Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
On February 11, 2021, the Compensation Committee (the “Committee”) of the Board of Directors of Independence Contract Drilling, Inc. (the “Company”) made the following compensation decisions relating to the Company’s named executive officers (“NEOs”):
Suspension of Payments Under 2020 Annual Incentive Program
As previously disclosed, all payments under the Company’s 2020 Annual Incentive Program were suspended, and no payments for annual achievements against this plan will be made to any NEOs.
2021 Long-Term Incentive Awards
The Committee approved and granted the following 2021 long-term incentive plan awards to NEOs under the Company’s 2019 Omnibus Incentive Plan. All of these awards are at risk and constitute performance-based compensation.
•Out-of-the-money Stock Appreciation Rights (“SARs”) with the following terms: (i) Strike price of $5.73 per share of common stock under the SAR awards, representing 115% of the closing price for shares of the Company’s common stock on the date of grant ($4.98); (ii) cap of $10 per share set on the fair market value of the common stock under the SAR awards (for determining fair market value on the date of exercise of a SAR, the average closing price for the preceding 20 trading days will be utilized); (iii) Settlement of awards solely in cash; (iv) vesting over three years in equal 1/3 increments with a seven-year term; (v) one-year non-compete and non-solicitation covenants; (vi) no acceleration of vesting on a change of control; and (vii) accelerated vesting on termination without cause or for good reason.
•TSR Performance awards with the following material terms: (i) TSR performance measured against both a peer group of companies and a broad-based index (Russell Microcap), with payout equal to 0% to 200% of the target award based upon comparison to these measures; (ii) award vesting capped at target if negative TSR during the performance period; (iii) three-year cliff vesting with performance measured over a cumulative one-year, two-year and three-year periods; (iv) settlement of awards solely in cash based upon a fixed target value; and (v) proportionate vesting upon a change of control or termination of employment without cause or for good reason.
•The following chart summarizes the level of these LTIP awards for each NEO:
|
|
|
|
|
|
|
|
|
Executive Officer
|
Shares under SAR Awarded
|
TSR Award (at Target)
|
J. Anthony Gallegos Jr., President & Chief Executive Officer
|
1,405,437
|
|
$431,500
|
Philip A. Choyce, Executive Vice President & Chief Financial Officer
|
522,638
|
|
$160,450
|
Philip A. Dalrymple, Senior Vice President - Operations
|
242,671
|
|
$74,500
|
Scott A. Keller, Senior Vice President - Business Development
|
294,137
|
|
$90,300
|
Katherine Kokenes, Vice President & Chief Accounting Officer
|
162,866
|
|
$50,000
|
Retention Agreements
The Committee also approved one-time retention agreements for each of the NEOs. The retention agreements provide for a cash payment to each NEO subject to continuous employment over a three-year period. Payment is not accelerated upon the occurrence of a change of control, but does accelerate on termination of employment without cause or for good reason. The agreements include a one-year non-compete and non-solicitation agreement. The following chart summarizes the level of retention award for each NEO:
|
|
|
|
|
|
Executive Officer
|
Retention Award Amount
|
J. Anthony Gallegos Jr., President & Chief Executive Officer
|
$893,648
|
Philip A. Choyce, Executive Vice President & Chief Financial Officer
|
$301,560
|
Philip A. Dalrymple, Senior Vice President - Operations
|
$197,951
|
Scott A. Keller, Senior Vice President - Business Development
|
$249,087
|
Katherine Kokenes, Vice President & Chief Accounting Officer
|
$147,160
|