Document:

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                                                                   Exhibit 10.12

                              EMPLOYMENT AGREEMENT

        THIS AGREEMENT, made this 6th day of September 2000, between NIKE, Inc.,
(hereinafter "Nike"), and Mindy Grossman (hereinafter "Executive").

        In consideration of the mutual covenants and promises contained herein,
Nike and Executive agree as follows:

        1. EMPLOYMENT.

           A. Position. Executive is hereby employed by Nike to serve as its
Vice President, Apparel. This position will be designated as a Corporate Officer
subject to approval within 30 days of the parties' execution of this Agreement
by the Nike Board of Directors (the "Board"). The position will report to Phil
Knight, CEO of Nike, or his successor, with respect to the functions related to
global apparel, and to Charlie Denson, or his successor, Vice President and
General Manager, Nike USA, with respect to functions related to US Region
apparel. In the event the Board fails to grant such approval, at Executive's
option, the Agreement is terminated and Executive will receive and otherwise not
forfeit (a) the sign-on bonus then received under Paragraph 3(D); and (b) any
stock granted and vested under the initial stock grant received under Paragraph
4(D). This amount shall be deemed full and final severance pay for all services
provided to Nike by Executive and shall be Executive's sole and exclusive remedy
for termination of this Agreement.

           B. Best Efforts. Executive agrees to faithfully perform her duties as
Vice President, Apparel, to the best of her ability, experience and talent, and
to the reasonable satisfaction of Nike.

           C. Place of Performance. Executive shall carry out her
responsibilities at an office location in Manhattan, New York City, New York.
The office, furnishings, equipment and one "full time equivalent" ("FTE")
support personnel shall be provided by Nike, and commensurate with Executive's
senior executive status. In recognition of the fact that Executive's principal
residence is located in New York City, New York, Executive shall not be required
to relocate from the New York Metropolitan area during the term of this
Agreement, except as may be mutually agreed upon by Nike and Executive. In the
event Executive agrees to relocate to the Portland Metropolitan area, Nike will
pay reasonable relocation expenses in accordance with applicable Nike policy.

        2. TERM OF EMPLOYMENT. The term of this Agreement shall commence in
September 2000 on a date to be determined and shall terminate on the third
anniversary of such date, subject to prior termination as hereinafter provided
in Paragraph 9.

        3. COMPENSATION. During the period of time Executive is employed by Nike
under this Agreement, Executive shall be compensated as follows:

           A. Base Salary. Executive's initial base salary shall be at the rate
of Six Hundred Thousand Dollars ($600,000) per annum. Upon the first anniversary
of the Agreement, Executive's base salary shall be increased to no less than Six
Hundred Fifty Thousand Dollars ($650,000) per annum. Upon the second anniversary
of the Agreement, Executive's base salary shall be increased to no less than
Seven Hundred Fifty Thousand Dollars ($750,000) per annum.

           B. Performance Sharing Bonus. Executive will be eligible to
participate in Nike's incentive bonus Performance Sharing Plan (PSP): As an
executive-level employee, Executive will have an incentive bonus target of sixty
percent (60%) of Executive's base pay received during the proceeding fiscal
year, except that the incentive bonus target for the fiscal year ending May 31,
2001 will be $360,000, provided that Executive commences employment by March 1,
2001. Executive's individual incentive bonus may be higher or lower than the
target amount depending upon company and individual performance and future
changes to the plan.

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           C. Long-Term Incentive Award. In addition, Executive will be eligible
for a Long-Term Incentive award in accordance with the terms of the NIKE, Inc.
Long-Term Incentive Plan (LTIP) attached as Exhibit A and by this reference made
a part of this Agreement. Executive's target award under the LTIP is Two Hundred
Thousand Dollars ($200,000) per plan year. LTIP awards are to be paid out in
shares of NIKE, Inc. Class B Common Stock (Restricted Shares), subject to the
restrictions set forth in the plan and Restricted Stock Bonus Agreement to be
signed by Executive. All of the Restricted Shares awarded under the LTIP shall
be initially unvested and shall vest on the third anniversary of the grant date.

           D. Sign-On Bonus. Executive shall receive a one-time "signing" bonus
upon execution of this Agreement in the amount of Two Hundred Fifty Thousand
Dollars ($250,000), less withholdings. In addition, Executive shall be eligible
for a bonus of One Hundred Fifty Thousand Dollars ($150,000), less withholdings,
payable within fourteen calendar days of the first anniversary of the Agreement,
dependent upon Executive meeting the apparel business goals mutually agreed upon
by Executive and the Vice President and General Manager, USA Region, and set
forth in Schedule A, attached.

        4. STOCK OPTIONS. Subject to the terms of the NIKE, Inc. 1990 Stock
Incentive Plan, as amended from time to time:

           A. Initial Stock Option Grant. Upon initial employment, and subject
to executing a Stock Option Agreement in the form attached hereto as Exhibit C,
Executive will be granted the option to purchase One Hundred Thousand (100,000)
shares of NIKE, Inc. Class B Common Stock at the market price of such shares at
the close of trading on the date the options are granted. The options shall be
granted on or about the first day after Executive begins employment. The right
to purchase shares granted in the initial stock option grant shall accrue with
respect to one-third (33 1/3%) of the shares on each of the three succeeding
anniversaries of the grant date.

           B. Annual Stock Option Grants. During the term of this Agreement,
Executive annually will be eligible for at least Thirty Thousand (30,000)
additional shares of NIKE, Inc. Class B Common Stock at the market price of such
shares at the close of trading on the date the options are granted. These
options are typically granted in July of each year. To be eligible for the
annual grant of stock options, Executive must be employed by Nike as of the
close of the Fiscal Year (May 31st). The right to purchase shares with respect
to annual stock option grants shall accrue with respect to one-fourth (25%) of
the shares on each of the four succeeding anniversaries of the grant date.

