NVIDIA 2013 Annual Report Download - page 96

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granted to a participant unless agreed to by the affected participant. We will obtain stockholder approval of any amendment
to the Amended and Restated 2007 Plan as required by applicable law and listing requirements. Unless sooner terminated,
the Amended and Restated 2007 Plan will automatically terminate on March 21, 2022, which is the day before the tenth
anniversary of the date the Amended 2007 Plan was adopted by our Compensation Committee.
U.S. Federal Income Tax Consequences
The following is a summary of the principal United States federal income taxation consequences to participants and
us with respect to participation in the Amended and Restated 2007 Plan. This summary is not intended to be exhaustive,
and does not discuss the income tax laws of any city, state or foreign jurisdiction in which a participant may reside. The
information is based upon current federal income tax rules and therefore is subject to change when those rules change.
Because the tax consequences to any participant may depend on his or her particular situation, each participant should
consult the participant’s tax adviser regarding the federal, state, local, and other tax consequences of the grant or exercise
of an award or the disposition of stock acquired the Amended and Restated 2007 Plan. The Amended and Restated 2007
Plan is not qualified under the provisions of Section 401(a) of the Code and is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974. Our ability to realize the benefit of any tax deductions described below
depends on our generation of taxable income as well as the requirement of reasonableness, the provisions of Section 162
(m) of the Code and the satisfaction of our tax reporting obligations.
Nonstatutory Stock Options. Generally, there is no taxation upon the grant of an NSO if the stock option is granted
with an exercise price equal to the fair market value of the underlying stock on the grant date. On exercise, a participant
will recognize ordinary income equal to the excess, if any, of the fair market value on the date of exercise of the stock over
the exercise price. If the participant is employed by us or one of our affiliates, that income will be subject to withholding
taxes. The participant’s tax basis in those shares will be equal to their fair market value on the date of exercise of the stock
option, and the participant’s capital gain holding period for those shares will begin on that date.
Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a
tax reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by
the participant.
Incentive Stock Options. The Amended and Restated 2007 Plan provides for the grant of stock options that qualify as
“incentive stock options,” as defined in Section 422 of the Code. Under the Code, a participant generally is not subject to
ordinary income tax upon the grant or exercise of an ISO. If the participant holds a share received on exercise of an ISO
for more than two years from the date the stock option was granted and more than one year from the date the stock option
was exercised, which is referred to as the required holding period, the difference, if any, between the amount realized on a
sale or other taxable disposition of that share and the holder’s tax basis in that share will be long-term capital gain or loss.
If, however, a participant disposes of a share acquired on exercise of an ISO before the end of the required holding
period, which is referred to as a disqualifying disposition, the participant generally will recognize ordinary income in the
year of the disqualifying disposition equal to the excess, if any, of the fair market value of the share on the date the ISO
was exercised over the exercise price. However, if the sales proceeds are less than the fair market value of the share on the
date of exercise of the stock option, the amount of ordinary income recognized by the participant will not exceed the gain,
if any, realized on the sale. If the amount realized on a disqualifying disposition exceeds the fair market value of the share
on the date of exercise of the stock option, that excess will be short-term or long-term capital gain, depending on whether
the holding period for the share exceeds one year.
For purposes of the alternative minimum tax, the amount by which the fair market value of a share of stock acquired
on exercise of an ISO exceeds the exercise price of that stock option generally will be an adjustment included in the
participant’s alternative minimum taxable income for the year in which the stock option is exercised. If, however, there is
a disqualifying disposition of the share in the year in which the stock option is exercised, there will be no adjustment for
alternative minimum tax purposes with respect to that share. In computing alternative minimum taxable income, the tax