The following text was given to use by the Software Freedom Conservancy, and explains the various sections of the agreement we would need to formally accept to join the Conservancy.The actual legalese
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 Bongo is to forward FOSS and that both the Conservancy and Bongo want Bongo to join the Conservancy. The Conservancy's mission (and charitable purpose) is to advance only FOSS development, so it is important that this context be stated clearly.
Paragraph 1 - Term of Agreement
This paragraph says that Bongo 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 Bongo can choose to leave the Conservancy at any time.
Paragraph 2 - Project Management and Activities
Both parties agree that Bongo will be FOSS. As noted above, this is the fundamental goal and charitable purpose of the Conservancy. The Conservancy will not sponsor proprietary projects.
This clearly sets out the limits of the Conservancy's management over Bongo. Due to requirements connected to the tax exempt status that the Conservancy is seeking to achieve, the ultimate legal control of the projects must be in the hands of the Conservancy. From the IRS's perspective, the projects compose the Conservancy, and the purpose of its tax exemption is to forward the FOSS mission of those projects.
However, the Conservancy does not want to interfere with the successful software development work already underway in member projects; such activity should continue after the agreement without interruption or interference. This paragraph delegates part of the Conservancy's legal authority back to the developers, so that Bongo can run itself in day-to-day matters.
The only limitations that we must place are to prevent Bongo from producing non-free software (as per the 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 FOSS 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 Bongo, in their capacity as individuals (when not representing Bongo), still may engage in for-profit service businesses related to their Free Software work. The work of Bongo itself must fit the guidelines, but individuals are free to act in their own capacity in other endeavors.
If you are ever concerned that a particular activity -- be it one carried out for Bongo or one that an individual developer engaged in independently -- might be a problem, you can always ask the Conservancy's lawyers for clarification.
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 Bongo to the relevant developers. The Conservancy, when acting as a fiscal sponsor, must have the legal authority to manage Bongo, even though section (b) delegates the day-to-day operations to the developers.
This section clarifies that Bongo 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 Free Software community and does not ask member projects to bear the overhead costs. Of course, projects are welcome to make donations to the Conservancy if they desire.
Paragraph 4 - Project Fund/Variance Power
This sets out the financial structure in connection with the relationship described above in paragraph 2. The Conservancy will maintain a separate bank account for Bongo and, for tax purposes, the Conservancy will report all of the income to Bongo in its IRS filings. Bongo therefore will not need to file any separate tax returns with the IRS. The Conservancy will keep the financial books for Bongo. The developers will direct the Conservancy to spend the money on behalf of Bongo, within the limitations imposed by the tax laws. The Conservancy will receive any checks on behalf of Bongo, and it will also write checks on behalf of Bongo.
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 FOSS 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 the conservancy (i.e., forwarding FOSS).
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 Bongo. This can be a single maintainer, a committee of developers or a few specified representatives. To the extent that it makes sense for Bongo 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? Bongo 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.
Paragraph 7 - Outstanding Liabilities
In this section, Bongo 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 Bongo.
Paragraph 8 - Termination
Projects can leave the 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 Bongo to join. If there isn't another fiscal sponsor or other tax exempt non-profit to take over Bongo, Bongo 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 FOSS-related charitable work.
These restrictions would also apply to any separate tax exempt entity, so if Bongo were to incorporate and achieve tax exemption outside of the 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 sign the signature page and fax or scan a copy for the contract to take effect.