EX-10 3 exhibit101.txt EXHIBIT 10.1 - FORM OF LTIP AGREEMENT EXHIBIT 10.1 NIKE, INC. FY _______ LONG-TERM INCENTIVE AWARD AGREEMENT This FY _______ Long-Term Incentive Award Agreement (this "Agreement") is entered into as of _____________, 20__, between NIKE, Inc., an Oregon corporation (the "Company"), and ________ ("Recipient"). On _________, 20__, the Compensation Committee (the "Committee") of the Company's Board of Directors authorized a performance-based award to Recipient pursuant to Section 6 of the Company's Long-Term Incentive Plan (the "Plan"). Compensation paid pursuant to the award is intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). Recipient desires to accept the award subject to the terms and conditions of this Agreement. NOW, THEREFORE, the parties agree as follows: 1. Award. Subject to the terms and conditions of this _____ Agreement, the Company shall pay to Recipient the dollar amount (the "Dollar Target Award Payment") determined under this Agreement based on (a) the Company's financial performance during the _______-year period from June 1, 20__ to May 31, 20__ (the "Performance Period") as described in Section 2 and (b) Recipient's continued employment during the Performance Period as described in Section 3. Recipient's "Dollar Target Award" for purposes of this Agreement is $___________. 2. Revenue and EPS Performance Conditions. ______________________________________ 2.1 Subject to Section 3, the Dollar Target Award Payment to be paid to Recipient shall be determined by multiplying the Payout Factor by the Dollar Target Award. The "Payout Factor" equals the average of the Revenue-Related Percentage Level for the Performance Period and the EPS-Related Percentage Level for the Performance Period. The Revenue-Related Percentage Level for the Performance Period shall be determined under the table below based on the Company's Cumulative Revenue (as defined below) for the Performance Period. The EPS-Related Percentage Level for the Performance Period shall be determined under the table below based on the Company's Cumulative EPS (as defined below) for the Performance Period. For example, if the Company's Cumulative Revenue for the Performance Period is $_______ and the Company's Cumulative EPS for the Performance Period is $_______, then the Revenue-Related Percentage Level will be 110%, the EPS-Related Percentage Level will be 140%, and the Payout Factor will therefore equal 125%. Revenue-Related EPS-Related Cumulative Revenue Percentage Level Cumulative EPS Percentage Level __________________ ________________ ______________ ________________ (in millions) Less than $____ 0% Less than $____ 0% $____ 10% $____ 10% $____ 20% $____ 20% $____ 30% $____ 30% $____ 40% $____ 40% $____ 50% $____ 50% $____ 60% $____ 60% $____ 70% $____ 70% $____ 80% $____ 80% $____ 90% $____ 90% $____ 100% $____ 100% $____ 110% $____ 110% $____ 120% $____ 120% $____ 130% $____ 130%+ $____ 140% $____ 140% $____ or more 150% $____ or more 150% If the Company's Cumulative Revenue is between any two data points set forth in the first column of the above table, the Revenue-Related Percentage Level shall be determined by interpolation between the corresponding data points in the second column of the table as follows: the difference between the Cumulative Revenue and the lower data point shall be divided by the difference between the higher data point and the lower data point, the resulting fraction shall be multiplied by the difference between the two corresponding data points in the second column of the table, and the resulting product shall be added to the lower corresponding data point in the second column of the table, with the resulting sum being the Revenue-Related Percentage Level. If the Company's Cumulative EPS is between any two data points set forth in the third column of the above table, the EPS-Related Percentage Level shall be similarly determined by interpolation between the corresponding data points in the fourth column of the table. For example, if the Company's Cumulative Revenue is $_______ and the Company's Cumulative EPS is $_______, then the Revenue-Related Percentage Level will be 115%, the EPS-Related Percentage Level will be 135%, and the Payout Factor will therefore equal 125%. 2.2 Subject to adjustment in accordance with Sections 2.4, 2.5 and 2.6 below, the Company's "Cumulative Revenue" for the Performance Period shall equal the sum of the Company's revenues for the _______ fiscal years of the Company in the Performance Period. For this purpose, the Company's revenues for each fiscal year of the Company during the Performance Period shall be as set forth in the audited consolidated financial statements of the Company and its subsidiaries. 2.3 Subject to adjustment in accordance with Sections 2.4, 2.5 and 2.6 below, the Company's "Cumulative EPS" for the Performance Period shall equal the sum of the Company's diluted earnings per common share for the _______ fiscal years of the Company in the Performance Period. The Company's diluted earnings per common share for each fiscal year of the Company during the Performance Period shall be as set forth in the audited consolidated financial statements of the Company and its subsidiaries. 2.4 In the event that any acquisition of a business shall occur during the Performance Period, the Company's Cumulative Revenue for the Performance Period shall be appropriately adjusted to exclude the revenues of the acquired business, and the Company's Cumulative EPS for the Performance Period shall be appropriately adjusted to approximate the Cumulative EPS as if the acquisition had not occurred, by (a) excluding any costs of the acquisition recorded by the Company, (b) excluding the operating income of the acquired business, (c) reducing interest expense for any cash paid or debt incurred to fund the acquisition based on the actual interest rate of such debt or the Company's average interest rate for borrowed funds, (d) adjusting the tax provision to reflect the adjusted amount of pre-tax income after making the above adjustments, and (e) reducing weighted average shares outstanding used for the EPS calculation by the number of Company shares, if any, issued in the acquisition. 