"We got a couple of objections to the Key Employee Incentive Plan."

That's according to Midway Games head of investor relations Geoffrey Mogilner in phone interview with Edge on Tuesday.

Midway creditors and a U.S. government-appointed trustee overseeing the publisher's bankruptcy proceedings did not buy the firm's $3.75 million "Key Employee Incentive Plan" (KEIP). The parties categorized the proposed bonuses as "outrageous" and "overpriced," particularly in light of the current state of the economy and Midway itself.

Under pressure from the feds and creditors, Midway on Monday submitted a revised plan in an attempt to appease the groups. A court will hear the new plan on Wednesday.

In the previously proposed plan, 29 key Midway employees were poised to divvy up the $3.75 million in bonuses if certain milestones were met related to the sale and reorganization of the company and its assets. At least five of those employees are believed to be top execs.

But creditors and the U.S. Trustee found the plan unacceptable.

"Given the current state of the general economy, coupled with historical data related to incentive bonuses paid by these Debtors, the Motion constitutes an outrageous request and is not justified by the facts and circumstances of the case," wrote the acting U.S. Trustee Roberta DeAngelis in a bankruptcy filing obtained by Edge.

She said that the previously proposed bonuses for Midway officers and managers are 400 percent greater than bonuses paid to the same group in 2008, when the company wasn't in such dire financial straits. The 2008 bonuses exceed the prior year's bonuses to the same group by over 200 percent, she said.

The Official Committee of Unsecured Creditors wasn't happy with Midway's proposed plan either. "These estates cannot reasonably bear employment bonus programs that will obligate them to pay bonuses to senior management and others that, in the aggregate, will exceed $8 million. ...

"Recoveries to unsecured creditors could be quite small."

The creditors committee said that it would not object to an incentive plan that it deemed "reasonably priced."

Conor Tully, sr. managing director for FTI Consulting, echoed creditors' objections to the plan. He said, "I do not believe that the proposed plan represents a sound exercise of business judgment by [Midway]." Tully claims the original incentive plan is "overpriced" compared to other similar bankruptcy cases; "not actually tied to any standard of performance by either the employee or the debtors"; and doesn't require the recipient of a bonus to stay with Midway following a sale or reorganization of the company.

Creditors also took issue with how the plan intended to reward key employees for "past, not future achievements." One of the milestones that Midway listed in its incentive plan (which was worth a $497,500 bonus) was to find a publishing deal for the game Wheelman--Midway had already landed a publishing deal with Ubisoft prior to the plan.

"Accomplished events cannot be incentivizing," wrote DeAngelis.

Midway's Mogilner said that the Wheelman deal hadn't been finalized when the company drafted the plan.

But the creditors also argued that certain types of work, such as finding publishing deals, are "well within the sphere" of management's normal responsibilities, and management is already rewarded with "substantial" base compensation even without a bonus.

The other two milestones that were part of Midway's original plan include:

• Entering an agreement to sell the Mortal Kombat franchise or submit a reorganization plan that would allow Midway to continue as a going concern. ($1.3 million bonus.)
• Confirming a plan of reorganization or liquidation or the actual closing of a sale of Mortal Kombat. ($2 million.)

The creditors called the three milestones of the KEIP "disingenuous," as bonuses would be paid "without regard for performance or creditor recoveries."

The new plan

Midway's revised incentive plan now elimiates the Wheelman-specific bonus. Also struck from the KEIP is any mention of the Mortal Kombat franchise; bonuses are now based on the sale of Midway's "assets" in general.

In addition, the new plan makes clear that CEO Matt Booty is ineligible for any of the bonuses, although he and the Compensation Committee will decide how the bonuses are distributed.

The new bonus amounts are undisclosed in Midway's public filings. Mogilner said he was unaware of the revised amounts, but says the bonuses are "considerably less" than the $3.75 million that was proposed previously, and now payouts are "variable based on the outcome" of the performance of key employees.

The court will issue a ruling on the plan Wednesday.

Thanks to Variety for the heads up.