MIDWAY GAMES INC, S-8, 1998-12-04

MIDWAY GAMES INC
S-8, 1998-12-04
PREPACKAGED SOFTWARE

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As filed with the Securities and Exchange Commission on December 4, 1998
Registration No. 333-_________

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-8
REGISTRATION STATEMENT

MIDWAY GAMES INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>

DELAWARE 36-2814522
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

</TABLE>

3401 NORTH CALIFORNIA AVENUE
CHICAGO, ILLINOIS 60618
(Address, including zip code, of Registrant's principal executive offices)

-----------------

1998 STOCK INCENTIVE PLAN
(Full title of the Plan)

-----------------

Orrin J. Edidin
Vice President, Secretary and General Counsel
Midway Games Inc.
3401 North California Avenue
Chicago, Illinois 60618
(773) 961-2222
(Name and address, including zip code, and
telephone number, including area code, of agent for service)

Copy to:

Jeffrey N. Siegel, Esq.
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
(212) 782-0700

<PAGE>

CALCULATION OF REGISTRATION FEE

===============================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE(5)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
common stock, par value $.01(3) 750,000 shares $10.07 $ 7,552,500 $2,099.59
- ---------------------------------------------------------------------------------------------------------------
common stock, par value $.01(3)(4) 2,250,000 shares $10.07 $22,657,500 $6,298.79
TOTAL: $8,398.38
===============================================================================================================
</TABLE>

(1) Pursuant to Rule 416 under the Securities Act of 1933, this registration
statement covers an indeterminable number of shares of common stock which
may become issuable pursuant to the anti-dilution provisions of the 1998
Stock Incentive Plan (the "Plan").

(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(h)(1) on the basis of the average of the high and low
prices of the common stock reported on the New York Stock Exchange on
December 1, 1998.

(3) In accordance with the Rights Agreement between the Registrant and The Bank
of New York, dated March 5, 1998, all shares of common stock are
accompanied by certain stock purchase rights.

(4) Shares issuable upon the exercise of options available under the Plan.

(5) $11,418.08 was paid with registration statement No. 333-25757, relating to
2,000,000 shares of common stock and $2,862.98 was paid with registration
statement No. 333-57583, relating to 750,000 shares of common stock, which
shares are being carried forward in the combined reoffer prospectus being
filed herewith (to the extent that they are or may be control securities).
See Rule 429 note below.

---------------------

Pursuant to Rule 429 under the Securities Act of 1933, as amended (the
"Securities Act"), the prospectus filed together with this Registration
Statement shall be deemed to be a combined prospectus which shall also relate to
the Registrant's Registration Statements No. 333-25757 and 333-57583, each on
Form S-8.

<PAGE>

PART I

INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS

The documents containing the information specified in Part I of Form
S-8 will be sent or given to eligible participants as specified by Rule
428(b)(1) under the Securities Act and are not being filed with the Securities
and Exchange Commission (the "Commission").

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.

The Registration Statement, the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1998, the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1998 and the description of
the Registrant's common stock and Rights contained in the Registrant's
Registration Statements on Form 8-A (File No. 1-12367) filed on October 30, 1996
and April 20, 1998, respectively, pursuant to Section 12(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), including all exhibits
thereto and any amendments or reports filed for the purpose of updating such
information, are incorporated herein by reference and made a part of this
Registration Statement as of the date hereof.

All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the effective date of this
Registration Statement and prior to the termination of the offering of the
common stock offered hereby shall be deemed to be incorporated by reference into
this Registration Statement and to be a part hereof from the date of filing of
such documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Registration Statement to the extent that a
statement contained herein or in any document which is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Registration Statement.

ITEM 4. DESCRIPTION OF SECURITIES.

Not applicable.

ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.

The legality of the issuance of the shares of common stock offered
hereby will be passed upon for the Registrant by Shack & Siegel, P.C., 530 Fifth
Avenue, New York, New York 10036. As of December 1, 1998, shareholders of Shack
& Siegel, P.C. hold, in the aggregate, 10,990 shares of common stock and options
to purchase 35,000 shares of common stock.

ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Registrant's authority to indemnify its officers and directors is
governed by the provisions of Section 145 of the General Corporation Law of the
State of Delaware (the "DGCL"), by the Amended and Restated Bylaws of the
Registrant, as amended (the "Bylaws"), by the Restated Certificate of
Incorporation, as

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<PAGE>

amended, of the Registrant (the "Certificate of Incorporation") and by
indemnification agreements entered into with each of its directors (the
"Indemnity Agreements").

Under Section 145 of the DGCL, directors and officers as well as other
employees and individuals may be indemnified against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement in connection
with specified actions, suits or proceedings, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation (a "derivative action")) if they acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of the
Registrant, and with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard of
care is applicable in the case of derivative actions, except that
indemnification only extends to expenses (including attorneys' fees) incurred in
connection with defense or settlement of such an action and the DGCL requires
court approval before there can be any indemnification where the person seeking
indemnification has been found liable to the Registrant.

The Certificate of Incorporation and Bylaws of the Registrant provide
that the Registrant shall, to the fullest extent permitted by Section 145 of the
DGCL, (i) indemnify any and all persons whom it shall have power to indemnify
under said section from and against any and all of the expenses, liabilities or
other matters referred to in or covered by said section, and (ii) advance
expenses related thereto to any and all said persons. The indemnification and
advancement of expenses provided for therein shall not be deemed to be exclusive
of any other rights to which those indemnified may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in their official capacities and as to action in another capacity
while holding such offices, and shall continue as to persons who have ceased to
be directors, officers, employees or agents and shall inure to the benefit of
the heirs, executors and administrators of such person. In addition, the
Certificate of Incorporation of the Registrant provides for the elimination of
personal liability of directors of the Registrant to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director, to
the fullest extent permitted by the DGCL, as amended and supplemented.

The Indemnity Agreements provide for the indemnification of officers
and directors to the fullest extent permitted by the laws of the State of
Delaware and obligate the Registrant to provide the maximum protection allowed
under Delaware law. In addition, the Indemnity Agreements supplement and
increase such protection in certain respects.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that, in the opinion of the Commission, such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.

The Company has an insurance policy that provides coverage to directors
and officers with respect to certain claims for which indemnity is not available
pursuant the foregoing provisions described in this Item 6.

ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.

Not applicable.

ITEM 8. EXHIBITS.

Exhibit Number Description
- -------------- ------------
<S> <C>
4.1 Rights Agreement, dated as of October 24, 1996, between the Registrant and The Bank
of New York, as Rights Agent, incorporated by reference to Exhibit 2.1 to the
</TABLE>

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<TABLE>
<S> <C>
Registrant's Registration Statement on Form S-1, as amended, effective October 29,
1996 (File No. 333-11919) (the "Form S-1").

4.2 First Amendment to Rights Agreement, dated as of November 6, 1997, between the
Registrant and The Bank of New York, as Rights Agent, incorporated by reference to
Exhibit 8 to the Registrant's Registration Statement on Form 8-A/A, Amendment No. 1,
filed with the Commission on April 20, 1998.

4.3(a) 1996 Stock Option Plan, incorporated by reference to Exhibit 4(a) to the Registrant's
Registration Statement on Form S-8, filed with the Commission on April 24, 1997
(File No. 333-25757) (the "1997 Form S-8").

4.3(b) Forms of Option Agreements under the 1996 Stock Option Plan, incorporated by reference
to Exhibits 4(b) and 4(c) to the 1997 Form S-8.

4.4(a) 1998 Non-Qualified Stock Option Plan, incorporated by reference to Exhibit 4.4(a) to the
Registrant's Registration Statement on Form S-8, filed with the Commission on June 24,
1998 (File No. 333-57583) (the "1998 Form S-8").

4.4(b) Form of Option Agreement under the 1998 Non-Qualified Stock Option Plan, incorporated by
reference to Exhibit 4.4(b) to the 1998 Form S-8.

4.5(a) 1998 Stock Incentive Plan.

4.5(b) Form of Option Agreement under the 1998 Stock Incentive Plan.

4.5(c) Form of Subscription Agreement under the 1998 Stock Incentive Plan.

5 Opinion of Shack & Siegel, P.C., counsel for Registrant, regarding original issuance
securities.

23.1 Consent of Shack & Siegel, P.C. (contained in the Opinion filed as Exhibit 5 hereto).

23.2 Consent of Ernst & Young LLP.

24 Power of Attorney (contained on the signature page hereof).

</TABLE>

ITEM 9. UNDERTAKINGS.

a. The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;

(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value

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<PAGE>

of securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;

(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;

provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section l3 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.

(2) That, for the purpose of determining liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

b. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

c. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

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<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois on this 1st day of
December, 1998.

MIDWAY GAMES INC.

