PRIVILEGED & CONFIDENTIAL SUBJECT TO CONTRACT — DRAFT

PRIVILEGED & CONFIDENTIAL SUBJECT TO CONTRACT — DRAFT
MASTER SERVICES AGREEMENT
FIRST DRAFT — FOR DISCUSSION PURPOSES ONLY
Prepared by:
Calderwood & Harkness LLP 600 Lexington Avenue, 30th Floor New York, NY 10022
Drafter: Christy Bauer, Lead Associate Date of Circulation: April 3, 2023 Matter No.: 1022-00008
MASTER SERVICES AGREEMENT
This MASTER SERVICES AGREEMENT (this "Agreement") is entered into as of __, 2023 (the "Effective Date"), by and between:
NORTHGATE AMERICAS, INC., a corporation organized and existing under the laws of the State of Delaware, with its principal office located at 1700 Market Street, Suite 2400, Philadelphia, Pennsylvania 19103, and its registered office at c/o Calvert Corporate Services, Inc., 1209 Orange Street, Wilmington, Delaware 19801 (hereinafter referred to as "Customer" or "Licensee");
and
CEDARPOINT SYSTEMS INTEGRATION, INC., a corporation organized and existing under the laws of the State of Delaware, with its headquarters located at 11400 Commerce Park Drive, Suite 600, Reston, Virginia 20191, and its registered office at c/o Calvert Corporate Services, Inc., 1209 Orange Street, Wilmington, Delaware 19801 (hereinafter referred to as "Service Provider" or "Licensor").
Customer and Service Provider are each individually referred to herein as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Customer is a wholly owned subsidiary of Northgate Telecommunications PLC, a public limited company organized under the laws of England and Wales and listed on the London Stock Exchange (ticker: NTP.L), headquartered at 45 Threadneedle Court, London EC2R 8AH, United Kingdom, which operates fixed-line, mobile, and enterprise cloud communications services across fourteen (14) countries, employs approximately twenty-two thousand (22,000) people globally, and reported revenues of approximately £6.8 billion for the fiscal year ended December 31, 2022;
WHEREAS, Customer operates a managed wide-area network spanning approximately three hundred forty (340) enterprise locations across twenty-eight (28) states of the United States of America and three (3) provinces of Canada in North America, serving the North American operations of Northgate Telecommunications PLC and its affiliated entities;
WHEREAS, Service Provider is a Delaware corporation specializing in managed network infrastructure, software-defined wide-area network ("SD-WAN") deployment, network monitoring, and cybersecurity services for enterprise clients in the telecommunications and financial services sectors, founded in 2009, employing approximately one thousand eight hundred (1,800) people, and reporting revenues of approximately four hundred twenty million dollars ($420,000,000) for the fiscal year ended December 31, 2022;
WHEREAS, Service Provider has developed and owns a proprietary network orchestration platform known as "ArcMesh" (current production release version 4.2), which Service Provider licenses to its enterprise clients as embedded technology within its managed network services offerings;
WHEREAS, Customer desires to engage Service Provider to provide managed network services, including the deployment of SD-WAN infrastructure, network monitoring, and cybersecurity services, and to license the ArcMesh Platform for deployment across Customer's North American network, and Service Provider desires to provide such services and license such platform, all on the terms and conditions set forth herein;
WHEREAS, the Parties have entered into that certain Mutual Non-Disclosure Agreement dated February 22, 2023 (the "NDA"), governing the exchange of confidential information in connection with the negotiation of this Agreement and the transactions contemplated hereby; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each Party, the Parties hereby agree as follows:
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ARTICLE 1 — DEFINITIONS AND INTERPRETATION
Section 1.1 — Definitions
As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not otherwise defined in this Section 1.1 shall have the meanings ascribed to them elsewhere in this Agreement.
"Acceptable Use Policy" means the acceptable use policy governing Customer's use of the ArcMesh Platform and the Managed Network, as set forth in Exhibit D attached hereto.
"Affiliate" means, with respect to any Party, any entity that directly or indirectly controls, is controlled by, or is under common control with such Party. For purposes of this definition, "control" means the ownership or power to vote more than fifty percent (50%) of the outstanding voting securities or equivalent ownership interests of such entity.
"Agreement" means this Master Services Agreement, together with all Exhibits and Schedules attached hereto and incorporated herein by reference, as the same may be amended, supplemented, or modified from time to time in accordance with the terms hereof.
"Annual Contract Value" or "ACV" means fifteen million dollars ($15,000,000) per Contract Year, representing the aggregate annual Fees payable by Customer to Service Provider hereunder.
"ArcMesh Platform" means Service Provider's proprietary network orchestration software platform, including the current production release (version 4.2 as of the Effective Date) and all Updates and Upgrades thereto provided by Service Provider during the Term, together with all related documentation.
"Change of Control" has the meaning set forth in Section 14.3(a) and as further detailed in Schedule 2.
"Comparable Customer" means any customer of Service Provider that has entered into a contract with Service Provider for managed network services with respect to two hundred (200) or more managed nodes.
"Confidential Information" has the meaning set forth in Section 12.1.
"Contract Year" means each successive twelve (12) month period commencing on the Effective Date. The first Contract Year shall commence on the Effective Date and end on the day immediately preceding the first anniversary of the Effective Date, and each subsequent Contract Year shall commence on the anniversary of the Effective Date and end on the day immediately preceding the next anniversary thereof.
"Custom Work Product" has the meaning set forth in Section 5.3.
"Customer Data" means all data, content, and information provided by Customer, its Affiliates, or their respective users that is transmitted over, processed by, or stored on the Managed Network or the ArcMesh Platform in connection with this Agreement, including network configuration data, traffic data, performance data, and any personally identifiable information.
"Customer Indemnified Parties" has the meaning set forth in Section 10.1.
"Data Security Requirements" means the data security and privacy requirements set forth in Exhibit E attached hereto.
"Effective Date" means the date first written above in the preamble of this Agreement.
"Escrow Agent" means Dravello National Bank, a nationally chartered bank headquartered in Charlotte, North Carolina.
