August 10, 2001
16, 2002
To Our Shareholders:
You are cordially invited to attend the annual meeting of shareholders of NIKE, Inc. to be held at the Center for Cultural Exchange, One Longfellow
Square,Portland Exposition Building, 239 Park Avenue, Portland, Maine 04101,04102, on Monday,Wednesday, September 17, 2001,18, 2002, at 1:00 P.M. Eastern Time. Registration will begin at 12:00 P.M.
NIKE's
NIKE’s Cole Haan and Bauer NIKE Hockey subsidiaries are headquartered nearby. I believe that the annual meeting provides an excellent opportunity for shareholders to become better acquainted with NIKE and its directors and officers. I hope that you will be able to attend. Highlights of the meeting will be available on videotape by calling 1-800-640-8007 following the meeting.
Whether or not you plan to attend, the prompt execution and return of your proxy card will both assure that your shares are represented at the meeting and minimize the cost of proxy solicitation.
Sincerely,
[/s/ Philip H. Knight]
Philip H. Knight
| Sincerely, |
 |
| Philip H. Knight | |
| Chairman of the Board, | |
| President, and Chief Executive Officer |
Notice of the Board,
President, and Chief Executive
Officer
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NIKE LOGO
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 17, 2001
Annual Meeting of Shareholders
To the Shareholders of NIKE, Inc.
The annual meeting of shareholders of NIKE, Inc., an Oregon corporation, will be held on Monday, September 17, 2001,18, 2002, at 1:00 P.M., at the Center for
Cultural Exchange, One Longfellow Square,Portland Exposition Building, 239 Park Avenue, Portland, Maine 04101,04102, for the following purposes:
1. To elect a Board of Directors for the ensuing year.
2. To approve the NIKE, Inc. Employee Stock Purchase Plan.
3. To consider a shareholder proposal.
4. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants.
5.
| 1. | To elect a Board of Directors for the ensuing year. | |
| 2. | To approve the extension of and amendments to the NIKE, Inc. Long Term Incentive Plan. | |
| 3. | To ratify the appointment of PricewaterhouseCoopers LLP as independent accountants. | |
| 4. | To transact such other business as may properly come before the meeting. |
All shareholders are invited to attend the meeting. Shareholders of record at the close of business on July 25, 2001,2002, the record date fixed by the Board of Directors, are entitled to notice of and to vote at the meeting. You must present an admission ticket enclosed in this Proxy Statement.
By Order of the Board of Directors
JOHN E. JAQUA
Beaverton, Oregon
Whether or not you intend to be present at the meeting, please sign and date the enclosed proxy and return it in the enclosed envelope, or vote by telephone or over the internet following the instructions on the proxy. 4
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of NIKE, Inc. ("NIKE"(“NIKE” or the "Company"“Company”) for use at the annual meeting of shareholders to be held on September 17, 2001,18, 2002, and at any adjournment thereof (the "Annual
Meeting"“Annual Meeting”). The Company expects to mail this proxy statement and the enclosed proxy to shareholders on or about August 10, 2001.16, 2002.
The Company will bear the cost of solicitation of proxies. In addition to the solicitation of proxies by mail, certain officers and employees of the Company, without extra compensation, may also solicit proxies personally or by telephone. The Company has retained ADP Investor Communications Services, 51 Mercedes Way, Edgewood, New York, to assist in the solicitation of proxies from nominees and brokers at an estimated fee of $5,000 plus related out-of-pocket expenses. Copies of proxy solicitation materials will be furnished to fiduciaries, custodians and brokerage houses for forwarding to the beneficial owners of shares held in their names.
All valid proxies properly executed and received by the Company prior to the Annual Meeting will be voted in accordance with the instructions specified in the proxy. Where no instructions are given, shares will be voted FOR the election of each of the named nominees for director, FOR approval of the extension of and amendments to the NIKE, Inc. Employee Stock PurchaseLong-Term Incentive Plan, AGAINST the shareholder proposal regarding
business principles for China, and FOR ratification of the appointment of PricewaterhouseCoopers LLP as independent accountants. A shareholder may choose to strike the names of the proxy holders named in the enclosed proxy and insert other names.
A shareholder giving the enclosed proxy has the power to revoke it at any time before it is exercised by affirmatively electing to vote in person at the meeting or by delivering to John F. Coburn III, Assistant Secretary of NIKE, either an instrument of revocation or an executed proxy bearing a later date.
Holders of record of NIKE'sNIKE’s Class A Common Stock ("(“Class A Stock"Stock”) and holders of record of NIKE'sNIKE’s Class B Common Stock ("(“Class B Stock"Stock”), at the close of business on July 25, 2001,2002, will be entitled to vote at the Annual Meeting. On that date, 99,126,33498,095,361 shares of Class A Stock and 170,114,060167,763,188 shares of Class B Stock were issued and outstanding. Neither class of Common Stock has cumulative voting rights. 5
Each share of Class A Stock and each share of Class B Stock is entitled to one vote on every matter submitted to the shareholders at the Annual Meeting. With regard to Proposal 1, the election of directors, the holders of Class A Stock and the holders of Class B Stock will vote separately. Holders of Class B Stock are currently entitled to elect 25 percent of the total Board, rounded up to the next whole number. Holders of Class A Stock are currently entitled to elect the remaining directors. Under this formula, holders of Class B Stock, voting separately, will elect three directors, and holders of Class A Stock, voting separately, will elect eightnine directors. Holders of Class A Stock and holders of Class B Stock will vote together as one class on Proposals 2 3 and 4.
2
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3.
PROPOSAL 1
ELECTION OF DIRECTORS
A Board of 1112 directors will be elected at the Annual Meeting. All of the nominees were elected at the 20002001 annual meeting of shareholders.shareholders, except for Jeanne P. Jackson, who was elected as a director by the Board of Directors in November 2001. Directors will hold office until the next annual meeting of shareholders or until their successors are elected and qualified.
Thomas E. Clarke, Jill K. Conway and Delbert J. Hayes are nominated by management for election by the holders of Class B Stock. The other eightnine nominees are nominated by management for election by the holders of Class A Stock.
Under Oregon law, if a quorum of each class of shareholders is present at the Annual Meeting, the eightnine director nominees who receive the greatest number of votes cast by holders of Class A Stock and the three director nominees who receive the greatest number of votes cast by holders of Class B Stock will be elected directors. Abstentions and broker non-votes will have no effect on the results of the vote. Unless otherwise instructed, proxy holders will vote the proxies they receive for the nominees listed below. If any nominee becomes unable to serve, the holders of the proxies may, in their discretion, vote the shares for a substitute nominee or nominees designated by the Board of Directors.
Background information on the nominees as of July 15, 2001,2002, appears below:
NOMINEES FOR ELECTION BY CLASS
Nominees for Election by Class A SHAREHOLDERS
Shareholders
Ralph D. DeNunzio -- — Mr. DeNunzio, 69,70, a director of the Company since 1988, is President of Harbor Point Associates, Inc., New York, New York, a private investment and consulting firm. Mr. DeNunzio was employed by the investment banking firm of Kidder, Peabody & Co. Incorporated from 1953 to 1987, where he served as President from 1977 to 1986, as Chief Executive Officer from 1980 to 1987 and as Chairman of the Board of Directors from 1986 to 1987. Mr. DeNunzio served as Vice Chairman and Chairman of the Board of Governors of the New York Stock Exchange from 1969 to 1972 and was President of the Securities Industry Association in 1981. In 1970, Mr. DeNunzio headed the Securities Industry Task Force, which led to enactment of the Securities Investor Protection Act of 1970 and establishment of the Securities Investor Protection Corporation. He is also a director of FDX Corporation and Harris Corporation.
Richard K. Donahue -- — Mr. Donahue, 74,75, a director since 1977, is Vice Chairman of the Board. He served as President and Chief Operating Officer of the Company from 1990 until 1994. He has been a partner in the law firm of Donahue & Donahue, Lowell, Massachusetts, since 1951. From 1961 to 1963, Mr. Donahue was an assistant to President John F. Kennedy. Mr. Donahue is a former President of the Massachusetts Bar Association and the New England Bar Association. He is a member of the John F.
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Douglas G. Houser -- — Mr. Houser, 66,67, a director since 1970, is an Assistant Secretary of the Company and has been a partner in the Portland, Oregon law firm of Bullivant, Houser, Bailey since 1965. Mr. Houser is a trustee of Willamette University and a Fellow in the American College of Trial Lawyers, and has served as a member of the Board of Governors and Treasurer of the Oregon State Bar Association and as a Director of the Rand Corporation, Institute for Civil Justice Board of Overseers.
Jeanne P. Jackson — Ms. Jackson, 50, a director since November 2001, was CEO of Walmart.com from March 2000 to December 2001. She was formerly employed by Gap, Inc. in 1995 and served as president and CEO of Banana Republic, a division of Gap Inc., from 1996 to March 2001, and also served as CEO of Gap, Inc. Direct, a division of Gap, Inc., from 1998 to March 2001. Since 1978, she has held various retail management positions with Victoria’s Secret, The Walt Disney Company, Saks Fifth Avenue, and Federated Department Stores. Ms. Jackson is a Trustee of the United States Ski and Snowboard Team, and serves on the Board of Advisors of the Harvard Graduate School of Business. She is also a director of McDonald’s Corporation.
John E. Jaqua -- — Mr. Jaqua, 80,81, a director since 1968, is Secretary of NIKE and has been a principal in the law firm of Jaqua & Wheatley, P.C., Eugene, Oregon, since 1962. Mr. Jaqua has served as President of the Oregon State Bar Association and as a State Delegate to the House of Delegates of the American Bar Association.
Philip H. Knight -- — Mr. Knight, 63,64, a director since 1968, is President, Chief Executive Officer and Chairman of the Board of Directors of NIKE. Mr. Knight is a co-founder of the Company and, except for the period from June 1983 through September 1984, served as its President from 1968 to 1990, and from June 2000 to present. Prior to 1968, Mr. Knight was a certified public accountant with Price Waterhouse and Coopers & Lybrand and was an Assistant Professor of Business Administration at Portland State University.
Charles W. Robinson -- — Mr. Robinson, 81,82, a director since 1978, is Chairman and President of Robinson & Associates, Inc., Santa Fe, New Mexico, a venture capital firm. From January 1978 to January 1979, Mr. Robinson was Vice Chairman of the Board of Blyth, Eastman, Dillon & Co., Inc. and from March 1977 to December 1977, was Senior Managing Director of Kuhn Loeb & Co., Incorporated. Mr. Robinson served as Under-secretary of State for Economic Affairs from 1974 to 1976, at which time he was appointed Deputy Secretary of State. From 1964 to 1974, Mr. Robinson was President of Marcona Corporation. Mr. Robinson is also a director of Allen Telecom, Inc., and a trustee of The Brookings Institution.
A. Michael Spence -- —Dr. Spence, 57,58, a director since 1995, is a partner of Oak Hill Venture Partners. He was the Philip H. Knight Professor and Dean of the Graduate School of Business at Stanford University from 1990 to 1999. From 1984 to 1990 he was Dean of the Faculty of Arts and
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John R. Thompson, Jr. -- — Mr. Thompson, 59,60, a director since 1991, was head coach of the Georgetown University men'smen’s basketball team from 1972 until 1998. Mr. Thompson also serves as Assistant to the President of Georgetown for Urban Affairs. Mr. Thompson was head coach of the 1988
4
8 United States Olympic basketball team. He is a past President of the National Association of Basketball Coaches and presently serves on its Board of Governors.
NOMINEES FOR ELECTION BY CLASS
Nominees for Election by Class B SHAREHOLDERS
Shareholders
Thomas E. Clarke -- — Dr. Clarke, 50,51, a director since 1994, joined the Company in 1980, and serves as President of New Business Ventures of the Company. He was appointed divisional vice president in charge of marketing in 1987, corporate Vice President in 1989, General Manager in 1990, and served as President and Chief Operating Officer from 1994 to 1999. Dr. Clarke previously held various positions with the Company, primarily in research, design, development and marketing. Dr. Clarke holds a Doctorate degree in biomechanics.
Jill K. Conway -- — Dr. Conway, 66,67, a director since 1987, is currently a Visiting Scholar with the Massachusetts Institute of Technology'sTechnology’s Program in Science, Technology and Society, and Chairman of Lend Lease Inc., an Australian-based property company. Dr. Conway was a Professor of History and President of Smith College, Northampton, Massachusetts, from 1975 to 1985. She was affiliated with the University of Toronto from 1964 to 1975, and held the position of Vice President, Internal Affairs from 1973 to 1975. Her field of academic specialty
is history. Dr. Conway holds numerous Honorary Doctorates from North American universities. She is currentlyalso a director of Merrill Lynch & Co., Inc., and Colgate-Palmolive Company. She is currently a trustee of Mount Holyoke College.
Delbert J. Hayes -- — Mr. Hayes, 67, a director since 1975, served as Executive Vice President of NIKE from 1980 to 1995. Mr. Hayes served as Treasurer and in a number of other executive positions with the Company from 1975 to 1980. Mr. Hayes was a partner with Hayes, Nyman & Co., certified public accountants, from 1970 to 1975. Prior to 1970, Mr. Hayes was a certified public accountant with Price Waterhouse for eight years.
BOARD OF DIRECTORS AND COMMITTEES
Board of Directors and Committees
The Board currently has an Executive Committee, an Audit Committee, a Finance Committee, a Corporate Responsibility Committee, a Personnel Committee, and a Compensation Plan Subcommittee of the Personnel Committee, and may also appoint other committees from time to time. There is
4
The Executive Committee of the Board is currently composed of Messrs. Knight (Chairman), Clarke, and Houser. The Executive Committee is authorized to act on behalf of the Board on all corporate actions for which applicable law does not require participation by the full Board. In practice, the Executive Committee acts in place of the full Board only when emergency issues or scheduling make it difficult or impracticable to assemble the full Board. All actions taken by the Executive Committee must be reported at the next Board meeting. The Executive Committee held no formal meetings during 5
9
the fiscal year ended May 31, 2001,2002, but took actions from time to time pursuant to written consent resolutions.