By: /s/ Neil D. Nicastro
-------------------------------
Neil D. Nicastro,
Chief Executive Officer

POWER OF ATTORNEY

Each person whose signature to this Registration Statement appears
below hereby appoints Neil J. Nicastro, Harold H. Bach, Jr. and Orrin J. Edidin,
and each of them acting singly, as his attorney-in-fact, to sign on his behalf
individually and in the capacity stated below and to file all amendments and
post-effective amendments to this Registration Statement, which amendment or
amendments may make such changes and additions to this Registration Statement as
such attorney-in-fact may deem necessary or appropriate.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE DATE TITLE
- --------- ---- -----
<S> <C> <C>
/s/ Neil D. Nicastro December 1, 1998 Chairman of the Board of Directors, President,
- -------------------- Chief Executive Officer (Principal Executive
Neil D. Nicastro Officer) and Chief Operating Officer

/s/ Harold H. Bach, Jr. December 1, 1998 Executive Vice President - Finance,
- ----------------------- Treasurer (Principal Financial and Principal
Harold H. Bach, Jr. Accounting Officer) and Director

/s/ Byron C. Cook December 1, 1998 Executive Vice President - Home Video and
- ----------------- Director
Byron C. Cook

/s/ Kenneth J. Fedesna December 1, 1998 Executive Vice President - Coin-Op Video
- ---------------------- and Director
Kenneth J. Fedesna

/s/ Louis J. Nicastro December 1, 1998 Director
- ---------------------
Louis J. Nicastro

/s/ William C. Bartholomay December 1, 1998 Director
- --------------------------
William C. Bartholomay

/s/ William E. McKenna December 1, 1998 Director
- ----------------------
William E. McKenna
</TABLE>

<PAGE>

/s/ Norman J. Menell December 1, 1998 Director
- --------------------
Norman J. Menell

/s/ Harvey Reich December 1, 1998 Director
- --------------------
Harvey Reich

/s/ Ira S. Sheinfeld December 1, 1998 Director
- --------------------
Ira S. Sheinfeld

/s/ Gerald O. Sweeney, Jr. December 1, 1998 Director
- --------------------------
Gerald O. Sweeney, Jr.

/s/ Richard D. White December 1, 1998 Director
- --------------------
Richard D. White

</TABLE>

<PAGE>

RESALE PROSPECTUS

MIDWAY GAMES INC.

4,415,000 SHARES

COMMON STOCK, PAR VALUE $.01

We design, publish and market interactive entertainment software played in
both the coin-operated and home markets. Our main office is located at 3401
North California Avenue, Chicago, IL 60618, telephone no. (773) 961-2222.

Our common stock is listed on the New York Stock Exchange under the symbol
"MWY".

Officers and directors who are listed on page 11 below as "selling
stockholders" may sell up to the number of shares of our common stock listed
opposite their names. The selling stockholders acquired or may acquire the
shares to be offered by purchasing shares or exercising stock options granted to
them under our stock option plans or our 1998 Stock Incentive Plan. The selling
stockholders have not informed us of any current intention to sell any Shares.

PLEASE SEE THE "RISK FACTORS" SECTION BEGINNING ON PAGE 3 BELOW
FOR A DISCUSSION OF CERTAIN RISKS OF AN INVESTMENT IN OUR COMMON STOCK.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.

The date of this prospectus is December 1, 1998

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ABOUT THIS PROSPECTUS

This prospectus relates to 4,415,000 shares (the "Shares") of our common
stock that the selling stockholders named in this prospectus may sell until we
terminate this offering. The selling stockholders in this offering are all
officers and directors of Midway Games Inc. We have agreed to pay the expenses
incurred in registering the Shares, including legal and accounting fees.

The Shares have not been registered under the securities laws of any
state or other jurisdiction as of the date of this prospectus. Brokers or
dealers should confirm the existence of an exemption from registration or
effectuate such registration in connection with any offer and sale of the
Shares.

Most of the information about us that you need to know before you invest
in the Shares is not included in this prospectus. It is important that you
obtain and read the information described under the heading "Where You Can Find
More Information" below in order to get all the important information about
Midway. You should also read the "Risk Factors" section beginning on page 3
below for a discussion of certain risks of an investment in our common stock.

DOCUMENTS INCORPORATED BY REFERENCE

We are incorporating the following items into this prospectus by this
reference:

our Annual Report on Form 10-K for the fiscal year ended June 30, 1998,
including the exhibits thereto;

our Quarterly Report on Form 10-Q for the fiscal quarter ended September
30, 1998; and

the description of our common stock and accompanying rights contained in
our registration statements on Form 8-A (File No. 1-12367) filed on
October 30, 1996 and April 20, 1998 under Section 12(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),

including any amendment or report filed for the purpose of updating such
information.

All documents that we file after the date of this prospectus pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act prior to the termination
of this offering shall be considered to be incorporated by reference in this
prospectus and to be a part of this prospectus from the date of filing of such
documents. Any statement contained in a previously filed document incorporated
by reference in this prospectus shall be considered to be modified or superseded
to the extent that a statement in this prospectus (or in any document filed
after the date of this prospectus and incorporated in this prospectus by
reference) modifies or supersedes such statement. Any statement so modified or
superseded shall not be considered, except as so modified or superseded, to
constitute a part of this prospectus.

We will provide without charge to each person, including any beneficial
owner, to whom a copy of this prospectus is delivered, upon written or oral
request, a copy of any or all of the information that has been incorporated by
reference in this prospectus (not including exhibits to such information, unless
such exhibits are specifically incorporated by reference into the information
which this prospectus incorporates). Requests for copies of such information
should be directed to us at our principal executive office: 3401 North
California Avenue, Chicago, IL 60618 (773) 961-2222, Attention: Vice
President--Finance.

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WHERE YOU CAN FIND MORE INFORMATION

We have filed three registration statements (and amendments to them) on
Form S-8 with the Securities and Exchange Commission (the "SEC") concerning the
Shares: File Nos. 333-25757, 333-57583 and 333- __________. This prospectus
constitutes a part of each of these registration statements. As the SEC rules
allow, however, this prospectus does not contain all the information set forth
in or filed with those registration statements. In addition, there may have been
changes in the facts set forth in this prospectus since the date it was filed.
For further information about Midway Games Inc. and our common stock, please
read the registration statements and the exhibits to them. This prospectus also
refers to certain other documents filed with the SEC without giving a complete
description of them. Therefore, you should read any document referred to
carefully in order to understand it fully. You may obtain copies as explained in
the next paragraph.

We file annual and quarterly reports and certain current reports, proxy
statements and other information with the SEC that are required to be filed
under the Exchange Act. You may read and copy the registration statements and
all of this information at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
internet site on the Worldwide Web at www.sec.gov that contains reports, proxy
and information statements and other information regarding us and other issuers
that file electronically with the SEC.

We have not authorized any person to give any information or to make any
representations other than those contained in this prospectus in connection with
any offer to sell or sale of the securities to which this prospectus relates
and, if given or made, you must not rely on such information or representations
as having been authorized. This prospectus does not constitute an offer to sell
to or a solicitation of any offer to buy from any person in any state in which
any such offer or solicitation would be unlawful.

RISK FACTORS

In addition to considering the other information set forth in, or
incorporated by reference into, this prospectus, you should carefully consider
the following risks and uncertainties, which may cause our operating results to
vary from anticipated results or which may materially and adversely affect our
operating results:

DEPENDENCE ON NEW PRODUCT INTRODUCTIONS

Our success depends on generating revenue from new products and from
enhancements of existing products. Video game products typically have market
life spans of only three to twelve months. In addition, the process of
developing software products like ours is extremely complex and is expected to
become more complex and expensive in the future as new platforms and
technologies are introduced. Furthermore, consumer preferences for video games
are difficult to predict, and few video game products achieve sustained market
acceptance. We believe that the importance to our success of developing "hit"
products will continue and increase in the future. We cannot assure you that the
new products that we introduce will achieve any significant degree of market
acceptance, or that such acceptance will be sustained for any meaningful period.

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RISK OF PRODUCT DELAYS

From time to time, we have experienced delays in product introductions.
We depend on a variety of design and technical personnel and other development
components to introduce our new products and enhancements. The timing of a
creative process is difficult to predict, and the increasingly complex products
that we and our competitors introduce require increasing development time. It
usually takes us six to 24 months to complete a new product's development from
the time we approve a concept, and the amount of development time required is
increasing as our products become more complex. We cannot assure you that we
will be able to introduce new products and enhancements on a timely basis.
Unanticipated delays could cause us to miss an important selling season for the
delayed products, and we could mistime product promotions. In addition, our
development schedule for other products could be affected. A significant delay
in the introduction of one or more new products or enhancements could have a
material adverse effect on our operating results and financial condition.

RAPID TECHNOLOGICAL CHANGE

The video game market, both in the coin-operated and home segments, is
characterized by rapidly changing technology. We must continually anticipate and
adapt our products to emerging technologies, including new hardware platforms,
operating systems and media formats. When we choose to incorporate a new
technology into our products or to publish or develop a product for a new
platform, we may be required to make a substantial development investment one to
two years in advance of initial shipment of such products. We cannot assure you
that we will be able to identify accurately which emerging technologies will
gain widespread acceptance. If we invest in the development of a video game that
does not achieve significant commercial success, our revenues from that product
will be adversely affected, and we may not recover our development costs. If, on
the other hand, we do not choose to pursue the development of products
incorporating new technology or for new platforms that achieve significant
commercial success, our revenue growth may also be adversely affected. In
addition, consumers may defer purchasing software for use on existing platforms
following the announcement of an introduction date for hardware platforms
incorporating new technologies. We may not be able to obtain licenses to use new
technologies. Accordingly, sales of our existing software products could be
adversely affected by such announcements. We cannot assure you that we will be
able to develop or acquire the expertise necessary to enable us to develop or
market products for emerging technologies.

