Resignation - William D. Perez

 

January 20, 2006

 

Board of Directors

NIKE, Inc.

One Bowerman Drive

Beaverton, Oregon 97005-6453

 

Re:   Resignation

      ___________

 

Dear Board Members:

 

     I have discussed with Chairman Phil Knight my continued service to

NIKE and the Board, and for various reasons unrelated to my performance,

I believe it may be best for me to resign as a director and officer of

NIKE, Inc.

 

     Accordingly, I am tendering my resignation to the Board upon the

condition that the Company agrees to treat the resignation as a

"termination without cause" under my employment agreement, in which

case the severance and vesting provisions shall apply upon termination

of my employment.  The Company will also agree to purchase my Portland

house for my original purchase price plus subsequent remodeling

expenses and purchases, and reimburse me for or provide certain other

transitional expenses and services that I have outlined to Lindsay

Stewart.  The resignation will be effective upon the Board's acceptance

of my resignation on these terms.

 

     While my employment agreement gives me an opportunity to be

notified of and to resolve any issues or concerns of the Board, I

understand the issues related to my resignation, and do not desire to

resolve them, so I waive that provision in the agreement.  I also agree

to release the Company from any liability related to my employment or

resignation, and I reaffirm my obligations under my non-competition

agreement.

 

     If this resignation is acceptable, kindly countersign this letter.

It has been a pleasure working with you.

 

                              Very truly yours,

 

 

                              William D. Perez

 

 

 

Accepted on behalf of the Company:

 

By:  ________________________________

 

Title:  _____________________________

 

 

 

 
 
 
                             WILLIAM D. PEREZ
                             ________________
 
                            TERMS OF EMPLOYMENT
                            ___________________
 
 
 
1.     Effective Date.
       ______________
 
       Your employment will commence on December 28, 2004.
 
2.     Position.
       ________
 
     President and Chief Executive Officer of Nike, Inc. reporting to
the Nike Board of Directors.  In addition, you will be appointed to the
Board of Directors of Nike upon commencement of your employment and
subsequently stand for election at Nike's annual shareholder meeting in
September 2005.
 
3.     Base Salary and Performance Sharing Plan.
       ________________________________________
 
     Your initial base salary shall be $1,350,000 per year.  In
addition, you will be eligible for an annual bonus payable in August of
each year under Nike's Performance Sharing Plan (PSP).  Your target
bonus will equal 125% of your fiscal year base earnings, with the
performance measure being based on achievement of Nike, Inc. pre-tax
income goals.  Your fiscal 2005 base earnings will equal five months'
salary, or $562,500, and, in addition, your fiscal year 2005 bonus,
while not technically covered by the PSP, will be on the same terms as
the 2005 PSP awards to other executives except that you will be
guaranteed a payout of at least 100% of the target rate or $703,125
(125% of $1,350,000 = $1,687,500 multiplied by 5/12 of a year =
$703,125).  Your actual bonus award can increase up to 150% of your
target rate in the event Nike exceeds its pre-tax income goals.
 
4.     Annual Stock Grants.
       ___________________
 
 
       a.     Stock Options
              _____________
 
         You will be eligible to receive an annual stock option grant
     under Nike's Stock Incentive Compensation Plan beginning with the
     fiscal 2006 grant cycle, subject to Plan rules and final approval
     by the Nike Board of Directors.  Annual grants are traditionally
     made in July, thus July 2005, would be your first annual grant
     date.  The size of the award would be commensurate with
     performance; provided, however, your annual grants will be for no
     less than 150,000 shares.  The ten year option rights would vest at
     the rate of one-fourth per year over four years and be priced at
     the closing price on the day before the grant date.
 
       b.     Restricted Stock
              ________________
 
         You will also receive an annual restricted stock grant under
     the aforementioned Plan.  These grants will also be made in July of
     each year, with your first annual grant being in July 2005.  The
     size of the grants would be commensurate with performance, but in
     no event be valued at less than $2,000,000 per year.  These rights
     will also vest at the rate of one-fourth per year over the four
     years following the date of grant.
 
5.     Long Term Incentive Plan (LTIP).
       _______________________________
 
     In July 2005, you will receive a target award in Nike's '06-'08
LTIP on terms determined by the Compensation Committee.  Your target
award will be $600,000 delivered in cash or Nike stock.  The actual
award will be 0-150% of the target award depending on Nike achieving
both EPS and revenue goals.  Also in July 2005, you will receive (a) a
$600,000 target award in a special '06-'07 LTIP that will have EPS and
revenue goals consistent with the remaining performance in Nike's
existing '05-'07 LTIP, and (b) a $283,000 target award in a special '06
LTIP that will have EPS and revenue goals consistent with the remaining
performance in Nike's existing '04-'06 LTIP.  Although you will not
participate in the '03-'05 LTIP or any corresponding LTIP, you will be
paid an additional cash bonus in August 2005 equal to the amount you
would have received if you had been a participant in the '03-'05 LTIP
with an $83,000 target award.
 