           C. Restricted Stock Grant. In addition, subject to executing a
Restricted Stock Bonus Agreement in the form attached hereto as Exhibit B and by
this reference made a part of this Agreement, Executive shall be granted such
number of shares of NIKE, Inc. Class B Common Stock (Restricted Shares) as are
sufficient to equal a market price of Six Hundred Sixty Seven Thousand Dollars
($667,000) at the close of trading on the date of this Agreement. Such
Restricted Shares are subject to the restrictions set forth in the attached
Restricted Stock Bonus Agreement. All of the Restricted Shares shall be
initially unvested, and shall vest with respect to one-half (50%) of the total
Restricted Shares on each of the two succeeding anniversaries of the grant date.

           D. Initial Stock Grant. In addition, upon execution of this
Agreement, Executive shall be granted such number of shares of NIKE, Inc. Class
B Common Stock as are sufficient to equal a market price of Three Hundred Thirty
Three Thousand Dollars ($333,000) at the close of trading on the date of this
Agreement. All of the shares granted pursuant to this section shall be fully
vested at the time of grant.

        5. TRAVEL AND EXPENSES.

           A. Car/Apartment Expenses. During the first year of this Agreement,
Nike shall reimburse Executive up to Fifty Thousand Dollars ($50,000) of the
costs related to the operation of a car, including garage parking, gasoline,
automobile insurance, automobile leasing, maintenance and repairs, and the costs
related to the lease of an apartment, including real estate broker fees,
apartment security fees, home insurance, home maintenance and repairs, and home
cleaning service fees.

           B. New York-Portland Travel Expenses. During the term of this
Agreement, Executive will be required by Nike to travel between New York City
and Portland, Oregon, on a reasonable basis and according to a schedule

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mutually acceptable to the parties. Nike shall reimburse Executive for all
reasonable travel expenses incurred by Executive for travel between New York
City and Portland, Oregon, by Executive and her immediate family. Executive and
her immediate family shall be entitled to business class or first class travel
commensurate with Executive's position as a senior executive employee of Nike.

           C. Other Business Travel and Entertainment Expenses. During the term
of this Agreement, Nike shall reimburse Executive for all reasonable expenses
incurred by Executive in connection with the performance of her duties to Nike
in accordance with applicable Nike policy.

        6. BENEFITS. As a senior executive of Nike, Executive shall be entitled
to participate in Nike's 401(k) plan, medical, dental, life and disability
insurance plans, deferred compensation plan and such other benefit plans and
packages that now are or may hereafter become available to senior executive
employees of Nike in accordance with terms of those respective plans.

        7. CONFIDENTIALITY AND COVENANT NOT TO COMPETE. As a condition of Nike's
offer of employment, Executive has executed a separate "Covenant Not to Compete
and Non-Disclosure Agreement" attached as Exhibit D and by this reference made a
part of this Agreement. It is understood that this Covenant Not to Compete and
Non-Disclosure Agreement shall be independent of, and survive the termination
of, this Agreement.

        8. NON-COMPETITION RESTRICTIONS.

           A. Enforcement of Restrictions. In the event Executive's previous
employer attempts to or is successful in enforcing any non-compete restrictions
after the execution of this Agreement, Executive will use her best efforts to
secure her release from any such restrictions. Nike agrees to pay any reasonable
attorney's fees incurred by Executive in seeking to defend against, challenge or
limit the effect of the enforcement of any such restrictions. If the
restrictions are enforced such that Executive is unable to commence or continue
her duties as set forth in Paragraph 1, Nike agrees to compensate Executive for
up to twelve (12) months in the total amount of $750,000, in twelve equal
installments, plus an amount equivalent to the cost of benefits received from
her previous employer.

           B. Termination Upon March 1, 2001. If the restrictions are enforced
such that Executive is unable to commence or resume her duties by March 1, 2001,
the Agreement is terminated upon that date and Executive will receive and
otherwise not forfeit (a) the sign-on bonus then received under Paragraph 3(D);
(b) any stock granted and vested under the initial stock grant received under
Paragraph 4(D); and (c) the remaining installments of the $750,000 amount
payable under Paragraph 8(A) above. This amount shall be deemed full and final
severance pay for all services provided to Nike by Executive and shall be
Executive's sole and exclusive remedy for termination of this Agreement.

           C. Mitigation. In the event Executive becomes eligible for payments
under Paragraph 8(A), Executive shall not have a duty prior to March 1, 2001 to
mitigate or to seek employment elsewhere as a condition to receiving such
payments. Such payments shall in no event be reduced prior to March 1, 2001 by
any income earned by Executive from employment or self-employment. After March
1, 2001, Executive shall use her best efforts to obtain employment in a position
consistent with Executive's obligations under Paragraph 7. Any interim earnings
from such employment by Executive from March 1, 2001 forward will be offset from
Nike's obligation to pay compensation under Paragraphs 8(A) and 8(B).

