>> > structured in this way.  If any provisions seem problematic to you, let
>> > us know and we'll work with you to try to build an agreement that works
>> > for both of us.  We look forward to Evergreen joining the Conservancy!
>> >
>> >
>> > --
>> > Bradley M. Kuhn, Executive Director, Software Freedom Conservancy
>> >
>
>