Donor agreement between the Mercatus Center and George Mason University to fund a faculty position

A 2009 agreement between George Mason University and the Mercatus Center, a research center located at the school, to fund a professor position

AGREEMENT BETWEEN Hiik
THE MERCATUS. CENTER AND GEORGE msommnuaasm i is
REGARDING THE ESTABLISHMENT or a a

THIS AGREEMENT is made July 22, 2009 between the Mercatus Center. Inc., 3301 North
Fairfax Drive, Arlington, Virginia 2220] ("Mercatus") and George Mason University, Fairfax, Virginia

("the University").

WHEREAS Mercatus has received an offer of assistance from the Charles G. Koch Charitable
Foundation ("Koch?) to create the Mercatus Professorship at the Mercatus Center at George Mason

University and

WHEREAS Mercatus deems it in its interest to support the academic excellence and
advancement of the University; and

WHEREAS the University deems it in its interest to attract a quali?ed faculty member to their
department of Economics to ful?ll the objectives of the Professorship (as herein described);

NOW THEREFORE, Mercatus and the University enter into this Agreement to create a tenured
faculty position within George Mason University Faculty Position") to be occupied by the initial
holder of the Professorship (that is, the candidate selected as a result of the procedures detailed in this
document, the "Professor"). In consideration of the University?s creation of the GMU Faculty Position,
Mercatus agrees to contribute $1,000,000 to the George Mason University Foundation as scheduled in

Section 5, infra.

The ?nal say in all faculty appointments lies in speci?ed GMU procedures, involving academic
approval and ?nal approval by the Board of Visitors. Nothing in this document shall be construed as
overriding such procedures. Alterations in the terms or conditions of this Agreement can be instituted
only upon mutual agreement of the parties to the agreement and acceptance of any changes is likewise
subject to the rules and procedures of George Mason University.

J. Ohiectives and Requirements of the Professorship. The objective of the Professorship is to
advance the understanding, acceptance and practice of those free market processes and principles which
promote individual freedom, opportunity and prosperity including the rule of law, constitutional
government, private property and the laws, regulations, organizations, institutions and social norms upon
which they rely. The occupant of the Professorship ("Professor") shall hold a doctorate degree and shall
be quali?ed in and committed to the foregoing principles. The objectives of the Professorship shall be
accomplished through teaching, research, publishing, print and electronic media and such other means as
may reasonably be deemed to comport with the mission of Mercatus. The primary academic af?liations
of the Professor will be GMU and Mercatus. At the conclusion of each academic year, the occupant shall
provide the Selection Committee and the Advisory Board with a brief summary of the principal activities,
accomplishments and expenditures of the Professorship for?the previous year and a budget and plan for
the subsequent academic year. Any additional objectives or requirements for the Professorship shall be
decided by unanimous vote of the Selection Committee (Section 2, m.

in addition to an annual report by the Professor to the Selection Committee and Advisory Board,
the president of Mercatus will report to these same bodies on how the Professor has contributed to the
mission of Mercatus, as well as the purposes de?ned in the grant underwriting the Professorship.
Substantive contributions to Mercatus programs include 5 or more per year of the following:

a Teaching in a Capitol Hill Campus course or event;

. Producing a research product an article published in a refereed journal, a working
paper of Suitable quality, a useful database, a public interest comment), decidedjointly
with the President and General Director of Mercatus, and which is closely related to the
Center?s mission of producing highly credible research about the underlying sources of

prosperity and poverty;
a Participating in a minimum of three Mercatus fundraising or public relations events;
I Supervising a student supported by Mercatus on a research project related to the

Mercatus mission a research project in Regulatory Studies, a dissertation, other
research likely to signi?cantly advance the student?s knowledge and skills).

Substituting these contributions with alternative activities is allowable upon unanimous approval
of the selection committee.