RELIANCE ON MORTAL KOMBAT PRODUCTS

Revenues from Mortal Kombat products accounted for approximately 19.1%,
22.0% and 34.9% of our total revenues during fiscal 1998, 1997 and 1996,
respectively. If Mortal Kombat products fail to continue to sell, or if we fail
to replace the Mortal Kombat products with additional products generating
significant revenues, our business, operating results and financial condition
could be materially and adversely affected.

FLUCTUATIONS IN OPERATING RESULTS

We have experienced and expect to continue to experience significant
quarterly fluctuations in net sales and operating results due to a variety of
factors, including:

fluctuations in our mix of products with varying profit margins;

the size and rate of growth of the consumer software market;

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market acceptance of our products and those of our competitors and
dedicated platform manufacturers;

development and promotional expenses relating to the introduction of new
products or enhancements of existingproducts;

the timing and success of product introductions, changes in
our pricing policies and those of our competitors;

the accuracy of our and retailers' forecasts of consumer demand; and the
timing of orders from major customers, order cancellations and delays
in shipment.

Our expense levels are based, in part, on our expectations regarding future
sales and, as a result, operating results would be adversely affected by a
decrease in sales or a failure to meet our sales expectations.

SEASONALITY

While the coin-operated game business is not generally seasonal in
nature, the home video game business is highly seasonal. Sales of home video
games are typically significantly higher during the September and December
quarters due to the year-end holiday buying season. Sales in other quarters are
generally lower and vary significantly as a result of new product introductions
and other factors. We cannot assure you that we will achieve consistent
profitability on a quarterly or annual basis.

COMPETITION

The video game business is intensely competitive and is characterized by
the continuous introduction of new titles and the development of new
technologies. Our ability to compete successfully in this market is based, in
large part, upon our ability to select and develop popular titles, to identify
and obtain rights to commercially marketable intellectual properties and to
adapt our products for use with new technologies. In addition, successful
competition is also based upon price, access to retail shelf space in the case
of home games, product enhancements, brand recognition, marketing support and
access to distribution channels. Our competitors vary in size from very small
companies with limited resources to very large corporations with greater
financial, marketing and product development resources than ours. We are often
in competition with platform manufacturers and companies that we depend upon for
distribution or other services. These companies may have an incentive to promote
their own products in preference to ours.

We believe that large diversified entertainment, cable and
telecommunications companies, in addition to large software companies such as
Microsoft, are increasing their focus on the interactive entertainment market,
which will result in greater competition for us. In particular, many of our
competitors are developing on-line interactive games and interactive networks
that will be competitive with our interactive products. We cannot assure you
that we will be able to compete successfully against current or future
competitors. Competitive pressures that we face could materially and adversely
affect our business and financial condition.

PRODUCT RETURNS AND PRICE ADJUSTMENTS

In our home video game business, we accept product returns for defective
products and sometimes provide replacements, markdowns or other credits on
varying terms in the event that the customer holds slow-moving inventory of our
home games. At the time of product shipment, we establish reserves, including
reserves under our policies for price protection and returns of defective
products, according to estimates of the

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<PAGE>

potential for future returns of products based on historical return rates,
seasonality of sales, retailer inventories of our products and other factors.
Product returns, markdowns and credits that exceed our reserves could have a
material adverse effect on our business, operating results and financial
condition. Although we maintain reserves which we believe to be adequate with
respect to product returns and price reductions, we cannot assure you that the
reserves established will not be exceeded.

DEPENDENCE ON DEDICATED PLATFORM MANUFACTURERS

We depend heavily on the manufacturers of dedicated video game platforms
in a number of ways. In fiscal 1998, 86% of our unit sales of software products
were for use on 32- and 64-bit game platforms (Nintendo 64, Sony PlayStation and
Sega Saturn). The balance of our home video game unit sales were primarily for
the 16-bit Super Nintendo Entertainment System and Sega Genesis platforms, as
well as for portable game systems.

We expect an increasing portion of our revenues in the coming years will be
comprised of games for 32- and 64-bit game platforms or new generations of game
platforms. If the popularity of home video games on dedicated hardware platforms
materially declines, or if we were to lose our license to publish software from
Nintendo or Sony, our business would be materially and adversely affected.

We are generally obligated to submit new games to the dedicated platform
manufacturers for approval prior to development and/or manufacturing. Rejection
or substantial delay in approval of a product by a dedicated platform
manufacturer could have a material adverse effect on our financial condition and
results of operations. We have not experienced any significant delays in the
approval process for any of our games in the past. We cannot assure you,
however, that we will not experience such delays in the future. The dedicated
platform manufacturers may also limit the number of titles that we can release
in any year, which may limit any future growth in sales.

We depend on Nintendo, Sony and Sega for the protection of the
intellectual property rights to their respective hardware platforms and
technology, their ability to control the proliferation of new titles by
licensees and others and their ability to discourage unauthorized persons from
producing software for the Nintendo, Sony and Sega platforms. We also rely upon
the dedicated platform manufacturers for the manufacturing of software
cartridges and CD-ROMs containing our software for their platforms.

MANUFACTURING RISKS

The manufacturing of cartridges and CD-ROMs for our home games is
performed for us by third parties who are often our competitors. While we have
not to date experienced any material delays or interruptions in the manufacture
of our products, we cannot assure you that such delays or interruptions will not
occur. If any significant delays do occur, and we cannot remedy them without
further delay, they could materially and adversely affect our business,
operating results and financial condition. Unanticipated price increases from
any of such contract manufacturing sources also could adversely affect our
business.

INTELLECTUAL PROPERTY LICENSES AND APPROVALS

While we primarily seek to develop original proprietary games, certain
of our games are based on properties or trademarks owned by third parties, such
as the National Basketball Association, National Football League, National
Hockey League or their respective players' associations. Our future success may
also depend upon our ability to procure licenses for additional popular
intellectual properties. There is competition for such

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<PAGE>

licenses, and we cannot assure you that we will be successful in acquiring
additional intellectual property rights with significant commercial value.

Our intellectual property licenses generally require that new products
developed under such licenses be submitted to the licensor for approval prior to
release. Such approval is generally discretionary. Rejection or delay in
approval of a product by a licensor could have a material adverse effect on our
business, operating results and financial condition. While we have not
experienced any significant delays in obtaining new product approvals from our
licensors in the past, we cannot assure you that we will not experience delays
in the future. The owners of intellectual property licensed by us generally
reserve the right to protect such intellectual property against infringement.

DEPENDENCE ON KEY PERSONNEL

Our success depends to a significant extent upon the performance of
senior management and on our ability to continue to attract, motivate and retain
highly qualified software developers. The loss of services of senior management,
highly-qualified software developers or other key personnel could have a
material adverse effect on us. Competition for highly skilled employees with
technical, management, marketing, sales, product development and other
specialized training is intense, and we cannot assure you that we will be
successful in attracting and retaining such personnel. Specifically, we may
experience increased costs in order to attract and retain skilled employees.

RISKS OF ACQUISITION STRATEGY

We have announced that our growth strategy may include acquiring other
companies. Our success with this strategy depends on our ability to identify and
negotiate attractive investments in businesses that we believe will complement
or enhance our business. We cannot assure you that we will be able to properly
identify and evaluate opportunities, control costs and liabilities incurred with
the acquisition of the new businesses or assets, effectively manage our growth
or anticipate and evaluate the numerous risks involved in acquiring and
operating a new business or asset. Management's resources may be diverted from
more valuable projects because of the focus on an acquisition strategy. The
acquisition of a costly or unproductive business or asset could materially and
adversely affect our business.

CONFLICTS OF INTEREST WITH WMS INDUSTRIES INC.

Certain of our officers and directors are also officers, directors and
stockholders of WMS Industries Inc. ("WMS") and may be subject to various
conflicts of interest including, among others, the performance by the two
companies under their existing agreements with each other as well as the
negotiation of any agreements required to be entered into in the future between
these two parties. Additionally, we may be subject to various conflicts of
interest arising from the relationship among us and WMS and our respective
affiliates.

Mr. Neil D. Nicastro, Midway's Chairman of the Board, President, Chief
Executive Officer and Chief Operating Officer is also a director of and a
consultant to WMS. Mr. Louis J. Nicastro, one of Midway's directors, is also the
Chairman of the Board, President and Chief Executive Officer of WMS. Mr. Neil D.
Nicastro is the son of Mr. Louis J. Nicastro. Mr. Harold H. Bach, Jr., Mr.
Kenneth J. Fedesna and Mr. Orrin J. Edidin, officers and employees of WMS and/or
various of its affiliates, are also officers of Midway. Mr. Bach and Mr. Fedesna
are also directors of Midway. Each of Messrs. Bach, Fedesna and Edidin will
devote such time

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<PAGE>

to Midway's business and affairs as the Board deems appropriate. However, each
such person has other duties and responsibilities with WMS that may conflict
with time which might otherwise be devoted to his duties with Midway. We
anticipate that Messrs. Bach, Fedesna and Edidin will resign their positions
with WMS by June 30, 1999.

