NVIDIA DEF 14A 2009
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant x
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 2009
You are cordially invited to attend the Annual Meeting of Stockholders of NVIDIA Corporation which will take place on Wednesday, May 20, 2009, at 9:00 a.m. pacific daylight time in Building E of our headquarters located at 2800 Scott Boulevard, Santa Clara, California, 95050 for the following purposes:
These items of business are more fully described in the proxy statement accompanying this notice. Only stockholders who owned our stock at the close of business on March 30, 2009 may vote at the Annual Meeting or any adjournments, continuations or postponements of the meeting.
We are pleased to take advantage of the U.S. Securities and Exchange Commission rule that allows companies to furnish proxy materials to their stockholders over the Internet. On or about April 8, 2009, we mailed to our stockholders (other than those who previously requested electronic or paper delivery) a Notice of Internet Availability of Proxy Materials, or the Notice, containing instructions on how to access our proxy materials, including our proxy statement and annual report. The Notice also instructs you on how to access your proxy card to vote over the Internet. Your vote is important. Whether or not you plan to attend the Annual Meeting, PLEASE VOTE YOUR SHARES.
Please see the map at the back of this proxy statement for directions to Building E of our headquarters located at 2800 Scott Boulevard, Santa Clara, California, 95050. We look forward to seeing you at our Annual Meeting.
By Order of the Board of Directors
/s/ David M. Shannon
David M. Shannon
Santa Clara, California
April 8, 2009
Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting To Be Held on May 20, 2009.
This Notice, Proxy Statement, our Annual Report on Form 10-K and our Stockholder Letter
can be accessed electronically at
TABLE OF CONTENTS
2701 SAN TOMAS EXPRESSWAY
SANTA CLARA, CALIFORNIA, 95050
FOR THE 2009 ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 2009
Why am I receiving these materials?
Your proxy is being solicited on behalf of the Board of Directors, or the Board, of NVIDIA Corporation, a Delaware corporation. Your proxy is for use at our 2009 Annual Meeting of Stockholders, or the 2009 Annual Meeting, to be held on Wednesday, May 20, 2009, at 9:00 a.m. pacific daylight time. This proxy statement contains important information regarding the 2009 Annual Meeting, the proposals on which you are being asked to vote, information you may find useful in determining how to vote and voting procedures.
Where is the 2009 Annual Meeting going to be?
Our 2009 Annual Meeting will take place in Building E of our headquarters located at 2800 Scott Boulevard, Santa Clara, California 95050. Our principal executive offices are located at 2701 San Tomas Expressway, Santa Clara, California 95050, and our telephone number is (408) 486-2000. Please see the map at the end of this proxy statement for directions to the 2009 Annual Meeting.
Why did I receive a Notice in the mail regarding the Internet availability of proxy materials this year instead of a full set of proxy materials?
We are pleased to take advantage of the U.S. Securities and Exchange Commission, or SEC, rule that allows companies to furnish their proxy materials over the Internet. On or about April 8, 2009, we sent stockholders who own our common stock at the close of business on March 30, 2009 (other than those who previously requested electronic or paper delivery) a Notice of Internet Availability of Proxy Materials, or the Notice, containing instructions on how to access our proxy materials, including our proxy statement and our fiscal 2009 annual report. The Notice also instructs you on how to access your proxy card to vote over the Internet or by telephone. In addition, the Notice contains instructions on how to request a paper copy of our proxy materials, including this proxy statement, our fiscal 2009 annual report and a form of proxy card or voting instruction card. The Notice also provides instructions on how you can elect to receive future proxy materials electronically or in printed form by mail. If you choose to receive future proxy materials electronically, you will receive an email next year with instructions containing a link to the proxy materials and a link to the proxy voting site. Your election to receive proxy materials electronically or in printed form by mail will remain in effect until you terminate such election. We believe that this process allows us to provide our stockholders with the information they need in a timelier manner, while reducing the environmental impact and lowering the costs of printing and distributing our proxy materials.
Why did I receive a full set of proxy materials in the mail instead of a Notice regarding the Internet availability of proxy materials?
We are providing stockholders who have previously requested to receive paper copies of the proxy materials with paper copies of the proxy materials instead of a Notice. If you would like to reduce the environmental impact and the costs incurred by us in mailing proxy materials, you may elect to receive all future proxy materials electronically via email or the Internet.
If you make this election, you will receive an e-mail message shortly after the proxy statement is released containing the Internet link to access our Notice, proxy statement and annual report. The e-mail also will include instructions for voting on the Internet.
In order to receive these materials electronically, you must follow the applicable procedure below:
Stockholders of Record. If you are a stockholder of record, you can choose to receive our future proxy materials electronically by following the instructions to vote on the Internet at www.proxyvote.com and when prompted, indicate that you agree to access stockholder communications electronically in future years.
Street Name Holders. If your shares are held in street name, you can choose to receive our future proxy materials electronically by visiting www.icsdelivery.com/nvda.
Your choice to receive proxy materials electronically will remain in effect until you contact our Investor Relations Department and tell us otherwise. You may visit the Investor Relations section of our website at www.nvidia.com, send an electronic mail message to email@example.com or contact our Investor Relations Department by mail at 2701 San Tomas Expressway, Santa Clara, California 95050.
The SEC has enacted rules that permit us to make available to stockholders electronic versions of the proxy materials even if the stockholder has not previously elected to receive the materials in this manner. We have chosen this option in connection with the 2009 Annual Meeting, and if you have not previously requested to receive electronic or paper delivery, you should have received by mail, a Notice instructing you how to access the materials on the Internet and how to vote your shares.
Who can vote at the 2009 Annual Meeting?
Stockholders of record at the close of business on March 30, 2009 (the record date) will be entitled to vote at the 2009 Annual Meeting. On the record date, there were 544,633,196 shares of common stock outstanding and entitled to vote. A list of stockholders entitled to vote at the 2009 Annual Meeting will be available at our headquarters, 2701 San Tomas Expressway, Santa Clara, California for 10 days prior to the 2009 Annual Meeting. If you would like to view the stockholder list, please call our Stock Administration Department at (408) 486-2000 to schedule an appointment.
What is the difference between a stockholder of record and a beneficial owner?
Stockholder of Record. You are a stockholder of record if at the close of business on March 30, 2009 your shares were registered directly in your name with BNY Mellon Shareowner Services, our transfer agent.
Beneficial Owner. You are a beneficial owner if your shares were held through a broker or other nominee and not in your name at the close of business on March 30, 2009. Being a beneficial owner means that, like most of our stockholders, your shares are held in street name and your broker sends the Notice or the proxy materials to you. As a beneficial owner, your broker or other nominee is the stockholder of record of your shares. You have the right to direct your broker on how to vote the shares in your account. However, because you are not the stockholder of record, if you would like to vote your shares in person at the 2009 Annual Meeting you must obtain a legally valid proxy from your broker prior to the 2009 Annual Meeting.
What am I voting on?
There are two matters scheduled for a vote:
In addition, you are entitled to vote on any other matters that are properly brought before the 2009 Annual Meeting.
How do I vote?
You may either vote FOR all the nominees to the Board or you may WITHHOLD your vote for any nominee you specify. For each other matter to be voted on, you may vote FOR or AGAINST or ABSTAIN from voting.
Stockholder of Record. If you are a stockholder of record, there are four ways for you to vote your shares.
In Person. You may vote in person by coming to the 2009 Annual Meeting. Even if you plan to attend the 2009 Annual Meeting, we urge you to vote by proxy prior to the 2009 Annual Meeting to ensure your vote is counted.
By Proxy. If you received printed proxy materials, you may submit your proxy by mail by signing your proxy card. If you provide specific voting instructions, your shares will be voted as you have instructed.
By Telephone or Internet. You may submit your proxy by following the instructions provided in the Notice to vote over the Internet. If you received a printed version of the proxy materials by mail, you may submit your proxy by following the instructions provided with your proxy materials and on your proxy card to vote over the Internet or by telephone.
Beneficial Owner. If you are a beneficial owner, you should have received a Notice or voting instructions from your broker. You should follow the instructions in the Notice or voting instructions in order to instruct your broker on how to vote your shares. The broker holding your shares may allow you to deliver your voting instructions by telephone or over the Internet. If your Notice or voting instructions do not include telephone or Internet instructions, please complete and return your Notice or voting instructions promptly by mail. To vote in person at the 2009 Annual Meeting, you must obtain a valid proxy from your broker.
Will the 2009 Annual Meeting be webcast?
An audio webcast of the 2009 Annual Meeting will be available on the Investor Relations page of our website at www.nvidia.com at 9:00 a.m. local time on May 20, 2009. The webcast will allow investors to listen to the 2009 Annual Meeting, but stockholders accessing the 2009 Annual Meeting through the webcast will not be considered present at the 2009 Annual Meeting and will not be able to vote through the webcast or to ask questions. An archived copy of the webcast will be available on our web site through June 5, 2009. Registration to listen to the webcast will be required.
What is a broker non-vote?
Brokers that hold shares of our common stock for a beneficial owner typically have the authority to vote on routine proposals when they have not received instructions from the beneficial owner at least 10 days prior to the 2009 Annual Meeting. The election of directors and the ratification of the selection of our independent registered public accounting firm are considered to be routine matters. Brokers may not vote their customers shares on matters that are considered to be non-routine. The shares that are not voted on non-routine matters are called broker non-votes.
How are votes counted?
Votes will be counted by the inspector of election appointed for the 2009 Annual Meeting, who will separately count FOR votes, AGAINST votes, abstentions and broker non-votes. With regard to Proposal 1, the election of three members to our Board named in this proxy statement, you may withhold your vote for a particular nominee. The number of WITHHOLD votes will also be counted by the inspector of election. You may also choose to abstain. Shares not present at the meeting, shares voting ABSTAIN and broker non-votes will have no effect on the election of directors.
