Briefing Document: NVIDIA Corp. Proxy Statement (DEF 14A) - June 25, 2001
Source: nVidia Proxy Statement for Stockholders Annual Report 2001
Key Themes:
This proxy statement outlines the agenda and provides information for NVIDIA Corporation's 2001 Annual Meeting of Stockholders. The primary themes covered include:
Stockholder Meeting Logistics and Voting: Details on the date, time, location, record date for voting, and proxy solicitation process for the annual meeting.
Election of Directors: Information regarding the nomination and election of three directors to the Board.
Capital Structure Changes: A proposal to significantly increase the authorized number of shares of Common Stock.
Independent Auditor Ratification: Seeking stockholder approval for the selection of KPMG LLP as the independent auditors.
Corporate Governance and Oversight: Information about the Board's structure, committees (Audit and Compensation), and their responsibilities.
Executive and Director Compensation: Disclosure of compensation awarded to named executive officers and details regarding director compensation, particularly stock options.
Stock Ownership Information: Data on beneficial ownership of Common Stock by directors, executive officers, and major stockholders.
Financial Performance Comparison: A graph illustrating NVIDIA's stock performance relative to relevant market indices.
Most Important Ideas and Facts:
Annual Meeting Details:
The 2001 Annual Meeting of Stockholders was scheduled for Wednesday, August 15, 2001, at 2:00 p.m. local time at NVIDIA's corporate headquarters in Santa Clara, California.
The record date for determining stockholders entitled to vote was the close of business on June 21, 2001.
As of June 21, 2001, there were 71,197,331 shares of Common Stock outstanding and entitled to vote, with each share holding one vote.
The proxy solicited on behalf of the Board of Directors, and the company intended to mail the proxy statement and card on or about June 29, 2001.
The company would bear the cost of proxy solicitation, which might be supplemented by telephone, telegram, or personal solicitation by directors, officers, or employees.
Proposals for Stockholder Vote:
Proposal 1: Election of Directors: Stockholders were asked to elect three directors to hold office until the 2004 Annual Meeting. The nominees were James C. Gaither, Jen-Hsun Huang, and A. Brooke Seawell, all of whom were current directors. Directors are elected by a plurality of votes.
Proposal 2: Increase in Authorized Common Stock: The Board proposed an amendment to the Amended and Restated Certificate of Incorporation to increase the authorized number of shares of Common Stock from 200,000,000 to 500,000,000 shares.
The stated purpose was to provide flexibility for future business and financial purposes, such as raising capital, equity incentives, stock dividends, strategic relationships, and acquisitions.
The document acknowledges that the additional shares could also be used to "oppose a hostile takeover attempt or to delay or prevent changes in control or management." It explicitly states this proposal was "not by the threat of any hostile takeover attempt."
Approval of this proposal required the affirmative vote of the holders of a majority of the outstanding shares of Common Stock. Abstentions and broker non-votes would have the same effect as negative votes.
As of April 30, 2001, 70,104,138 shares were outstanding, with significant shares reserved for options, rights, and convertible notes.
Proposal 3: Ratification of Independent Auditors: The Board selected KPMG LLP as independent auditors for the fiscal year ending January 27, 2002, and sought stockholder ratification.
KPMG LLP had audited NVIDIA's financial statements since April 1995.
While not required, the ratification was presented as "a matter of good corporate practice." If not ratified, the Audit Committee and Board would reconsider the selection.
Audit fees for fiscal year ended January 28, 2001, were $263,000. Other professional fees (primarily statutory audit, income tax review, acquisition assistance, tax strategy, and SEC filings) totaled $724,000. There were no fees for information technology consulting.
The Audit Committee determined that the non-audit services were compatible with auditor independence.
Ratification required the affirmative vote of a majority of shares present in person or by proxy and entitled to vote. Abstentions had the effect of negative votes.
Board of Directors and Committees:
The Board was composed of seven members, divided into three classes with three-year terms.
The nominees for election (Gaither, Huang, Seawell) belonged to the class whose term expired in 2001.
Biographical information for all directors and nominees is provided, highlighting their experience and other board memberships.
The Board held five meetings and acted by unanimous written consent five times during the fiscal year ended January 28, 2001.
Audit Committee: Composed of William J. Miller, A. Brooke Seawell, and Mark A. Stevens. Its purpose is to assist the Board in overseeing financial reporting, internal controls, and the independent auditors. The charter was adopted in May 2000 and amended in May 2001, and was attached as Appendix A.
Seawell was noted as not being classified as independent under Nasdaq standards due to an option grant received for serving as interim CFO in fiscal 1999, but the Board determined his background made him highly qualified for the committee.
The Audit Committee reviewed the audited financial statements for fiscal year 2001 and discussed required matters with KPMG LLP.
Compensation Committee: Composed of Tench Coxe, James C. Gaither, and Harvey C. Jones. It makes recommendations on executive compensation, awards stock options, and determines compensation levels. It acted by unanimous written consent five times.
Each Board member attended at least 75% of applicable meetings.
