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<p class="MsoNormal"><span style="font-size:11.0pt;font-family:"Calibri","sans-serif";color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-size:14.0pt;font-family:"Calibri","sans-serif"">Dear CCWG ACCT Co-Chairs, Members, Participants and ICANN Staff, <o:p></o:p></span></p>
<p class="MsoNormal" style="margin-left:1.0in"><span style="font-size:14.0pt;font-family:"Calibri","sans-serif""><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-size:14.0pt;font-family:"Calibri","sans-serif"">We are writing to raise with you the following issues that we identified in our high level review of the above referenced Annexes:<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:14.0pt;font-family:"Calibri","sans-serif""><o:p> </o:p></span></p>
<p class="MsoNormal"><b><u><span style="font-size:14.0pt;font-family:"Calibri","sans-serif";color:black">Annex 3 (Fundamental Bylaws) :</span></u></b><span style="font-size:14.0pt;font-family:"Calibri","sans-serif""> To ensure that ICANN’s status as a California
nonprofit public benefit corporation cannot be changed without Empowered Community approval, we recommend providing the Empowered Community with the right to approve any transfers of all or substantially all of the assets of ICANN. Without this protection,
ICANN’s status as a California nonprofit public benefit corporation could be changed via transfer of assets and dissolution without Empowered Community approval.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:14.0pt;font-family:"Calibri","sans-serif";color:black">While language in Annex 3 now clarifies that changes to the Articles of Incorporation will require Empowered Community approval (in a similar process to changes
to Fundamental Bylaws), and the Articles include provisions to the effect that ICANN is under California Nonprofit Public Benefit Corporation Law, there is a loophole that needs to be closed. While pursuant to Recommendation 3, Article provisions can only
be changed with the approval of the Empowered Community, one common way of changing a corporation’s legal jurisdiction is NOT by amending articles but by the creation of a new entity in the desired jurisdiction followed by a transfer of all or substantially
all the assets to the new entity. (Note that the other common approach is a merger, but the language in Annex 3 already protects the Empowered Community in that scenario since California law provides that a merger must be approved by anyone whose approval
of an articles amendment is required, i.e., this would include the Empowered Community.)
<i>Therefore we recommend that a provision be added to the Articles (as allowed by Corporations Code Section 5911), requiring Empowered Community approval for a transfer of all or substantially all of the assets of ICANN.</i> Such a provision would also protect
the Empowered Community in case of a dissolution since any dissolution would be preceded by a transfer of assets.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:14.0pt;font-family:"Calibri","sans-serif";color:black"><o:p> </o:p></span></p>
<p class="MsoNormal"><b><u><span style="font-size:14.0pt;font-family:"Calibri","sans-serif";color:black">Annex 4 (Community IRP & Separation Powers):</span></u></b><span style="font-size:14.0pt;font-family:"Calibri","sans-serif";color:black"> The Proposal
currently provides that the Bylaws will require specific SO or AC concurrence in support of community IRP challenges against Board decisions that relate directly to that SO or AC.
<i>We recommend that consideration be given to the process through which this concurrence will be obtained with respect to ACs that have uniformly opted out of the escalation process (e.g., RSSAC or SSAC).</i> See also the note below about another IRP concern.
Depending how CCWG determines to address the concern, it may fit in Annex 4 or Annex 7 or both.
<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:14.0pt;font-family:"Calibri","sans-serif";color:black"><o:p> </o:p></span></p>
<p class="MsoNormal"><b><u><span style="font-size:14.0pt;font-family:"Calibri","sans-serif";color:black">Annex 7 (Scope of IRP)
</span></u></b><span style="font-size:14.0pt;font-family:"Calibri","sans-serif";color:black">: Currently, the Proposal does not address in any detail who takes the actions necessary on the part of the Empowered Community to move the IRP and enforcement processes
forward, once the Empowered Community has decided to act. We presume it is the chairs of the ACs and SOs working together as necessary but this has not been detailed. This issue is discussed
</span><span style="font-size:14.0pt;font-family:"Calibri","sans-serif"">in sections 4 and 5 of the<span style="color:black"> memorandum we provided on November 6, 2015.