If you are a stockholder of record and you returned a signed and dated proxy card without marking any voting selections, your shares will be voted FOR proposal numbers one and two. If any other matter is properly
presented at the 2009 Annual Meeting, either Jen-Hsun Huang or David M. Shannon as your proxy will vote your shares using his best judgment.
May I change my vote after submitting my proxy?
Yes. If you are a stockholder of record, you may revoke your proxy at any time before the final vote at the 2009 Annual Meeting in any one of the following four ways:
What is the quorum requirement?
We need a quorum of stockholders to hold our 2009 Annual Meeting. A quorum exists when at least a majority of the outstanding shares entitled to vote at the close of business on March 30, 2009 are represented at the 2009 Annual Meeting either in person or by proxy. On the record date, there were 544,633,196 shares of common stock outstanding and entitled to vote meaning that 272,316,599 shares must be represented in person or by proxy to have a quorum.
Your shares will be counted towards the quorum only if you submit a valid proxy or vote at the 2009 Annual Meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is not a quorum, a majority of the votes present at the 2009 Annual Meeting may adjourn the 2009 Annual Meeting to another date.
How many votes are needed to elect directors (Proposal 1)?
We have adopted Bylaw provisions providing for a majority vote standard in non-contested elections. As the number of nominees properly nominated for the 2009 Annual Meeting is the same as the number of directors to be elected, the 2009 Annual Meeting is a non-contested election. Pursuant to our Bylaws, if the number of votes WITHHELD with respect to a nominee exceeds the number of votes FOR, then the nominee is required to submit their resignation for consideration by our Board and our Nominating and Corporate Governance Committee.
How many votes are needed to ratify PricewaterhouseCoopers LLP as our independent registered public accounting firm (Proposal 2)?
The affirmative vote of a majority of shares present in person or represented by proxy and entitled to vote is required for the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm. If you ABSTAIN from voting, it will have the same effect as an AGAINST vote. If you do not vote, it will have no effect.
How can I find out the results of the voting at the 2009 Annual Meeting?
Preliminary voting results will be announced at the 2009 Annual Meeting. Final voting results will be published in our quarterly report on Form 10-Q for our second quarter ending July 26, 2009, which will be filed with the SEC by September 4, 2009.
Who is paying for this proxy solicitation?
We will pay the entire cost of soliciting proxies. Our directors and employees may also solicit proxies in person, by telephone, by mail, by Internet or by other means of communication. Directors and employees will not
be paid any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.
What does it mean if I receive more than one Notice or full set of proxy materials in the mail?
If you received more than one Notice or proxy materials your shares are registered in more than one name or are held in different accounts. Please complete, sign and return each Notice or proxy card to ensure that all of your shares are voted. If you would like to modify your instructions so that you receive one Notice or proxy card for each account or name, please contact your broker.
What does it mean if multiple members of my household are stockholders but we only received one Notice or full set of proxy materials in the mail?
The SEC has adopted rules that permit companies and intermediaries, such as brokers, to satisfy the delivery requirements for Notices and proxy materials with respect to two or more stockholders sharing the same address by delivering a single Notice or set of proxy materials addressed to those stockholders. In accordance with a prior notice sent to certain brokers, banks, dealers or other agents, we are sending only one Notice or set of proxy materials to those addresses with multiple stockholders unless we received contrary instructions from any stockholder at that address. This practice, known as householding, allows us to satisfy the requirements for delivering Notices or proxy materials with respect to two or more stockholders sharing the same address by delivering a single copy of these documents. Householding helps to reduce our printing and postage costs, reduces the amount of mail you receive and helps to preserve the environment.
If you currently receive multiple copies of the Notice or proxy materials at your address and would like to request householding of your communications, please contact your broker. Once you have elected householding of your communications, householding will continue until you are notified otherwise or until you revoke your consent. If any stockholder residing at such an address wishes to receive a separate set of documents, they may telephone our Stock Administration Department at (408) 486-2000 or write to our Stock Administration Department at 2701 San Tomas Expressway, Santa Clara, California 95050.
When are stockholder proposals due for next years annual meeting?
To be considered for inclusion in next years proxy materials, your proposal must be submitted in writing by December 9, 2009 to NVIDIA Corporation, 2701 San Tomas Expressway, Santa Clara, California 95050, Attention: General Counsel/Secretary and must comply with all applicable requirements of Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended. If you wish to submit a proposal that is not to be included in next years proxy materials, but that may be considered at the 2010 annual meeting, you must do so in writing following the above instructions not later than the close of business on December 9, 2009, and not earlier than the close of business on November 9, 2009. We also advise you to review our bylaws, which contain additional requirements about advance notice of stockholder proposals and director nominations, including the different notice submission date requirements in the event that we do not hold our 2010 annual meeting between April 20, 2010 and June 19, 2010.
Can I view these proxy materials on NVIDIAs website?
Yes. This proxy statement is posted on our Investor Relations website at www.nvidia.com. You also can use this website to view our other filings with the SEC, including our Annual Report on Form 10-K for the fiscal year ended January 25, 2009. The contents of our website are not a part of this proxy statement.
ELECTION OF DIRECTORS
Our Board is divided into three classes serving staggered three year terms. At the 2009 Annual Meeting, our stockholders will elect three directors to serve until our 2012 annual meeting of stockholders. Messrs. Coxe and Perry are currently directors and were previously elected by our stockholders. Mr. Stevens is also currently a director and previously served as a member of the Board from June 1993 until June 2006. Mr. Stevens was recommended for appointment to the Board by our management. Our Nominating and Corporate Governance Committee reviewed the qualifications of each of the nominees for election and unanimously recommended that each nominee be submitted for election to the Board. Our Board approved the recommendation at its meeting held on February 12, 2009. If elected at the 2009 Annual Meeting, each of the nominees will serve until the 2012 annual meeting of stockholders and until a successor is elected or appointed.
The Board expects the nominees will be available for election. If a nominee declines or is unable to act as a director, your proxy may be voted for any substitute nominee proposed by the Board or the size of the Board may be reduced. In accordance with our Bylaws, directors are elected if they receive more FOR votes than WITHHOLD votes. Unless you instruct otherwise, your proxy will be voted FOR the election of these nominees.
Nominees for Election for a Three-Year Term Expiring at Our 2012 Annual Meeting
Tench Coxe is a managing director of the general partner of Sutter Hill Ventures, a venture capital investment firm. Prior to joining Sutter Hill Ventures in 1987, Mr. Coxe was Director of Marketing and MIS at Digital Communication Associates. Mr. Coxe also serves on the board of directors of eLoyalty Corporation, a customer loyalty software firm, and several privately-held companies. Mr. Coxe holds a B.A. degree in Economics from Dartmouth College and an M.B.A. degree from Harvard Business School.
Mark L. Perry currently serves as the President and Chief Executive Officer and a member of the board of directors of Aerovance Inc., a biopharmaceutical company. Prior to joining Aerovance in February 2007, Mr. Perry served as the senior business advisor for Gilead Sciences, Inc., a biopharmaceutical company. Mr. Perry was an executive officer of Gilead from July 1994 to April 2004, serving in a variety of capacities, including General Counsel, Chief Financial Officer and most recently, Executive Vice President of Operations, responsible for worldwide sales and marketing, legal, manufacturing and facilities. From September 1981 to June 1994, Mr. Perry was with the law firm Cooley Godward Kronish LLP in San Francisco and Palo Alto, California, serving as a partner of the firm from 1987 until 1994. Mr. Perry holds a B.A. degree in History from the University of California, Berkeley and a J.D. degree from the University of California, Davis.
Mark A. Stevens has been a managing member of Sequoia Capital, a venture capital investment firm, since March 1993. Prior to that time, beginning in July 1989, he was an associate at Sequoia Capital. Prior to joining Sequoia, he held technical sales and marketing positions at Intel Corporation and was a member of the technical staff at Hughes Aircraft Company. Mr. Stevens currently serves on the boards of several privately-held companies. Mr. Stevens holds a B.S.E.E. degree, a B.A. degree in Economics and an M.S. degree in Computer Engineering from the University of Southern California and an M.B.A. degree from Harvard Business School.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THE ELECTION
TO THE BOARD OF EACH NAMED NOMINEE.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
The following is information for each of the members of our Board as of the date of this proxy statement.
Directors Continuing in Office until Our 2010 Annual Meeting
James C. Gaither has been a managing director of Sutter Hill Ventures, a venture capital investment firm, since July 2000. He is a retired partner of the law firm of Cooley Godward Kronish LLP and was a partner of the firm from 1971 until July 2000 and senior counsel to the firm from July 2000 to 2003. Prior to beginning his law practice with the firm in 1969, Mr. Gaither served as a law clerk to The Honorable Earl Warren, Chief Justice of the United States Supreme Court, Special Assistant to the Assistant Attorney General in the United States Department of Justice and Staff Assistant to the President of the United States, Lyndon Johnson. Mr. Gaither is a former president of the Board of Trustees at Stanford University and is Vice Chairman of the Board of Directors of The William and Flora Hewlett Foundation and Chairman of the Board of Trustees of The Carnegie Endowment for International Peace. Mr. Gaither holds a B.A. in Economics from Princeton University and a J.D. degree from Stanford University Law School.
Jen-Hsun Huang co-founded NVIDIA in April 1993 and has served as our President and Chief Executive Officer since that time. From 1985 to 1993, Mr. Huang was employed at LSI Logic Corporation, a computer chip manufacturer, where he held a variety of positions, most recently as Director of Coreware, the business unit responsible for LSIs system-on-a-chip strategy. From 1984 to 1985, Mr. Huang was a microprocessor designer for Advanced Micro Devices, Inc., a semiconductor company. Mr. Huang holds a B.S.E.E. degree from Oregon State University and an M.S.E.E. degree from Stanford University.