2, Selection Committee. The Selection Committee shall have five (5) members. The decision-
making rule for the Selection Committee shall be majority vote, except in the case of changing or
providing additional objectives or requirements, in which case the decision-making rule shall be by
unanimous vote. The members of the initial Selection Committee the Selection Committee that
chooses an Initial Professor as de?ned in Section 4, infra) will be: the President or Executive Director of
Mercatus or the most closely corresponding position, two (2) members designated by Koch, one of whom
must be a member of the GMU faculty, the Chair of the GMU department where it is anticipated the
Professor will receive the majority or all of his appointment, and one (i member of the same department,
to be designated by the department Chair. In addition to the Selection Committee. candidates will also
interview with speci?c members of Mercatus staff appointed by Mercatus General Director, President,
Executive Director, and Chief Operating Of?cer. The Selection Committee will take staff evaluations
into account when making hiring decisions. In the event that the selectidn committee and the Provost do
not come to an agreement on selecting a candidate for the Professorship, the donated funds would be
returned to the donor if it is then an entity described in Section 501(c)(3) of the Internal Revenue Code. if
the donor is an individual or an entity that is not described in Section 501(c)(3), the donated funds would
be redirected to other charitable and educational activities selected by Mercatus in its sole discretion.

3. Structure of Professorship. The Professorship will exist at Mercatus in perpetuity in accordance
with the terms and conditions of the agreement between Mercatus and Koch (Appendix A). An invitation
to occupy the Professorship will require a majority vote of the Selection Committee. Through this
Agreement, the University agrees to provide the Initial Professor with a tenured faculty position at George
Masml University Faculty Position"), with all the privileges and protections associated with that
title, at an annual salary of the appropriate amount. The University agrees to pay the university salary and
providevfull university bene?ts for the GMU Faculty Position as long as an Initial Professor quali?es for a
tenured faculty position at George Mason University and otherwise remains quali?ed for the
Professorship (as determined by the Advisory Board at its sole discretion). For purposes of this
agreement and the separate agreement in Appendix A, Initial Professor shall refer to any individuals
chosen by the Initial Selectigommineeand rati?ed by GMU to occupy both the Professorship and the

GMUFaculty Position prio to September 1,2014?)

The Professorship shall be operated exclusively for charitable and educational purposes within
the purview of Section 501(c)(3) of the Internal Revenue Code of 1954 or such section or comparable
section as hereinafter amended. No part of the funds shall inure to the bene?t of any private individual
and/or business corporation and no part of the activities of the Professorship shall consist of carrying on

2 LW.O9

or otherwise attempting to influence legislation or participating or intervening in any political campaign
on behalf of any candidate for public of?ce.

4. Advisory ?gam. Through the agreement between Mercatus and Koch (Appendix A), an
Advisory Board shall be created to receive an annual summary of the activities, accomplishments, and
expenditures of the Professorship and to review the administration of the agreement and a budget and plan
for the subsequent academic year. In doing so, it shall have the right to: .

Consult with the Selection Committee or the Mercatus Center or Koch regarding the
quali?cations of candidates for the Professorship;

0 Discuss with the Grantees (the Mercatus Center and GMU) and their
representatives/aHiliates, their administrative of?cers or trustees, the appointment of an
occupant of the Professorship and any other matters relating to carrying out the purposes
for which the Professorship is established;

- Ensure compliance with the terms of this Agreement through apprOpriate administrative
or legal channels;

Make periodic assessments of the Professor's performance and/or activities; and

Make a determination (based on the individual's performance or otherwise) that the
Professor ?lling the Professorship is no longer quali?ed to do so, and upon this
determination will submit in writing to Koch and to Mercatus a recommendation that the
Professor be removed from the Professorship, and that Mercatus withheld the payment of
additional funds under this agreement during a vacancy in the Professorship.

The Advisory Board shall have no authority or control, either directly or indirectly over the funds
received by Mercatus, over the administration of the Professorship or the selection of the occupant of the
Professorship except through its determination of an occupant's continued quali?cation to fill the
Professorship and shall only act as a body that has a continuing interest in seeing that the terms and
conditions of this Agreement and the obligations of Mercatus, GMU and their representatives/af?liates

are carried out.

