Article 4. Funding of JVS Services and Other PFS Contract Costs; Success Payments

Article 4 of the Pathways to Economic Advancement, Pay for Success Contract.

Table of Contents

Article 4. Funding of JVS Services and Other PFS Contract Costs; Success Payments

Section 4.01 SFMA Operating Account; SFMA Deposit Account; Funding Plan. Prior to the Service Commencement Date, SFI will have obtained financial commitments (the “Funding Commitments”) in the aggregate amount of $12,430,000 from the Funding Partners pursuant to a plan to support the provision of JVS Services and funding of certain additional costs under this PFS Contract, the Evaluation Implementation Agreement, the Side Letter Agreement and the Technical Assistance Services Agreement (the “Funding Plan”), set forth in Schedule E.

SFMA shall maintain a deposit account (the “SFMA Operating Account”), and all cash proceeds received by SFMA from the Funding Partners pursuant to the Private Funding Agreements, including any interest earned on such amounts, shall be deposited into the SFMA Operating Account and may only be transferred in accordance with the Funding Plan, as set forth in Schedule E.

SFMA shall maintain the deposit account with account number and wire instructions previously provided to the Commonwealth (the “SFMA Deposit Account”), and all cash proceeds received by SFMA from the Commonwealth hereunder as Success Payments, including any interest earned on such amounts, shall be deposited into the SFMA Deposit Account and may only be transferred in accordance with the Private Funding Agreements.

Section 4.02 Success Payments Determination and Representations.

(a) As provided in Section 35VV(c) of the Enabling Act, the Secretary hereby determines that the payments that the Commonwealth is obligated to pay under this PFS Contract are a general obligation of the Commonwealth for which its full faith and credit are pledged for the benefit of JVS, as the Authorized Contractor under this PFS Contract, and its successors and permitted assigns. The maximum amount of Success Payments from the PFS Fund that can be made pursuant to this PFS Contract with the benefit of such pledge is $15,000,000, subject to the provisions of this PFS Contract, including those governing whether or not such payments shall be made.

(b) The Secretary hereby represents that this PFS Contract meets the Authorizing Criteria for (and constitutes) an Authorized PFS Agreement under the Enabling Act and that, specifically:

a. A substantial portion of the Success Payments under this PFS Contract is contingent on the achievement of the specific outcomes set forth in Schedule C and Section 4.03 hereof (collectively, the “Final Outcomes”);

b. This PFS Contract provides for the Independent Evaluator to confirm that the Final Outcomes have been met via an objective review process, namely the Evaluation Plan included in Schedule C and Section 4.03 hereof;

c. As set forth in Section 4.03, Schedule B and Schedule D hereto, this PFS Contract provides for the timing and calculation of the amount of Success Payments that would be earned during each fiscal year of this PFS Contract if the Final Outcomes are met;

d. As set forth in Section 4.02(c) hereof, this PFS Contract provides for a sinking fund requirement under which the Secretary will request an appropriation in the manner and amount stated in said section; and

e. The Secretary hereby determines that this PFS Contract will result in significant performance improvements and budgetary savings for the Commonwealth across all impacted agencies if the Final Outcomes are achieved.

(c) The Secretary shall request an appropriation for each fiscal year during the Contract Term in an amount equal to the expected Success Payments that the Commonwealth will ultimately be obligated to pay in the future based upon the service provided during such fiscal year if the Final Outcomes are achieved. Such amounts upon appropriation shall be deposited to the PFS Fund maintained by the Secretary.

Section 4.03 Outcomes Measurement, Calculation and Payment of Success Payments. The Commonwealth shall make payments (the “Success Payments”) to SFMA contingent upon the calculation of payments as follows.

(a) Final Outcomes Measurement. Measurement of Final Outcomes will occur according to the Project Timeline specified in Schedule B and the methodology specified in Schedule C. The Independent Evaluator will provide the Operating Committee with a Final Outcomes Report for review and verification for each quarter during each Measurement Period as set forth in Schedules B and C, which will form the basis for calculating Success Payments. Other reports for purposes of monitoring will occur as specified in Schedule F.

(b) Calculation of Success Payments. Calculation of Success Payments will occur according to the frequency specified in Schedule B and the methodology specified in Schedule D. SFI will provide a proposed invoice, inclusive of the approved Final Outcomes Report to the Operating Committee for review and verification. Verified invoices (the “Success Payment Invoice”) will then be submitted to the Secretary;

(c) Payment. Within forty-five (45) calendar days following receipt of each Success Payment Invoice, the Secretary shall cause to be paid to SFMA (by wire transfer of immediately available funds) a Success Payment equal to the Success Payment calculated and set forth in the Success Payment Invoice. Such Success Payments shall be made from funds available in the PFS Fund into the SFMA Deposit Account. The unavailability of funds in the PFS Fund shall not excuse any breach by the Secretary of her obligation to make timely payments as required by this PFS Contract.

(d) The time periods stated in this Section 4.03 may be extended by written agreement of SFI, SFMA and the Commonwealth. Any agreement to extend time under this provision shall not require the approval of the Funding Partners, unless such extension materially affects the timing of Success Payments.

Section 4.04 Wind Up. Upon notification of termination of this PFS Contract in accordance with Article 8, any remaining amounts in the SFMA Operating Account and the SFMA Deposit Account, if any, will be applied in accordance with the wind-up provisions set forth in Section 5 of Schedule E.

Section 4.05 Capital Shortfall. SFMA will send notices to the Funding Partners or their representatives approximately three months prior to each of the ten capital calls, which are expected to take place approximately one month prior to the Service Commencement Date and approximately every June and December thereafter (the “Capital Call Dates”). The Funding Partners will have a deadline of 45 calendar days, but no less than 30 days, prior to each of these Capital Call Dates to provide the committed capital after which the Funding Partner will be in default (“Capital Shortfall”). SFMA shall provide a) confirmation to the Commonwealth that committed capital has been provided prior to each of the Capital Call Dates and b) information to the Commonwealth as promptly as practicable upon becoming aware of facts that might lead to a Capital Shortfall. SFMA shall keep the Commonwealth promptly apprised of the status of any actions being taken to remedy any such Capital Shortfall.

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