Contract analysis

I. INTRODUCTION AND EXECUTIVE SUMMARY Lumos Analytics Inc. ("Lumos" or "Respondent"), a Delaware corporation headquartered at 580 Howard Street, Suite 400, San Francisco, California 94105, respectfully submits this Confidential Mediation Statement to the Honorable Robert K. Tannenbaum (Ret.) in advance of the mediation session scheduled for November 14, 2023, at the Bay Area Dispute Resolution Center, 44 Montgomery S

II. BACKGROUND: THE PARTIES AND THEIR RELATIONSHIP A. Lumos Analytics Inc. Lumos is an enterprise SaaS and fintech analytics platform that serves the financial services industry. The company's core product suite delivers real-time financial analytics, proprietary risk scoring algorithms, and regulatory compliance dashboards designed to meet the needs of banks, asset managers, and insurance companies operating in comp

III. THE MASTER SERVICES AGREEMENT The following is a summary of the key provisions of the MSA relevant to this dispute. A complete copy of the MSA, including all exhibits, is provided as Exhibit A to this Confidential Mediation Statement. A. Execution and Term The Master Services Agreement was executed on January 15, 2021, by and between Lumos Analytics Inc., as service provider, and Pinnacle Financial Holdings LLC,

Section 3.4 of Exhibit C establishes a cap on the maximum SLA credits available in any rolling twelve (12)-month period. The cap is set at thirty percent (30%) of the annual subscription fee: 30% × $1,440,000 = $432,000 This cap represents the parties' negotiated understanding of the maximum financial exposure that Lumos would bear for service level failures within any twelve-month period. The cap was the product of

Section 3.5 of Exhibit C establishes the procedural requirements for requesting SLA credits. The provision states, in relevant part: Customer must submit a written credit request to Provider within thirty (30) calendar days following the end of the calendar month in which the downtime event occurred. The request must specify the affected services and the observed downtime. Failure to submit a timely credit request sh

Section 2.3 of Exhibit C sets forth certain categories of downtime that are excluded from the uptime calculation for purposes of determining SLA credits. Notably, the exclusions include: Downtime attributable to customer infrastructure or third-party services not provided by [Lumos] shall be excluded from the uptime calculation. This exclusion is directly relevant to the March 2023 incident (INC-5033), where the root

I. Limitation of Liability (§11.2)

Section 11.2 of the MSA contains an aggregate limitation of liability provision. The aggregate liability of either party under the MSA, arising from any and all claims, whether in contract, tort, or otherwise, is capped at twelve (12) months of fees paid or payable under the agreement. Based on the annual subscription fee of $1,440,000, the aggregate liability cap is: $1,440,000 This cap applies regardless of the num

Section 11.3 of the MSA contains a mutual waiver of indirect, consequential, incidental, special, exemplary, and punitive damages, including but not limited to lost profits, lost revenue, loss of business, and loss of data. This waiver is mutual—it applies equally to both Lumos and Pinnacle—and was a material term of the parties' bargained-for agreement. Section 11.3 provides, in relevant part: IN NO EVENT SHALL EITH

Section 14.3 of the MSA provides for mandatory mediation in San Francisco, California, as a prerequisite to the commencement of litigation. If mediation is unsuccessful, the parties agreed to submit to the exclusive jurisdiction of the state and federal courts located in San Francisco County, California. The parties' agreement to mediate reflects their original intent, at the time of contracting, to resolve disputes

Section 14.1 of the MSA provides that the agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to its conflict of laws principles.

IV. THE ALLEGED INCIDENTS A. Overview. Pinnacle alleges that Lumos experienced four distinct service disruptions between October 2022 and March 2023 that resulted in uptime levels below the 99.95% monthly commitment set forth in the SLA. Pinnacle's formal demand letter, dated May 1, 2023, and sent by its counsel at Hargrove, Tillman & Burch LLP, asserts a total damages claim of $2,870,000 arising from these four inci

V. LUMOS'S DEFENSES Lumos has substantial defenses to Pinnacle's claims across multiple dimensions. Each defense is addressed in turn below. A. Defense 1: Disputed Uptime Measurements — Sentinel Monitoring Data Lumos's platform infrastructure is monitored by Sentinel Uptime Services Inc. ("Sentinel"), an independent third-party monitoring and incident-response logging provider headquartered at 2200 Mission College Bl