5. Payment Schedule. Mercatus will make the ?rst payment of $200,000 to the George Mason
University Foundation on or before August 31, 2009. Each of the additional ?ve (5) annual payments
($160,000) shall be paid on or before the last day in August each year beginning in 2010 and ending in
2014. In the event that the Professorship may be vacant during any portion of this period, payments may
be suspended during such period of vacancy. When the vacancy is ?lled, payments will then be resumed
and the payment schedule extended correspondingly so that the total amount to be paid will remain the
same. The payment schedule will be as follows:

On or before Amotmt

August 3 i 2009 $200,000
August 3 l, 2010 $160,000
August 31, 2011 $160,000
August 2012 $160,000
August 3 1, 2013 $160,000
August 31, 2014 $160,000

No additional service fee or tax will be applied to this contribution.

3 LW.09

6. State Law Provisions. This Agreement shall be governed by the laws of the state of Virginia. In
addition, to the extent an amendment does not con?ict with federal law, the agreement may be amended

by mutual agreement of the parties.

IN WITNESS WHEREOF, the Mercatus Center and the University have executed this
Agreement on the date ?rst stated above.

George on University

8~15w0?

133.: Date:

Peter N. Steams Fro vos:

By: 6% @1199} Date:

Dean, College of Arts 85 Sciences

Me entus Center, Inc.

a . Date:

Brian Hooks COO

By: Cit/Q Date:

Tyler/C en General Director

4 LW.09

AGREEMENT BETWEEN
THE MERCATUS CENTER AND THE CHARLES G. KOCH CHARITABLE FOUNDATION
REGARDING THE ESTABLISHMENT OF A PROFESSORSHIP

THIS AGREEMENT is made July 22, 2009 between The Charles G. Koch Charitable
Foundation (?Koch?) and the Mercatus Center, Inc. (?Mercatus?), a quali?ed exempt charitable
Organization. The purpose of this Agreement is to memorialize the structure, purposes, and recruitment
process for the Mercatus Professorship (the ?Professorship?) at the Mercatus Center at George Mason
University and to clarify the relationship between the Professor and Mercatus.

The initial challenge was made by Menlo F. Smith to raise funds for 5 professorships at GMU at
a total of $5 million. Mr. Smith offered to assist in ?nding one or more grants totaling $1.25 million
toward the effort, which was then matched by the Charles G. Koch Charitable Foundation with an
additional $1.25 million. This initial $2.5 million to be raised by Mr. Smith and pledged by the Koch
Foundation is contingent upon at least an additional $2.5 million in gents or commitments -- intended to
match the amount of the Smith and Koch monies to' be secured by December 31, 2006, The additional
$2.5 million must be raised for the purpose of supporting these professorships. In the event that these
additional funds are received by December 2006 GMU and Koch agree to the terms of this
Agreement" in full Requisite funds were raised within the appropriate timeframe and this challenge was

met.

The terms of this Agreement shall not be amended without the consent, in writing. of Koch and
Mercauis.

The ?nal say in all faculty appointments lies in speci?ed GMU procedures, involving academic
approval and ?nal approval by the Board of Visitors. Nothing in this document shall be construed as
overriding such procedures. Alterations in the terms or conditions of this Agreement can be instituted
only upon mutual agreement of the parties to the agreement and acceptance of any changes is likewise
subject to the rules and procedures of George Mason University.

. (?roam Transfer. In order to establish the Professorship at the Mercatus Center at George
Mason University (?Professorship?), Koch shall assist in ?nding one or more grants to be paid to
Mercatus in the sum of $500,000 under the schedule of three annual installments as stipulated in Section

5, infra; the ?rst to be received in July of 2009.

2. Qbr'eCtiyes and Rgpr'g?ments of the Professorship. The objective of the Professorship is to

advance the understanding, acceptance and practice of those free market processes and principles which
promote individual freedom, opportunity and prosperity including the rule of law, constitutional
government, private property and the laws, regulations, organizations institutions and social norms upon
which they rely. The occupant of the Professorship (?Professor? shall hold a doctorate degree and shall
be quali?ed 1n and committed to the foregoing principles. Notwithstanding any provision to the contrary
herein, the Professorship position shall be publicly referred to as the ?Charles G. Koch Professor. The
objectives of the Professorship shall be accomplished through teaching, research, publishing, print and
electronic media and such other means as may reasonably be deemed to comport with the mission of
Mercatus. The primary academic afflictions of the Professor will be GMU and Mercatus. At the
conclusion of each academic year, the occupant shall provide the Selection Committee and the Advisory
Board with a brief summary of the principal activities, accomplishments and expenditures of the
Professorship for the previous year and a budget and plan for the subsequent academic year. Any