        9. TERMINATION.

           A. For Cause: Nike may terminate Executive's employment for cause at
any time after delivering written notice to Executive. For purposes of this
Employment Agreement, cause shall include (i) Executive's substantial continual
and repeated neglect of material duties specified hereunder or hereafter
conveyed to Executive and consistent with her position and senior executive
status, which is not cured following thirty days after receipt of written notice
from Nike specifying such neglect and demanding a cure thereof; (ii) acts of
material dishonesty; (iii) Executive's conviction for, or plea of nolo
contendere to, a felony crime; or (iv) Executive's material violation of any
material term or condition of this Agreement, which is not cured following
thirty days after receipt of written notice from Nike specifying such breach and
demanding a cure thereof. Nike may not terminate Executive for cause without the
approval of a quorum of the Personnel

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Committee of the Board and written notice of same to Executive. Executive's
failure to perform her duties and obligations under this Agreement because of
incapacity due to illness or accident will not be considered a cause to
terminate Executive. Upon termination for cause, the obligations of Nike to
Executive hereunder shall cease and Executive shall not be entitled to any
severance payments, except that the parties agree that Executive will receive
and otherwise not forfeit (a) any base salary paid, accrued or owing under
Paragraph 3(A); (b) any sign-on bonus then received under Paragraph 3(D); (c)
any stock options granted and vested under the Long Term Incentive Award
pursuant to Paragraph 3(C); and (d) any stock granted and vested under the stock
or stock option grants pursuant to Paragraph 4. Any payments or stock options to
which Executive is entitled under this paragraph shall be payable or transferred
to Executive within fourteen calendar days of the termination For Cause. This
amount shall be deemed full and final severance pay for all services provided to
Nike by Executive and shall be Executive's sole and exclusive remedy for
termination of this Agreement.

            B. Without Cause: Nike may terminate Executive's employment Without
Cause upon written notice to Executive. If, however, Executive is terminated
Without Cause prior to conclusion of the term of this Agreement, Nike shall
proffer, within three calendar days of the termination, an appropriate release
document. Upon execution of the appropriate release document by Executive, Nike
shall pay Executive as severance pay within 30 days of the written notice of
termination (i) a lump sum equal to Executive's base salary for the fiscal year
in which Executive was terminated; (ii) in lieu of PSP, an additional payment of
sixty percent (60%) of Executive's base salary earned during the fiscal year to
date; and (iii) any unvested Restrictive Shares of NIKE, Inc. Class B Common
Stock pursuant to Paragraph 4(C) and unvested Stock Options pursuant to
Paragraph 4(A) shall immediately vest. These amounts shall be deemed full and
final severance pay for all services provided to Nike by Executive and shall be
Executive's sole and exclusive remedy for termination of this Agreement, except
that the parties expressly agree that Executive will receive and otherwise not
forfeit (a) any base salary paid, accrued or owing under Paragraph 3(A); (b) any
stock options granted and vested under the Long Term Incentive Award pursuant to
Paragraph 3(C); (c) any sign-on bonus amount received under Paragraph 3(D); and
(d) any stock options granted and vested under the stock option grants pursuant
to Paragraph 4. Any payments of stock or stock options to which Executive is
entitled under this paragraph shall be payable or transferred to Executive
within fourteen calendar days of the Executive's execution of the release
document.

            C. For Good Reason. Executive may terminate her employment For Good
Reason at any time upon written notice to Nike. Executive shall have Good Reason
to terminate her employment only: (i) in the event of a material breach of this
Agreement by Nike; (ii) upon a material change in the title, functions and
reporting relationships of her position as described in Paragraph 1; (iii) upon
a "Change in Control" in the ownership or management of Nike, as that term is
defined in Paragraph 10; and (iv) if Executive is required, without her consent,
to move her office from the New York City Metropolitan area to any other
location. In the event Executive terminates her employment For Good Reason, Nike
shall pay Executive as if she were terminated Without Cause pursuant to
Paragraph 9(B).

            D. Without Good Reason. Executive may terminate her employment
Without Good Reason at any time upon written notice to Nike. In the event
Executive terminates her employment Without Good Reason, Nike shall pay
Executive as if she were terminated For Cause pursuant to Paragraph 9(A).

            E. Death. In the event of the Executive's death during the term of
this Agreement, this Agreement shall terminate automatically, except that Nike
will pay Executive's estate as if she were terminated For Cause on the date of
her death.

            F. Disability. Upon a written, medically sufficient determination by
Nike's long-term disability provider that Executive is eligible to receive
benefits under Nike's long-term disability policy for senior executives, Nike
may terminate Executive, except that Nike will pay Executive as if she were
terminated Without Cause.

        10. CHANGE IN CONTROL. For purposes of this Agreement, a Change in
Control shall mean the occurrence of any of the following events:

            A. Any person (as defined in Sections 3(a)(9) and 13(d)(3) of the
Securities and Exchange Act of 1934 (the "Exchange Act") acquires directly or
indirectly the beneficial ownership (within the meaning of rule 13d-3
promulgated pursuant to the Exchange Act) of any voting security of Nike and
immediately after such

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acquisition such person is, directly or indirectly, the beneficial owner of
voting securities representing 50% or more of the total votes of all of the then
outstanding voting securities of Nike;

            B. The individuals (A) who constitute the Board as of the date of
this Agreement (the "Original Directors") or (B) who thereafter are elected to
the Board and whose election, or nomination for election, to the Board was
approved by a vote of the Original Directors then still in office (such
directors becoming "Additional Original Directors" immediately following their
election) or (C) who are elected to the Board and whose election, or nomination
for election, to the Board was approved by a vote of the Original Directors and
Additional Original Directors then still in office (such directors also becoming
"Additional Original Directors" immediately following their election), cease for
any reason to constitute a majority of the members of the Board; or

            C. The shareholders of Nike approve a plan of complete liquidation
of either the company or an agreement for the sale or disposition of either the
company or all or substantially all of Nike assets.

        11. INDEMNIFICATION. Upon commencement of employment, Executive shall
execute an Indemnity Agreement in the form attached hereto as Exhibit E.