The Audit Committee is currently composed of Mr. Hayes (Chairman), Mr. Houser and Dr. Spence. The Audit Committee reviews and makes recommendations to the Board regarding services provided by the independent accountants, reviews with the independent accountants the scope and results of their annual examination of the Company'sCompany’s consolidated financial statements and any recommendations they may have, and makes recommendations to the Board with respect to the engagement or discharge of the independent accountants. The Audit Committee also reviews the Company'sCompany’s procedures with respect to maintaining books and records, the adequacy and implementation of internal auditing, accounting and financial controls, and the Company'sCompany’s policies concerning financial reporting and business practices. The Audit Committee met fournine times during the fiscal year ended May 31, 2001.2002.
The Finance Committee is currently composed of Messrs. Robinson (Chairman), DeNunzio, and Hayes. The Finance Committee considers long-term financing options and needs of the Company, long-range tax and currency issues facing the Company, and management recommendations concerning major capital expenditures and material acquisitions or divestments. The Finance Committee met five times during the fiscal year ended May 31, 2001.2002.
The Corporate Responsibility Committee is currently composed of Dr. Conway (Chair), and Messrs. Donahue and Spence. The Corporate Responsibility Committee reviews significant activities and policies regarding labor and environmental practices, community affairs, charitable and foundation activities, diversity and equal opportunity, and environmental and sustainability initiatives, and makes recommendations to the Board of Directors. The Board establishedCorporate Responsibility Committee met three times during the committee in June 2001.fiscal year ended May 31, 2002.
The Personnel Committee is currently composed of Mr. DeNunzio (Chairman), Dr. Conway, Mr. Jaqua, Dr. Spence and Mr. Thompson. The Personnel Committee makes recommendations to the Board regarding officers'officers’ compensation, management incentive compensation arrangements and profit
5
The Compensation Plan Subcommittee of the Personnel Committee is currently composed of Dr. Spence and Mr. Jaqua. The Subcommittee grants stock options and restricted stock bonuses under the NIKE, Inc. 1990 Stock Incentive Plan, and determines targets and awards under the NIKE, Inc. Executive Performance Sharing Plan and the NIKE, Inc. Long-Term Incentive Plan.
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DIRECTOR COMPENSATION AND RETIREMENT PLAN
Director Compensation and Retirement Plan
Messrs. Knight and Clarke do not receive additional compensation for their services as directors. Directors are reimbursed for travel and other expenses incurred in attending Board meetings. No fee is paid for attending Compensation Plan Subcommittee meetings. In fiscal 2000, directors made a one-time election to be compensated under either:
| (a) the previously existing method, which consists of a fee of $18,000 per year, plus $2,000 for each Board meeting attended, $1,000 for each committee meeting attended, medical insurance, and $500,000 of life insurance coverage, or | |
| (b) the |
Messrs. DeNunzio, Houser, and Spence elected the latter revised compensation, and any new non-employee directors elected after fiscal 2000 will be compensated in the revised fashion.
The Company has since 1989 provided certain retirement benefits to non-employee directors who retire after serving for five years or more. The plan has provided that after ten years of service by a director, the Company will provide such director for the remainder of his or her life with $500,000 of life insurance and medical insurance at the levels provided by the Company to all of its employees at the time the director retires. The plan has also provided that a director who has served for at least five years will receive an annual retirement cash payment for life, commencing on the later of age 65 or the date the director retires or ceases to be a member of the Board. The annual retirement cash payment ranges from $9,000 for five years of service up to a maximum of $18,000 for 10 or more years of service.
In fiscal 2000, in an effort to reduce future retirement obligations, the Board of Directors approved a new retirement plan that allowed directors to make a one-time election to waive their future rights to annual retirement cash payments in exchange for a credit to a stock account under the Company'sCompany’s Deferred Compensation Plan equal to the lump sum present value of the payments based on the actuarial life expectancy of each director. The number of shares of Class B Common Stock credited to each stock account was based on the market price of the stock on September 1, 1999. The three
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New directors elected after the 1993 fiscal year must retire at age 72.
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STOCK HOLDINGS OF CERTAIN OWNERS AND MANAGEMENT
Stock Holdings of Certain Owners and Management
The following table sets forth the number of shares of each class of NIKE securities beneficially owned, as of July 15, 2001,2002, by (i) each person known to the Company to be the beneficial owner of more than 5 percent of any class of the Company'sCompany’s securities, (ii) each of the nominees for director, (iii) each executive officer listed in the Summary Compensation Table ("(“Named Officers"Officers”), and (iv) all nominees, Named Officers, and other executive officers as a group. Because Class A Stock is convertible into Class B Stock on a share-for-share basis, each beneficial owner of Class A Stock is deemed by the Securities and Exchange Commission to be a beneficial owner of the same number of shares of Class B Stock. Therefore, in indicating a person'sperson’s beneficial ownership of shares of Class B Stock in the table, it has been assumed that such person has converted into Class B Stock all shares of Class A Stock of which such person is a beneficial owner. For these reasons the table contains substantial duplications in the numbers of shares and percentages of Class A and Class B Stock shown for Messrs. Hayes, Jaqua and Knight,Knight; for Cardinal Fund I, L.P.; and for all directors and officers as a group.
| Shares | |||||||||||||
| Title of | Beneficially | Percent of | |||||||||||
| Class | Owned(1) | Class(2) | |||||||||||
| Thomas E. Clarke(3) | Class B | 325,982 | (4)(5)(7)(8) | 0.2 | % | ||||||||
| Portland, Oregon | |||||||||||||
| Jill K. Conway | Class B | 66,711 | (9) | ||||||||||
| �� | Boston, Massachusetts | ||||||||||||
| Ralph D. DeNunzio | Class B | 109,371 | (4)(9) | ||||||||||
| Riverside, Connecticut | |||||||||||||
| Richard K. Donahue | Class B | 137,002 | 0.1 | % | |||||||||
| Lowell, Massachusetts | |||||||||||||
| Delbert J. Hayes | Class A | 640,000 | 0.7 | % | |||||||||
| Newberg, Oregon | Class B | 654,447 | (9) | 0.4 | % | ||||||||
| Douglas G. Houser | Class B | 94,373 | (4)(9) | ||||||||||
| Portland, Oregon | |||||||||||||
| John E. Jaqua | Class A | 574,209 | 0.6 | % | |||||||||
| Eugene, Oregon | Class B | 576,899 | (9) | 0.3 | % | ||||||||
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| Shares | |||||||||||||
| Title of | Beneficially | Percent of | |||||||||||
| Class | Owned(1) | Class(2) | |||||||||||
| Jeanne P. Jackson | Class B | — | |||||||||||
| Huntington Beach, California | |||||||||||||
| Philip H. Knight(3) | Class A | 78,655,047 | (6) | 80.2 | % | ||||||||
| Beaverton, Oregon | Class B | 78,665,730 | (6)(7) | 31.9 | % | ||||||||
| Charles W. Robinson | Class B | 300,000 | 0.2 | % | |||||||||
| Santa Fe, New Mexico | |||||||||||||
| A. Michael Spence | Class B | 23,258 | (4)(9) | ||||||||||
| Palo Alto, CA | |||||||||||||
| John R. Thompson, Jr. | Class B | 32,372 | (4)(9) | ||||||||||
| Washington, D.C. | |||||||||||||
| Charles Denson(3) | Class B | 139,761 | (4)(5)(7)(8) | 0.1 | % | ||||||||
| Portland, Oregon | |||||||||||||
| Mindy Grossman(3) | Class B | 55,119 | (4)(7) | ||||||||||
| Beaverton, Oregon | |||||||||||||
| Mark G. Parker(3) | Class B | 433,941 | (4)(5)(7)(8) | 0.3 | % | ||||||||
| Beaverton, Oregon | |||||||||||||
| Nissho Iwai American Corporation | Preferred | (10) | 300,000 | 100.0 | % | ||||||||
| Portland, Oregon | |||||||||||||
| Cardinal Fund I, L.P. | Class A | 14,718,131 | (11) | 15.0 | % | ||||||||
| Fort Worth, Texas | Class B | 14,718,131 | 8.1 | % | |||||||||
| FMR Corp. | Class B | 13,187,347 | (12) | 7.9 | % | ||||||||
| Boston, Massachusetts | |||||||||||||
| Capital Research and Management Company | Class B | 15,081,730 | (12) | 9.0 | % | ||||||||
| Los Angeles, California | |||||||||||||
| All directors and executive officers as a group (23 persons) | Class A | 79,869,256 | 81.4 | % | |||||||||
| Class B | 82,208,514 | (4) | 33.2 | % | |||||||||
| (1) | A person is considered to beneficially own any shares: (a) over which the person exercises sole or shared voting or investment power, or (b) of which the person has the right to acquire beneficial ownership at any time within 60 days (such as through conversion of securities or exercise of stock options). Unless otherwise indicated, voting and investment power relating to the above shares is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children. |
| (2) | Omitted if less than 0.1 percent. |
| (3) | Executive officer listed in the Summary Compensation Table. |
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| (4) | These amounts include the right to acquire, pursuant to the exercise of stock options, within 60 days after July 15, 2002, the following numbers of shares: 273,750 shares for Dr. Clarke, 2,000 shares for Mr. DeNunzio, 2,000 shares for Mr. Houser, 22,000 shares for Dr. Spence, 25,000 shares for Mr. Thompson, 112,000 shares for Mr. Denson, 40,834 shares for Ms. Grossman, 385,377 shares for Mr. Parker, and 1,340,211 shares for the executive officer and director group. |
| (5) | Includes shares held in accounts under the NIKE, Inc. Retirement Savings Plan for Dr. Clarke, Mr. Denson, and Mr. Parker in the amounts of 2,410, 4,125, and 2,755 shares, respectively. |
| (6) | Does not include: (a) 814,790 shares held by a limited partnership in which a corporation owned by Mr. Knight’s spouse is a co-general partner, (b) 65,224 shares owned by such corporation, (c) 1,000,000 Class B |
| (7) | These amounts include (a) 3,105, 3,105, 777, and 1,553 restricted shares granted to Mr. Knight, Dr. Clarke, Mr. Denson, and Mr. Parker, respectively, under the NIKE, Inc. Long-Term Incentive Plan, as to which the restrictions expire August 15, 2002; (b) 5,719, 5,719, 1,430, and 2,859 restricted shares granted to Mr. Knight, Dr. Clarke, Mr. Denson, and Mr. Parker, respectively, under the NIKE, Inc. Long-Term Incentive Plan, as to which the restrictions expire August 15, 2003; (c) 1,859, 1,859, 929, 929, and 929 shares granted to Mr. Knight, Dr. Clarke, Mr. Denson, Ms. Grossman, and Mr. Parker, respectively, under the NIKE, Inc. Long-Term Incentive Plan, as to which the restrictions expire August 15, 2004, and (d) 8,363 restricted shares granted to Ms. Grossman under the NIKE, Inc. 1990 Stock Incentive Plan, as to which the restrictions expire September 6, 2002. If an officer’s employment terminates before the restrictions expire, any remaining restricted shares are forfeited, except that the shares granted to Ms. Grossman in (d) above are not forfeited if the termination is without cause or for good reason. |
| (8) | These amounts include 24,078, 9,029, and 18,058 restricted shares granted on March 8, 2000 to Dr. Clarke, Mr. Denson, and Mr. Parker, respectively, under the NIKE, Inc. 1990 Stock Incentive Plan as to which restrictions expire March 8, 2003, unless employment terminates before that date, in which case any remaining restricted shares are forfeited. |
| (9) | Includes shares credited to accounts under the NIKE, Inc. Deferred Compensation Plan in the following amounts: 4,293 for Dr. Conway; 3,971 for Mr. DeNunzio; 4,347 for Mr. Hayes; 4,373 for Mr. Houser; 2,690 for Mr. Jaqua; 1,258 for Dr. Spence; and 3,372 for Mr. Thompson. |
| (10) | Preferred Stock does not have general voting rights except as provided by law, and under certain circumstances as provided in the Company’s Restated Articles of Incorporation, as amended. |
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| (11) | Includes 1,950,000 shares of Class A |
| (12) | Information provided as of December 31, 2001 in a |
Section 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEBeneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company'sCompany’s directors and executive officers, and persons who own more than 10 percent of a registered class of the Company'sCompany’s equity securities, to file with the Securities and Exchange Commission, the New York Stock Exchange and the Pacific Stock Exchange initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than 10 percent shareholders are required by the regulations of the Securities and Exchange Commission to furnish the Company with copies of all Section 16(a) forms they file. To the Company'sCompany’s knowledge, based solely on review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the fiscal year ended May 31, 20012002 all Section 16(a) filing requirements applicable to its officers, directors and greater than 10 percent beneficial owners were complied with, except as follows. The Company filed one report late for each of Dr.
Conway, Mr. DeNunzio, Mr. Hayes, Mr. Houser, Mr. Jaqua, Dr. Spence, and Mr.
Thompson, covering the initial crediting of shares of Class B Stock to their
accounts under the Deferred Compensation Plan in September 1999 and the
crediting of additional shares to their accounts for dividend reinvestments on
three dividend payment dates in fiscal year 2000. One report, covering the sale
of 352 shares in a retirement account was filed late for Mr. Hayes due to broker
error. Finally,that one report, covering the sale of 20,0005,521 shares was filed late for Mr. Robinson as a result of the broker's administrative error.
Frits vanPaaschen.
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EXECUTIVE COMPENSATION
The following table discloses compensation awarded to, earned by, or paid to the Company'sCompany’s Chief Executive Officer and its next four most highly compensated executive officers for all services rendered by them in all capacities to the Company and its subsidiaries during the fiscal year ended May 31, 20012002 and the two preceding fiscal years.
