Meeting minutes 3 31 2014 (2)

i-GATE NEST Board Meeting Meeting Minutes March 31, 2014

INTRODUCTIONS/ROLL CALL Present: Mayor John Marchand, Hal La Flash, Art Pontau, Rick Lazansky, Sblend Sblendorio, Doug Rotman, Troy Brown, Chris Foss, Shail Khiyara, Marshall Kamena, Rameet Kohli, Alex Greenwood Excused absence: Woody Clark CITIZENS FORUM none ACCEPTANCE OF MINUTES Motion: Mayor Marchand Second: Board Member La Flash Motion carried unanimously NOTE: Chairman Khiyara announced he will not be participating in any votes due to his role as interim CEO MATTERS FOR CONSIDERATION CEO Update Chairman Khiyara provided an update on his activities meeting with i-GATE portfolio companies, funding partners, and other i-GATE stakeholders. Also provided an update on the move to downtown, announced the development of a new i-GATE website, as well as a messaging meeting to define some high level messaging themes for i-GATE. The goal is to reach capacity in the downtown facility by the end of the year.

Discussion of Combining Boards Development Corporation Chairman Sblend Sblendorio provided and outline of the board combination process and motivation:  The original purpose for having two organizations was to support a future real estate development possibility on the Livermore Valley Open Campus  Such a project is not imminent  Having two organizations costs money – taxes, bookkeeping, etc. – and it’s duplicative  To combine the boards: o The NEST board would sell its assets, which essentially amount to its bank accounts, to the Development Corporation through joint resolutions executed simultaneously. o Then reconstitute the Development Corporation board with any of the NEST board members whom the NEST board decides should continue; this could be all

o

current NEST board members or a subset of the NEST board, whichever the NEST board decides.

The NEST board members would resign except for one member, and then the NEST board could be sold to LLNL for it to use as a foundation for the Discovery Center

Board Member Clark asked what constitutes an “asset” in the sale of NEST to the Development Corporation.

Development Corporation Chairman Sblendorio stated that NEST’s only assets are its bank accounts, which currently total approximately $82,000.

Mayor Arnerich asked what is the reason for having the Development Corporation remain if we are not planning to build a building.

Chairman Sblendorio clarified that the Development Corporation is simply a corporate shell, and that its mission sufficiently broad to allow it to perform the mission of NEST without having to go back to the IRS to change anything. He stated that what we choose to call the surviving corporate entity is up to the board to decide.

Mayor Arnerich asked why we have one entity that all the startups come to and get services, and then we also have another entity with the i-GATE name on it. Why not just have one entity?

Board Member La Flash stated that is the reason for this effort to combine the boards.

Chairman Sblendorio commented that the only reason to keep the NEST corporate entity alive is because it has a value and can be sold. If there was no value, we would simply dissolve it and arrive at one entity that way.

Mayor Arnerich asked if someone can draw a diagram demonstrating the relationship between the two entities, and where the checks from the city partners will have gone and will go.

Brandon Cardwell drew a diagram depicting the Development Corporation and NEST side by side as individual entities under a single banner of “i-GATE”. He commented that from an outsider’s perspective, there is only one i-GATE. The startups don’t know or care if they are part of NEST or part of the Development Corporation. He stated that we have to look back to determine if the City partner checks have been going to NEST or Development Corporation. He noted that all of the City partners are members of both boards already.

Brandon then drew a vertical line in between the two entities to indicate their separation. He then drew a line depicting the sale of NEST to LLNL and changed the NEST name to “Discovery Center Foundation”. He stated that at this point, NEST would no longer be a part of i-GATE. Finally, he depicted the individual members of the NEST board relocating to the box representing the Development Corporation, and then changed the name to “i-GATE Innovation Hub Board”.

Chairman Khiyara asked what happens to the current members of the Development Corporation board.

Brandon Cardwell stated that nothing happens to them as a result of the merger.

Chairman Khiyara asked why not dissolve both boards?

Board Member Lazansky replied how could you appoint board members if both boards were dissolved?

Mayor Arnerich asked if we have the articles of incorporation that say who is on the board.

Chairman Sblendorio replied that articles of incorporation and bylaws never say who is on the board, they will just provide the framework for how many board members you can have, and those can always be amended to whatever the boards decide they want.

Mayor Arnerich commented that it is a higher level discussion than that, and Chairman Khiyara concurred.

Chairman Khiyara stated he thinks there are three steps: 1. Sale of the NEST entity 2. Dissolving the NEST entity by virtue of the sale 3. Define who is in the new entity Chairman Khiyara also stated his understanding that in addition to the five NEST board members who currently serve on the Development Corporation as well, more NEST board members could be appointed to the new entity. Breaking it down further, we need to decide how many board members we want on the new entity, and who are they.

