NOTE 11 — Common Stock and Stock-Based Compensation

The authorized number of shares of Class A Common Stock, no par value, and Class B Common Stock, no par value, are 200 million and 1,200 million, respectively. Each share of Class A Common Stock is convertible into one share of Class B Common Stock. Voting rights of Class B Common Stock are limited in certain circumstances with respect to the election of directors. There are no differences in the dividend and liquidation preferences or participation rights of the Class A and Class B common shareholders.

In 1990, the Board of Directors adopted, and the shareholders approved, the NIKE, Inc. 1990 Stock Incentive Plan (the “1990 Plan”). The 1990 Plan provides for the issuance of up to 326 million previously unissued shares of Class B Common Stock in connection with stock options and other awards granted under the plan. The 1990 Plan authorizes the grant of non-statutory stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, and performance-based awards. The exercise price for stock options and stock appreciation rights may not be less than the fair market value of the underlying shares on the date of grant. A committee of the Board of Directors administers the 1990 Plan. The committee has the authority to determine the employees to whom awards will be made, the amount of the awards, and the other terms and conditions of the awards. Substantially all stock option grants outstanding under the 1990 Plan were granted in the first quarter of each fiscal year, vest ratably over four years, and expire 10 years from the date of grant.

The following table summarizes the Company’s total stock-based compensation expense recognized in selling and administrative expense:



	Year Ended May 31,
(In millions)	2013		2012		2011
Stock options⁽¹⁾	$	123	$	96	$	77
ESPPs	19		16		14
Restricted stock	32		18		14
TOTAL STOCK-BASED COMPENSATION EXPENSE	$	174	$	130	$	105


(1)	Expense for stock options includes the expense associated with stock appreciation rights. Accelerated stock option expense is recorded for employees eligible for accelerated stock option vesting upon retirement. Accelerated stock option expense for years ended May 31, 2013, 2012, and 2011 was $22 million, $17 million, and $12 million, respectively.

As of May 31, 2013, the Company had $199 million of unrecognized compensation costs from stock options, net of estimated forfeitures, to be recognized as selling and administrative expense over a weighted average period of 2.3 years.

The weighted average fair value per share of the options granted during the years ended May 31, 2013, 2012, and 2011, as computed using the Black-Scholes pricing model, was $12.71, $11.08, and $8.84, respectively. The weighted average assumptions used to estimate these fair values are as follows:



	Year Ended May 31,
	2013		2012		2011
Dividend yield	1.5	%	1.4	%	1.6	%
Expected volatility	35.0	%	29.5	%	31.5	%
Weighted average expected life (in years)	5.3		5.0		5.0
Risk-free interest rate	0.6	%	1.4	%	1.7	%

The Company estimates the expected volatility based on the implied volatility in market traded options on the Company’s common stock with a term greater than one year, along with other factors. The weighted average expected life of options is based on an analysis of historical and expected future exercise patterns. The interest rate is based on the U.S. Treasury (constant maturity) risk-free rate in effect at the date of grant for periods corresponding with the expected term of the options.

The following summarizes the stock option transactions under the plan discussed above:



	Shares ⁽¹⁾		Weighted Average Option Price
	(In millions)
Options outstanding May 31, 2010	72.2		$	23.30
Exercised	(14.0	)	21.35
Forfeited	(1.3	)	29.03
Granted	12.7		34.60
Options outstanding May 31, 2011	69.6		$	25.65
Exercised	(18.0	)	22.81
Forfeited	(1.0	)	35.61
Granted	13.7		45.87
Options outstanding May 31, 2012	64.3		$	30.59
Exercised	(9.9	)	24.70
Forfeited	(1.3	)	40.14
Granted	14.6		46.55
Options outstanding May 31, 2013	67.7		$	34.72
Options exercisable at May 31,
2011	40.1		$	22.03
2012	33.9		24.38
2013	35.9		27.70


(1)	Includes stock appreciation rights transactions.

The weighted average contractual life remaining for options outstanding and options exercisable at May 31, 2013 was 6.3 years and 4.7 years, respectively. The aggregate intrinsic value for options outstanding and exercisable at May 31, 2013 was $1,823 million and $1,218 million, respectively. The aggregate intrinsic value was the amount by which the market value of the underlying stock exceeded the exercise price of the options. The total intrinsic value of the options exercised during the years ended May 31, 2013, 2012, and 2011 was $293 million, $453 million, and $267 million, respectively.

In addition to the 1990 Plan, the Company gives employees the right to purchase shares at a discount to the market price under employee stock purchase plans (“ESPPs”). Employees are eligible to participate through payroll deductions of up to 10% of their compensation. At the end of each six-month offering period, shares are purchased by the participants at 85% of the lower of the fair market value at the beginning or the end of the offering period. Employees purchased 1.6 million, 1.7 million, and 1.6 million shares during each of the three years ended May 31, 2013, 2012 and 2011, respectively.

From time to time, the Company grants restricted stock units and restricted stock to key employees under the 1990 Plan. The number of shares underlying such awards granted to employees during the years ended May 31, 2013, 2012, and 2011 were 1.6 million, 0.7 million, and 0.4 million with weighted average values per share of $46.86, $49.49, and $35.11, respectively. Recipients of restricted stock are entitled to cash dividends and to vote their respective shares throughout the period of restriction. Recipients of restricted stock units are entitled to dividend equivalent cash payments upon vesting. The value of all grants of restricted stock and restricted stock units was established by the market price on the date of grant. During the years ended May 31, 2013, 2012, and 2011, the aggregate fair value of restricted stock and restricted stock units vested was $25 million, $22 million, and $15 million, respectively, determined as of the date of vesting.