Business Model.docx

Exhibit 4.0 (Business Model) Solicitation No. 5400028075

Managed Cloud Services

Exhibit 4.0 Business Model

Solicitation No. 5400028075

Table of Contents

IntroductionThe following documents comprise the entire Business Model for the Managed Cloud Services Request for Proposal (RFP) with Competitive Negotiations:

· Exhibit 4.0 (Business Model)

· Exhibit 4.1 (Pricing Structure)

· Exhibit 4.2 (Financial Responsibility Matrix)

· Exhibit 4.3 (Form of Invoice) This Exhibit contains the methodology and requirements for calculating the Charges for all Services, unless otherwise expressly provided in the Contract.

The Service Provider shall follow the instructions in these and all other RFP documents, including all Exhibits.

All capitalized terms in this Exhibit 4.0 (Business Model) shall have the same meanings given in Exhibit 1.1 (Definitions). All Exhibit 4.0 (Business Model) documents hereto are incorporated by reference herein.

The Service Provider shall be responsible for the accuracy and completeness of the operational and financial assumptions underlying its pricing. All pricing assumptions will be included in Exhibit 4.1 (Pricing Structure), Assumptions.’ If no assumptions are specified, then the State will assume there are none. The State requires that all assumptions be eliminated prior to contract execution. The State’s contractual arrangements with a Service Provider shall not be subject to assumption verification or post-closing diligence. Accordingly, Service Provider shall minimize their assumptions and seek to eliminate all assumptions during the proposal and due diligence period. Service Provider shall not be entitled to adjust its pricing or any other terms of the Contract due to incorrect, incomplete, unresolved, or undocumented assumptions on the part of the Service Provider.

All Charges calculated in accordance with Exhibit 4.0 (Business Model) shall be reported to the State by the Service Provider per Exhibit 4.3 (Form of Invoice). The Service Provider shall not impose any fixed or monthly required minimum fees or support level pricing for any Service or at the total contract level; in no event will the State be required to pay Service Provider for Services not consumed or utilized by the State.

All Charges are expressed and shall be paid in U.S. Dollars.

Financial Provisions Fees Payment of Charges In consideration of Service Provider’s performance of the Services and in accordance with South Carolina Code §11-35-45, the State shall pay Service Provider pursuant to Exhibit 4.1 (Pricing Structure). Service Provider shall pay any relevant subcontractors the appropriate share of such payments no later than the 10th day after the day Service Provider receives payment from the State. Service Provider shall ensure that its subcontractors pay their suppliers the appropriate share of their payment from Service Provider no later than the 10th day after Service Provider pays the subcontractor.

No Additional Charges Unless expressly set forth in this Contract or in Exhibit 4.0 (Business Model) as a responsibility of the State, there shall be no charges, fees, expenses, or other amounts payable to Service Provider for the provision of Services. Any costs incurred by Service Provider prior to the Commencement Date are included in the Charges and are not to be separately paid or reimbursed by the State.

Incidental Expenses

1. Service Provider acknowledges that, except as expressly provided otherwise in this Contract, expenses that Service Provider incurs in performing the Services (including management, travel and lodging, document reproduction and shipping, equipment, and software required by Service Provider Personnel) are included in the Charges set forth in Exhibit 4.1 (Pricing Structure). Accordingly, such Service Provider expenses shall not be separately chargeable or reimbursed by the State.

2. Other expenses incurred by the Service Provider, including taxes, shipping, packing, postal, and moving expenses, are the Service Provider's financial responsibility and are not separately chargeable or reimbursable.

No Charge for Reperformance At no additional cost or expense to the State, Service Provider shall reperform (including any required backup or restoration of data from scheduled backups or, if not available on such backups, restoration by other means with the State's reasonable cooperation) any Services that result in incorrect outputs or that are not correctly performed due to an error or breach of this Contract by Service Provider, and the resources required for such performance shall not be counted in calculating the Charges payable or resources utilized by the State hereunder. Service Provider shall be solely responsible for any costs and expenses incurred by the State in connection with such performance.

No Charge for Contract Changes Unless otherwise agreed, changes in the Services (including changes in State Rules, State Standards, Strategic Plans, Technology Plans, processes, Materials, Equipment, and Systems) and changes in the rights or obligations of the Parties under this Contract shall result in changes in the applicable Charges only if and to the extent (i) this Contract expressly provides for a change in the Charges in such circumstances; (ii) the agreed upon Charges or pricing methodology expressly provides for a price change in such circumstances; or (iii) such change meets the definition of New Services, and additional Charges are applicable in accordance therewith.

Efforts to Minimize Service Provider shall continually seek to identify methods of reducing and minimizing the State's total cost of receiving the Services (including Retained Expenses) and shall notify the State of such methods and the estimated potential savings associated with each such method.

