8-KLeadership ChangesExhibits & Filings

NIKE, Inc. 8-K Report, Executive Changes (Jul 24, 2008)

Filed July 24, 2008For Securities:NKE

Summary

This 8-K filing from NIKE, Inc., dated July 24, 2008, announces the execution of Amended and Restated Covenant Not to Compete and Non-Disclosure Agreements with two key executives, Mark G. Parker and Charles D. Denson. The primary purpose of these amendments is to ensure compliance with Section 409A of the Internal Revenue Code, which governs deferred compensation arrangements. For investors, the key takeaway is that these agreements have been updated to avoid potential tax penalties for the named executives. Specifically, any payments that would normally be made during a two-year non-competition period following termination of employment (whether voluntary or involuntary) will now be delayed by six months after the executive's separation from service. This delay is a necessary adjustment to comply with Section 409A. The company will accumulate these delayed payments and issue them in a lump sum, with interest, after the six-month waiting period.

Key Highlights

  • 1NIKE, Inc. amended and restated non-compete and non-disclosure agreements with executives Mark G. Parker and Charles D. Denson.
  • 2The amendments are specifically to comply with Section 409A of the Internal Revenue Code.
  • 3The goal of the amendments is to prevent tax penalties for the executives related to deferred compensation.
  • 4Non-compete payments, previously made monthly during a two-year post-termination period, will now be delayed for six months after the executive's separation from service.
  • 5Payments due before the six-month mark will be paid in a lump sum, with interest, after the waiting period.
  • 6The non-compete period remains two years following termination of employment.
  • 7The filing includes the amended agreements as exhibits (10.1 and 10.2).

Frequently Asked Questions

The main reason is to ensure compliance with Section 409A of the Internal Revenue Code, which regulates non-qualified deferred compensation plans and aims to prevent tax penalties for the executives involved.

For executives Mark G. Parker and Charles D. Denson, any payments related to their non-compete agreements that would have been made within the first six months after their separation from service will now be delayed and paid in a lump sum after that six-month period, along with accrued interest. This is a timing adjustment to comply with tax regulations, not a reduction in the total potential payment.

No, this filing does not indicate any departures or changes in leadership. It specifically pertains to the amendment of existing agreements with Mark G. Parker and Charles D. Denson to ensure compliance with tax laws.

Section 409A of the Internal Revenue Code sets strict rules for when deferred compensation can be paid out. Failure to comply with these rules can result in significant tax penalties for the executive, including immediate taxation on all vested deferred compensation, plus an additional 20% penalty tax and potential interest charges. The amendments to NIKE's agreements are designed to avoid these penalties.