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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On February 6,
A Special
Thomas R. Bates, Jr. | J. Anthony Gallegos, Jr. | |||
Chairman of the Board | Chief Executive Officer |
1. | Elect five directors to the board of directors of the Company to serve until the 2021 Annual Meeting of Stockholders; |
2. | Approve, on an advisory basis, the compensation of our named executive officers, as disclosed in this Proxy Statement; |
3. | Approve, on an advisory basis, whether future votes to approve executive compensation should occur every one, two, or three years; |
4. | Ratify the appointment of BDO USA, LLP as the Company’s Independent Auditors for 2020; and |
5. | Transact such other business as may properly come before the Annual Meeting or any adjournments or postponements of the meeting. |
Sincerely, | |
Philip A. Choyce | |
Corporate Secretary |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2020 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 12, 2020 |
The Notice of Annual Meeting of Stockholders, Proxy Statement for the Annual Meeting and the Annual Report on Form 10-K for the fiscal year ended December 31, 2019 are available at www.proxyvote.com. |
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election of five directors to serve until the 2021 Annual Meeting of Stockholders, (2) the approval, on an advisory basis, of the compensation of our named executive officers, as disclosed in this Proxy Statement, (3) the approval, on an advisory basis, whether future votes to approve executive compensation should occur every one, two, or three years, and (4) the ratification of the appointment of BDO USA, LLP as the Company’s independent auditors for 2020. In addition, you will be asked to consider and vote upon any other matters that may properly come before the Annual Meeting.
IF YOU PLAN TO ATTEND: Please bring
Sincerely,
Philip A. Choyce
Corporate Secretary
Houston, Texas
Annual Meeting by: (1) sending in an executed proxy card with a later date; (2) timely submitting a proxy with new voting instructions by telephone or over the internet; (3) sending a written notice of revocation by mail to Independence Contract Drilling, Inc., 2019
THE BOARD OF DIRECTORS WELCOMES STOCKHOLDERS WHO WISH TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
INDEPENDENCE CONTRACT DRILLING, INC.
20475 State Highway 249, Suite 300,
Houston, TXTexas 77070
PROXY STATEMENT
, 2019
This marked “Proxy Information Enclosed, Attention: Corporate Secretary”; or (4) attending and voting in person by completing a ballot at the Annual Meeting. Attendance at the Annual Meeting will not, in itself, constitute revocation of a completed and delivered proxy statementcard.
Only stockholderscost-reduction initiatives, the Company is reducing the number of recorddirectors from its current seven (7) directors to five (5) directors effective at the closeAnnual Meeting. Based on the recommendations from our Nominating and Corporate Governance Committee, the Board has nominated Messrs. Matthew D. Fitzgerald, J. Anthony Gallegos, Jr., Daniel F. McNease, James G. Minmier and Adam J. Piekarski for election as directors to serve until the 2021 Annual Meeting of business on December 16, 2019Stockholders and until their successors have been elected and qualified, or until their earlier death, resignation or removal. To be elected as a director, each nominee must receive the affirmative vote of a majority of the votes cast at the Annual Meeting. The director terms for Messrs. Thomas R. Bates, Jr. and James D. Crandell will expire at the Annual Meeting.
Director Nominee | Position and Offices | Director Since | Age | |||
Matthew D. Fitzgerald | Director | 2012 | 62 | |||
J. Anthony Gallegos, Jr. | Chief Executive Officer, Director | 2018 | 50 | |||
Daniel F. McNease | Director | 2013 | 68 | |||
James G. Minmier | Director | 2018 | 56 | |||
Adam J. Piekarski | Director | 2018 | 38 |
The representation in person or by proxy of at least a majoritybest interest of the outstanding sharesCompany and its stockholders. In addition, our Related Person Transaction Policy is designed to assist the Board in preparing the disclosure that SEC rules require to be included in the Company’s applicable filings under the Securities Act of 1933 as amended (the “Securities Act”) and the Exchange Act. Please see “Certain Relationships and Related Party Transactions—Policies and Procedures for Identifying, Assessing and Approving Related Person Transactions” for additional information regarding our Related Person Transaction Policy. In addition to our Related Person Transaction Policy, which applies only to the persons enumerated above in specified circumstances, we have also adopted a Conflicts of Interest Policy, described in more detail below, which facilitates the general review of possible conflicts of interest for all our employees and our directors.
Atremoving any director before the Special Meeting,director’s term of office expires. As of the Reverse Split Proposaldate of this Proxy Statement, the number of board members has been set at seven, but will be subjectreduced to a vote of stockholders.
five following the Annual Meeting.
be voted (1) FORapprovaleach committee as of the Reverse Split Proposal and (2) FORthe adjournment or postponementdate of the Special Meeting, if necessary, to solicit additional proxies in the event that there are not sufficient votes at the time of the Special Meeting.
this Proxy Statement. The Board knowsappoints members to its various committees on an annual basis at a regularly scheduled meeting, typically following the annual meeting of nostockholders. Additional information about each committee is set forth below under the heading “—Committees of The Board.” As noted above under “Corporate Governance—Committee Charters,” each committee has a charter, which is available on our website at http://icdrilling.investorroom.com/corporategovernance.
This proxy statementheading “Proposal 1: Election of Directors—Director Biographies and the accompanying notice and form of proxy will be first mailed to stockholders on or about , 2019.
Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | ||||
Thomas R. Bates, Jr. Chairman of the Board | X | X | ||||
J. Anthony Gallegos, Jr. Chief Executive Officer | ||||||
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Matthew D. Fitzgerald | ||||||
Chair | Chair | |||||
Daniel F. McNease | X | Chair | ||||
James G. Minmier | X | X | ||||
Adam J. Piekarski | ||||||
IMPORTANT INFORMATION ABOUT THE SPECIAL MEETING AND VOTING
The following questions and answers briefly address some commonly asked questions aboutFollowing the SpecialAnnual Meeting and this proxy statement. They mayassuming that all nominees are re-elected at the Annual Meeting, the Board intends to reduce the number of Board committees from three to two by combining the responsibilities of the Audit Committee and Nominating and Corporate Governance Committee into a single committee. It is intended that the membership of each committee would be comprised of Messrs. Fitzgerald, McNease and Minmier, who the Board has determined qualify as independent, with Mr. Fitzgerald serving as chairman of the combined Audit-Nominating and Corporate Governance Committee and Mr. Minmier serving as chairman of the Compensation Committee.
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We have sent you this proxy statement, the Notice of Special2019 Annual Meeting of StockholdersStockholders.
WeMinmier are seeking approval ofeach independent under the Reverse Split Proposal in order to (i) meet continued listing standards of the New York Stock ExchangeNYSE. Mr. Gallegos, Jr. is not considered independent due to his current employment relationship with us. Mr. Piekarski is not considered independent due to his relationship with MSD Capital. Affiliates of MSD Capital are the lenders under our Term Loan Agreement dated October 1, 2018 as described further in “Certain Relationships and Related Person Transactions—Related Person Transactions.”
We will hold the Special Meeting in order to seek this approval. This proxy statement contains important information about the Special Meeting, us,management and the Reverse Split Proposal,Board are essential for effective risk management and you should read it carefully.
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meeting NYSE continued listing standards for tradingoversight. Our Chairman has regular discussions with our Chief Executive Officer and other senior officers to discuss strategy and risks facing the Company. Senior management regularly attends Board meetings, provides Board presentations on the NYSE;
reducing appealstrategic matters involving our operations and is available to electronic trading firms, to whom lower priced shares with steady volume offer greater profit potential;
improving appeal to retail investors;
reducing per share elements of trading costs;
eliminating negative connotation associated with lower-priced stocks; and
reducing volatility.
The anticipated risks consideredaddress any questions or concerns raised by the Board included:
failureWhile the Board is ultimately responsible for risk oversight at the Company, each of the Board committees assists the Board in fulfilling its oversight responsibilities in certain areas of risk. The Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to realize expected benefits;
increasingrisk management in the percentageareas of authorizedfinancial reporting, internal controls and accounting. The Compensation Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs. The Nominating and Corporate Governance Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with Board organization, membership and structure, succession planning and corporate governance.
limitingThe Audit Committee is currently comprised of Messrs. Bates, Fitzgerald (chairman) and McNease. Each member of the Audit Committee is “financially literate” as defined in the NYSE listing standards. The Board has determined that each of our members of the Audit Committee, qualifies as an “audit committee financial expert” as defined under the rules and regulations of the SEC.
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“FOR” an amendmentNominating and Corporate Governance Committee
“FOR” the adjournment or postponement of the Special Meeting of stockholders, if necessary, to solicit additional proxies in the event that there are not sufficient votes at the time of the Special Meeting of stockholders to approve the Reverse Split Proposal.
If any other matter is presented at the Special Meeting, your proxy provides that your shares will be voteddeteriorating market conditions caused by the proxy holder listedCOVID-9 pandemic, we have reduced 2020 cash compensation for our CEO by 55% compared to target compensation levels and by between 45% and 50% for our other named executive officers.
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“1. This Corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares of stock which the Corporation shall have the authority to issue is 60,000,000 consisting of 50,000,000 shares of Common Stock, with a par value of $.01 per share and 10,000,000 shares of Preferred Stock, with a par value of $.01 per share. Each share of Common Stock shall entitle the holder thereof to one (1) vote on each matter submitted to a vote at any meeting of stockholders; provided, that, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to this Certificate (including, but not limited to, any certificate of designations relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Certificate (including, but not limited to, any certificate of designations relating to any series of Preferred Stock) or pursuant to the DGCL.”