"Escrow Agreement" means the escrow agreement among Customer, Service Provider, and the Escrow Agent, substantially in the form attached hereto as Annex A, providing for the establishment and maintenance of the Wind-Down Escrow Deposit.
"Fees" means, collectively, the Managed Services Fees, the License Fees, and the Professional Services Fees, as set forth in Exhibit C attached hereto.
"Force Majeure Event" has the meaning set forth in Section 18.1.
"Governmental Authority" means any federal, state, provincial, local, municipal, or foreign governmental, regulatory, or administrative body, department, commission, board, bureau, agency, or authority, including any court, tribunal, or arbitral body, having jurisdiction over the subject matter in question.
"Indemnified Party" means the Party entitled to indemnification under Article 10, as applicable.
"Indemnifying Party" means the Party obligated to provide indemnification under Article 10, as applicable.
"Initial Term" means the five (5) year period commencing on the Effective Date and ending on the day immediately preceding the fifth anniversary of the Effective Date.
"Insurance Requirements" means the minimum insurance coverage requirements set forth in Exhibit F attached hereto.
"intellectual Property Rights" means all intellectual property rights of any kind or nature, whether registered or unregistered, including patents, patent applications, copyrights, copyright registrations, trademarks, trademark registrations and applications, service marks, trade names, trade dress, trade secrets, know-how, inventions, algorithms, software (including source code and object code), databases, domain names, and all other intellectual property rights recognized under applicable law.
"Legacy Infrastructure" means Customer's existing multiprotocol label switching ("MPLS")-based network infrastructure currently provided by Greystone Halcyon Software ("Greystone"), a limited liability company headquartered at 8300 Greensboro Drive, Suite 400, McLean, Virginia 22102, pursuant to a separate agreement between Customer and Greystone.
"License Fees" means the fees payable by Customer for the license to and maintenance of the ArcMesh Platform, as set forth in Exhibit C, in the amount of three million dollars ($3,000,000) per Contract Year, representing twenty percent (20%) of the ACV.
"Managed Network" means the wide-area network comprising the three hundred forty (340) Nodes identified in Schedule 1 attached hereto, as such Schedule may be updated from time to time by mutual written agreement of the Parties.
"Managed Services Fees" means the fees payable by Customer for the managed network services provided by Service Provider hereunder, as set forth in Exhibit C, in the amount of ten million five hundred thousand dollars ($10,500,000) per Contract Year, representing seventy percent (70%) of the ACV.
"Material Breach" has the meaning set forth in Section 15.2.
"Migration Plan" means the phased migration plan described in Section 3.5, as further detailed in the Transition Services Side Letter, pursuant to which Customer's network operations shall be migrated from the Legacy Infrastructure to the SD-WAN/ArcMesh Platform infrastructure.
"Monthly Run-Rate" means one million two hundred fifty thousand dollars ($1,250,000) per month, calculated as the ACV of fifteen million dollars ($15,000,000) divided by twelve (12) months.
"Most Favored Nation" or "MFN" has the meaning set forth in Section 7.2 and as further detailed in Schedule 3 attached hereto.
"Node" means each managed network endpoint location identified in Schedule 1 that is connected to and managed as part of the Managed Network.
"NOC" means Service Provider's Network Operations Center, consisting of the primary NOC located at Service Provider's facilities at 11400 Commerce Park Drive, Suite 600, Reston, Virginia 20191, and the secondary NOC located at 200 Portage Avenue, Suite 1500, Winnipeg, Manitoba R3C 3X2, Canada.
"Professional Services Fees" means the fees payable by Customer for implementation, migration, and optimization services provided by Service Provider hereunder, as set forth in Exhibit C, in the amount of one million five hundred thousand dollars ($1,500,000) per Contract Year, representing ten percent (10%) of the ACV.
"Renewal Term" means each successive two (2) year renewal period following the expiration of the Initial Term, as described in Section 2.2.
"Service Credits" means the credits to be applied against Fees in the event of Service Provider's failure to meet the SLA targets, as set forth in Section 6.4 and Exhibit B.
"Service Level Agreement" or "SLA" means the service level commitments and performance standards set forth in Exhibit B attached hereto, as applicable to the Services.
"Service Provider Indemnified Parties" has the meaning set forth in Section 10.2.
"Service Provider Personnel" means all employees, agents, independent contractors, and subcontractors of Service Provider who are engaged in the performance of the Services or any aspect thereof.
"Term" means, collectively, the Initial Term and any Renewal Terms.
"Total Contract Value" or "TCV" means seventy-five million dollars ($75,000,000) for the Initial Term, calculated as the ACV of fifteen million dollars ($15,000,000) multiplied by five (5) Contract Years.
"Transition Assistance" has the meaning set forth in Section 15.6.
"Updates" means bug fixes, error corrections, patches, security updates, and minor version releases to the ArcMesh Platform (e.g., version 4.2.1, 4.2.2, etc.) that do not introduce material new functionality.
"Upgrades" means major version releases to the ArcMesh Platform (e.g., version 5.0, 6.0, etc.) that introduce material new functionality or architectural changes.
"Wind-Down Escrow Deposit" means the annual escrow deposit of seven hundred fifty thousand dollars ($750,000), representing five percent (5%) of the ACV, as described in Section 7.5.
Section 1.2 — Interpretation
The following rules of interpretation shall apply to this Agreement:
(a) All references in this Agreement to "Sections," "Articles," "Exhibits," "Schedules," "Annexes," and other subdivisions refer to the corresponding Sections, Articles, Exhibits, Schedules, Annexes, and subdivisions of or to this Agreement unless expressly provided otherwise.
(b) The table of contents and the headings of the Articles, Sections, and other subdivisions of this Agreement are inserted for convenience of reference only and shall not control or affect the meaning or construction of any of the provisions hereof.
(c) The word "including" (and with correlative meaning "include" and "includes") means "including, without limitation" and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.
(d) Unless otherwise specified, all references to currency amounts in this Agreement are to lawful money of the United States of America (U.S. dollars).
(e) The term "business day" means any day other than a Saturday, a Sunday, or a day on which commercial banks in New York, New York are authorized or required by applicable law to close.
(f) Words in the singular shall be held to include the plural and vice versa, and words of one gender shall be held to include the other genders as the context requires.
