At the last meeting, we discussed various bylaws issues. This started
with the quorum issue. I was short on the official notice period for the
last meeting, plus there was a desire for legal advice on certain
questions, so we held off on voting on things.
As promised, I engaged a lawyer at Moss & Barnett. I consulted with him
on the questions, he drafted bylaws changes, I reviewed them, and then
the board reviewed them. The results of this are below. I have numbered
the changes for ease of reference, but the order is not significant;
each amendment is standalone.
The Board recommends adoption of all changes.
The Proposed (all changes) and Current bylaws are attached.
Please review and comment here on the mailing list. Out of respect for
people's time, I would like to avoid a long interactive meeting,
limiting that to primarily voting. "Speak now or forever hold your
peace" as it were.
*Change 1: Quorum*
This is the issue that we have discussed at length before. There seemed
to be a consensus on this previously. Our lawyer's view was that the
proposed language was fine. But when he actually integrated it into the
text, he did use slightly different structure, giving them "(i)" and
"(ii)" prefixes. So this is now using the lawyer's wording.
ACTION:
Amend the first sentence of section 1.11 "Quorum" to insert the words,
"the lesser of (i) ten (10) members entitled to vote or (ii)", such that
it now reads:
Members representing _the lesser of (i) ten (10) members entitled to
vote or (ii)_ ten percent (10%) of the voting power of the
membership interests entitled to vote at a meeting of the members
are a quorum for the transaction of business.
*Change 2: Affiliates*
As discussed at the last meeting, we wanted to add to the bylaws (where
it belongs) the longstanding MICE policy that affiliated members (e.g.
parent companies and subsidiaries) only get one vote. We specifically
wanted to get a lawyer to draft the language for defining this.
Originally, we were (or at least I was) thinking that we wanted
self-executing language (e.g. if two members merge, one of the entities
/automatically/ loses membership status). The lawyer strongly advised
against this. First off, for that to work, the language has to be
deterministic at the point the e.g. merger happens. For example, there
is no way for the merged entities to indicate which will be the member
moving forward. Second, he advised this creates a risk of ultra vires
actions. Imagine some members merge, then we elect a board member in a
nearly-tied election, then the board makes some decisions, etc. etc.
Later, we find out about a merger that predated the election, and that
changed the result of the election. Now you have to try to unwind all
that? While that particular possibility is remote, ultimately he
recommended a different approach, which is what is taken here.
This change creates an affirmative duty for members to notify MICE of
mergers. It allows the board to refuse to admit the second entity (for
new member scenarios) and to terminate the membership of all-but-one
affiliate (for e.g. the merger scenario). This is the procedure we have
been using.
This also includes a language cleanup to clarify what "Board" means.
This is just a cleanup.
The Bylaws allow the Board to amend the membership qualifications
section, and that was the original plan discussed at the last meeting.
But since the members are already voting on bylaws changes, the board is
bringing this to the members too. This also allows for the language
cleanup in section 1.1 and the section 1.16 change.
ACTION:
Amend section 1.1 "Membership Qualifications" to make the existing text
subsection "(a)".
Amend section 1.1 (a) to insert the text, " of Governors of the Company
(the “Board” or “Board of Governors”)" after the first occurrence of
"Board", such that it reads:
In order to qualify for membership, a member shall be: (i) an
operator of an internet protocol network which has one or more
direct, or approved indirect, connections to Midwest Internet
Cooperative Exchange LLC’s (the “Company”) switches; or (ii) an
operator of equipment providing approved indirect connections; or
(iii) an operator of a colocation data center in which the Company’s
switches are located. A member may be elected by the membership or
appointed to membership by the Board_of Governors of the Company
(the “Board” or “Board of Governors”)_. Members may have such other
qualifications as the Board may prescribe by amendment to this
Operating Agreement.
Add a subsection 1.1 (b) that reads:
Each member shall have an affirmative duty to disclose the identity
each of its Affiliates that is a member of the Company. “Affiliate”
means, with respect to any entity, (i) any other entity directly or
indirectly controlling, controlled by, or under common control with
such specified entity, or (ii) any other person or entity owning or
controlling fifty percent (50%) or more of the outstanding voting
securities of such entity. For purposes of the foregoing, the term
“control” (including, with correlative meanings, the terms
“controlled by” and “under common control with”), as applied to any
entity, means the possession, directly or indirectly, of the power
to cause the direction of the management and policies of such
entity, whether through the ownership of voting or other securities,
by contract or otherwise. The Board may refuse to admit any entity
that is an Affiliate of a member or may condition such admission on
the acknowledgment that such entity and each of its Affiliates, will
only have one member vote which may only be exercised by one of the
affiliated members.
Amend section 1.16 "Resignation, Expulsion or Suspension of Members" to
add a subsection (d) that reads:
Notwithstanding the foregoing, the Board may terminate the
membership of one or more members who are Affiliates, such that such
Affiliates shall only have one member vote. The intention of this
provision is to prevent the concentration of voting power in members
who are under common ownership or common control.