        12. GENERAL PROVISIONS.

            A. Entire Agreement. This Agreement, together with the exhibits and
schedule attached hereto, constitutes the entire understanding between Executive
and Nike and supersedes all prior agreements or discussions between the parties.
No amendment or modification of this Agreement shall be valid unless it is in
writing referring to this Agreement and signed by both parties.

            B. Severability. If any provision of this Agreement shall be held
invalid or unenforceable by a court of competent jurisdiction, the invalid
provision(s) shall not affect any other provision of this Agreement.

            C. Assignability. This Employment Agreement is not assignable by
either party without the written consent of the other.

            D. Waiver. The waiver by either party of a breach of any provision
of this Agreement shall not operate as, or be construed as, a waiver of any
subsequent breach.

            E. Waiver of Right to Jury Trial. In order to facilitate the prompt
and cost effective resolution of disputes, as a condition to entering into this
Agreement, Executive and Nike hereby waive and relinquish any right to a jury
trial they may now or hereinafter have in any dispute arising out of or relating
to this Agreement.

            F. Governing Law/Jurisdiction. This Agreement shall be governed by
the laws of the State of Oregon without regard to choice of law provisions. The
parties consent that jurisdiction over and venue for any legal proceeding
arising out of the interpretation or enforcement of this Agreement shall be in a
state court located in Washington County, Oregon.

IN WITNESS WHEREOF, the parties hereby execute this Agreement to be effective
the day and year first written above.

EXECUTIVE                                      NIKE, Inc.

/s/ Mindy Grossman                            /s/ Jeffrey M. Cava
----------------------------------            ----------------------------------
Mindy Grossman                                By:  Jeff Cava
                                              Its: Vice President, Global Human
                                              Resources

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                             COVENANT NOT TO COMPETE
                          AND NON-DISCLOSURE AGREEMENT

PARTIES:

        Mindy Grossman (EMPLOYEE) and NIKE, Inc., and its divisions,
        subsidiaries and affiliates. (NIKE):

RECITALS:

        A. This Covenant Not to Compete and Non-Disclosure Agreement is executed
upon initial employment or upon the EMPLOYEE's advancement with NIKE and is a
condition of such employment or advancement.

        B. Over the course of EMPLOYEE's employment with NIKE, EMPLOYEE will be
or has been exposed to and/or is in a position to develop confidential
information peculiar to NIKE's business and not generally known to the public as
defined below ("Protected Information"). It is anticipated that EMPLOYEE will
continue to be exposed to Protected Information of greater sensitivity as
EMPLOYEE advances in the company.

        C. The nature of NIKE's business is highly competitive and disclosure of
any Protected Information would result in severe damage to NIKE and be difficult
to measure.

        D. NIKE makes use of its Protective Information throughout the world.
Protective Information of NIKE can be used to NIKE's detriment anywhere in the
world.

AGREEMENT:

In consideration of the foregoing, and the terms and conditions set forth below,
the parties agree as follows:

        1. COVENANT NOT TO COMPETE.

           (a) COMPETITION RESTRICTION. During EMPLOYEE's employment by NIKE,
under the terms of any employment contract or otherwise, and for one year
thereafter, (the "Restriction Period"), EMPLOYEE will not directly or
indirectly, own, manage, control, or participate in the ownership, management or
control of, or be employed by, consult for, or be connected in any manner with,
any business engaged anywhere in the world in the athletic footwear, athletic
apparel or sports equipment and accessories business, or any other business
which directly competes with NIKE or any of its parent, subsidiaries or
affiliated corporations ("Competitor"). BY WAY OF ILLUSTRATION ONLY, examples of
NIKE competitors include, but are not limited to: Adidas, FILA, Reebok, Puma,
Champion, Oakley, DKNY, Converse, Asics, Saucony, New Balance, B.U.M, FUBU, The
Gap, Tommy Hilfiger, Umbro, Northface,

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Venator (Footlockers), Sports Authority, Columbia Sportswear, Wilson, Mizuno,
Callaway Golf and Titleist. This provision is subject to NIKE's option to waive
all or any portion of the Restriction Period as more specifically provided
below.

           (b) EXTENSION OF TIME. In the event EMPLOYEE breaches this covenant
not to compete, the Restriction Period shall automatically toll from the date of
the first breach, and all subsequent breaches, until the resolution of the
breach through private settlement, judicial or other action, including all
appeals. The Restriction Period shall continue upon the effective date of any
such settlement judicial or other resolution. NIKE shall not be obligated to pay
EMPLOYEE the additional compensation described in paragraph 1(d) below during
any period of time in which this Agreement is tolled due to EMPLOYEE's breach.
In the event EMPLOYEE receives such additional compensation pursuant to
paragraph 1(d) below after any such breach, EMPLOYEE must immediately reimburse
NIKE in the amount of all such compensation upon the receipt of a written
request by NIKE.

           (c) WAIVER OF NON-COMPETE. NIKE has the option, in its sole
discretion, to elect to waive all or a portion of the Restriction Period or to
limit the definition of Competitor, by giving EMPLOYEE seven (7) days prior
notice of such election. In the event all or a portion of the Restriction Period
is waived, NIKE shall not be obligated to pay EMPLOYEE for any period of time as
to which the covenant not to compete has been waived.

           (d) ADDITIONAL CONSIDERATION. As additional consideration for the
covenant not to compete described above, if after termination of EMPLOYEE's
employment for any reason, NIKE elects to enforce the non-competition agreement,
NIKE shall pay EMPLOYEE a monthly payment equal to one hundred percent (100%) of
EMPLOYEE's last monthly base salary while the Restriction Period is in effect.
The first payment to EMPLOYEE of additional consideration shall follow on the
next applicable pay period after the election to enforce the non-competition
agreement, payable in accordance with NIKE's payroll practices.