Beneficial Ownership of Common Stock (as of April 30, 2001):
Key beneficial owners of more than 5% included:
Jen-Hsun Huang (President and CEO): 5,556,186 shares (7.9%)
Chris A. Malachowsky (VP, Engineering): 4,308,250 shares (6.1%)
Curtis R. Priem (Chief Technical Officer): 5,861,525 shares (8.3%)
FMR Corporation (Fidelity Management & Research Company, etc.): 10,221,168 shares (14.6%)
Janus Capital Corporation: 4,744,851 shares (6.8%)
All current directors and executive officers as a group (11 persons) beneficially owned 17,991,737 shares, representing 24.8% of the total outstanding shares.
Executive Compensation:
Director compensation was primarily through automatic nonstatutory stock option grants under the Director Plan Provisions. Directors did not receive cash compensation.
Initial grants for new non-employee directors were 100,000 options, vesting monthly over four years.
Annual grants were 40,000 shares, plus 10,000 shares for committee members, vesting monthly over one year (contingent on meeting attendance).
The exercise price was at least 100% of the fair market value on the grant date.
Named Executive Officer compensation included salary, bonus, and long-term incentives, primarily stock options.
The Compensation Committee's philosophy aimed to align executive interests with stockholders, attract and retain talent, and achieve competitive compensation levels.
Base Salaries: Targeted at the industry median for comparable companies.
Bonus: Semi-annual incentive bonus plan based on achieving specific financial performance targets (operating margin and individual objectives).
Long-Term Incentives: Primarily stock options granted under the 1998 Equity Incentive Plan, vesting over four years. The size of grants was based on competitive practices, linking compensation to stockholder interests, individual performance, and job level.
In fiscal 2001, executive officers received 1,025,000 option grants, approximately 9.5% of the total options granted to employees.
CEO Compensation (Jen-Hsun Huang): Base salary increased from $300,000 to $400,000 for fiscal 2001. Bonus target for fiscal 2001 was $400,000, which he achieved. For fiscal 2002, base salary remained $400,000, and the bonus target increased to $600,000. He received an option grant of 800,000 shares in fiscal 2001.
Performance Measurement Comparison:
A graph shows the total stockholder return of an investment in NVIDIA's Common Stock from its Nasdaq listing date (January 22, 1999) through January 26, 2001, compared to the Hambrecht & Quist Technology Index and the Nasdaq Stock Market (U.S.).
During this period, NVIDIA's stock significantly outperformed both indices, with a $100 investment on January 22, 1999, growing to $543.42 by January 26, 2001, while the Nasdaq reached $109.63 and the H&Q Tech Index reached $144.59.
Certain Transactions:
James C. Gaither, a director and Compensation Committee member, was Senior Counsel to Cooley Godward LLP, which provided legal services to NVIDIA since its inception.
Indemnity Agreements:
NVIDIA entered into indemnity agreements with each director and executive officer, providing for indemnification for expenses incurred in actions or proceedings due to their status, to the fullest extent permitted by the Bylaws and Delaware law.
Key Quotes:
"Notice Is Hereby Given that the 2001 Annual Meeting of Stockholders of NVIDIA Corporation, a Delaware corporation, will be held on Wednesday, August 15, 2001 at 2:00 p.m. local time at NVIDIA's corporate headquarters located at 2701 San Tomas Expressway, Santa Clara, California..." (Notice of Annual Meeting)
"To approve an amendment to our Amended and Restated Certificate of Incorporation to increase the authorized number of shares of Common Stock from 200,000,000 shares to 500,000,000 shares;" (Notice of Annual Meeting - Purpose 2)
"The Board of Directors has fixed the close of business on June 21, 2001 as the record date for the determination of stockholders entitled to notice of and to vote at this Annual Meeting of Stockholders..." (Notice of Annual Meeting)
"Although at present the Board of Directors has no plans to issue the additional shares of Common Stock, it desires to have such shares available to provide additional flexibility to use its capital stock for business and financial purposes in the future." (Approval of Increase in Number of Authorized Shares of Common Stock)
"We could also use the additional shares of Common Stock that would become available for issuance if the proposal were adopted to oppose a hostile takeover attempt or to delay or prevent changes in control or management." (Approval of Increase in Number of Authorized Shares of Common Stock)
"Stockholder ratification of the selection of KPMG LLP as our independent auditors is not required by our Bylaws or otherwise. However, the Board is submitting the selection of KPMG LLP to the stockholders for ratification as a matter of good corporate practice." (Ratification of Selection of Independent Auditors)
"The goals of the compensation program are: (1) to align the financial interests of the executive officers and other key employees with those of the stockholders; and (2) to provide a means for NVIDIA to attract, retain, and reward high-quality executives who contribute to our long-term success." (Report of the Compensation Committee)
"We provide significant equity-based incentives for executives and other key employees to ensure they are motivated over the long-term to increase stockholder value and to contribute to our long-term growth." (Report of the Compensation Committee)
"Based on its review of the audited financial statements and the various discussions noted above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2001." (Report of the Audit Committee)
This briefing document summarizes the critical information presented in the NVIDIA Corp. DEF 14A filing from June 2001, providing a concise overview of the company's planned stockholder meeting agenda, key proposals, and relevant corporate governance and financial details from that period.
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