Taxes If applicable, the State will provide additional guidance regarding assessment of taxes. Service Provider shall not include any taxes in the Charges except as expressly provided in this Section. Without limiting the generality of the foregoing, Service Provider’s responsibilities in connection with taxes arising under or in connection with this Contract include the following obligations.

Income Taxes Service Provider shall be responsible for its income taxes.

Sales, Use, and Property Taxes Service Provider shall be responsible for any sales, lease, use, personal property, stamp, duty, or other such taxes on Equipment, Materials, or property it owns or leases or licenses from a third party, including any lease or license assigned pursuant to this Contract.

Taxes on Goods or Services Used by Service Provider Service Provider shall be responsible for all sales, service, value-added, lease, use, personal property, excise, consumption, and other taxes and duties payable by Service Provider on any goods or services used or consumed by Service Provider in providing the Services where the tax is imposed on Service Provider’s acquisition or use of such goods or services and the amount of tax is measured by Service Provider’s costs in acquiring or procuring such goods or services and not by the State's cost of acquiring such goods or services from Service Provider.

Service Taxes

1. Subject to item 1.1.7.4(2) and item 1.1.7.4(3) below, Service Provider shall be financially responsible for all Service Taxes, provided that the State is responsible for any such tax imposed on the Services after the Effective Date.

2. Notwithstanding item 1.1.7.4(1) above, if Service Taxes imposed on the Services after the Effective Date (whether new or higher) are the result of Service Provider moving all or part of its operations to a different jurisdiction (e.g., relocating the performance of the Services to a new service location or Service Provider using an Affiliate or Subcontractor to perform all or part of the Services), Service Provider shall be financially responsible for such new or higher Service Taxes.

3. Notwithstanding item 1.1.7.4(1) and item 1.1.7.4(2) above, if the State shall become responsible for Service Taxes after the Effective Date (whether new or higher), the Parties shall identify and diligently seek to agree upon legally permissible means of minimizing such new or higher Service Taxes. If the financial impact of all such new or higher Service Taxes exceeds six percent (6%) of the then-current annual Charges, the State may elect to terminate this Contract in its entirety or to terminate any portions impacted by such new or higher Service Taxes (unless Service Provider agrees to assume financial responsibility for such new or higher Service Taxes exceeding the six percent (6%) threshold).

4. To the extent required under applicable Laws, Service Provider shall charge the State for any such Service Taxes and then credit the State (to the extent permitted by law) or reimburse the State for that portion of such Service Taxes for which Service Provider is financially responsible under this provision.

Withholding Any withholding tax or other tax of any kind that the State is required by applicable Law to withhold and pay on behalf of Service Provider with respect to amounts payable to Service Provider under this Contract shall be deducted from said amount prior to remittance to Service Provider. The State shall provide to Service Provider reasonable assistance, which shall include the provision of documentation as required by revenue authorities, to enable Service Provider to claim exemption from or obtain repayment of such withheld taxes and shall, upon request, provide Service Provider with a copy of the withholding tax certificate.

Tax Filings Service Provider represents, warrants, and covenants that it shall file appropriate tax returns and pay applicable taxes owed arising from or related to the provision of the Services in all applicable jurisdictions. At the State's request, Service Provider shall provide the State with (i) written confirmation that Service Provider has filed all required tax forms and returns and has collected and remitted all applicable amounts, and (ii) such other information pertaining to applicable taxes as the State may reasonably request.

New Services Procedures

1. If the State requests that Service Provider perform any New Services not provided for in the scope of this Contract but reasonably related to the Services, Service Provider shall promptly prepare a New Services proposal for the State's consideration. Unless otherwise agreed by the Parties, Service Provider shall prepare such New Services proposal at no additional charge to the State and shall deliver such proposal to the State within ten (10) days of its receipt of the State’s request, provided that Service Provider shall respond more quickly in the case of a pressing need or an emergency. The State shall provide information as Service Provider reasonably requests to prepare such New Service proposal. Such New Services proposal shall include, among other things, the following at a level of detail sufficient to permit the State to make an informed business decision: (i) a project plan and fixed price or price estimate for the New Service; (ii) a breakdown of such price or estimate to include relevant cost and pricing data in accordance with Solicitation Document (Managed Cloud Services), Section I.1 Mandatory Clauses - State; (iii) a description of the service levels to be associated with such New Service; (iv) a schedule for commencing and completing the New Service; (v) a description of the new hardware or software to be provided by Service Provider in connection with the New Service; (vi) a description of the software, hardware, and other resources, including Resource Unit utilization, necessary to provide the New Service; (vii) any additional facilities or labor resources to be provided by the State in connection with the proposed New Service; (viii) any risks associated with the New Service and/or the integration of the New Service into the existing environment; and (ix) in the case of any Developed Materials to be created through the provision of the proposed New Services, any ownership rights therein that differ from the provisions of Attachment I.4 (Negotiated Terms and Conditions), Ownership of Data and Materials and in Exhibit 1.4 (General Provisions), Article 10 Materials. The Procurement Officer may accept or reject proposals for New Services at their sole discretion. The approval of New Services will be in the form of a change order signed by the Procurement Officer. Upon completion of the change order, Service Provider shall perform the New Services and be paid in accordance with the proposal submitted by Service Provider and the provisions of this Contract.