        2. SUBSEQUENT EMPLOYER. EMPLOYEE agrees to notify NIKE at the time of
separation of employment of the name of EMPLOYEE's new employer, if known.
EMPLOYEE further agrees to disclose to NIKE the name of any subsequent employer
during the Restriction Period, wherever located and regardless of whether such
employer is a competitor of NIKE.

        3. NON-DISCLOSURE AGREEMENT.

           (a) PROTECTABLE INFORMATION DEFINED. "Protected Information" shall
mean all proprietary information, in whatever form and format, of NIKE and all
information provided to NIKE by third parties which NIKE is obligated to keep
confidential. EMPLOYEE agrees that any and all information to which EMPLOYEE has
access concerning NIKE projects and internal NIKE information is Protected
Information, whether in verbal form, machine-readable form, written or other
tangible form, and whether designated as confidential or unmarked. Without
limiting

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the foregoing, Protected Information includes information relating to NIKE's
research and development activities, its intellectual property and the filing or
pendency of patent applications, confidential techniques, methods, styles,
designs, design concepts and ideas, customer and vendor lists, contract factory
lists, pricing information, manufacturing plans, business and marketing plans,
sales information, methods of operation, manufacturing processes and methods,
products, and personnel information.

           (b) Excluded Information. Notwithstanding paragraph 3(a), Protected
Information excludes any information that is or becomes part of the public
domain through no act or failure to act on the part of EMPLOYEE. Specifically,
employees shall be permitted to retain as part of their personal portfolio
copies of the employees' original artwork and designs, provided the artwork or
designs have become part of the public domain. In any dispute between the
parties with respect to this exclusion, the burden of proof will be on EMPLOYEE
and such proof will be by clear and convincing evidence.

           (c) Employee's Obligations. During the period of employment by NIKE
and for a period of two (2) years thereafter, EMPLOYEE will hold in confidence
and protect all Protected Information and will not, at any time, directly or
indirectly, use any Protected Information for any purpose outside the scope of
EMPLOYEE's employment with NIKE or disclose any Protected Information to any
third person or organization without the prior written consent of NIKE.
Specifically, but not by way of limitation, EMPLOYEE will not ever copy,
transmit, reproduce, summarize, quote, publish or make any commercial or other
use whatsoever of any Protected Information without the prior written consent of
NIKE. EMPLOYEE will also take reasonable security precautions and such other
actions as may be necessary to insure that there is no use or disclosure,
intentional or inadvertent, of Protected Information in violation of this
Agreement.

        4. RETURN OF PROTECTED INFORMATION. At the request of NIKE at anytime,
and in any event, upon termination of employment, EMPLOYEE shall immediately
return to NIKE all confidential documents, including tapes, notebooks, drawings,
computer disks and other similar repositories of or containing Protected
Information, and all copies thereof, then in EMPLOYEE's possession or under
EMPLOYEE's control.

        5. UNAUTHORIZED USE. During the period of employment with NIKE and
thereafter, EMPLOYEE will notify NIKE immediately if EMPLOYEE becomes aware of
the unauthorized possession, use or knowledge of any Protected Information by
any person employed or not employed by NIKE at the time of such possession, use
or knowledge. EMPLOYEE will cooperate with NIKE in the investigation of any such
incident and will cooperate with NIKE in any litigation with third parties
deemed necessary by NIKE to protect the Protected Information. NIKE shall
provide reasonable reimbursement to EMPLOYEE for each hour so engaged and that
amount shall not be diminished by operation of any payment under Paragraph 1(d)
of this Agreement.

<PAGE>

        6. NON-RECRUITMENT. During the term of this Agreement and for a period
of one (1) year thereafter, EMPLOYEE will not directly or indirectly , solicit,
divert or hire away (or attempt to solicit, divert or hire away) to or for
himself or any other company or business organization, any NIKE employee,
whether or not such employee is a full-time employee or temporary employee and
whether or not such employment is pursuant to a written agreement or is at will.

        7. ACCOUNTING OF PROFITS. EMPLOYEE agrees that, if EMPLOYEE should
violate any term of this Agreement, NIKE shall be entitled to an accounting and
repayment of all profits, compensation, commissions, remuneration or benefits
which EMPLOYEE directly or indirectly has realized and/or may realize as a
result of or in connection with any such violation (including the return of any
additional consideration paid by NIKE pursuant to Paragraph 1(d) above). Such
remedy shall be in addition to and not in limitation of any injunctive relief or
other rights or remedies to which NIKE may be entitled at law or in equity.

        8. GENERAL PROVISIONS.

           (a) SURVIVAL. This Agreement shall continue in effect after the
termination of EMPLOYEE's employment, regardless of the reason for termination.

           (b) WAIVER. No waiver, amendment, modification or cancellation of any
term or condition of this Agreement will be effective unless executed in writing
by both parties. No written waiver will excuse the performance of any act other
than the act or acts specifically referred to therein..

           (c) SEVERABILITY. Each provision herein will be treated as a separate
and independent clause and unenforceability of any one clause will in no way
impact the enforceability of any other clause. Should any of the provisions in
this Agreement be found to be unreasonable or invalid by a court of competent
jurisdiction, such provision will be enforceable to the maximum extent
enforceable by the law of that jurisdiction.

           (d) APPLICABLE LAW/JURISDICTION. This Agreement, and EMPLOYEE's
employment hereunder, shall be construed according to the laws of the State of
Oregon. EMPLOYEE further hereby submits to the jurisdiction of, and agrees that
exclusive jurisdiction over and venue for any action or proceeding arising out
of or relating to this Agreement shall lie in the state and federal courts
located in Oregon.

