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Board of Trustees Meeting Minutes

No. 26 (May 15, 2002)
Board Meeting Minutes

Minutes of Board Meeting No. 26

15 May 2002, Conference Call

Author(s):  G. Huston
Date:       2002-05-15
Committee:  BOT
Document:   00-26
Revision:   0
Supersedes:
Status:     Unconfirmed
Maintainer: G. Huston
Access:     Unrestricted

The meeting was held by audio-conference. The following members of the board of trustees attended the conference call and took part to the discussion:

  • Brian Carpenter
  • Martin Burack
  • John Gage
  • Alan Greenberg
  • Christine Maxwell
  • Kees Neggers
  • Manuel Sanroma
  • Latif Ladid
  • George Sadowsky
  • Wawa Ngenge
  • Lynn St-Amour

Also attending the call were four officers of ISOC:

  • Randy Bush
  • Ole Jacobsen
  • Robert Vaughan
  • David Maher

As well as Jorge Contreras and Nader Mousavi from the law firm Hale and Dorr LLP in Boston.

The following trustees were excused or recused themselves to avoid potential conflicts of interest:

  • Rosa Delgado (recused)
  • Don Heath (recused)
  • Barbara Fraser
  • Tarek Kamel
  • Srisakdi Charmonman

The specific purpose of this Board meeting is to vote on a resolution that would encompass a binding vote to let ISOC submit a bid for the .org registry with Afilias as sub-contractor. A draft of the motion was formally prepared before the meeting, and was the basis of the discussion:

RESOLVED: That the President and other proper officers of the Corporation are hereby authorized, empowered and directed, in the name
and on behalf of the Corporation, to prepare and submit a written application (the “Registry Application”) to the Internet Corporation for
Assigned Names and Numbers, Inc. (“ICANN”) under which a subsidiary to be established by ISOC (“Newco”) will, if the Registration
Application is accepted by ICANN, succeed Verisign, Inc. as the registry operator of the .org top-level domain.
FURTHER RESOLVED: That the Corporation be and hereby is authorized to enter an agreement with Afilias, Inc. (the “Agreement”),
substantially on the terms and conditions set forth in Exhibit A attached hereto, pursuant to which ISOC will cooperate with Afilias, Inc. in order
to prepare and submit the Registry Application to ICANN.

FURTHER RESOLVED: That the President and other proper officers of the Corporation are hereby authorized, empowered and
directed, in the name and on behalf of the Corporation:

  1. to execute and deliver the Agreement with Afilias, Inc.,
  2. to prepare and submit the Registry Application to ICANN, and
  3. to take any and all actions, and execute and deliver any and all documents, agreements, certificates and instruments as the officer so
    acting may deem necessary or appropriate to effect the intent of the foregoing resolutions, including, without limitation, all actions,
    agreements, certificates, documents, and instruments contemplated by the Agreement.

Alan Greenberg formally proposed the motion, and Manuel Sanroma seconded this proposal.

Lynn mentioned that the lawyers recommended adding in a clause regarding additional safeguards for ISOC by putting in an additional paragraph, the text of
which was supplied by ISOC lawyers. David Maher commented that he thinks Affilias will accept this change when it is proposed. Brian discussed whether there
would be a need for an amendment to the proposed resolution that would simply say “as modified by the additional paragraph in Exhibit A.” Christine put forward
this motion. Alan agreed to the friendly amendment. The suggested modification is the following:

Addendum to the end of Clause IX.e of the LOI:

“Without limiting the generality of the foregoing, it is understood
that each party will make an independent assessment of the
commercial feasibility and desirability of assuming operation of the
Registry as contemplated herein, and shall be free, without penalty,
to discontinue negotiations concerning the Proposal and the other
matters described herein if such party, in good faith, reaches the
conclusion that the operation of the Registry would not be in its own
best financial or commercial interest or would otherwise be
inconsistent with its policy or (in the case of ISOC) charitable goals.”

