Item 1.01. Entry into a Material Definitive Agreement
On May 25, 2022, the U.S. National Reconnaissance Office (NRO) awarded Maxar
Intelligence Inc., a wholly owned subsidiary of Maxar Technologies Inc.
(collectively, the "Company" or "Maxar"), a 10-year contract worth up to $3.24
billion, inclusive of a firm 5-year base contract commitment worth $1.5 billion
and options worth up to $1.74 billion as part of the Electro-Optical Commercial
Layer program ("EOCL Contract"). The EOCL contract will transition the imagery
acquisition requirements currently addressed by the EnhancedView Follow-On
contract ("EVFO Contract") and, with this award, replaces that scope.
Under the EOCL Contract, Maxar will continue to provide high-resolution
commercial satellite imagery services to the NRO for use across the U.S. defense
and intelligence community. The EOCL Contract has an initial contract value of
$1.5 billion with a 5-year base period of performance with the imagery
acquisition portion beginning on June 15, 2022. This reflects a contractual
commitment of just over $300 million for each of the first five years of the
EOCL Contract to continue at a level comparable to services provided by Maxar
under the EVFO Contract. The $300 million base period commitment provides NRO
access to the current constellation, then access, at an equivalent level, to the
Legion satellites and the related imagery archive after satellites in our
current constellation are no longer operational. The EOCL Contract, however, is
flexible and allows for growth to consider additional capacity from the Legion
satellites when they are operational. Accordingly, the Company retains growth
capacity from its Legion satellites for the NRO and other customers.
While the imagery acquisition portion of EVFO will be moved to EOCL, Maxar will
continue to perform other awarded services on the EVFO contract through 2024,
concurrent with the new EOCL Contract. The opportunity to increase services
beyond the awarded amount is also built into the contract.
The EOCL Contract differs significantly from the EVFO Contract in that it is a
5-year commitment with option years, instead of a one-year commitment with
option years, and in addition, EOCL has built-in flexibility to increase
services.
For year five, the government has awarded a priced option for increased
capabilities at a value of $40 million, bringing the potential value for year
five to $340 million. For years six through ten, the government has awarded
additional options with a potential annual value of up to $340 million.
The EOCL Contract is subject to risks and uncertainties that relate to all
government contracts and as discussed in our Risk Factors set forth in our
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Also as was the
case with both the EnhancedView ("EV") and EVFO Contracts, the Company is
required to meet certain quality assurance metrics under the EOCL Contract
related to imagery delivery performance. If the Company does not meet the
quality assurance requirements, it is subject to a performance penalty. The
Company has a strong record of meeting performance requirements under the EV and
EVFO Contracts, as demonstrated by the less than 0.03% of penalties incurred
since 2010.
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