SUMMARY COMPENSATION TABLE
Summary Compensation Table
| Long-term | |||||||||||||||||||||||||||||||||
| Compensation | |||||||||||||||||||||||||||||||||
| Annual Compensation | Restricted | ||||||||||||||||||||||||||||||||
| Stock | Stock | All Other | |||||||||||||||||||||||||||||||
| Name and | Other Annual | Awards | Options | LTIP | Compensation | ||||||||||||||||||||||||||||
| Principal Position | Year | Salary($) | Bonus($) | Compensation($) | ($) | (#) | Payouts($) | ($)(1) | |||||||||||||||||||||||||
| Philip H. Knight | 2002 | 1,350,321 | 1,377,327 | — | — | 0 | 0 | 572,856 | (2) | ||||||||||||||||||||||||
| Chairman, Chief | 2001 | 1,300,000 | 663,000 | — | — | 0 | 92,000 | 586,427 | |||||||||||||||||||||||||
| Executive | 2000 | 1,205,300 | 1,330,651 | — | — | 0 | 272,000 | 666,665 | |||||||||||||||||||||||||
| Officer and | |||||||||||||||||||||||||||||||||
| President | |||||||||||||||||||||||||||||||||
| Thomas E. Clarke | 2002 | 1,107,051 | 0 | 102,049 | (3) | — | 0 | 0 | 68,358 | (4) | |||||||||||||||||||||||
| President of | 2001 | 1,100,000 | 448,800 | 103,509 | — | 0 | 92,000 | 75,410 | |||||||||||||||||||||||||
| New Business | 2000 | 910,833 | 942,712 | 110,338 | 2,000,000 | (5) | 150,000 | 272,000 | 126,899 | ||||||||||||||||||||||||
| Ventures | |||||||||||||||||||||||||||||||||
| Mark G. Parker | 2002 | 897,436 | 595,000 | — | — | 60,000 | 0 | 50,284 | (4) | ||||||||||||||||||||||||
| President | 2001 | 772,756 | 255,531 | — | — | 0 | 46,000 | 55,686 | |||||||||||||||||||||||||
| NIKE Brand | 2000 | 658,333 | 545,100 | — | 1,500,000 | (5) | 105,000 | 136,000 | 84,994 | ||||||||||||||||||||||||
| Charles Denson | 2002 | 713,141 | 472,812 | 108,502 | (7) | — | 60,000 | 0 | 35,702 | ||||||||||||||||||||||||
| President | 2001 | 458,333 | 146,413 | 243,287 | (7) | — | 0 | 46,000 | 27,837 | ||||||||||||||||||||||||
| NIKE Brand | 2000 | 294,167 | 171,580 | 200,017 | (7) | 750,000 | (5) | 40,000 | 68,000 | 29,291 | |||||||||||||||||||||||
| Mindy Grossman | 2002 | 645,833 | 395,250 | — | — | 30,000 | 0 | 199,137(8) | |||||||||||||||||||||||||
| Vice President | 2001 | 404,615 | 183,600 | — | 999,985 | (6) | 100,000 | 46,000 | 302,646(8)(9) | ||||||||||||||||||||||||
| Apparel | 2000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| (1) |
11
| (5) | Represents the value of restricted shares granted based on the closing market price of the Class B Stock on the grant date. In fiscal 2000, restricted stock grants were made to Dr. Clarke for 72,235 shares, Mr. Parker for 54,176 shares, and Mr. Denson for 27,088 shares. The restrictions lapse with respect to one third of the shares on each of the first three anniversaries of the grant date, unless employment terminates before that date, in which case any remaining restricted shares are forfeited. Dividends on restricted shares are paid currently to the holders. On May 31, 2002, the number of remaining restricted shares and the dollar value of those shares based on the fair market value of $53.75 per share on that date was 24,078 shares with a value of $2,294,198 for Dr. Clarke, 18,058 shares with a value of $970,618 for Mr. Parker, and 9,029 shares with a value of $485,309 for Mr. Denson. |
| (6) | Represents the value of shares and restricted shares granted to Ms. Grossman based on the closing market price of the Class B Stock on the grant date. A stock grant was made to Ms. Grossman in fiscal 2001 for 25,078 shares, of which 16,727 were restricted. The restrictions lapse with respect to one-half of the shares on each of the first two anniversaries of the grant date, unless employment terminates before that date, in which case any remaining restricted shares are forfeited except if the termination is without cause or for good reason. Dividends on restricted shares are paid currently to the holder. On May 31, 2002, the number of remaining restricted shares and the dollar value of those shares based on the fair market value of $53.75 per share on that date was 8,363 shares with a value of $449,511. |
| (7) | Represents additional compensation, taxes and expenses for overseas assignment and relocation, including gross up for taxes on such compensation, for Mr. Denson. |
| (8) | Includes additional compensation to Ms. Grossman for relocation and transportation expenses, including gross up for taxes on such compensation, in the amount of $163,694 for fiscal 2002, and $52,646 for fiscal 2001. |
| (9) | Includes $250,000 signing bonus paid to Ms. Grossman at the commencement of her employment. |
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Option Grants in the Fiscal Year Ended May 31, 20012002
| Potential Realizable Value | ||||||||||||||||||||||||
| at Assumed Annual Rates of | ||||||||||||||||||||||||
| % of Total | Stock Price Appreciation for | |||||||||||||||||||||||
| Options Granted | Exercise or | Option Term(3) | ||||||||||||||||||||||
| Options Granted | to Employees | Base Price | Expiration | |||||||||||||||||||||
| Name | (#)(1) | in Fiscal Year | ($/share)(2) | Date | 5%($) | 10%($) | ||||||||||||||||||
| Philip H. Knight | — | — | — | — | — | — | ||||||||||||||||||
| Thomas E. Clarke | — | — | — | — | — | — | ||||||||||||||||||
| Mark G. Parker | 60,000 | 1.4 | $ | 42.36 | 7/11/11 | $ | 1,598,399 | $ | 4,050,656 | |||||||||||||||
| Charles Denson | 60,000 | 1.4 | $ | 42.36 | 7/11/11 | $ | 1,598,399 | $ | 4,050,656 | |||||||||||||||
| Mindy Grossman | 30,000 | 0.7 | $ | 42.36 | 7/11/11 | $ | 799,200 | $ | 2,025,328 | |||||||||||||||
| (1) | The options shown in the table with the expiration date of July 12, 2011 become exercisable with respect to 25% of the total number of shares on each of July 12, 2002, 2003, 2004, and 2005. All options for all individuals will become fully exercisable generally upon the approval by the Company’s shareholders of a merger, plan of exchange, sale of substantially all of the Company’s assets or plan of liquidation. |
| (2) | The exercise price is the market price of Class B Stock on the date the options were granted. |
| (3) | Assumed annual appreciation rates are set by the SEC and are not a forecast of future appreciation. The actual realized value depends on the market value of the Class B Stock on the exercise date, and no gain to the optionees is possible without an increase in the price of the Class B Stock. All assumed values are before taxes and do not include dividends. |
Aggregated Option Exercises in the amount of $12,385 each
for Dr. Clarke and Messrs. Parker and DeStefano, and $5,585 each for Messrs.
Knight and Todd. Also includes contributions by the Company to the Deferred
Compensation Plan for Messrs. Knight, Clarke, Todd, Parker and DeStefano of
$80,842, $61,526, $58,617, $41,688, and $20,539, respectively.
(2) Represents the value of restricted shares granted based on the closing
market price of the Class B Stock on the grant date. In fiscal 2000,
restricted stock grants were made to Dr. Clarke for 72,235 shares, Mr.
Parker for 54,176 shares, and Mr. DeStefano for 36,177 shares. The
restrictions lapse with respect to one third of the shares on each of the
first three anniversaries of the grant date, unless employment terminates
before that date, in which case any remaining restricted shares are
forfeited. Dividends on restricted shares are paid currently to the holders.
OnFiscal Year
| Number of Unexercised | Value of Unexercised | |||||||||||||||||||||||
| Options at | In-the-Money Options | |||||||||||||||||||||||
| Shares | Fiscal Year-End(#) | at Fiscal Year-End($)(1) | ||||||||||||||||||||||
| Acquired on | Value | |||||||||||||||||||||||
| Name | Exercise(#) | Realized($) | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
| Philip H. Knight | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
| Thomas E. Clarke | 0 | 0 | 240,000 | 90,000 | $ | 1,656,406 | $ | 1,057,031 | ||||||||||||||||
| Mark G. Parker | 35,000 | $ | 1,272,188 | 332,127 | 125,625 | $ | 6,133,414 | $ | 1,437,267 | |||||||||||||||
| Charles Denson | 0 | 0 | 88,250 | 83,750 | $ | 1,555,828 | $ | 963,947 | ||||||||||||||||
| Mindy Grossman | 0 | 0 | 33,334 | 96,666 | $ | 462,509 | $ | 1,266,691 | ||||||||||||||||
| (1) |
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Long-Term Incentive Plans Awards in Fiscal Year Ended May 31, 2002
| Performance | ||||||||||||||||
| or Other Period | ||||||||||||||||
| Until Maturation | ||||||||||||||||
| Name | or Payout(1) | Threshold($) | Target($) | Maximum($) | ||||||||||||
| Philip H. Knight | Fiscal Year 2003 | 40,000 | 400,000 | 600,000 | ||||||||||||
| Fiscal Year 2004 | 40,000 | 400,000 | 600,000 | |||||||||||||
| Thomas E. Clarke | — | — | — | — | ||||||||||||
| Mark G. Parker | Fiscal Year 2003 | 20,000 | 200,000 | 300,000 | ||||||||||||
| Fiscal Year 2004 | 20,000 | 200,000 | 300,000 | |||||||||||||
| Charles Denson | Fiscal Year 2003 | 20,000 | 200,000 | 300,000 | ||||||||||||
| Fiscal Year 2004 | 20,000 | 200,000 | 300,000 | |||||||||||||
| Mindy Grossman | Fiscal Year 2003 | 20,000 | 200,000 | 300,000 | ||||||||||||
| Fiscal Year 2004 | 20,000 | 200,000 | 300,000 | |||||||||||||
| (1) | In July 2001, the Compensation Plan Subcommittee established a series of performance targets based on fiscal 2003 and 2004 revenues and earnings per share corresponding to award payouts ranging from 10% to 150% of the target awards. Participants will receive a payout at the highest percentage level at which both performance targets are met, subject to the Committee’s discretion to reduce or eliminate any award based on Company or individual performance. Under the terms of the awards, on August 15, 2003 and 2004 the Company would issue in the name of each participant a number of shares of Class B Stock with a value equal to the award payout based on the closing price of the Class B Stock on that date on the New York Stock Exchange. The shares will be 100% vested at that time. The Company’s performance in fiscal year 2002 corresponded to an LTIP payout of 0% of the target awards for 2002. |
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Equity Compensation Plans
The following table summarizes equity compensation plans approved by shareholders and equity compensation plans that were not approved by the shareholders as of May 31, 2001 of $41.10 per share. Values
are stated on a pre-tax basis.
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LONG-TERM INCENTIVE PLANS AWARDS IN FISCAL YEAR ENDED MAY 31, 2001
2002:
| (c) | |||||||||||||
| Number of Securities | |||||||||||||
| (a) | Remaining Available for | ||||||||||||
| Number of Securities | (b) | Future Issuance Under | |||||||||||
| to be Issued Upon | Weighted-Average | Equity Compensation | |||||||||||
| Exercise of Outstanding | Exercise Price of | Plans (Excluding | |||||||||||
| Options, Warrants and | Outstanding Options, | Securities Reflected in | |||||||||||
| Plan category | Rights | Warrants and Rights | Column (a)) | ||||||||||
| Equity compensation plans approved by shareholders(1) | 16,757,547 | $ | 42.25 | 14,351,090 | |||||||||
| Equity compensation plans not approved by shareholders(2) | 330,000 | 41.70 | 0 | ||||||||||
| Total | 17,087,547 | $ | 42.24 | 14,351,090 | |||||||||
| (1) | Includes 16,626,753 outstanding subject to the 1990 Stock Incentive Plan and 130,794 outstanding subject to the Long-Term Incentive Plan. Includes 10,559,877 available for future issuance under the 1990 Stock Incentive Plan, 869,206 available for future issuance under the Long-Term Incentive Plan, and 2,922,007 available for future issuance under the Employee Stock Purchase Plan. |
| (2) | The Company has granted to a few consultants and directors nonqualified options to purchase NIKE Class B Stock. The options have terms ranging from 8 to 10 years, expiring at various times from 2003 |
15 2003 and 2004 the
Company would issue in the name of each participant a number of shares of
Class B Stock with a value equal to the award payout based on the closing
price of the Class B Stock on that date on the New York Stock Exchange. The
shares will be 100% vested at that time. The Company's performance in fiscal
year 2001 corresponded to an LTIP payout of 23% of the target awards for
2001.
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Notwithstanding anything to the contrary set forth in any of the Company'sCompany’s filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, the following Performance Graph and the Report of the Personnel Committee below shall not be incorporated by reference into any such filings and shall not otherwise be deemed filed under such acts.
