NVIDIA 2005 Annual Report Download - page 81

NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
The following table summarizes information about stock options outstanding as of January 30, 2005:
Options Outstanding Options Exercisable
Range of Exercise Prices Number Outstanding
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise
Price Number Exercisable
Weighted
Average
Exercise
Price
$0.09 − $0.09 2,000 1.9 $ 0.09 2,000 $ 0.09
0.33 − 0.33 123,300 2.6 $ 0.33 123,300 $ 0.33
0.66 − 0.79 567,960 2.9 $ 0.75 567,960 $ 0.75
1.04 − 1.38 174,668 3.0 $ 1.29 174,668 $ 1.29
1.58 − 2.25 4,465,078 3.3 $ 1.78 4,465,078 $ 1.78
4 .09 − 5.88 3,609,167 4.5 $ 4.80 3,585,022 $ 4.80
7.65 − 11.07 4,387,246 6.0 $ 9.45 3,274,188 $ 9.49
11.51 − 17.18 14,133,223 5.0 $ 14.49 6,857,542 $ 14.81
17.53 − 26.25 13,953,002 5.4 $ 22.38 6,210,995 $ 19.79
26.38 − 39.54 4,120,013 5.9 $ 31.90 3,182,306 $ 31.44
42.98 − 53.61 624,000 6.6 $ 43.35 617,750 $ 43.26
65.47 − 65.47 500 7.0 $ 65.47 375 $ 65.47
$0.09 − $65.47 46,160,157 5.1 $ 16.10 29,061,184 $ 14.05
Note 10 − Retirement Plan
We have a 401(k) Retirement Plan, or the Plan, covering substantially all of our United States employees. Under the Plan,
participating employees may defer up to 100 percent of their pre−tax earnings, subject to the Internal Revenue Service annual
contribution limits.
Note 11 − Stock Option Exchange
On September 26, 2002, we commenced an offer, or the Offer, to our employees to exchange outstanding stock options with exercise
prices equal to or greater than $27.00 per share, or Eligible Options. The Offer was implemented in order to improve employee
morale by realigning the cash and equity components of our compensation programs, eliminate significant out−of−the−money options
and reduce the number of outstanding stock options relative to the number of shares outstanding, or "options overhang", thereby
reducing future potential dilution to existing stockholders. Stock options to purchase an aggregate of approximately 20,615,000 shares
were eligible for tender at the commencement of the Offer, representing approximately 39% of our outstanding stock options as of the
commencement date. Only employees of NVIDIA or one of our subsidiaries as of September 26, 2002 who continued to be employees
through the Offer termination date of October 24, 2002 were eligible to participate in the Offer. Employees who were on medical,
maternity, worker's compensation, military or other statutorily protected leaves of absence, or a personal leave of absence, were also
eligible to participate in the Offer. Employees who were terminated on or before the Offer termination date of October 24, 2002, were
not eligible to participate in the Offer. In addition, our Chief Executive Officer and Chief Financial Officer and members of our Board
of Directors were not eligible to participate in this Offer.
Eligible employees who participated in the Offer received, in exchange for the cancellation of Eligible Options, a fixed amount of
consideration, represented by fully vested, non−forfeitable common stock less applicable withholding taxes, equal to the number of
shares underlying such Eligible Options, multiplied by $3.20, less the amount of applicable tax withholdings, divided by $10.46, the
closing price of our common stock as reported on the Nasdaq National Market on October 24, 2002. We concluded that the
consideration paid for the Eligible Options represented "substantial consideration" as required by Issue 39(f) of EITF Issue No. 00−23
"Issues Relating to Accounting for Stock Compensation Under APB Opinion No. 25 and FASB Interpretation No. 44," as the $3.20
per Eligible Option was at least the fair value for each Eligible Option, as determined using the Black−Scholes option−pricing model.
In determining the fair value of the Eligible Options using the Black−Scholes option−pricing model, we used the following
assumptions: (i) the expected remaining life was deemed to be the remaining term of the options, which was approximately 7.8 years;
(ii) a volatility of 50.0% during the expected life; (iii) a risk−free interest rate of 3.71%; and (iv) no dividends. The amount of $3.20
per Eligible Option was established at the commencement of the offer period and remained unchanged throughout the offer period.
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