| The final clause of Section 201(6) makes clear that any offer |
or sale of the underlying security that occurs as a result of the |
offer or sale of an option or other derivative security exempted |
under this provision or as the result of the exercise of the |
option or other derivative security, is covered by the exemption |
if the option met the terms of the exemption at the time such |
derivative security was written (that is, sold) or issued. The |
sale of the underlying security when an option is exercised would |
be exempt even if the underlying security is not at that time |
subject to any exemption under the Act. This is consistent with |
existing precedent under federal law suggesting that the legality |
of the sale of an underlying security when an option is exercised |
should be determined by the status of the security at the time |
the option was written rather than at the time of exercise. See, |
e.g., H. Kook & Co., Inc. v. Scheinman, Hochstin & Trotta, Inc., |
414 F.2d 93 (2d Cir. 1969). Any transaction in an underlying |
security that results from the offer, sale, or exercise of any |
derivative security issued by a registered clearing agency and |
traded on a national securities exchange or association is exempt |
if the derivative security when written was exempt under Section |
201(6). |