Article IV of the Amended and Restated Certificate of Incorporation would be amended and restated to add the following paragraph as follows:
“4. Upon this Certificate of Amendment becoming effective pursuant to the General Corporation Law of the State of Delaware (the “Effective Time”), each share of Common Stock, either issued and outstanding or held by the Corporation as treasury stock, in each case immediately prior to the Effective Time (the “Old Common Stock”), shall be automatically reclassified as and converted into [1/10 to 1/20] of a fully paid and nonassessable share of Common Stock (the “New Common Stock”). No fractional shares of the New Common Stock shall be issued in connection with the Reverse Stock Split. The Company will pay cash in lieu of any fractional shares. Cash paid in lieu of any fractional shares shall be determined based on the average closing market price of the Old Common Stock on the New York Stock Exchange (or if the Old Common Stock does not remain listed thereon, on the principal securities exchange or quotation service for the Old Common Stock, as determined byfiscal 2019. Accordingly, the Board of Directors recommends that our stockholders vote in favor of the Corporation) forsay-on-pay vote as set forth in the ten trading days immediately precedingfollowing resolution:
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You do not need to attend the Special Meeting to vote your shares. Shares represented by valid proxies, received in time for the Special Meeting and not revoked prior to the Special Meeting, will be voted at the Special Meeting. For instructions on how to change your proxy, see “Can you change your vote after you have mailed your signed proxy?” below.
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Please note that voting via the Internet and telephone will only be available until 11:59 p.m. (Eastern) on February 5, 2020, the day prior to the Special Meeting.
If your shares are held in “street name”, meaning they are held for your account by a broker or other nominee, you may vote:
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Thus, if you hold your shares in street name and you do not instruct your bank, broker or other nominee how to vote in the election of directors or on matters related to the Reverse Stock Split Proposal, no votes will be cast on these proposals on your behalf.
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You may also obtain additional information about us from documents filed with the Securities and Exchange Commission by following the instructions under “Where You Can Find More Information” on page 20.
REVERSE SPLIT PROPOSAL
APPROVAL OF AN AMENDMENT TO OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE SPLIT OF THE COMPANY’S COMMON STOCK
Reasons for the Reverse Split Proposal
The Board has unanimously adopted a resolution authorizing, approving, declaring advisable and recommending to the Company’s stockholders for their approval an amendment to the Company’s Amended and Restated Certificate of Incorporation to effect a reverse split of the outstanding and treasury shares of the Company’s common stock in a ratio of 1share-for-10 shares up to a ratio of 1share-for-20 shares, together with a reduction in the authorized number of shares of the Company’s common stock from 200,000,000 shares to 50,000,000 shares (the “Reverse Split Amendment”), which ratio will be selected by the Board following stockholder approval and prior to the time of filing of a Certificate of Amendment with the Delaware Secretary of State and set forth in a public announcement. The form of Reverse Split Amendment is attached to this proxy statement asAnnex A.
The Board believes that a reverse stock split is necessary to regain compliance with the NYSE’s minimum $1.00 bid price requirement, as described below, and may improve liquidity with respect to the Company’s common stock discussed herein.
Potential Effects of the Amendment
If Proposal 1 is approved at the Special Meeting, the Company may issue the shares of common stock that would become available for issuance upon completion of any reverse split (i) pursuant to future securities offering transactions, (ii) pursuant to future acquisition transactions involving payment of consideration in equity securities of the Company and (iii) other general corporate purposes.
Ifour stockholders and recommends that stockholders vote for future advisory votes on executive compensation to occur every one year. While our executive compensation program is designed to promote a long-term connection between pay and performance, the Board determines to implement the Reverse Split Amendment, the Company would communicate to the public, prior to the effective time of the Reverse Split Amendment, additional details regarding the Reverse Split Amendment (including the final reverse split ratio, as determined by the Board). The Board reserves the right to elect not to proceedDirectors recognizes that executive compensation decisions are made annually and that an annual say-on-pay vote:
In determining which reverse split amendment to implement, if any, following receipt of stockholder approval of this Proposal 1, the Board may consider, among other things, various factors, such as:
the historical trading price and trading volumecore elements of our common stock;
the then-prevailing trading price and trading volume of our common stock and the expected impact of the Reverse Split on the trading market for our common stock in the short- and long-term;
the Company’s ability to continue its listing on the New York Stock Exchange;
which reverse split amendment would result in the least administrative cost to us; and
prevailing general market and economic conditions.
The failure ofAllows stockholders to approve this Proposal 1 could prevent the Company from regaining compliance with the NYSE’s $1.00 minimum bid price requirement (the “Minimum Bid Price Requirement”), unless the market price ofprovide timely, direct input on our common stock increases above the Minimum Bid Price Requirement without a reverse split for at least 10 consecutive trading days. If NYSE delists our common stock, then our common stock would likely
become traded on the over the counter market maintained by OTC Markets Group Inc. (the “OTC”), which does not have the substantial corporate governance or quantitative listing requirements for continued trading that the NSYE has. In that event, interest in our common stock may decline and certain institutions may not have the ability to trade in our common stock, all of which could have a material adverse effect on the liquidity or trading volume of our common stock. If our common stock becomes significantly less liquid due to delisting from the NYSE, our shareholders may not have the ability to liquidate their investments in our common stock as and when desired and we believe our access to capital would become significantly diminished as a result. Also, due to certain state securities (blue sky) law requirements which apply to securities that are not listed on an exchange, our ability to consummate future public offerings would be materially limited, and could require that the Company undertake private placements on terms that are significantly less favorable than the terms of a public offering.
Reasons for the Reverse Split
To maintain our NYSE Listing.
The Company’s common stock is listed on the NYSE. On November 5, 2019, the NYSE provided notice to the Company that the decline in the share price of the Company’s common stock has caused it to be out of compliance with one of the NYSE’s continued listing standards. Section 802.01C of the NYSE Listed Company Manual requires the average closing price of a listed company’s common stock to be at least $1.00 per share over a consecutive 30trading-day period to comply with the NYSE continued listing standards. As required by the NYSE rules, the Company notified the NYSE, within 10 business days of receipt of thenon-compliance notice, of its intent to return to compliance with the NYSE continued listing standard.
Under the NYSE’s rules, in order to get back in compliance with the listing standard, both the Company’s closing share price on the last day of any calendar month and the average closing share price (over a consecutive30-trading day period ending on the last day of that month) must exceed $1.00 within six months following receipt of thenon-compliance notice. Notwithstanding the foregoing, if the Company determines to remedy thenon-compliance by taking action that will require shareholder approval, such as the reverse stock split, the NYSE will continue to list the Company’s common stock pending shareholder approval by no later than its next annual meeting, and the implementation of such action promptly thereafter. The Company will be back in compliance with its listing standard if the share price promptly exceeds $1.00 per share, and the price remains above the level for at least the following 30 trading days.
To potentially improve the liquidity of our common stock.
A reverse split could allow a broader range of institutions to invest in our common stock (namely, funds that are prohibited from buying stocks whose price is below a certain threshold), potentially increasing trading volume and liquidity of our common stock and potentially decreasing the volatility of our common stock if institutions become long-term holders of our common stock. A reverse split could help increase analyst and broker interest in our common stock as their policies can discourage them from following or recommending companies with low stock prices. Because of the trading volatility often associated withlow-priced stocks, many brokerage houses and institutional investors have internalexecutive compensation philosophy, policies, and practices that either prohibit them from investingas disclosed inlow-priced stocks or tend to discourage individual brokers from recommendinglow-priced stocks to their customers. Some our proxy statement each year; and
If the Reverse Split Proposal is approvedCompensation Committee and the Board believesof Directors may decide that effecting the reverse splitit is in the best interests of the Company and itsour stockholders to hold a say-on-pay vote more or less frequently than the preference receiving the highest number of votes of our stockholders. However, the Compensation Committee and the Board may effectof Directors value the reverse split regardlessopinions expressed by our stockholders in their vote on this proposal and expect to take into account the outcome of whetherthis vote when considering the Company’s stock is delisted from the NYSE, for purposesfrequency of enhancing the liquidityfuture advisory votes on executive compensation.
Certain Risks Associated with a Reverse Split
There can be no assurance that the reverse split will increase the market priceratification of the common stockappointment. Representatives of BDO will attend the Annual Meeting, where they will be available to respond to appropriate questions and have the desired effect of maintaining compliance with the Minimum Bid Price Requirement. The Board believes that a reverse split has the potential to increase the market price of the common stock so that the Company may be able to satisfy the Minimum Bid Price Requirement. However, the long- and near-term effect of the reverse split upon the market price of the common stock cannot be predicted with any certainty.
Moreover, the total market capitalization of the common stock after the reverse split may be lower than the total market capitalization before the reverse split. As of the record date, our market capitalization was $ million, notwithstanding that we had shares outstanding as of the record date.
Further, following any reverse stock split, we will have additional shares available to issue upon conversion or exercise of securities of the Company that are convertible into or exercisable for common stock. In addition, we will continue to require significant proceeds from sales of our debt or equity securities to fund our operations for the near future, which will cause further dilution to stockholders. The issuance of a substantial amount of shares of common stock or securities convertible into or exercisable for common stock in the future could cause downward pressure on the price of our common stock and there is no assurance that the market price for the common stock will remain at a level sufficient to satisfy the Minimum Bid Price Requirement.
Impact of a Reverse Split If Implemented
A reverse split would affect all of our common stockholders uniformly and would not affect any stockholder’s percentage ownership interests or proportionate voting power. The other principal effects of the reverse split will be that:
the number of issued and outstanding shares of common stock (and treasury shares) will be reduced proportionately based on the final reverse split ratio, as determined by the Board;
based on the final reverse split ratio, the per share exercise price of all outstanding options will be increased proportionately and the number of shares of common stock issuable upon the exercise of all outstanding options will be reduced proportionately;
the number of shares reserved for issuance and any maximum number of shares with respect to which equity awards may be granted to any participant under the Company’s 2019 Omnibus Incentive Plan will be reduced proportionately based on the final reverse split ratio (as previously announced, no further awards will be made under the Company’s 2012 Omnibus Long-Term Incentive Plan);
the number of shares of our authorized common stock will be reduced from 200,000,000 to 50,000,000, and the percentage of such shares that are unissued and not reserved for future issuance will increase; and
all share and per share amounts in our financial statements and notes thereto will be retroactively adjusted for all periods presented to give effect to this reverse stock split.