2. If Service Provider is unable to provide such New Services using its resources (including resources it procures through a supplier or Subcontractor), the State may require Service Provider to engage (as Service Provider’s subcontractor) a third party approved or selected by the State to provide such services. Notwithstanding any provision to the contrary, (i) Service Provider shall act reasonably and in good faith in formulating such pricing proposal; (ii) Service Provider shall use commercially reasonable efforts to identify potential means of reducing the cost to the State, including utilizing subcontractors as and to the extent appropriate; (iii) such pricing proposal shall be no less favorable to the State than the pricing and labor rates set forth herein for comparable Services; and (iv) such pricing proposal shall take into account the existing and future volume of business between the State and Service Provider.

Services Evolution and Modification The Parties anticipate that, as referenced in Exhibit 1.4 (General Provisions), Section 7.10 Technology Evolution, the Services shall evolve and be supplemented, modified, enhanced, or replaced over time to keep pace with technological advancements and improvements in the methods of delivering Services and changes in the operations of the State. The Parties acknowledge and agree that these changes shall modify the Services and shall not be deemed to result in New Services unless the changed services meet the definition of New Services.

Admin Requests Service Provider shall not agree to provide New Services to the State without the prior approval of the Procurement Officer. Without limiting Admin's other rights under this Contract or applicable Law, if Service Provider fails to comply strictly with this Section, it shall receive no compensation for any Services rendered to any person or Entity violating this Section.

Extraordinary Events Definition As used in this Contract, an "Extraordinary Event" means a circumstance in which an event or discrete set of events has occurred or is planned with respect to the operations of the State that results or shall result in a change in the scope, nature, or volume of the Services that the State shall require from Service Provider. Examples of the kinds of events that might cause such substantial increases or decreases include the following:

1. Changes in locations where the State operates;

2. Changes in constituencies served by, or activities or operations of, the State;

3. Privatizations, dispositions, or reorganizations of the State;

4. Changes in the method of service delivery;

5. Changes in the applicable regulatory environment or applicable Laws;

6. Changes in the State's policy, technology, or processes.

Consequence If an Extraordinary Event occurs, the State may, at its option, request more favorable pricing with respect to applicable Charges for any functional service area specified in Exhibit 4.1 (Pricing Structure) in accordance with the following:

1. Service Provider and the State shall mutually determine on a reasonable basis the efficiencies, economies, savings, and resource utilization reductions, if any, resulting from such Extraordinary Event and, upon the State's approval, Service Provider shall then proceed to implement such efficiencies, economies, savings, and resource utilization reductions as quickly as practicable and in accordance with the agreed upon schedule. As the efficiencies, economies, savings, or resource utilization reductions are realized, the Charges specified in Exhibit 4.1 (Pricing Structure) shall be promptly and equitably adjusted to pass through to the State the net benefit of such efficiencies, economies, savings, and resource utilization reductions; provided, that the State shall reimburse Service Provider for any net costs or expenses incurred to realize such efficiencies, economies, savings, or resource utilization reductions if and to the extent Service Provider: (i) notifies the State of such additional costs and obtains the State's approval prior to incurring such costs; (ii) uses commercially reasonable efforts to identify and consider practical alternatives, and reasonably determines that there is no other more practical or cost-effective way to obtain such savings without incurring such expenses; and (iii) uses commercially reasonable efforts to minimize the additional costs to be reimbursed by the State.

2. An Extraordinary Event shall not result in Charges to the State being higher than such Charges would have been if the rates and charges then specified in Exhibit 4.1 (Pricing Structure) had been applied. The State may, at its sole option, elect, for each Extraordinary Event, at any time to forego its rights under this Section and instead apply rates and charges specified in Exhibit 4.1 (Pricing Structure) to adjust the Charges.

Unanticipated Change If an Unanticipated Change occurs, and if the State requests any modifications to the Services to incorporate such Unanticipated Change, the Parties shall use Exhibit 1.4 (General Provisions), Section 7.5 Change Control procedures to equitably adjust the Charges and other relevant provisions of this Contract to take such Unanticipated Change into account. An "Unanticipated Change" shall consist of a material change in the technologies and/or processes available to provide all or any portion of the Services which is outside the normal evolution of technology experienced by the Services, that was not generally available as of the Effective Date and that would materially reduce Service Provider’s cost of providing the Services.