PERFORMANCE GRAPH
Performance Graph
The following graph demonstrates a five-year comparison of cumulative total returns for NIKE'sNIKE’s Class B Stock, the Standard & Poor'sPoor’s 500 Stock Index, and the Standard & Poor'sPoor’s Footwear and Textiles-ApparelApparel and Accessories Indices. The graph assumes an investment of $100 on May 31, 19961997 in each of the Company'sCompany’s Common Stock, and the stocks comprising the Standard & Poor'sPoor’s 500 Stock Index and the Standard & Poor'sPoor’s Footwear and Textiles-ApparelApparel and Accessories Indices. Each of the indices assumes that all dividends were reinvested.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN AMONG NIKE, INC., S&P 500 INDEX, S&P FOOTWEAR INDEX AND S&P TEXTILES-APPARELAPPAREL AND ACCESSORIES INDEX
(PERFORMANCE GRAPH)
S&P TEXTILES
NIKE, INC. S&P 500 S&P FOOTWEAR (APPAREL)
---------- ------- ------------ ------------
5/96 100 100 100 100
5/97 115.29 129.41 117.79 106.04
5/98 93.07 169.12 94.14 126.14
5/99 124.7 204.68 119.41 91.45
5/00 88.65 226.13 84.77 69.5
5/01 86 202.27 88.14 96.42
The Standard & Poor'sPoor’s Footwear Index consists of NIKE and Reebok International. The Standard & Poor's Textiles-ApparelPoor’s Apparel and Accessories Index consists of Liz Claiborne, Inc., RussellVF Corp., and VF Corp.Jones Apparel. The Standard & Poor'sPoor’s Footwear and Textiles-ApparelApparel and Accessories Indices include companies in two major lines of business in which the Company competes. The indices do not encompass all of the Company'sCompany’s competitors, nor all product categories and lines of business in which the Company is engaged. Because NIKE is part of the S&P Footwear Index, the price and returns of NIKE stock affect this index.
The Stock Performance shown on the Graph above is not necessarily indicative of future performance. The Company will not make nor endorse any predictions as to future stock performance.
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REPORT OF THE PERSONNEL COMMITTEE OF THE BOARD
The Personnel Committee of the Board of Directors (the "Committee"“Committee”), subject to the approval of the Board of Directors, determines the compensation of the Company'sCompany’s five most highly compensated executive officers, including the Chief Executive Officer, and oversees the administration of executive compensation programs, except that stock option grants, and targets and awards under the Executive Performance Sharing Plan and the Long-Term Incentive Plan, are made by the Compensation Plan Subcommittee (the "Subcommittee"“Subcommittee”), which is composed of outside directors.
Executive Compensation Policies and Programs.The Company'sCompany’s executive compensation programs are designed to attract and retain highly qualified executives and to motivate them to maximize shareholder returns by achieving both short- and long-term strategic Company goals. The programs link each executive'sexecutive’s compensation directly to individual and Company performance. A significant portion of each executive'sexecutive’s total compensation is variable and dependent upon the attainment of strategic and financial goals, individual performance objectives, and the appreciation in value of the Common Stock.
There are three basic components to the Company's "payCompany’s “pay for performance"performance” system: base pay; annual incentive bonus; and long-term equity-based incentive compensation. Each component is addressed in the context of individual and Company performance, competitive conditions and equity among employees. In determining competitive compensation levels, the Company analyzes information from several independent surveys which include information regarding the general industry as well as other consumer product companies. Since the Company'sCompany’s market for executive talent extends beyond the sports industry, the survey data includes global name-brand consumer product companies with sales in excess of $2 billion. A comparison of the Company'sCompany’s financial performance with that of the companies and indices shown in the Performance Graph is only one of many factors considered by the Committee to determine executive compensation.
Base Pay.Base pay is designed to be competitive, although conservative (generally in the second or third quartile) as compared to salary levels for equivalent executive positions at other global consumer product companies. An executive'sexecutive’s actual salary within this competitive framework will vary based on responsibilities, experience, leadership, potential future contribution, and demonstrated individual performance (measured against strategic management objectives such as maintaining customer satisfaction, developing innovative products, strengthening market share and profitability, and expanding the markets for the Company'sCompany’s products). The types and relative importance of specific financial and other business objectives vary among the Company'sCompany’s executives depending on their positions and the particular operations or functions for which they are responsible. The Company'sCompany’s philosophy and practice is to place a relatively greater emphasis on the incentive components of compensation.
Annual Incentive Bonus.Each executive is eligible to receive an annual cash bonus under the Executive Performance Sharing Plan. The "target"“target” level for that bonus, like the base salary level, is set
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19
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Long-Term Equity-Based Incentive Compensation.The long-term equity-based compensation program is tied directly to shareholder return. Under the current program, long-term incentive compensation consists of stock options, 25% of which vest in each of the four years after grant, and performance-based stock or cash awards under the Long-Term Incentive Plan ("LTIP"(“LTIP”).
Stock options are awarded with an exercise price equal to the fair market value of the Class B Stock on the date of grant. Accordingly, the executive is rewarded only if the market price of the Class B Stock appreciates. Since options vest over time, the Company periodically grants new options to provide continuing incentives for future performance. The size of previous grants and the number of options held are considered by the Subcommittee, but are not entirely determinative of future grants. Like base pay, the grant is set with regard to competitive considerations, and each executive'sexecutive’s actual grant is based upon individual performance measured against the criteria described in the preceding paragraphs and the executive'sexecutive’s potential for future contributions.
Under the LTIP, the Subcommittee has established a series of performance targets corresponding to awards of stock ranging from 10% to 150% of the target awards. The performance targets are currently based on revenues and earnings per share. The Company expects that future awards under the LTIP will be for performance periods from between one to three years, in order to provide an incentive to achieve the Company'sCompany’s longer-term performance goals. If performance targets are achieved, the shares of stock issued to executives will be 100% vested for payouts made after 2002.
Stock options and performance-based stock and cash awards under the LTIP are designed to align the interests of the Company'sCompany’s executives with those of shareholders by encouraging executives to enhance the value of the Company and, hence, the price of the Class B Stock and the shareholders'shareholders’ return. In addition, through deferred vesting and three-year performance periods, this component of the compensation system is designed to create an incentive for the individual executive to remain with the Company.
Other Plans.The Company maintains combined profit sharing and 401(k) retirement plans, a non-qualified Deferred Compensation Plan, and has proposed an Employee Stock Purchase Plan. Under the profit sharing retirement plan, the Company annually contributes to a trust on behalf of employees, including executive officers, an amount that in the past five fiscal years has equaled an annual contribution of between 3.29% to 6.94%4.09% of each employee'semployee’s earnings. The percentage is determined by the Board of Directors.
16
20
18
For fiscal 2001,2002, under the terms of the profit sharing plan, each employee, including each executive officer, received a contribution to his or her plan account of 3.29%3.62% of the employee'semployee’s total salary and bonus up to $170,000, and an
additional 4.0% of the employee's total salary and bonus in excess of
approximately $80,400 and below $170,000. Under the terms of the Deferred Compensation Plan, employees, including executive officers, whose total salary and bonus exceeds $170,000 receive a supplemental profit sharing contribution into a nonqualified deferred compensation account in an amount equal to the additional contribution they would have received under the profit sharing plan if not for the $170,000 cap on salary and bonus considered for purposes of that plan as required under IRS regulations. Accordingly, those employees each received supplemental contributions equal to 3.29%3.62% of their salary and bonus in excess of $170,000. These profit sharing plans serve to retain employees and executives, since funds do not fully vest until after five years of employment with the Company.
Under the 401(k) retirement plan, the Company contributes up to 4% of each employee'semployee’s earnings as a matching contribution for pre-tax salary deferred into the plan. This matching contribution is initially invested in Class B Stock, which strengthens the linkage between employee and shareholder interests.
This year, the Company has proposed for shareholder approval an
The Company’s Employee Stock Purchase Plan ("ESPP"(“ESPP”) that would qualifyqualifies under Section 423 of the Internal Revenue Code. See Proposal 2. The ESPP would allowallows employees to defer up to 10% or $25,000 of their annual compensation for purchases of Class B Stock.Stock, subject to certain limitations. The stock would beis purchased every six months at 85% of the lower of the price of the stock at the beginning and end of the six-month period. The ESPP is intended to encourage employee investment in the Company and to provide an incentive for employees to increase shareholder returns.
Annual Reviews.Each year, the Committee reviews the executive compensation policies with respect to the linkage between executive compensation and the creation of shareholder value, as well as the competitiveness of the programs. The Committee determines what changes, if any, are appropriate in the compensation programs for the following year. In conducting the annual review, the Committee considers information provided by Human Resources staff and uses surveys and reports prepared by independent compensation consultants.
Each year, the Committee, with the Chairman and Human Resources staff, reviews the individual performance of each of the other four most highly compensated executive officers, and the Chairman'sChairman’s recommendations with respect to the appropriate compensation levels and awards. The Subcommittee sets performance and bonus targets, and certifies awards, under the Executive Performance Sharing Plan and the LTIP, and makes stock option grants and restricted stock awards. The Committee makes recommendations to the Board of Directors for final approval of all other compensation matters. The Committee also reviews with the Chairman and the Human Resources staff the financial and other strategic objectives, such as those identified above, for each of the named executive officers for the following year.
17
21
19
For fiscal year 2001,2002, the Company met targeted performance objectives set for named executive officers sufficient for a payout under the Executive Performance Sharing Plan and the LTIP.Plan. This resulted from increased profitability due to aligning costs with revenues, and sales increases in key product categories and markets, helping to offsetmore than offsetting reductions in others. Furthermore, the Company'sCompany’s competitive position in the industry remained strong. The Company'sCompany’s financial performance corresponded to bonuses of 51%102% of the individual targeted bonuses under the Executive Performance Sharing Plan and 23%
of their individual targeted stock payoutsPlan. There was no payout under the LTIP.
LTIP because the Company did not meet the 2002 targets under that plan.
Chief Executive Officer.In reviewing Mr. Knight'sKnight’s performance, the Committee focused primarily on the Company'sCompany’s performance in fiscal year 2001,2002, which resulted in better earnings compared to the performance of the previous year. The Committee noted continued progress toward the achievement of various strategic objectives such as earnings growth, infrastructure expansion, and growth in key product categories and regions, outsideincluding the United States. The Committee also considered the other factors and considerations described above. Consistent with the plans, Mr. Knight received a bonus of $663,000$1,377,327 under the Executive Performance Sharing Plan, and an award of $92,000 worth of Class B
Stockbut no payout under the LTIP.LTIP and no stock option awards. The Committee increaseddid not change Mr. Knight'sKnight’s base salary for the 20022003 fiscal year by 3.8 percent to $1,350,000. Mr. Knight received no stock
option awards.
year.
Section 162(m) of the Internal Revenue Code.In 2000 shareholders amended
and re-approved the Executive Performance Sharing Plan and in 1997 shareholders
approved the stock option plan, and it is proposed that shareholders amend and re-approve the LTIP.LTIP this year. The plans are each designed to satisfy the performance-based exception to the Section 162(m) limitation on deductibility with respect to incentive compensation for named executive officers, except that restricted stock bonuses granted in March 2000 willdo not qualify as performance based.
| Members of the Personnel Committee: | |
| Ralph D. DeNunzio, Chairman | |
| Jill K. Conway | |
| John E. Jaqua* | |
| A. Michael Spence* | |
| John R. Thompson, Jr. |
| * | Also members of the Compensation Plan Subcommittee. |
Personnel Committee:
Ralph D. DeNunzio, Chairman
Jill K. Conway
John E. Jaqua*
A. Michael Spence*
John R. Thompson, Jr.
- ---------------
* Also members of the Compensation Plan Subcommittee.
PERSONNEL COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONCommittee Interlocks and Insider Participation
The members of the Personnel Committee of the Board of Directors during the fiscal year ended May 31, 20012002 are listed above. The Committee is composed solely of non-employee directors. Mr. Jaqua serves as Secretary of the Company, but is not an employee. During the fiscal year ended May 31, 2001,
18
222002, the Company paid Harbor Point Associates, Inc., of which director Ralph D. DeNunzio is President, $91,667
20
Employment Contracts and Termination of Employment and Change-in-Control Arrangements
An agreement between the Company and President of New Business Ventures, Dr. Thomas E. Clarke, contains a covenant not to compete that extends for one year following the termination of his employment with the Company. The agreement provides that if he voluntarily resigns, the Company will make monthly payments to him during the one-year noncompetition period in an amount equal to one-half of his last monthly salary. The agreement provides further that if his employment is terminated by the Company, the Company will make monthly payments to him during the one-year noncompetition period in an amount equal to his last monthly salary. The Company may unilaterally waive the covenant not to compete. If the covenant is waived, the Company will not be required to make the payments described above for the months as to which the waiver applies.
The Company has a similar agreement with Vice President of the NIKE Brand Mark G. Parker that extends for one year following the termination of Mr. Parker'shis employment with the Company. The agreement provides that if Mr. Parker voluntarily resigns, the Company will make monthly payments to him during the one-year noncompetition period in an amount equal to the greater of (i) $20,833 or (ii) one-twenty-fourth of the total salary and bonuses received by Mr. Parker during the 12-month period immediately preceding his resignation. The agreement provides further that if Mr. Parker'sParker’s employment is terminated by the Company, the Company will make monthly payments to him during the one-year noncompetition period in an amount equal to the greater of (i) $41,667 or (ii) one-twelfth of the total salary and bonuses received by Mr. Parker during the 12-month period immediately preceding his termination. If Mr. Parker is terminated without cause, the parties may mutually agree to waive the covenant not to compete, and if Mr. Parker is terminated for cause, the Company may unilaterally waive the covenant. If the covenant is waived, the Company will not be required to make the payments described above for the months as to which the waiver applies.
The Company has an employment agreement and a covenant not to compete with Vice President Ian T. Todd, pursuant to which Mr. Todd is toMindy Grossman. Under the agreement, the Company will pay certain travel expenses for her and her family between New York City and Beaverton, Oregon. Ms. Grossman will also receive minimum
annual salary increases of five percent,$50,000 and $100,000, respectively, on the first two anniversaries of her three-year employment agreement which commenced on September 6, 2000, and a target bonus of 60 percent of hisher annual salary. Mr. Todd willsalary under the Executive Performance Sharing Plan. Ms. Grossman was also granted a signing bonus, initial restricted stock grant, and stock options described in the Summary Compensation Table. She is to be granted an option to purchase 25,000at least 30,000 shares of Class B Stock each year during the term of hisher contract, which expires July
31, 2004. Company has guaranteed a minimum level of appreciation in such options
during the employment contract period. In the event the appreciation of vested
options is less than an amount computed assuming a 10% per annum increase in
share value, the Company will pay a cash bonus on July 31, 2004
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23
equal to the shortfall. The options generally vest with respect to 25% of each option on the first four anniversaries of
21
Certain Transactions and Business Relationships
During the fiscal year ended May 31, 2001,2002, the Company paid Harbor Point Associates, Inc., of which director Ralph D. DeNunzio is President, $91,667$103,576 for financial consulting services, and paid Dr. Jill K. Conway $74,487 ($37,226 in
cash, and 884 shares of Class B Stock valued at $37,261)Robanna, Inc., a corporation owned by director John R. Thompson, Jr., $150,000 for consulting services
rendered for labor and corporate responsibility matters.services. The Company expects to pay Mr. DeNunzio, or his firm, and Dr. ConwayMr. Thompson for additional consulting services that may be performed by them for the Company during fiscal year 2002.2003.
