Nike (NKE)

Performance-Based Long-Term Incentive Plan

The first component in our long-term portfolio mix is performance-based awards payable in cash under our Long-Term Incentive Plan (“LTIP”). As with the annual bonus, the LTIP follows our “pay for performance’ philosophy. If we exceed our targets, we will pay more; if we fall short, we will pay less or nothing at all. This program causes our executives to focus on overall, long-term financial performance, and is intended to reward them for improving shareholder returns. At the beginning of each fiscal year, the Committee establishes performance goals and potential cash payouts for the next three fiscal years for all executives under the LTIP. LTIP measures for all executives are based 50% on cumulative revenues for the three-year performance period and 50% on cumulative diluted earnings per share (“EPS”) for the period, in each case excluding the effect of acquisitions, divestitures and accounting changes.

In June 2008, the Committee approved LTIP awards to all Named Executive Officers for the fiscal 2009-2011 performance period. Target award levels were approved for each Named Executive Officer, with the threshold award equal to 50% of the target award and the maximum award equal to 200% of the target award. The target awards were $2,000,000 for Mr. Parker, $1,500,000 for Mr. Denson and $500,000 for Mr. Blair, Mr. DeStefano and Mr. Edwards. The target awards for Mr. Parker, Mr. Denson, Mr. Blair, Mr. DeStefano, and Mr. Edwards were increased from the prior year target awards of $1,500,000, $1,000,000, $300,000, $300,000, and $300,000, respectively, reflecting the Committee’s desire to have a higher portion of their compensation dependent on achievement of these long-term growth measures. The Committee sets these target LTIP levels each year based on its judgment of what it believes to be a desirable mix of long-term compensation, the impact of the position in the Company, and of what it finds to be competitive with our peer group of companies and our competitors, while maintaining internal pay equity for comparable positions.

For the fiscal 2009-2011 performance period, the cumulative revenue necessary to achieve the target award payout corresponds to a compounded annual growth rate (“CAGR”) in revenues of 8% from fiscal 2008 results of $18,557 million, which was adjusted to account for the acquisition of Umbro plc and the divestitures of NIKE Bauer Hockey and the Starter brand of Exeter Brands Group, all of which occurred in fiscal 2008. The 50% threshold payout requires cumulative revenues corresponding to a 4% CAGR, and the 200% maximum payout requires cumulative revenues corresponding to an 13.1% CAGR. The Committee set the CAGR for the target award payout level (the calculation of which excludes the effect of

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any acquisitions during the performance period) to correspond to our long-term financial goal of high single digit revenue growth including the effect of acquisitions. For EPS over the fiscal 2009-2011 performance period, the target payout requires cumulative EPS corresponding to a 13% CAGR from fiscal 2008 results of $3.39, which was adjusted to account for the acquisition of Umbro plc and the divestitures of NIKE Bauer Hockey and the Starter brand of Exeter Brands Group, all of which occurred in fiscal 2008. The 50% threshold payout requires cumulative EPS corresponding to an 6.5% CAGR, and the 200% maximum payout requires cumulative EPS corresponding to a 23.2% CAGR. The Committee set the CAGR for the target award payout level (the calculation of which excludes the effect of any acquisitions during the performance period) to correspond to our long-term financial goal of mid-teens EPS growth including the effect of acquisitions. The total payout percentage will be the average of the payout percentages determined for cumulative revenues and cumulative EPS, respectively.

Our executive officers were eligible to receive similar LTIP awards set in June 2006 covering the fiscal 2007-2009 performance period. Based on our performance over the last three fiscal years, the maximum 150% payout percentage under these awards was earned. Cumulative revenues for the period were $54,260 million after adjustment to eliminate the effects of the acquisition of Umbro plc, and the divestitures of NIKE Bauer Hockey and the Starter brand of Exeter Brands Group, all of which occurred in fiscal 2008, or 108% of the target payout level for revenue and a 9.8% CAGR, which corresponded to a 150% payout level for revenues. Cumulative EPS for the period, after adjustment to eliminate the effects of the acquisition of Umbro Ltd. and the divestitures of NIKE Bauer Hockey and the Starter brand of Exeter Brands Group, was $10.09, or 108% of the target payout level for EPS and a 12.6% CAGR, which corresponded to a 150% payout level for EPS. The total payout percentage was the average of the payout percentages determined for cumulative revenues and cumulative EPS, respectively.

