Running Clock Question

[Freddy]

Our state allows for a running clock with a 40 or more point differential. Our state Officials' Guidebook specifies only this:
II. Point Differential Rule
A. At all levels of play and in MHSAA tournaments, after the first half
when one team has a lead of 40 points or more, a running clock shall
be established. The clock shall revert to regular time schemes should
the score be reduced to a 30-point lead or less. During any running
clock mode, the clock shall be stopped as normal for all timeouts and
between quarters; and for free throws during the last two (2) minutes of
the game.
Question: Timeout is granted during running clock scenerio. Timeout was granted after a foul which would have a free thrower shooting two shots. When the timeout is over, when would the running clock be restarted?
Possible Answers:
1) When the ball becomes alive, that is, when it is put at the disposal of the free thrower, or
2) When the ball is rebounded after a missed second shot or after inbounded after a successful second shot.
Our state really doesn't specify beyond what I quoted above from our Officials' Guidebook.
I say 1.
A seasoned "table official" and an area AD says 2.
What say you?