This excerpt taken from the NVDA DEF 14A filed May 31, 2005.
Option Grants in Fiscal 2005
We grant options to purchase shares of our common stock to our named executive officers under our 1998 Equity Incentive Plan, or the 1998 Plan. As of May 1, 2005, options to purchase a total of 38,744,881 shares were outstanding under the 1998 Plan and options to purchase 8,793,348 shares remained available for grant under the 1998 Plan. The following table presents each stock option grant during fiscal 2005 to each of the named executive officers. The exercise price of each option was equal to the closing price of our common stock as reported by Nasdaq for the last market-trading day prior to the date of grant. 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.
The following table also presents the potential aggregate increase in market capitalization of NVIDIA based upon the 167,089,545 outstanding shares of common stock as of January 30, 2005. The potential realizable value is calculated based on the applicable term of the option at the time of grant. Stock price appreciation of 5% and 10% is assumed pursuant to rules promulgated by the SEC and does not represent our prediction of our stock price performance. The potential realizable values at 5% and 10% appreciation are calculated by:
All shares listed in the following table under the heading "Number of Securities Underlying Options Granted" are subject to vesting. The shares subject to the option granted to Mr. Huang vest 25% four years and three months after the date of grant and the remaining 75% of the shares subject to the option vest in equal quarterly installments over a nine month period. This option shall be fully vested on the fifth year anniversary of the date of grant and has a seven-year term. The shares subject to the options granted to Mr. Fisher and Dr. Ma vest 25% one year and three months after the date of grant and the remaining 75% of the shares subject to the option vest in equal quarterly installments over a two year and nine month period. These options shall be fully vested on the fourth year anniversary of the date of grant. The shares subject to the options granted to Messrs. Burkett and Shannon vest 25% two years and nine months after the date of the grant and the remaining 75% of the shares subject to the option vest in equal quarterly installments over a one year three month period. These options shall be fully vested on the fourth year anniversary of the date of grant. The options grants to Messrs. Burkett, Fisher and Shannon and Dr. Ma have six year terms. The term of each option is subject to earlier termination if the optionee's service with us ceases. Under certain circumstances following a change of control, the vesting of such option grants may accelerate and become immediately exercisable.
Percentages shown under "Percent of Total Options Granted to Employees in Fiscal Year" are based on an aggregate of 8,259,926 options granted to our employees under all of our equity incentive plans during the fiscal year ended January 30, 2005.