Several board members asked for more information on the actual business case for the proposal, in view of an apparent drop in the recent rate of registrations in the .ORG domain. David Maher mentioned that figures revealed are based on the fact that the average term for registrations in the domain is 1.3 to 1.4 years, and that the sharp drop in registrations was simply because of a policy decision of Verisign, which recently stopped offering promotional free registrations; he felt that the remaining registrations would stay, and reminded the Board that Affilias is after all investing its money in this.

There is a general demand for transparency in the numbers on which the board can make a decision on. Others agreed. Alan Greenberg asks if there is any reason why ICANN would not volunteer more information before hand? David Maher answers that the Afilias people are the only ones who have talked to ICANN. Wawa Ngenge asks if Afilias is trying to hide information Lynn says no, but observes that Verisign is trying to downplay things and make things cloudy. Alan Greenberg suggests that we should explicitly ask Afilias to try to get better numbers – from ICANN also.

Kees raised some questions about this proposed engagement, and observed that replies did not change his opinion; he felt that this proposal is a desperate attempt to grab some money at the expense of ruining ISOC’s original mission, and that it will change ISOC for ever; by doing this, we are associating ourselves with the dirty side of the Internet, thus tainting ISOC. Randy said the risk is not too large though he agrees with much of what Kees said. Latif said we have to take some risk to bring in some financial returns, and that we cannot go on being nostalgic… Brian mentioned that while extra revenues will be needed to move away from the current “hand to mouth” mode of operation, this proposal is still a fundamental change, putting ISOC in competition with operational agents; there is a risk to do fundamental damage to ISOC.

Following this discussion, the board discussed the impact of the proposed operation on ISOC’s image, i.e. whether the board believed that it will harm ISOC’s reputation. Randy observed that there will certainly be some vocal protest, but that most of the impact could be withstood if we followed good business practices. A general opinion was that it will be prudent to isolate the operation of the .ORG domain in a subsidiary of ISOC. Some members of the board had mentioned previously that the board of the new subsidiary would be a subset of the board of trustees; according to Hale and Dorr this not a very good idea. They said it would be very advisable to have no overlap between the two boards; they would recommend separation. The board generally agreed with this recommendation.

Martin Burack asked then how late in the game will we be able to withdraw? In fact, the discussion showed that there are two notion of withdrawal, a joint withdrawal of their proposal by ISOC and Affilias, and a withdrawal of ISOC from its association with Affilias. The answer to the first question depends from the ICANN timetable, which at this point is still unknown; ICANN envisage publication of a draft RFP on May 20, 2002, and we expect final RFP by 5/28, with a deadline of submission set to 6/18; in any case, the last point of withdrawal is when signing the contract between ICANN and ISOC. Withdrawing from an association with Affilias would be much harder; according to Hale and Dorr if we do not negotiate in good faith after signing the LOI then we could be liable to them for damages. We have tried to place a cap of $100,000 to any potential damage, but Affilias is reluctant to accept this cap. According to the lawyers, the LOI is key, and we need to make it so that ISOC is well protected by the new additional exit language. According to Christine, anything can be changed if we get new information, and if indeed we negotiate in good faith.

Marty Burack asks when a business case could be finished, or by when we need to have a business case. Lynn says it would be 3 weeks from now, but the business case will have assumptions in it. Marty then asks Lynn under which circumstance she would decide that the business case is not worth it; Lynn gives as an example that if the business case indicates 3 to 5 years to break even, it is not worth going after, but on the other hand if the business case promises 1/2 million net profit to isoc in 2/3 years time, then it will be fairly reasonable.