Refundable Items Paid Amounts Where the State has paid for a Service, function, or item for which Service Provider is assuming financial responsibility under this Contract, Service Provider shall promptly refund to the State, upon either Party identifying the payment, that portion of such paid expense which is attributable to periods after Service Provider assumes financial responsibility.

Refunds and Credits If Service Provider should receive a refund, credit, discount, or other rebate for goods or services paid for by the State on a Retained Expense, cost-plus or cost-reimbursement basis, then Service Provider shall (i) notify the State of such refund, credit, discount, or rebate, and (ii) pay the full amount of such refund, credit, discount, or rebate to the State.

Invoicing and Payments Invoicing Invoice After the Commencement Date, and within five (5) Business Days after the end of each month in which Services are provided thereafter, Service Provider shall meet with the State to review any preliminary Charges and Resource Unit (RU) volumes that Service Provider expects to charge. Service Provider shall provide variance explanations for Resource Unit dollar and volume fluctuations based on the thresholds established by and at the level of detail required by the State.

1. Invoices will be in a format in accordance with Exhibit 4.3 (Form of Invoice). Each Monthly Invoice shall, if applicable:

a. Comply with all applicable legal, regulatory, and accounting requirements, including the South Carolina Code of Laws;

b. Allow the State to validate volumes and Charges; and

c. Comply with the State accounting and billing requirements, including providing sufficient detail for each Customer (project code or subaccount) to allocate costs to all Federal and State programs in accordance with the relative benefits received and to make Federal claims according to the Federal cost plan of such Customer.

2. Within ten (10) Business Days after the end of each month, Service Provider shall present the State (including Admin or Customers) with an invoice (the “Monthly Invoice”) for all Charges due and owing for the preceding month. Each invoice shall include the related data utilized to establish the Charges and sufficient information to validate the Service volumes and other Charges.

3. The Monthly Invoices to the State (including Admin or Customers) will include the Service Provider’s name, date of invoice, service period, and other pertinent information to verify the Customer’s receipt of the Services. It must also provide detailed and customized information as requested.

a. Charges will be expressed in U.S. Dollars.

b. Charges will be reported in arrears (no advance or concurrent charges).

c. Charges shall not include any taxes (see Section 1.1.7 Taxes).

4. The Service Provider shall participate in independent verification and validation (IV&V) activities coordinated and approved by the State. The State may also require the Service Provider to utilize a designated measurement tool, approved by the State, in the invoicing or Chargeback process, at no additional cost to the State, if IV&V results determine the existing measurement or tracking tools do not consistently perform accurately or otherwise in accordance with the requirements of this Exhibit 4 (Business Model). Any tool changes and/or processes proposed by Service Provider require prior State Acceptance, which the State may withhold in its sole discretion.

Credits To the extent a Service Level Credit, Deliverable Credit, or other credit may be due to the State pursuant to this Contract, Service Provider shall provide the State with an appropriate credit against amounts then due and owing. If no further payments are due to Service Provider, Service Provider shall pay such amounts to the State within thirty (30) days of the date such amounts become due and owing.

Time Limitation Unless otherwise requested by Service Provider in advance, and agreed by the State in its sole discretion, if Service Provider fails to provide an invoice to the State for any amount within four (4) invoice cycles (i.e., issuance of invoices) of the month in which the Services in question are rendered or the expense incurred, or such other period designated by the State, Service Provider shall waive any right it may otherwise have to charge for and collect such amount.

Payment Due Subject to the other provisions of this Exhibit, each Monthly Invoice due under this Contract shall be due and payable by the State under and in accordance with South Carolina Code §11-35-45.

Set Off Subject to Section 1.1.10 Unanticipated Change, the State may set off against any and all amounts to be paid or reimbursed by the State any amount that Service Provider is obligated to pay the State hereunder, provided that the State notifies Service Provider in writing of the amounts of, and the basis for, such set off.

Disputed Charges Disputed Amounts

1. The State may withhold any amount of any invoice in dispute as provided in and in accordance with the South Carolina Code of Laws.

2. For invoice amounts paid by the State that become the subject of a dispute, in addition to any amounts that Service Provider may subsequently credit to the State arising from resolution of such dispute, Service Provider shall include interest on the reimbursed amounts accrued.

No Waiver Neither the failure to dispute any Charges or amounts prior to payment nor the failure to withhold any amount shall constitute, operate, or be construed as a waiver of any right the State may otherwise have to dispute any Charge or amount or recover any amount previously paid.

Volume Discount The volume discount excludes all consideration of transition services.

Service Provider shall apply the volume-based discounts in Exhibit 4.1 (Pricing Structure) for the total work delivered to the State. The discounts apply on an aggregate incremental tiers basis and are not applied unilaterally to the entire sum of Charges. For example, if the Monthly Charges for service types equals $2.2M, the first $1M will be discounted by the first-tier percent, the second $1.2M will be discounted by the second-tier percent, and so on.

