From my friend (for Watts) regarding the options given to the executive staff prior to this latest announcement. Keep in mind that normally he would have a lot more information at his disposal and would spend a lot of time for research, so this is an off the cuff response and should be taken as that.
"It is probably not illegal (from what I can tell from info limited to your email). Granting stock options is not seen as "trading" while in possession of material, non-public information. Pre-deal option grants aren't much different from golden parachutes or special deal-related bonuses. They smooth the way for CEOs to agree to sell or merge their businesses rather than fight to hang on to their jobs. It could be more of tax dodge. The options are likely structured to avoid being treated as a golden parachute payment and the taxes associated with those. Of course, if there are misrepresentations or inadequate disclosure, all bets are off."
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