First, price isn't going to be the issue - service and reliability will be. So the structure of your quote needs to deal with that in such a way that you can alleviate concern on their part of what happens if your product doesn't work at a critical time (having no idea what your product is, I can't give a more concrete or relevant example).
I would give them a discount on the licenses, but not on the service agreement. They are ordering the licenses in bulk, so knock down the price a bit to lure them in. But the service agreement is not something they want waived. From the perspective of the client, if they don't pay for service in year 1, they won't believe they're going to get the same level of service as someone who does.
I would, instead, if you want to discount the service as well, give them a completely discounted rate (not free) and then keep that rate for the 4 years. If you want to give 25% off, then do it.
The amount of discount you're offering, though, sounds very high from the service side. On the product side, you've already built the product, so offering a discount isn't money out of your pocket, and the cost of customer acquisition for 99 of those licenses is $0.
The service agreement, though, is going to be money out of the pocket in the long run, because the price (assuming you priced your product normally) is based on the number of hours you expect to be working on support. A client with 100 users is 100 times more likely to make use of the agreement, so you'll have to pay someone to do that work. Do you really want to give that away?