Citrix 2006 Annual Report Download - page 69

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
Citrix Systems, Inc.  Annual Report
Company generally used the date of the first in-person
Board of Directors meeting after the evidence suggested
that the amount and terms of the grant were final as
the revised measurement date for financial accounting
purposes. Where evidence existed of advance approval by
the Compensation Committee (such as facsimile header
dates on signed unanimous written consent forms), the
Company used this information as evidence of when
the Compensation Committee approval was obtained,
and used that date as the revised measurement date for
financial accounting purposes.
May 1998 – November 2003: During this period the
Company issued approximately 70.5 million options over
87 grant dates. In the restatement, the Company corrected
measurement dates for approximately 50.6 million options
granted on 79 of the 87 grants dates. The Company made
these corrections because it did not complete the required
granting actions by the original grant date, including,
obtaining approvals from the Compensation Committee
and not finalizing the amounts or recipients as of the
original grant date.
During this period, a substantial majority of the grants were
approved using unanimous written consent forms signed
by the Compensation Committee for which, in most cases,
there was no documentary evidence of when approval
was actually obtained. As discussed above, where there
was insufficient evidence to determine when approval
conclusively was obtained, the Company generally used
the date of the first in-person Board of Directors meeting
after the evidence suggested that the amount and terms
of the grant were final as determined by management as
the revised measurement date for financial accounting
purposes. However, if there was evidence sufficient for the
Company to conclude that the required granting actions
were completed on a date that was earlier than the next
in-person Board meeting, in accordance with APB No.25,
the Company set the revised measurement date at the
earlier date.
November 2003 – December 2006: Beginning in
November 2003, the Company granted 9.5 million
options to employees on 42 grant dates pursuant to
delegated authority described above. In virtually all cases
these grants were made on predetermined annual grant
dates or the first business day of the month following
the employee’s hire date or performance recognition
and were issued pursuant to an underlying system of
processes, controls and management approvals. After
the award was communicated to the employee and the
administrative processes were complete the CFO signed
an internal delegation of authority form after the grant
date. The Company concluded that the CFO’s signature
on these documents was perfunctory and was not a
required granting action. During this period, approximately
3% of the individual non-executive employee grants
(or 7% of the total non-executive employee options)
awarded pursuant to the delegation process exceeded
the delegation limitations discussed above and should
have been presented for approval by the Compensation
Committee. Although these grants were not approved by
the Compensation Committee, they were communicated
to employees and processed pursuant to the same system
of processes, controls and management approvals as
grants within the limitations. The Company has concluded
that these grants were legally outstanding and that the
requirements to establish a measurement date were met
on the original grant date.
The Company revised the measurement date for the non-
executive annual grant originally dated April 1, 2004. The
grant was issued pursuant to the delegation of authority
above and was revised because the Company had not
completed the process of determining grant amounts
and recipients until after the grant date. The Company
determined revised measurement dates for each individual
recipient through May 20, 2004 by assessing when each
grant was fixed with finality as reflected in hard copy and
electronic documents and other information. This was
the only grant date that options issued under delegated
authority were revised and the Company recognized total
pre-tax stock compensation expense of approximately $0.2
million related to this grant.
Compensation Committee approval continued to be a
required granting action for all stock option grants outside
of the parameters of the delegated authority, as described
above. For grants outside of the delegation of authority,