Although the number of outstanding shares of common stock would decrease following the Reverse Split Amendment, the Board does not intend for a reverse split to be the first step in a “going private transaction” within the meaning of Rule13e-3 of the Exchange Act.
The following table reflects the number of shares of common stock that would be outstanding as a result of the effectiveness of the Reverse Split Amendment and the approximate percentage reduction in the number of outstanding shares based on 76,319,474 shares of common stock issued and outstanding as of November 26, 2019. As of November 26, 2019 we had 123,680,526 shares of common stock available for issuance. The following table also shows the shares that would be available for issuance if the Reverse Split Amendment is effected.
Proposed Reverse Split Ratio | Approximate Percentage Reduction | Approximate Shares of Common Stock to be Outstanding After the Reverse Split | Shares of Common Stock Available for Issuance After the Reverse Split | |||||||||
1-for-10 | 90 | % | 7,631,947 | 42,368,053 | ||||||||
1-for-20 | 95 | % | 3,815,974 | 46,184,026 |
Effect of Reverse Split and Potential Anti-Takeover Effect
Management does not anticipate that our financial condition, the percentage ownership of common stock by management, the number of our stockholders, or any aspect of our business will materially change as a result of the Reverse Split Amendment. Because the Reverse Split Amendment will apply to all issued and outstanding shares of common stock and outstanding rights to purchase common stock or to convert other securities into common stock, the proposed Reverse Split Amendment will not alter the relative rights and preferences of existing stockholders. However, while the number of shares of common stock outstanding will be decreased by a1-for-10 up to1-for-20 ratio, the number of authorized shares will be decreased to 50,000,000 from 200,000,000 (effectively a1-for-4 ratio decrease).
Management does not currently plan to use the effective increase in the percentage of our authorized but unissued shares that will result from the Reverse Split Amendmentopportunity to make it more difficult or to discourage a future merger, tender offer or proxy contest or the removal of incumbent management. This Proposal 1 is not the result of management’s knowledge of an effort to accumulate our securities or to obtain control of the Company by means of a merger, tender offer, solicitation or otherwise.
Summarized in the following paragraphs are provisions included in our Certificate of Incorporation, as amended, and our bylaws that may have the effect of discouraging, delaying or preventing a change in control or an unsolicited acquisition proposal that a stockholder might consider favorable, including a proposal that might result in the payment of a premium over the market price for the shares held by our stockholders.
Effects of authorized but unissued common stock and blank check preferred stock. One of the effects of the existence of authorized but unissued common stock and undesignated preferred stock may be to enable our Board to make more difficult or to discourage an attempt to obtain control of the Company by means of a merger, tender offer, proxy contest or otherwise, and thereby to protect the continuity of management. If the Board were to determine that a takeover proposal was not in our best interest, such shares could be issued by the Board without stockholder approval in one or more transactions that might prevent or render more difficult or costly the completion of the takeover transaction by diluting the voting or other rights of the proposed acquirer or insurgent stockholder group, by putting a substantial voting block in institutional or other hands that might undertake to support the position of the incumbent board of directors, by effecting an acquisition that might complicate or preclude the takeover, or otherwise.
In addition, our Certificate of Incorporation grants our Board broad power to establish the rights and preferences of authorized and unissued shares of additional series of preferred stock. The creation and issuance of one or more additional series of preferred stock could decrease the amount of earnings and assets available for distribution to holders of shares of common stock. The issuance also may adversely affect the rights and powers, including voting rights, of those holders and may have the effect of delaying, deterring or preventing a change in control of the Company.
Cumulative Voting. Our Certificate of Incorporation does not provide for cumulative voting in the election of directors which would allow holders of less than a majority of the voting stock to elect some directors.
Vacancies. Section 223 of the Delaware General Corporation Law and our bylaws provide that all vacancies, including newly created directorships, may be filled by the affirmative vote of a majority of directors then in office, evenstatement if less than a quorum.
Fractional Shares
If the reverse stock split ratio determined to be implemented by the Board, if any, will result in fractional shares, the Company will not issue fractional shares. Instead, the Company will pay cash in lieu of the fractional share. Cash paid in lieu of any fractional shares shall be determined based on the average closing market price of the old common stock on the New York Stock Exchange (or if the old common stock does not remain listed thereon, on the principal securities exchange or quotation service for the old common stock, as determined by the Board) for the ten trading days immediately preceding the day of the Effective Time, with payment for eachone-tenth of a share of new common stock being equal to the average closing price of one share of old common stock on the New York Stock Exchange (or if the old common stock does not remain listed thereon, on the principal securities exchange or quotation service for the old common stock, as determined by the Board).
Certain U.S. Federal Income Tax Consequences of the Reverse Stock Split
The following discussion is a general summary of certain U.S. federal income tax consequences of the reverse split that may be relevant to U.S. Holders (as defined below) of our common stock, but does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local ornon-U.S. tax laws are not discussed. This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated thereunder (the “Treasury Regulations”), judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service (“IRS”), in each case in effect as of the date hereof. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a holder of our common stock. We have not sought and will not seek an opinion of counsel or any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the reverse split.
This discussion is limited to holders that hold our common stock as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income tax consequences relevant to such holders’ particular circumstances, including the impact of the tax on net investment income imposed by Section 1411 of the Code. In addition, it does not address consequences relevant to holders subject to particular rules, including, without limitation:
persons that are not U.S. Holders (as defined below);
persons subject to the alternative minimum tax;
U.S. Holders (as defined below) whose functional currency is not the U.S. dollar;
persons holding our common stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;
banks, insurance companies or other financial institutions;
real estate investment trusts or regulated investment companies;
brokers, dealers or traders in securities;
S corporations, partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein);
tax-exempt organizations or governmental organizations;
persons deemed to sell our common stock under the constructive sale provisions of the Code;
persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation; and
tax-qualified retirement plans.
If an entity treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding our common stock and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences to them.
THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT INTENDED AS TAX ADVICE. HOLDERS OF OUR COMMON STOCK SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT ARISING UNDER OTHER U.S. FEDERAL TAX LAWS (INCLUDING ESTATE AND GIFT TAX LAWS), UNDER THE LAWS OF ANY STATE, LOCAL ORNON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
For purposes of the discussion below, a “U.S. Holder” is a beneficial owner of shares of our common stock that for U.S. federal income tax purposes is or is treated as: (1) an individual who is a citizen or resident of the United States; (2) a corporation created or organized under the laws of the United States, any state thereof, or the District of Columbia; (3) an estate the income of which is subject to U.S. federal income tax regardless of its source; or (4) a trust that (a) is subject to the primary supervision of a U.S. court and the control of one of more “United States persons” (within the meaning of Section 7701(a)(30) of the Code), or (b) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes.
A reverse split should constitute a “recapitalization” for U.S. federal income tax purposes. As a result, a U.S. Holder generally should not recognize gain or loss upon the reverse split, except with respect to cash received in lieu of a fractional share of our common stock. A U.S. Holder’s aggregate tax basis in the shares of our common stock received pursuant to the reverse split should equal the aggregate tax basis of the shares of our common stock surrendered (excluding any portion of such basis that is allocated to any fractional share of our common stock), and such U.S. Holder’s holding period in the shares of our common stock received should include the holding period in the shares of our common stock surrendered. Treasury Regulations provide detailed rules for allocating the tax basis and holding period of the shares of our common stock surrendered to the shares of our common stock received pursuant to the reverse split. Holders of shares of our common stock acquired on different dates and at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such shares.
A U.S. Holder that, pursuant to the proposed reverse split, receives cash in lieu of a fractional share of our common stock should recognize capital gain or loss in an amount equal to the difference, if any, between the amount of cash received and the portion of the U.S. Holder’s aggregate adjusted tax basis in the shares of our common stock surrendered that is allocated to such fractional share. Such capital gain or loss will constitute long-term capital gain or loss if the holder’s holding period is greater than one year as of the effective date of the reverse stock split.
Information Reporting and Backup Withholding. A U.S. Holder (other than corporations and certain other exempt recipients) may be subject to information reporting and backup withholding when such holder receives cash in lieu of a fractional share of our common stock pursuant to the reverse split. A U.S. Holder will be subject to
backup withholding if such holder is not otherwise exempt and such holder does not provide its taxpayer identification number in the manner required or otherwise fails to comply with applicable backup withholding tax rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or allowed as a credit against the U.S. Holder’s federal income tax liability, if any, provided the required information is timely furnished to the IRS. U.S. Holders should consult their tax advisors regarding their qualification for an exemption from backup withholding and the procedures for obtaining such an exemption.
Vote Required for Approval
Pursuant to applicable New York Stock Exchange Listed Company Manual rules, the affirmative voteappointment of BDO as independent auditors will require approval of a majority of the total votes cast at the Annual Meeting, in accordance with Section 1.7 of the Company’s Bylaws. In accordance with NYSE rules, a meeting whereproposal to ratify independent auditors is considered to be a quorum is present is required to approve“discretionary” item. This means that brokerage firms may vote in their discretion on this matter on behalf of beneficial owners who have not furnished voting instructions within the Reverse Split Proposal.time period specified in the voting instructions submitted by such brokerage firms. Abstentions will not be counted in votes cast and therefore will not have the same effect as a vote “AGAINST” this proposal, and if you fail to vote, it will have noany effect on the outcomeproposal. Your shares will be voted as you specify on your proxy. If your properly executed proxy does not specify how you want your shares voted, we will vote them for the ratification of the proposal unless the shares are countedappointment of BDO as present at the Special Meeting. Brokernon-votes will not affect the outcome of the vote on this proposal.
Effectiveness of the Amendment and Vote Required
If the Board decides to implement a reverse split, the reverse split will become effective on the date the Reverse Split Amendment is filed with the Secretary of State of the State of Delaware. The time of such filing, if any, will be determined by the Board in its sole discretion. Beginning on the effective time of the Reverse Split Amendment, each certificate representingpre-reverse split shares of common stock will be deemed for all corporate purposes to evidence ownership of post-reverse split shares of common stock. If the Reverse Split Amendment is not effective under the DGCL prior to December 31, 2020, the Reverse Split Amendment will be abandoned and no reverse stock split will be effected by the Board.
independent auditors.
PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR OF THIS PROPOSAL UNLESS A STOCKHOLDER INDICATES OTHERWISE ON THE PROXY.
ADJOURNMENT OR POSTPONEMENT OF THE SPECIAL MEETING OF STOCKHOLDERS
You may be asked to vote to approve a proposal to adjourn or postpone the Special Meeting, if necessary, to solicit additional proxies in the event that there are not sufficient votes at the time of the Special Meeting to approve the Stock Issuance Proposal set forth in this proxy statement. We currently do not intend to propose adjournment or postponement of the Special Meeting of stockholders if there are sufficient votes to approve the other proposals.
Vote Required
Pursuant to our bylaws, the affirmative vote of a majority of the stockholders present in person or represented by proxy at a meeting and entitled to vote is required to approve the adjournment or postponement of the Special Meeting of stockholders. Abstentions will have no effect on this proposal, and if you fail to vote, it will have no effect on the outcome of the proposal unless the shares are counted as present at the Special Meeting. Brokernon-votes will not affect the outcome of the vote on this proposal.
OUR BOARD RECOMMENDS A VOTE “FOR” THE
Year Ended December 31, | ||||||||
2019 | 2018 | |||||||
Audit Fees(1) | $ | 629,918 | $ | 521,700 | ||||
Audit-Related Fees | — | — | ||||||
Tax Fees | — | — | ||||||
All Other Fees | — | — | ||||||
Total | $ | 629,918 | $ | 521,700 |
(1) | “Audit Fees” consisted of amounts incurred for services performed in association with the annual audit of our consolidated financial statements and internal control over financial reporting and the review of financial statements included in our quarterly reports on Form 10-Q, the filing of our registration statements, the filing of our annual proxy statement and S-3 shelf registration statement in connection with the Sidewinder Merger and other services normally provided by the Company’s independent registered public accounting firm in connection with regulatory filings for the fiscal years shown. |
Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in Column (A)) | ||||
Plan Category | (A) | (B) | (C) | |||
Equity compensation plans approved by security holders(1) | 33,458 | $254.80 | — | |||
Equity compensation plans not approved by security holders | — | — | — | |||
Total | 33,458 | $254.80 | — |
(1) | Represents our 2012 Omnibus Plan. For additional information, see “Executive Compensation—2012 and 2019 Omnibus Plan.” Pursuant to the terms of the adoption of the 2019 Omnibus Plan, no further grants will be made under the 2012 Omnibus Plan.” |
Name and Address of Beneficial Owners (1)(2) | Shares Beneficially Owned (3) | Shares Acquirable within 60 days (4) | Total | Percent of Common Stock Beneficially Owned | ||||||||||||
5% Stockholders: | ||||||||||||||||
MSD Capital, L.P.(5) | 4,471,800 | — | 4,471,800 | 5.9 | % | |||||||||||
MSD Partners, L.P.(6) | 18,838,512 | — | 18,838,512 | 24.7 | % | |||||||||||
Anthem, Inc.(7) | 4,046,591 | — | 4,046,591 | 5.3 | % | |||||||||||
Birch Grove Capital LP(8) | 4,252,659 | — | 4,252,659 | 5.6 | % | |||||||||||
Directors and Named Executive Officers: | ||||||||||||||||
Thomas R. Bates, Jr.(9) | 231,110 | — | 231,110 | * | ||||||||||||
J. Anthony Gallegos, Jr.(10) | 493,710 | — | 493,710 | * | ||||||||||||
James D. Crandell(11) | 44,634 | — | 44,634 | * | ||||||||||||
Matthew D. Fitzgerald(12) | 62,606 | — | 62,606 | * | ||||||||||||
Daniel F. McNease(13) | 77,080 | — | 77,080 | * | ||||||||||||
James G. Minmier(14) | 35,818 | — | 35,818 | * | ||||||||||||
Adam J. Piekarski(15) | — | — | — | * | ||||||||||||
Philip A. Choyce(16) | 623,934 | 157,000 | 780,934 | 1.0 | % | |||||||||||
Christopher K. Menefee(17) | 341,593 | 58,875 | 400,468 | * | ||||||||||||
Byron A. Dunn(18) | 30 | 400,350 | 400,380 | * | ||||||||||||
All Directors and Executive Officers as a Group (12 persons):(19) | 2,428,890 | 215,875 | 2,644,765 | 3.5 | % |
Name and Address of Beneficial Owners(1)(2) | Shares Beneficially Owned (3) | Shares Acquirable within 60 days (4) | Total | Percent of Common Stock Beneficially Owned | ||||||||
5% Stockholders: | ||||||||||||
MSD Capital, L.P.(5) | 223,590 | — | 223,590 | 5.9 | % | |||||||
MSD Partners, L.P.(6) | 937,356 | — | 937,356 | 24.6 | % | |||||||
Anthem, Inc.(7) | 200,361 | — | 200,361 | 5.3 | % | |||||||
Birch Grove Capital LP(8) | 212,333 | — | 212,333 | 5.6 | % | |||||||
Directors and Named Executive Officers: | ||||||||||||
Thomas R. Bates, Jr.(9) | 12,984 | — | 12,984 | 0.3 | % | |||||||
J. Anthony Gallegos, Jr.(10) | 26,576 | — | 26,576 | 0.7 | % | |||||||
James D. Crandell(11) | 3,660 | — | 3,660 | 0.1 | % | |||||||
Matthew D. Fitzgerald(12) | 4,558 | — | 4,558 | 0.1 | % | |||||||
Daniel F. McNease(13) | 5,282 | — | 5,282 | 0.1 | % | |||||||
James G. Minmier(14) | 4,281 | — | 4,281 | 0.1 | % | |||||||
Adam J. Piekarski(15) | — | — | — | — | % | |||||||
Philip A. Choyce(16) | 31,894 | 7,850 | 39,744 | 1.0 | % | |||||||
Philip A. Dalrymple(17) | 10,355 | — | 10,355 | 0.3 | % | |||||||
Travis G. Fitts, Jr. | 8,492 | — | 8,492 | 0.2 | % | |||||||
Christopher K. Menefee | 18,725 | 2,943 | 21,668 | 0.6 | % | |||||||
All Directors and Executive Officers as a Group (11 persons):(18) | 109,750 | 9,812 | 119,562 | 3.1 | % |
|
(1) | “Beneficial ownership” is a term broadly defined by the SEC in Rule13d-3 under the Exchange Act and includes more than the typical forms of stock ownership, that is, stock held in the person’s name. The term also includes what is referred to as “indirect ownership” meaning ownership of shares as to which a person has or shares investment or voting power, or a person who, through a trust or proxy, prevents the person from having beneficial ownership. |
(2) | The address for each Named Executive Officer and director set forth in the table, unless otherwise indicated, is c/o Independence Contract Drilling, Inc., 20475 State Highway 249, Suite 300, Houston, Texas 77070. |
(3) | Amounts shown include common stock and restricted stock awards beneficially owned as of |
holdings as of December 31, |
(4) | Reflects the number of shares that could be purchased upon the exercise of options, warrants or other right of conversion held by the named person as of |
(5) | As reported on Schedule 13D as of October 1, 2018, as filed by MSD Capital, L.P. with the SEC on October 3, 2018. MSD Energy Investments, L.P. is the record and direct beneficial owner of the shares. MSD Capital, L.P. is the general partner of, and may be deemed to beneficially own securities beneficially owned by MSD Energy Investments, L.P. MSD Capital Management, LLC is the general partner of, and may be deemed to beneficially own securities beneficially owned by, MSD Capital, L.P. Each of Glenn R. Fuhrman, John C. Phelan and Marc R. Lisker is a manager of, and may be deemed to beneficially own securities beneficially owned by MSD Capital Management, LLC. Michael S. Dell is the controlling member of MSD Capital Management, LLC and may be deemed to beneficially own securities beneficially owned by MSD Capital Management, LLC. MSD Capital’s address is 645 Fifth Avenue, 21st Floor, New York, New York 10022. |
(6) | As reported on |
(7) | As reported on Amendment to Schedule 13G as filed with the SEC on |
(8) | As reported on Amendment to Schedule 13G as of |
(9) | Excludes |
(11) | Excludes 2,564 shares underlying |
(16) | Shares acquirable within |
April 15, 2020. Includes |
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|
|
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Shares acquirable within 60 days include options to purchase |
Name | Age | Position | ||
J. Anthony Gallegos, Jr. | 50 | President and Chief Executive Officer | ||
Philip A. Choyce | 53 | Executive Vice President and Chief Financial Officer | ||
Philip A. Dalrymple | 40 | Vice President - Operations | ||
Michael J. Harwell | 51 | Vice President - Finance and Chief Accounting Officer | ||
Scott A. Keller | 40 | Vice President - Sales and Marketing |
Realized Pay as a % | ||||||||||||||
Fiscal Year | Summary Compensation Table ($)(1) | Target Total Compensation($)(2) | Total Realized Pay($)(3) | Summary Compensation Table | Target Total Compensation | |||||||||
2015 | 669,089 | 2,415,000 | 1,041,909 | 156% | 43% | |||||||||
2016 | 1,982,403 | 2,415,000 | 1,192,194 | 60% | 49% | |||||||||
2017 | 2,368,797 | 2,292,000 | 1,853,742 | 78% | 81% | |||||||||
2018(4) | 1,653,340 | 2,209,000 | 3,155,494 | 191% | 143% | |||||||||
2019 | 1,532,435 | 2,363,000 | 853,264 | 56% | 36% | |||||||||
Total | 8,206,064 | 11,694,000 | 8,096,603 | 99% | 69% |
(1) | Total compensation for our Chief Executive Officer, from 2015 through 2019, as reported on our Summary Compensation Table in this Proxy Statement, as well as proxy statements for prior years. |
(2) | Total target compensation for our Chief Executive Officer determined by our Compensation Committee based upon data prepared by our independent compensation consultant, Pearl Meyer. |
(3) | Calculated as actual salary and bonus/annual incentive paid, plus the value of all stock vesting during the applicable fiscal year for our Chief Executive Officer. Restricted stock and performance award vesting was valued at the fair market value of our common stock on the date of vesting. |
(4) | Total realized pay includes $2,193,226 of compensation relating to the acceleration of vesting of stock awards in connection with the Sidewinder Merger and our former CEO’s termination of employment upon closing of the transaction. Excludes $3,480,000 of cash severance payable to our former CEO pursuant to the terms of his employment contract, including in connection with a three-year non-competition agreement. |