ANTITAKEOVER PROVISIONS

Management could use several charter or statutory provisions and
agreements as anti-takeover devices to discourage, delay or prevent a change in
control of Midway. The use of these provisions and agreements could adversely
affect the market price of Midway's common stock:

Blank Check Preferred Stock. Midway's Certificate of Incorporation, as
amended, authorizes the issuance of 5,000,000 shares of preferred stock with
such designations, rights and preferences as may be determined from time to time
by the Board of Directors. Accordingly, the Board has the power, without
stockholder approval, to issue preferred stock with dividend, liquidation,
conversion, voting or other rights which could adversely affect the voting power
or other rights of the holders of the common stock. Management has no present
plans, agreements or commitments to the issue any shares of preferred stock.

Rights Plan. Under a Rights Agreement with The Bank of New York, each
share of Midway common stock has an accompanying Right to purchase, upon certain
acquisitions of beneficial ownership of 15 percent or more of the common stock,
convertible preferred stock that permits each holder to receive common stock at
half price. We can redeem the Rights at $.01 per Right, subject to certain
conditions, at any time. The Rights expire in 2007.

Classified Board. The Certificate of Incorporation provides for a
classified Board of Directors. Upon the expiration of staggered terms,
approximately one third of Midway's directors are elected for three year terms
to succeed those directors whose terms expire. This means that a person could
not obtain control of the Board until the second annual stockholders' meeting
after acquiring a majority of the voting stock.

Other Charter Provisions. The Certificate of Incorporation also
provides, among other things, that:

1) directors may be removed only for cause and only by an
affirmative vote of at least 80% of outstanding common stock;

2) any vacancy on the Board may be filled only by a vote of a
majority of the remaining directors then in office;

3) there may be no stockholder action by written consent;

4) only the President, the Chairman of the Board or the Board
of Directors may call special meetings of stockholders, and the only
business permitted to be conducted at stockholder meetings is business
brought before the meeting by or at the direction of the Board;

5) stockholders must follow an advance notice procedure for the
submission of director nominations and other business to be considered
at an annual meetings of stockholders;

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<PAGE>

6) either a majority vote of the Board or an affirmative vote
of at least 80% of outstanding common stock is needed in order to adopt,
amend or repeal the Bylaws; and

7) an affirmative vote of 80% of outstanding common stock is
needed in order to adopt, amend or repeal the above provisions.

Section 203 of the Delaware General Corporation Law. In general, this
statute prohibits a publicly-held Delaware corporation from engaging in a
business combination with anyone who owns at least 15% of its common stock for a
period of three years after that person has acquired the 15% ownership, unless
the business combination is approved by the board or stockholders of the public
corporation.

ADVERSE EFFECTS OF POTENTIAL FUTURE SALES OF COMMON STOCK

We have 100,000,000 authorized shares of common stock, of which
37,052,000 shares were issued and outstanding as of December 1, 1998, excluding
1,448,000 treasury shares. In the event that all of our issued and outstanding
stock options were exercised as of such date, approximately 39,500,000 shares of
common stock would be outstanding. The Board of Directors has broad discretion
with respect to the issuance of the remaining authorized but unissued shares,
including discretion to issue such shares in compensatory and acquisition
transactions. In the event that we seek to procure additional financing through
the sale and issuance of our securities, our then current stockholders may
suffer dilution in their percentage ownership of shares of the common stock. In
addition, the future issuance of shares at a price below the then current market
price of the common stock pursuant to this prospectus or the registration
statements listed under the heading "Where You Can Find More Information" above,
or otherwise, or even the potential of such sales, may have a depressive effect
on the future market price of the common stock.

DILUTIVE NATURE OF OPTIONS AND OTHER DERIVATIVE SECURITIES

As of December 1, 1998, we had outstanding options to purchase an
aggregate of approximately 2,468,000 shares of common stock exercisable at an
average exercise price of approximately $18.75 per share. Our stock option and
stock incentive plans also authorize the grant of options to purchase
approximately an additional 3,280,000 shares of common stock. During the terms
of our outstanding options, which average over eight years from the date hereof,
the holders thereof are given the opportunity to profit from a rise in the
market price of the common stock. The holders of options would be most likely to
exercise them and purchase the common stock at a time when we could obtain
capital by a new offering of securities on terms more favorable to us than those
provided by the options. Consequently, the terms on which we could obtain
additional capital during such periods may be adversely affected.

YEAR 2000 ISSUES (YEAR 2000 READINESS DISCLOSURE)

The term Y2K is used to refer to a worldwide computer-related problem
where software programs and embedded programs in microprocessors will not work
properly when processing a date later than December 31, 1999. This problem
results from using only two digits to represent the year in a date and assuming
19 to be the first two digits of the year. Many existing programs will continue
to assume a 19 as the first and second digit while a 20 or greater is required.
A method of fixing the problem is to rewrite the program to provide for a four
or five digit year field. This Y2K problem has resulted in significant
remediation costs and worldwide concern about the future operations of
businesses and other institutions.

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<PAGE>

Since 1996, we have worked to make our systems Y2K compliant together
with WMS, our Chicago information services provider. Systems utilized by our
subsidiary, Atari Games Corporation, have been made compliant with a software
upgrade, and testing of the systems is ongoing. Accounting and finance systems
utilized by our other major subsidiary, Midway Home Entertainment, Inc. have
been made Y2K compliant, and the remaining systems, such as the customer
interface and shipping systems will be made compliant by July 1999 with a
planned software upgrade at a nominal cost.

We believe that there are no Y2K issues with respect to the
functionality of any of our products sold in the past or to be sold in the
future. We also believe that there are no Y2K issues with respect to the
functionality of the hardware platforms for which we sell home video games.

WMS provides contract manufacturing services to us. WMS has assured us
in writing that the systems used in their contract manufacturing are Y2K
compliant. WMS also has notified us that the assembly of the coin-operated video
games should not be affected by malfunctioning tools or equipment using embedded
microprocessors, as the assembly process is not heavily reliant on such tools or
equipment.

We are exposed to potential Y2K problems because we rely on
distributors, large customers and coin-operated video game component suppliers.
We are in the process of contacting our suppliers to assess the potential
problem, if any. We have not made a determination as to our customers' or
suppliers' levels of Y2K compliance at this time. If needed, we will adjust the
coin-operated title release dates to adjust for any failures by suppliers, and
at worst we would expect a short-term delay in shipments of our products. If
such a delay should occur, we do not expect to experience a material and adverse
effect on operating results for any reportable period.

This discussion of Y2K risks and readiness contains certain
forward-looking statements concerning future conditions and our business outlook
based on currently available information that involve risks and uncertainties.
The actual state of our Y2K readiness and exposure could differ materially from
that anticipated in the forward-looking statements as a result of certain risks
and uncertainties, including, without limitation, the ability to obtain supplies
and energy, make deliveries, communicate with business partners, the Y2K
readiness of customers and other business partners and the other risks described
above in this Risk Factors section.

USE OF PROCEEDS; DILUTION

We will not receive any of the proceeds from the sale of the common
stock offered by this prospectus, but we will receive the purchase or exercise
price upon the purchase or exercise of options by the selling stockholders. We
plan to use any such proceeds for working capital. For a discussion of the
possible dilutive effects of the Shares, see "Risk Factors" above.

SELLING STOCKHOLDERS

This prospectus relates to Shares that are being registered for reoffers
and resales by selling stockholders who have acquired or may acquire Shares
pursuant to our stock option plans or stock incentive plan. The selling
stockholders named below may resell any or all of the Shares at any time they
choose while this prospectus is effective.

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<PAGE>

Executive officers, directors and others who are considered to be
"affiliates" of Midway Games Inc. who acquire common stock under the Plans may
be added to the selling stockholders listed below, and their number of Shares to
be sold may be increased or decreased, by use of a prospectus supplement filed
with the SEC. An "affiliate" is defined in Rule 405 under the Securities Act as
a "person that directly, or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with" us.
Non-affiliates who purchased restricted securities (as defined in Rule 144(a)(3)
under the Securities Act) under any of our employee benefit plans and who are
not named below may use this prospectus for the offer or sale of their common
stock if they hold 1,000 shares or less. Although a person's name is included in
the table below, neither that person nor we are making an admission that such
person is our "affiliate."

The table below sets forth with respect to each selling stockholder,
based upon information available to us as of December 1, 1998, the number of
Shares beneficially owned before and after the sale of the Shares; the maximum
number of Shares to be sold; and the percent of the outstanding shares of common
stock owned before and after the sale of the Shares. We have not been informed
whether or not any selling stockholders intend to sell any Shares. The inclusion
of Shares in the table below does not constitute a commitment to sell any
Shares.

