This is in response to the poster who asked what a poison pill did.
A poison pill is a defense against a hostile takeover.
Deep Down's poison pill is found in its 14C filing dated May 16. It was voted on and approved by management and the board of directors.
I will attempt to make the document understandable by all. It reads long so be prepared for boilerplate and my comments.
Essentially, the Company is under complete control of the management and the BOD. The Company did this by creating certain Bylaws and Amendments that gave them the control they deemed necessary to thwart a hostile takeover OR a buyout from a company that could have been made as an overture to the shareholders of Deep Down (say they offered us $5.00 per share tomorrow).
The defenses against hostile takeovers was approved by 60%+ of the voting shares on May 28.
The company states that it has authorized 490,000,000 shares of Common Stock of which 174,703,162 are outstanding. DDI can also issue 10,000,000 shares of "serial preferred stock" of which none are currently outstanding. DDI may issue the preferred stock and require the acquierer to also purchase this stock in a takeover bid.
The Company says the issuance of the above stated stock may dilute the voting interests of stockholders if used in a defense. The BOD may issue an additional class of voting preferred stock to a person opposed to the acquisition, and subsequently prevent the acquisition single-handedly.
"The Company's BOD has the full authority to change the number of shares of any class of series, if any, of authorized stock by increasing or decreasing the number of shares without obtaining the approval of the shareholders."
In essense, I believe this means the company may issue an unlimited number of shares to the person and this, of course, would also dilute our shares by whatever number were issued.
Another defense has been created by amendments to shareholder meetings.
As it reads now, stockholder meetings may only be called by the BOD or a committee appointed by the BOD. A company that amasses shares and seeks to acquire DDI may not call a special meeting without the consent of the BOD.
The BOD has amended its constitution. It now divided into three classes. In a nutshell, it is now set up much like the U.S. Senate which every two years has a third of the body up for election. The majority of the body stays in toto and can only be changed in the majority on a two-election cycle. The DDI BOD sits in one year, two year and three year seats. Thus, the staggered board makes is more difficult for stockholders to change the BOD for whatever reason.
REMOVAL OF DIRECTORS
A director may be removed except for cause by the vote of the holders of 75% of the outstanding shares of capital stock entitled to vote at an election of directors. The SUPERMAJORITY vote requirement would make if difficult for stockholders to remove directors, even if the stockholders believe such removal would be beneficial.
The power to determine the number of directors within the 1 to 15 mandated by DDI's Bylaws and Amendments and the power to fill vacancies in now vested soley in the BOD. This means that an entity or person cannot acquire control of the Company by increasing the number of members on the board. I believe this is one of the most effective tools they have created to thwart a takeover.
CUMULATIVE VOTING
Under Nevada law, there is no cumulative voting by shareholders for the election of directors. The means that the holders of the majority of the stock may elect all of the directors at a meeting. The minority group cannot have its sharedholders' stake represented to elect one of more representatives to the board.
Amendments hereinafter require the approval of two-thirds of the BOD AND 75% of the outstanding voting interests entitled to vote to adopt an amendment. Bylaws may be amended by two-thirds approval of the BOD OR 75% of the outstanding voting interests entitled to vote for the election of directors.
The above provisions make it difficult for shareholders to change provisions in the Bylaws and Amendments the prevent or discourage hostile acquisitions and it tends to entrench management.
NEW BUSINESS
Any new business or nominees for the BOD to be taken up at a special or annual meeting of stockholders must be submitted and delivered to the Secretary of the Corporation in person or by first class mail not less than 30 days nor more than 60 days prior to the meeting.
The Chairman of the annual of special meeting may, if the facts warrant, determine and declare to the meeting that a nomination or proposal was not made in accordance with the foregoing procedure and he may disregard the nomination or proposal and lay it over for action at the next annual of special meeting (which may be called only by the BOD).
The Company states that the advance notice requirement may give management time to solicit its own proxies in an attempt to defeat any dissident slate of nominations.
Verbatim: "In addition, these notice provisions make of more difficult for stockholders to nominate candidates for election to the BOD or propose new business unless it is approved by the BOD and could inhibit the ability of the shareholders to bring up new business in response to recent developments."
I believe the above verbiage means that shareholdes are at a loss to be able to respond to the Amendments and Bylaws that have been created to thwart a hostile takeover or what may be deemed a premature buyout.
Lastly, the Company reserves the right to repeal, alter, amend or rescind any provision contained in the Articles, and even the Articles may be repealed, altered, amended or rescinded only if approved by no less that 75% of the shares entitled to vote.
Thus, they can do away with the poison pill (I would guess a poison pill would be hard to swallow if, say, an acquirer offered $25 a share).
As holders of approximately 70% of the shares, the Company management and BOD have created, in my estimation, a bullet-proof defense against a takeover or buyout and in its creation have given all power to management and the BOD, and, in turn, have relieved shareholders of any say in the Company's affairs.
The above is my take. Any commments are welcome.
Trueheart
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