Alex Greenwood asked how many board members we have currently.

Chairman Khiyara stated there are 16 on NEST and 14 on the Development Corporation.

Brandon Cardwell commented that of the 14 Development Corporation members, eight are also on the NEST board.

Troy Brown commented we need to have the conversation about what we are doing, which will drive the discussion of who needs to be at the table, rather than trying to put the seats and then figure it out.

Alex Greenwood agreed.

Troy Brown stated that we need to identify the mission the non-profit is trying to carry out, and then find the right board members to help accomplish that mission.

Dr. Kamena asked “which is the chicken and which is the egg?”

Troy Brown stated that the egg is understanding what we are doing, and we can grow from there.

Mayor Arnerich stated that the City partners need to find out to which entity they write their checks, so we don’t get rid of the board with which the cities currently have contracts. He commented that he doesn’t have a problem consolidating to one board, which is the right thing to do, but in terms of the board, we need to be cautious about how we operate using public funds to pay for 99% of i-GATE. He stated that we should be more discriminating about who

gets to be on the board, and we should require that every board member write a check. Mayor Arnerich commented that he sits on the boards of several foundations, and there is always the requirement to write a check to be a board member.

Mayor Arnerich also stated that when Thomas Spirgi was CEO, there had been several conversations about opportunities to change the funding stream. Whether at the board level or the other tiers like the Venture Advisory Board, there is a value proposition that should be tied to a fee to help raise revenue for the organization. The public sector is in i-GATE to create jobs and keep brain trust, but we need to have a conversation about what’s the value proposition to others of being associated with i-GATE now that there is success here now. We are missing the opportunity to create revenue from others who are investing money or helping to raise money for the startups. Whether it’s memberships or something else, we need to “fiscalize” these relationships so the public sector can move away.

Chairman Khiyara asked if the cities would move off the board when they were no longer funding.

Mayor Arnerich replied, “possibly.”

Chairman Sblendorio left the meeting.

Dr. Kamena stated that Mayor Arnerich has said a great deal that is very important, and he appreciates the need for high transparency. However, the board merger is a fairly mechanical process, and if the concern is over to which agency the city checks are written, the successor agency could certainly receive the checks. Who is going to be on the board is the key issue.

Brandon Cardwell clarified that the MOUs with partner cities are not NEST or the Development Corporation, but with the “i-GATE Innovation Hub”.

Mayor Arnerich stated that we need to be very careful and to create clear documentation of what we’ve done, who did it, and why, because we are talking about public funds. It would be helpful to have one or more of our city attorneys take a look at this before doing anything.

Chairman Khiyara asked which city attorney would be available to work with Chairman Sblendorio. Chairman Khiyara also stated that he has requested and will continue to request a written documentation of the process.

Mayor Arnerich commented that one of the city attorneys needs to be involved, but doesn’t need to drive the process.

Mayor Marchand asked Troy Brown if Livermore’s city attorney could work on the merger, and Troy replied that that was possible, and that he is supportive of any of the partner city attorneys taking a look at the final documents.

Nelson Fialho offered Pleasanton’s city attorney to provide support as well. He also commented that the cities are good at setting up the initial infrastructure, such as space, some funding for staffing, etc., but that that is where the cities’ responsibilities end, and the private sector needs to take over. He commented that if we have two boards, the second board should really be comprised of investors who can fund the organization and/or the companies. And while he understands the need to consolidate, Nelson commented that there may be another model for us to consider where the cities do what they do best to set the systems in place, and then the

private sector takes over to make introductions, incubate further, and help the businesses locate in our city. He suggested instead of consolidating, we look at restructuring the boards so that responsibilities are made clearer.

Dr. Clark commented that we should have all the cities attorneys review the merger if we have funding from all the cities, and he asked which entity has been receiving funds from the cities.

Mayor Arnerich commented that Danville has been writing checks to NEST. Board Member Kohli asked what was the initial reason for combining the two boards, as it sounds now like it’s getting very complicated. He asked if it would be better to keep things as is until the end of the year and restart the merger in 2015 after we have a better defined scope for the organization.

Dr. Clark agreed, and stated that while this topic is important, it is not the most important item for the board to be discussing now.

Nelson Fialho agreed and recommended that the board aim to have resolution on the board merger by the end of the fiscal year in June.

Mayor Arnerich agreed.

Troy Brown asked what the initial thought process for combining the boards was.

