BREAKING/EXCLUSIVE: Has Solo Cup Management Been Instructed To Sell The Company?

A fascinatng freight-train of half-million dollar bonuses -- payable only to a small number of executive officers of Solo, and only on a change of control within the next three months -- was filed overnight with the SEC. These changes can be fairly read as instructions from the board to find a buyer for Solo Cup, in that they contain the highly-unusual provision that the full bonus amounts are paid to the executives four months after a change of control, even if the executives don't lose their positions in the putative transaction. Far more common, since the meltdown of 2008, would be that the payments would only be made, if a change in title or layoff occured, post the transaction. So this looks much more like an advance payment on getting a deal -- any deal -- done, and may create an expectation that the sale of the company is a foregone conclusion. See the full Solo SEC Form 8-K, here:

. . .Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Retention Bonuses

On February 15, 2012, the Board of Directors (the “Board”) of Solo Cup Company, a Delaware corporation (the “Company”), approved the payment of retention bonuses (the “Retention Bonuses”) to, among others, the following named executive officers of the Company: (i) Robert M. Korzenski, President and Chief Executive Officer; (ii) Robert D. Koney, Jr., Executive Vice President and Chief Financial Officer; (iii) George F. Chappelle, Jr., Executive Vice President and Chief Operating Officer; (iv) Jan Stern Reed, Executive Vice President - Human Resources, General Counsel and Secretary; and (v) Peter J. Mendola, Senior Vice President - Manufacturing. Under the terms of the Retention Bonuses, the Company will pay these executives a bonus in the amount of: (i) $500,000 for each of Mr. Korzenski, Mr. Chappelle, Mr. Koney and Ms. Reed; and (ii) $110,000 for Mr. Mendola, in each case only upon the completion of a transaction involving a change in control of the Company occurring prior to June 1, 2012. The Retention Bonuses will be paid on the earliest to occur of: (i) the termination of the executive's employment on the date that is the later to occur of the completion of the transaction or the date until which a purchaser chooses to continue the executive's employment following the completion of the transaction or (ii) the date that is four months following completion of the transaction, provided that the executive remains employed by the Company through such date.

Severance Terms

On February 15, 2012, the Board approved changes to the severance terms applicable to Messrs. Chappelle and Koney. As modified, one year of base salary will be payable if the employment of the executive terminates without “cause” as that term is defined in the Company's Salary Severance Policy or the executive terminates his employment for “good reason.” Good reason includes the following: (i) a substantial diminution of the executive's position, authority, duties or responsibilities; (ii) the Company's failure to comply with the terms of the executive's employment; (iii) a reduction in base salary or a material reduction in benefits (except pursuant to an across-the-board reduction for senior executives); (iv) a material adverse change in such executive's title, which has the effect of reducing such executive's position within the Company to an executive level lower in the Company or of less authority within the Company or (v) relocation of such executive's primary place of employment to a location more than 35 miles from Lake Forest, Illinois.

In addition, the Board approved changes to the severance terms applicable to Mr. Mendola. As modified, one year of base salary will be payable if Mr. Mendola is entitled to severance pay under the Company's Salary Severance Policy in connection with a change in control of the Company that occurs prior to June 1, 2012.

In addition, on February 15, 2012, the Company, Solo Cup Investment Corporation and Solo Cup Operating Corporation entered into amendments to each Employment Agreement held with Robert M. Korzenski and Jan Stern Reed to clarify the definition of “good reason” to include (i) a material adverse change in such executive's title, which has the effect of reducing such executive's position within the Company to an executive level lower in the Company or of less authority within the Company, or (ii) relocation of such executive's primary place of employment to a location more than 35 miles from Lake Forest, Illinois. . . .

In sum, it is my experienced opinion that these are highly unusual, and very oddly-shapen "retention" bonuses, if the affected executive is able to get the bonus before year end 2012, and then immediately quit the company -- even where no change in duties has occured. Wild.

"Executives: Proceed to party!" The rest of the rank-and-file, many of whom have given their entire working lives to Solo? Not. So. Much.

That's extremely unfortunate -- and almost the inverse of Toby Keith's hit-single ode to the company's flagship product.