Contract Performance Incentives

1. The Service Provider shall have the option throughout the term of this Contract to propose initiatives to the State that create value in areas not already identified and required in the Contract. These Contract Performance Incentives (CPIs) are intended to incentivize Service Provider performance beyond the requirements of the Contract. CPIs are outcomes-based performance incentives designed to reward innovation investments that create value shared between the Service Provider and the State. For example, the Service Provider may consider investing in a consumption management program designed to optimize State spend that creates value beyond the initiative's cost.

2. The State may identify a business objective and solicit the Service Provider for a CPI initiative proposal, or the Service Provider may independently approach the State with a proposed CPI initiative. In either scenario, the Service Provider will develop a CPI proposal that includes the following:

a. Objective and quantified outcome;

b. Acceptance criteria defining measure of success;

c. Detailed description of initiative and solution;

d. Business model, including:

i. Service Provider investment amount and description;

ii. Total value created and proposed sharing of value between Service Provider and the State; and

e. Assumptions and dependencies.

3. The State has the option to accept, propose changes to, or reject the proposed CPI initiative. The State does not anticipate funding the CPI initiative but rather sharing the value that is created with the Service Provider. All approved CPI initiatives will be documented with a Work Order that describes the business model terms and acceptance criteria in detail.

Personnel Projection Matrix

1. Set forth in Exhibit 4.1 (Pricing Structure), ‘Staffing’ is the Personnel Projection Matrix. The Service Provider will staff Service Provider Personnel in a manner consistent with the Personnel Projection Matrix, and the Service Provider’s staffing for the performance of Services will not be changed without the State’s prior approval. The State may withhold such approval, among other reasons, if there are good faith concerns that such changes could have an adverse impact on the Service Provider’s ability to perform its obligations under the Agreement. The State reserves the right to change the Personnel Projection Matrix format from time to time in its reasonable discretion and upon advance notice to the Service Provider. The Service Provider will alert the State to any of the following changes:

a. At any time during the first Contract Year, the number of Service Provider Personnel is five percent (5%) or more below the counts provided for such period;

b. At any time during the second Contract Year, the number of Service Provider Personnel is ten percent (10%) or more below the counts provided for the applicable period described in clause 1.6(1)(a); or

c. At any time during or after the third Contract Year, the number of Service Provider Personnel is fifteen percent (15%) or more below the annual totals reflected for such period described in clause 1.6(1)(a).

2. The Service Provider will provide to the State, every quarter, an updated Personnel Projection Matrix reflecting the current and future counts. The Service Provider will adjust the numbers in the Personnel Projection Matrix to account for any material and sustained increase or decrease in the required level of Services above or below the Resource Units as of the Effective Date (including New Services). The Service Provider will provide its rationale for calculating such adjustments to the State, which will be subject to the review and approval of the State.

3. During the first twelve (12) months following the Commencement Date any changes, material or otherwise, to the deployment of Service Provider Personnel will be reported by the Service Provider to the State within five (5) Business Days following the end of each month in which such changes occurred, and after such twelve (12) month period, the Service Provider will report all material changes in the number of Service Provider Personnel within the tenth (10th) Business Day following the end of each month in which such changes occurred.

4. For twenty-four (24) months following the Commencement Date, the Service Provider will provide the State with a report by the tenth (10th) Business Day following the end of each month identifying the Service Provider Personnel terminated for cause or performance during that month.

5. The State reserves the right to discontinue this Personnel Projection Matrix requirement at any point during the term of the Contract.

Charges Categories

1. The annual Charges for Service Provider Services for each Contract Year are set forth in Exhibit 4.1 (Pricing Structure) and reflect the resources required to provide Service Provider Services. There are four (4) Service Provider Services Charge categories that fully compensate Service Provider for providing Services, each designed to bundle Services with similar economic profiles:

a. Resource Unit (RU) Charges are for steady-state run services. There are two types of Resource Unit Charges:

i. Fixed Charges encompass Services with static cost structures, even during times of growth or recession. These Charges are not subject to change based on the volume of Service consumption.

ii. Variable Charges represent Services whose cost structure to deliver the Services is highly dependent on the underlying volumes of Service. These Charges are calculated by multiplying the applicable unit rate from Exhibit 4.1 (Pricing Structure) for the related contract month by the quantity of corresponding RUs actually consumed by the State during the applicable Billing Month.

b. Deliverable Charges are Fixed Charges for Services paid upon delivery and the State’s Acceptance of the applicable Deliverables. There are two (2) types of Deliverable Charges:

i. Transition Charges are for Transition Service Deliverables completed and accepted.

ii. Request for Solution (RFS) Project Payment Based Deliverables are for future Projects not currently anticipated that must be agreed upon between the State and the Service Provider and require an approved solution proposal priced using the Rate Card Rates set forth in Exhibit 4.1 (Pricing Structure). RFS Project Payment Based Deliverable Charges will be billed on a fixed milestone basis.

c. Rate Card Charges compensate Service Provider for services using the Rate Card rates set forth in Exhibit 4.1 (Pricing Structure).

d. Pass-Through Expenses are for Service Provider expenses that the State has agreed to pay directly to a Third Party or reimburse to Service Provider.