Brandon Cardwell replied that Thomas Spirgi was driving the combination of the two boards to create more efficiency in reporting and reduce the cost burden of financially maintaining two entities. As described by Chairman Sblendorio, the process was thought to be relatively straightforward and mechanical, and the issues of strategy and vision could be addressed with all the same people from both boards sitting in the same room as members of one combined board. We have Development Corporation board members like Betsy Cantwell who are critical partners, and they are not present at NEST board meetings.

Troy Brown agreed that from a tactical perspective it’s easier to administer one board, but the challenge is the mission question, which will ultimately drive what the new board will look like, and we need to be thoughtful about that.

Mayor Marchand commented that one of challenges was that every time we wanted to do something to move the organization forward more quickly, there were multiple entities – the MAC, the NEST, and the Development Corporation – that had to be consulted, which made us less nimble.

Dr. Kamena asked why the mission of the combined board would be fundamentally different from the combined missions of the individual boards.

Chairman Khiyara stated his view that the lack of nimbleness stemmed from operational elements being brought to the board level when they didn’t need to be. He commented that the board should be focused on the broad strategic elements, funding, and the mission.

Board Member Kohli asked if the board should make a motion to table the board combination effort until June to allow the mayors and city managers to make a list of questions that need to be answered before they are comfortable moving forward.

Brandon Cardwell asked if there any deliverables the board would like to request from Chairman Sblendorio, such as a step-by-step description of the process.

Mayor Arnerich stated the pertinent items are the process and which funds are being transferred.

Board Member White commented that the merger is pretty routine stuff, but because the entire merger process is effectuated simultaneously, a lot of work has to go in to preparing the documents in advance. All of these documents would be put together in advance, so the board could send the packet to the city attorneys and build in 30 days for review prior to voting on the item.

Chairman Khiyara asked if that can be done by June.

Board Member White replied that the documents should be easy to collect, the sticking point will be making sure the city attorneys have enough time to review, which is the reason for the 30 day recommendation.

Dr. Clark agreed, and asked to clarify that Chairman Khiyara will continue to serve as chairman while performing acting CEO responsibilities.

Mayor Arnerich and Board Member Kohli agreed that we need to have clarity so Chairman Khiyara doesn’t feel like there is uncertainty.

Mayor Marchand asked if acting as interim CEO and Chairman is a conflict of responsibilities.

Troy Brown stated that we need to get some legal clarification around a few things: 1. The Brown Act requirements applicable to the i-GATE meetings 2. Any 1090 conflicts related the Chairman serving as interim CEO Troy stated his understanding that there is no 1090 conflict as long as the interim CEO role is unpaid, but it would be a conflict if the role is paid. Even outside of that, we need to ensure we are following Brown Act procedures related to notices, agenda postings, etc.

Several board members commented that Chairman Khiyara will likely not want to serve in an unpaid role, and that he should be paid.

Board Member Lazansky commented that Chairman Khiyara is replacing Thomas, and Thomas was paid, therefore Chairman Khiyara should be paid.

Brandon Cardwell commented that during his discussion with the Livermore city attorney the previous Friday, he was made aware of the 1090 conflict which refers to any board member engaging in “self-dealing�, or an act that leads to financial gain from the organization of which he is a board member. Brandon recommended that before any compensation is paid to Chairman Khiyara for his services as interim CEO, Chairman Khiyara consult one of the city attorneys for clarity on this rule.

Chairman Khiyara stated he had spoken with the Livermore city attorney the prior week, and the city attorney had told him there was no conflict.

Brandon Cardwell replied that the first question the city attorney asked him was, “is Shail being paid.”

Chairman Khiyara stated he was unaware of that.

Troy Brown commented that the issue here is the source of the funding and the role of the CEO. If the board wants Chairman Khiyara to continue serving in both roles, it needs to understand that there is a conflict there, and he won’t be able to accept money. Troy recommended the discussion be tabled until a legal analysis could be obtained.

Nelson Fialho offered a substitute motion to Dr. Kamena’s earlier motion, which was: Within the next 30 days, the city attorney’s office for the City of Livermore make a recommendation on the compensation and structure for the interim CEO position.

Mayor Arnerich seconded.

Board Member Kohli asked if the analysis would be ready in time for the next NEST board meeting at the end of April.

Nelson Fialho recommended the board keep that meeting date in place, and if the decision is to compensate Chairman Khiyara for the interim CEO position, make it retroactive to the start date of that role.

Motion carried unanimously.

Mayor Arnerich agreed with and seconded the previous motion to have all merger documents put together for review by June.

