NVIDIA 2007 Annual Report Download - page 79

NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Equity Incentive Program
Overview. We consider equity compensation to be long term compensation and an integral component of our efforts to attract
and retain exceptional executives, senior management and world−class employees. We believe that properly structured equity
compensation aligns the long−term interests of stockholders and employees by creating a strong, direct link between employee
compensation and stock appreciation, as stock options are only valuable to our employees if the value of our common stock increases
after the date of grant.
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, on January 5, 2007. The 2004 Plan was adopted by the
PortalPlayer stockholders in 2004 and as of January 28, 2007, 1,017,644 shares of NVIDIA common stock were authorized for
issuance under the 2004 Plan. In addition, any shares subject to outstanding options under the PortalPlayer 1999 stock option plan that
expire unexercised or any unvested shares that are forfeited will be available for issuance under the 2004 Plan. The number of shares
authorized for issuance under the 2004 Plan will be increased on January 1 from 2007 through 2009 by 460,033 shares and on January
1 from 2010 through 2014 by 276,000 or a number of shares determined by the Board.
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.
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 on January 5, 2007. The 1999 Plan was terminated upon completion of PortalPlayer's initial public offering
of common stock in calendar 2004. No shares of common stock are available for issuance under the 1999 Plan other than to satisfy
exercises of stock options granted under the 1999 Plan prior to its termination and any shares that become available for issuance as a
result of expiration or cancellation of an option that was issued pursuant to the 1999 Plan shall become available for issuance under
the 2004 Plan. Previously authorized yet unissued shares under the 1999 Plan were cancelled upon completion of PortalPlayer's initial
public offering.
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, incentive stock options were granted at a price that was not less than 100% of the fair market value of
PortalPlayer's common stock, as determined by its board of directors, on the date of grant. Non−statutory stock options were granted
at a price that was not less than 85% of the fair market value of PortalPlayer's common stock, as determined by its board of directors,
on the date of grant.
Generally, options granted under the 1999 Plan are exercisable for a period of ten years from the date of grant, and shares vest
at a rate of 25% on the first anniversary of the grant date of the option, and an additional 1/48th of the shares upon completion of each
succeeding full month of continuous employment thereafter. 70
Source: NVIDIA CORP, 10−K, March 16, 2007