A. Brooke Seawell has been a Venture Partner with New Enterprise Associates, a venture capital investment firm, since January 2005. From February 2000 to December 2004, Mr. Seawell was a Partner with Technology Crossover Ventures, a venture capital investment firm. From 1997 to 1998, Mr. Seawell was Executive Vice President of NetDynamics, Inc., an application server software company, which was acquired by Sun Microsystems, Inc. From 1991 to 1997, Mr. Seawell was Senior Vice President and Chief Financial Officer of Synopsys, Inc., an electronic design automation software company. Mr. Seawell also serves on the board of directors of Informatica Corporation, a data integration software company, Glu Mobile, Inc., a publisher of mobile games, and several privately-held companies. Mr. Seawell serves on the Management Board of the Stanford Graduate School of Business. Mr. Seawell holds a B.A. degree in Economics and an M.B.A. degree in Finance from Stanford University.
Directors Continuing in Office until Our 2011 Annual Meeting
Harvey C. Jones is the Chairman of the board of directors of Tensilica Inc., a privately-held company he co-founded in 1997. Tensilica designs and licenses application-specific microprocessors for use in high-volume
embedded systems. From December 1987 through February 1998, Mr. Jones held various positions at Synopsys, Inc., an electronic design automation software company, where he served as Chief Executive Officer through January 1994 and as Executive Chairman of the board of directors until February 1998. Prior to Synopsys, Mr. Jones served as President and Chief Executive Officer of Daisy Systems Corporation, a computer-aided engineering company that he co-founded in 1981. Mr. Jones currently serves on the board of directors of Wind River Systems, Inc., an embedded software and services provider, and several privately-held companies. Mr. Jones holds a B.S. degree in Mathematics and Computer Sciences from Georgetown University and an M.S. degree in Management from the Massachusetts Institute of Technology.
William J. Miller has served as an independent board member for several companies and has been an occasional consultant to several technology companies since October 1999. From April 1996 through October 1999, Mr. Miller was Chief Executive Officer and Chairman of the board of directors of Avid Technology, Inc., a provider of digital tools for multimedia. Mr. Miller also served as President of Avid Technology from September 1996 through October 1999. From March 1992 to October 1995, Mr. Miller served as Chief Executive Officer of Quantum Corporation, a mass storage company. He was a member of the board of directors of Quantum, and Chairman thereof, from May 1992 and September 1993, respectively, to August 1995. From 1981 to March 1992, he served in various positions at Control Data Corporation, a supplier of computer hardware, software and services, most recently as Executive Vice President and President, Information Services. Mr. Miller serves on the board of directors of Waters Corporation, a scientific instrument manufacturing company, Digimarc Corporation, a developer and supplier of secure identification products and digital watermarking technology, Overland Storage, Inc., a supplier of data storage products, and Glu Mobile, Inc., a publisher of mobile games. Mr. Miller holds B.A. and J.D. degrees from the University of Minnesota.
Independence of the Members of the Board of Directors
Consistent with the requirements of The NASDAQ Stock Market LLC, or NASDAQ, our Corporate Governance Policies require our Board to affirmatively determine that a majority of our directors do not have a relationship that would interfere with their exercise of independent judgment in carrying out their responsibilities and meet any other qualification requirements required by the SEC and NASDAQ. After considering all relevant relationships and transactions, the Board determined all members of the Board are independent as defined by the SECs and NASDAQs rules and regulations, except for Jen-Hsun Huang, our president and chief executive officer. The Board also determined that all members of our Audit, Compensation and Nominating and Corporate Governance Committees are independent under applicable NASDAQ listing standards. In March 2009, in connection with the settlement of the stockholder derivative lawsuits relating to our historical stock option practices, or the Settlement, we adopted a supplement to our Corporate Governance Policies, or the Supplement, to be effective on the date that the Settlement is effective, currently expected to be on or about April 17, 2009. Once effective, the Supplement will require our Board to affirmatively determine that at least 75% of our directors are independent as defined by the SECs and NASDAQs rules and regulations and our own higher standards. As of the date of the mailing of this proxy statement, 80% of the members of our Board are independent.
Lead Independent Director
The other independent members of the Board appointed Mr. Gaither as the lead independent director of the Board. As the Lead Director, Mr. Gaither presides over executive sessions of the Board. Mr. Gaither works with our chief executive officer and the other members of the Board to establish the agenda for executive sessions of the independent directors. Effective immediately following our 2009 Annual Meeting, as part of our periodic Lead Director rotation, the other independent members of the Board appointed Mr. Miller to succeed Mr. Gaither as the Lead Director.
Audit Committee Financial Experts
The Board has determined that each of Messrs. Seawell and Perry satisfy the criteria adopted by the SEC to serve as an audit committee financial expert within the meaning of the SEC rules.
Corporate Governance Policies of the Board of Directors
The Board has documented our governance practices by adopting Corporate Governance Policies to assure that the Board will have the necessary authority and practices in place to review and evaluate our business operations as needed and to make decisions that are independent of our management. The Corporate Governance Policies and the Supplement, as described above, set forth the practices the Board follows with respect to board composition and selection, regular evaluations of the Board and its committees, board meetings and involvement of senior management, chief executive officer performance evaluation, and board committees and compensation. As required under NASDAQs listing standards, our independent directors have in the past and will continue to meet regularly in scheduled executive sessions at which only independent directors are present. Our Corporate Governance Policies and the Supplement may be viewed under Corporate Governance in the Investor Relations section of our website at www.nvidia.com.
Although we do not have a formal policy regarding attendance by members of the Board at our annual meetings, our practice is that in addition to Mr. Huang, one independent director will attend each annual meeting on behalf of all independent directors and all members of the Board are encouraged to attend. Messrs. Huang, Gaither, Jones and Miller were present at our 2008 annual meeting.
Code of Conduct
We have a Worldwide Code of Conduct that applies to all of our executive officers, directors and employees, including our principal executive officer and principal financial and accounting officer. Also, we have a Financial Team Code of Conduct that applies to our executive officers, directors and members of our finance, accounting and treasury departments. Both the Worldwide Code of Conduct and the Financial Team Code of Conduct are available under Corporate Governance in the Investor Relations section of our website at www.nvidia.com. If we make any amendments to the Worldwide Code of Conduct or the Financial Team Code of Conduct or grant any waiver from a provision of either code to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website.
Stockholder Communications with the Board of Directors
Stockholders who wish to communicate with the Board regarding nominations of directors or other matters may do so by sending written communications addressed to David M. Shannon, our Secretary, at NVIDIA Corporation, 2701 San Tomas Expressway, Santa Clara, California 95050. All stockholder communications we receive that are addressed to the Board will be compiled by our Secretary. If no particular director is named, letters will be forwarded, depending on the subject matter, to the Chair of the Audit, Compensation, or Nominating and Corporate Governance Committee.
Nomination of Directors
The Nominating and Corporate Governance Committee identifies, reviews and evaluates candidates to serve as directors and recommends candidates for election to the Board. In making its determinations, the Nominating and Corporate Governance Committee strives to select individuals who have the highest personal and professional integrity, have demonstrated exceptional ability and judgment and will be effective in collectively serving the long-term interests of the stockholders. In selecting individuals as nominees, the Nominating and Corporate Governance Committee will also consider any other factor that it deems relevant, including industry experience and diversity.
In the case of incumbent directors whose terms of office are set to expire, the Nominating and Corporate Governance Committee reviews these directors overall service to NVIDIA during their terms, including the number of meetings attended, level of participation, quality of performance, and any other relationships and transactions that might impair the directors independence. In the case of new director candidates, the Nominating and Corporate Governance Committee determines whether the nominee is independent for NASDAQ purposes, which determination is based upon applicable NASDAQ listing standards, applicable SEC
rules and regulations and, when necessary, the advice of counsel. The Nominating and Corporate Governance Committee uses its network of contacts to compile a list of potential candidates, but may also engage a professional search firm. The Nominating and Corporate Governance Committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the Board. The Nominating and Corporate Governance Committee meets to discuss and consider the candidates qualifications and then selects a nominee for recommendation to the Board.
The Nominating and Corporate Governance Committee evaluates candidates proposed by stockholders using the same criteria as it uses for other candidates. Matters put forth by our stockholders will be reviewed by the Nominating and Corporate Governance Committee, which will determine whether these matters should be presented to the Board. The Nominating and Corporate Governance Committee will give serious consideration to all such matters and will make its determination in accordance with its charter and applicable laws. Stockholders seeking to recommend a prospective nominee should follow the instructions under the heading Stockholder Communications with the Board of Directors. Stockholder submissions must include the full name of the proposed nominee, a description of the proposed nominees business experience for at least the previous five years, complete biographical information, a description of the proposed nominees qualifications as a director and a representation that the nominating stockholder is a beneficial or record owner of our stock. Any such submission must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director if elected. Stockholders are advised to review our bylaws, which contain the requirements for director nominations. The Nominating and Corporate Governance Committee did not receive any stockholder nominations during fiscal 2009.
Majority Vote Standard
As a part of our continuing process of enhancing our corporate governance procedures and to provide our stockholders with a more meaningful role in the outcome of the election of directors, in March 2006, our Board amended our Bylaws to adopt a majority vote standard for non-contested director elections. Our Bylaws now provide that in a non-contested election if the votes cast FOR an incumbent director do not exceed the number of votes WITHHELD, such incumbent director shall promptly tender his resignation to the Board. The Nominating and Corporate Governance Committee will review the circumstances surrounding the WITHHELD vote and promptly make a recommendation to the Board on whether to accept or reject the resignation or whether other action should be taken. In making its decision, the Board will evaluate the best interests of NVIDIA and our stockholders and will consider all factors and relevant information. The Board will act on the Nominating and Corporate Governance Committees recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date of certification of the stockholder vote. The director who tenders his resignation will not participate in the Boards or the Nominating and Corporate Governance Committees decisions. In a contested election, which is an election in which the number of nominees exceeds the number of directors to be elected, our directors will be elected by a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors at that meeting.
