Creative 2002 Annual Report Download - page 37

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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 2002, 2001 and 2000, 248,000, 225,000 and 57,000 shares were issued at a weighted average exercise price of
$5.19, $10.80 and $15.25 per share under Creative’s Employee Share Purchase Plan respectively.
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 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.
As of October 6, 1998, Creative is no longer subject to the listing rules of the Singapore Exchange 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.
In fiscal 1999, Creative granted 2.9 million options under the 1999 Scheme at a weighted average exercise price of $10.14,
which was below fair market value, resulting in deferred share compensation of $5.1 million which is being amortized over
the vesting period of the underlying options.
In fiscal 2000, Creative granted 4.3 million options under the 1999 Scheme at a weighted average exercise price of $9.14,
which was below fair market value, resulting in deferred share compensation of $6.3 million which is being amortized over
the vesting period of the underlying options.
No options were granted under the 1999 Scheme in fiscal 2001.