Mr. Knight makes his airplane available for business use by the Company for no charge. NIKE operates and maintains the aircraft. During fiscal 2001,2002, Mr. Knight reimbursed the Company $63,439$163,783 for NIKE'sNIKE’s operating costs related to his personal use of this aircraft.
INDEBTEDNESS OF MANAGEMENT
Indebtedness of Management
In 1994 the Company loaned $500,000 at 5.65% per annum to President of New Business Ventures Thomas E. Clarke for the purchase of a second home. The loan is secured by the second home, and must be repaid within 180 days following termination of employment. As an inducement to remain employed by the Company, the Company has agreed to forgive $100,000 of the loan commencing January 1, 2000 and on each of the four anniversary dates thereafter, provided that Dr. Clarke remains employed by the Company.
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PROPOSAL 2
APPROVAL OF EXTENSION OF AND AMENDMENTS TO
In 1997, the Board of Directors adopted, and the shareholders approved, the Company’s Long-Term Incentive Plan (the "ESPP"“Plan”) is intended. Historically, the Company had relied exclusively on stock options to provide a convenientlong-term incentives to officers and practical means by which employees may participate in
stock ownership ofemployees. To provide more competitive compensation arrangements, particularly for officers and senior managers, the Company. The Board of Directors believes that the opportunityCompany should have the flexibility to acquire a proprietary interestmake long-term incentive awards of stock or cash subject to such terms and restrictions as may be determined at the time of the awards. The Plan gives the Company broad authority to make such awards and to qualify such awards as “performance-based compensation” as defined under Section 162(m) of the Internal Revenue Code of 1986 (the “Code”), thereby permitting full deductibility of any amounts paid under the Plan to the named executive officers.
The Plan provides that it will terminate at the first shareholder meeting that occurs in the successfifth year after the Company’s shareholders approve the Plan. This provision is consistent with the requirement under the Code that the Plan be reapproved by shareholders every five years in order for awards under the Plan to continue to qualify as performance-based compensation. See “Tax Consequences.” Accordingly, unless the shareholders reapprove the Plan as requested in this proposal, the Plan will terminate at the Annual Meeting. If the shareholders reapprove the Plan, the Plan will be extended for an additional five years until the first shareholder meeting in 2007.
Under the Plan as originally adopted, only corporate and division officers of the Company throughwere eligible to receive awards under the acquisition of shares of Class B Stock pursuantPlan. Since fiscal 2000, the Company has made awards to selected senior managers similar to the ESPP willawards made to officers under the Plan, but has made those awards under the Company’s 1990 Stock Incentive Plan rather than under the Plan. To permit all such future awards to be an important aspectmade under one plan instead of the Company's ability to attract and retain highly
qualified and motivated employees. Accordingly,two plans, the Board has approvedof Directors adopted amendments to the ESPP,Plan, subject to shareholder approval.approval, to expand eligibility under the Plan to include all employees of the Company and its subsidiaries. In addition, the Board of Directors has adopted technical amendments to Section 6(c) of the Plan, subject to shareholder approval, to clarify the wording of that section.
The complete text of the ESPPPlan, marked to show the proposed amendments, is attached to this proxy statement as Exhibit A. The following description of the ESPPPlan is a summary of certain provisions and is qualified in its entirety by reference to Exhibit A.
DESCRIPTION OF THE ESPP
Description of the Plan
Eligibility. Under the proposed Plan amendments, all employees of the Company and its subsidiaries will be eligible to receive awards under the Plan. Although this group currently consists of approximately 22,700 persons, the Company’s current intent is to grant awards under the Plan to approximately 100 officers and senior managers.
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Shares Reserved for the ESPP. A total of 3,000,000Available. The Plan provides that not more than 1,000,000 shares of Class B Stock are reservedmay be issued pursuant to the Plan.
Administration. Grants of target awards under the ESPPPlan and all other decisions regarding the administration of the Plan are made by the Personnel Committee of the Board of Directors, or if the Personnel Committee is not comprised solely of “outside directors” as that term is defined in regulations under Section 162(m), another Board committee consisting solely of outside directors. Currently, the Plan is administered by the Compensation Plan Subcommittee of the Personnel Committee (the “Committee”).
Target Awards. The Committee may grant target awards denominated either in Class B Stock or in dollar amounts and shall make such awards within 90 days after the commencement of the period covered by the award (the “Performance Period”). All or part of the awards will be earned if performance targets established by the Committee for issuancethe Performance Period are met and the participant satisfies any other restrictions established by the Committee. Performance targets must be expressed as an objectively determinable level of performance of the Company or any subsidiary, division or other unit of the Company, based on one or more of the following: net income, net income before taxes, operating income, revenues, return on sales, return on equity, earnings per share, total shareholder return, or any of the foregoing before the effect of acquisitions, divestitures, accounting changes, restructuring, or other special charges, as determined by the Committee at the time of establishing the performance target. Target awards may be paid in cash or Class B Stock and may be made as awards of restricted shares subject to participating employees.forfeiture if performance targets are not satisfied, as determined by the Committee. The Committee shall not establish target award opportunities for any participant such that the maximum amount payable under target awards denominated in stock which have Performance Periods ending in any single fiscal year exceeds the equivalent of 20,000 shares of Class B Stock or the maximum amount payable under target awards denominated in dollars which have Performance Periods ending in any single fiscal year exceeds $1,000,000. The payment of a target award in cash will not reduce the number of shares reserved under the ESPPPlan.
Determination of Award Payouts. At the end of each Performance Period, the Committee will certify the attainment of the performance targets and the calculation of the payouts of the related target awards. No award shall be paid if the related performance target is subjectnot met, but the Committee may, in its discretion, reduce or eliminate a participant’s calculated award based on circumstances relating to adjustmentthe performance of the Company or the participant.
Changes in the event of stock
dividends, reverse or forward stock splits, combinations of shares,
recapitalizations or other changes inCapital Structure. The Plan provides that if the outstanding Class B Stock.
Eligibility. All active employeesStock is increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company and its participating
subsidiaries are eligible to participateby reason of any stock split, stock dividend or recapitalization, appropriate adjustment will be made by the Committee in the ESPP, except for the following:
(a) any employee who has been employed less than one month when an offering
commences, (b) any employee whose customary employment is less than 20 hours per
week,number and (c) any employee who would, immediately after an offering, and after
including the numberkind of shares that could be purchased in that offering, own or
be deemed to own five percent or more of the voting power or value of all
classes of stock of the Company or any subsidiary of the Company.
ESPP Offerings. The ESPP shall be implemented by a series of six-month
offerings, with a new offering commencing on April 1 and October 1 of each year
beginning with October 1, 2001. The first day of each offering is the "offering
date"available for that offering and the last day of each offering is the "purchase date"
for that offering. An employee may purchase shares only through payroll
deductions permittedawards under the ESPP. Payroll deductions must be not less than 1%
or more than 10% of the participant's compensation.Plan.
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Amendment and Termination. The maximum number of shares that any participant may purchase in any
single offering is 1,000 shares. In addition, the terms of an offering may not
allow an employee's right to purchase shares under all stock purchase plans of
the Company and its subsidiaries to which Section 423 of the Internal Revenue
Code of 1986, as amended (the "Code"), applies to accrue at a rate that exceeds
$25,000 of
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fair market value of shares, as determined on the offering date, for each
calendar year in which the offering is outstanding.
Purchase Price. The price at which sharesPlan may be purchased in an offering
will be the lower of (a) 85 percent of the fair market value of a share of Class
B Stock on the offering date of the offering or (b) 85 percent of the fair
market value of a share of Class B Stock on the purchase date of the offering.
The fair market value of a share of Class B Stock on any date will be the
closing price on the immediately preceding trading day of the Class B Stock on
the New York Stock Exchange or, if the Class B Stock is not traded on the New
York Stock Exchange, such other reported value of the Class B Stock as may be
specifiedamended by the BoardCommittee, with the approval of Directors.
Termination and Amendment. The ESPP will terminate when all of the shares
reserved for purposes of the ESPP have been purchased, provided that the Board of Directors, in its sole discretion may terminate the ESPP at any time. The
Board may at any time amendexcept to the ESPP in any and all respects, providedextent that
without shareholder approval the Board may not increase the number of shares
reserved for the ESPP or decrease the purchase price of shares offered pursuant
to the ESPP.
TAX CONSEQUENCES
The ESPP is intended to qualify as an "employee stock purchase plan" within
the meaning of Section 423 of the Code. Under the Code, employees will not
recognize taxable income or gain with respect to shares purchased under the ESPP
either at the offering date or the purchase date of an offering. If an employee
disposes of shares purchased under the ESPP more than two years after the
offering date, or in the event of the employee's death at any time, the employee
or the employee's estate generally willwould be required to reportmaintain the qualification of Plan awards as ordinary
compensation income forperformance-based compensation. Unless again reapproved by the taxable yearshareholders, the Plan will terminate at the first meeting of disposition or death an amount equal
to the lesser of (a) the excessshareholders of the fair market valueCompany in the year 2007.
Tax Consequences
An employee who receives stock in connection with the performance of the sharesservices will generally realize taxable income at the time of disposition or death overreceipt unless the applicable purchase price, or (b) 15
percentshares are substantially nonvested for purposes of Section 83 of the fair market valueCode. Absent an election under Section 83(b), an employee who receives substantially nonvested stock in connection with performance of services will realize taxable income in each year in which a portion of the shares on the offering date. In the case
of such a disposition or death, thesubstantially vests. The Company will notgenerally be entitled to anya tax deduction from income. Any gain on the disposition in excess of the amount treatedincludible as ordinary compensation income generally will be capital gain.
If an employee disposes of shares purchased under the ESPP within two years
after the offering date,by the employee generally will be required to reportat the excess of the fair market value of the shares on the purchase date over the
applicable purchase price as ordinary compensation income for the year of
disposition. If the disposition is by sale, any difference between the fair
market value of the shares on the purchase date and the disposition price
generally will be capital gainsame time or loss. In the event of a disposition within two
years after the offering date, subject to certain limitations suchtimes as the $1,000,000 cap on deductibility underemployee recognizes income with respect to the shares.
Section 162(m) of the Code limits to $1,000,000 per person the amount that the Company generallymay deduct for compensation paid to any of its most highly compensated officers in any year. Under IRS regulations, compensation received through a performance-based award will not be subject to the $1,000,000 limit if the performance-based award and the plan meet certain requirements. One such requirement is shareholder approval at least once every five years of the performance criteria upon which award payouts will be entitled to a deduction from incomebased and the maximum amount payable under awards, both of which are set forth in the yearPlan. Approval of such
disposition equalthis Proposal 2 will constitute reapproval of the performance criteria and maximum amounts under the Plan previously approved by shareholders. Other requirements are that objective performance goals and the amounts payable upon achievement of the goals be established by a committee of at least two outside directors and that no discretion be retained to increase the amount payable under the employeeawards. The Company believes that, if this proposal is requiredapproved by the shareholders, compensation received on vesting of awards granted under the Plan in compliance with all of the above requirements will continue to report as ordinary
compensation income.
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RECOMMENDATION OF THE BOARDbe exempt from the $1,000,000 deduction limit.
Plan Benefits
In July 2002, the Committee made target awards under the Plan which are summarized in the following table. The awards to persons who are not corporate or division officers are subject to shareholder approval of the Plan amendment making them eligible for awards under the Plan. The Performance Period for these target awards is the three-year period consisting of the Company’s 2003-2005 fiscal years. Since the Plan was adopted in 1997, target awards with similar target amounts but different performance criteria have been made with Performance Periods corresponding to each fiscal year from 1998 through 2004. Payouts for fiscal years 1998, 1999, 2000, 2001 and 2002 were 0%, 39%, 75%, 23% and 0% of target, respectively. Of the 1,000,000 shares of Class B Stock originally reserved for
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| Long-Term Incentive Plan(1) | |||||||||||||
| Dollar Value($) | |||||||||||||
| Name and Position | Threshold | Target | Maximum | ||||||||||
| Philip H. Knight | $ | 40,000 | $ | 400,000 | $ | 600,000 | |||||||
| Chairman, Chief Executive Officer and President | |||||||||||||
| Thomas E. Clarke | — | — | — | ||||||||||
| President of New Business Ventures | |||||||||||||
| Mark G. Parker | $ | 20,000 | $ | 200,000 | $ | 300,000 | |||||||
| President of the NIKE Brand | |||||||||||||
| Charlie Denson | $ | 20,000 | $ | 200,000 | $ | 300,000 | |||||||
| President of the NIKE Brand | |||||||||||||
| Mindy Grossman | $ | 20,000 | $ | 200,000 | $ | 300,000 | |||||||
| Vice President, Apparel | |||||||||||||
| Executive Officer Group (includes above 5 officers) | $ | 280,000 | $ | 2,800,000 | $ | 4,200,000 | |||||||
| All Other Employee Group | $ | 550,000 | $ | 5,500,000 | $ | 8,250,000 | |||||||
| (1) | The Committee established a series of performance targets based on revenues and earnings per share for the three-year period consisting of fiscal 2003-2005 corresponding to award payouts ranging from 10% to 150% of the target awards. Participants will receive a payout at the average of the percentage levels at which the two performance targets are met, subject to the Committee’s discretion to reduce or eliminate any award based on Company or individual performance. Under the terms of the awards, on August 15, 2005 the Company would issue to each participant either cash equal to the award payout or a number of shares of Class B Stock with a value equal to the award payout based on the closing price of the Class B Stock on that date on the New York Stock Exchange, at the election of the participant. |
Board Recommendation
The Board of Directors recommends that shareholders vote FOR approval of the ESPP.extension of and amendments to the Plan. Holders of Class A Stock and Class B Stock will vote together as a single class on Proposal 2. If holders of a majority of the shares of Common Stock vote on the proposal, Proposal 2 will be adopted if a majority of the votes cast are cast for the proposal. Abstentions are considered votes cast and have the same effect as “no” votes in favor ofdetermining whether the proposal exceedis adopted. Broker non-votes are not counted as voted on the votes cast against the proposal. Accordingly,
abstentionsproposal and broker non-votes willtherefore have no effect on the results of the vote.