Board Meeting Information
The Board met 7 times during fiscal 2009. In addition, during fiscal 2009, the Board held a two-day meeting, during which the Board discussed the strategic direction of NVIDIA, explored and discussed new business opportunities and the product roadmap, and addressed possible challenges facing NVIDIA. We expect each Board member to attend each meeting of the Board and the committees on which he serves. In fiscal 2009, each Board member attended 75% or more of the aggregate meetings of the Board and of the committees on which he served.
Committees of the Board of Directors
The Board has three standing committees: an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. Each of these committees operates under a written charter, which may be viewed under Corporate Governance in the Investor Relations section of our website at www.nvidia.com.
In fiscal 2006, the Board concluded that having our directors rotate and serve on different committees provides a benefit to us and our stockholders. By rotating among committees, we believe all members are more fully informed regarding the full scope of Board and our activities. The Board believes that such rotations are a good corporate governance practice and intends to make periodic rotations in the future. On February 5, 2009, the Nominating and Corporate Governance Committee examined the composition and chairmanship of the Boards committees and recommended certain rotations to the full Board for fiscal 2010, as described below.
If all nominees to our Board are elected, effective immediately following our 2009 Annual Meeting, our committees will be composed of the following members:
In addition to our three standing committees, in August 2007 the Board formed a Special Litigation Committee to investigate, evaluate, and make a determination as to how we should proceed with respect to the claims and allegations asserted in certain derivative actions cases brought on behalf of NVIDIA against certain of our current and former executive officers and directors. The derivative actions assert claims concerning errors related to our historical stock option granting practices and associated accounting for stock-based compensation expense. Dr. Steven Chu and Mr. Perry served on the Special Litigation Committee during fiscal 2009. Dr. Chu resigned from the Board of Directors and all committees thereof, effective as of the date he was sworn in as Secretary of Energy of the United States, January 21, 2009. In March 2009, we settled each of the derivative actions. Assuming the Settlement becomes effective in April 2009, the responsibilities of the Special Litigation Committee have concluded.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For fiscal 2009, the Compensation Committee consisted of Messrs. Gaither, Jones, Miller and Stevens. Mr. Stevens was appointed to the Compensation Committee effective September 3, 2008. As described above, if all nominees to our Board are elected, immediately following our 2009 Annual Meeting, the Compensation Committee shall consist of Messrs. Jones, Miller and Stevens. No member of the Compensation Committee is an officer or employee of NVIDIA, and none of our executive officers serve as a director or member of a compensation committee of any entity that has one or more executive officers serving as a member of our Board or Compensation Committee. Each of our current directors has purchased and holds shares of our common stock.
Our non-employee directors receive options to purchase shares of our common stock for their services as members of our Board. Non-employee directors do not receive cash compensation for their services as members of our Board, but may be reimbursed for expenses incurred in attending Board and committee meetings and continuing educational programs as set forth in our Corporate Governance Policies. Directors who are also employees do not receive any fees or equity compensation for service on the Board. Mr. Huang is our only employee director.
Historically, options to purchase shares of our common stock have been automatically granted to our non-employee directors under our 1998 Non-Employee Directors Stock Option Plan as incorporated into our 1998 Equity Incentive Plan, which we refer to as the 1998 Plan. Beginning in June 2007, we started granting annual stock option grants on the first trading day after the annual meeting to our non-employee directors from our 2007 Equity Incentive Plan, which we refer to as the 2007 Plan.
In March 2008, the Compensation Committee undertook its annual review of the type and form of compensation paid to our non-employee directors in connection with their service on our Board and its committees. The Compensation Committee consulted with our Human Resources Department and Hewitt Associates LLC, or Hewitt, and reviewed peer company data. Based on this review, the Compensation Committee recommended, and the Board of Directors approved, continuing our practice of compensating our non-employee directors solely through the use of stock option grants in fiscal 2009 and to target the compensation of non-employee directors at approximately the 75th percentile of the peer companies. The Compensation Committee employed our binomial option pricing model to determine grant recommendations whose fair value (as determined in accordance with Statement of Financial Accounting Standards No. 123 (revised), or SFAS No. 123(R), Share Based Payment) approximately aligned with the 75th percentile of our select peer companies total annual compensation, both cash and equity, for non-employee directors. As a result of this review, the Compensation Committee recommended, and the Board approved, establishing the fiscal 2009 initial, annual Board and committee stock option grants at 120,000, 30,000 and 10,000 shares, respectively.
The Board does not set a specific dollar value target for the grants to the non-employee directors. Instead, the Compensation Committee establishes in advance a set number of shares subject to such grants, generally a few months before the date of our annual meeting. As a result, the fair value of such grants will fluctuate as the price of our common stock fluctuates during the interim period.
See Compensation Discussion and AnalysisRole of Various Parties in Making Compensation Decisions for additional information about the role of Hewitt.
The following table provides information regarding compensation of non-employee directors who served during fiscal 2009:
DIRECTOR COMPENSATION FOR FISCAL 2009
In March 2009, the Compensation Committee again undertook an annual review of the form and amount of compensation paid to our non-employee directors. The Compensation Committee consulted with our Human Resources Department and Hewitt, and reviewed peer company data. Based on this review, the Compensation Committee recommended, and the Board of Directors approved, the continuation of our policy of aligning directors and stockholders interests by providing only equity compensation in the form of stock options and to target the compensation of non-employee directors at approximately the 75th percentile of the peer companies. The Compensation Committee employed our binomial option pricing model to determine grant recommendations whose approximate fair value (as determined under SFAS No. 123(R) for financial reporting purposes) aligned with the 75th percentile of our select peer companies total annual compensation, both cash and equity, for non-employee directors.
Historically, two grants have been made to non-employee directors: one for committee service vesting over the following year, and one for board service, vesting over one year, commencing two years following the grant. In light of the fact that all non-employee directors currently serve on a committee and will do so in fiscal 2010, it was determined that for fiscal 2010, the annual board and committee grant should be combined into a single grant to compensate for overall service to NVIDIA. In addition, the Compensation Committee determined such combined grant should vest quarterly over the year following the 2009 Annual Meeting in order to correlate the vesting of the annual stock option to the non-employee directors service on the Board and its committees over the following year. Therefore, as a result of the review above, a single stock option for 48,000 shares will be granted to each non-employee director on the first trading day following the date of our 2009 Annual Meeting.
SUMMARY OF NON-EMPLOYEE DIRECTOR COMPENSATION
The following table summarizes the compensation provided to our non-employee directors for fiscal 2009 and compensation expected to be provided in fiscal 2010.
The following are the principal terms of the stock options granted to our non-employee directors in fiscal 2009.
Initial Grants. In fiscal 2009, Initial Board Grants for 120,000 shares were made to each new non-employee director who was elected or appointed to our Board on the date of election or appointment. On September 3, 2008, in connection with his appointment to the Board, Mr. Stevens was granted a stock option to purchase 120,000 shares of our common stock, at an exercise price of $11.66 per share, which was the closing price of NVIDIA common stock as reported by NASDAQ on September 3, 2008.
Annual GrantsBoard Members. Annual Board Grants are made on the first trading day after the annual meeting, unless there is a blackout period under our insider trading policy in which case, the Annual Board Grants will be made on the first trading day after the trading window opens. On June 20, 2008, each of Messrs. Coxe, Gaither, Jones, Miller, Perry and Seawell and Dr. Chu was granted a stock option to purchase 30,000 shares of our common stock, at an exercise price of $19.76 per share, which was the closing price of NVIDIA common stock as reported by NASDAQ on June 20, 2008.
Annual GrantsCommittee Members. In fiscal 2009, the Annual Committee Grants were made on the day after the annual meeting. On June 20, 2008, each of Messrs. Coxe, Gaither, Jones, Miller, Perry and Seawell was granted a stock option to purchase 10,000 shares of our common stock, at an exercise price of $19.76 per share, which was the closing price of NVIDIA common stock as reported by NASDAQ on June 20, 2008.
Annual GrantsAdjusted Vesting for Not Attending Meetings. With respect to the Annual Board Grants granted in fiscal 2009, if a non-employee director fails to attend at least 75% of the regularly scheduled meetings of the Board during the two-year period following the grant of the option, vesting of the option will change. Instead of vesting as described above, the Annual Board Grants will vest 30% upon the three-year anniversary of the grant date and 70% during the fourth year, such that the entire option will become fully vested on the four-year anniversary of the date of the grant. If a non-employee director fails to attend at least 75% of the regularly scheduled meetings of the committee on which he sits during the year following the grant of the option, rather than vesting as described above, his Annual Committee Grant will vest annually over four years following the date of grant at the rate of 10% per year for the first three years and 70% during the fourth year. To date, these adjusted vesting provisions have never been triggered.
Annual GrantsAdjusted Vesting for Disability. With respect to the Annual Board Grants granted in fiscal 2009, if a non-employee directors service as a director terminates between the date of grant of the Annual Board Grant and the two-year anniversary of the date of grant of the Annual Board Grant due to disability, the Annual Board Grant will immediately vest and be exercisable on a pro rata basis for each full quarter served during such time. With respect to the Annual Committee Grants granted in fiscal 2009, if a non-employee directors service as a committee member terminates between the date of grant of the Annual Committee Grant and the one-year anniversary of the date of grant of the Annual Committee Grant due to disability, then the Annual Committee Grant will immediately vest and be exercisable based on the number of months served on the respective committee prior to the termination of service.
Adjusted Vesting for Death. If a non-employee directors service as a director terminates due to death, the Initial Board Grant, Annual Board Grants and Annual Committee Grants shall immediately vest and become exercisable.
Vesting Adjustments. The change-in-control provisions in each of our 1998 Plan and 2007 Plan apply to options to purchase shares of our common stock held by our non-employee directors and may result in the acceleration of the vesting of such shares in certain circumstance. Please see Employee, Severance and Change-in-Control Agreements for a further discussion of these provisions.
