Over the years, we’ve written a bit about Coach, mostly because many of their employment agreements have been unusually generous. Back in 2008, for example, the company came up with multiple ways to pay Creative Director Reed Krakoff, as we footnoted here.
So when we saw the latest agreement with Krakoff (filed late Wednesday), we couldn’t help but dive in, even though Bloomberg got the key details in this story: Krakoff’s bonus will be $3 million less if Coach isn’t able to reach a binding agreement to sell the Reed Krakoff label by July 29.
What the story doesn’t say is that up until yesterday’s filing, the sale of the label was mostly speculation. Last month, the WSJ ran this story, which said Weinstein Perella had been retained by Coach to sell the brand, which the article said was losing money. How much it is losing is unclear since the company hasn’t provided any numbers in its filings. Coach owns the brand. Back in April, the New York Times quoted Krakoff as looking at “different scenarios” for the brand, but he declined to say if he would buy it from Coach.
But back to the agreement, which has writing that only a corporate attorney (or the folks who write the math questions for the SAT) could love. Here’s a snip:
The Committee has determined, and you expressly accept and agree (notwithstanding anything to the contrary in your Employment Agreement or otherwise), that if the Company has, notwithstanding its good faith efforts, not entered into a binding written agreement for the sale of the Reed Krakoff brand by July 29, 2013, then your Annual Bonus with respect to fiscal year 2013 will be $3,000,000 less than the amount otherwise determined under the Annual Incentive Plan based on the performance goals previously disclosed to you (but shall not be reduced to an amount less than zero; if your Annual Bonus with respect to fiscal year 2013 would otherwise have been less than $3,000,000, you shall receive no Annual Bonus with respect to 2013).
Reading between the lines here, it looks like Krakoff needs to get his investors to make a firm commitment over the next 2 1/2 weeks, or he stands to lose $3 million. That’s a lot of money to lose, even for someone like Krakoff, whose NYC townhouse got the full CNN-gush here. But getting bankers to move quickly — in 90 degree heat and 100% humidity — may even be beyond Krakoff’s considerable talents.
The good news — for Krakoff at least — is that even if there is no signed agreement by July 29 — the bonus can’t be less than zero!