Performance-Based Long-Term Incentive Plan

The first component in our long-term portfolio mix is performance-based awards payable in cash under our Long-Term Incentive Plan (“LTIP”). As with the annual bonus, the LTIP follows our “pay for performance’ philosophy. If we exceed our targets, we will pay more; if we fall short, we will pay less or nothing at all. This program causes our executives to focus on overall, long-term financial performance, and is intended to reward them for improving shareholder returns. At the beginning of each fiscal year, the Committee establishes performance goals and potential cash payouts for the next three fiscal years for all executives under the LTIP. LTIP measures for all executives are based 50% on cumulative revenues for the three-year performance period and 50% on cumulative diluted earnings per share (“EPS”) for the period, in each case excluding the effect of acquisitions, divestitures and accounting changes.

In June 2007, the Committee approved LTIP awards to all Named Executive Officers for the fiscal 2008-2010 performance period. Target award levels were approved for each Named Executive Officer, with the threshold award equal to 50% of the target award and the maximum award equal to 200% of the target award. The target awards were $1,500,000 for Mr. Parker, $1,000,000 for Mr. Denson and $300,000 for Mr. Blair, Mr. DeStefano and Mr. Edwards. The target awards for Mr. Parker and Mr. Denson were increased from $600,000 and $500,000, respectively, in the prior year, reflecting the Committee’s desire to have a higher portion of their compensation dependent on achievement of these long-term growth measures. Target award levels for the other Named Executive Officers remained at the same levels approved each year since 2003. The Committee sets these target LTIP levels each year based on its judgment of what it believes to be a desirable mix of long-term compensation, the impact of the position in the Company, and of what it finds to be competitive with our peer group of companies and our competitors, while maintaining internal pay equity for comparable positions.

For the fiscal 2008-2010 performance period, the cumulative revenue necessary to achieve the target award payout corresponds to a compounded annual growth rate (“CAGR”) in revenues from fiscal 2007 results of 8%. The 50% threshold payout requires cumulative revenues corresponding to a 5.3% CAGR,

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and the 200% maximum payout requires cumulative revenues corresponding to a 11.5% CAGR. The Committee set the CAGR for the target award payout level (the calculation of which excludes the effect of any acquisitions during the performance period) to correspond to our long-term financial goal of high single digit revenue growth including the effect of acquisitions. For EPS over the fiscal 2008-2010 performance period, the target payout requires cumulative EPS corresponding to a 13% CAGR from fiscal 2007 results. The 50% threshold payout requires cumulative EPS corresponding to an 8.5% CAGR, and the 200% maximum payout requires cumulative EPS corresponding to a 20.1% CAGR. The Committee set the CAGR for the target award payout level (the calculation of which excludes the effect of any acquisitions during the performance period) to correspond to our long-term financial goal of mid-teens EPS growth including the effect of acquisitions. The total payout percentage will be the average of the payout percentages determined for cumulative revenues and cumulative EPS, respectively.

Our executive officers were eligible to receive similar LTIP awards set in June 2005 covering the fiscal 2006-2008 performance period. Based on our performance over the last three fiscal years, the maximum 150% payout percentage under these awards was earned. Cumulative revenues for the period were $49,954 million after adjustment to eliminate the effects of the acquisition of Umbro plc, and the divestitures of NIKE Bauer Hockey and the Starter brand of Exeter Brands Group, all of which occurred in fiscal 2008, or 108% of the target payout level for revenue and a 10.8% CAGR, which corresponded to a 150% payout level for revenues. Cumulative EPS for the period, after adjustment to eliminate the effects of the acquisition of Umbro Ltd., and the divestitures of NIKE Bauer Hockey and the Starter brand of Exeter Brands Group, as well as FAS 123R expense from fiscal 2007 and 2008, was $18.96, or 112% of the target payout level for EPS and an 18.5% CAGR, which corresponded to a 150% payout level for EPS. The total payout percentage was the average of the payout percentages determined for cumulative revenues and cumulative EPS, respectively.

Performance-Based Long-Term Incentive Plan

The first component in our long-term portfolio mix is performance-based awards payable in cash under our Long-Term Incentive Plan (“LTIP”). As with the annual bonus, the LTIP follows our “pay for

31

performance’ philosophy. If we exceed our targets, we will pay more; if we fall short, we will pay less or nothing at all. This program causes our executives to focus on overall, long-term financial performance, and is intended to reward them for improving shareholder returns. At the beginning of each fiscal year, the Committee establishes performance goals and potential cash payouts for the next three fiscal years for all executive officers under the LTIP. LTIPs for all executives are based 50% on cumulative revenues for the three-year performance period and 50% on cumulative diluted earnings per share before the effect of acquisitions, divestitures and accounting changes (“EPS”) for the period.