Section 3.5 of Exhibit C to the MSA establishes a clear and unambiguous procedural requirement for SLA credit requests: the customer must submit a written credit request within thirty (30) calendar days following the end of the calendar month in which the downtime event occurred. The provision further states that failure to submit a timely credit request constitutes a forfeiture of the credit for the applicable perio

Section 11.3 of the MSA contains a broad, mutual waiver of indirect, consequential, incidental, special, exemplary, and punitive damages, including but not limited to lost profits, lost revenue, loss of business, and loss of data. The waiver applies regardless of whether damages are based on contract, tort, strict liability, or any other theory, and regardless of whether the party has been advised of the possibility

Section 2.3 of Exhibit C to the MSA ("Exclusions from Uptime Calculation") expressly excludes from the uptime calculation any downtime attributable to customer infrastructure or third-party services not provided by Lumos. Brindoval is, by definition, a "third-party service not provided by Lumos." The downtime associated with INC-5033 was directly caused by a configuration change within the Brindoval environment and t

VI. LUMOS'S ASSESSMENT OF MAXIMUM EXPOSURE Based on the defenses set forth above, Lumos assesses its exposure across three scenarios: A. Best Case for Lumos Under this scenario, Lumos's strongest defenses are applied in full: All consequential damages ($2,750,000) are barred by Section 11.3 (Defense 4). Under this scenario, Lumos's total exposure is $30,000. B. Realistic Middle Case Under this scenario, Lumos's defen

VII. PROPOSED SETTLEMENT FRAMEWORK A. Guiding Principles Lumos approaches this mediation with the recognition that both parties benefit from preserving their commercial relationship. Pinnacle has been a valued Lumos customer since January 2021, and the annual subscription of $1,440,000 represents a significant and important account. From Pinnacle's perspective, the Lumos platform has become an embedded component of i

1. Service Credits. Lumos proposes providing service credits in an amount to be negotiated during mediation, applied against future subscription invoices under a renewed MSA, in lieu of any cash payment. The service credits would be structured to provide Pinnacle with meaningful near-term cost relief while reflecting the contractual and factual defenses set forth in this statement. Lumos envisions that the appropriat

2. MSA Renewal. As a condition of the settlement, Pinnacle would renew the MSA for an additional multi-year term (to be negotiated, but Lumos envisions a two- or three-year renewal), demonstrating both parties' commitment to the continuation of the relationship. The renewal would be on terms mutually agreed upon by the parties, incorporating the enhancements described below.

3. Reduced Subscription Fee. Lumos is willing to discuss a modest reduction in the annual subscription fee for the renewal term. A fee reduction, even if relatively modest on an annual basis, would provide Pinnacle with significant savings over the life of a multi-year renewal and would represent a tangible concession by Lumos.

4. Enhanced SLA Commitments. Lumos is prepared to offer meaningful improvements to the SLA in an amended Exhibit C to the renewed MSA. Potential enhancements include, but are not limited to: (a) An increased uptime commitment above the current 99.95% threshold; (b) Real-time uptime dashboard access for Pinnacle, providing transparency and enabling Pinnacle to independently monitor Lumos platform availability on an on

5. Mutual Release. The settlement would include a full and mutual release of all claims, counterclaims, demands, and causes of action arising from or related to Incidents INC-4471, INC-4602, INC-4815, and INC-5033, and any other matters arising under the MSA through the date of the settlement agreement.

6. No Admission of Liability. The settlement would be on a no-fault, no-admission basis. Neither party would admit liability or wrongdoing in connection with the settlement.

7. Confidentiality. All terms of the settlement, including the amount of any service credits, fee reductions, or other consideration, would remain strictly confidential. Neither party would disclose the terms of the settlement to any third party, except as required by law or with the prior written consent of the other party. C. Commercial Rationale The commercial rationale for a service credit- and renewal-based sett

VIII. CONCLUSION Lumos Analytics Inc. respectfully requests that the Honorable Robert K. Tannenbaum consider the following in facilitating the mediation session scheduled for November 14, 2023: The strength of Lumos's contractual defenses. Lumos has presented six independent defenses, each of which individually reduces Pinnacle's recoverable damages, and which collectively demonstrate that Pinnacle's $2,870,000 deman