Marty Burack asks who should sign the contract, a non-profit or a joint-venture? The reason for the question is that there is a proposal that Verisgn would provide a $5M funding to ICANN, and that the funding is earmarked for a non-profit. Marty asks further whether the subsidiary would be qualified? The answer is that this is unclear; for example, Verisign may refuse to provide the money to a joint-venture in which a for-profit company is involved. Alan observes that the payment by Verisign is to ICANN, and that ICANN, not Verisign, will decide who gets the funding; Randy warns however that we can expect ICANN to try to retain the $5M. On the other hand, Affilias is trying to get at least a fraction of the money, and is indeed here for profit. As a consequence, it is better that the response to the RFC be submitted by ISOC itself rather than by the subsidiary, given that ISOC has a better chance for the $5M endowment fund.

John Gage observes that in the LOI, we agree to exclusively subcontract Affilias, yet we now that Neustar is interested; does the LOI also allow us to make another proposal with Neustar? Lynn knows that Neustar is planning to go forward as a commercial bidder. They plan to set up an advisory board to which they would invite ISOC; for that service, they would pay ISOC a consultant. The conversations were limited because of the NDA with Affilias. Lynn did not feel she should continue the conversation as other proposals were more interesting to ISOC…. David observes that our deal with Affilias will end after the final bid is accepted by ICANN; we would be free at that point to deal with other, e.g. accept a consulting fee; however, at that point, we would appear to be one of their competitor, and we would have “lost the high ground.” John Gage asks, if newstar and newco are competitors, with others, what is the likelihood of ISOC winning? According to David Maher, Affilias believe they have a good chance, because they already got .info; they will be the one putting up the $35,000 fee.

Marty Burack asks a point of clarification, i.e. whether after the proposed resolution Lynn would have authority to go ahead; Alan Greenberg observes that the resolution authorize the president to negotiate with Affilias and make a proposal to ICANN, but it does not include the authority to actually sign the contract; in fact, Alan: would not feel comfortable to give blanket authority to create an unspecified subsidiary. The consensus is that the board will have to meet again to approve the final agreement, the formation of the subsidiary, information of the IRS, etc. By then, the application to ICANN will be public. We could discuss this openly on the board.

At this point, the trustees decide that they have enough information to proceed with the vote. A roll call shows that 10 trustees are present for the vote: Brian Carpenter, Martin Burack, John Gage, Alan Greenberg, Christine Maxwell, Kees Neggers, Manuel Sanroma, Latif Ladid, George Sadowsky, and Wawa Ngenge. There are 7 votes in favor, 1 No vote by Kees Neggers, and 2 abstentions, Marty Burack and Brian Carpenter. The amended resolution is carried.

Resolution 02-7 Authorization to submit application to ICANN for the operation of .org top-level domain registry
RESOLVED That the President and other proper officers of the Corporation are hereby authorized, empowered and directed, in the name and on behalf of the Corporation, to prepare and submit a written application (the “Registry Application”) to the Internet Corporation for Assigned Names and Numbers, Inc. (“ICANN”) under which a subsidiary to be established by ISOC (“Newco”) will, if the Registration Application is accepted by ICANN, succeed Verisign, Inc. as the registry operator of the .org top-level domain.
FURTHER RESOLVED: That the Corporation be and hereby is authorized to enter an agreement with Afilias, Inc. (the “Agreement”), substantially on the terms and conditions set forth in Exhibit A attached hereto, as modified by the additional paragraph in Exhibit A, pursuant to which ISOC will cooperate with Afilias, Inc. in order to prepare and submit the Registry Application to ICANN.
FURTHER RESOLVED: That the President and other proper officers of the Corporation are hereby authorized, empowered and directed, in the name and on behalf of the Corporation:
a) to execute and deliver the Agreement with Afilias, Inc.,
b) to prepare and submit the Registry Application to ICANN, and
c) to take any and all actions, and execute and deliver any and all documents, agreements, certificates and instruments as the officer so acting may deem necessary or appropriate to effect the intent of the foregoing resolutions, including, without limitation, all actions, agreements, certificates, documents, and instruments contemplated by the Agreement.