2.5 In the event that any divestiture of a business shall occur during the Performance Period, the Company's Cumulative Revenue for the Performance Period shall be appropriately adjusted as provided in Section 2.5(i) below to reflect an assumed level of revenue of the divested business for that portion of the Performance Period occurring after the divestiture, and the Company's Cumulative EPS for the Performance Period shall be appropriately adjusted (a) to exclude any gain or loss on the sale, (b) as provided in Section 2.5(ii) below to reflect an assumed level of operating income of the divested business for that portion of the Performance Period occurring after the divestiture, (c) to reduce interest income for any cash or notes received in the divestiture based on the actual interest rate on such notes or the Company's average interest rate for borrowed funds, and (d) to adjust the tax provision to reflect the adjusted amount of pre-tax income after making the above adjustments. (i) The Company's Cumulative Revenue for the Performance Period shall be appropriately adjusted to include the Imputed Revenues of the divested business. "Imputed Revenues" shall mean the result obtained by multiplying the Average Daily Revenues of the divested business by the number of calendar days in the Performance Period occurring after the divestiture. "Average Daily Revenues" shall mean the result obtained by dividing (x) the revenues of the divested business during that portion of the Performance Period occurring prior to the divestiture by (y) the number of calendar days in the Performance Period occurring prior to the divestiture. (ii) The Company's Cumulative EPS for the Performance Period shall be appropriately adjusted to reflect the Imputed Operating Income of the divested business. "Imputed Operating Income" shall mean the result obtained by multiplying the Average Daily Operating Income of the divested business by the number of calendar days in the Performance Period occurring after the divestiture. "Average Daily Operating Income" shall mean the result obtained by dividing (x) the operating income of the divested business during that portion of the Performance Period occurring prior to the divestiture by (y) the number of calendar days in the Performance Period occurring prior to the divestiture. 2.6 If the Company implements a change in accounting principle during the Performance Period either as a result of issuance of new accounting standards or otherwise, and the effect of the accounting change was not reflected in the Company's business plan at the time of approval of this award, then Cumulative Revenue and Cumulative EPS shall be adjusted to eliminate the impact of the change in accounting principle. 2.7 All financial computations required to effect adjustments pursuant to Sections 2.4, 2.5 and 2.6 shall be calculated by the Company in accordance with generally accepted accounting principles applied in a manner consistent with the application of such principles to the preparation of the audited consolidated financial statements of the Company and its subsidiaries. 3. Employment Condition. In order to receive the Dollar ____________________ Target Award Payment determined under Section 2, Recipient must be employed by the Company on the last day of the Performance Period. If Recipient's employment by the Company is terminated at any time prior to the end of the Performance Period, for any reason or no reason, with or without cause, including because of death or disability, Recipient shall not be entitled to receive the Dollar Target Award Payment or any portion thereof. 4. Certification and Payment. As soon as practicable _________________________ following the completion of the audit of the Company's consolidated financial statements for the final year of the Performance Period, the Company shall calculate the Dollar Target Award Payment payable to Recipient. This calculation shall be submitted to the Committee. Notwithstanding anything to the contrary in this Agreement, the Committee may, in its sole discretion, reduce or eliminate the calculated Dollar Target Award Payment based on circumstances relating to the performance of the Company or Recipient. Without limiting the generality of the foregoing, if at any time during the Performance Period Recipient's base pay is reduced or Recipient is assigned a different title, job or set of responsibilities resulting in a decrease in Recipient's level of responsibility for the Company (any such reduction in base pay or assignment resulting in a decrease in Recipient's level of responsibility for the Company, a "Demotion"), the Committee may, in its sole discretion, reduce or eliminate the calculated Dollar Target Award Payment. Recipient acknowledges and agrees that, in the event the Committee reduces or eliminates the calculated Dollar Target Award Payment in connection with any Demotion occurring during the Performance Period, the Company intends for such reduction or elimination to constitute the "proration" of Recipient's Dollar Target Award with respect to such Demotion described in Plan- related documents prepared by the Company and delivered to Recipient; and that, in connection with any Demotion, in the event of any inconsistency between the "proration" provisions of any such Plan- related documents and the provisions of this Agreement, the provisions of this Agreement shall control. The Committee shall certify in writing (which may consist of approved minutes of a Committee meeting) the level of Cumulative Revenue and Cumulative EPS attained by the Company and the Dollar Target Award Payment (if any) payable to Recipient. The Recipient shall receive the Dollar Target Award Payment so certified, subject to applicable tax withholding, in cash on August 15, 20__. Notwithstanding the foregoing, if Recipient shall have made a valid election to defer receipt of all or any portion of the Dollar Target Award Payment pursuant to the terms of the Company's Deferred Compensation Plan (a "Deferral Election"), payment of all or such portion of the Dollar Target Award Payment so deferred shall be made in accordance with the terms of the Deferred Compensation Plan and the Deferral Election. 