</span></span><span style="font-size:14.0pt"> (<b><a href="https://community.icann.org/download/attachments/52896826/MemoonSoleDesignator-CEVImplementation00730666-4xA3536-0001.pdf?version=1&modificationDate=1447167804000&api=v2"><span style="color:windowtext">Link</span></a></b>).<span style="color:black">
</span></span><span style="font-size:14.0pt;font-family:"Calibri","sans-serif";color:black"> <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:14.0pt;font-family:"Calibri","sans-serif";color:black">Note that this concern relates to both the IRP and enforcement generally and we would like clarification whether it is meant to be a Work Stream 2 issue or should
be dealt with on a general basis now and then also addressed in more detail in Work Stream 2. (In either event, it will need to be mentioned in Annex 12.)
<i>We recommend that consideration be given to including language along the following lines at an appropriate place in the annexes concerning IRP and enforcement processes (and that appropriate mention be made in Annex 12 (Work Stream 2) regarding the need
for additional implementation work </i></span><i><span style="font-size:14.0pt;font-family:"Calibri","sans-serif"">on this issue) :</span></i><span style="font-size:14.0pt;font-family:"Calibri","sans-serif""><o:p></o:p></span></p>
<p class="MsoNormal" style="margin-left:2.5in"><span style="font-size:14.0pt;font-family:"Calibri","sans-serif""> <o:p></o:p></span></p>
<p class="MsoNormal" style="margin-left:.5in"><i><span style="font-size:14.0pt;font-family:"Calibri","sans-serif"">When the Empowered Community has decided to shall pursue an IRP or enforcement litigation, the decision would be implemented by those chairs of
the Supporting Organizations and Advisory Committees who supported the proposal. Those chairs of the SOs and ACs who supported the decision to file an Empowered Community IRP or undertake enforcement litigation would constitute a “Chairs Council” that would,
by majority vote, act on behalf of the Empowered Community in taking any reasonably necessary ministerial steps to implement the decision to pursue the Empowered Community IRP, and to delegate and oversee tasks related to the Empowered Community IRP, including
but not limited to engagement of legal counsel to represent the Empowered Community in the Empowered Community IRP, approve court filings, or to enforce an Empowered Community IRP Award in court if ultimately necessary.</span></i><i><span style="font-size:14.0pt;font-family:"Calibri","sans-serif""><o:p></o:p></span></i></p>
<p class="MsoNormal" style="margin-left:2.0in"><span style="font-size:14.0pt;font-family:"Calibri","sans-serif""><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-size:14.0pt;font-family:"Calibri","sans-serif"">Please let us know if we can assist in any way with your further consideration of these issues,<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:14.0pt;font-family:"Calibri","sans-serif""><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-size:14.0pt;font-family:"Calibri","sans-serif"">Kind regards,<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:14.0pt;font-family:"Calibri","sans-serif"">Holly and Rosemary<o:p></o:p></span></p>
<p class="MsoNormal" style="margin-left:.5in"><span style="font-size:14.0pt;font-family:"Calibri","sans-serif""><o:p> </o:p></span></p>
<p class="MsoNormal" style="margin-left:.5in"><span style="font-size:14.0pt;font-family:"Calibri","sans-serif";color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><b><span style="font-size:14.0pt;font-family:"Calibri","sans-serif";color:#1F497D">HOLLY J. GREGORY</span></b><span style="font-size:14.0pt;font-family:"Calibri","sans-serif";color:#1F497D"><br>
Partner and Co-Chair<br>
Global Corporate Governance & Executive Compensation Practice<o:p></o:p></span></p>
<div>
<p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto"><b><span style="font-size:14.0pt;font-family:"Calibri","sans-serif";color:#1F497D">Sidley Austin LLP<br>
</span></b><span style="font-size:14.0pt;font-family:"Calibri","sans-serif";color:#1F497D">+1 212 839 5853<br>
<a href="mailto:holly.gregory@sidley.com" title="Click to send email to Gregory, Holly">holly.gregory@sidley.com</a></span><span style="font-size:14.0pt;font-family:"Calibri","sans-serif"">
<o:p></o:p></span></p>
</div>
<p style="margin-left:1.5in"><span style="font-size:14.0pt;font-family:"Calibri","sans-serif""><o:p> </o:p></span></p>
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<p></p>
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