Creative 2000 Annual Report Download - page 29

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NOTE 8 – EMPLOYEE SHARE PURCHASE AND STOCK OPTION PLANS (Cont’d)
On November 18, 1996, the Board of Directors offered all employees with stock options (from both the Old and New Plans),
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 three 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.
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.
Effective April 2000, unvested stock options to purchase 0.2 million shares of Creative’s ordinary stock granted under the
New Plan and 1999 Scheme to employees of a subsidiary were cancelled in exchange for the right to receive options granted
by the subsidiary. The employees are allowed to retain outstanding options vested on March 31, 2000. In May 2000, the
subsidiary adopted a separate stock option plan and employees were then granted options under this plan. See “Subsidiary
Stock Option Plan” below for additional information.