(g) The terms "hereof," "herein," "hereby," "hereto," and derivative or similar words refer to this entire Agreement, including the Exhibits, Schedules, and Annexes hereto.
(h) References to any agreement or contract shall mean such agreement or contract as amended, supplemented, or modified from time to time in accordance with its terms, unless otherwise expressly stated.
(i) References to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing, or interpreting the statute or regulation.
ARTICLE 2 — TERM AND RENEWAL
Section 2.1 — Initial Term
The initial term of this Agreement shall commence on the Effective Date and shall continue in full force and effect for a period of five (5) years from the Effective Date (the "Initial Term"), unless earlier terminated in accordance with the provisions of Article 15. The signing and closing of this Agreement shall occur simultaneously, and the Services shall commence on the Effective Date, subject to the satisfaction or waiver of the conditions precedent set forth in Article 9. The Initial Term shall expire on the day immediately preceding the fifth anniversary of the Effective Date.
Section 2.2 — Renewal
(a) Upon expiration of the Initial Term, this Agreement shall automatically renew for up to two (2) successive renewal terms, each of two (2) years' duration (each, a "Renewal Term"), unless either Party provides written notice of non-renewal to the other Party at least one hundred eighty (180) days prior to the expiration of the then-current Term (whether the Initial Term or a Renewal Term, as applicable).
(b) Following the exhaustion of both automatic Renewal Terms contemplated by Section 2.2(a), any further renewal or extension of this Agreement shall be by mutual written agreement of the Parties only, on such terms and conditions as the Parties may negotiate and agree upon in good faith.
(c) For the avoidance of doubt, if both automatic Renewal Terms are exercised, the maximum duration of this Agreement (absent further mutual agreement) shall be nine (9) years from the Effective Date (the five-year Initial Term plus two successive two-year Renewal Terms).
Section 2.3 — Survival
The expiration or termination of this Agreement for any reason shall not release either Party from any obligation or liability that has accrued prior to such expiration or termination. In addition, the following provisions shall survive any expiration or termination of this Agreement and shall remain in full force and effect: Article 1 (Definitions and Interpretation), Article 5 (Intellectual Property), Section 6.4 (Service Credits, to the extent accrued prior to termination), Article 10 (Indemnification), Article 11 (Limitation of Liability), Article 12 (Confidentiality), Section 13.4 (Data Retention and Destruction), Section 14.5 (Binding on Successors), Section 15.5 (Effect of Termination), Section 15.6 (Transition Assistance), Article 19 (Dispute Resolution), Article 20 (Governing Law), Article 21 (Notices), and Article 22 (General Provisions).
ARTICLE 3 — SCOPE OF SERVICES
Section 3.1 — Managed Network Services
Service Provider shall provide to Customer managed wide-area network services across all three hundred forty (340) Nodes located in twenty-eight (28) states of the United States of America and three (3) provinces of Canada, as more particularly described in Exhibit A (Statement of Work / Service Descriptions) and as identified in Schedule 1 (Node Locations). The managed network services shall include, without limitation, the following:
(a) Continuous network operations, including provisioning, configuration management, and change management for all Nodes on the Managed Network;
(b) Real-time network monitoring, including performance monitoring, fault monitoring, and event correlation, utilizing the ArcMesh Platform and such other tools as Service Provider may deploy from time to time;
(c) Network management and optimization services, including traffic engineering, bandwidth optimization, quality of service ("QoS") management, and capacity planning;
(d) Incident management, problem management, and root cause analysis in accordance with ITIL best practices and the SLA; and
(e) Such other managed network services as are described in Exhibit A.
Service Provider shall provide twenty-four hours per day, seven days per week, three hundred sixty-five days per year ("24×7") Network Operations Center monitoring from Service Provider's facilities, consisting of the primary NOC located at 11400 Commerce Park Drive, Suite 600, Reston, Virginia 20191, and the secondary NOC located at 200 Portage Avenue, Suite 1500, Winnipeg, Manitoba R3C 3X2, Canada. The secondary NOC shall serve as a fully redundant backup facility capable of assuming all monitoring and management functions in the event of a disruption at the primary NOC.
Section 3.2 — SD-WAN Deployment
Service Provider shall deploy and optimize software-defined wide-area network ("SD-WAN") infrastructure utilizing the ArcMesh Platform (version 4.2 as of the Effective Date) across all Nodes on the Managed Network. The SD-WAN deployment shall include:
(a) Design, engineering, and architecture of the SD-WAN overlay network;
(b) Provisioning and deployment of SD-WAN edge devices and controllers at each Node;
(c) Configuration and optimization of the ArcMesh Platform to manage traffic routing, application-aware policy enforcement, and dynamic path selection across the Managed Network;
(d) Integration with Customer's existing enterprise systems, including Customer's network management, security information and event management ("SIEM"), and IT service management ("ITSM") platforms; and
(e) Migration and replacement of Customer's Legacy Infrastructure, consisting of the MPLS-based network currently provided by Greystone Halcyon Software, in accordance with the Migration Plan set forth in Section 3.5.
Section 3.3 — Cybersecurity Services
In addition to the managed network and SD-WAN services described above, Service Provider shall provide the following cybersecurity services for the managed network perimeter:
(a) Continuous cybersecurity monitoring of all network traffic and events across the Managed Network;
(b) Threat detection, analysis, and correlation utilizing automated threat intelligence feeds and the ArcMesh Platform's integrated security module;
(c) Incident response services, including containment, eradication, and recovery procedures in the event of a security incident affecting the Managed Network or Customer Data; and
(d) Compliance with the Data Security Requirements set forth in Exhibit E, including applicable encryption standards, access control requirements, and network segmentation requirements.
Service Provider shall maintain and regularly update its threat intelligence capabilities and shall promptly notify Customer of any material cybersecurity threats, vulnerabilities, or incidents affecting or reasonably likely to affect the Managed Network or Customer Data, in accordance with the breach notification procedures set forth in Section 13.2.
Section 3.4 — Professional Services
Service Provider shall provide the following professional services to Customer throughout the Term:
(a) Implementation Services. Service Provider shall provide all implementation services necessary to deploy the ArcMesh Platform and the SD-WAN infrastructure across the Managed Network, including project management, engineering, testing, and commissioning.