Time Period | Performance Units Vesting | Full Value RS/RSUs Issued(1) | Total Adjusted Awards(2) | Weighted Average Shares Outstanding | Burn-Rate | |||||
Fiscal 2017 | 4,038 | 24,493 | 42,797 | 1,888,100 | 2.27% | |||||
Fiscal 2018 | 8,147 | 57,692 | 98,759 | 2,379,000 | 4.15% | |||||
Fiscal 2019 | — | 28,250 | 42,375 | 3,773,500 | 1.12% | |||||
Three Year Average Burn-Rate | 2.29% |
(1) | Represents restricted stock units and restricted stock shares issued during applicable fiscal years. Excludes 20,480 restricted stock units and 32,332 restricted stock shares issued to former Sidewinder executive officers relating to their becoming officers of us following the Sidewinder Merger and termination of prior employment agreements. |
(2) | Value of performance shares vesting and full value restricted stock and restricted stock unit awards granted applying the ISS assigned premium of 1.5x to full value awards granted. |
Peer Group | ||
Performance | Helmerich & Payne Nabors Industries, Ltd Patterson-UTI, Inc. Precision Drilling, Inc. | Pioneer Energy Services, Inc. Trinidad Drilling, Inc. Superior Energy Services, Inc. RPC, Inc. |
Compensation | Akita Drilling Ltd. Enservco Corporation Flotek Industries Geospace Technologies Corporation Gulf Island Fabrication, Inc. Ion Geophysical Corporation | Natural Gas Services Group, Inc. Panhandle Oil and Gas Inc. Parker Drilling, Inc. PHX Energy Services Corp. Pioneer Energy Services Corp. Trinidad Drilling Ltd. Extreme Drilling Corp. |
Name | Position | Annual Salary($) | ||
J. Anthony Gallegos, Jr. | President & Chief Executive Officer | 464,000 | ||
Philip A. Choyce | Executive Vice President & Chief Financial Officer | 319,000 | ||
Philip A. Dalrymple | Vice President - Operations | 250,000 | ||
Travis G. Fitts, Jr. | Senior Vice President - Human Resources & HS&E | 260,000 | ||
Christopher K. Menefee | Senior Vice President - Business Development | 266,800 |
Name | Below Entry | Target | Over Achievement | |||
J. Anthony Gallegos, Jr. | 0% | 100% | 200% | |||
Philip A. Choyce | 0% | 80% | 160% | |||
Philip A. Dalrymple | 0% | 50% | 100% | |||
Travis G. Fitts, Jr. | 0% | 60% | 120% | |||
Christopher K. Menefee | 0% | 60% | 120% |
2019 Weighting | ||||||||||
Name | TRIR (Safety) | Adjusted EBITDA | Utilization Equivalent Rigs | Synergy Realization | MBO Objectives | |||||
J. Anthony Gallegos, Jr. | 15% | 35% | 15% | 15% | 20% | |||||
Philip A. Choyce | 15% | 35% | 15% | 15% | 20% | |||||
Philip A. Dalrymple | 15% | 35% | 15% | 15% | 20% | |||||
Travis G. Fitts, Jr. | 15% | 35% | 15% | 15% | 20% | |||||
Christopher K. Menefee | 15% | 35% | 15% | 15% | 20% |
2019 Criteria | ||||||||
Bonus Criteria | Entry | Target | Over Achievement | Actual Performance | ||||
Safety (TRIR)(1) | 1.55 100% Industry Average | 1.49 90% Industry Average | 1.24 80% Industry Average | 1.51 Between Entry and Target | ||||
Payout (15% Weighting) | Above = 0% | 100% | 200% | 4% | ||||
Adjusted EBITDA ($'000s)(2) | $50.2 million | $62.8 million | $75.4 million | $43.4 million Below Entry | ||||
Payout (35% Weighting) | Below = 0% | 100% | 200% | 0% | ||||
Utilization Equivalent Rigs(3) | 27 Rigs | 30 Rigs | 33 Rigs or Above | 25.4 Rigs Below Entry | ||||
Payout (15% Weighting) | Below = 0% | 100% | 200% | 0% | ||||
Synergy Realization(4) | $9 million | $10 million | $12 million or Above | Greater than $15 million Over Achievement | ||||
Payout (15% Weighting) | Above = 0% | 100% | 200% | 200% |
(1) | Total Recordable Incidence Rate (“TRIR”). Industry Average is based upon the International Association of Drilling Contractor’s published 2019 Incident Rate for United States Land-Based contract drilling activities. |
(2) | Adjusted EBITDA represents EBITDA less stock-based compensation expense, Sidewinder merger expenses, and gain or loss on disposals of assets. |
(3) | Equivalent rigs determined by dividing total fleet operating days by 365. |
(4) | Represents synergies realized directly related to the Sidewinder merger |
Executive | Objective | Performance Achievement |
J. Anthony Gallegos, Jr. (Between Target and Over Achievement) 152% | • Finalization of Sidewinder Merger Integration: 6/30/19 Target date (33% weighting) | • Complete by Target date |
• Achieve Sidewinder Merger synergy run rate target by 9/30/19: Entry: $9M, Target: $10M; OA: $12M (33% weighting) | • Complete at OA level | |
• Achieve fleetwide technical downtime: Entry: 2.2%; Target: 2.0%, OA: 1.8% (33% weighting) | • Achieved between Target and OA level |
Executive | Objective | Performance Achievement |
Philip A. Choyce (Between Target and Over Achievement) 130% | • Complete rollout of revised procurement platform: Entry: 7/31/19; Target: 6/30/19; OA: 5/31/19 (20% weighting) | • Complete at OA level |
• Achieve Sidewinder Merger synergy run rate Target by 9/30/19: Entry: $9M, Target: $10M; OA: $12M (30% weighting) | • Complete at OA level | |
• Successful migration from EGC and 404(b) attestation by independent auditors (10% weighting) | • Complete at Target level | |
• Add one or more investment bank analysis coverage (10% weighting) | • Not achieved | |
• Successful roll-out and adoption of post-merger asset management system (20% weighting) | • Complete at Target level | |
• Completion of replacement asset tracking systems by 12/31/19 (10% weighting) | • In process at year end. Not achieved |
Executive | Objective | Performance Achievement |
Philip A. Dalrymple (Between Target and Over Achievement) 120% | • Safety TRIR: Entry: Industry Avg; Target: 90% Industry Average; OA: 80% Industry Average (35% weighting) | • Between Entry and Target |
• Achieve fleetwide technical downtime: entry: 2.2%; target 2.0%, OA 1.8% (20% weighting) | • Achieved between Target and OA level | |
• Integration of field level support staff and crews following Sidewinder merger (30% weighting) | • Complete at OA level | |
• Complete rollout of revised procurement platform: Entry: 7/31/19; Target: 6/30/19; OA: 5/31/19 (5% weighting) | • Complete at OA level | |
• 3rd party drilling optimization agreements in place for beta implantation on at least one operating rig (5% weighting) | • Complete at OA level | |
• Successful roll-out and adoption of post-merger asset management system (20% weighting) | • Complete at Target level |
Executive | Objective | Performance Achievement |
Travis G. Fitts (Between Entry and Target Achievement) 74% | • Safety TRIR: Entry: Industry Avg; Target: 90% Industry Average; OA: 80% Industry Average (50% weighting) | • Achieved between Entry and Target level |
• Achieve 25% reduction in turnover by 4Q’19 compared to YTD average (10% weighting) | • Below Entry level achievement | |
• Implement holistic crisis management program (5% weighting) | • In process at year end: No achievement | |
• Complete handover of Compensation Committee process from CFO (5% weighting) | • Achieved at Target level | |
• Institute complete online onboarding process for new hires (5% weighting) | • Achieved at Target level | |
• Implement social media strategy for ICD (15% weighting) | • Achieved at OA level | |
• Implement rig move process improvement plan (10% weighting) | • Achieved at OA level |
Executive | Objective | Performance Achievement |
Christopher K. Menefee (Between Entry and Target Achievement) 70% | • Contractual utilization (equivalent rigs) Entry: 27; Target: 30; OA: 33 rigs (30% weighting) | • Below Entry level achievement |
• Average renewal dayrates greater than $23,000 in 4Q’19 | • Below Entry level achievement | |
• 300 Series dayrates greater than $25,000 per day (10% weighting) | • Below Entry level achievement | |
• Addition of one new “major” customer (15% weighting) | • Below Entry level achievement | |
• 3rd party drilling optimization agreements in place for beta implantation on at least one operating rig (35% weighting) | • Achieved at OA level: Three systems in place |
Name | Safety (TRIR) Metric($) | Adjusted EBITDA($) | Utilization Equivalent Rigs | Synergies($) | MBO($) | Total Annual Incentive Payment($) | ||||||
J. Anthony Gallegos, Jr. | 18,600 | — | — | 139,500 | 141,360 | 299,460 | ||||||
Philip A. Choyce | 10,208 | — | — | 76,560 | 66,352 | 153,120 | ||||||
Philip A. Dalrymple | 5,000 | — | — | 37,500 | 30,000 | 72,500 | ||||||
Travis G. Fitts, Jr. | 6,240 | — | — | 46,800 | 23,088 | 76,128 | ||||||
Christopher K. Menefee | 6,403 | — | — | 48,024 | 22,411 | 76,838 |
2019 LONG-TERM INCENTIVE AWARDS | |||
Component | % of Award | Terms | Alignment |
Restricted Stock Units - Time Based | 50% | Vest in equal annual installments over a three-year period, subject to continued service. | Restricted stock unit awards provide full value shares to our executive officers which is key to retention and aligning interests with our stockholders; the ultimate value of these awards is dependent on stock price performance. |
TSR Performance Awards | 25% | Three-year performance period with payout range of 0 (below 25th percentile), 100% (50th percentile) and 200% (above 75th percentile) based upon Company’s relative TSR versus peer group over a cumulative one, two and three-year period. | Aligns interests with our stockholders and rewards for out-performance compared to peer companies; the ultimate value is based upon both (1) meeting the applicable performance measure and (2) stock price performance. |
