Briefing Document: NVIDIA Corporation Definitive Proxy Statement (DEF 14A) Filed May 26, 2000
Subject: Review of NVIDIA Corporation's Definitive Proxy Statement filed on May 26, 2000, for the Annual Meeting of Stockholders on July 12, 2000.
Source: Excerpts from NVIDIA CORP FORM DEF 14A filed 05/26/00 for the Period Ending 07/12/00.
Key Themes and Important Ideas:
This document is a definitive proxy statement filed by NVIDIA Corporation outlining the agenda and details for its 2000 Annual Meeting of Stockholders. The primary purposes of the meeting are to elect directors, ratify the selection of independent accountants, and address any other proper business. The document also provides significant information regarding the company's corporate governance, executive and director compensation, and stock ownership.
1. Annual Meeting of Stockholders:
Date and Time: Wednesday, July 12, 2000, at 2:00 p.m. local time.
Location: Santa Clara Westin Hotel, 5101 Great America Parkway, Santa Clara, California.
Record Date: The close of business on June 5, 2000, for stockholders entitled to notice and to vote.
Agenda Items:Elect two directors to hold office until the 2003 Annual Meeting.
Ratify the selection of KPMG LLP as independent accountants for the fiscal year ending January 28, 2001.
Transact other business as may properly come before the meeting.
2. Corporate Governance and Board Structure:
Board Structure: The Board of Directors is divided into three classes, with terms of three years, with approximately one-third of the directors elected each year.
Current Board Size: The Board is composed of seven members.
Director Elections (Proposal 1): Stockholders will vote to elect two directors to the class whose term expires in 2000. The nominees are the current directors Tench Coxe and Mark A. Stevens. If elected, they will serve until the 2003 annual meeting.
Filling Vacancies: Vacancies on the Board can only be filled by a majority vote of the remaining directors.
Voting for Directors: Directors are elected by a plurality of the votes present in person or represented by proxy.
3. Independent Auditors (Proposal 2):
Selection: The Board has selected KPMG LLP as the independent auditors for the fiscal year ending January 28, 2001. KPMG LLP has audited the company's financial statements since April 1995.
Ratification: Stockholders are asked to ratify this selection.
Significance of Ratification: If stockholders do not ratify the selection, the Audit Committee and the Board will reconsider retaining the firm. However, even if ratified, the Audit Committee and Board can still appoint different auditors if deemed in the company's best interest.
Voting for Auditors: The affirmative vote of a majority of the shares present in person or represented by proxy is required for ratification.
4. Stock Ownership and Beneficial Ownership:
Common Stock Outstanding: As of April 30, 2000, the company had 32,053,692 shares of Common Stock outstanding and entitled to vote.
Voting Rights: Each holder of record of Common Stock is entitled to one vote per share.
Significant Stockholders: The document details the beneficial ownership of Common Stock by directors, nominees, executive officers, and those known to own more than five percent.
Curtis R. Priem: 9.4% (3,035,625 shares)
Jen-Hsun Huang (President and CEO): 8.7% (2,804,592 shares)
Chris A. Malachowsky (Vice President, Engineering): 6.5% (2,089,125 shares)
All current directors and executive officers as a group: 28.3% (9,326,372 shares)
Calculation of Beneficial Ownership: Includes shares subject to options exercisable within 60 days.
5. Director Compensation:
No Cash Compensation: Directors do not receive cash compensation for their services, but are reimbursed for expenses.
Stock Option Grants: Non-employee directors receive nonstatutory stock option grants under the 1998 Non-Employee Directors' Stock Option Plan ("Directors' Plan").
Non-Discretionary Grants: Option grants under the Directors' Plan are non-discretionary.
Initial Grant: 50,000 shares upon initial election or appointment as a non-employee director. Vests monthly over four years.
Annual Grant: 20,000 shares annually on the day following each Annual Meeting. Pro-rated if service was not for the entire period since the prior Annual Meeting. Vests in full after one year if 75% of Board meetings are attended, otherwise vests annually over four years (10% for 3 years, 70% in year 4).
Committee Grant: 5,000 shares annually for each committee membership. Pro-rated if service was not for the entire period. Vests in full after one year if 75% of committee meetings are attended, otherwise vests annually over four years.
Past Grants: Details of previous option grants to specific non-employee directors are provided.
Outstanding Options and Future Availability: As of April 30, 2000, 268,750 shares were under outstanding options and 31,250 shares remained available for future grant under the Directors' Plan.
Indemnity Agreements: The Company has entered into indemnity agreements with directors and executive officers to indemnify them for expenses related to actions or proceedings due to their status.
6. Executive Compensation:
Named Executive Officers: The document provides compensation information for the Chief Executive Officer and the four other most highly compensated executive officers with compensation exceeding $100,000 in fiscal year 2000.