Amount and Shares Percent of Class(2)
Nature of Beneficially ------------------------
Beneficial Shares to Owned Before After
Name and Position Ownership be Sold (1) After Offering Offering Offering
- ----------------- ---------- ----------- -------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Neil D. Nicastro, Chairman of the Board, 888,458(3) 650,000 458,458 2.3% 1.2%
Chief Executive Officer, President
and Chief Operating Officer and son
of Louis J. Nicastro

Louis J. Nicastro, Director and father of 50,547(4) 35,000 15,547 * *
Neil D. Nicastro

Byron C. Cook, Executive Vice 158,589(5) 150,000 68,589 * *
President-- Home Video and Director

Kenneth J. Fedesna, Executive Vice 132,463(5) 150,000 42,463 * *
President-- Coin Op Video and
Director

Harold H. Bach, Jr., Executive Vice 121,674(5) 150,000 31,674 * *
President -- Finance, Treasurer, Chief
Financial and Chief Accounting
Officer and Director

Orrin J. Edidin, Vice President, Secretary 500 35,000 500 * *
and General Counsel

William C. Bartholomay, Director 80,370(4) 35,000 45,370 * *

William E. McKenna, Director 51,958(4) 35,000 16,958 * *

Norman J. Menell, Director 52,506(4) 35,000 17,506 * *

Harvey Reich, Director 51,277(4) 35,000 16,277 * *

Ira S. Scheinfeld, Director 56,801(4) 35,000 21,801 * *

Gerald O. Sweeney, Jr., Director 35,000(4) 35,000 -0- -0- -0-

Richard D. White, Director 35,000(4) 35,000 -0- -0- -0-
</TABLE>

- -------------------
* Less than 1%

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(1) Does not constitute a commitment to sell any or all of the stated
number of Shares. The number of Shares shall be determined from time to
time by each selling stockholder in his discretion. Shares listed in
this column may represent Shares underlying stock options.

(2) Based on 37,052,000 shares of common stock outstanding as of December 1,
1998. Shares issuable upon the exercise of options exercisable within 60
days by such person are deemed to be outstanding with respect to the
calculation of such person's percent of class.

(3) Includes 430,000 Shares which may be acquired pursuant to the exercise
of stock options.

(4) Includes 35,000 Shares which may be acquired pursuant to the exercise
of stock options.

(5) Includes 90,000 Shares which may be acquired pursuant to the exercise
of stock options.

PLAN OF DISTRIBUTION

The selling stockholders are selling the common stock for their own
accounts. The selling stockholders, pledgees, donees, transferees or other
successors in interest to the selling stockholders may sell or transfer common
stock for value in one or more transactions on the New York Stock Exchange (or
any successor stock exchange), in negotiated transactions or in a combination of
such methods of sale, at market prices prevailing at the time of sale, at prices
related to such market prices or at prices otherwise negotiated. The selling
stockholders may effect such transactions by selling the common stock to or
through broker-dealers. Such broker-dealers may receive compensation in the form
of underwriting discounts, concessions or commissions from the selling
stockholders and/or the purchasers of the common stock for whom such
broker-dealers may act as agents (which compensation may be more or less than
customary commissions). The selling stockholders and any broker-dealers that
participate in the distribution of the common stock may be deemed to be
"underwriters" as that word is used in Section 2(11) of the Securities Act, and
any commissions received by them and any profit on the resale of the common
stock sold by them may be considered to be underwriting discounts and
commissions under the Securities Act. All selling and other expenses incurred by
individual selling stockholders will be borne by such selling stockholders. Each
share of common stock is sold together with certain stock purchase rights. These
rights are described in a registration statement on Form 8-A (File No. 1-12367)
which we filed with the SEC on October 30, 1996 and amended on Form 8A/A filed
April 20, 1998. See "Documents Incorporated by Reference" above.

We do not know whether or not any of the selling stockholders will sell
any or all of the common stock that they may offer under this prospectus.

LEGAL MATTERS

The validity of the Shares has been passed upon by our counsel, Shack &
Siegel, P.C., New York, New York. As of December 1, 1998, stockholders of Shack
& Siegel, P.C. hold a total of 10,999 shares of common stock and options to
purchase 35,000 shares of common stock.

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EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K for
the year ended June 30, 1998, as set forth in their report, which is
incorporated in this prospectus by reference. Our consolidated financial
statements are incorporated by reference in reliance on their report, given on
their authority as experts in accounting and auditing.

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EXHIBIT INDEX

Exhibit No. Description
- ----------- -----------
<S> <C>
4.1 Rights Agreement, dated as of October 24, 1996, between the Registrant and The Bank
of New York, as Rights Agent, incorporated by reference to Exhibit 2.1 to the
Registrant's Registration Statement on Form S-1, as amended, effective October 29,
1996 (File No. 333-11919) (the "Form S-1").

4.2 First Amendment to Rights Agreement, dated as of November 6, 1997, between the
Registrant and The Bank of New York, as Rights Agent, incorporated by reference to
Exhibit 8 to the Registrant's Registration Statement on Form 8-A/A, Amendment
No. 1, filed with the Commission on April 20, 1998.

4.3(b) Forms of Option Agreements under the 1996 Stock Option Plan, incorporated by reference
to Exhibits 4(b) and 4(c) to the 1997 Form S-8.

4.4(b) Form of Option Agreement under the 1998 Non-Qualified Stock Option Plan, incorporated by
reference to Exhibit 4.4(b) to the 1998 Form S-8.

4.5(a) 1998 Stock Incentive Plan.

4.5(b) Form of Option Agreement under the 1998 Stock Incentive Plan.

4.5(c) Form of Subscription Agreement under the 1998 Stock Incentive Plan.

5 Opinion of Shack & Siegel, P.C., counsel for Registrant, regarding original issuance
securities.

23.1 Consent of Shack & Siegel, P.C. (contained in the Opinion filed as Exhibit 5 hereto).

23.2 Consent of Ernst & Young LLP.

24 Power of Attorney (contained on the signature page hereof).
</TABLE>

<PAGE>

Exhibit 4.5(a)

MIDWAY GAMES INC.

1998 STOCK INCENTIVE PLAN

ARTICLE I

Purpose of the Plan

The 1998 Stock Incentive Plan (the "Plan") is intended to provide a method
whereby eligible employees of Midway Games Inc. (the "Company") and its
Subsidiaries ("Employees" as such term is hereinafter defined) may be encouraged
to acquire a proprietary interest in the Company and whereby such individuals
may realize benefits from any increase in the value of the shares of common
stock, $0.01 par value per share (the "Common Stock"), of the Company; to
provide Employees with greater incentive and to encourage their continued
provision of services to the Company; and, generally, to promote the interests
of the Company and all of its stockholders. Under the Plan, shares of Common
Stock may be purchased and options to purchase Common Stock may be issued and
exercised on the terms and subject to the conditions hereinafter set forth.
Capitalized terms are defined in Article XIV hereof.

ARTICLE II

ADMINISTRATION OF THE PLAN

SECTION 1. Subject to the authority as described herein of the Board of
Directors of the Company (the "Board"), the Plan shall be administered by the
Stock Option Committee of the Board (the "Committee") which is composed of at
least two members of the Board who are Non-Employee Directors. The Committee is
authorized to interpret the Plan and may from time to time adopt such rules and
regulations for carrying out the Plan as it may deem best. All determinations by
the Committee shall be made by the affirmative vote of a majority of its
members, but any determination reduced to writing and signed by a majority of
its members shall be fully enforceable and effective as if it had been made by a
majority vote at a meeting duly called and held. Subject to any applicable
provisions of the Plan, all determinations by the Committee or by the Board
pursuant to the provisions of the Plan, and all related orders or resolutions of
the Committee or the Board, shall be final, conclusive and binding on all
Persons, including the Company and its stockholders, employees and optionees.

SECTION 2. All authority delegated to the Committee pursuant to the Plan,
may also be exercised by the Board. Subject to the foregoing, in the event of
any conflict or inconsistency between determinations, orders, resolutions or
other actions of the Committee and the Board, the actions of the Board shall
control.

SECTION 3. With respect to persons subject to Section 16 of the 1934 Act,
transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any
provision of the Plan or action by the Committee fails to so comply, it shall be
deemed null and void to the extent permitted by law and deemed advisable by the
Committee.

ARTICLE III

EFFECTIVE DATE AND DURATION OF THE PLAN

The Plan shall be effective as of November 24, 1998 and shall terminate on
November 23, 2008. Such termination will not affect any option then outstanding.

ARTICLE IV

ELIGIBILITY OF RECIPIENTS

Any Employee who is an Employee on the date that his duly executed
Subscription Agreement in the form annexed hereto is delivered to the Company
shall be eligible to participate in the Plan.

ARTICLE V

ISSUANCE OF STOCK AND OPTIONS

SECTION 1. Subscription Agreements will only be accepted during offering
periods which shall commence and terminate on such dates prior to November 23,
2008 as the Committee shall from time to time determine (each such period
referred to herein as an "Offering Period"). Subject to the conditions and
limitations in the Plan, during an Offering Period, each eligible Employee may
subscribe for the purchase of up to the number of whole shares of Common Stock
(subject to the provisions of Section 4 of this Article) that equals 1.5
multiplied by the Employee's Base Compensation divided by the closing price of
the Common Stock on the New York Stock Exchange on the last day of the Offering
Period, rounded down to the nearest share. The Subscription Agreement shall
specify a dollar amount which does not exceed 1.5 multiplied by such Base
Compensation, and the subscriber shall deliver a check to the Company for such
amount, together with the executed Subscription Agreement. For each share of
Common Stock purchased during an Offering Period under the Plan (a "Purchased
Share"), options to purchase three additional shares, subject to the Plan, shall
be issued to the purchaser together with the shares purchased.