6.     Employee Benefit Plans.
       ______________________
 
     Of course, as a Nike employee, you will be eligible to participate
in the company's 401k and Profit Sharing Plans.  Under the former, Nike
matches 100% of the employee's first 4% of compensation contributed to
the Plan.  The company makes a "make up" contribution each year to the
non-qualified Nike Deferred Compensation Plan equal to the profit
sharing percentage for the year under the Profit Sharing Plan multiplied
by your salary and bonus in excess of the indexed cap ($210,000 in 2005)
on salary and bonus eligible under IRS regulations for profit sharing
under the qualified Profit Sharing Plan.  The company also provides
typical medical and life insurance options, as well as vacation and
other welfare benefits.  You will be credited initially with five weeks'
paid time off (PTO) per year.
 
7.     Initial Incentives.
       __________________
 
       a.     Stock Options
              _____________
 
         Upon commencement of employment, you will be granted the option
     (under the previously described incentive plan) to purchase 200,000
     shares of Nike Class B common stock, with an exercise price equal
     to the closing price on the day before the stock option is granted.
     These ten year options will vest at the rate of one-third per year
     over three years.
 
       b.     Restricted Stock
              ________________
 
         Upon commencement of employment, you will also be granted
     100,000 shares of restricted stock, which will likewise vest at the
     rate of one-third per year over three years.
 
       c.     Relocation Assistance
              _____________________
 
         Nike's general relocation policy, which covers almost all
     moving costs, will apply to assist you in moving to the Portland,
     Oregon, area and an additional cash payment of $50,000 will be
     provided to cover incidental expenses of such a move.
 
8.     Employment Status and Early Termination of Employment.
       _____________________________________________________
 
     As an employee of Nike, your employment will be "at will" and
terminable by either you or Nike at any time.  However, if, within the
first three years of your employment, Nike terminates your employment
without cause (where "cause" would be limited to acts of dishonesty,
insubordination or substantial repeated neglect of material duties) or
you resign for good reason (where "good reason" would be any of a
material breach of this Agreement by Nike, a material change, without
your consent, in the title, functions and reporting relationships of
your position (including removal or failure to re-elect you to the
Board), or if you are required, without your consent, to relocate your
office more than 35 miles from Beaverton, Oregon), you will receive  a
lump sum severance within thirty days of termination equal to two years'
base salary plus your actual PSP bonus for the fiscal year of separation
from Nike based on Nike, Inc. performance or the full year's PSP bonus
at your target rate, whichever is greater.  In addition, you will vest
in the restricted stock and stock options granted at initial employment,
but not in rights subsequently granted.  If Nike terminates your
employment without cause or you resign for good reason at any time after
your first three years of employment, you will receive severance equal
to two years' base salary.  Upon a termination without cause or for good
reason at any time, you will have continued exercisability of the stock
options granted at initial employment for three years (or for the
unexpired term of the options if less).  You will not have a duty to
mitigate or to seek employment elsewhere as a condition to receiving
your severance payments.  Such payments shall in no event be reduced by
any income earned from subsequent employment or self-employment.
 
     In any event, it is understood that before a decision to terminate
your employment is made, you will be apprised in writing of the issues
or concerns of the Board of Directors that might lead to termination,
and be given an opportunity over a period of not less than thirty days
to attempt to resolve such concerns.  Of course, the ultimate
disposition of the matter will be up to the Board.
 
 
9.     Non-Competition and Indemnification.
       ___________________________________
 
     Given your position, it is Nike's policy, and the Board of
Directors will expect you to sign, a Non-Compete Agreement when you
begin employment with Nike.
 
     As a director and executive officer of Nike, the company provides
the protection of an Indemnity Agreement, indemnifying you against
claims asserted against you as a result of your status as a director and
executive officer, or as a result of actions taken or not taken in the
performance of your executive responsibilities.  This Agreement details
the indemnification provisions of the company's by-laws and is secured
by the company's credit as well as Directors' and Officers' coverage,
the current program providing $100 million of coverage in excess of the
company's $25 million deductible.  (The deductible does not apply to
Side A coverage which insures directors and officers directly when there
is no corporate indemnification available.)
 
 
 
Nike, Inc.
 
______________________________          ________________________________
Lindsay D. Stewart                      William D. Perez
Vice President & Chief of Staff         Dated:__________________________
Dated:________________________
 
 
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