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PROPOSAL 3
SHAREHOLDER PROPOSAL
John C. Harrington, P.O. Box 6108, Napa, California 94581-1108, a holder of
100 shares of Class B Stock, submitted the following resolution (the
"Proposal"), for the reasons stated. The Board of Directors recommends a vote
AGAINST the Proposal and asks shareholders to read through NIKE's response,
which follows the shareholder proposal.
US BUSINESS PRINCIPLES FOR HUMAN RIGHTS OF WORKERS IN CHINA
WHEREAS: our company's business practices in China respect human and labor
rights of workers. The eleven principles below were designed to commit a company
to a widely accepted and thorough set of human and labor rights standards for
China. They were defined by the International Labor Organization and the United
Nations Covenants on Economic, Social and Cultural Rights, and Civil, and
Political Rights. They have been signed by the Chinese government and China's
national laws.
(1) No goods or products produced within our company's facilities or
those of suppliers shall be manufactured by bonded labor, forced labor,
within prison camps or as part of reform-through-labor or
reeducation-through-labor programs.
(2) Our facilities and suppliers shall adhere to wages that meet
workers' basic needs, fair and decent working hours, and at a minimum, to
the wage and hour guidelines provided by China's national labor laws.
(3) Our facilities and suppliers shall prohibit the use of corporal
punishment, any physical, sexual or verbal abuse or harassment of workers.
(4) Our facilities and suppliers shall use production methods that do
not negatively affect the worker's occupational safety and health.
(5) Our facilities and suppliers shall not call on police or military
to enter their premises to prevent workers from exercising their rights.
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(6) We shall undertake to promote the following freedoms among our
employees and the employees of our suppliers: freedom of association and
assembly, including the rights to form unions and bargain collectively;
freedom of expression, and freedom from arbitrary arrest or detention.
(7) Company employees and those of our suppliers shall not face
discrimination in hiring, remuneration or promotion based on age, gender,
marital status, pregnancy, ethnicity or region of origin.
(8) Company employees and those of our suppliers shall not face
discrimination in hiring, remuneration or promotion based on labor,
political or religious activity, or on involvement in demonstrations, past
records of arrests or internal exile for peaceful protest, or membership in
organizations committed to non-violent social or political change.
(9) Our facilities and suppliers shall use environmentally responsible
methods of production that have minimum adverse impact on land, air and
water quality.
(10) Our facilities and suppliers shall prohibit child labor, at a
minimum comply with guidelines on minimum age for employment within China's
national labor laws.
(11) We will issue annual statements to the Human Rights for Workers
in China Working Group detailing our efforts to uphold these principles and
to promote these basic freedoms.
RESOLVED: Stockholders request the Board of Directors to make all possible
lawful efforts to implement and/or increase activity on each of the principles
named above in the People's Republic of China.
SUPPORTING STATEMENT: As U.S. companies import more goods, consumer and
shareholder concern is growing about working conditions in China that fall below
basic standards of fair and humane treatment. We hope that our company can prove
to be a leader in its industry and embrace these principles.
RECOMMENDATION OF THE BOARD
The Board of Directors recommends a vote AGAINST adoption of the Proposal
for the following reasons:
NIKE supports the general intent of the Proposal, but believes that it
already has a Code of Conduct that addresses most of the principles contained in
the Proposal that the Company can legally comply with in China. Also, there are
elements of the proposal that are vague and so sweeping in nature that
compliance would be difficult or impossible to measure.
NIKE is committed to operating in full compliance with applicable laws in
every country in which it does business, including China, and requires the same
compliance of its contract manufacturers.
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NIKE was among the first in the industry to establish standards for labor
practices and environmental responsibility in the numerous countries in which
its products are manufactured. These standards and principles are embodied in
the NIKE Code of Conduct, first established in 1992. NIKE has regularly revised,
improved and expanded the Code of Conduct as it has been able to raise levels of
compliance in its contract factories. The Code's requirements frequently exceed
the requirements of local laws in many countries, and in many instances impose
standards that are higher than those stated in the Proposal.
The Board believes the Proposal is redundant because NIKE's Code of Conduct
already prohibits the use of forced labor or child labor, and requires employers
to respect the dignity of workers. Moreover, NIKE works with its contractors on
safety standards, and has adopted specific exposure limit standards for indoor
factory air quality (or their equivalent) established by U.S. OSHA.
Since 1992, the Company has invested significant resources to develop its
own internal system to monitor compliance with the Code of Conduct, and to work
with external auditing partners, and, more recently, international
non-governmental organizations to collect data directly from workers to help
enforce the Code.
In addition, some parts of the Proposal are vague and overbroad, and lack
clear standards, such as requiring wages that meet workers' "basic needs,"
requiring production methods that do not "negatively affect" worker health and
have "minimum adverse impact" on land, air and water quality, and "promoting"
enumerated freedoms.
The Proposal also calls for contradictory actions. It requires an employer
to comply with the law of the country in which it operates, but also requires
that the employer promote the right to form unions and establish collective
bargaining -- actions which are illegal in China. Further, since NIKE does not
control the state in China, nor its police, the Company is not in a position to
guarantee workers freedom from arrest or detention. Where rights of free
association and collective bargaining are illegal, NIKE has successfully used
worker opinion surveys conducted by independent non-governmental organizations
to provide necessary information to NIKE and factory management about workers'
needs and desires.
But, in the spirit of the proponent of the Proposal, NIKE has, in the past
three years,
- raised the minimum age for workers to 18 years for its contract footwear
factories and 16 for its apparel factories.
- sponsored, with its factory partners, loan programs for workers to
provide capital for small businesses in factory communities, and free
education for workers seeking to improve their quality of life.
- improved the air quality in factories by developing and introducing safe
water-based glues to replace petroleum-based glues in shoe production.
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- worked with the Global Alliance for Workers and Communities to assess
worker sentiments and needs in factories in Thailand, Vietnam and
Indonesia, and developed remediation plans to meet worker concerns about
conditions and benefits such as education or health care. The Global
Alliance will undertake similar survey research in China. See
www.theglobalalliance.org.
- made significant investments in community youth sports development
programs in China, including building or making available high quality
youth sports facilities and organizing and funding youth sports programs.
The Board encourages shareholders to obtain more information about these
programs and the NIKE Code of Conduct, and also to take a look inside a factory
at www.nikebiz.com/social.
Although the Board agrees with the concerns for worker welfare expressed,
the Board believes that adoption of the Proposal as currently worded would be
counterproductive because of its redundancy with the Code of Conduct, vague and
conflicting requirements, and the potential to divert valuable resources from
Code of Conduct compliance monitoring. Accordingly, the Board recommends a vote
AGAINST the Proposal.
Holders of Class A Stock and Class B Stock will vote together as a single
class on Proposal 3. If holders of a majority of the shares of Common Stock vote
on the proposal, Proposal 3 will be adopted if the votes cast in favor of the
proposal exceed the votes cast against the proposal. Accordingly, abstentions
and broker non-votes will have no effect on the results of the vote.
PROPOSAL 4
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company, upon recommendation of its Audit Committee, has appointed PricewaterhouseCoopers LLP as independent accountants to examine the Company'sCompany’s consolidated financial statements for the fiscal year ending May 31, 20022003 and to render other professional services as required.
The Board of Directors is submitting the appointment of PricewaterhouseCoopers LLP to shareholders for ratification.
PricewaterhouseCoopers has served as independent accountants to the Company since 1971. Representatives of PricewaterhouseCoopers will be present at the Annual Meeting and are expected to be available to respond to questions.
Aggregate fees billed for professional services rendered by the Company’s principal accountants, PricewaterhouseCoopers LLP, for the most recent fiscal year:
| Audit Fees | $ | 1.9 million | ||||
| Financial Information Systems | ||||||
| Design and Implementation | $ | 5.9 million | ||||
| All Other Fees | ||||||
| Acquisition due diligence | $ | 0.6 million | ||||
| Financial consulting services | $ | 0.6 million | ||||
| Labor and corporate responsibility | $ | 0.5 million | ||||
| Sales Incentive Projects | $ | 2.2 million | ||||
| Supply Chain Development and Training | $ | 5.1 million | ||||
| Tax consulting services | $ | 2.3 million | ||||
| Total | $ | 19.1 million | ||||
Beginning in late 1998, NIKE commenced a multi-year, $400 million project to replace and upgrade its supply chain technology systems, including design, production, sales, distribution and finance. PricewaterhouseCoopers LLP was chosen through a competitive bidding process as one of several major contractors to work on a portion of that project. In fiscal 2002, approximately $11 million of the non-audit fees paid to PricewaterhouseCoopers, including amounts listed in the table above as “Financial Information Systems Design and Implementation” services, were for services related to the
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The Audit Committee has established policies, procedures and practices related to audit and non-audit services performed by the Company’s principal accountants. The Audit Committee has also assigned responsibility for implementing the policies, procedures and practices, and has communicated them internally and to the principal accountant. The policies include, among others, the following:
| • | Engagements of the Company’s principal accountants to perform non-audit services (other than tax, acquisition due diligence, attest, and statutory audit services) in excess of $100,000 are competitively bid and approved by both the Chief Financial Officer and the Company’s Internal Audit Director. | |
| • | The Audit Committee reviews and approves all non-audit services by the Company’s principal accountants at each Committee meeting. | |
| • | The principal accountants may not perform financial information design and implementation services for the Company in the future, other than the completion of their portion of the supply chain project described above. | |
| • | The principal accountants may not provide internal audit services, except those services related to financial control review, attest work, and local language and culture assistance. | |
| • | The Audit Committee reviews and approves the Company’s hiring for a senior executive position anyone directly from the principal accountant’s firm, or anyone who was involved in providing audit services to the Company in the previous five years. |
The Sarbanes-Oxley Act of 2002, recently signed into law by President Bush, and proposed changes to the listing standards of the New York Stock Exchange, contain provisions that will supercede or supplement the existing policies, procedures and practices of the Audit Committee. The Audit Committee intends to comply fully with the Act and listing standards.
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Notwithstanding anything to the contrary set forth in any of the Company'sCompany’s filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, the following Report of the Audit Committee shall not be incorporated by reference into any such filings and shall not otherwise be deemed filed under such acts.
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REPORT OF THE AUDIT COMMITTEE
The Audit Committee has:
- Reviewed and discussed the audited financial statements with management.
- Discussed with the independent auditors the matters required to be
discussed by SAS 61.
- Received the written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No. 1, and has
discussed with the independent auditors the auditors' independence.
- Based on the review and discussions above, recommended to the Board of
Directors that the audited financial statements be included in the
Company's Annual Report on Form 10-K for the last fiscal year for filing
with the Securities and Exchange Commission.
- Considered whether the provision by the principal accountant of
professional services other than for the audit of the Company's financial
statements is compatible with maintaining the principal accountant's
| • | Reviewed and discussed the audited financial statements with management. | |
| • | Discussed with the independent auditors the matters required to be discussed by SAS 61. | |
| • | Received the written disclosures and the letter from the independent auditors required by Independence Standards Board Standard No. 1, and has discussed with the independent auditors the auditors’ independence. | |
| • | Based on the review and discussions above, recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the last fiscal year for filing with the Securities and Exchange Commission. | |
| • | Considered whether the provision by the principal accountant of professional services other than for the audit of the Company’s financial statements is compatible with maintaining the principal accountant’s independence, and determined that it is compatible. |
The Board of Directors has determined that the members of the Audit Committee are independent. The Audit Committee has adopted a written charter.
Members of the Audit Committee:
Delbert J. Hayes, Chairman
OTHER MATTERS
As of the time this proxy statement was printed, management was unaware of any proposals to be presented for consideration at the Annual Meeting other than those set forth herein, but if other matters do properly come before the Annual Meeting, the persons named in the proxy will vote the shares represented by such proxy according to their best judgment.
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SHAREHOLDER PROPOSALS
A proposal by a shareholder for inclusion in the Company'sCompany’s proxy statement and form of proxy for the 20022003 annual meeting of shareholders must be received by John F. Coburn III, Assistant Secretary of NIKE, at One Bowerman Drive, Beaverton, Oregon 97005-6453, on or before April 12, 200218, 2003 in order to be eligible for inclusion. Rules under the Securities Exchange Act of 1934 describe standards as to the submission of shareholder proposals. In addition, the Company'sCompany’s bylaws require that any shareholder wishing to make a nomination for Director, or wishing to introduce a proposal or other business at a shareholder meeting must give the Company at least 60 days'days’ advance written notice, and that notice must meet certain requirements described in the bylaws.
A COPY OF NIKE'S 2001 ANNUAL REPORT ON FORMcopy of NIKE’S 2002 Annual Report on Form 10-K WILL BE AVAILABLE TO
SHAREHOLDERS WITHOUT CHARGE UPON REQUEST TO: INVESTOR RELATIONS,will be available to shareholders without charge upon request to: Investor Relations, NIKE, INC.Inc., ONE
BOWERMAN DRIVE, BEAVERTON, OREGON 97005-6453.