SECTION 2. The shares and options to be issued under the Plan shall be made
available, at the discretion of the Committee, either from the authorized but
unissued shares of Common Stock or from shares of Common Stock reacquired by the
Company, including shares purchased by the Company in the open market or
otherwise obtained. No option shall be issued unless and until the optionee
accepts and agrees to the terms of the option agreement evidencing the option in
the form prescribed by the Committee.

SECTION 3. Subject to the provisions of Article X hereof, the aggregate
number of Purchased Shares and shares underlying options issued together with
such Purchased Shares shall not exceed 3,000,000 (750,000 Purchased Shares and
2,250,000 shares underlying options). Purchased Shares and options which are
canceled, lapse or are otherwise terminated shall be available for reissuance
under the Plan.

-2-

SECTION 4. If the total number of Purchased Shares (and shares underlying
accompanying options) subscribed for (and not withdrawn) by all eligible
Employees during an Offering Period exceeds the number of Purchased Shares which
the Committee has determined may be purchased during that Offering Period under
the Plan, the number of shares and options issued to each subscriber shall be
reduced pro rata, to the extent necessary to avoid issuing more than the number
of Purchased Shares and options authorized to be issued during such Offering
Period hereunder, in the same ratio as the number of shares authorized to be
issued during such Offering Period bears to the total number of shares of Common
Stock subscribed for, and each subscriber's Purchased Shares shall be rounded
down to the nearest share.

SECTION 5. On the next business day after the end of an Offering Period,
the Company shall notify each subscriber of the purchase price of the shares of
Common Stock. Unless the subscriber shall withdraw his or her subscription by
the end of the business day following such notice, he or she shall be deemed to
have irrevocably confirmed the subscription. If a subscriber shall cease to be
an Employee during an Offering Period, he or she will be deemed to have elected
to withdraw, and his or her Subscription Agreement shall be void. No subscriber
shall have any right to withdraw his or her subscription except as set forth in
this Section.

SECTION 6. As soon as practicable after the end of an Offering Period and
the one day withdrawal period described in Section 5 of this Article, the
Company shall also confirm to each subscriber the number of Purchased Shares
issued pursuant to his or her Subscription Agreement. The Company shall promptly
cash the subscribers' check and issue in the name of each subscriber stock
certificates representing his or her Purchased Shares and an instrument
evidencing his or her options. If there has been a pro-rata reduction in the
number of shares to be issued, the Company shall promptly refund the appropriate
overpayment amounts to the subscribers and issue in the name of each subscriber
stock certificates representing such subscriber's Purchased Shares and an
instrument evidencing his or her options. The certificates and instruments
evidencing Purchased Shares and stock options issued under this Section 6 shall
be retained in escrow by the Company for a period of six months after the end of
the applicable Offering Period, at which time they shall be delivered to the
subscriber.

ARTICLE VI

RESALE OF PURCHASED SHARES

SECTION 1. Until the expiration of six months after the end of the
applicable Offering Period, subscribers may not (i) sell any Purchased Shares or
contract to do so, (ii) have a short position in or any put or other option to
dispose of any shares of Common Stock; or (iii) enter into any other transaction
directly or indirectly involving Common Stock intended to reduce the economic
risk of investment in the Purchased Shares.

SECTION 2. The Purchased Shares have been listed for trading on the New
York Stock Exchange. If at any time the further listing, registration or
qualification of the Purchased Shares upon any securities exchange or under any
state or Federal law, or the consent or approval of any governmental regulatory
body, is necessary as a condition of, or in connection with, the resale of the
Purchased Shares, however, the Purchased Shares may not be resold unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained. Unless, at the time of resale, there shall be in effect as
to the Purchased Shares a registration statement under the Act, a holder who
intends to sell Purchased Shares shall deliver a

-3-

certification (a) acknowledging that such Purchased Shares may be "restricted
securities" as defined in Rule 144 promulgated under the Act; and (b) containing
such holder's agreement that such Purchased Shares may not be sold or otherwise
disposed of except in compliance with applicable provisions of the Act. The
Company agrees to use its best efforts to register the Purchased Shares under
the Act and to keep a resale prospectus available for use by any holder for whom
such prospectus is required to permit such holder to sell Purchased Shares.

ARTICLE VII

PURCHASE PRICE OF OPTIONS

The purchase price per share of Common Stock under options issued under the
Plan shall be the closing price of the Common Stock on the New York Stock
Exchange on the last day of the applicable Offering Period.

ARTICLE VIII

EXERCISE OF OPTIONS

SECTION 1. Each purchaser's options issued under the Plan shall terminate
ten years after the last day of the applicable Offering Period and shall vest
one year after the last day of the applicable Offering Period, if the optionee
is then an Employee.

SECTION 2. A person electing to exercise an option then exercisable shall
give written notice to the Company of such election and of the number of shares
of Common Stock such person has elected to purchase. A person exercising an
option shall at the time of purchase tender the full purchase price of such
shares, which tender, except as provided in Section 3 of this Article, shall be
made in cash or cash equivalent (which may be such person's personal check) or,
to the extent permitted by applicable law, in shares of Common Stock already
owned by such person (which shares shall be valued for such purpose on the basis
of their closing price on the New York Stock Exchange on the date of the
exercise), or in any combination thereof; provided, however, that payment in
shares of common stock already owned shall not be permitted unless the chief
financial officer of the Company determines that such payment will not require
the Company to recognize a compensation expense under applicable accounting
rules. In the event of payment in shares of Common Stock already owned, such
shares shall be appropriately endorsed for transfer to the Company. The Company
shall have no obligation to deliver shares of Common Stock pursuant to the
exercise of any option, in whole or in part, until such payment in full of the
purchase price therefor is received by the Company. No optionee, or legal
representative, legatee or distributee of such optionee, shall be or be deemed
to be a holder of any shares of Common Stock subject to such option or entitled
to any rights of a stockholder of the Company in respect of any shares of Common
Stock covered by such option until such shares have been paid for in full and
issued or delivered by the Company.

SECTION 3. In order to assist an optionee in the exercise of an option
issued under the Plan, the Committee may, in its discretion, authorize, either
at the time of the issuance of the option or thereafter (a) the extension of a
loan to the optionee by the Company, (b) the payment by the optionee of the
purchase price of the Common Stock in installments, (c) the guarantee by the
Company of a loan obtained by the optionee from a third party or (d) make such
other reasonable arrangements to facilitate the exercise of

-4-

options in accordance with applicable law. The Committee shall authorize the
terms of any such loan, installment payment arrangement or guarantee, including
the interest rate, which shall be not less than the rate of interest from time
to time imputed under Section 483 of the Code, and terms of repayment thereof,
and shall cause the instrument evidencing any such option to be amended, if
required, to provide for any such extension of credit. Loans, installment
payment arrangements and guarantees may be authorized without security, and the
maximum amount of any such loan or guarantee shall be the purchase price of the
Common Stock being acquired, plus related interest payments.

SECTION 4. Each option shall be subject to the requirement that if at any
time the Board shall in its discretion determine that the listing, registration
or qualification of the shares of Common Stock subject to such option upon any
securities exchange or under any state or Federal law, or the consent or
approval of any governmental regulatory body, is necessary as a condition of, or
in connection with, the issuance of such option or the issuance or purchase of
shares thereunder, such option may not be exercised in whole or in part unless
such listing, registration, qualification, consent or approval shall have been
effected or obtained free from any conditions not reasonably acceptable to the
Board. Unless at the time of exercise of an option and the issuance of Common
Stock so purchased, there shall be in effect as to such Common Stock a
registration statement under the Act, the holder of such option shall deliver a
certification (a) acknowledging that such shares of Common Stock may be
"restricted securities" as defined in Rule 144 promulgated under the Act; and
(b) containing such optionee's agreement that such Common Stock may not be sold
or otherwise disposed of except in compliance with applicable provisions of the
Act. In the event that the Common Stock is then listed on a national securities
exchange, the Company shall use its best efforts to cause the listing of the
shares of Common Stock subject to options upon such exchange. The Company agrees
to use its best efforts to register the shares of Common Stock issuable upon
exercise of options granted hereunder and to keep a resale prospectus available
for use by any stockholder for whom such prospectus is required to permit such
holder to sell such shares.

SECTION 5. The Company may establish appropriate procedures to provide for
payment or withholding of such income or other taxes as may be required by law
to be paid or withheld in connection with the exercise of options or any other
matters under the Plan, and to ensure that the Company receives prompt advice
concerning the occurrence of any event which may create, or affect the timing or
amount of, any obligation to pay or withhold any such taxes or which may make
available to the Company any tax deduction resulting from the occurrence of such
event.

ARTICLE IX

TRANSFERABILITY OF OPTIONS

No option issued under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will or the laws of descent and
distribution) by the optionee except to the extent specifically permitted by the
Committee as specified in the instrument evidencing the option as the same may
be amended from time to time. Any such attempted assignment, transfer, pledge or
other disposition other than as heretofore provided shall be without effect.