Brandon Cardwell asked if the board needed that motion considering the board had voted at the previous meeting to endorse moving forward with the merger, and that the current motion being considered was in fact giving direction to the chairman of the Development Corporation board.

Nelson Fialho stated that what Chairman Sblendorio is asking for is the NEST board’s support to put together a staff report-like package that includes all the necessary documents to move forward.

Mayor Arnerich moved to support Chairman Sblendorio’s effort to prepare a comprehensive package describing the merger process and provide 30 days for partner cities’ attorneys to review, facilitated by Pleasanton’s city attorney. The motion carried unanimously.

Mayor Arnerich also commented that separate from that, we need to look at board membership going forward and how we bring new board members who can also bring revenue.

Chairman Khiyara commented that if the determination is that the CEO we bring in to the organization cannot also serve as a board member, it will present a challenge to bringing in a private sector CEO. Dr. Clark left the meeting.

Nelson Fialho stated that he would like to invite Chairman Khiyara to the discussion with the city attorneys of whether and how we can accomplish that.

Discussion of CEO Search Chairman Khiyara asked if the board wants to begin a search for the CEO. Board Member Rotman asked what was done during the search for Thomas and what did we learn.

Chairman Khiyara commented that a search committee was formed comprised of LLNL, both chairs, and a couple of other members. Candidate interviews were conducted by the partner cities.

Mayor Arnerich added that the lessons learned were that we didn’t have revenue, we couldn’t offer much, and we didn’t have a clear idea of what we were doing. We did the interviews, stopped, and then Thomas came along.

Brandon Cardwell noted that Thomas actually dropped out prior to interviews due to the lack of a coherent mission.

Mayor Arnerich recommended the board delay until after June 30th and work with Chairman Khiyara to stabilize who we are, what we are, and then talk about sustainability so the person coming in has an understanding of those things.

Chairman Khiyara asked if Mayor Arnerich was suggesting to not search during that timeframe.

Mayor Arnerich answered we shouldn’t search because we don’t know what we are searching for, and we don’t have the sustainability to offer that person. We also should get through the board merger process and not bring a CEO into the middle of that.

Board Member Kohli agreed that the board should bring someone in “clean” after all of these items have been dealt with.

Mayor Marchand agreed that the board needs to have a unified vision before trying to hire an executive, but i-GATE is burning capital, and it can’t afford to wait five or six months.

Brandon Cardwell offered that Thomas Spirgi was a very operational CEO, and it seemed that toward the end of Thomas’ time at i-GATE, the board really wanted him to engage in more visioning of how to grow the organization. If the board wants a CEO who is going to help chart that course, it makes sense to bring that person in during the visioning process, not after.

Mayor Arnerich stated that the bottom line is that i-GATE is running out of money.

Brandon Cardwell asked if that gets better by waiting.

Mayor Arnerich stated that it doesn’t, but we need to quickly look at other opportunities to bring revenue into the organization, or we will be out of business before we start.

Brandon Cardwell commented that the execution team is looking at ways to extract more revenue from the facility based aspect of i-GATE. He also noted that the opportunity to monetize relationships doesn’t come until there are successes to demonstrate that value. We are now at the point where we have those successes at a small scale. We are fostering companies that are procuring services, so following the Plug and Play model of pay-to-play for service providers

may be viable. There are 200 companies at Plug and Play so we have to have a sense of scale and proportion, but we have only been at this in earnest for 18 months.

Chairman Khiyara stated that the board needs to set up the structure to create the touch points that can be monetized, such as a fund.

Mayor Arnerich commented that those are all good ideas, but we haven’t been having those discussions at the board.

Nelson Fialho added that while he agrees that it would be ideal to have those structures in place, the CEO search is going to take time, and we can simultaneously create a search committee to find the next CEO. Chairman Khiyara commented that there are three people in the pipeline for the next CEO, all Tri-Valley residents. Reena Jadhav has dropped out due to family commitments. Whoever constitutes the search committee, Chairman Khiyara offered to bring the other two to the table.

Brandon Cardwell added that last time the search committee posted the job on LinkedIn, but that didn’t yield much. In the end, all of the final candidates came through networks.

Nelson Fialho asked who wants to be on search committee.

Mayor Marchand, Board Member Lazansky, Board Member Kohli, Mayor Thorne, and Chairman Khiyara volunteered.

Mayor Arnerich suggested we in parallel continue to look at ways to drive revenue.

Chairman Khiyara asked if the search committee is to vet candidates or actually hire one.

Mayor Arnerich replied, to vet candidates and then bring them back to the board.

Chairman Khiyara offered to send the job description to the search committee.

MEETING ADJOURNED