(b) Migration Services. Service Provider shall provide migration services to facilitate the transition of Customer's network operations from the Legacy Infrastructure to the SD-WAN/ArcMesh Platform infrastructure, as further described in Section 3.5 and the Migration Plan.
(c) Optimization Services. Service Provider shall provide ongoing network optimization services, including performance tuning, capacity planning, and technology refresh recommendations.
(d) Quarterly Network Performance Reviews. Service Provider shall conduct quarterly network performance reviews with Customer, including detailed reporting on network performance, utilization trends, security posture, and optimization recommendations. Each quarterly review shall be documented in a written report delivered to Customer within ten (10) business days following the end of each calendar quarter.
(e) Dedicated Service Delivery Manager. Service Provider shall assign a dedicated service delivery manager to the Customer account, who shall serve as the primary point of contact for all service-related matters and shall be responsible for coordinating the delivery of all Services, managing escalations, and ensuring compliance with the SLA. The dedicated service delivery manager shall be a senior professional with relevant experience in managed network services and shall be subject to Customer's reasonable approval.
Section 3.5 — Migration Plan
(a) Service Provider shall migrate Customer's network operations from the Legacy Infrastructure to the SD-WAN/ArcMesh Platform infrastructure in three (3) phases over a period of eighteen (18) months from the Effective Date (the "Migration Plan"), as follows:
(i) Phase 1 (Months 1–6): Migration of the first tranche of Nodes, comprising approximately one hundred (100) Nodes in the eastern United States, as further identified in the Transition Services Side Letter. Phase 1 shall include the initial deployment and configuration of the ArcMesh Platform, establishment of core network connectivity, and migration of the first group of Nodes from the Greystone MPLS infrastructure to the SD-WAN overlay.
(ii) Phase 2 (Months 7–12): Migration of the second tranche of Nodes, comprising approximately one hundred forty (140) Nodes in the central and western United States, as further identified in the Transition Services Side Letter. Phase 2 shall include the expansion of the SD-WAN overlay, additional integration with Customer's enterprise systems, and continued migration of Nodes from the Legacy Infrastructure.
(iii) Phase 3 (Months 13–18): Migration of the final tranche of Nodes, comprising approximately one hundred (100) Nodes in the remaining United States locations and all Canadian locations, as further identified in the Transition Services Side Letter. Phase 3 shall include the completion of all migration activities, decommissioning of the Legacy Infrastructure, and final acceptance testing.
(b) Parallel-Run Requirements. During each phase of the migration, Service Provider shall maintain parallel operation of the Legacy Infrastructure and the new SD-WAN/ArcMesh Platform infrastructure for a period of not less than thirty (30) days following the migration of each tranche of Nodes, to ensure continuity of service and to permit verification of performance prior to cutover.
(c) Rollback Procedures. Service Provider shall develop and maintain documented rollback procedures for each phase of the migration, enabling the restoration of network operations on the Legacy Infrastructure in the event that the migrated infrastructure does not meet the acceptance criteria. Rollback procedures shall be tested prior to the commencement of each migration phase.
(d) Acceptance Testing. Each phase of the migration shall be subject to acceptance testing criteria to be mutually agreed upon by the Parties and set forth in the Transition Services Side Letter. Customer shall have a period of fifteen (15) business days following the completion of each phase to conduct acceptance testing and either accept or reject the migrated infrastructure (with written reasons for any rejection).
(e) Coordination with Greystone. Service Provider shall cooperate and coordinate with Greystone Halcyon Software, as reasonably necessary to facilitate the orderly migration from the Legacy Infrastructure. Customer shall use commercially reasonable efforts to ensure that Greystone cooperates with Service Provider during the migration process. Service Provider acknowledges that Customer's obligations to Greystone under its existing agreement with Greystone may impose certain requirements and constraints on the migration timeline and process, and Service Provider shall accommodate such requirements to the extent reasonably practicable.
Section 3.6 — Service Provider Personnel
(a) Service Provider shall assign qualified personnel with appropriate skills, experience, and professional certifications to perform the Services in accordance with this Agreement. Service Provider shall ensure that all Service Provider Personnel performing the Services are adequately trained and supervised.
(b) Service Provider shall designate a dedicated service delivery manager for the Customer account, as described in Section 3.4(e), who shall serve as the single point of accountability for Service Provider's performance under this Agreement.
(c) Customer shall have the right to request the replacement of any Service Provider Personnel assigned to the Customer account, for reasonable cause. Such request shall be made in writing, specifying the reasons for the requested replacement. Service Provider shall use commercially reasonable efforts to replace the individual within thirty (30) days of receipt of such request, without interruption to the Services.
(d) Service Provider shall be solely responsible for the compensation, benefits, employment taxes, and other obligations related to Service Provider Personnel. All Service Provider Personnel shall be and remain employees or contractors of Service Provider (or its approved subcontractors), and nothing in this Agreement shall create an employment, agency, or similar relationship between Customer and any Service Provider Personnel.
Section 3.7 — Subcontracting
(a) Service Provider shall not subcontract any material portion of the Services without the prior written consent of Customer, which consent shall not be unreasonably withheld, conditioned, or delayed. For purposes of this Section 3.7, a "material portion" of the Services means any component of the Services that, individually or in the aggregate, accounts for more than ten percent (10%) of the ACV or involves access to Customer Data or Customer's network infrastructure.
(b) Notwithstanding any subcontracting permitted hereunder, Service Provider shall remain fully responsible for the performance of all subcontracted work and for the acts and omissions of its subcontractors. Service Provider shall ensure that all subcontractors are bound by obligations of confidentiality and data security at least as restrictive as those set forth in this Agreement.
(c) Service Provider shall provide Customer with written notice of any approved subcontractor engaged to perform a material portion of the Services, including the identity, qualifications, and scope of work of such subcontractor.