EMPLOYEE                                           NIKE, Inc.

/s/ Mindy Grossman                                 By  /s/ Lindsay D. Stewart
 --------------------                                  -------------------------
                                                   Name:  Lindsay D. Stewart
DATE      9-7-00                                   Title: Vice President
     ----------------<PAGE>
                                                                    EXHIBIT 10.1

                                   N2H2, INC.

                     HOWARD PHILIP WELT EMPLOYMENT AGREEMENT

        This Agreement is made by and between N2H2, Inc. (the "Company"), and
Howard Philip Welt ("Executive") effective as of May 18, 2002.

1.      DUTIES AND SCOPE OF EMPLOYMENT.

        a.     POSITIONS AND DUTIES. Executive will continue to serve as
               President and Chief Executive Officer of the Company. Executive
               will render such business and professional services in the
               performance of his duties, consistent with Executive's position
               within the Company, as shall reasonably be assigned to him by the
               Company's Board of Directors (the "Board"). Executive will report
               to the Board and all other Company employees will report to
               Executive.

        b.     BOARD MEMBERSHIP. Executive will continue to serve as a member of
               the Company's Board of Directors (the "Board"), subject to any
               required Board and/or stockholder approval.

        c.     OBLIGATIONS. During the Employment Term, Executive will devote
               his full business efforts and time to the Company. For the
               duration of the Employment Term, Executive agrees not to actively
               engage in any other employment, occupation or consulting activity
               for any direct or indirect remuneration without the prior
               approval of the Board (which approval will not be unreasonably
               withheld); provided, however, that Executive may, without the
               approval of the Board, serve in any capacity with any civic,
               educational or charitable organization, or as a member of
               corporate Boards of Directors (but in all cases subject to
               Section 11).

2.      TERM.

        a.     Executive and the Company agree that Executive's employment with
               the Company shall be for a period of twelve (12) months
               commencing on the Effective Date (defined below). Executive and
               the Company acknowledge that this employment relationship may be
               terminated at any time, upon sixty (60) days advance written
               notice to the other party, with or without good cause or for any
               or no cause, at the option either of the Company or Executive.
               The period of Executive's employment under this Agreement is
               referred to herein as the "Employment Term."

3.      EXECUTIVE BENEFITS.

        a.     During the Employment Term, Executive will be eligible to
               participate in accordance with the terms of all Company employee
               benefit plans that are applicable to other senior executives of
               the Company, as such plans and terms may exist from time to time.

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        b.     Executive will be eligible to participate in an incentive bonus
               plan or program for senior management of the Company, should one
               be established during the Employment Term.

        c.     Company shall, during the Employment Term, pay for Executive's
               parking and health club membership.

4.      COMPENSATION.

        a.     BASE SALARY. During the Employment Term, the Company will pay
               Executive no salary in compensation for his services. The
               Compensation Committee of the Board (the "Committee") will
               reevaluate compensation arrangements from time to time and may
               adjust the Base Salary in accordance with its normal practices.

        b.     STOCK OPTIONS. The Company will grant Executive an option to
               purchase up to 1,400,000 shares of the Company's common stock
               ("Shares") at an exercise price equal to the Fair Market Value on
               the date of grant. The option will vest monthly in arrears in
               equal (116,666) amounts, with such vesting commencing as of the
               Effective Date. For purposes of this Section 4(b), "Fair Market
               Value" shall mean the average of the high and low sales prices of
               the Company's common stock on the Over-the-Counter Bulletin
               Board.

5.      EXPENSES. The Executive is authorized to incur reasonable expenses on
        behalf of the Company in the performance of his duties under this
        Agreement on a basis consistent with the Company's policies from time to
        time, including expenses for travel, business entertainment and other
        business activities. The Executive shall submit all claims for
        reimbursement of such expenses directly to the Company and the Company
        shall ensure that such expenses are reimbursed to the Executive within a
        reasonable time after submission by the Executive of an itemized account
        of such expenses, together with such vouchers or receipts for individual
        expense items as the Company may reasonably require.

6.      SEVERANCE.

        a.     TERMINATION WITHOUT AGREEMENT OF EXECUTIVE OTHER THAN FOR CAUSE.
               If the Company terminates Executive's employment with the Company
               without "Cause" (as defined below) , then promptly following such
               termination of employment, Executive will be entitled to
               immediate 100% vesting of any stock options previously granted to
               Executive that would have vested within eighteen - (18) months of
               the date Executive is terminated without "Cause" (as defined
               below). The term within which Executive must exercise any options
               to acquire Company stock received prior to the date hereof shall
               be as provided in any applicable stock option agreement and the
               Company's stock option plan. If Executive is terminated without
               agreement of Executive other than for Cause, Death or Disability,
               then the term within which Executive must exercise any vested
               options to acquire Company stock received under this Agreement
               shall be

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               the earlier of three (3) years from the Termination Date and the
               expiration of the 10-year term of the Option. If the Executive is
               terminated for reason of Death or Disability, then the term
               within which Executive must exercise any options to acquire
               Company stock shall be as provided in any applicable stock option
               agreement and the Company's stock option plan

        b.     VOLUNTARY TERMINATION FOR GOOD REASON. If Executive voluntarily
               terminates his employment with the Company for "Good Reason" (as
               defined below) then Executive will be entitled to the same
               benefits provided in Section 6(a) above (and subject to the same
               terms and conditions provided in Section 6(a)). The term within
               which Executive must exercise any options to acquire Company
               stock received prior to the date hereof shall be as provided in
               any applicable stock option agreement and the Company's stock
               option plan. Under this paragraph 6(b), the term within which
               Executive must exercise any vested options to acquire Company
               stock received under this Agreement shall be the earlier of three
               (3) years from the Termination Date and the expiration of the
               10-year term of the Option.