For the Board of Directors
JOHN E. JAQUA
SECRETARY
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One Bowerman Drive, Beaverton, Oregon 97005 -6453.
| For the Board of Directors | |
| JOHN E. JAQUA | |
| SECRETARY |
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EXHIBIT A
NIKE, INC. EMPLOYEE STOCK PURCHASE PLANInc. LONG-TERM INCENTIVE PLAN*
This is the Long-Term Incentive Plan of NIKE, Inc. for the payment of incentive compensation to designated employees.
Section 1. PurposeDefinitions.
The following terms have the following meanings:
| Board:The Board of Directors of the Company. | |
| Code:The Internal Revenue Code of 1986, as amended. | |
| Committee:The Personnel Committee of the Board, provided however, if the Personnel Committee of the Board is not composed entirely of Outside Directors, the “Committee” shall mean a committee composed entirely of at least two Outside Directors appointed by the Board from time to time. | |
| Company:NIKE, Inc. | |
| Outside Directors:The meaning ascribed to this term in Section 162(m) of the Code and the regulations proposed or adopted thereunder. | |
| Performance Period:The period of time for which Company performance is measured for purposes of a Target Award. | |
| Performance Target:An objectively determinable level of performance as selected by the Committee to measure performance of the Company or any subsidiary, division, or other unit of the Company for the Performance Period based on one or more of the following: net income, net income before taxes, operating income, revenues, return on sales, return on equity, earnings per share, total shareholder return, or any of the foregoing before the effect of acquisitions, divestitures, accounting changes, restructuring, or other special charges, as determined by the Committee at the time of establishing a Performance Target. | |
| Plan:The Long-Term Incentive Plan of the Company. | |
| Target Award:An amount of compensation to be paid to a Plan participant based on achievement of a particular Performance Target level, as established by the Committee. Target Awards shall be denominated at the time of grant either in Class B Common Stock (“Stock Target Awards”) or in dollar amounts (“Dollar Target Awards”). Payment under a Stock Target Award |
| * | Matter in bold and underline is new; matter in brackets and italics is to be deleted. |
A-1
| Year:The fiscal year of the Company. |
Section 2.Objectives.
The number of shares reserved for the Plan is subject
to adjustment in the event of any stock dividend, stock split, combination of
shares, recapitalization or other change in the outstanding Class B Common Stock
of the Company. The determination of whether an adjustment shall be made and the
manner of any such adjustment shall be made by the Board of Directors of the
Company, which determination shall be conclusive.
3. Administration of the Plan. The Plan shall be administered by or under
the direction of the Personnel Committee of the Board of Directors, which may
delegate some or all of its duties and authority to one or more Company
employees. The Personnel Committee may promulgate rules and regulations for the
operationobjectives of the Plan adopt forms for use in connection with the Plan, and
decide any question of interpretation of the Plan or rights arising thereunder.
The Personnel Committee may consult with counsel for the Company on any matter
arising under the Plan. All determinations and decisions of the Personnel
Committee shall be conclusive.
4. Eligible Employees. All Eligible Employees (as defined below) of the
Company and all Eligible Employees of each corporate subsidiary of the Company
that is designated by the Board of Directors of the Company as a participant in
the Plan (such participating subsidiary being hereinafter called a
"Participating Subsidiary") are eligible to participate in the Plan. An
"Eligible Employee" is an employee who has been employed by the Company or a
Participating Subsidiary for at least one full month priorto:
| (a) recognize and reward on a long-term basis[the Company’s corporate and division officers]selected employees of the Company and its subsidiaries for their contributions to the overall profitability and performance of the Company; and | |
| (b) qualify compensation under the Plan as “performance-based compensation” within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder. |
Section 3.Shares Subject to the Offering Date
(as defined below) excluding, however, (a) any employee whose customary
employment is less than 20 hours per week,Plan.
Subject to adjustment as provided below and (b) any employee who would, after
a purchase ofin Section 9, the shares under the Plan, own or be deemed (under Section 424(d) of
the Internal Revenue Code of 1986, as amended (the "Code")) to own stock
(including stock subject to any outstanding options held by the employee)
possessing 5 percent or more of the total combined voting power or value of all
classes of stock of the Company or any parent or subsidiary of the Company.
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5. Offerings.
(a) Offering and Purchase Dates. The Plan shall be implemented by a series
of six-month offerings (the "Offerings"), with a new Offering commencing on
April 1 and October 1 of each year beginning with October 1, 2001. Each Offering
commencing on April 1 of any year shall end on September 30 of that year, and
each Offering commencing on October 1 of any year shall end on March 31 of the
following year. The first day of each Offering is the "Offering Date" for that
Offering and the last day of each Offering is the "Purchase Date" for that
Offering.
(b) Grants; Limitations. On each Offering Date, each Eligible Employee
shall be granted an option under the Plan to purchase shares of Class B Common
Stock on the Purchase Date for the Offering for the price determined under
paragraph 7 of the Plan exclusively through payroll deductions authorized under
paragraph 6 of the Plan; provided, however, that (i) no option shall permit the
purchase of more than 1,000 shares, and (ii) no option may be granted under the
Plan that would allow an employee's right to purchase shares under all stock
purchase plans of the Company and its parents and subsidiaries to which Section
423 of the Code applies to accrue at a rate that exceeds $25,000 of fair market
value of shares (determined at the date of grant) for each calendar year in
which such option is outstanding.
6. Participation in the Plan.
(a) Initiating Participation. An Eligible Employee may participate in an
Offering under the Plan by filing with the Company a subscription and payroll
deduction authorization on a form furnished by the Company. The subscription and
payroll deduction authorization must be filed no later than the "Subscription
Deadline," which shall be a number of days prior to the Offering Date with the
exact number of days being established from time to time by the Personnel
Committee by written notice to Eligible Employees. Once filed, a subscription
and payroll deduction authorization shall remain in effect unless amended or
terminated, and upon the expiration of an Offering the participants in that
Offering will be automatically enrolled in the new Offering starting the
following day. The payroll deduction authorization will authorize the employing
corporation to make payroll deductions in an amount designated by the
participant from each of the participant's paychecks during the Offering. The
designated amount to be deducted from each paycheck must be a whole percentage
of not less than one percent or more than 10 percent of the participant's
Compensation (as defined below) for the period covered by the paycheck. If
payroll deductions are made by a Participating Subsidiary, that corporation will
promptly remit the amount of the deductions to the Company.
(b) Definition of Compensation. "Compensation" means the participant's pay
reportable on IRS Form W-2 (under Section 3401(a) of the Code), adjusted as
follows:
(i) Before-tax contributions to a non-qualified deferred compensation
arrangement, contributions to a plan qualified under Section 401(k) of the
Code, and any amounts set aside by the
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34
participant from otherwise taxable pay under a welfare benefit plan
qualified under Section 125 of the Code shall be included.
(ii) Expense reimbursements, disability benefits, payments from a
nonqualified deferred compensation arrangement, stock option income, and
adjustments for overseas employment (other than any transfer premium) shall
be excluded.
(iii) Any payment representing excess vacation or paid time-off
accruals (where such excess represents vacation or time-off not taken)
shall be excluded.
(c) Amending Participation. After a participant has begun participating in
the Plan by initiating payroll deductions, the participant may amend the payroll
deduction authorization (i) once during any Offering to decrease the amount of
payroll deductions, and (ii) effective for the first paycheck of a new Offering
to either increase or decrease the amount of payroll deductions. In addition, if
the amount of payroll deductions from any participant during an Offering exceeds
the maximum amount that can be applied to purchase shares in that Offering under
the limitations set forth in paragraph 5(b) above, then (x) as soon as
practicable following a written request from the participant, payroll deductions
from the participant shall cease and all such excess amounts shall be refunded
to the participant, and (y) payroll deductions from the participant shall
restart as of the commencement of the next Offering at the rate set forth in the
participant's then effective payroll deduction authorization. A permitted change
in payroll deductions shall be effective for any paycheck only if written notice
is received by the Company at least 10 business days prior to the payday for
that paycheck.
(d) Terminating Participation. After a participant has begun participating
in the Plan by initiating payroll deductions, the participant may terminate
participation in the Plan by written notice received by the Company at least
some number of days prior to a Purchase Date, with the exact number of days
being established from time to time by the Personnel Committee by written notice
to participants. Participation in the Plan shall also terminate when a
participant ceases to be an Eligible Employee for any reason, including death or
retirement. A participant may not reinstate participation in the Plan with
respect to a particular Offering after once terminating participation in the
Plan with respect to that Offering. Upon termination of a participant's
participation in the Plan, all amounts deducted from the participant's
Compensation and not previously used to purchase sharesawarded under the Plan shall be
returned to the participant.
7. Option Price. The price at which shares shall be purchased in an
Offering shall be the lower of (a) 85% of the fair market value of a share of
Class B Common Stock on the Offering Date of the Offering or (b) 85% of the fair
market value of a share of Class B Common Stock on the Purchase Date of the
Offering. The fair market value of a share of Class B Common Stock on any date
shall be the closing price on the immediately preceding trading day of the Class
B Common Stock on the New York Stock Exchange or, if the Class B Common Stock is
not traded on the New York Stock Exchange, such other reported value of the
Class B Common Stock as shall be specified by the Board of Directors.
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35
8. Purchase of Shares. All amounts withheld from the Compensation of a
participant shall be credited to his or her account under the Plan. No interest
will be paid on such accounts, unless otherwise determined by the Board of
Directors. On each Purchase Date, the amount of the account of each participant
will be applied to the purchase of shares (including fractional shares) by such
participant from the Company at the price determined under paragraph 7 above.
Any cash balance remaining in a participant's account after a Purchase Date as a
result of the limitations set forth in paragraph 5(b) above shall be repaid to
the participant.
9. Delivery and Custody of Shares. Shares purchased by participants
pursuant to the Plan will be delivered to and held in the custody of such
investment or financial firm (the "Custodian") as shall be appointed by the
Personnel Committee. The Custodian may hold in nominee or street name
certificates for shares purchased pursuant to the Plan, and may commingle shares
in its custody pursuant to the Plan in a single account without identification
as to individual participants. By appropriate instructions to the Custodian, a
participant may from time to time sell all or part of the shares held by the
Custodian for the participant's account at the market price at the time the
order is executed. If a participant desires to sell all of the shares in his or
her account, the Custodian or the Company will purchase any fraction of a share
in the account at the same price per share that the whole shares are sold on the
market. By appropriate instructions to the Custodian, a participant may obtain
(a) transfer into the participant's own name of all or part of the whole shares
held by the Custodian for the participant's account and delivery of such whole
shares to the participant, or (b) transfer of all or part of the whole shares
held for the participant's account by the Custodian to a regular individual
brokerage account in the participant's own name, either with the firm then
acting as Custodian or with another firm; provided, however, that no shares may
be transferred under (a) or (b) until two years after the Offering Date of the
Offering in which the shares were purchased.
10. Records and Statements. The Custodian will maintain the records of the
Plan. As soon as practicable after each Purchase Date each participant will
receive a statement showing the activity of his or her account since the
preceding Purchase Date and the balance on the Purchase Date as to both cash and
shares. Participants will be furnished such other reports and statements, and at
such intervals, as the Personnel Committee shall determine from time to time.
11. Expense of the Plan. The Company will pay all expenses incident to
operation of the Plan, including costs of record keeping, accounting fees, legal
fees, commissions and issue or transfer taxes on purchases pursuant to the Plan,
on dividend reinvestments and on delivery of shares to a participant or into his
or her brokerage account. The Company will not pay expenses, commissions or
taxes incurred in connection with sales of shares by the Custodian at the
request of a participant. Expenses to be paid by a participant will be deducted
from the proceeds of sale prior to remittance.
12. Rights Not Transferable. The right to purchase shares under this Plan
is not transferable by a participant, and such right is exercisable during the
participant's lifetime only by the participant. Upon the death of a participant,
any cash withheld and not previously applied to purchase shares, together with
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36
any shares held by the Custodian for the participant's account shall be
transferred to the persons entitled thereto under the laws of the state of
domicile of the participant upon a proper showing of authority.
13. Dividends and Other Distributions; Reinvestment. Stock dividends and
other distributions in sharesconsist of Class B Common Stock of the Company, on shares
held byand the Custodian shall be issued to the Custodian and held by it for the
accounttotal number of the respective participants entitled thereto. Cash distributions
other than dividends, if any, on shares held by the Custodian will be paid
currently to the participants entitled thereto. Cash dividends, if any, on
shares held by the Custodian will be reinvested in Class B Common Stock on
behalf of the participants entitled thereto. The Custodian shall establish a
separate account for each participant for the purpose of holding shares acquired
through reinvestment of the participant's dividends. On each dividend payment
date, the Custodian shall receive from the Company the aggregate amount of
dividends payable with respect to all shares held by the Custodian for
participants' accounts under the Plan. As soon as practicable thereafter, the
Custodian shall use all of the funds so received to purchase shares of Class B Common Stock inthat may be issued under the public market, andPlan shall then allocatenot exceed 1,000,000 shares. If a Target Award granted under the Plan expires, terminates or is cancelled, the unissued shares subject to such Target Award shall again be available under the Plan. If shares (including fractional shares) amongissued under a Target Award are forfeited to the dividend reinvestment accountsCompany, the number of shares forfeited shall again be available under the Plan.
Section 4.Administration.
The Plan will be administered by the Committee. Subject to the provisions of the participants pro rata based onPlan, the amountCommittee will have full authority to interpret the Plan, to establish and amend rules and regulations relating to it, to determine the terms and provisions for making awards and to make all other determinations necessary or advisable for the administration of dividends reinvested for each
participant. A participantthe Plan.
Section 5.Participation.
Target Awards may sellbe granted under the Plan only to individuals selected by the Committee who are[corporate or transfer shares indivision officers of the participant's
dividend reinvestment account in accordance with paragraph 9 above, except that
there shall be no holding period required for a transfer from a dividend
reinvestment account.
