8-K: LiveWire and Harley-Davidson Forge New Master Services Agreement

LiveWire Group, Inc. has entered into a new seven-year Master Services Agreement with Harley-Davidson, Inc., effective January 1, 2025, for a range of outsourced services.

Summary

• LiveWire Group, Inc. has established a new Master Services Agreement with Harley-Davidson, Inc. effective January 1, 2025.
• This agreement replaces a previous master services agreement from September 22, 2022.
• Harley-Davidson will provide various outsourced services to LiveWire, including testing and development, regulatory support, and supply chain management.
• The agreement has an initial term of seven years and is renewable upon mutual agreement.
• Services will be provided based on a flat monthly fee, with additional fees for projects outside the scope of the agreement.
• A joint steering committee will meet annually to forecast service needs and adjust the monthly fee.
• LiveWire will own the intellectual property rights for deliverables created by Harley-Davidson, excluding Harley-Davidson's background intellectual property.
• The agreement includes indemnification clauses for third-party claims related to breaches, legal violations, and intellectual property infringement.
• Liability is capped at the total fees paid in the 12 months preceding a claim, except for fraud, gross negligence, or willful misconduct.

Sentiment

Score: 7

Explanation: The document outlines a significant agreement that is expected to benefit LiveWire by providing access to necessary services. The terms are generally favorable, but there are some risks and limitations.

Positives

• The new agreement provides LiveWire with a structured framework for accessing a wide range of services from Harley-Davidson.
• The flat monthly fee structure provides predictable costs for core services.
• LiveWire retains ownership of intellectual property rights for deliverables, fostering innovation.
• The joint steering committee ensures ongoing collaboration and adjustments to service needs.
• The agreement includes clear indemnification clauses, protecting both parties from third-party claims.

Negatives

• The agreement allows Harley-Davidson to terminate if LiveWire does not engage them for at least 40% of its production in a calendar year.
• Liability is capped, which could limit LiveWire's recourse in certain situations.
• The agreement allows Harley-Davidson to terminate the agreement if LiveWire undergoes a change of control.

Risks

• LiveWire's reliance on Harley-Davidson for critical services could pose a risk if Harley-Davidson's performance is not satisfactory.
• Disputes over whether a project falls within the scope of the monthly fee could lead to disagreements and delays.
• The termination clause related to manufacturing volume could create pressure on LiveWire to maintain a certain level of production with Harley-Davidson.
• The change of control termination clause could limit LiveWire's strategic options.

Future Outlook

The agreement is set for an initial term of seven years, with potential for renewal upon mutual agreement, indicating a long-term strategic partnership between LiveWire and Harley-Davidson.

Management Comments

• The document does not contain any direct quotes from management.

Industry Context

This agreement reflects a trend of companies outsourcing non-core functions to focus on their core competencies. It also highlights the ongoing relationship between LiveWire and its former parent company, Harley-Davidson, in the electric vehicle market.

Comparison to Industry Standards

• The outsourcing of services like testing, regulatory support, and supply chain management is common in the automotive and technology industries.
• The seven-year term is relatively long, suggesting a significant commitment from both parties.
• The intellectual property ownership structure is typical, with the client owning deliverables and the service provider retaining background IP.
• The liability cap is a standard practice in service agreements to limit financial exposure.
• The termination clause related to manufacturing volume is unusual and specific to the relationship between LiveWire and Harley-Davidson.

Stakeholder Impact

• Shareholders may view this agreement positively as it provides a framework for LiveWire to access necessary services.
• Employees of LiveWire may be impacted by the outsourcing of certain functions to Harley-Davidson.
• Customers of LiveWire may benefit from improved products and services resulting from the agreement.
• Harley-Davidson will benefit from the revenue generated by providing services to LiveWire.

Next Steps

• The joint steering committee will meet to formulate a forecast and plan for LiveWire's service needs.
• LiveWire and Harley-Davidson will begin implementing the services outlined in the agreement on January 1, 2025.
• The parties will need to agree on additional letter agreements for services outside the scope of the monthly fee.

Key Dates

Keywords

Master Services Agreement, Harley-Davidson, LiveWire, Outsourcing, Services Agreement, Intellectual Property, Manufacturing, Supply Chain, Electric Vehicles