        c.     OTHER VOLUNTARY TERMINATIONS. If Executive's employment is
               terminated for any reason other than for Cause, Death or
               Disability (including by Executive, for any reason) within twelve
               (12) months after a "Change of Control" (as defined below) then
               Executive will be entitled to the same payments and benefits
               provided in Section 6(a) above (and subject to the same terms and
               conditions provided in Section 6(a)); and will be paid a cash
               severance payment of $250,000, in twelve monthly installments
               beginning on the first day of the month immediately following
               termination. The term within which Executive must exercise any
               options to acquire Company stock shall be as provided in any
               applicable stock option agreement and the Company's stock option
               plan.

        d.     TERMINATION WITHOUT AGREEMENT OF EXECUTIVE FOR CAUSE. If the
               Company Terminates Executive's employment with the Company for
               Cause then Executive will not be entitled to any other
               compensation or benefits from the Company except to the extent
               provided under the applicable stock option agreement(s) or as may
               be required by law (for example, under Section 4980B of the
               Code), and except that promptly following termination of such
               employment, Executive will be entitled to an additional two
               months vesting of the stock options granted to Executive
               hereunder (not to exceed the total number of stock options
               granted to Executive hereunder). The term within which Executive
               must exercise any options to acquire Company stock shall be as
               provided in any applicable stock option agreement and the
               Company's stock option plan.

        e.     DEFINITIONS. For purposes of this Agreement:

               "Cause" means a termination of Executive's employment by the
               Company due to (i) Executive's failure or refusal to perform his
               duties, responsibilities or obligations hereunder after at least
               twenty-one (21) days' prior written notice

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<PAGE>

               regarding any such failure or refusal; (ii) Executive's breach of
               any non-competition or confidentiality agreement with the
               Company; (iii) the willful misappropriation of funds or property
               of the Company; (iv) use of alcohol or drugs which interferes
               with performance of Executive's obligations under this Agreement,
               continuing after thirty (30) days' prior written notice; (v)
               conviction of a felony or of any crime involving moral turpitude,
               fraud or misrepresentation; or (vi) the commission by Executive
               of any willful or intentional act in disregard of the interests
               of the Company which could be reasonably expected to materially
               injure the reputation, business or business relationships of the
               Company, provided, however, that a good faith mistake in the
               normal course of business shall not be considered "Cause" under
               this Section 6(e).

               "Disabled" means Executive being unable to perform the principal
               functions of his duties due to a physical or mental impairment,
               but only if such inability has lasted or is reasonably expected
               to last for at least six (6) months. Whether Executive is
               Disabled shall be determined by the Committee based on evidence
               provided by one or more medical experts selected by the
               Committee. Executive agrees to be seen by or consult with medical
               experts of the Committee's choosing;

               "Good Reason" means (i) a material reduction (without Executive's
               consent) in his title, authority, status, or responsibilities, or
               (ii) a material breach by the Company of its obligations under
               this Agreement;

               "Change of Control" means a merger, consolidation or other
               reorganization in which the Company is not the surviving
               corporation, or in which the Company becomes a subsidiary of
               another corporation, or the sale, lease or exchange of all or
               substantially all of the Company's assets to any other
               corporation or entity (except a subsidiary or parent
               corporation).

7.      INDEMNIFICATION. The Company shall (and is hereby obligated to)
        indemnify (including advance payment of expenses, which such expenses
        shall include, without limitation, attorneys' fees) the Executive for
        all actions taken by Executive as an officer of Company or the failure
        of Executive to take any action in each and every situation where the
        Company is obligated to make such indemnification pursuant to applicable
        law and the relevant portions of the Company's Articles of Incorporation
        and Bylaws. During the Employment Term, the Company, at its sole
        expense, shall maintain in effect director and officer liability
        insurance containing a liability coverage endorsement covering the
        Company's indemnification duty. Upon request, the Company shall furnish
        to the Executive a certificate of such insurance that shall bear an
        endorsement that the same shall not be canceled, non-renewed or
        materially reduced in coverage or limits by the Company, without thirty
        (30) days prior written notice to the Executive.

8.      ASSIGNMENT. This Agreement will be binding upon and inure to the benefit
        of (a) the heirs, executors and legal representatives of Executive upon
        Executive's death and (b) any successor of the Company. Any such
        successor of the Company will be deemed substituted for the Company
        under the terms of this Agreement for all purposes. For this purpose,
        "successor" means any person, firm, corporation or other business entity
        which

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<PAGE>

        at any time, whether by purchase, merger or otherwise, directly or
        indirectly acquires all or substantially all of the assets or business
        of the Company. None of the rights of Executive to receive any form of
        compensation payable pursuant to this Agreement may be assigned or
        transferred except by will or the laws of descent and distribution. Any
        other attempted assignment, transfer, conveyance or other disposition of
        Executive's right to compensation or other benefits will be null and
        void.

9.      NOTICES. All notices, requests, demands and other communications called
        for hereunder shall be in writing and shall be deemed given (i) on the
        date of delivery if delivered personally, (ii) one (1) day after being
        sent by a well established commercial overnight service, or (iii) four
        (4) days after being mailed by registered or certified mail, return
        receipt requested, prepaid and addressed to the parties or their
        successors at the following addresses, or at such other addresses as the
        parties may later designate in writing:

        If to the Company:

        N2H2, Inc
        900 Fourth Avenue, Suite 3600
        Seattle, WA 98164
        ATTN: Peter Nickerson, Chairman of the Board

        If to Executive:

        at the last residential address known by the Company.