In order to comply with our NDA agreement with Affilias, the minutes of this meeting will be archived by ISOC, but will not be published to the general public.

Exhibit A – Draft Letter of Intent

May , 2002

Internet Society
1775 Wiehle Avenue, Suite 102
Reston, VA 20190-5108

Ladies and Gentlemen:

This letter of intent (“LOI”) constitutes a preliminary agreement between Afilias, Inc. (“Afilias”) and the Internet Society (“ISOC”) concerning the preparation of an application to succeed VeriSign, Inc. as the registry operator for the .org top-level domain (the “Registry”) on the terms and conditions set forth below.

In consideration of their mutual promises, the parties agree:

I. Commencing upon the execution of this LOI, Afilias and ISOC will work together to prepare a written application (“Application”) for submission to the Internet Corporation for Assigned Names and Numbers, Inc. (“ICANN”) in response to a Request for Proposal (“RFP”) first released by ICANN on May 1, 2002.

II. The Application will contain at least the following provisions:

1. ISOC will submit an Application to ICANN to become the registry operator for the .org Registry.

2. In the Application, ISOC may propose the establishment of a separate entity, owned or controlled solely by ISOC (“Newco“) to serve as the registry operator, if the Application is selected by ICANN.

3. ISOC (or its designee, Newco) will exclusively subcontract with Afilias to provide all registry services for the operation of the Registry, subject to the terms and conditions of a subcontract between ISOC (or its designee, Newco) and Afilias (the “Subcontract”), which may contain performance, stability and other technical requirements.

4. ISOC (or its designee, Newco) will be the sole beneficiary of the US$5 million amount anticipated to be paid by Verisign as set forth in Section 5.1.4 of current .org registry agreement. ISOC (or its designee, Newco) will allocate or otherwise make one-third of this amount available to Afilias to be used in connection with registry transitioning services.

5. Application is anticipated to propose a competitive registration fee while still permitting reasonable margins for both ISOC and Afilias. It is currently anticipated that an annual fee of US$6 per domain name will be charged for registrations and renewals of second-level domain names in the Registry.

6. Afilias shall receive two-thirds of each per registrant domain name annual fee received by ISOC (or its designee, Newco), or such other amount as is mutually agreed, for the provision of all Registry services.

7. ISOC will work in conjunction with Afilias to develop the registry policies for the inclusion in the Application. The Application shall include the following policy provisions:

a. All existing registrants in the .org domain will be permanently “grandfathered” with the right to renew registrations indefinitely.

b. Disputes relating to abusive registration of domain names in the .org domain shall be subject to a Domain Name Dispute Resolution Policy tailored to the specific needs of the .org domain.

c. The .org domain will remain “open” in the sense that there will be no legal eligibility requirements for registration of a domain name.

d. There will be an educational and marketing program to emphasize the non-commercial character of the domain and its suitability for
not-for-profit organizations.

8. As the registry operator, ISOC (or its designee, Newco) will receive all fees in connection with the operation of the Registry.

9. Afilias will have limited access to the registrar and registrant data relating to those accounts as necessary for the Registry administrative services.

10. Afilias agrees to, and shall, indemnify, defend and hold harmless ISOC (and its designee, Newco), and their directors, shareholders, officers, agents, employees, successors and assigns from any and all claims, demands, suits, actions, judgments, damages, costs, losses, expenses (including reasonable attorney fees and expenses) and other liability arising from the operation of the Registry or any other activity of Afilias or its affiliates (and whether such claims are brought by registrants, registrars or other third parties). Afilias shall have the right to assume and control the defense and settlement of any such claim using counsel who are acceptable to ISOC. Afilias shall not accept or agree to any settlement which imposes liability not covered by this indemnification or which places any restrictions on the indemnified parties without ISOC’s prior written consent.

11. ISOC (or its designee, Newco) and Afilias will incorporate into the Registry Registrar Agreement a registrar indemnification provision for the benefit of the registry operator.