ARTICLE 4 — ARCMESH PLATFORM LICENSE
Section 4.1 — License Grant
Subject to the terms and conditions of this Agreement and Customer's timely payment of the License Fees, Service Provider hereby grants to Customer a non-exclusive, non-transferable (except as expressly provided in Section 14.2), limited license to access and use the ArcMesh Platform (version 4.2 as of the Effective Date, and all subsequent Updates and Upgrades provided during the Term) during the Term, solely in connection with the operation, management, and optimization of the Managed Network. The license granted hereunder is limited to Customer's North American operations and encompasses use at and in connection with the three hundred forty (340) Nodes identified in Schedule 1. Customer shall not have the right to sublicense, distribute, or otherwise make available the ArcMesh Platform to any third party without Service Provider's prior written consent.
Section 4.2 — License Restrictions
Customer acknowledges and agrees that the license granted under Section 4.1 is subject to the following restrictions:
(a) Customer shall not reverse-engineer, decompile, disassemble, or otherwise attempt to derive the source code of the ArcMesh Platform, except to the extent that such activities are expressly permitted by applicable law notwithstanding this restriction.
(b) Customer shall not modify, adapt, translate, or create derivative works based upon the ArcMesh Platform, except as expressly authorized by Service Provider in writing.
(c) Customer shall not use the ArcMesh Platform outside the scope of the licensed use, including use in connection with network operations outside of the Managed Network or outside of Customer's North American operations.
(d) Customer shall not remove, alter, or obscure any proprietary notices, labels, or markings on or within the ArcMesh Platform.
(e) Customer shall comply with the Acceptable Use Policy set forth in Exhibit D at all times during the Term.
(f) Customer shall not permit any unauthorized third party to access or use the ArcMesh Platform and shall implement reasonable security measures to prevent unauthorized access.
Section 4.3 — Updates and Upgrades
(a) Updates. During the Term, Service Provider shall provide Customer with all Updates to the ArcMesh Platform at no additional charge. Updates shall be deployed to the Managed Network in accordance with Service Provider's standard release management procedures and shall be subject to Customer's reasonable testing and approval process prior to deployment in Customer's production environment. Service Provider shall provide Customer with reasonable advance notice (not less than five (5) business days, except in the case of critical security patches requiring emergency deployment) of any Update prior to its installation.
(b) Upgrades. During the Term, Service Provider shall provide Customer with all Upgrades to the ArcMesh Platform as part of the ArcMesh Platform license and maintenance fees included in the License Fees. Upgrades shall be subject to a more rigorous testing and approval process, and Service Provider shall work with Customer to schedule the deployment of Upgrades at mutually agreed times that minimize disruption to the Managed Network. Service Provider shall provide Customer with not less than thirty (30) days' advance notice of any Upgrade, together with updated documentation and release notes.
(c) Compatibility. Service Provider shall ensure that all Updates and Upgrades are backward-compatible with Customer's existing configurations and customizations to the extent reasonably practicable. In the event that an Update or Upgrade requires material changes to Customer's network configuration or operations, Service Provider shall provide Customer with reasonable advance notice and shall cooperate with Customer to implement such changes with minimal disruption.
Section 4.4 — Documentation
Service Provider shall provide and maintain current, complete, and accurate documentation for the ArcMesh Platform, including user manuals, technical specifications, API documentation, configuration guides, and release notes. Documentation shall be updated to reflect each Update and Upgrade and shall be made available to Customer in electronic format through Service Provider's documentation portal. Service Provider shall ensure that documentation is sufficient to enable Customer's qualified IT personnel to understand the functionality, configuration, and operation of the ArcMesh Platform within the Managed Network.
ARTICLE 5 — INTELLECTUAL PROPERTY
Section 5.1 — Service Provider IP
Service Provider retains all right, title, and interest in and to the ArcMesh Platform, its source code, object code, documentation, user interface designs, algorithms, data structures, and all other components thereof, together with all Service Provider pre-existing intellectual Property Rights and any improvements, modifications, or enhancements thereto made by or on behalf of Service Provider (collectively, "Service Provider IP"). Nothing in this Agreement shall be construed to transfer or assign any ownership rights in the Service Provider IP to Customer. The license granted to Customer under Article 4 is the sole and exclusive right granted to Customer with respect to the ArcMesh Platform and the Service Provider IP.
Section 5.2 — Customer IP
Customer retains all right, title, and interest in and to Customer Data, Customer's trademarks, trade names, logos, and all other Customer pre-existing intellectual Property Rights (collectively, "Customer IP"). Nothing in this Agreement shall be construed to transfer or assign any ownership rights in the Customer IP to Service Provider. To the extent Service Provider requires any access to or use of Customer IP in connection with the performance of the Services, Customer hereby grants to Service Provider a limited, non-exclusive, non-transferable, revocable license to access and use such Customer IP solely for the purpose of performing the Services during the Term.
Section 5.3 — Work Product
(a) Any and all deliverables, configurations, customizations, scripts, templates, reports, architectures, designs, and other work product created by Service Provider or Service Provider Personnel specifically for Customer under this Agreement (collectively, "Custom Work Product") shall be the sole and exclusive property of Customer. Service Provider hereby irrevocably assigns, and shall cause its Personnel to irrevocably assign, to Customer all right, title, and interest in and to such Custom Work Product, including all intellectual Property Rights therein.
(b) Notwithstanding the foregoing, Service Provider shall retain a non-exclusive, perpetual, royalty-free, worldwide license to use and incorporate any general knowledge, skills, methodologies, processes, techniques, and know-how that are not specific to Customer or Customer Data and that are developed or acquired by Service Provider in the course of performing the Services ("General Know-How"). For the avoidance of doubt, General Know-How does not include Customer Data, Customer's Confidential Information, or any Custom Work Product that incorporates Customer-specific configurations, data, or business logic.
Section 5.4 — Feedback
Customer may, from time to time, provide suggestions, ideas, enhancement requests, recommendations, or other feedback regarding the ArcMesh Platform or the Services (collectively, "Feedback"). Customer hereby grants to Service Provider a non-exclusive, perpetual, irrevocable, royalty-free, worldwide license to use, modify, incorporate, and otherwise exploit such Feedback for any purpose without restriction, obligation, or compensation to Customer. Nothing in this Section 5.4 shall be construed to require Customer to provide any Feedback.