In June 2006, the Committee approved LTIP awards to all Named Executive Officers for the fiscal 2007-2009 performance period. Target award levels were approved for each executive, with the threshold award equal to 10% of the target award and the maximum award equal to 150% of the target award. The target awards were $600,000 for Mr. Parker, $500,000 for Mr. Denson and $300,000 for Mr. Blair, Mr. DeStefano and Mr. Stewart. These were the same LTIP target award levels approved for the Named Executive Officers each year since 2003, except that Mr. Parker’s target LTIP award was $500,000 for his last three annual LTIP awards made prior to becoming Chief Executive Officer. The Committee sets these target LTIP levels each year based on the desired mix of long-term compensation and its judgment of what it finds to be competitive with our peer group of companies and our competitors, while maintaining internal pay equity.

For the fiscal 2007-2009 performance period, the cumulative revenue necessary to achieve the target award payout corresponds to a compounded annual growth rate (“CAGR”) in revenues from fiscal 2006 results of 6%, the 10% threshold payout requires cumulative revenues corresponding to a 1.4% CAGR, and the 150% maximum payout requires cumulative revenues corresponding to a 7.8% CAGR. The Committee set the CAGR for maximum payout levels to correspond to our long-term financial goal of high single digit revenue growth. The target award payout level is lower than this long-term financial goal in part because the performance goal calculation excludes any benefit from acquisitions during the performance period.

In setting the target level EPS goal for the fiscal 2007-2009 performance period, the Committee recognized that the adoption of FAS 123R by us in fiscal 2007 would have a significant impact on EPS for this performance period. Our EPS for fiscal 2006 was $5.28, and we estimated that FAS 123R would have a $0.37 impact on fiscal 2007 results. The Committee desired to set a three-year EPS target based on a 12% CAGR from fiscal 2006 results, adjusted for the effect of FAS 123R in 2007, to measure performance on a comparable basis. Accordingly, in calculating the CAGR for the first year of the performance period, the target EPS was reduced by $0.37 to provide comparability. For EPS over the performance period, the target payout requires a FAS 123R-adjusted cumulative EPS corresponding to a 12% CAGR from fiscal 2006 results, the 50% threshold payout requires cumulative EPS corresponding to an 9.2% CAGR, and the 200% maximum payout requires cumulative EPS corresponding to a 13.9% CAGR. The Committee set the CAGR for maximum payout levels to correspond to our long-term financial goal of mid-teens EPS growth. The target award payout level is lower than this long-term financial goal in part because the performance goal calculation excludes any benefit from acquisitions during the performance period. The total payout

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percentage for all participants will be the average of the payout percentages determined for cumulative revenues and cumulative EPS, respectively.

As described in Proposal 2 in this proxy statement, in June 2007, the Committee set target award payout levels for the fiscal 2008-2010 performance period based on higher three-year performance targets of an 8% CAGR in revenues, and a 13% CAGR in EPS, with higher payouts of up to 200% of the target payout for higher growth rates, and no payout below the 50% payout level. The Committee intends the higher performance targets to be more aligned with our long-term growth goals, excluding acquisitions. The Committee also increased the target award amounts for Mr. Parker and Mr. Denson to $1,500,000 and $1,000,000, respectively reflecting the Committee’s desire to have a higher portion of their compensation dependent on achievement relative to these long-term growth measures.

Our executive officers were eligible to receive similar LTIP awards set in June 2004 covering the fiscal 2005-2007 performance period. Based on our performance over the last three fiscal years, the maximum 150% payout percentage under these awards was earned. Cumulative revenues for the period were $44,890 million after adjustment to eliminate revenues resulting from our August 2004 acquisition of Official Starter LLC (the “Exeter Acquisition”), or 108.6% of the target payout level, which corresponded to the 150% payout level for revenues. Cumulative EPS for the period, after adjustment to eliminate FAS 123R expense from fiscal 2007 and EPS as a result of the Exeter Acquisition, was $15.97, or 120.3% of the target payout level, which corresponded to the 150% payout level for EPS. The total payout percentage was the average of the payout percentages determined for cumulative revenues and cumulative EPS, respectively.