14. Voting and Shareholder Communications. In connection with voting on any
matter submitted to the shareholdersCompany]employees of the Company or a subsidiary of the Custodian will causeCompany.
Section 6.Determination of the shares held byPerformance Targets and Awards.
(a) Performance Targets and Awards.The Committee shall establish in writing, in its sole discretion, the CustodianPerformance Targets and Target Award opportunities for each participant's accounts to be voted in
accordance with instructions from the participant, or, if requested by a
participant, furnish to the participant a proxy authorizing the participant to
vote the shares held by the Custodian for his or her accounts. Copies of all
general communications to shareholderswithin 90 days of the Company will be sentbeginning of the applicable Performance Period. The Committee may establish (i) several Performance Target levels for each participant, each corresponding to participants a different Target Award opportunity, and (ii) different Performance Targets and Target Award opportunities for each participant
A-2
(b) Other Terms and Restrictions.The Committee may establish other restrictions to payment under a Target Award, such as a continued employment requirement, in addition to satisfaction of the Performance Targets. Some or all of any shares of Class B Common Stock issuable under any Target Award may be issued at the time of the award or any other time as restricted shares subject to forfeiture in whole or in part if Performance Targets or, if applicable, other restrictions are not satisfied.
(c) Maximum Awards.The Committee shall not establish Target Award opportunities for any participant such that the maximumamount payable[number of shares of Class B Common Stock issuable] under Stock Target Awards which have Performance Periods ending in any single Year exceedsthe equivalent of 20,000 sharesof Class B Common Stock or the maximum amount[of cash] payable under Dollar Target Awards which have Performance Periods ending in any single Year exceeds $1,000,000.
(d) Tax Withholding.Each participant who has purchasedreceived shares under the
Planof Class B Common Stock upon payment of an award shall, immediately upon notification of the amount due, if any, pay to the Company in cash amounts necessary to satisfy any applicable federal, state and local tax withholding determined by the Company to be required. If the Company
determines that additional withholding is required beyond any amount deposited
at the time of purchase, the participant shall pay such amount to the Company on
demand.requirements. If the participant fails to pay the amount demanded, the Company may withhold that amount from other amounts payable by the Company to the participant, including salary, subject to applicable law. 16. Responsibility and Indemnity. NeitherWith the consent of the Committee, a participant may satisfy this obligation, in whole or in part, by having the Company its Boardwithhold from any shares to be issued that number of Directors,shares that would satisfy the Personnel Committee,withholding amount due or by delivering shares of Class B Common Stock to the Custodian, any Participating Subsidiary,
nor any member, officer, agent, or employeeCompany to satisfy the withholding amount.
(e) Effect on Shares Available.The payment of anya Target Award in cash shall not reduce the number of them, shall be liable to
any participantshares of Class B Common Stock reserved for issuance under the PlanPlan. The number of shares of Class B Common Stock reserved for any mistake of judgment or for any omission
or wrongful act unless resulting from gross negligence, willful misconduct or
intentional misfeasance. The Company will indemnify and save harmless its Board
of Directors, the Personnel Committee, the Custodian and any such member,
officer, agent or employee against any claim, loss,
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37
liability or expense arising out of the Plan, except such as may result from the
gross negligence, willful misconduct or intentional misfeasance of such entity
or person.
17. Conditions and Approvals. The obligations of the Companyissuance under the Plan shall be subjectreduced by the number of shares issued upon payment of an award, less the number of shares surrendered or withheld to compliancesatisfy withholding obligations.
Section 7.Determination of Plan Awards.
At the conclusion of the Performance Period, in accordance with all applicable stateSection 162(m)(4)(C)(iii) of the Code, prior to the payment of any award under the Plan, the Committee shall certify in the Committee’s internal meeting minutes the attainment of the Performance Targets for the Performance Period and federal laws and
regulations, compliancethe calculation of the awards. No award shall be paid if the related Performance Target is not met. The Committee may, in its sole discretion, reduce or eliminate any participant’s calculated award based on circumstances relating to the performance of the Company or the participant. Awards will be paid in accordance with the rulesterms of the awards as soon as practicable following the Committee’s certification of the awards.
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Section 8.Termination of Employment.
The terms of a Target Award may provide that in the event of a participant’s termination of employment for any reason during a Performance Period, the participant (or his or her beneficiary) will receive, at the time provided in Section 7, all or any portion of the award to which the participant would otherwise have been entitled.
Section 9.Changes in Capital Structure.
If the outstanding Class B Common Stock of the Company is hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any stock exchange on whichsplit, combination of shares or dividend payable in shares, recapitalization or reclassification, appropriate adjustment shall be made by the Company's securitiesCommittee in the number and kind of shares available for grants under the Plan. In addition, the Committee shall make appropriate adjustment in the number and kind of shares subject to outstanding Target Awards so that the recipient’s proportionate interest before and after the occurrence of the event is maintained. Notwithstanding the foregoing, the Committee shall have no obligation to effect any adjustment that would or might result in the issuance of fractional shares, and any fractional shares resulting from any adjustment may be listed,disregarded or provided for in any manner determined by the Committee. Any such adjustments made by the Committee shall be conclusive.
Section 10.Miscellaneous.
(a) Amendment and Termination of the Plan.The Committee with the approval of such federal and state
authoritiesthe Board may amend, modify or agencies as may have jurisdiction overterminate the Plan or the Company.
The Company will use its best effort to comply with such laws, regulationsat any time and
rules and to obtain such approvals.
18. Amendment of the Plan. The Board of Directors of the Company may from time to time amendexcept insofar as approval by the Plan in any and all respects, except that without the
approvalCompany’s shareholders is required pursuant to Section 162(m)(4)(C)(ii) of the shareholders of the Company, the Board of Directors may not
increase the number of shares reserved for the Plan (except for adjustments
authorized in paragraph 2 above) or decrease the purchase price of shares
offered pursuant to the Plan.
19. Termination of the Plan.Code. The Plan shall terminate when all ofat the shares reserved for purposes of the Plan have been purchased, providedfirst shareholder meeting that the
Board of Directors in its sole discretion may at any time terminate the Plan
without any obligation on account of such termination, except as hereinafter in
this paragraph provided. Upon termination of the Plan, the cash and shares, if
any, heldoccurs in the accountsfifth year after the Company’s shareholders approve the Plan. Notwithstanding the foregoing, no such amendment, modification or termination shall affect the payment of each participant shall forthwith be distributed to
the participantTarget Awards previously established.
(b) No Assignment.Except as otherwise required by applicable law, no interest, benefit, payment, claim or to the participant's order, provided that if prior to the
termination of the Plan, the Board of Directors and shareholders of the Company
shall have adopted and approved a substantially similar plan, the Board of
Directors may in its discretion determine that the accounts of each participant
under this Plan shall be carried forward and continued as the accounts of such
participant under such other plan, subject to the right of any participant under the plan shall be subject in any manner to request distributionany claims of any creditor of any participant or beneficiary, nor to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind, and any attempt to take any such action shall be null and void.
(c) No Rights to Employment.Nothing contained in the Plan shall give any person the right to be retained in the employment of the cashCompany or any of its subsidiaries. The Company reserves the right to terminate a participant at any time for any reason notwithstanding the existence of the Plan.
(d) Beneficiary Designation.The Committee shall establish such procedures as it deems necessary for a participant to designate a beneficiary to whom any amounts would be payable in the event of a participant’s death.
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(e) Plan Unfunded.The entire cost of the Plan shall be paid from the general assets of the Company. The rights of any person to receive benefits under the Plan shall be only those of a general unsecured creditor, and shares, if any, heldneither the Company nor the Board nor the Committee shall be responsible for his accounts.
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38
the adequacy of the general assets of the Company to meet and discharge Plan liabilities, nor shall the Company be required to reserve or otherwise set aside funds for the payment of its obligations hereunder.
(f) Applicable Law.The Plan and all rights thereunder shall be governed by and construed in accordance with the laws of the State of Oregon.
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ANNUAL
September 18, 2002
NIKE, INC.
P.O. BOX 8094
JERSEY CITY, NJ 08818-8094
43069
PROVIDENCE, RI 02940-3069
VOTE BY INTERNET -— www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site. You will be prompted to enter your 12-digit Control Number which is located below to obtain your records and to create an electronic voting instruction form.
VOTE BY PHONE -— 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call. You will be prompted to enter your 12-digit Control Number which is located below and then follow the simple instructions the Vote Voice provides you.
VOTE BY MAIL
Mark, sign, and date your proxy card and return it in the postage-paid envelope we have provided or return it to Nike,NIKE, Inc., c/o ADP, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [ ] NIKE01
KEEP THIS PORTION FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DETACH AND RETURN THIS PORTION ONLY
NIKE, INC.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR PROPOSALS 2 AND 3.
| To withhold authority to vote, mark | |||||||||||||||||||||||||||
| For | Withhold | For All | “For All | ||||||||||||||||||||||||
| All | All | Except | nominee’s number on the line below. | ||||||||||||||||||||||||
| 1. | Election of Directors; | [ ] | [ ] | [ ] | |||||||||||||||||||||||
| Nominees: 01) Ralph D. DeNunzio, 02) Richard K. Donahue, (03) Douglas G. Houser, 04) Jeanne P. Jackson, 05) John E. Jaqua, | |||||||||||||||||||||||||||
| For | Against | Abstain | |||||||||||||||||||||||||
| 2. | Proposal to approve the extension of and amendments to the NIKE, Inc. | [ ] | [ ] | [ ] | |||||||||||||||||||||||
| 3. | Proposal to ratify the appointment of PricewaterhouseCoopers LLP as independent | [ ] | [ ] | [ ] | |||||||||||||||||||||||
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR, AND FOR PROPOSALS 2 AND 3. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME BEFORE THE MEETING.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
For address changes and/or comments, please check [ ]
this box and write them on the back where indicated.
(Please date and sign below exactly as your name or names appear hereon. Joint owners should each sign personally. Corporate proxies should be signed in full corporate name by an authorized officer and attested. Persons signing in a fiduciary capacity should indicate their full titles in such capacity.)
| Signature (PLEASE SIGN WITHIN BOX) Date | Signature (Joint Owners) Date |
NIKE, INC.
CLASS A COMMON STOCK PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 20012002 MEETING OF SHAREHOLDERS
SEPTEMBER 17, 2001
18, 2002
The undersigned hereby appoints Philip H. Knight, Delbert J. Hayes and Douglas G. Houser, and each of them, proxies with full power of substitution, to vote, as designated on the reverse side, on behalf of the undersigned all shares of Class A Common Stock which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of NIKE, Inc. on September 17, 2001,18, 2002, and any adjournments thereof, with all powers that the undersigned would possess if personally present. A majority of the proxies or substitutes present at the meeting may exercise all powers granted hereby.
ADDRESS CHANGE/COMMENTS:
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If you noted address changes or comments above,
please mark the corresponding box on the reverse side. 41
[Nike logo]
NIKE, INC.
P.O. BOX 8094
JERSEY CITY, NJ 08818-8094
43069
PROVIDENCE, RI 02940-3069
VOTE BY INTERNET -— www.proxyvote.com
Use the internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site. You will be prompted to enter your 12-digit Control Number which is located below to obtain your records and to create an electronic voting instruction form.
VOTE BY PHONE -— 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call. You will be prompted to enter your 12-digit Control Number which is located below and then follow the simple instructions the Vote Voice provides you.
VOTE BY MAIL
Mark, sign, and date your proxy card and return it in the postage-paid envelope we have provided or return it to Nike,NIKE, Inc. c/o ADP, 51 Mercedes Way, Edgewood, NY 11717.
| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: NIKE03 |
KEEP THIS PORTION FOR YOUR RECORDS.
DETACH AND RETURN THIS PORTION ONLY.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
NIKE, INC.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 2 AND 3.
| 1. | Election of Directors: | |
| Nominees: 01) Thomas E. Clarke, 02) Jill K. Conway, and 03) Delbert J. Hayes. |
| FOR | WITHHOLD | FOR ALL | To withhold authority to vote, mark | |||||||||||||
| ALL | ALL | EXCEPT | and write the nominee's number on the line below. | |||||||||||||
| [ ] | [ ] | [ ] | ||||||||||||||
| 2. | Proposal to approve the extension of and amendments to the NIKE, Inc. |
| FOR | AGAINST | ABSTAIN | ||||||||||||||
| [ ] | [ ] | [ ] | ||||||||||||||
| 3. | Proposal to ratify the appointment of PricewaterhouseCoopers LLP as independent accountants. |
| FOR | AGAINST | ABSTAIN | ||||||||||||||
| [ ] | [ ] | [ ] | ||||||||||||||
THESE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR, AND FOR PROPOSALS 2 AND 3. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME BEFORE THE MEETING.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
| For address changes and/or comments, please check | [ ] |
(Please date and sign below exactly as your name or names appear hereon. Joint owners should each sign personally. Corporate proxies should be signed in full corporate name by an authorized officer and attested. Persons signing in a fiduciary capacity should indicate their full titles in such capacity.)
| Signature (PLEASE SIGN WITHIN BOX) Date | Signature (Joint Owners) | Date | ||||||
NIKE, INC.
CLASS B COMMON STOCK PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 20012002 MEETING OF SHAREHOLDERS
SEPTEMBER 17, 2001
18, 2002
The undersigned hereby appoints Philip H. Knight, Delbert J. Hayes and Douglas G. Houser, and each of them, proxies with full power of substitution, to vote, as designated on the reverse side, on behalf of the undersigned all shares of Class B Common Stock which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of NIKE, Inc. on September 17, 2001,18, 2002, and any adjournments thereof, with all powers that the undersigned would possess if personally present. A majority of the proxies or substitutes present at the meeting may exercise all powers granted hereby.
ADDRESS CHANGE/COMMENTS:
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If you noted address changes or comments above,
please mark the corresponding box on the reverse side.