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM FOR FISCAL 2010
The Audit Committee has selected PricewaterhouseCoopers LLP, or PwC, to serve as our independent registered public accounting firm for our fiscal year ending January 31, 2010. Stockholder ratification of the Audit Committees selection of PwC is not required by our bylaws or any other governing documents or laws. As a matter of good corporate governance, we are submitting the selection of PwC to our stockholders for ratification. If our stockholders do not ratify the selection, the Audit Committee will reconsider whether or not to retain PwC. Even if the selection is ratified, the Audit Committee in its sole discretion may direct the appointment of a different independent registered public accounting firm at any time during the fiscal year if it determines that such a change would be in our best interests and those of our stockholders.
The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the 2009 Annual Meeting will be required to ratify the selection of PwC. Abstentions will be counted toward the tabulation of votes cast and will have the same effect as votes against the proposal. Broker non-votes are counted toward a quorum, but are not counted for any purpose in determining whether this proposal has been approved.
We expect that a representative of PwC will attend the 2009 Annual Meeting. The PwC representative will have an opportunity to make a statement at the 2009 Annual Meeting if he or she so desires. The representative will also be available to respond to appropriate stockholder questions.
THE BOARD RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The material in this report is not soliciting material, is not deemed filed with the SEC and is not to be incorporated by reference in any of our filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, except to the extent specifically incorporated by reference therein.
The Audit Committee oversees accounting, financial reporting, internal control over financial reporting, financial practices and audit activities of NVIDIA and its subsidiaries. The Audit Committee reviews the results and scope of the audit and other services provided by the independent registered public accounting firm and reviews financial statements and the accounting policies followed by NVIDIA prior to the issuance of the financial statements with both management and the independent registered public accounting firm.
Management is responsible for the financial reporting process, the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States, or GAAP, the system of internal control over financial reporting, and the procedures designed to facilitate compliance with accounting standards and applicable laws and regulations. PricewaterhouseCoopers LLP, or PwC, our independent registered public accounting firm for fiscal 2009, was responsible for performing an independent audit of the consolidated financial statements and issuing a report on the consolidated financial statements and of the effectiveness of our internal control over financial reporting as of January 25, 2009. PwCs judgments as to the quality, not just the acceptability, of our accounting principles and such other matters are required to be disclosed to the Audit Committee under applicable standards. The Audit Committee oversees these processes. Also, the Audit Committee has ultimate authority and responsibility to select, evaluate and, when appropriate, terminate the independent registered public accounting firm. The Audit Committee approves audit fees and non-audit services provided by and fees paid to the independent registered public accounting firm.
The Audit Committee members are not professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management or the independent registered public accounting firm. The Audit Committee does not plan or conduct audits, determine that our financial statements are complete and accurate and in accordance with GAAP, or assess our internal control over financial reporting. The Audit Committee relies, without additional independent verification, on the information provided by our management and on the representations made by management that the financial statements have been prepared with integrity and objectivity, and the opinion of PwC that such financial statements have been prepared in conformity with GAAP.
In this context, the Audit Committee reviewed and discussed the audited consolidated financial statements for fiscal 2009 with management and our internal control over financial reporting with management and PwC. Specifically, the Audit Committee discussed with PwC the matters required to be discussed by Statement on Auditing Standards No. 61, as amended. We have received from PwC the written disclosures and letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding PwCs communications with the Audit Committee concerning independence. The Audit Committee also considered whether the provision of certain permitted non-audit services by PwC is compatible with PwCs independence and discussed PwCs independence with PwC.
Based on the Audit Committees review and discussions, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Annual Report on Form 10-K of NVIDIA for the fiscal year ended January 25, 2009.
Mark L. Perry, Chairman
A. Brooke Seawell
FEES BILLED BY THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The following is a summary of fees billed by PwC for fiscal 2009 and 2008 for audit, tax and other professional services during the fiscal year:
All of the services provided for fiscal 2009 and 2008 described above were pre-approved by the Audit Committee or the Chairman of the Audit Committee through the authority granted to him by the Audit Committee, which is described below.
Our Audit Committee determined that the rendering of services other than audit services by PwC was compatible with maintaining PwCs independence.
Pre-Approval Policies and Procedures
The Audit Committee has adopted policies and procedures for the pre-approval of all audit and permissible non-audit services rendered by our independent registered public accounting firm. The policy generally permits pre-approvals of specified permissible services in the defined categories of audit services, audit-related services and tax services up to specified amounts. Pre-approval may also be given as part of the Audit Committees approval of the scope of the engagement of our independent registered public accounting firm or on an individual case-by-case basis before the independent registered public accounting firm is engaged to provide each service. In some cases the full Audit Committee provides pre-approval for up to a year related to a particular defined task or scope. In other cases, the Audit Committee has delegated power to Mark L. Perry, the Chairman of our Audit Committee, to pre-approve additional non-audit services if the need for the service was unanticipated and approval is required prior to the next scheduled meeting of the Audit Committee. Mr. Perry then communicates such pre-approval to the full Audit Committee at its next meeting.
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of February 15, 2009 as to shares of our common stock beneficially owned by:
Beneficial ownership is determined in accordance with the SECs rules and generally includes voting or investment power with respect to securities as well as shares of common stock subject to options exercisable within 60 days of February 15, 2009. Unless otherwise indicated, the address of each of the individuals listed below is c/o NVIDIA Corporation, 2701 San Tomas Expressway, Santa Clara, California 95050.
COMPENSATION DISCUSSION AND ANALYSIS
Our Compensation Discussion and Analysis describes our compensation philosophy and objectives, outlines our compensation program, and explains how we believe our compensation program achieves our philosophy and objectives. We also explain how our compensation process works as well as our compensation decisions for fiscal 2009 and certain compensation decisions for fiscal 2010. Those senior executives whose compensation is discussed below are listed in the Summary Compensation Table for Fiscal Years 2009, 2008 and 2007 in this proxy statement and in this section we refer to them as our executive officers. The compensation process for these executive officers is the same for the other members of our executive staff.
Executive Compensation Philosophy and Overview
Our success is grounded in our culture of innovation, teamwork, and entrepreneurship. Our compensation programs are designed to support this culture by allowing us to:
Elements of Compensation
Our executive compensation program consists of the following components:
As discussed in greater detail below, the Compensation Committee of the Board of Directors, or the Compensation Committee, does not use a strict weighting system between compensation elements for each executive officer, but instead considers the total compensation necessary to motivate and retain these individuals with a mix that is significantly biased towards performance based components, including variable cash compensation and equity compensation. At present, we do not believe it is necessary to supplement these three primary elements with perquisites, executive change-in-control arrangements or special severance benefits, except in special circumstances, such as short term arrangements as discussed below for Mr. White.
How We Make Compensation Decisions
Role of the Various Parties in Making Compensation Decisions
Our executive compensation program is administered by the Compensation Committee, with the assistance of our Chief Executive Officer, or CEO, and members of our Human Resources Department, including the Senior Vice President, Human Resources.
For fiscal 2009, the Compensation Committee retained an executive compensation consultant, Hewitt Associates LLC, or Hewitt, to assist with the compensation-determination process for all executive officers, including our CEO. Hewitt reports directly to the Compensation Committee. Hewitt worked with the Compensation Committee and our management to gather and analyze third-party data about our peer companies compensation practices and provided feedback regarding proposed macro-compensation decisions. During fiscal 2009, Hewitt also aided the Compensation Committee with a review of the compensation of our non-employee directors.
At the end of each fiscal year, our Senior Vice President, Human Resources and other members of his department work with the CEO and the Compensation Committee to review our overall compensation program for our executive officers. The process begins with members of our Human Resources department gathering data from the Radford Executive Survey. They then analyze compensation practices at our peer companies (described below), assess existing compensation programs at NVIDIA, forecast our growth, and model total compensation costs and stock dilution from any proposed changes to the existing compensation programs. The Senior Vice President, Human Resources then presents a proposed compensation plan for the upcoming fiscal year to our CEO.
Our CEO reviews the plan for the upcoming year with the Compensation Committee. In addition, our CEO reviews the individual performance of each executive against results achieved and leadership demonstrated during the previous year. Our CEO also considers the challenges faced during the previous year and the scope and difficulty of the executive officers role. The CEO then makes recommendations for each executive officers base salary, variable compensation level and equity-based awards for the new fiscal year, as well as variable compensation payouts for the prior year. Through several regularly scheduled meetings, the Compensation Committee reviews these recommendations with the CEO and the Senior Vice President, Human Resources and makes compensation decisions for the executive officers. The Compensation Committee adjusts each executive officers compensation up or down based on the factors discussed above.
The Compensation Committee, working directly with Hewitt, makes compensation decisions for our CEO separately without his participation. The Compensation Committee evaluates the CEOs performance taking into account a self-review prepared by the CEO and the Compensation Committees own judgment of the results achieved by our CEO as compared to goals established at the beginning of the fiscal year. In addition, the Compensation Committee analyzes market data and the compensation practices at our peer companies. At the end of this annual process, the Compensation Committee reviews its overall compensation decisions with the full Board in executive session.
When establishing the compensation program each year, the Compensation Committee determines the amount and types of compensation that will best allow us to secure key talent and to motivate performance and innovation, keeping in mind the competitive market for executive talent. In order to balance these goals, the Compensation Committee reviews the data discussed below.
For fiscal 2009, members of our Human Resources Department began with the full Radford Executive Survey of 162 companies as a source of compensation data for all of the executive officers. They then created three different subsets or peer lists within that larger group as described in the table below. We use information based on all four groups to help assess the market and help determine appropriate levels of compensation for our executive officers. The following companies make up our three peer company groups:
Key to Table:
EE: Companies listed as employee peers are the companies in various industries with which we feel we compete for executives and employees.
EX: Companies listed as executive peers are the companies of similar size, complexity and with comparable revenue.