ROIC Performance Awards | 25% | Three-year performance period with payout range of 0 to 200% based upon Company’s ROIC in each of years one, two and three measured against predetermined goals established by the Compensation Committee, with year-three goals tied to achieving and exceeding the Company’s weighted average cost of capital. | Aligns interests with our stockholders by rewarding returns-based decision making and actions; the ultimate value of these awards is dependent on both (1) meeting the applicable performance measure and (2) stock price performance. |
Name | Time Vested Restricted Stock Unit Awards | Performance Stock Unit Awards | Total LTIP Awards | |||
J. Anthony Gallegos, Jr. | 10,250 | 10,250 | 20,500 | |||
Philip A. Choyce | 3,784 | 3,784 | 7,568 | |||
Philip A. Dalrymple | 2,271 | 2,271 | 4,542 | |||
Travis G. Fitts, Jr. | 1,414 | 1,414 | 2,828 | |||
Christopher K. Menefee | 1,592 | 1,592 | 3,184 |
Position | Multiple | |
President and Chief Executive Officer | 4X | |
Senior or Executive Vice President | 2X | |
Vice President | 1X |
Name | Principal Position During 2019 | |
J. Anthony Gallegos, Jr. | President and Chief Executive Officer | |
Philip A. Choyce | Executive Vice President and Chief Financial Officer | |
Philip A. Dalrymple | Vice President - Operations | |
Travis G. Fitts, Jr. | Former Senior Vice President - Human Resources & HS&E | |
Christopher K. Menefee | Former Senior Vice President - Business Development |
Non-Equity | |||||||||||||||||||||||
Incentive Plan | Stock | Option | All Other | ||||||||||||||||||||
Salary | Bonus | Compensation | Awards | Awards | Compensation | Total | |||||||||||||||||
Name and Principal Position | Year | ($) (1) | ($) (2) | ($) (3) | ($) (4) | ($) | ($) (5) | ($) | |||||||||||||||
J. Anthony Gallegos, Jr.(6) | 2019 | 465,000 | — | 299,460 | 745,175 | — | 22,800 | 1,532,435 | |||||||||||||||
(President and Chief Executive Officer) | 2018 | 106,250 | 42,500 | 156,294 | 2,382,746 | — | 15,744 | 2,703,534 | |||||||||||||||
Philip A. Choyce | 2019 | 319,000 | — | 153,120 | 275,119 | — | 22,800 | 770,039 | |||||||||||||||
(Executive Vice President and | 2018 | 319,000 | — | 477,479 | 1,219,840 | — | 20,100 | 2,036,419 | |||||||||||||||
(Chief Financial Officer) | 2017 | 319,000 | — | 158,543 | 651,190 | — | 16,645 | 1,145,378 | |||||||||||||||
Philip A. Dalrymple(7) | 2019 | 250,000 | — | 72,500 | 165,134 | — | 19,620 | 507,254 | |||||||||||||||
(Vice President - Operations) | |||||||||||||||||||||||
Travis G. Fitts, Jr.(7)(8) | 2019 | 260,000 | — | 76,128 | 102,819 | — | 20,880 | 459,827 | |||||||||||||||
(Former Senior Vice President - | |||||||||||||||||||||||
Human Resources & HS&E) | |||||||||||||||||||||||
Christopher K. Menefee(8) | 2019 | 266,800 | — | 76,838 | 115,800 | — | 30,880 | 490,318 | |||||||||||||||
(Former Senior Vice President - | 2018 | 250,000 | — | 250,650 | 1,014,561 | — | 22,332 | 1,537,543 | |||||||||||||||
Business Development) | 2017 | 250,000 | — | 71,000 | 239,438 | — | 26,645 | 587,083 |
(1) | Amounts reflected in this column include total annual salary paid during the applicable fiscal year. |
(2) | Amounts reflected in this column represent bonuses earned during the applicable year. |
(3) | Amounts reflected in this column represent performance-based incentive compensation earned under a plan during the applicable year, excluding discretionary components not based on performance criteria and thus reported as bonus. |
(4) | Amount reflected in this column reflect the value of restricted stock, restricted stock unit awards and performance stock unit awards (at target level) granted during the applicable fiscal year, calculated in accordance with FASB ASC Topic 718. Values represent the fair market value of such restricted stock on the date of grant. Assumptions used in the calculation of these amounts are included in Note 11 to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC. |
(5) | All other compensation includes our 401(k) Plan matching contributions and health insurance and life insurance premiums paid by us on behalf of each of our NEOs. For Mr. Menefee, amounts also include club dues paid by us on his behalf of $8,080, $8,100 and $9,500 for the fiscal years ended 2019, 2018 and 2017, respectively. |
(6) | Mr. Gallegos was appointed as an executive officer on October 1, 2018 following the consummation of the Sidewinder Merger. Bonus payments made to Mr. Gallegos represent the discretionary portion of Mr. Gallegos' annual incentive payment for 2018. Excludes $1,134,004 of predecessor compensation payments paid to Mr. Gallegos that were assumed in connection with the Sidewinder Merger. Stock awards in 2018 for Mr. Gallegos represent awards made to him in connection with his appointment as President and Chief Executive Officer of the Company following completion of the Sidewinder Merger. |
(7) | Messrs. Fitts and Dalrymple were not named executive officers during 2017 or 2018. |
(8) | Messrs. Fitts and Menefee each left the employment of the Company in April 2020. |
All Other | Grant Date | ||||||||||||||||||||||||
Estimated future payouts | Estimated future payouts | Stock | Fair Value | ||||||||||||||||||||||
under non-equity incentive | under equity incentive | Awards; | of | ||||||||||||||||||||||
plan awards | plan awards | Number of | Stock | ||||||||||||||||||||||
Shares of | and | ||||||||||||||||||||||||
Stock or | Option | ||||||||||||||||||||||||
Name | Grant Date | Threshold | Target | Maximum | Threshold | Target | Maximum | Units | Awards | ||||||||||||||||
($) | ($) | ($) | (#) | (#) | (#) | (#) | ($) | ||||||||||||||||||
J. Anthony Gallegos, Jr. | 2/27/2019 | (1) | 4,640 | 464,000 | 928,000 | ||||||||||||||||||||
6/4/2019 | (2) | 1,691 | 5,125 | 10,250 | 148,625 | ||||||||||||||||||||
6/4/2019 | (3) | 1,691 | 5,125 | 10,250 | 198,850 | ||||||||||||||||||||
6/4/2019 | (4) | 10,250 | 397,700 | ||||||||||||||||||||||
Philip A. Choyce | 2/27/2019 | (1) | 2,552 | 255,200 | 446,600 | ||||||||||||||||||||
6/4/2019 | (2) | 624 | 1,892 | 3,784 | 54,868 | ||||||||||||||||||||
6/4/2019 | (3) | 624 | 1,892 | 3,784 | 73,410 | ||||||||||||||||||||
6/4/2019 | (4) | 3,784 | 146,831 | ||||||||||||||||||||||
Philip A. Dalrymple | 2/27/2019 | (1) | 1,250 | 125,000 | 250,000 | ||||||||||||||||||||
6/4/2019 | (2) | 374 | 1,135 | 2,270 | 32,915 | ||||||||||||||||||||
6/4/2019 | (3) | 374 | 1,135 | 2,270 | 44,038 | ||||||||||||||||||||
6/4/2019 | (4) | 2,271 | 88,132 | ||||||||||||||||||||||
Travis G. Fitts, Jr. | 2/27/2019 | (1) | 1,590 | 159,000 | 318,000 | ||||||||||||||||||||
6/4/2019 | (2) | 233 | 707 | 1,414 | 20,503 | ||||||||||||||||||||
6/4/2019 | (3) | 233 | 707 | 1,414 | 27,432 | ||||||||||||||||||||
6/4/2019 | (4) | 1,414 | 54,874 | ||||||||||||||||||||||
Christopher K. Menefee | 2/27/2019 | (1) | 1,500 | 150,000 | 300,000 | ||||||||||||||||||||
6/4/2019 | (2) | 262 | 796 | 1,592 | 23,084 | ||||||||||||||||||||
6/4/2019 | (3) | 262 | 796 | 1,592 | 30,885 | ||||||||||||||||||||
6/4/2019 | (4) | 1,593 | 61,803 |
(1) | The 2020 non-equity incentive cash bonus plan for the fiscal year ended December 31, 2019 was approved on February 10, 2020. The plan sets a target opportunity for each executive’s annual cash bonus as a percent of salary, with payout contingent upon meeting ICD's financial goals and other key performance objectives as described above in “Compensation Discussion and Analysis”. The annual cash bonus opportunity attributable to each metric was determined based on a measurement of actual performance relative to target performance, with a .01% payout for threshold achievement, 100% payout for achievement of target performance and 200% maximum payout for over achievement of target or more. The cash bonuses were awarded under the 2012 Omnibus Incentive Plan, as amended. |
(2) | On February 27, 2019, the Company granted, subject to the approval of the Company's 2019 Omnibus Long-Term Incentive Plan by the Company's stockholders at the 2019 Annual Meeting of Stockholders held June 4, 2019, TSR performance unit awards to the Named Executive Officers. These awards provide for the recipients to receive shares of Common Stock upon the achievement of certain performance goals established by the Company during a specified period. As more fully described above in "Compensation Discussion and Analysis", the performance goals are tied to the Company's total stockholder return for the performance period as compared to total stockholder return for our peer group determined by the Compensation Committee. The grant date fair value of these awards was determined based on a Monte-Carlo simulation model, which is consistent with the valuation used for the recognition of compensation expense under FASB ASC Topic 718. |
(3) | On February 27, 2019, the Company granted, subject to the approval of the Company's 2019 Omnibus Long-Term Incentive Plan by the Company's stockholders at the 2019 Annual Meeting of Stockholders held June 4, 2019, ROIC performance unit awards to the Named Executive Officers. These awards provide for the recipients to receive shares of Common Stock upon the achievement of certain performance goals established by the Company during a specified period. As more fully described above in "Compensation Discussion and Analysis", the performance goals are tied to the Company's return on invested capital compared to absolute return on invested capital goals during the period as established by the Compensation Committee. The grant date fair value of these performance unit awards units was based on the closing price of the Company's Common Stock |