2. Exhibit 4.0 (Business Model) is not intended to fully describe each Service in detail but rather how the Services are charged, with Exhibit 2.1 (Managed Cloud Services Statement of Work), providing a description of the Services, Exhibit 3.0 (Performance Model) describing the expected performance, and Exhibit 2. 2 (Managed Cloud Services Solution), the Service Provider solution document describing how Service Provider intends to deliver the Services, including the required people, processes, and tools included in the Charges. Exhibit 4.2 (Financial Responsibility Matrix) provides guidance with respect to the financial responsibilities of the Service Provider and the State.

3. The Service Provider shall charge the State on a monthly basis in accordance with Exhibit 4.3 (Form of Invoice) for a pro rata portion of the annual Fixed Charge, which shall be calculated by dividing the annual Fixed Charge specified in Exhibit 4.1 (Pricing Structure) for the applicable Contract Year by the twelve (12). Variable Charges may change on a monthly basis based on the methodology for calculating Charges. The Service Provider shall charge the State for Deliverable Charges upon completion of Deliverables, but no sooner than the first month following the Commencement Date.

4. Charges may be revised from time to time by agreement of the Parties based on the State’s usage, demand, and business requirements. Charges may only be modified over time in accordance with the Contract, including this Exhibit. Service Provider acknowledges and agrees that the Charges (RU, Deliverable, and Rate Card), as adjusted pursuant to this Exhibit, fully compensate Service Provider for providing the Services.

Changes to Charges The State may, from time to time (e.g., based on information provided by Service Provider in response to a request from the State for analysis for savings opportunities pursuant to Exhibit 1.4 (General Provisions), Section 7.5.3 State Approval – Cost, Adverse Impact) propose to add, remove, or modify the methodology for charging Services and may also from time to time, by giving at least thirty (30) days’ notice to Service Provider (or such shorter period as may be required by applicable Laws), move Charges from one (1) Charge category to another Charge category, in each case for purposes of re-allocating the pricing under the Contract without changes in scope; provided that, in any such event, the aggregate Monthly Charges for all Charge categories shall not be increased or decreased as a result of such re-allocation. Notwithstanding the foregoing, in connection with changes to Charge categories, the State may also propose appropriate adjustments to reduce the existing or new Charges, as applicable, to reflect advancements or changes in technology and related changes in functionality and relative performance where applicable. If the State proposes to add or remove a Charge Category or move Charges from one Charge category to another, the Parties shall agree on the Charges components applicable thereto and on corresponding adjustments to the Charges components for the remaining other Charge categories. Notwithstanding the foregoing, to the extent any of the foregoing changes are required by federal funding requirements or applicable Laws, Service Provider will implement such changes in a timely manner upon notice from the State, and if such changes require the addition or removal of a Charge category, then the Charges components applicable thereto and the corresponding adjustments to the Charges components for the remaining other Charge categories shall be equitably adjusted by the Parties.

Billing Month The monthly billing period ("Billing Month”) is from the first day of the calendar month through the last day of the same calendar month. If the Commencement Date of Service or any New Service occurs on a day later than the first day of a calendar month, then the first Billing Month shall be the period from the Commencement Date through the last day of such calendar month, and in that case, any amounts payable on a monthly basis shall be prorated for such month based upon the actual number of days from the Commencement Date to the end of such month. In the event of Termination, if the Termination Date occurs on a day prior to the last day of a calendar month, then the last Billing Month shall be the period from the first calendar day of the month of Termination through the Termination Date. Any amounts payable on a monthly basis shall be prorated for such month based upon the actual number of days from the first calendar day of the month of Termination to the Termination Date.

Resource Unit Charges General Resource Unit Charges consist of Variable and Fixed Charges. The Variable Charges pricing methodology utilizes Resource Units defined in Article 3 Resource Unit Definitions, with Charges calculated from the Unit Rates provided in Exhibit 4.1 (Pricing Structure). The monthly Variable Charges shall be calculated by multiplying the applicable Unit Rate for the applicable Contract Year by the quantity of corresponding Resource Units actually consumed during the applicable Billing Month. Fixed Charges are static and billed on a monthly basis, as documented in Exhibit 4.1 (Pricing Structure).