Compensation Philosophy: The goals are to align executive interests with stockholders and to attract, retain, and reward high-quality executives.
Compensation Elements:Base Salary: Targeted at the industry median for comparable companies. Reviewed annually based on market data (including the Radford Survey) and individual performance.
Bonus: Semi-annual incentive bonus plan based on achieving specific financial performance targets (operating margin). Distributed based on individual performance objectives. Introduced in the second half of fiscal 2000.
Long-Term Incentives: Primarily in the form of stock options granted under the 1998 Equity Incentive Plan. Options are granted at or above fair market value and are intended to align executive interests with stockholder value. Vesting is generally over four years.
CEO Compensation (Jen-Hsun Huang):Fiscal 2000 Base Salary: $300,000
Fiscal 2000 Bonus: $300,000
Fiscal 2001 Increases: Base salary increased to $400,000, and annual bonus target increased to $400,000.
Fiscal 2001 Option Grant: 400,000 shares granted at fair market value, vesting quarterly over four years. This grant was intended to maintain competitive compensation and strengthen alignment with stockholders.
Stock Options for Named Executive Officers: Tables detail option grants in the last fiscal year and unexercised options held at year-end (January 30, 2000).
Employee Stock Purchase Plan: Executive officers are generally eligible, but applicable laws regarding stock ownership made Messrs. Huang, Malachowsky, and Priem ineligible.
7. Performance Measurement:
Comparison Graph: Includes a comparison of the cumulative total return of an investment of $100 in NVIDIA's Common Stock against the Hambrecht & Quist Technology Index and the Nasdaq Stock Market (U.S.) from January 22, 1999 (IPO date) through January 28, 2000. The graph demonstrates significant stock price appreciation for NVIDIA during this period compared to the indices.
8. Other Important Facts:
Company Information: NVIDIA Corporation, located in Santa Clara, California, SIC Code 3674 (Semiconductors and Related Devices), Sector Technology.
Stock Split: The Board approved a two-for-one stock split in May 2000, payable as a stock dividend on June 26, 2000, to stockholders of record on June 12, 2000. The share numbers in the proxy statement do not reflect this split.
Rule 14a-8 Proposals: Deadline for submitting a stockholder proposal for inclusion in the 2001 proxy statement is February 12, 2001. Deadlines for proposals not included in the proxy materials are also provided (March 14, 2001, to April 13, 2001).
Section 16(a) Compliance: Based on available information, all Section 16(a) filing requirements for officers, directors, and greater than ten percent beneficial owners were complied with during the fiscal year ended January 30, 2000.
Registration Rights: Certain stockholders (Messrs. Coxe, Gaither, Jones, and Miller) hold registration rights pursuant to a Second Amended and Restated Investors' Rights Agreement.
Key Quotes:
"At the meeting, stockholders will be asked to (a) elect two directors to hold office until the 2003 Annual Meeting of Stockholders; (b) ratify the selection of KPMG LLP as independent accountants of he Company for its fiscal year ending January 28, 2001; and (c) transact such other business as may properly come before the meeting or any adjournment or postponeme t thereof."
"The Board of Directors has fixed the close of busine s on June 5, 2000, as the record date for the determination of stockholders entitled to notice of and to vote at this Annual Meeting of Stockholders..."
"The Board is presently composed of seven members. There are two directors in the class whose term of office expires in 2000. Each of the nominees for election to this class is currently a director of the Company."
"The Board has selected KPMG LLP as the Company's independent auditors for the fiscal year ending January 28, 2001..."
"The Company's executive compensation policies and practices are established and administered by the Compensation Committee of the Board of Directors (the "Committee")."
"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 the Company to attract, retain, and reward high-quality executives who contribute to the long-term success of the Company."
"The Company's philosophy regarding base salaries for executives is conservative, with the goal of maintaining base salaries at the industry median for comparable companies."
"Long-term incentives have been in the form of stock options. The Committee believes that equity-based compensation closely aligns the interests of executive officers with those of stockholders..."
"The Board of Directors approved a two-for-one stock split in May 2000. The stock split will be paid in the form of a stock dividend to be distributed on June 26, 2000 to all stockholders of record on June 12, 2000."
Overall Summary:
This proxy statement provides a snapshot of NVIDIA's corporate structure, upcoming stockholder decisions, and compensation practices in mid-2000. It highlights the routine business of electing directors and appointing auditors, while also revealing the importance of stock-based compensation for both executives and directors as a means of aligning interests with stockholders and attracting talent. The document also details the significant stock ownership held by the company's founders and early investors. The approved stock split indicates a positive outlook and potential for future growth at the time.
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