12. If ICANN accepts the Application, ISOC (or its designee, Newco) and Afilias will negotiate in good faith a Subcontract for Registry services incorporating the substance of this Section II (Paragraphs 1-11 above) as well as the following provisions:

a. ISOC (or its designee, Newco) and Afilias will mutually agree on any new registry services (i.e. enhanced whois, WLS, etc.) consistent with ICANN requirements.

b. ISOC shall flow-down to Afilias other provisions from the ISOC-ICANN Registry Agreement relating to the operation of the
Registry services.

c. ISOC’s obligation to proceed with the transaction contemplated by this LOI shall be subject to ISOC’s satisfaction that the operation of
the Registry will not jeopardize ISOC’s tax-exempt status.

In addition, the parties agree as follows:

III. The terms and conditions of the NDA dated April 3, 2002 between the parties shall continue in force.

IV. Prior to publication of the Application by ICANN, neither party shall communicate the provisions of this LOI to any third party (other than professional advisers) without the prior consent of the other party.

V. Neither party shall offer to enter into or assist in any collaboration with any third party to amend the Application, or to prepare or provide any assistance for any separate proposal in response to the RFP, without the prior written consent of the other party.

VI. Each of the Paragraphs 1-12 in Section II above is material to ISOC, and nothing contained in this LOI shall obligate ISOC to make any change in any of such Paragraphs 1-12 for any reason, including the purpose of improving the possibility of acceptance of the Application by ICANN.

VII. This LOI is a binding agreement. This LOI shall terminate and the provisions hereof shall have no further force or effect (other than Sections III above and VIII and IX below, which shall survive such termination) upon the earlier to occur of: (i) the mutual agreement of the parties; or (ii) ICANN’s public announcement that it has selected a registry for the .org TLD other than ISOC or its designee Newco.

VIII. Afilias shall reimburse ISOC for its reasonable and necessary documented costs and expenses incurred in the preparation and negotiation of this LOI, the Application, and if applicable, the Subcontract and the Registry Agreement between ISOC (or its designee, Newco) and ICANN, whether or not the Application is successful.

IX. Miscellaneous Provisions.

a. This LOI shall be interpreted in accordance with the laws of the State of Virginia, excluding its conflict of laws rules.

b. Neither party shall assign or transfer its rights or obligations under this LOI without the prior written consent of the other party.

c. The parties are independent contractors, and nothing in this LOI is intended to characterize the parties as partners or joint venturers. Neither party shall have any authority hereunder to bind or represent the other.

d. Neither party shall be liable under this LOI for any lost profit, lost opportunity, indirect, consequential, incidental, punitive,
exemplary, multiple or other similar damages, no matter what the alleged cause, and even if such party has been made aware of
the possibility of such damages.

e. Neither party shall have any liability in respect of any failure to agree upon and execute the Subcontract as contemplated by this LOI, or for the failure of ICANN and ISOC or Newco to enter into the prime contract relating to the Registry, provided that each party complies with its obligation hereunder to negotiate in good faith. Without limiting the generality of the foregoing, it is understood that each party will make an independent assessment of the commercial feasibility and desirability of assuming operation of the Registry as contemplated herein, and shall be free, without penalty, to discontinue negotiations concerning the Proposal and the other matters described herein if such party, in good faith, reaches the conclusion that the operation of the Registry would not be in its own best financial or commercial interest or would otherwise be inconsistent with its policy or (in the case of ISOC) charitable goals.

f. The maximum liability of the parties under this LOI for direct damages for all causes (other than the obligation to pay specific amounts due hereunder) shall not exceed $100,000.

If this conforms to your understanding, please so indicate by signing and returning a duplicate copy of this letter.

Yours very truly,
Afilias, Inc.

By:________________________
Accepted and agreed:
Internet Society

By:___________________
Date:__________________

Summary of Resolutions

Not any resolution available.