(4) | On February 27, 2019, the Company granted, subject to the approval of the Company's 2019 Omnibus Long-Term Incentive Plan by the Company's stockholders at the 2019 Annual Meeting of Stockholders held June 4, 2019, time based restricted stock unit awards to the Named Executive Officers. These awards provide full value shares to our executive officers which is key to retention and aligning interests with our stockholders. The ultimate value of these awards is dependent on stock price performance. As more fully described above in "Compensation Discussion and Analysis", the time based restricted stock units vest in equal annual installments, over a 3-year period, subject to continued service. The grant date fair value of these time based restricted stock units was based on the closing price of the Company's Common Stock on June 4, 2019, the date of approval of the Company's 2019 Omnibus Incentive Plan by the Company's stockholders, which is consistent with the valuation used by the Company for the recognition of compensation expense under FASB ASC Topic 718. |
Equity | ||||||||||||||||||||||||||
incentive | ||||||||||||||||||||||||||
Equity | plan | |||||||||||||||||||||||||
incentive | awards: | |||||||||||||||||||||||||
plan | market or | |||||||||||||||||||||||||
awards: | payout | |||||||||||||||||||||||||
Number | number of | value of | ||||||||||||||||||||||||
of | Market | unearned | unearned | |||||||||||||||||||||||
Number of | Number of | shares | value of | shares, | shares, | |||||||||||||||||||||
Securities | Securities | or units | shares or | units or | units or | |||||||||||||||||||||
Underlying | Underlying | of stock | units of | other | other | |||||||||||||||||||||
Unexercised | Unexercised | that | stock that | rights that | rights that | |||||||||||||||||||||
Option, | Option, | Option | Option | have not | have not | have not | have not | |||||||||||||||||||
Exercisable | Unexercisable | Exercise | Expiration | vested | vested | vested | vested | |||||||||||||||||||
Name | Grant Date | (#) (1) | (#) | Price ($) | Date | (#) (2) | ($) (3) | (#) (4) | ($) | |||||||||||||||||
J. Anthony Gallegos, Jr. | 10/1/2018 | — | — | — | — | 7,860 | 156,728 | — | — | |||||||||||||||||
12/26/2018 | — | — | — | — | 19,756 | 393,935 | — | — | ||||||||||||||||||
6/4/2019 | — | — | — | — | 10,250 | 204,385 | 10,250 | 204,385 | ||||||||||||||||||
Philip A. Choyce | 3/2/2012 | 7,850 | — | 254.80 | 3/2/2022 | — | — | — | — | |||||||||||||||||
12/26/2018 | — | — | — | — | 12,195 | 243,168 | — | — | ||||||||||||||||||
6/4/2019 | — | — | — | — | 3,784 | 75,453 | 3,784 | 75,453 | ||||||||||||||||||
Philip A. Dalrymple | 12/26/2018 | — | — | — | — | 6,098 | 121,594 | — | — | |||||||||||||||||
6/4/2019 | — | — | — | — | 2,271 | 45,284 | 2,270 | 45,284 | ||||||||||||||||||
Travis G. Fitts, Jr. | 12/26/2018 | — | — | — | — | 6,098 | 121,594 | — | — | |||||||||||||||||
6/4/2019 | — | — | — | — | 1,414 | 28,195 | 1,414 | 28,195 | ||||||||||||||||||
Christopher K. Menefee | 12/4/2012 | 2,928 | — | 254.80 | 12/3/2022 | — | — | — | — | |||||||||||||||||
12/26/2018 | — | — | — | — | 10,670 | 665,852 | — | — | ||||||||||||||||||
6/4/2019 | — | — | — | — | 1,592 | 31,744 | 1,592 | 31,744 |
(1) | These stock options were issued under our 2012 Omnibus Plan and are fully vested. |
(2) | These shares represent restricted stock awards and restricted stock units issued under our 2012 Omnibus Plan and 2019 Omnibus Plan. The restricted stock units granted on October 1 vest ratably on each of October 1, 2020 and October 1, 2021. The restricted stock granted on December 26, 2018 represent five-year awards that vest ratably |
(3) | The market value is based upon the applicable number of shares |
(4) | Performance restricted stock units |
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Option Awards | Stock Awards | |||||||||||
Name | Number of Shares | Value | Number of Shares | Value | ||||||||
Acquired on Exercise | Realized on Exercise | Acquired on Vesting | Realized on Vesting | |||||||||
(#) | ($) | (#) | ($) (1) | |||||||||
J. Anthony Gallegos, Jr. | — | — | 3,929 | 88,804 | ||||||||
Philip A. Choyce | — | — | — | — | ||||||||
Philip A. Dalrymple | — | — | — | — | ||||||||
Travis G. Fitts, Jr. | — | — | — | — | ||||||||
Christopher K. Menefee | — | — | — | — |
(1) | Value determined based upon the closing price of |
CEO Pay Ratio Mr. Gallegos had total compensation of $1,532,435 as reflected in the Summary Compensation Table included in this Proxy Statement. Our median employee’s annual total compensation for 2019 was $96,446, which considers both cash and equity compensation. As a result, we estimate that Mr. Gallegos 2019 annual total compensation was approximately 15.9 times that |
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Stockholders interested in submitting a proposal for inclusion in our proxy materials for our next annual meeting, and presentation at our next annual meeting, may do so by following the procedures set forth in Rule14a-8 under the Exchange Act. Provided that the date of our next annual meeting is not more than 30 days frommedian employee.
The Company’s Amended and Restated Bylaws (“Bylaws”) require that stockholders interested in submitting a proposal or nominee for consideration at the 2020 Annual Meeting of Stockholders, which is not submitted for inclusion in our proxy materials pursuant to Rule14a-8 under the Exchange Act, may do so by following the procedures set forth in Section 1.3 of our Bylaws. Section 1.3 of our Bylaws requires any such proposals to be submitted in writing to Independence Contract Drilling, Inc., 20475 State Highway 249, Suite 300, Houston, TX 77070, Attn: Corporate Secretary no later than the close of business on the 90th day nor earlier than the close of business on the 120th day priordirectors, information relating to the anniversary of the preceding year’s annual meeting. Pursuant to this requirement, notice must be received no later than close of business on March 6, 2020 nor earlier than close of business on February 5, 2020 to be considered timely under our Bylawscompensation earned for purposes of our 2020 Annual Meeting of Stockholders; provided, however, thatservices rendered in the event that such date of the annual meeting is more than 30 days before or more than 60 days after June 4, 2020, stockholder notice must be delivered no earlier than the close of business on the 120th day prior to such annual meeting and no later than the close of business on the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by us. To be in proper form, a stockholder’s notice must include the information about the proposal or nominee specified in our Bylaws.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to “incorporate by reference” the information in certain documents that we file with it, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this proxy statement, and information that we subsequently file with the SEC prior to the Special Meeting will automatically update and supersede this information. This proxy statement incorporates by reference the Company’s documents listed below (FileNo. 001-36590) and any future filings we make with the SEC prior to the Special Meeting under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act:
The Company’s Annual Report on Form10-K forall capacities during the fiscal year ended December 31, 2018, which contains2019.
Fees Earned or | Other | |||||||
Paid in Cash | Stock Awards | Compensation | Total | |||||
Director | ($) | ($)(1) | ($) | ($) | ||||
Thomas R. Bates, Jr. | 76,000 | 55,428 | — | 131,428 | ||||
James D. Crandell | 48,500 | 55,428 | — | 103,928 | ||||
Matthew D. Fitzgerald | 78,000 | 55,428 | — | 133,428 | ||||
Daniel F. McNease | 66,000 | 55,428 | — | 121,428 | ||||
James G. Minmier | 53,000 | 55,428 | — | 108,428 | ||||
Adam J. Piekarski(2) | 80,000 | — | — | 80,000 |
(1) | Amount reflected in this column reflects the value of restricted stock, restricted stock unit awards and performance stock unit awards (at target level) granted during the applicable fiscal year, calculated in accordance with FASB ASC Topic 718. Values represent the fair market value of such restricted stock on the date of grant. Assumptions used in the calculation of these amounts are included in Note 11 to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC. |
(2) | Mr. Piekarski was appointed to the Board on October 1, 2018 pursuant to the terms and conditions of the Sidewinder Merger. Pursuant to the terms of the Sidewinder Stockholders’ Agreement, director fees of $20,000 per quarter associated with Mr. Piekarski’s service are assigned to MSD Partners. Mr. Piekarski does not participate in equity awards from the Company. |
The Company’s Quarterly Reports on Form10-Q for the fiscal quarters ended March 31, 2019, June 30, 2019 and September 30, 2019;
The Company’s Current Reports on Form8-K filed on March 5, 2019, June 4, 2019, August 1, 2019 and November 5, 2019 (except, with respect to eachBoard knows of the foregoing, for portions of such reports which were deemedno matters to be furnished and not filed);
The Company’s proxy statement filed on Schedule 14A dated April 25, 2019 in connection withacted upon at the Company’s 2019 annual meeting of stockholders, as incorporated by reference into the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 2018; and
The description of the Company’s common stock contained in its Form8-A filed on August 5, 2014.
