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

[Dan Scott]

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)?

A major corollary to the agreement with the Software Freedom Conservancy
is the proposed rules of governance for the Evergreen Software
Foundation. There has been some recent discussion about those rules of
governance on the Evergreen-Governance mailing list; I'm hoping that
that discussion will be brought back over to the Evergreen-General
mailing list soon, as both of these matters are of great significance to
the future of the Evergreen community.

Dan

----- 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
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