ARTICLE 6 — SERVICE LEVEL AGREEMENT
Section 6.1 — Network Availability
Service Provider shall maintain monthly uptime availability of not less than ninety-nine and ninety-five hundredths percent (99.95%) per Node, as measured in accordance with the methodology set forth in Exhibit B (the "SLA Target"). Service Provider commits to use commercially reasonable efforts to exceed the SLA Target and to provide the highest level of network availability consistent with industry best practices for managed SD-WAN services.
Section 6.2 — Measurement
(a) Uptime availability shall be measured on a per-Node basis over each calendar month during the Term, in accordance with the measurement methodology described in Exhibit B. Uptime shall be calculated as the total number of minutes in the applicable calendar month minus the total number of minutes of Downtime (as defined in Exhibit B) during such month, divided by the total number of minutes in the applicable calendar month, expressed as a percentage.
(b) Scheduled maintenance windows shall be excluded from uptime availability calculations, provided that Service Provider has provided Customer with not less than five (5) business days' advance written notice of any scheduled maintenance and that such maintenance is performed during the pre-approved maintenance windows specified in Exhibit B. Emergency maintenance necessitated by critical security vulnerabilities may be performed with shorter notice, subject to Service Provider's obligation to provide as much advance notice as is reasonably practicable under the circumstances.
(c) Service Provider shall maintain comprehensive monitoring and reporting systems capable of accurately measuring uptime availability on a per-Node basis and shall make such monitoring data available to Customer upon reasonable request.
Section 6.3 — Reporting
(a) Service Provider shall provide Customer with monthly SLA compliance reports within ten (10) business days following the end of each calendar month. Each monthly report shall include, at a minimum: (i) uptime availability for each Node during the applicable month; (ii) a summary of all incidents and outages during the applicable month, including root cause analysis; (iii) a summary of all Service Credits earned by Customer during the applicable month; and (iv) such other information as is specified in Exhibit B.
(b) In addition to the monthly reports, Service Provider shall conduct quarterly network performance reviews with Customer, as described in Section 3.4(d), which shall include a comprehensive review of SLA performance, trend analysis, and recommendations for improvement.
Section 6.4 — Service Credits
(a) In the event that Service Provider fails to meet the SLA Target for any Node during any calendar month, Customer shall be entitled to the following tiered Service Credits, calculated on the Monthly Run-Rate of Managed Services Fees (one million two hundred fifty thousand dollars ($1,250,000) per month):
(b) Service Credits shall be calculated based on the aggregate network performance across all Nodes during the applicable calendar month. In the event that different Nodes experience different levels of uptime availability, the Service Credit shall be calculated based on the weighted average uptime availability across all Nodes.
(c) Service Credits earned by Customer shall be applied as credits against the next monthly invoice issued by Service Provider following the determination of the Service Credit amount. Customer shall not be entitled to receive Service Credits in cash or as a refund, except upon termination or expiration of this Agreement, in which case any outstanding Service Credits shall be applied as a credit against Customer's final payment obligations or refunded to Customer, at Customer's election.
(d) Service Credits shall constitute Customer's sole and exclusive remedy for Service Provider's failure to meet the SLA Target, without prejudice to Customer's termination rights under Section 6.5 in the event of persistent SLA failure.
Section 6.5 — Material Breach for Persistent SLA Failure
In the event that Service Provider fails to achieve monthly uptime availability of at least ninety-nine and fifty hundredths percent (99.50%) for any Node for three (3) consecutive calendar months, such failure shall constitute a Material Breach of this Agreement, entitling Customer to terminate this Agreement for cause pursuant to Section 15.2. For the avoidance of doubt, this termination right is in addition to, and not in lieu of, Customer's right to receive Service Credits under Section 6.4 for the months in which the SLA Target was not met.
Section 6.6 — Annual Service Credit Cap
Notwithstanding anything to the contrary in this Article 6, the maximum aggregate Service Credits to which Customer shall be entitled in any Contract Year shall not exceed thirty percent (30%) of the annual Managed Services Fees for such Contract Year, which amount is three million one hundred fifty thousand dollars ($3,150,000), calculated as ten million five hundred thousand dollars ($10,500,000) multiplied by thirty percent (30%).
Section 6.7 — Exclusions
The SLA commitments and Service Credit provisions set forth in this Article 6 shall not apply to Downtime or service degradation resulting from any of the following:
(a) Force Majeure Events, as defined in Section 18.1;
(b) Scheduled maintenance performed in accordance with Section 6.2(b);
(c) Outages, errors, or service degradation caused by Customer's acts or omissions, including misuse of the ArcMesh Platform, unauthorized modifications to network configurations, or Customer's failure to comply with Service Provider's reasonable operational requirements;
(d) Failures attributable to third-party telecommunications carriers, internet service providers, or other third-party service providers not under Service Provider's direct control, provided that Service Provider has used commercially reasonable efforts to select and manage such third-party providers; and
(e) Outages resulting from Customer-directed changes to the Managed Network that were implemented over Service Provider's written objection.
ARTICLE 7 — FEES AND PAYMENT
Section 7.1 — Fee Structure
(a) The Total Contract Value for the Initial Term is seventy-five million dollars ($75,000,000). The Annual Contract Value is fifteen million dollars ($15,000,000) per Contract Year, and the Monthly Run-Rate is one million two hundred fifty thousand dollars ($1,250,000) per month.
(b) The Fees are composed of the following components:
(c) The detailed pricing schedule, fee structure, payment milestones, and any applicable unit pricing are set forth in Exhibit C attached hereto. In the event of any conflict between this Section 7.1 and Exhibit C, the provisions of Exhibit C shall control.
Section 7.2 — Most Favored Nation Pricing
(a) Service Provider represents and warrants that the per-unit pricing for managed network services under this Agreement (calculated on a per-Node, per-month basis) shall not exceed the lowest per-unit pricing offered by Service Provider to any Comparable Customer during the trailing twelve (12) month period immediately preceding each Contract Year. For purposes of this Section 7.2, a "Comparable Customer" means any customer of Service Provider with two hundred (200) or more managed nodes.
(b) The detailed terms and conditions of the MFN pricing commitment are set forth in Schedule 3 attached hereto, including the methodology for determining per-unit pricing comparisons, adjustments for scope and service mix differences, and the applicable lookback period.