5. Tax Withholding. Recipient acknowledges that the amount of _______________ the Dollar Target Award Payment payable to Recipient (other than any amount deferred pursuant to a Deferral Election) will be treated as ordinary compensation income for federal and state income and FICA tax purposes, and that the Company will be required to withhold taxes on this income amount. 6. Promotions. If at any time during the Performance Period __________ Recipient's base pay is increased or Recipient is assigned a different title, job or set of responsibilities resulting in an increase in Recipient's level of responsibility for the Company (any such increase in base pay or assignment resulting in an increase in Recipient's level of responsibility for the Company, a "Promotion"), the Company may, but shall not be required to, grant to Recipient an additional award (the "Mid-Plan Grant") on terms similar to those provided in this Agreement. Any such Mid-Plan Grant shall constitute a grant separate from and independent of the grant represented by this Agreement, and any such Mid-Plan Grant shall not be granted under the Plan and shall not qualify as performance-based compensation under Section 162(m) of the Code. The terms and conditions of any Mid-Plan Grant shall be set forth in a separate, Mid-Plan Grant agreement between the Company and Recipient in the form determined by the Company in its sole discretion (a "Mid-Plan Grant Agreement"). Recipient acknowledges and agrees that no Mid-Plan Grant shall be payable to Recipient unless Recipient executes and delivers a Mid-Plan Grant Agreement in connection therewith. Recipient acknowledges and agrees that any Mid-Plan Grant granted to Recipient in connection with any Promotion during the Performance Period will be intended to constitute the "proration" of Recipient's Dollar Target Award with respect to such Promotion described in Plan-related documents prepared by the Company and delivered to Recipient; and that, in connection with any Promotion, in the event of any inconsistency between the "proration" provisions of any such Plan-related documents and the provisions of this Section 6 and the Mid-Plan Grant Agreement, the provisions of this Section 6 and the Mid-Plan Grant Agreement shall control. 7. No Right to Employment. Nothing contained in this ______________________ Agreement shall confer upon Recipient any right to be employed by the Company or any of its subsidiaries or to continue to provide services to the Company or any of its subsidiaries or to interfere in any way with the right of the Company or any of its subsidiaries to terminate Recipient's services at any time for any reason, with or without cause. 8. Miscellaneous. _____________ 8.1 Entire Agreement; Amendment. This Agreement ___________________________ constitutes the entire agreement of the parties with regard to the subjects hereof and may be amended only by written agreement between the Company and Recipient. 8.2 Notices. Any notice required or permitted under this _______ Agreement shall be in writing and shall be deemed sufficient when delivered personally to the party to whom it is addressed or when deposited into the United States Mail as registered or certified mail, return receipt requested, postage prepaid, addressed to the Company, Attention: Secretary, at its principal executive offices or to Recipient at the address of Recipient in the Company's records, or at such other address as such party may designate by ten (10) days' advance written notice to the other party. 8.3 No Assignment; Rights and Benefits. Recipient shall __________________________________ not sell, assign, pledge or otherwise transfer this Agreement or any rights hereunder, whether voluntarily or by operation of law, or by gift, bequest or otherwise. Any purported sale, assignment, pledge or transfer by Recipient shall be null and void. The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company's successors and assigns and, subject to the foregoing restriction on assignment, be binding upon Recipient's heirs, executors, administrators, successors and assigns. 8.4 Further Action. The parties agree to execute such ______________ further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement. 8.5 Applicable Law; Attorneys' Fees. The terms and _______________________________ conditions of this Agreement shall be governed by the laws of the State of Oregon. In the event either party institutes litigation hereunder, the prevailing party shall be entitled to reasonable attorneys' fees to be set by the trial court and, upon any appeal, the appellate court. 8.6 Headings. The headings in this Agreement are for ________ convenience only and will not control or affect the meaning or construction of the provisions of this Agreement. 8.7 Counterparts. This Agreement may be executed in two ____________ or more counterparts, each of which shall be deemed an original. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. NIKE, INC. By _________________________ Title ______________________ RECIPIENT _____________________________