Midway embroiled in bonus controversy
Incentives plan revised following criticism by unsecured creditors
Midway has amended plans to pay out more than USD 3.7 million in executive and employee bonuses following a complaint by its unsecured creditors.
The 'key employee incentive plan' drew in heavy criticism over the terms under which employees would receive the payouts, which was branded as "disingenuous" and counterproductive.
Under the original deal, executives were to be awarded USD 500,000 in bonuses for selling the Wheelman publishing rights to Ubisoft. In addition, a USD 1.3 million bonus was to be paid out for the sale of the Mortal Kombat franchise or for the submission of a reorganisation plan to the court, with a further USD 2 million bonus when the aforementioned sale or court approval was secured.
Midway's creditors were eager to point out that the Wheelman deal had been completed before the incentive plan was drawn up, saying that bonuses should not be paid retroactively, and that the submission of a reorganisation plan was a legal requirement and needed no incentives.
"The notion that a bonus program designed to reward employees for past accomplishments could be considered an 'incentive' is simply disingenuous," objected the creditors trustee, according to Variety.
"The Debtors seek authority to pay bonuses to a selected group of officers and managers which are four hundred percent greater than bonuses paid to the same group in 2008 when the Debtors were not before the Bankruptcy Court," the trustee complained.
"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.
"In a survey prepared by the committee's financial advisor, FTI Consulting, of compensation plans proposed in some twenty comparable bankruptcy cases in recent years, the Proposed Plan is, by far, the richest compensation plan that has been proposed, despite the unusually poor conditions of the current economy."
Midway's executive management restructured the incentives plan to exclude CEO Matt Booty of any cash bonus and remove the retroactive payout for the sale of the Wheelman publishing rights.
Payouts will now be secured for selling all of Midway's properties, as well as for receiving court approval for a restructuring plan that owner Mark Thomas also approves of or allows for payment in full of his USD 30 million secured claim.
While the minimum payout will be lower than the previous sum of USD 3.75 million, there is potential for Midway employees to receive more depending on the price for which assets are sold.