LW.09

additional objectives or requirements for the Professorship shall be decided by unanimous vote of the
Selection Committee (Section 3,

In addition to an annual report by the Professor to the Selection Committee and Advisory Board,
the Mercatus president will report to these same bodies on how the Professor has contributed to the
mission of Mercatus, as well as the purposes de?ned in the grant underwriting the Professorship.
Substantive contributions to Mercatus programs include 5 or more per year of the following:

0 Teaching in 11 Capitol Hill Campus course or event;

it Producing a research product an article published in a refereed journal, a working paper
of suitable quality, a useful database, a public interest comment), decided jointly with the
President and General Director of Mercatus, and which is closely related to the Center?s
mission of producing highly credible research about the underlying sources of prosperity and
Poverty;

11 Participating In a minimum of three Mercatus fundraising or public relations events;

0. Supervising a student supported by Mercatus on a research project related to the Mercatus
mission a research project in Regulatory Studies, a dissertation, other research likely to
signi?cantly advance the student's knowledge and skills).

Substituting these contributions with alternative activities is allowable upon unanimous approval
of the Selection Committee.

3. Selection Committee. The Selection Committee shall have ?ve (5) members. The decision-
making rule for the Selection Committee shall be majority vote, except in the case of changing or
providing additional objectives or requirements, in which case the decision-making rule shall be by
unanimous vote. The members of the Initial Selection Committee the Selection Committee that
chooses an Initial Professor as de?ned in Section 4, infra) will be: the President or Executive Director of
Mercatus or the most closely corresponding position, two (2) members designated by Koch, one of whom
must be a member of the GMU faculty, the Chair of the GMU department where it is anticipated the
Professor will receive the majority or all of his appointment, and one member of the same department,
to be designated by the department Chair. In addition to the Selection Committee, candidates will also
interview with speci?c members of Mercatus staff appointed by Mercatus General Director, President,
Executive Director, and Chief Operating Officer. The Selection Committee will take staff evaluations
into account when making hiring decisions. In the event that the selection committee and the Provost do
not come to an agreement on selecting a candidate for the Professorship, the donated funds would be
returned to the donor if it is then an entity described in Section 501(c)(3) of the Internal Revenue Code. if
the donor is an individual or an entity that is not described in Section 501(c)(3), the donated funds would
be redirected to other charitable and educational activities selected by Mercatus in its sole discretion.

4. Structure of Professorsmn. The Professorship will exist at Mercatus in perpetuity in accordance with
the terms and conditions of this Agreement An invitation to occupy the Professorship will require a
majority vote of the Selection Committee. Additionally, through a separate agreement between the
Mercatus and George Mason University (Appendix A) any Initial Professor will have a tenured faculty
position within George Mason University Faculty Position?), afforded all the privileges and
protections associated with that title. Mercatus will enter into that agreement with the University 1n
reliance upon ful?llment of this Agreement. George Mason University will pay the university salary and
provide full university bene?ts for the GMU Faculty Position as long as an Initial Professor quali?es for a
tenured faculty position at George Mason University and otherwise remains quali?ed for the
Professorship (as determined by the Advisory Board at its sole discretion). For purposes of this
Agreement and the separate agreement in Appendix A, Initial Professor shall refer to any individuals

2 LW.O9

chosen by the Initial Selection Committee and rati?ed by GMU to occupy both the Professorship and the
GMU Faculty Position prior to September 1,2014.

Should an initial holder of the Professorship vacate the position after September 1, 2014,
Mercatus Will have sole discretion, with the concurrence of the Advisory Board, to bestow the Mercatus
position on the subsequent holder including the option of transferring the professorship to an existing
GMU professor or other Mercatus Scholar whose work is consistent with the original intent of this

Agreement.

