Creative 2004 Annual Report Download - page 33

31
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, made up of the Board of Directors, 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 2002, Creative granted 7.1 million options under the 1999 Scheme at a weighted average exercise price of $4.57. Options to
acquire 2.9 million shares were granted in fiscal 2002 below fair market value, resulting in a deferred share compensation of $0.8 million
being amortized over the vesting period of the underlying options. The 7.1 million options that were granted in fiscal 2002 included 1.6
million Creative’s options that were granted to assume 3Dlabs’ outstanding employee stock options (see Note 17).
In fiscal 2003, Creative granted 0.4 million options at fair market value under the 1999 Scheme at a weighted average exercise price of
$6.99.
In fiscal 2004, Creative granted 0.15 million options at fair market value under the 1999 Scheme at a weighted average exercise price
of $10.14.
Creative Employee Stock Option Plans
A summary of options granted to employees and non-employee directors under Creative’s stock option plans is presented below:
Options Outstanding
Number of Shares Weighted Average
(’000) Exercise Price ($)
Balance as of June 30, 2001 6,781 9.01
Granted – at fair market value 2,509 4.72
– below fair market value 2,931 4.80
– pursuant to the acquisition of 3Dlabs (see Note 17) 1,641 3.93
Exercised (1,070) 6.45
Canceled (913) 9.18
Balance as of June 30, 2002 11,879 6.56
Granted – at fair market value 380 6.99
Exercised (566) 4.58
Canceled (1,101) 7.44
Balance as of June 30, 2003 10,592 6.59
Granted – at fair market value 150 10.14
Exercised (1,517) 5.64
Canceled (304) 6.48
Balance as of June 30, 2004 8,921 6.82