To the extent that any information contained in any Current Report onForm 8-K, or any exhibit thereto, was furnished, rather than filed with, the SEC, that information or exhibit is specifically not incorporated by reference in this document.
You may obtain copies of these documents,Meeting other than exhibits, free of charge on our website, www.icdrilling.com, as soon as reasonably practicable after they have been filed with the SEC and through the SEC’s website,www.sec.gov. You may also obtain such documents by submitting a written request either to Investor Relations, Independence Contract Drilling, Inc., 20475 State Highway 249, Suite 300, Houston, TX 77070 or to investor@icdrilling.com, or an oral request by calling the Company’s Investor Relations group at(281) 598-1230.
You should rely only on the information contained or incorporated by reference in this proxy statement. We have not authorized anyone to provide you with information that is different from the information contained in this proxy statement. This proxy statement speaks only as of its date unless the information specifically indicates that another date applies.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any reports, proxy statements or other information filed by us at the SEC’s public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at1800-SEC-0330 for further information on the public reference rooms. You may also obtain copies of these reports, proxy statements and other documents at the SEC’s website, the address of which is http://www.sec.gov. Reports, proxy statements and other information concerning the Company also may be inspected at the offices of the New York Stock Exchange, which is located at 20 Broad Street, New York, New York 10005.
OTHER MATTERS ARISING AT THE SPECIAL MEETING
The matters referred toproposals included in the Notice of Special Meetingaccompanying notice and described in this proxy statement are, to the knowledge of our Board, the only matters that will be presented for consideration at the Special Meeting.Proxy Statement. If any other matters should properly come beforematter requiring a vote of stockholders arises, including a question of adjourning the SpecialAnnual Meeting, the persons appointed bynamed as proxies in the accompanying proxy card will have the discretion to vote on such matters in accordance withthereon according to their best judgment pursuant to the discretionary authority granted to them in the proxy.
The cost of solicitation of proxies will be borne by the Company, and in addition to soliciting stockholders by mail through its regular employees, we may request banks, brokers and other custodians, nominees and fiduciaries to solicit their customers who have ICD common stock registered in the names of a nominee and, if so, will reimburse such banks, brokers and other custodians, nominees and fiduciaries for their reasonableout-of-pocket costs. Solicitation by officers and employees of the Company or by certain outside proxy solicitation services may also be made of some stockholders in person or by mail, telephone or telegraph following the original solicitation.
DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS
In some cases, only one copy of the proxy statement is being delivered to multiple stockholders sharing an address. However, this delivery method, called “householding,” is not being used if we have received contrary instructions from one or more of the stockholders. We will deliver promptly, upon written or oral request, a separate copy of this proxy statement to a stockholder at a shared address to which a single copy of the proxy statement was delivered. To request a separate delivery of the proxy statement now or in the future, a stockholder may submit a written request either to Investor Relations, Independence Contract Drilling, Inc., 20475 State Highway 249, Suite 300, Houston, TX 77070 or to investor@icdrilling.com or an oral request by calling the Company’s Investor Relations group at(281) 598-1230. Additionally, any stockholders who are presently sharing an address and receiving multiple copies of the proxy statement and who would prefer to receive a single copy of such materials may instruct us accordingly by directing that request to the Company in the manner provided above.
Our Board knows of no business that will be presented for consideration at the Special Meeting other than those items stated above. If any other business should come before the Special Meeting, votes may be cast pursuant to proxies in respect to any such business in the best judgment of the person or persons acting under the proxies of what they consider to be in the best interests of the Company. The accompanying proxy card confers discretionary authority to act with respect to any additional matters that may come before the SpecialAnnual Meeting or any adjournment or postponement thereof. Although representatives
CERTIFICATE OF AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF INDEPENDENCE CONTRACT DRILLING, INC.
(Pursuant to Section 242 of the General Corporation Law of the State of Delaware)
Independence Contract Drilling, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “DGCL”),
DOES HEREBY CERTIFY:
FIRST: That the name of this corporation is Independence Contract Drilling, Inc. (the “Corporation”) and that the Corporation was originally incorporated pursuant to the DGCL on November 4, 2011 under the name Independence Contract Drilling, Inc.
SECOND: That the Board of Directors of the Corporation duly adopted resolutions setting forth the proposed amendment to the Amended and Restated Certificate of Incorporation of the Corporation, declaring said amendment to be advisable and in the best interests of the Corporation and its stockholders and authorizing the appropriate officers of the Corporation to solicit the consent of the stockholders therefor, which resolutions setting forth the proposed amendment are substantially as follows:
RESOLVED:
The first paragraph of Article IV of the Amended and Restated Certificate of Incorporation of this Corporation be amended and restated to read in its entirety as follows:
“1. This Corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares of stock which the Corporation shall have the authority to issue is 60,000,000 consisting of 50,000,000 shares of Common Stock, with a par value of $.01 per share and 10,000,000 shares of Preferred Stock, with a par value of $.01 per share. Each share of Common Stock shall entitle the holder thereof to one (1) vote on each matter submitted to a vote at any meeting of stockholders; provided, that, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to this Certificate (including, but not limited to, any certificate of designations relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Certificate (including, but not limited to, any certificate of designations relating to any series of Preferred Stock) or pursuant to the DGCL.”
RESOLVED:
Article IV of the Amended and Restated Certificate of Incorporation of this Corporation be amended to add the following paragraph as follows:
“4. Upon this Certificate of Amendment becoming effective pursuant to the General Corporation Law of the State of Delaware (the “Effective Time”), each share of Common Stock, either issued and outstanding or held by the Corporation as treasury stock, in each case immediately prior to the Effective Time (the “Old Common Stock”), shall be automatically reclassified as and converted into [1/10 to 1/20] of a fully paid and nonassessable share of Common Stock (the “New Common Stock”). No fractional shares of the New Common Stock shall be issued in connection with the Reverse Stock Split. The Company will pay cash in lieu of any fractional shares. Cash paid in lieu of any fractional shares shall be determined based on the average closing market price of the
Old Common Stock on the New York Stock Exchange (or if the Old Common Stock does not remain listed thereon, on the principal securities exchange or quotation service for the Old Common Stock, as determined by the Board of Directors of the Corporation) for the ten trading days immediately preceding the day of the Effective Time, with payment for eachone-tenth of a share of New Common Stock being equal to the average closing price of one share of Old Common Stock on the New York Stock Exchange (or if the Old Common Stock does not remain listed thereon, on the principal securities exchange or quotation service for the Old Common Stock, as determined by the Board of Directors of the Corporation). Any stock certificate that, immediately prior to the Effective Time, represented shares of the Old Common Stock, shall from and after the Effective Time, automatically and without the necessity of presenting the same for exchange, represent that number of whole shares of New Common Stock into which such shares of Old Common Stock shall have been reclassified pursuant to this Certificate of Amendment.”
THIRD: That thereafter said amendment was duly adopted in accordance with the provisions of Section 242 of the DGCL by written consent of the stockholders holding the requisite number of shares required by statute given in accordance with and pursuant to Section 228 of the DGCL.
IN WITNESS WHEREOF, Independence Contract Drilling, Inc. has caused this Certificate of Amendment to the Amended and Restated Certificate of Incorporation to be signed by its Chief Executive Officer this day of , 2020.
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INDEPENDENCE CONTRACT DRILLING, INC.
20475 State Highway 249, Suite 300,
Houston, TXTexas 77070,
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically viae-mail or the Internet. To sign up for electronic delivery, please follow the instructions abovestockholders entitled to vote usingat the Internet and, when prompted, indicate that you agreeAnnual Meeting. The list will be open to receive or access proxy materials electronically in future years.
VOTE BY PHONE -1-800-690-6903
Usethe examination of any touch-tone telephonestockholder, for purposes germane to transmit your voting instructions. Vote by 11:59 P.M. ET on February 5, 2020. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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NOTE: Such otherAnnual Meeting, during ordinary business as may properly comehours for at least ten days before the meeting or any adjournment thereof.
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The |
Important Notice Regarding the Availability of Proxy Materials for the Independence Contract Drilling, Inc. SpecialAnnual Meeting of Stockholders, to be held on February 6, 2020:
The Notice ofProxy Statement for the SpecialAnnual Meeting and Proxy Statementthe Annual Report on Form 10-K for the fiscal year ended December 31, 2019 are available atwww.proxyvote.com
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INDEPENDENCE CONTRACT DRILLING, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON February 6, 2020 AT 9:00 AM LOCAL TIME
The undersigned hereby constitutes and appoints J. Anthony Gallegos, Jr. and Philip A. Choyce, and each of them, the attorneys and proxies of the undersigned with the full power of substitution to appear and to vote all of the shares of common stock of Independence Contract Drilling, Inc., held of record by the undersigned on February 6, 2020, as if personally present at the Special Meeting of Stockholders to be held on February 6, 2020, and any adjournment or postponement thereof, as designated on the reverse.
Each signatory to this proxy acknowledges receipt from Independence Contract Drilling, Inc., prior to execution of this proxy, of a notice of Special Meeting of Stockholders and a Proxy Statementdated , 2019.
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the recommendations of the Board of Directors, as noted on the reverse. This proxy also delegates discretionary authority to vote upon such other matters as may properly come before the Special Meeting and at any adjournment or postponement thereof. Please see the accompanying proxy statement for additional details.
YOU ARE URGED TO DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENVELOPE PROVIDED. IT IS IMPORTANT FOR YOU TO BE REPRESENTED AT THE SPECIAL MEETING. THIS PROXY MUST BE RECEIVED BY MAIL IN THE POSTAGE-PAID ENVELOPE PROVIDED OR ELECTRONICALLY VIA THE INTERNET AT WWW.PROXYVOTE.COM OR BY PHONE AT1-800-690-6903.
(If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.)
Continued and to be signed on reverse side