-5-

ARTICLE X

ADJUSTMENTS OF OPTIONS

SECTION 1. New option rights may be substituted for the options issued
under the Plan, or the Company's duties as to options outstanding under the Plan
may be assumed, by a corporation other than the Company, or by a parent or
subsidiary of the Company or such corporation, in connection with any merger,
consolidation, acquisition, separation, reorganization, liquidation or other
similar corporate transaction in which the Company is involved. Notwithstanding
the foregoing or the provisions of this Article, in the event such corporation,
or parent or subsidiary of the Company or such corporation, does not substitute
new option rights for, and substantially equivalent to, the options issued
hereunder, or assume the options issued hereunder, the options issued hereunder
shall terminate and thereupon become null and void (i) upon dissolution or
liquidation of the Company, or similar occurrence, (ii) upon any merger,
consolidation, acquisition, separation, reorganization, or similar occurrence,
where the Company will not be a surviving entity or (iii) upon a transfer of
substantially all of the assets of the Company or more than 80% of the
outstanding Common Stock in a single transaction; provided, however, that each
optionee shall have the right immediately prior to or concurrently with such
dissolution, liquidation, merger, consolidation, acquisition, separation,
reorganization or other similar corporate transaction, to exercise any unexpired
option issued hereunder whether or not then exercisable.

SECTION 2. In the event that the Committee determines that any dividend or
other distribution (whether in the form of cash, shares, other securities, or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of shares or other securities of the Company, issuance
of warrants or other rights to purchase shares or other securities of the
Company, or other corporate transaction or event affects the shares such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number of shares of Common
Stock or other securities of the Company (or number and kind of other securities
or property) with respect to which options may be issued and any limitations set
forth in the Plan, (ii) the number of shares of Common Stock or other securities
of the Company (or number and kind of other securities or property) subject to
outstanding options and (iii) the exercise price with respect to any option or,
if deemed appropriate, make provision for a cash payment to the holder of an
outstanding option including, if necessary, the termination of such an option.
Without limiting the generality of the foregoing, any such adjustment shall be
deemed to have prevented any dilution and enlargement of an optionee's rights if
such optionee receives in any such adjustment rights which are substantially
similar (after taking into account the fact that the optionee has not paid the
applicable exercise price) to the rights the optionee would have received had he
exercised his outstanding options and become a stockholder of the Company
immediately prior to the event giving rise to such adjustment.

SECTION 3. Adjustments required under this Article shall also be deemed to
increase by a like number the aggregate number of shares authorized for purchase
pursuant to options issued under the Plan.

-6-

ARTICLE XI

PRIVILEGES OF STOCK OWNERSHIP

No optionee shall be entitled to the privileges of stock ownership as to
any shares of Common Stock not actually issued and delivered to him or her.

ARTICLE XII

TERMINATION OF EMPLOYMENT

SECTION 1. In the event that an optionee shall cease to be an Employee by
voluntarily terminating his or her employment without the written consent of
such optionee's employer, or if such employer shall terminate such employment
for cause, the option held by such optionee shall terminate forthwith.

SECTION 2. If the holder of an option shall voluntarily cease to be an
Employee with the written consent of such holder's employer, which written
consent expressly sets forth a statement to the effect that options which are
exercisable on the date of such termination shall remain exercisable, or if the
optionee ceases to be an Employee for reasons other than cause, such optionee
may exercise his or her option to the extent exercisable at the time of such
termination, at any time prior to the expiration of three months after such
termination or the date of expiration of the option as fixed at the time of
issuance, whichever shall first occur. Options issued under the Plan to
Employees shall not be affected by any change in the position of employment so
long as the holder thereof continues to be an Employee.

SECTION 3. Except as otherwise provided in this Section, all outstanding
options held by an Employee or a permitted transferee shall become immediately
exercisable in the event of such Employee's death or a Change of Control of the
Company. In the case of an Employee's death, such options may be exercised
within one year after the date of such death, but not later than the expiration
of the option, solely in accordance with all of the terms and conditions of the
Plan by the optionee's personal representatives or by the person or persons to
whom the optionee's rights under the option shall pass by will or by the
applicable laws of descent and distribution. In the case of a Change of Control
such options shall be exercisable in accordance with all of the terms and
conditions of the Plan except that the vesting provisions of Section 1 of
Article VIII shall not apply other than as provided in the next sentence.
Anything herein to the contrary notwithstanding, no option shall be exercisable
after death or Change of Control if the optionee has not remained an Employee
for the shorter of (i) one year after the last day of the applicable Offering
Period and (ii) the period between the last day of the applicable Offering
Period and the date of death or Change of Control.

ARTICLE XIII

AMENDMENTS TO PLAN

The Board may at any time amend or modify the Plan; provided, however, that
no such amendment or modification shall, without the written consent of an
optionee, adversely affect any rights or obligations under any option
theretofore issued to such optionee under the Plan.

-7-

ARTICLE XIV

DEFINITIONS

For the purposes of this Plan, the following terms have the meanings
indicated:

Act: The Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

Base Compensation: means all base straight time gross earnings, including
commissions, overtime, shift premium and bonuses, but excluding other
compensation for such 12 month period as shall be designated by the Committee.

Board: Such term is defined in Article II, Section 1 hereof.

Change of Control: Shall be deemed to have occurred if, after November 24,
1998, individuals who presently constitute the Board or who have been
recommended for election to the Board by two-thirds of the Board consisting of
individuals who were either on the Board on November 24, 1998 or are such
recommended successors cease for any reason to constitute at least a majority of
the Board.

Code: The Internal Revenue Code of 1986, as amended and the regulations
promulgated thereunder.

Committee: Such term is defined in Article II, Section 1 hereof.

Common Stock: Such term is defined in Article I hereof.

Company: Such term is defined in Article I hereof.

Employee: Such term includes any officer of the Company, any salaried
executive, managerial, professional, administrative or other employee of the
Company or a Subsidiary of the Company and any person listed on Schedule 1
hereto. Such term also includes an employee on approved leave of absence
provided such employee's right to continue employment with his or her employer
upon expiration of such employee's leave of absence is guaranteed either by
statute or by contract.

1934 Act: The Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.

Non-Employee Director: Any director of the Company who is a Non-Employee
Director as that term is defined in Rule 16b-3 promulgated under the 1934 Act.

Offering Period: Such term is defined in Article V, Section 1 hereof.

Person: Such term has the meaning ascribed to it under the 1934 Act.

Purchased Share: Such term is defined in Article V, Section 1 hereof.

Plan: Such term is defined in Article I hereof and includes all amendments
hereof.

Subsidiary: A "Subsidiary Corporation" of the Company, as defined in
Section 424 of the Code.

-8-

Schedule 1

Daniel Calmeyn
John M. Cuccurullo
Patrick E. Delahanty
Kenneth J. Fedesna
Daniel Galarde
Donald E. Hassler
Sarah A. Highlander
Myrna D. Martinez
Thomas Murphy
Kathleen Pabian
Debra Silkwood
Ronald Sommers

-9-

<PAGE>

Exhibit 4.5(b)

OPTION AGREEMENT

December ___, 1998

TO: [Name of Optionee]

Re: Non-Qualified Stock Options issued pursuant to
1998 Stock Incentive Plan

This letter will evidence the issuance to you as of December ___, 1998 by
the Stock Option Committee of the Board of Directors of Midway Games Inc. (the
"Company") of an option pursuant to the Company's 1998 Stock Incentive Plan (the
"Plan") to purchase ___________ (_____) shares of the common stock, par value
$.01 per share ("Common Stock"), of the Company at a price of ___________
($_______ ) per share (the "Option"). Under applicable provisions of the
Internal Revenue Code of 1986, as amended, the Option is treated as a
non-qualified stock option.

This Option is issued in accordance with and is subject to and conditioned
upon all of the terms and conditions of this Agreement and of the Plan as from
time to time amended, provided, however, that no future amendment or termination
of the Plan shall, without your consent, alter or impair any of your rights or
obligations under the Plan, all of which are incorporated by reference in this
Agreement as if fully set forth herein.

In consideration of the granting of this Option by the Company, you hereby
agree to render faithful and efficient services to the Company or to the
subsidiary of the Company which is your primary employer, with such duties and
responsibilities as your employer shall from time to time prescribe, for a
period of at least one (1) year from the date this Option is granted and you
further agree that for a period of one (1) year after your termination of
employment, you will not own, manage, control or associate with -- as an agent,
officer, employee, investor, lender, or otherwise -- any business entity in the
United States which is a "Competitor" of your Employer. The term "Competitor" as
used in the preceding sentence means an entity engaged in the design,
manufacture or sale of coin-operated video games or the designing, publishing
and/or marketing of interactive entertainment software for use on dedicated
video game platforms and personal computers. You hereby specifically agree that
the scope of the above covenant is reasonable and fair. Should, however, a court
of competent jurisdiction deem it to be impermissibly overbroad, it is the
intention of the parties to this Agreement that the covenant be enforced as to
the greatest extent deemed to be enforceable. Further, you hereby agree that
during your employment and thereafter, you will not disclose, discuss, copy or
otherwise use or allow to be used, in any manner, in competition with or
contrary to the interests of the Company or any of its subsidiaries, the
customer lists, product research, engineering data or other trade secrets of the
Company or any of its subsidiaries. Nothing in this Option Agreement or in the
Plan shall confer upon you any right to continue in the employ of the Company or
any subsidiary of the Company or shall interfere with or restrict in any way the
rights of the Company and its subsidiaries, which are hereby expressly reserved.