(c) In the event that an MFN audit conducted pursuant to Section 7.2(d) reveals that Service Provider has offered per-unit pricing to a Comparable Customer that is more than three percent (3%) lower than the per-unit pricing charged to Customer under this Agreement (after adjustment for scope and service mix differences as described in Schedule 3), Service Provider shall:
(i) Issue a retroactive credit to Customer in an amount equal to the aggregate pricing differential for the period during which the MFN violation existed, such credit to be issued within forty-five (45) days of the date of the determination of the violation; and
(ii) Adjust the prospective per-unit pricing under this Agreement to bring it into compliance with the MFN commitment within thirty (30) days of the date of the determination of the violation, with such adjusted pricing to remain in effect for the remainder of the then-current Contract Year and any subsequent Contract Years unless further adjusted in accordance with this Section 7.2.
(d) MFN Audit Rights. Customer shall have the right to conduct an MFN audit once per calendar year to verify Service Provider's compliance with the MFN commitment set forth in this Section 7.2. Any such audit shall be conducted by an independent third-party auditor mutually agreed upon by the Parties, and Service Provider shall cooperate with such audit and provide the auditor with access to such records and information as are reasonably necessary to verify compliance, subject to appropriate confidentiality protections. The cost of each MFN audit shall be borne by Service Provider if the audit reveals an MFN violation, and by Customer if no violation is found.
Section 7.3 — Invoicing and Payment Terms
(a) Service Provider shall invoice Customer monthly in advance on the first business day of each calendar month for the Fees applicable to such month. Each invoice shall be delivered in electronic format and shall include reasonable detail regarding the Fees being invoiced, including a breakdown by fee component (Managed Services Fees, License Fees, and Professional Services Fees) and any applicable Service Credits, adjustments, or taxes.
(b) Payment of undisputed invoiced amounts shall be due within thirty (30) days of Customer's receipt of each invoice. Payments shall be made by wire transfer of immediately available funds to the bank account designated by Service Provider in writing.
(c) Any undisputed amounts not paid when due shall bear interest at a rate of one and one-half percent (1.5%) per month (or the maximum rate permitted by applicable law, whichever is less), calculated from the date such payment was due until the date of actual payment.
(d) Disputed Amounts. In the event that Customer in good faith disputes any portion of an invoice, Customer may withhold payment of the disputed portion pending resolution of the dispute, provided that: (i) Customer provides Service Provider with prompt written notice of the dispute, specifying the amount disputed and the basis for the dispute, within fifteen (15) business days of receipt of the applicable invoice; (ii) Customer continues to pay all undisputed amounts in accordance with Section 7.3(b); and (iii) the Parties use good-faith efforts to resolve the dispute within thirty (30) days of Customer's notice. If the dispute is not resolved within such thirty (30) day period, either Party may escalate the dispute in accordance with Article 19. No interest shall accrue on disputed amounts that are subsequently determined to have been properly withheld.
Section 7.4 — Taxes
(a) All Fees set forth in this Agreement are exclusive of all applicable taxes, including sales taxes, use taxes, value-added taxes, goods and services taxes, harmonized sales taxes, excise taxes, and any other similar taxes or governmental charges (collectively, "Taxes"). Customer shall be responsible for the payment of all Taxes applicable to the Services and the license granted hereunder, excluding any taxes imposed on or measured by Service Provider's net income, gross receipts, capital, or franchise taxes (collectively, "Service Provider Income Taxes"), which shall remain the sole responsibility of Service Provider.
(b) Cross-Border Tax Considerations. The Parties acknowledge that certain Services are delivered from Service Provider's secondary NOC located in Winnipeg, Manitoba, Canada, and that such Services may be subject to Canadian Goods and Services Tax ("GST") and/or Harmonized Sales Tax ("HST") under applicable Canadian federal and provincial tax laws. In addition, the Services are provided across twenty-eight (28) states of the United States, and the Parties acknowledge that state and local sales and use tax obligations may vary by jurisdiction. The Parties shall cooperate in good faith to determine the applicability of such Taxes and to minimize the aggregate tax burden to the extent permitted by applicable law.
(c) Tax Documentation and Cooperation. Each Party shall provide the other Party with such tax documentation, exemption certificates, and other information as may be reasonably requested to support tax filings, tax exemption claims, and compliance with applicable tax laws. Service Provider shall provide Customer with invoices that comply with applicable tax invoicing requirements in each relevant jurisdiction.
(d) Tax Gross-Up. In the event that any payment made by Customer to Service Provider under this Agreement is subject to any withholding tax or deduction required by applicable law, Customer shall gross up the payment so that, after giving effect to such withholding or deduction, Service Provider receives the full amount that it would have received had no such withholding or deduction been required, unless Service Provider is entitled to a credit or refund for such withholding tax, in which case Customer shall not be required to gross up.
(e) Transfer Pricing. The Parties acknowledge that Customer is a wholly owned subsidiary of Northgate Telecommunications PLC and that any upstream payments, cost allocations, or intercompany transactions between Customer and Northgate Telecommunications PLC or its other subsidiaries in connection with this Agreement may be subject to transfer pricing regulations under applicable tax laws. Customer shall be solely responsible for compliance with applicable transfer pricing requirements with respect to its intercompany arrangements, and Service Provider shall have no liability in connection therewith.
Section 7.5 — Wind-Down Escrow Deposit
(a) Customer shall deposit seven hundred fifty thousand dollars ($750,000) per Contract Year (representing five percent (5%) of the ACV) into an escrow account maintained with Dravello National Bank (the "Escrow Agent") pursuant to the Escrow Agreement. The initial deposit shall be made within ten (10) business days of the Effective Date, and subsequent deposits shall be made on each anniversary of the Effective Date during the Initial Term.
(b) The maximum aggregate amount of the Wind-Down Escrow Deposit shall be three million seven hundred fifty thousand dollars ($3,750,000), representing seven hundred fifty thousand dollars ($750,000) multiplied by five (5) Contract Years. The escrow account shall be maintained under account reference number FNB-ESC-2023-07742.