*Change 3: Action Without a Meeting*
This cleanup was proposed by the lawyer, when reviewing the bylaws. The
first sentence says that we can do things without a meeting by /every
single member/ consenting to it. As a practical matter, that would never
happen. It's also duplicative, since the second sentence says we can do
things without a meeting with a /majority/ of all members.
ACTION:
Amend section 1.13 "Action Without a Meeting" to strike the first
sentence, "Any action required or permitted to be taken at a meeting of
the members may be taken by written action signed, or consented to by
authenticated electronic communication, by all the members entitled to
vote on such action."
*Change 4: Removal of Board Members*
The lawyer found a number of concerns in the existing language (drafting
errors, referencing the wrong statute, etc.) and procedure. He basically
felt that it needed to be thrown out and completely redrafted.
The current bylaws allow the members to remove a governor, with or
without cause, by a "[two-thirds] majority" (drafting errors per
original). At our current size, this is effectively impossible. The
proposed change allows the members to remove a governor, with or without
cause, by a majority (of /all/ members, not just those voting on the
issue), which is still a very high bar, but far more possible should the
need arise.
The current bylaws allow the board to remove a governor only if the
board appointed that governor in the first place. The proposed change
allows the board to remove a governor for cause (which is defined in
quite a bit of detail) or disability (also defined).
The Board had significant discussion on this change. There are two
directly opposite concerns here, and any solution is going to involve
some compromise. First, it is desirable to be able to remove a governor,
promptly, when this is legitimate. Second, it is desirable to slow down
or prevent removing a governor when this is illegitimate.
We ultimately went back to the lawyer asking him to provide a mechanism
by which a removal could be reviewed by the members. This ended up
raising the question of notice to the removed governor. Initially notice
was required by implication; this was made explicit. As part of this,
section 1.14(d) "Notice to Members" was then copied, with
s/member/governor (and the "(1)" and "(2)" labels removed), as 2.11(c).
ACTION:
Amend section 2.11 to add a subsection (c) which reads:
Any notice to governors given by the Company or the Board by a form
of electronic communication consented to by the governor to whom the
notice is given is effective when given. The notice is deemed given
by:
(i) facsimile communication, when directed to a telephone number
at which the governor has consented to receive notice;
(ii) electronic mail, when directed to an electronic mail address
at which the governor has consented to receive notice;
(iii) a posting on an electronic network on which the governor
has consented to receive notice, together with separate notice to
the governor of the specific posting, upon the later of: (i) the
posting; and (ii) the giving of the separate notice; and
(iv) any other form of electronic communication by which the
governor has consented to receive notice, when directed to the
governor.
Consent by a governor to notice given by electronic communication
may be given in writing or by authenticated electronic
communication. The Company and the Board is entitled to rely on any
consent so given until revoked by such governor, provided that no
revocation affects the validity of any notice given before receipt
by the Company or the Board of revocation of the consent.
Replace the contents of section 2.17 "Removal of Governors" entirety with:
(a) _Removal for Cause or Disability by the Governors_. The Board
may remove a governor for Cause or Disability by the unanimous vote
of the governors, excluding the governor to be removed (the “_Voting
Governors_”). “_Cause_” shall exist if the Voting Governors
determine in good faith that the governor to be removed (i) has
failed to discharge his, her, or their duties as governor in good
faith, (ii) has breached his, her, or their fiduciary duties to the
Company or its members, (iii) has committed theft, embezzlement or
conversion of Company property, (iv) has engaged in any illegal
activity or fraud in connection with the Company, (v) has been
convicted of a felony or other crime involving moral turpitude,
while a governor; (vi) has engaged in a conflict of interest without
complying with Section 5.1 and 5.2 of this operating agreement or
(vii) has engaged in acts or omissions which the Board reasonably
deems to be materially damaging to the name, reputation, or business
of the Company or which could jeopardize the good will or
relationship with its member or other persons and entities important
to its mission. “_Disability_” a physical or mental impairment
which prevents the governor from performing his, her, or their
duties as a governor for a period of not less than 6 months. The
Board shall send a written notice to the removed governor stating
the basis for their removal under this Section 2.17(a), within three
(3) business days following a Board vote removing a such governor.
(b) _Retention Vote by Members_. In the event the Board has removed
a governor solely for the reasons stated in Section 2.17(a)(i) or
(vii) (and not for any other reason constituting Cause or
Disability), the removed governor within ten (10) business days
following the dispatch of the notice of removal may provide a notice
of disagreement with such removal and a request to submit such
matters to the vote of the Members. The Board shall call a meeting
of the Members to vote on the retention of such governor to be held
within 30 days. Prior to such meeting, the governor shall continue
to be removed subject to later reinstatement by the Members by
affirmative vote. If the governor is not reinstated by affirmative
vote, the position shall be filled by a vote of the Members. If
notice by the removed governor is not given within ten (10) business
days, the removed governor shall have waived his or her right to
challenge the removal. No governor shall have the right to appeal
or challenge a removal by the Board under Section 2.17(a), except as
expressly set forth in this Section 2.17(b)
(c) _Removal by Members_. Any one or all of the governors may be
removed at any time, with or without cause, by the affirmative vote
of a majority of the voting power of all membership interests
entitled to vote at an election of governors.
--
Richard