The Company shall not be obligated to issue any shares pursuant to this
Option if, in the opinion of counsel to the Company, the shares to be so issued
are required to be registered or otherwise qualified under

-1-

the Securities Act of 1933, as amended, or under any other applicable statute,
regulation or ordinance affecting the sale of securities, unless and until such
shares have been so registered or otherwise qualified.

It is understood that the Company may establish, from time to time,
appropriate procedures to provide for payment or withholding of such income or
other taxes as may be required by law to be paid or withheld in connection with
the exercise of this Option. By the execution hereof, you hereby agree to pay to
the Company all such amounts requested by the Company to permit the Company to
take any tax deduction available to it resulting from the exercise of this
Option. You also agree to comply with any procedures established, from time to
time, by the Company to ensure that the Company receives prompt advice
concerning the occurrence of any event which may create, or affect the timing or
amount of, any obligation to pay or withhold any such taxes or which may make
available to the Company any tax deduction resulting from the occurrence of such
event.

Subject to the Plan, this Option may be exercised only after the first
anniversary of the date hereof, if you are then an Employee as defined in the
Plan. This Option, to the extent not previously exercised, shall expire on
December ___, [2008].

This Option is to be exercised by delivering to the Company a written
notice of exercise in the form attached hereto as Exhibit A, together with
payment as provided in the Plan.

Would you kindly evidence your acceptance of this Option and your agreement
to comply with the provisions of this Agreement and of the Plan by executing the
enclosed copy of this Agreement under the words "ACCEPTED AND AGREED TO" and
returning a copy to Orrin J. Edidin, Vice President and Secretary of the
Company.

Very truly yours,

MIDWAY GAMES INC.

By:
---------------------------------
Neil D. Nicastro
President

ACCEPTED AND AGREED TO
this day of , 19
----- ------------- ----

- ----------------------------------
[Name of Optionee]

-2-

EXHIBIT A
Dated:
-----------

Vice President and Secretary
MIDWAY GAMES INC.
3401 North California Avenue
Chicago, IL 60618

Gentlemen:

Notice is hereby given of my election to purchase ___________ shares of
common stock, par value $.01 per share, of Midway Games Inc. (the "Company") at
a price of ___________($__________) per share pursuant to the provisions of the
stock option ("Option") issued to me on __________ under the terms of the 1998
Stock Incentive Plan.

Enclosed is my check made payable to the Company in the amount of $_______
in payment of the exercise price of the Option.

The following information is supplied for use in issuing and registering
the shares purchased hereby:

Number of certificates:
--------------------------
Denomination of
each certificate:
--------------------------
Name:
--------------------------
Address:
--------------------------

--------------------------
Social Security Number:
--------------------------

Very truly yours,

-----------------------
[Signature of Optionee]

-3-

<PAGE>

Exhibit 4.5(c)

SUBSCRIPTION AGREEMENT

1. The undersigned ("I" or "me") hereby elects to participate in the 1998 Stock
Incentive Plan (the "Plan") of Midway Games Inc. (the "Company") and subscribes
to purchase the maximum whole number of shares of the Company's common stock,
par value $.01 per share ("Common Stock"), as could be purchased for
$____________ on the New York Stock Exchange at the closing price thereof on the
last day of the Offering Period under the Plan, subject to pro-rata reduction in
accordance with the Plan. My check to the Company in the amount of $__________
is enclosed with this Agreement. The Company shall pay to me any money left over
after rounding down to the nearest whole number of shares. If there is a
pro-rata reduction, I understand that the Company will refund to me any
overpayment.

2. I have received a complete copy of the Plan, a summary of the Plan and
investment risk factors. I understand that my participation in the Plan is in
all respects subject to the terms of the Plan. I hereby agree to be bound by the
terms of the Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Plan. I understand that the Company
may terminate the Plan at any time prior to the last day of the Offering Period.

3. I understand and agree that prior to six (6) months after the end of the
Offering Period, I may not (i) sell any shares of Common Stock purchased under
this Agreement or contract to do so, (ii) have a short position in or any put or
other option to dispose of any shares of Common Stock; or (iii) enter into any
other transaction directly or indirectly involving Common Stock intended to
reduce the economic risk of investment in the shares of Common Stock purchased
under this Agreement. I also understand that until such time, the Company shall
hold in escrow for me the certificate representing such shares.

4. I understand that after the end of the Offering Period, the Company shall
notify me of the purchase price of the shares of Common Stock, and that unless I
withdraw my subscription by the end of the business day following the receipt of
such notice by delivery of a signed Notice of Withdrawal in the form of Exhibit
A hereto, I shall be deemed to have irrevocably confirmed this subscription. I
understand, further, that if I cease to be an Employee during the Offering
Period, I will be deemed to have elected to withdraw my subscription, and this
Subscription Agreement shall be void.

5. Shares purchased for me under the Plan should be issued in my name as
follows:

NAME: (Please print)
------------------------------------------------------
(First) (Middle) (Last)

Employee's Social Security Number:
-----------------------------------------

Employee's Address:
------------------------------------------------------

6. I UNDERSTAND THAT AN INVESTMENT IN SHARES OF THE COMPANY'S COMMON STOCK
INVOLVES SUBSTANTIAL RISK AND THAT THE PRICE OF THE COMPANY'S COMMON STOCK COULD
DECLINE SUBSTANTIALLY. I REPRESENT THAT ANY FUNDS USED BY ME FOR THIS INVESTMENT
HAVE NOT BEEN BORROWED AND THAT I HAVE SUFFICIENT PERSONAL FINANCIAL RESOURCES
TO BE ABLE TO WITHSTAND A LOSS OF MY ENTIRE INVESTMENT.

Dated:
----------------------------- ---------------------------------
Signature of Employee

EXHIBIT A

NOTICE OF WITHDRAWAL

The undersigned hereby withdraws from participation in the 1998 Stock
Incentive Plan of Midway Games Inc. (the "Plan"). The undersigned understands
and agrees that his or her subscription to purchase stock and receive options
under the Plan is hereby terminated.

Name and Address of Employee:

-------------------------------------

Signature:

-------------------------------------

Date: December , 1998
----

This Form should be returned by fax to:

Orrin J. Edidin
Vice President, Secretary and General Counsel
Midway Games Inc.
Fax No.: (773) 961-1020

<PAGE>

Exhibit 5

SHACK & SIEGEL, P.C.
530 FIFTH AVENUE
NEW YORK, NEW YORK 10036
(212) 782-0700

December 2, 1998

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: Midway Games Inc. Form S-8 Registration Statement

Ladies and Gentlemen:

We have acted as counsel to Midway Games Inc., a Delaware corporation (the
"Company"), in connection with the filing with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, of a registration
statement (the "Registration Statement") on Form S-8 registering 750,000 shares
of the Company's common stock, par value $.01 per share ("Common Stock"), and
2,250,000 shares of Common Stock underlying options that may be purchased,
pursuant to the Company's 1998 Stock Incentive Plan (the "Plan").

In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of:
(i) the Plan; (ii) the Registration Statement; (iii) the Company's Restated
Certificate of Incorporation, as amended; (iv) the Company's Amended and
Restated Bylaws; (v) proceedings of the Board of Directors of the Company and
(vi) such other documents as we have deemed necessary or appropriate as a basis
for the opinion set forth below. In our examination, we have assumed the
genuineness of all signatures, the legal capacity of all natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
the original documents of all documents submitted to us as certified or
photostatic copies and the authenticity of the originals of such latter
documents. As to any facts material to this opinion that we did not
independently establish or verify, we have relied upon statements and
representations of officers and other representatives of the Company and others.

Based upon and subject to the foregoing, we are of the opinion that the
original issuance of shares of Common Stock and shares of Common Stock
underlying options in accordance with the terms of the Plan has been duly
authorized and that all such shares, when issued and delivered, will be validly
issued, fully paid and non-assessable.

We consent to the filing of this opinion as Exhibit 5 to the Registration
Statement, and we further consent to the reference made to us under "Item 5.
Interests of Named Experts and Counsel" contained therein and under the caption
"Legal Matters" in the accompanying prospectus. Please note that, as described
in such Item 5, shareholders of this firm hold, in the aggregate, 10,990 Shares
and options to purchase an aggregate of 35,000 Shares.

The law covered by the opinions expressed herein is limited to the
corporate laws of the State of Delaware.

Very truly yours,

SHACK & SIEGEL, P.C.

By: /s/ Jeffrey N. Siegel
---------------------------------
Jeffrey N. Siegel

<PAGE>

Exhibit 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-8 (File No. 333-_______) and the related
Prospectus of Midway Games Inc. and to the incorporation by reference therein of
our reports dated August 17, 1998, with respect to the financial statements of
Midway Games Inc. and subsidiaries incorporated by reference in its Annual
Report (Form 10-K) for the year ended June 30, 1998 and the related financial
statement schedule included therein, filed with the Securities and Exchange
Commission.

/s/ Ernst & Young LLP

Chicago, Illinois
December 2, 1998

<PAGE>