SC: Companies listed as semiconductor peers are all the companies in the semiconductor industry from the Radford Executive Survey.
In order to analyze the survey data, each executive officers position is matched to a job code in the Radford Executive Survey. Our Human Resources Department then provides the CEO and the Compensation Committee with the average for each of the peer groups for the 50th percentile and for the 75th percentile for the three major components of our compensation program. These percentiles are not used as the standard for setting compensation, rather they are used to provide the Compensation Committee with data points for purposes of comparison in evaluating whether the proposed compensation levels for our executive officers are reasonably likely to help us achieve our compensation program objectives.
Use of Tally Sheets
When making annual decisions about an executive officers compensation, the Compensation Committee reviews the executive officers total compensation as set forth in a tally sheet that includes:
The tally sheets help the Compensation Committee analyze the executive officers short- and long-term compensation at NVIDIA and compare total compensation packages offered by our peer companies. The Compensation Committee is committed to reviewing tally sheets annually.
Elements of Our Compensation Program
Purpose. Base salaries are set at levels we believe are sufficient to recruit and retain executive officers. However, we believe biasing an executive officers compensation toward variable compensation programs and long-term equity compensation creates a strong link between that executives pay and performance. Therefore, while the Compensation Committee does not rely on a weighting system between fixed and variable compensation, our executive officers base salaries ranged from approximately 15% to 20% of their total target compensation in fiscal 2009, other than for our CEO. Base salaries are reviewed annually and adjusted as the Compensation Committee deems necessary and appropriate to meet our compensation and business goals.
Factors Considered When Establishing Base Salary. When setting base salaries, the Compensation Committee considers an executive officers responsibilities (including the scope of their position and complexity of the department or function they manage), experience, the base salaries for other members of NVIDIAs executive staff, and the market data of salaries at peer companies. While reviewing potential changes in base salary, the Compensation Committee also considers the operating expense impact and budgets for executive officer salary adjustments.
Fiscal 2009 Determinations. In March 2008, the Compensation Committee determined that the base salary of each executive officer for fiscal 2009 should remain at its fiscal 2008 level, as the Compensation Committee believed that they were set at levels that balanced our goals of retention and internal pay equity. In September 2008, in light of the current economic environment and our cost reduction efforts, Mr. Huang determined that it would be appropriate for substantially all of his compensation to be linked to our performance. The Compensation Committee accepted Mr. Huangs voluntary proposal to reduce his annual base salary from $600,000 to $1 (after taxes and benefit contributions). This reduction in Mr. Huangs base salary was effective on October 1, 2008.
Fiscal 2010 Determinations. In March 2009, the Compensation Committee determined that the base salary of each of Messrs. Shannon and Puri and Ms. Shoquist for fiscal 2010 should remain at its fiscal 2009 level. However, in light of the current economic environment and our cost reduction efforts, effective March 1, 2009,
these base salaries were temporarily reduced by 5% in connection with a company-wide salary reduction action, subject to periodic review against business conditions. For fiscal 2010, the Compensation Committee determined that the annual base salary of Mr. Huang should remain at its fiscal 2009 level of $600,000. However, given the current economic environment and our cost reduction efforts, Mr. Huang voluntarily proposed that his base salary remain at $1 (after taxes and benefit contributions) and the Compensation Committee accepted this proposal.
David White joined NVIDIA in February 2009 as our Executive Vice President and Chief Financial Officer, or CFO. His annual base salary was established at $425,000 for fiscal 2010, based primarily on the CEOs recommendation that this salary was necessary to attract an executive with his skills and background and in consideration of his compensation at his prior employer. Mr. White succeeds Mr. Burkett, whose decision to retire as CFO was previously announced in March 2008 and who is continuing to provide services to NVIDIA as a Senior Advisor.
Variable Cash Compensation
Purpose and Structure. In keeping with our pay-for-performance culture, variable cash compensation is designed to be a substantial portion of each executives total compensation annually and rewards executives for individual performance and for their role in helping NVIDIA meet its annual financial goals.
The variable cash compensation an executive officer actually receives depends on corporate financial results for the year and the executives individual performance during the year. A target payout is divided into two components:
The variable compensation plan for the executive officers is similar to the variable compensation plan applicable to over 900 NVIDIA key employees in that it focuses on both corporate and individual performance to determine payouts, if any, and has the same corporate performance goal.
Factors Considered When Establishing Target Variable Compensation. Annually, the Compensation Committee determines the total target variable compensation for each executive officer. When setting the amount of the target variable compensation for each executive officer, the Compensation Committee considers the following:
Fiscal 2009 Targets. The Compensation Committee approved the corporate performance target, established our CEOs performance targets and approved the fiscal 2009 total target variable compensation for each executive officer in March 2008.
Fiscal 2009 Payout Determinations.
Fiscal 2010 Targets.
Mr. White joined NVIDIA in February 2009 and under the terms of his offer letter he is eligible to receive a payout with respect to his individual performance target. His target variable compensation level was established at $385,000 (pro-rated for his time employed in fiscal 2010), based on the same factors that were used to set his base salary, as discussed above, of which 50% relates to his individual performance. If Mr. White leaves NVIDIA for any reason prior to the end of fiscal 2010 or the date of distribution, no incentive compensation will be paid to him.
Clawback Policy. In April 2009, in connection with the settlement of the stockholder derivative lawsuits relating to our historical stock option practices, or the Settlement, our Board adopted a policy, or the Clawback Policy, to be implemented on the date that the Settlement is effective, currently expected to be on or about April 17, 2009, pursuant to which, if (i) we are required to prepare an accounting restatement to correct an accounting error on an interim or annual financial statement included in a report on Form 10-Q or Form 10-K, due to material noncompliance with any financial reporting requirement under the federal securities laws, or a Restatement, and (ii) the Board or a committee of independent directors concludes that our CEO or CFO had received a variable compensation payment, or portion thereof, that would not have been payable if the original interim or annual financial statements reflected the Restatement, then our CEO or CFO shall disgorge to NVIDIA the net after-tax amount of such variable compensation payment.
In addition, pursuant to the Clawback Policy, if the Board or a committee of independent directors determines that an officer (including our CEO and CFO) or other employee received a variable compensation payment, or portion thereof, that would not have been payable if our original interim or annual financial statement reflected a Restatement, then the Board or such committee, in its discretion, may take such actions as it deems necessary or appropriate to address the events that gave rise to the Restatement and to prevent its recurrence. In using its discretion, the Board or such committee may consider whether such person was involved in the preparation of our financial statements or otherwise caused the need for the Restatement. Such actions may include, to the extent permitted by applicable law, requiring partial or full repayment of any variable compensation or other incentive compensation paid to such person, requiring repayment of any gains realized on the exercise of stock options or on the open-market sale of vested shares and causing the partial or full cancellation of restricted stock or deferred stock awards and outstanding stock options.
Purpose. NVIDIA believes equity-based compensation is critical to its overall compensation program for all of its employees, including its executive officers. Equity-based compensation provides several significant advantages:
Factors Considered. For each executive officer, the Compensation Committee considers the following elements in determining equity grants:
Fiscal 2009 Structure and Grants. In fiscal 2009, based on the factors explained above, the Compensation Committee made grants semi-annually to our executive officers on the third Wednesday of March and the third Wednesday of September, consistent with our policy for other employees. During the first quarter of fiscal 2009, the Compensation Committee approved a target equity grant for each eligible executive for fiscal 2009, which was divided as follows, except with respect to Ms. Shoquist as explained below: (a) 50% of the target grant was granted in March and (b) the remaining 50% was budgeted to be granted in September, subject to a performance review by the Compensation Committee prior to the September grant date. With respect to Ms. Shoquist, who at the time of the March 2008 grants was the newest executive officer at NVIDIA, the Compensation Committee agreed with the CEOs recommendation to grant more shares in March 2008 in order to provide additional long-term incentives.
In September 2008, the Compensation Committee determined to grant less than the remaining budgeted stock options in the second half of fiscal 2009. Accordingly, the Compensation Committee reduced the semi-annual grants for the second half of fiscal 2009 by 10% for each of Messrs. Huang, Puri and Shannon and Ms. Shoquist. Other than the stock option grant of 75,000 shares in March 2008, Mr. Burkett did not receive any other stock options in fiscal 2009, due to his decision to retire upon the hiring of our new CFO.
The number of stock options granted to our executive officers in fiscal 2009 were as follows:
In general, the vesting schedule of the executive officer semi-annual grants is such that they will begin to vest after currently held options are fully vested. The Compensation Committee structured vesting of the executive officer semi-annual grants to serve the following objectives:
Fiscal 2010 Structure and Grants. In March 2009, we introduced restricted stock units, or RSUs, as a form of equity compensation to all employees, including executive officers. Our executive officers (except Messrs. Huang and White as explained below), and the other top 260 leaders in NVIDIA, will receive as equity compensation a combination of RSUs and stock options. The target mix of stock options to RSUs for our executive officers on a value basis is 50% stock options and 50% RSUs. All of our other employees will receive RSUs only. The Compensation Committee believes that the use of RSUs, in combination with stock options, for our executive officers will maintain our pay-for-performance culture, provide significant award upside for achieving outstanding performance and promote retention, while maintaining a level of total direct compensation competitiveness and reducing overall dilution of stockholder ownership.
In March 2009, the Compensation Committee determined the target number of RSUs and stock options to be granted to the executive officers in fiscal 2010 and, consistent with past practices, intends to make the grants on a semi-annual basis (in March and September). In light of the company-wide salary reductions, no variable compensation in fiscal 2009 and 2010 and ineligibility to participate in the tender offer as discussed below, the Compensation Committee determined that larger than normal grants in March were necessary to create long-term incentive to our executive officers. The number of RSUs and stock options granted to our executive officers in March 2009 were as follows:
The Compensation Committee believes that the vesting periods of both the RSUs and the stock options properly balance the potential compensatory benefits of the grants with the long-term success of NVIDIA.