Resource Unit Measurement Methodology

1. In managing the provision of Services, the Service Provider shall maintain the flexibility to respond to changes in the State’s demand for the Services on a day-to-day and month-to-month basis, particularly those portions of the Services where the State experiences significant variations in demand. Unless otherwise provided in the Contract, if the provision of the Services requires increased dedicated support, additional resources, or extended hours of service, the Service Provider shall provide such support, resources, or extended hours of service at no additional charge to the State.

2. Resource Unit usage is measured on a monthly basis to determine the State’s actual consumption for calculation of Charges. Starting on the Commencement Date and monthly thereafter, Service Provider will measure, track, and report usage of Resource Units. Unless otherwise expressly stated herein with respect to an RU, Service Provider will measure and determine as of the last day of each calendar month the RU volume used in determining Resource Unit Charges for such month. Upon Commencement, Service Provider shall compute Monthly Charges on a prorated daily basis.

3. The Service Provider, with the State, will develop billing triggers to determine the criteria to initiate or stop billing a Resource Unit volume. These billing triggers will be documented in the Service Management Manual and, at a minimum, summarize all information related to the calculation of Charges for each Resource Unit Category, including billing start trigger, billing stop trigger, system of record, CMDB billing query, and exclusions.

4. Prior to the Commencement Date, the State and the Service Provider will review the measurement tools and processes for RU measurement, as well as resulting data, to ensure that such tools and processes are appropriate, accurate, producing consistent data, and reaching all devices to be measured. Any automated system used by the Service Provider to perform invoicing and billing responsibilities will be configured to track and record all user entries, reports, modifications, and all other actions taken in relation to the billing source data. Subject to the audit provisions of the Contract, the State or its designee may, at any time, perform an audit. The Service Provider will document the tools, methodologies, and processes used to measure, track, and report RU usage in the SMM. This documentation will be completed prior to Commencement Date and subsequently maintained as necessary when changes occur. The method and tools for measuring, tracking, and reporting Resource Units are subject to the State’s written approval.

5. Service Provider will record all billable RU consumption amounts and apply the contractual rates and pricing for final billing to the State per Exhibit 4.3 (Form of Invoice). The State may require additional consumption reports for governance or other needs.

6. The Resource Unit Charges shall fully compensate the Service Provider for providing the applicable Services at the actual usage levels for each Resource Unit in a given month. In no event will the State be required to pay Service Provider for volumes not consumed by the State.

Deliverable Charges General Deliverable Charges consist of Transition Charges and Project Charges. Deliverable Charges shall only be chargeable to the State upon the State’s acceptance of the applicable Deliverable in writing. Deliverable Charges shall be itemized on the applicable Monthly Invoice at a level of detail approved by the State.

Transition Charges The State will pay Transition Deliverables completed in the month the deliverable is approved by the State as part of the Monthly Invoice to the State. Transition Charges will be itemized on the applicable Monthly Invoices to the State in sufficient detail to delineate the specific nature of the Charges. The report will identify each Transition Charge (i.e., the relevant Transition Deliverable with which it is associated). Unless otherwise agreed, the State shall not incur any charges, fees, or expenses payable to Service Provider or any third party engaged by the Service Provider in connection with the Transition Services, other than those charges, fees, and expenses specified in Exhibit 4.1 (Pricing Structure).

Request for Solution (RFS) Project Payment Based Deliverables

1. Payment Based Deliverable Charges apply to certain projects that may arise from a Request for Solution (RFS) as described in Exhibit 2.1 (Managed Cloud Services Statement of Work). RFS Project Based Deliverables are to be used on discrete units of work that do not recur on a regular or periodic basis and have each of the following characteristics:

a. A defined start and end date;

b. Requested and approved by the State;

c. Not an inherent, necessary, or customary part of the day-to-day (i.e., regular, not daily) Services;

d. Not required by Service Provider to meet the existing Service Levels;

e. Not otherwise part of the Services to be provided within the monthly Charges; and

f. Requires more than forty (40) hours of effort (excluding hours for project management of the work).

2. Service Provider and the State shall agree to the RFS Project Payment Based Deliverables using Attachment H (Form of Work Order). The Form of Work Order must be agreed upon between the State and the Service Provider and requires an approved solution proposal priced using the Rate Card rates set forth in Exhibit 4.1 (Pricing Structure), Rate Card.’ The Payment Based Deliverables shall be associated with defined Deliverables that align with the completion of specified RFS project phases or interim Deliverables that are measurable and acceptable to the State.

3. If Service Provider fails to successfully complete any Payment Based Deliverable by the date specified in the Service Proposal, the State shall not be required to pay any portion of the Charges associated with the Payment Based Deliverable unless, and until, the successful completion of that Payment Based Deliverable is approved by the State. The Service Provider and the State agree that the Deliverable Amount shall reflect the accrued, but not yet earned, Service Provider Charges incurred in performing the RFS project related to the Payment Based Deliverable.

