Creative 2001 Annual Report Download - page 26

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 – EMPLOYEE SHARE PURCHASE AND STOCK OPTION PLANS
Creative Employee Share Purchase Plan
As approved by the shareholders in November 1999, Creative has adopted the 1999 Employee Share Purchase Plan
that permits substantially all employees to purchase Ordinary Shares of Creative. Participating employees may
purchase ordinary shares through regular payroll deductions accumulated during each offering period at a purchase
price of 85% of the lower of the fair market value on the offering date or on the purchase date. Each offering period
consists of four six months purchase periods, except for the first purchase period in the first offering period which
was four months. A total of 1.0 million Ordinary Shares were reserved for issuance under this plan. In addition,
on each July 1, the aggregate number of Ordinary Shares reserved for issuance under the plan shall be increased
automatically by 1% of the total number of outstanding Ordinary Shares of Creative on the immediately preceding
June 30; provided that the aggregate shares reserved under this plan shall not exceed 5.0 million shares.
In fiscal 2001 and 2000, 225,000 and 57,000 shares were issued at a weighted average exercise price of $10.80 and
$15.25 per share under Creative’s Employee Share Purchase Plan.
Creative Employee Stock Option Plans
In December 1994, Creative adopted the new Creative Technology Employees’ Share Option Scheme (the “New
Plan”). Options granted under this plan were in accordance with Section 422(a) of the US Internal Revenue Code
of 1986, as amended. On November 13, 1996, at a special meeting, shareholders approved certain changes to the
New Plan to make it less restrictive. Under the amended New Plan, the total number of shares that could be granted
was increased to an overall maximum of 15% of the issued share capital of Creative. The amended New Plan also
provided for incentive stock options (ISO’s) to be granted to employees of Creative on a quarterly basis, at the average
market price established on the five days closing immediately prior to the date of grant. The options vested at the
rate of 25% at the end of each anniversary of the grant date and were exercisable over a period not exceeding five
years from the date of grant.
On November 18, 1996, the Board of Directors offered all employees with stock options, the opportunity to cancel
four existing options in exchange for a grant of three new options at an exercise price of $5.90 (or S$8.52), the fair
market value of Creative’s Ordinary Shares on the date of the offer. The resulting new options have a vesting
schedule equal to that of the old options plus one year. As of November 18, 1996, approximately 4.8 million options
were eligible for exchange, of which 2.6 million options were exchanged for 1.9 million new options.
As of October 6, 1998, Creative is no longer subject to the listing rules of the stock exchange of Singapore but is
required only to comply with the listing rules of NASDAQ, including rules governing stock option plans. Since many
of Creative employees and shareholders are located in the United States of America, Creative has obtained shareholders’
approval on December 30, 1998 to replace the New Plan with the Creative Technology (1999) Share Option Scheme
(“1999 Scheme”), which is more in accordance with US practice. The 1999 Scheme allows options to be granted
to full-time employees as well as consultants and non-executive directors. The total number of shares that may be
granted as options is 7.5 million provided that such amount shall be automatically increased on the first day (July
1) of each of the five fiscal years ending June 30, 2001, 2002, 2003, 2004 and 2005 by four percent of the issued share
capital of Creative as at the last day of the immediate preceding fiscal year. The Option Committee has the discretion
to decide the vesting schedule in the letter of offer. If it is not specifically stated in the letter of offer, 1/4 of the total
amount of the grant vest on the first anniversary of the grant date and 1/48 of the total amount of the grant on the
last day of each calendar month thereafter. The exercise price of options granted under the 1999 Scheme may be
less than the fair market value of the shares as of the date of grant and the options expire after the tenth anniversary
of the date of grant, except in the case of options granted to participants other than employees, options expire not
later than the fifth anniversary of the date of grant.