Mr. White joined NVIDIA in February 2009 and under the terms of his offer letter he received a stock option grant of 450,000 shares on March 9, 2009 (the same date as all grants made to our employees that started employment in February 2009). Mr. White did not receive a combination of stock options and RSUs because he entered into his offer letter with NVIDIA before we introduced RSUs as a form of equity compensation. The number of shares subject to this stock option grant was based primarily on the CEOs recommendation that the amount of the grant was necessary to attract an executive with his skills and background. Given the magnitude of the grant, the vesting schedule for this option was extended such that it vests quarterly over a four year period, subject to acceleration as discussed below.
We offer our executive officers the same health and change-in-control protections that we offer to all of our employees. We do not have any special benefit, severance, change-in-control or other programs for our executive officers, except as discussed below for Mr. White.
Health and Welfare Benefits. In order to attract and retain qualified executive officers and other employees, we must offer our employees a competitive package of health and welfare programs. Our Human Resources Department compares annually our health and welfare benefits packages to those offered by peer companies to ensure our package is competitive and we will be able to attract and retain employees.
We maintain medical, vision, dental and accidental death and disability insurance as well as paid time off and paid holidays for all of our employees. Our executive officers are eligible to participate in these programs along with and on the same basis as our other employees. Like all of our full-time employees, our executive officers are eligible to participate in our 1998 Employee Stock Purchase Plan and our 401(k) plan.
No Perquisites. Our executive officers do not receive any perquisites or personal benefits that are not available to all NVIDIA employees.
Severance and Change-in-Control Agreements. Except in special circumstances, such as short term arrangements as discussed below for Mr. White, we do not have severance or change-in-control agreements with any of our employees, including our executive officers. While such agreements are offered by many of our peer companies, we want to encourage executive officers to focus on growing and building value for our stockholders by focusing our compensation program on at-risk compensation elements such as variable cash compensation and long-term equity grants.
Under the circumstances described under the heading Employment, Severance and Change-in-Control Agreements all of the stock options or restricted stock units held by our executive officers and all of our other employees would be accelerated if they were not assumed or substituted by an acquiring company. However, this is a provision of our broad-based employee equity incentive plan rather than a special executive change-in-control arrangement.
Pursuant to the terms of Mr. Whites offer letter, in the event that Mr. Whites employment is involuntarily terminated as a direct result of the completion of an acquisition of NVIDIA within the first twelve months of his employment, the vesting of his initial grant of 450,000 stock option shares will be accelerated such that 25% of such grant will be vested as of the date his employment is terminated. We believe that the terms of Mr. Whites offer letter are consistent with our prior practice for the recruitment of certain of our new executive officers.
Additional Executive Compensation Practices and Procedures
Managing the Use of Equity
While equity is an important component of overall compensation, we carefully monitor the number of equity-based awards granted to employees. We strive to balance compensation and reward to employees against equity expense and the potential dilution of stockholder ownership by following two principals:
For fiscal 2010, the Compensation Committee has established a total dilution budget of 3.5% to 4.0%. Our fiscal 2010 budget is based on gross dilution versus our historical practice of net dilution, and does not give effect to the approximately 28.5 million stock options accepted for cancellation in our recently completed tender offer and assumes that we do not implement a stock repurchase program in fiscal 2010. After giving effect to the cancellation of the approximately 28.5 million stock options in the tender offer and assuming we do not implement a stock repurchase program in fiscal 2010, our net dilution budget for fiscal 2010 is approximately negative 1.25% to negative 1.75%.
As discussed above in fiscal 2010 we will be granting our employees RSUs. For purposes of our annual dilution rate calculations each RSU is counted as more than one share in accordance with RiskMetrics published policies. Currently, based on our historical common stock volatility, each RSU is counted as 1.5 shares. We will not exceed the approved dilution budget without explicit approval from the Compensation Committee. The fiscal 2010 dilution budget also does not account for any grants that may result from mergers and acquisitions. We expect our dilution rate to vary in future periods as our business and competitive environment change and in response to any accounting or regulatory developments.
In March 2009, we completed a cash tender offer for approximately 33.1 million stock options held by our employees, of which approximately 28.5 million were tendered for cancellation. Members of the Board of Directors and our executive officers were not eligible to participate in the tender offer. We use equity to promote employee retention and to provide an incentive vehicle valued by employees that is also aligned to stockholder interest. However, our common stock price declined significantly during fiscal 2009, and all of the eligible options subject to the tender offer were out-of-the-money (i.e., had exercise prices above our then-current common stock price). Therefore, we provided an opportunity to our employees to obtain a cash payment for their eligible options, while reducing our existing overhang and potential stockholder dilution from such stock options. Only options with an exercise price of greater than $17.50 per share were eligible to be tendered. Shares subject to cancelled stock options are available for future issuance pursuant to the 2007 Equity Incentive Plan.
Equity Granting Policies
The Compensation Committee adopted specific policies regarding the grant dates of stock options to all employees in fiscal 2009. As part of its overall compensation review, the Compensation Committee annually reviews these policies and makes adjustments. Our specific grant policies for our executive officers are as follows:
We do not grant stock options upon the exercise of an option using shares already in the holders possession (i.e. reload options), make loans to executives to exercise their stock options or for any other reason, grant stock options at a discount, or allow semi-annual or off-cycle grants to be made to our executive staff when our stock trading window is closed.
Stock Ownership Guidelines
Our Corporate Governance Policies as supplemented by the Supplement, which is expected to be effective on or about April 17, 2009, as explained above, require each director and executive officer to hold at least 25,000 shares of our common stock during the period in which he or she serves as a director or executive officer, unless our Nominating and Corporate Governance Committee waives the requirement. The 25,000 shares may include vested but unexercised stock options. Non-employee directors and executive officers will have 18 months from the date that they become directors or executive officers to reach the ownership threshold. Each of our directors and executive officers currently meets the stock ownership requirement, except for Mr. White, who joined NVIDIA in February 2009 and has until August 2010 to reach this ownership threshold. The stock ownership guidelines are intended to further align director and executive officer interests with stockholder interests.
Tax and Accounting Implications
Section 162(m) of the Internal Revenue Code limits the amount that we may deduct from its federal income taxes for remuneration paid to our CEO and three most highly compensated executive officers (other than our CFO) to $1 million per executive per year, unless certain requirements are met. Section 162(m) provides an exception from this deduction limitation for certain forms of performance-based compensation, as well as for the gain recognized by an executive upon the exercise of qualifying compensatory stock options. While the Compensation Committee is mindful of the benefit to NVIDIA performance of full deductibility of compensation, we believe the Compensation Committee must not be constrained by the requirements of Section 162(m) where those requirements would impair flexibility in compensating our executive officers in a manner that can best promote our corporate objectives. Therefore, the Compensation Committee has not adopted a policy that requires that all compensation be deductible. The Compensation Committee intends to continue to compensate our executive officers in a manner consistent with the best interests of NVIDIA and our stockholders.
We adopted SFAS No. 123(R) on January 30, 2006. SFAS No. 123(R) establishes accounting for stock-based awards exchanged for employee services. Accordingly, stock-based compensation cost is measured at grant date, based on the fair value of the grants, and is recognized as an expense over the requisite employee service period. We use a binomial option pricing model to estimate the fair value of each stock option grant for accounting purposes.
SUMMARY COMPENSATION TABLE FOR FISCAL YEARS 2009, 2008 AND 2007
The following table summarizes information regarding the compensation earned by our chief executive officer, our chief financial officer and our other three executive officers during our fiscal year 2009. We refer to these individuals as our named executive officers.
GRANTS OF PLAN-BASED AWARDS FOR FISCAL 2009
The following table provides information regarding all grants of plan-based awards that were made to or earned by our named executive officers during fiscal 2009. Disclosure on a separate line item is provided for each grant of an award made to a named executive officer. The information in this table supplements the dollar value of stock options and other awards set forth in the Summary Compensation Table for Fiscal Years 2009, 2008 and 2007 by providing additional details about the awards.
The option grants to purchase shares of our common stock set forth in the following table were made under our 2007 Plan. The exercise price of options granted under the 2007 Plan is equal to the closing price of our common stock as reported by NASDAQ on the date of grant. Under the 2007 Plan, the exercise price may be paid in cash, in shares of our common stock valued at fair market value on the exercise date or through a cashless exercise procedure involving a same-day sale of the purchased shares. All stock option grants are subject to service based vesting.
During fiscal 2009, none of our named executive officers were awarded or held any performance-based equity incentive awards.
OUTSTANDING EQUITY AWARDS AS OF JANUARY 25, 2009
The following table presents information regarding outstanding equity awards held by our named executive officers as of January 25, 2009. Option grants made before February 2004 generally had a ten year term and option grants made after February 2004 generally have a six-year term. As of January 25, 2009, none of our named executive officers held unearned equity incentive awards or stock awards.
OPTION EXERCISES AND STOCK VESTED IN FISCAL YEAR 2009
The following table shows information regarding option exercises by our named executive officers during fiscal 2009. None of our named executive officers had stock awards outstanding or that vested during fiscal 2009.
Amounts shown under the heading Value Realized on Exercise represent the difference between the exercise price per share of the stock option and the sales price of the shares of our common stock. The value realized was determined without considering any taxes that may have been owed. The exercise price of each stock option was equal to the closing price of our common stock as reported by NASDAQ for the last trading day prior to the date of grant.
EMPLOYMENT, SEVERANCE AND CHANGE-IN-CONTROL AGREEMENTS
Employment Agreements. Our executives are at-will employees and we do not have employment, severance or change-in-control agreements with our executive officers, except as discussed in Compensation Discussion and AnalysisSeverance and Change-in-Control Agreements for Mr. White.
