CMKM Diamonds Inc. (fka CMKX)

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Jim: Rule 144 requires a person who is given restricted stock to hold it for a minimum of one year before selling. If he wants to sell before this time is over, the company is supposed to register his shares first before he does.

Rule 144 also has a provision where if a stock dividend is issued the length of time held is considered the same as the time you held the underlying stock which resulted in you getting the dividend. For example, say you purchased CMKX shares on 1 July 2003 and a year later was issued a stock dividend on 15 July 2004. The age of your dividend shares starts on 1 July 2003 (your original purchase). If the dividend was restricted stock, you could sell it right away without waiting any longer once the company/TA removed the legend on it.

Your first bold sentence says they don't want to use this provision to shorten your holding period. Instead, they want everyone to hold for one year from whenever it's issued (or until they register the shares if they opt to do so). As for the second bold sentence, I'm not sure. I'm not an attorney, but to me it doesn't appear to be worded correctly. I think they want to say dividend shares will be cancelled and voided if you try to sell early. As currently written, it appears to say if the dividend is distributed those shares will be cancelled.