director sti

anyone know how AWB director short term incentives work?
i note that the costs of exercising the options are ZERO and the exercise price is LOWER than the sp at date of issue. For eg, in oct 2008, MD was issued 336k options exercisbale at 2.06 (sp on issue date was 2.97). and exercise price is $0. expiry oct 2012.
is that just FREE MONEY for directors? do they have to hold for a minimum duration? (i know it seems insignificant and irrelevant since sp is now so low, but i just want to know how STI (short term incentives) work.
thanks!

anyone notice salary for philip gentry went up from 233k (2008) to 510k (2009). (double???)