(c) The terms and conditions governing the Wind-Down Escrow Deposit, including the escrow release conditions, investment of escrowed funds, and the Escrow Agent's duties and obligations, shall be as set forth in the Escrow Agreement. The Wind-Down Escrow Deposit shall be released in accordance with the Escrow Agreement upon the occurrence of any of the following events: (i) termination of this Agreement by Customer upon a Change of Control of Service Provider pursuant to Section 14.3(c)(ii); (ii) termination of this Agreement by Customer for Service Provider's Material Breach pursuant to Section 15.2; or (iii) natural expiration of this Agreement at the end of the Term (including any Renewal Terms), in which case the Wind-Down Escrow Deposit shall be returned to Customer.
(d) The Escrow Agent relationship manager is Brian Caulfield, located at 401 South Tryon Street, Suite 1200, Charlotte, North Carolina 28202.
Section 7.6 — Annual Escalation
The Parties shall negotiate in good faith the terms of any annual fee escalation applicable to the Fees during the Term, including the applicable escalation rate, the index or benchmark to be used (if any), and the timing of any escalation. The agreed-upon annual escalation mechanics shall be incorporated into Exhibit C prior to the execution of this Agreement.
[Note to Drafter: Annual escalation mechanics remain subject to commercial negotiation between the Parties. Client has indicated a preference for a cap tied to CPI (Consumer Price Index) with a maximum annual increase of 3%. Service Provider's initial position is a fixed 4% annual escalation. This section will be finalized upon resolution of the commercial terms.]
ARTICLE 8 — REPRESENTATIONS AND WARRANTIES
Section 8.1 — Mutual Representations and Warranties
Each Party hereby represents and warrants to the other Party, as of the Effective Date, that:
(a) It is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, and is duly qualified to do business in each jurisdiction where the nature of its business or the ownership of its properties requires such qualification.
(b) It has full corporate power and authority to enter into this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby.
(c) The execution, delivery, and performance of this Agreement by such Party have been duly authorized by all necessary corporate action, including any required approvals of its board of directors or shareholders.
(d) This Agreement constitutes the legal, valid, and binding obligation of such Party, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
(e) The execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated hereby will not: (i) violate, conflict with, or result in a breach of any provision of such Party's certificate of incorporation, bylaws, or other organizational documents; (ii) violate any applicable law, rule, regulation, order, judgment, or decree of any Governmental Authority; or (iii) violate, conflict with, result in a breach of, constitute a default under, or require any consent under any material agreement, contract, license, or instrument to which such Party is a party or by which it is bound.
Section 8.2 — Service Provider Representations and Warranties
Service Provider hereby represents and warrants to Customer, as of the Effective Date and on a continuing basis during the Term, that:
(a) All Services shall be performed in a professional and workmanlike manner, in accordance with generally accepted industry standards and best practices for managed network services, and in conformity with the specifications and requirements set forth in this Agreement and the applicable Exhibits and Schedules.
(b) The ArcMesh Platform, as delivered to Customer, does not and will not infringe upon, misappropriate, or otherwise violate any third-party intellectual Property Rights. Service Provider has not received any notice, claim, or demand alleging any such infringement, misappropriation, or violation.
(c) Service Provider has obtained all necessary rights, licenses, permissions, and consents required to grant the license to the ArcMesh Platform contemplated by Article 4, and such rights, licenses, permissions, and consents are in full force and effect and are not subject to any restrictions or limitations that would prevent or impair Customer's use of the ArcMesh Platform as contemplated by this Agreement.
(d) Service Provider shall comply with all applicable laws, rules, regulations, orders, and decrees of any Governmental Authority in connection with the performance of the Services, including all applicable telecommunications laws and regulations in the jurisdictions where the Services are provided.
(e) Service Provider's current insurance coverage meets or exceeds the Insurance Requirements set forth in Exhibit F, and Service Provider shall maintain such coverage throughout the Term in accordance with Article 16.
(f) The information provided by Service Provider to Customer regarding Service Provider's ownership and capitalization is true, correct, and complete in all material respects. As of the Effective Date, Service Provider's equity ownership is as follows: Ridgeline Capital Partners, LP holds sixty-two percent (62%) of the outstanding voting equity of Service Provider; Rajiv Sundaram holds eighteen percent (18%) of the equity; Teresa Cho holds twelve percent (12%) of the equity; and other employees and early investors hold the remaining eight percent (8%) of the equity.
Section 8.3 — Customer Representations and Warranties
Customer hereby represents and warrants to Service Provider, as of the Effective Date, that:
(a) Customer shall provide reasonable cooperation, access, and information necessary for Service Provider to perform the Services in accordance with this Agreement, including timely provision of Customer Data, access to Customer's premises and network infrastructure, and designation of qualified Customer personnel to serve as points of contact.
(b) Customer shall comply with the Acceptable Use Policy set forth in Exhibit D at all times during the Term.
(c) All data, content, and information provided by Customer to Service Provider in connection with this Agreement, and transmitted over the Managed Network, do not and will not infringe upon, misappropriate, or otherwise violate any third-party intellectual Property Rights or other rights.
Section 8.4 — Disclaimer
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND, WHETHER EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, AND EACH PARTY HEREBY SPECIFICALLY DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, NON-INFRINGEMENT, AND ANY WARRANTIES ARISING FROM COURSE OF DEALING, COURSE OF PERFORMANCE, OR USAGE OF TRADE. WITHOUT LIMITING THE FOREGOING, NEITHER PARTY MAKES ANY WARRANTY REGARDING THE RESULTS THAT MAY BE OBTAINED FROM THE USE OF THE SERVICES OR THE ARCMESH PLATFORM, OR THAT THE SERVICES OR THE ARCMESH PLATFORM WILL BE UNINTERRUPTED, ERROR-FREE, OR FREE OF HARMFUL COMPONENTS, EXCEPT TO THE EXTENT EXPRESSLY SET FORTH IN THE SLA.
ARTICLE 9 — CONDITIONS PRECEDENT TO CLOSING
Section 9.1 — Conditions to Customer's Obligations
The obligations of Customer to perform under this Agreement shall be subject to the satisfaction (or waiver by Customer) of the following conditions precedent on or prior to