4. After any given Payment Based Deliverable has been successfully completed by Service Provider and approved by the State, Service Provider invoice the State for the Payment Based Deliverable amount. Service Provider shall not charge the State for any amounts other than the Payment Based Deliverable amount.

Rate Card Services The State may, at their sole discretion, request Rate Card Services delivered utilizing the Exhibit 4.1 (Pricing Structure), Rate Card’ rates and the labor categories and skill sets. Rate Card Services are billable on a Monthly Productive Hours Worked basis under the following guidelines:

1. For each Rate Card resource that performs Monthly Productive Hours Worked in a given month, Service Provider shall charge the State at the applicable rate in Exhibit 4.1 (Pricing Structure), which is exclusive of all travel expenses.

2. Service Provider shall not charge the State in any given month for more than the maximum number of Monthly Productive Hours Worked, calculated by multiplying the number of Business Days in the month by eight (8) hours, unless overtime is approved by the State, which is to be paid at the same rate as Monthly Productive Hours Worked.

3. Service Provider shall not charge the State for Rate Card Resource overtime unless the State agrees to this in advance, in writing, and on an exception basis.

4. Service Provider shall be unable to charge the State for Rate Card Services exceeding 10% of the total Managed Cloud Services contract value over the life of the contract unless approved in advance by the Procurement Officer.

5. The State shall not incur any Rate Card Charges for the following activities:

a. Services performed by Service Provider Personnel that have not been approved, in advance, by the State per established approval processes;

b. Services performed by Service Provider Personnel providing non-Rate Card Services;

c. Project scoping, solutioning, and proposal activities;

d. Time expended by Service Provider Personnel to remedy Service Provider performance failure;

e. Nonproductive time (whether or not conducted on State Facilities), such as holidays, vacation time, sick leave, time spent consuming meals, or other personal time; and

f. Time used for education, training, mentoring, travel, administrative, or management (e.g., internal meetings, internal reporting, process implementation work, time and expense accounting, performance reviews, knowledge transfer).

6. The Charges for the Service Provider Personnel performing Rate Card Services shall be calculated as the product of:

a. Rates set forth in Exhibit 4.1 (Pricing Structure); and

b. The number of Productive Hours the Service Provider’s Personnel devoted to providing such approved Services during such month.

New Services Charges If and to the extent that the State requests Service Provider to perform any New Services in accordance with the terms of the Contract, the Charges shall be adjusted in accordance with the corresponding proposal submitted by Service Provider and approved by the State in accordance with Section 1.1.8 New Services; provided, however, that to the extent that any New Services are FTE-based, the Charges for such New Services shall be subject to the terms of Section 2.6 Rate Card Services, unless the Parties otherwise agree in writing.

Resource Unit Definitions This section sets forth the definitions for the Resource Units (RUs). RUs will be measured in accordance with Section 2.4 Resource Unit Charges above.

Cloud Service Provider (CSP) Service Charges The following Charges will fully compensate the Service Provider for MCS Services:

Resource Units:

Cloud Services - AWS Cloud Services – Azure Resource Unit Definition: The actual charges for this Resource Unit are inclusive of the cloud charges from CSP, net of all available discounts off the list price for any authorized cloud service provider, and actual monthly invoice net of partner discounts. If the CSP changes the discount program for the Service Provider, the Service Provider shall notify the State of the change and impact, and a contract amendment may be initiated to adjust the partner discount rates so that the State continues to receive most favorable pricing. The Service Provider may not retain funds from discounts obtained from the CSP. The CSP is compensated for support under the Managed Cloud Service Support Charges RUs, and the CSP charges are effectively considered pass-through. The Service Provider is required to provide the State with the CSP contract when requested for the State to verify partner discounts, bulk purchase commitments, and other relevant information.

Unit of measurement: Dollars Costs included:

Actual charges from CSPs only Managed Cloud Service (MCS) Support Charges The following Charges will fully compensate the Service Provider for MCS Services:

1. Resource Units:

Managed Cloud Service Provider Support - AWS – Base Services Managed Cloud Service Provider Support - AWS – Optional Services Managed Cloud Service Provider Support - Azure – Base Services Managed Cloud Service Provider Support - Azure – Optional Services Resource Unit Definition: Each MCS Support Charges RU corresponds to a Cloud Tier and a CSP. Service Provider shall recover for its Services by charging a percentage (%) uplift on the CSP charges, net of all available discounts.

Unit of measurement: Dollars Costs included:

Service Provider shall include AWS Enterprise Support or equivalent as described in Exhibit 2.1 (Statement of Work). The other CSPs do not include CSP support; however, this is subject to change at the State’s discretion. An example is a change in the contract structure or support delivery by a CSP.

Labor, hardware, software, management tools, and other miscellaneous costs necessary…