Change-in-Control Agreements. Our 1998 Plan provides that if we sell all or substantially all of our assets, or we are involved in any merger or any consolidation in which we are not the surviving corporation, or if there is any other change-in-control, all outstanding awards held by all employees then providing services, including our executive officers, under the 1998 Plan will either (a) be assumed or substituted for by the surviving entity or (b) if not assumed or substituted, the vesting and exercisability of the awards will accelerate in full and the awards will terminate if they are not exercised prior to the closing of the change-in-control.
Our 2007 Plan provides that in the event of a corporate transaction or a change-in-control, outstanding stock awards may be assumed, continued, or substituted by the surviving corporation. If the surviving corporation does not assume, continue, or substitute such stock awards, then (a) any stock awards that are held by individuals performing services for NVIDIA immediately prior to the effective time of the transaction, the vesting and
exercisability provisions of such stock awards will be accelerated in full and such stock awards will be terminated if not exercised prior to the effective date of the corporate transaction or change-in-control, and (b) all other outstanding stock awards will be terminated if not exercised on or prior to the effective date of the corporate transaction or change-in-control.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL
Potential Payments Upon Change-in-Control. Upon a change-in-control or certain other corporate transactions of NVIDIA, unvested stock options will fully vest in some cases as described above under Employment, Severance and Change-in-Control AgreementsChange-in-Control Agreements. The table below shows our estimates of the amount of the benefit each of our named executive officers would have received if the unvested options held by them as of January 25, 2009 had become fully vested as a result of a change-in-control. The estimated benefit amount of unvested options was calculated by multiplying the number of in-the-money unvested options held by the applicable named executive officer by the difference between the closing price of our common stock on January 23, 2009 as reported by NASDAQ, which was $7.71, and the exercise price of the option. Based on such closing price, none of our named executive officers would have received any benefit if the unvested options held by them as of January 25, 2009 had become fully vested as a result of a change-in-control.
COMPENSATION COMMITTEE REPORT
The material in this report is not soliciting material, is not deemed filed with the SEC and is not to be incorporated by reference in any of our filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, other than our Annual Report on Form 10-K, where it shall be deemed to be furnished, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing unless specifically incorporated by reference therein.
The Compensation Committee of the Board of Directors oversees the compensation programs of NVIDIA on behalf of the Board. In fulfilling its oversight responsibilities, the Compensation Committee reviewed and discussed with management the Compensation Discussion and Analysis included in this proxy statement.
In reliance on the review and discussions referred to above, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Annual Report on Form 10-K of NVIDIA for the year ended January 25, 2009 and in this proxy statement.
EQUITY COMPENSATION PLAN INFORMATION
The number of shares issuable upon exercise of outstanding stock options, the weighted-average exercise price of the outstanding options, and the number of stock options remaining for future issuance under each of our equity compensation plans as of January 25, 2009 are summarized as follows:
2000 Nonstatutory Equity Incentive Plan
The 2000 Nonstatutory Equity Incentive Plan, or the 2000 Plan, provided for the grant of nonstatutory stock options to employees, directors, and consultants. The terms and exercise price of awards granted under the 2000 Plan are set forth in each optionees option agreement. The term of nonstatutory stock options is either six or ten years. Grants made after May 8, 2003 generally have six year terms. Until February 2004, options granted to new employees vested over a period of four years, with 25% of the shares vesting one year from the date of grant and the remaining 75% of the shares vesting quarterly over the next three years. During this same time period, stock options granted to existing employees generally would vest each quarter over a four-year period from the date of grant. Beginning in February 2004, new employees initial options vest quarterly over a three-year period. Grants to existing employees in recognition of performance also vest over a three-year period; however, the option did not begin vesting until the second anniversary of the date of grant, after which time the option vests in quarterly increments over the remaining one-year period. Generally, an option terminates three months after the termination of the optionees service to NVIDIA. If the termination is due to the optionees disability, the exercise period generally is extended to 12 months. If the termination is due to the optionees death or if the optionee dies within three months after his or her service terminates, the exercise period generally is extended to 18 months following death. We no longer make option grants from this plan.
PortalPlayer, Inc. 2004 Stock Incentive Plan
We assumed the PortalPlayer, Inc. 2004 Stock Incentive Plan, or the 2004 Plan, and all related outstanding options in connection with our acquisition of PortalPlayer, Inc., or PortalPlayer, in January 2007. The 2004 Plan was adopted by the PortalPlayer stockholders in 2004. Each option we assumed in connection with our acquisition of PortalPlayer has been converted into the right to purchase that number of shares of NVIDIA common stock determined by multiplying the number of shares of PortalPlayer common stock underlying such option by 0.3601 and then rounding down to the nearest whole number of shares. The exercise price per share for each assumed option has been similarly adjusted by dividing the exercise price by 0.3601 and then rounding up to the nearest whole cent. Vesting schedules and expiration dates for the assumed options did not change. Under the 2004 Plan, options generally vest as to 25% of the shares one year after the date of grant and as to 1/48th of the shares each month thereafter and expire ten years from the date of grant. We no longer make option grants from this plan.
PortalPlayer, Inc. 1999 Stock Option Plan
We assumed options issued under the PortalPlayer, Inc. 1999 Stock Option Plan, or the 1999 Plan, when we completed our acquisition of PortalPlayer in January 2007. The 1999 Plan was terminated upon completion of PortalPlayers initial public offering of common stock in 2004. Each option we assumed in connection with our acquisition of PortalPlayer has been converted into the right to purchase that number of shares of NVIDIA common stock determined by multiplying the number of shares of PortalPlayer common stock underlying such option by 0.3601 and then rounding down to the nearest whole number of shares. The exercise price per share for each assumed option has been similarly adjusted by dividing the exercise price by 0.3601 and then rounding up to the nearest whole cent. Vesting schedules and expiration dates did not change. Under the 1999 Plan, options generally vest as to 25% of the shares one year after the date of grant and as to 1/48th of the shares each month thereafter and expire ten years from the date of grant.
REVIEW OF TRANSACTIONS WITH RELATED PERSONS
It is our policy that all employees, officers and directors must avoid any activity that is or has the appearance of conflicting with our interests. This policy is included in our Worldwide Code of Conduct and our Financial Team Code of Conduct. We conduct a review of all related party transactions for potential conflict of interest situations on an ongoing basis and all transactions involving executive officers or directors must be approved by the Audit Committee or another independent body of the Board. Except as discussed below, we did not conduct any transactions with related persons in fiscal 2009 that would require disclosure in this proxy statement or approval by the Audit Committee.
TRANSACTIONS WITH RELATED PERSONS
We have entered into indemnity agreements with our executive officers and directors which provide, among other things, that we will indemnify such executive officer or director, under the circumstances and to the extent provided for therein, for expenses, damages, judgments, fines and settlements he or she may be required to pay in actions or proceedings which he or she is or may be made a party by reason of his or her position as a director, executive officer or other agent of NVIDIA, and otherwise to the fullest extent permitted under Delaware law and our bylaws. We also intend to execute these agreements with our future executive officers and directors.
See the section above entitled Employment, Severance and Change-in-Control Agreements for a description of the terms of our 1998 Plan and our 2007 Plan related to a changein-control of NVIDIA.
We have granted stock options to our executive officers and our non-employee directors. See Executive Compensation and Director Compensation.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers, directors and persons who own more than 10% of a registered class of our equity securities to file initial reports of ownership and reports of changes in ownership of our common stock and other equity securities with the SEC. Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal 2009, all Section 16(a) filing requirements applicable to our executive officers, directors and greater than 10% beneficial owners were complied with; except that a Form 4, covering the acquisition of an aggregate of 11,700 shares of our common stock in connection with becoming a co-trustee of his childrens trusts, was filed late by Mr. Jones.
The Board knows of no other matters that will be presented for consideration at the 2009 Annual Meeting. If any other matters are properly brought before the 2009 Annual Meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ David M. Shannon
David M. Shannon
April 8, 2009
A COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 25, 2009 AS FILED WITH THE SEC IS BEING FURNISHED TO STOCKHOLDERS CONCURRENTLY HEREWITH. STOCKHOLDERS MAY SUBMIT A WRITTEN REQUEST FOR AN ADDITIONAL COPY OF THE ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 25, 2009 TO: INVESTOR RELATIONS, NVIDIA CORPORATION, 2701 SAN TOMAS EXPRESSWAY, SANTA CLARA, CALIFORNIA 95050. WE WILL ALSO FURNISH A COPY OF ANY EXHIBIT TO THE FORM 10-K IF SPECIFICALLY REQUESTED IN WRITING.
NVIDIA and the NVIDIA logo are either registered trademarks or trademarks of NVIDIA Corporation in the United States and other countries. Other company names used in this publication are for identification purposes only and may be trademarks of their respective companies.
Directions to Our Headquarters - Building E
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FROM INTERSTATE 280
Take the Saratoga Ave/Saratoga Exit towards Santa Clara
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Continue on Walsh Avenue to the stoplight at Scott Boulevard
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2701 SAN TOMAS EXPRESSWAY
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL THE NOMINEES AND PROPOSAL 2.
Vote On Directors
1. Election of the three directors nominated by the Board of Directors to hold office until the 2012 Annual Meeting of Stockholders.
01) Tench Coxe
02) Mark L. Perry
03) Mark A. Stevens
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The shares represented by this proxy when properly executed will be voted in the manner directed herein by the undersigned stockholder(s). If no direction is made, this proxy will be voted FOR all the nominees and proposal 2. If any other matters properly come before the meeting, the persons named in this proxy will vote in their discretion.
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS MAY 20, 2009
The stockholder(s) hereby appoint(s) Jen-Hsun Huang and David M. Shannon, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this proxy card, all of the shares of Common Stock of NVIDIA Corporation that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 9:00 a.m. pacific daylight time on May 20, 2009, at Building E of our headquarters located at 2800 Scott Boulevard, Santa Clara, California 95050, and any adjournment or postponement thereof.
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