10.     SEVERABILITY AND MODIFICATION OF ANY UNENFORCEABLE COVENANT. It is the
        parties' intent that each of the covenants be read and interpreted with
        every reasonable inference given to its enforceability. However, it is
        also the parties' intent that if any term, provision or condition of the
        covenants is held by a court of competent jurisdiction to be invalid,
        void or unenforceable, the remainder of the provisions thereof shall
        remain in full force and effect and shall in no way be affected,
        impaired or invalidated. Finally, it is also the parties' intent that if
        a court should determine any of the covenants are unenforceable because
        of over breadth, then the court shall modify said covenant so as to make
        it reasonable and enforceable under the prevailing circumstances.

11.     NON-COMPETITION AND NON-SOLICITATION. For a period beginning on the
        Effective Date (defined below) and ending twelve (12) months from the
        date when Executive ceases to be employed by the Company for any reason
        whatsoever, Executive, directly or indirectly, whether as employee,
        owner, sole proprietor, partner, director, member, consultant, agent,
        founder, co-venturer or otherwise, will:

        a.     Not engage, participate or invest in any business activity
               anywhere in the world which develops, manufactures or markets
               products or performs services which are competitive with the
               products or services of the Company at the time of Executive's
               termination, or products or services which the Company has under
               development or which are the subject of active planning at the
               time of Executive's

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               termination; PROVIDED, HOWEVER, that Executive, may own as a
               passive investor, securities of any corporation which competes
               with the business of the Company so long as such securities do
               not, in the aggregate, constitute more than 2% of any class of
               outstanding securities of such corporations;

        b.     Not attempt to employ, recruit or otherwise solicit, induce or
               influence any person to leave employment with the Company or its
               resellers or distributors; and

        c.     Not directly or indirectly solicit business from any of the
               Company's customers and users on behalf of any business that
               competes with the Company.

Notwithstanding the foregoing, this Section 11 shall not apply if this Agreement
is breached by the Company.

12.     NON-DISPARAGEMENT. Executive and the Company mutually covenant and agree
        that, during the Employment Term and for a period of twelve (12) months
        after the date of termination of Executive's employment with the
        Company, neither shall, directly or indirectly, disparage the other.

13.     ENTIRE AGREEMENT. This Agreement represents the entire agreement and
        understanding between the Company and Executive concerning Executive's
        employment relationship with the Company, and supersedes and replaces
        any and all prior agreements and understandings concerning Executive's
        employment relationship with the Company.

14.     ARBITRATION. In the event of any dispute arising out of or relating to
        this Agreement, the parties undertake to make every effort to reach an
        amicable settlement of their differences (including mediation if
        requested by a party). Failing such settlement, the dispute shall be
        referred to final and binding arbitration. It is understood and agreed
        between the parties hereto that any claim of any nature whatsoever
        arising out of or connected with Executive's employment with the
        Company, including but not limited to wrongful termination, breach of
        contract, defamation, and claims of discrimination (including age,
        disability, sex, religion, race, national origin, color, etc.) or
        harassment, whether under federal, state or local laws, common law or in
        equity, shall be decided by submission to final and binding arbitration.
        The arbitrator shall be a retired or former superior court or appellate
        court judge. This arbitration provision shall be governed by the Federal
        Arbitration Act. Any arbitration hereunder shall be conducted in
        Seattle, Washington in accordance with the Employment Arbitration Rules
        of the American Arbitration Association. Judgment shall be final upon
        the award rendered by the arbitrator and may be entered in any court
        having jurisdiction thereof. It is further understood and agreed between
        the parties hereto that actions seeking temporary injunctions are hereby
        excluded from arbitration and, therefore, may be sought in a court of
        appropriate jurisdiction without resort to arbitration, even though
        resolution of the underlying claim must be submitted to arbitration.
        Provided: This Section shall not govern any matter arising out of
        Executive's violation of the covenants contained in Section 11 of this
        Agreement, in which event the Company shall be entitled to seek
        injunctive or other equitable relief in any state or federal court
        located in King County, Washington, and the parties agree to submit to
        the jurisdiction of such court.

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15.     ATTORNEYS FEES. In the event of any dispute arising out of or involving
        this Agreement, the prevailing party shall be entitled to recover its
        reasonable attorneys' fees, experts' fees, and costs, including those
        for pretrial, trial, on appeal, in arbitration and in bankruptcy and all
        other costs and expenses associated with any such action in addition to
        any other relief to which such party may be entitled.

16.     NO ORAL MODIFICATION, CANCELLATION OR DISCHARGE. This Agreement may be
        changed or terminated only in writing (signed by Executive and the
        Company).

17.     WITHHOLDING. The Company is authorized to withhold, or cause to be
        withheld, from any payment or benefit under this Agreement the full
        amount of any applicable withholding taxes.

18.     GOVERNING LAW. This Agreement will be governed by the laws of the State
        of Washington (with the exception of its conflict of laws provisions).

19.     EFFECTIVE DATE. This Agreement is effective as of May 18, 2002.

20.     ACKNOWLEDGMENT. Executive acknowledges that he has had the opportunity
        to discuss this matter with and obtain advice from his private attorney,
        has had sufficient time to, and has carefully read and fully understands
        all the provisions of this Agreement, and is knowingly and voluntarily
        entering into this Agreement.

        IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
respective dates set forth below:

EXECUTIVE

/s/ Howard P. Welt                                      DATE: 8/13/02
-----------------------------------                               -------
Howard Philip Welt

N2H2, INC.

BY: /s/ J. Paul Quinn                                       DATE: 8/13/02
-----------------------------------                               -------
Name:  J. Paul Quinn
Title: Chief Financial Officer

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