| Item 1.01. | Entry into a Material Definitive Agreement. |
Equity Distribution Agreement
On June 5, 2020, Independence Contract Drilling, Inc. (the “Company”) entered into an equity distribution agreement (the “Agreement”) with Piper Sandler & Co. (the “Agent”), through its Simmons Energy division. Pursuant to the Agreement, the Company from time to time may offer and sell through the Agent shares of its common stock, par value $0.01 per share, having an aggregate offering price of up to $11,000,000 (the “Shares”). Sales of the Shares, if any, under the Agreement may be made in any transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”).
The Agreement contains customary representations, warranties and agreements by the Company, indemnification obligations of the Company and the Agent, including for liabilities under the Securities Act, other obligations of the parties and termination provisions. Under the terms of the Agreement, the Company will pay the Agent a commission equal to 3% of the gross sales price of the Shares sold.
The Company plans to use the net proceeds from any sales pursuant to the Agreement, after deducting the sales agent’s commissions and the Company’s offering expenses, for general corporate purposes, which may include, among other things, repayment of indebtedness and capital expenditures.
The Shares to be sold under the Agreement, if any, will be issued and sold pursuant to the Company’s shelf registration statement on FormS-3 (FileNo 333-227185), which was declared effective by the Securities and Exchange Commission on September 12, 2018, and a prospectus supplement thereto. This Current Report on Form8-K shall not constitute an offer to sell or the solicitation of an offer to buy the Shares nor shall there be any sale of the Shares in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or other jurisdiction.
The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to complete text of the Agreement, a copy of which is filed as Exhibit 1.1 to this Current Report on Form8-K, and incorporated by reference herein. A legal opinion related to the issuance and sale of the Shares is filed herewith as Exhibit 5.1.
Merger Consideration Amendment.
On June 4, 2020, the Company entered into a letter agreement (the “Merger Consideration Amendment”) with MSD Credit Opportunity Master Fund, L.P. in its capacity (i) as representative of the Members (the “Members’ Representative”) under that Agreement and Plan of Merger (the “Merger Agreement”), dated as of July 18, 2018 (the “Execution Date”), by and among the Company, Patriot Saratoga Merger Sub LLC, Sidewinder Drilling LLC (“Sidewinder”) and the Member’s Representative, and (ii) as representative of the Unitholder and Noteholders under a Contribution, Exchange and Restructuring Agreement, dated as of July 18, 2018, by and among (a) Sidewinder, (b) all of the holders of Series A Common Units of Sidewinder, (c) all of the holders of Floating Rate Secured Notes due February 15, 2020 of Sidewinder, and (d) all of the holders of the Amended and Restated Secured Notes due February 15, 2020 of Sidewinder pursuant to the Amended and Restated Second Lien Note Purchase Agreement, dated as of February 15, 2017, by and among Sidewinder and purchasers party thereto. The Merger Consideration Amendment provides for the deferral of payment by the Company of the Mechanical Rig Net Proceeds (as defined in the Merger Agreement) under the Merger Agreement to the earlier of (i) June 30, 2022 and (ii) a Change of Control Transaction (the “Payment Date”), and requires the Company to pay an additional amount in connection with such deferred payment equal to interest accrued on the amount of Mechanical Rig Net Proceeds during the period between May 1, 2020 and the Payment Date, which interest shall accrue at a rate of 15% per annum, compounded quarterly, during the period beginning on May 1, 2020 and ending on December 31, 2020 and at a rate of 25% per annum, compounded quarterly, during any period following December 31, 2020. ‘Change of Control Transaction’ has the meaning ascribed to such term in that certain Amended and Restated Stockholders’ Agreement of the Company, dated as of October 1, 2018. The Mechanical Rig Net Proceeds were previously payable in the second quarter of 2020, and as of March 31, 2020, the amount of Mechanical Rig Net Proceeds was $2,901,709 million.