5. Payment Schedule. The ?rst Koch? arranged payment of $200,000 shall be made to Mercatus on
or before July 3-1, 2009. Each of the additional two (2) armual payments ($150 000 each) shall be paid on
or before the last day in July each year beginning' In 2010 and ending in 201 1. In the event that the
Professorship may be vacant during any portion of this period, payments may be suspended during such
period of vacancy. When the vacancy is ?lled, payments will then be resumed and the payment schedule
extended correspondingly so that the total amount to be paid will remain the same. The payment schedule

will be as follows:

On or before Amognt

July 31, 2009 $200,000
July 31, 2010 $150,000
July 31, 2011 $150,000

No additional service fee or tax will be applied to this grant.

6. Receipt and Management of Funds. The grantors or any other persons or entities may make
additional contributions of cash or other real or personal property to support the work of the
Professorship. All contributions shall be subject to the terms and conditions of this Agreement. Any
funds being held for the Professorship shall be invested to produce optimal income and/or growth with
reasonable risk and any such income shall be utilized for the bene?t of the Professorship.

7. Safeguard of Philanthropic Intent an Educational Obiectives. In order to preserve and safeguard
the philanthropic and educational intent of thIs Agreement and the educational objectives of GMU and
Mercatus, the latter entities shall have full and unfettered discretion to administer the Professorship as
they deem appropriate, provided that such administration shall be consistent with the terms of this
Agreement and in accordance with the objectives, purposes and principles set forth in this Agreement.

The Professorship shall be operated exclusively for charitable and educational purposes within
the purview of Section 501(c)(3) of the Internal Revenue Code of 1954 or such section or comparable
section as hereina?er amended. No part of the funds shall inure to the bene?t of any private individual
and/or business corporation and no part of the activities of the Professorship shall consist of carrying on
or otherwise attempting to influence legislation or participating or intervening in any political campaign
on behalf of any candidate for public office.

8. Advisggy An Advisory Board shall be created consisting of one representative named by
Koch; one representative to be named by Meroatus; and a third representative to be named by the ?rst two
representatives. These representatives shall serve so long as they are willing and able to do so and shall
be replaced by the same means. The Advisory Board shall have the responsibility of reviewing the
administration of Sections 2 through 7 of this Agreement and a budget and plan for the subsequent

academic year. In so doing it shall have the right to;

3 LW.09

- Consult with the Selection Committee or the Mercatus Center or Koch regarding the

quali?cations of candidates for the Professorship;

Discuss with the Grantees and their representatives/a?iliates, their administrative of?cers or

trustees, the appointment of an occupant of the Professorship and any other matters relating to

carrying out the purposes for which the Professorship is established;

0 Ensure compliance with the terms of this Agreement through appropriate administrative ?or
legal channels;

. Make periodic assessments of the Professors performance and/or activities; and

Make a determination (based on the individual's performance or otherwise) that the Professor

?lling the Professorship is no longer quali?ed to do so, and upon this detenm'nation will

submit in writing to Koch and to' Mencatus a recommendation that the Professor be removed

from the Professorship, and that Mercatus withhold the payment of additional funds under

this Agreement during a vacancy in the Professorship.

The Advisory Board shall have no authority or control, either directly or indirectly over the funds
received by Mercatus, over the administration of the Professorship or the selection of the occupant of the
Professorship except through its determination of an occupants continued quali?cation to ?ll the
professorship and shall only act as a body that has a continuing interest in seeing that the terms and
conditions of this Agreement and the obligations of Mcrcatus, GMU and their representatives/af?liates

are carried out,

9. State Law Provisions. This Agreement shall be governed by the laws of the state of Virginia. In
addition, to the extent an amendment does not con?ict with federal law, the Agreement may be amended

by mutual agreement of the parties.

IN WITNESS WHEREOF, Mercatus and Koch have executed this Agreement on the date ?rst
stated above.

(Eagles G. Koch Foundation

(18$ng l? Damn (7-4 ?7

Richtird Fink President

Mercatus Center, Inc.

rl3y Date: ocl

Brian Hoe
Bycj?ll?gv 634% Date:

Tyler (2- wen General Director

i
.
HmnaWrI-rd-u

4 LW.O9