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As filed with the Securities and Exchange Commission on March 5, 1999
Registration No. 333-_________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
MIDWAY GAMES INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-2814522
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3401 NORTH CALIFORNIA AVENUE
CHICAGO, ILLINOIS 60618
(Address, including zip code, of Registrant's principal executive offices)
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1999 STOCK OPTION PLAN
(Full title of the Plan)
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Orrin J. Edidin, Esq.
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
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CALCULATION OF REGISTRATION FEE
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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(3)
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<S> <C> <C> <C> <C>
Common Stock, par value $.01(4)(5) 1,750,000 shares $8.19 $14,332,500 $3,984.44
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(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 1999 Stock Option Plan (the "1999 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 March 3, 1999.
(3) $11,418.08 was paid with registration statement No. 333-25757, relating
to 2,000,000 shares of common stock, $2,862.98 was paid with
registration statement No. 333-57583, relating to 750,000 shares of
common stock and $8,398.38 was paid with registration statement No.
333-68373, relating to 3,000,000 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.
(4) In accordance with the Rights Agreement between the Registrant and The
Bank of New York, dated October 24, 1996, as amended on November 6,
1997, all shares of common stock are accompanied by certain stock
purchase rights.
(5) Shares issuable upon the exercise of options available under the 1999
Plan.
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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, 333-57583 and 333-68373,
each on Form S-8.
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RESALE PROSPECTUS
MIDWAY GAMES INC.
5,185,464 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 pages 10-11 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 2 BELOW
FOR A DISCUSSION OF CERTAIN RISKS OF AN INVESTMENT IN OUR COMMON STOCK.
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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.
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The date of this prospectus is March 5, 1999
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ABOUT THIS PROSPECTUS
This prospectus relates to 5,185,464 shares (the "Shares") of our
common stock that the selling stockholders described in this prospectus may sell
until we terminate this offering. As used in this prospectus, the terms "we,"
"us," "our" and "Midway" mean Midway Games Inc., a Delaware corporation, and its
subsidiaries, unless the context indicates a different meaning.
The selling stockholders in this offering are officers and directors of
Midway Games Inc. We have agreed to pay the expenses incurred in registering the
Shares, including legal and accounting fees.
Most of the information about us that you need to know before you
invest in the Shares is not included in this prospectus. You should obtain and
read the information described under the headings "Documents Incorporated by
Reference" and "Where You Can Find More Information" in order to get all the
important information about Midway.
RISK FACTORS
You should carefully consider the following factors and the other
information in this prospectus before deciding to invest in the Shares. Some of
the information in these risk factors contain "forward-looking statements"
within the meaning of the federal securities laws. The forward-looking
statements describe our beliefs concerning future business conditions based on
currently available information. We do not intend to update the forward-looking
statements included in this prospectus. Forward-looking statements typically are
identified by use of terms such as "may," "will," "expect," "anticipate,"
"believe," "estimate" and similar words, although some forward-looking
statements are expressed differently. You should be aware that our actual
results could differ materially from those contained in the forward-looking
statements due to the financial strength of the amusement games industry in
general, the success of our planned advertising, marketing and promotional
campaigns and the factors below, among others described from time to time in our
filings with the SEC.
OUR OPERATING RESULTS MAY FLUCTUATE FROM QUARTER TO QUARTER.
We have experienced and expect to continue to experience significant
quarterly fluctuations in net sales and other operating results due to a variety
of factors, including:
- variations in the level of market acceptance of our products;
- delays and timing of product introductions;
- fluctuations in our mix of products with varying profit margins;
- the size and rate of growth of the consumer software market;
- market acceptance of our products and those of our competitors and
dedicated game platform manufacturers;
- development and promotional expenses relating to the introduction of
new products or enhancements of existing products;
- 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.
WE DEPEND ON MARKET ACCEPTANCE OF NEW PRODUCTS.
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 interactive entertainment
platforms and technologies are introduced. Furthermore, consumer preferences for
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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 Ahit@ 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 the acceptance will be sustained for any
meaningful period. The failure of new products to gain market acceptance could
have a material adverse effect on our operating results and financial condition.
WE MAY EXPERIENCE DELAYS IN INTRODUCING NEW PRODUCTS.
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 schedule product promotions incorrectly. This
could also affect our development schedule for other products. 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.
OUR MARKET IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE.
The video game market, both in the coin-operated and home segments,
experiences 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 make a substantial development investment one to two years in
advance of initial shipment of these 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 home game 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, these announcements could adversely affect sales of our existing
software products. 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.
WE RELY ON OUR MORTAL KOMBAT PRODUCTS.
Revenues from Mortal Kombat products accounted for approximately 19.1% of
our total revenues during fiscal 1998, 22.0% during 1997 and 34.9% during 1996.
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.
OUR HOME VIDEO GAME BUSINESS EXPERIENCES SEASONAL VARIATIONS.
Our 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.
OUR MARKET IS HIGHLY COMPETITIVE.
The video game business is intensely competitive and experiences the
continuous introduction of new titles and the development of
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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 in our market is also based upon:
- price;
- access to retail shelf space for 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 COULD EXCEED OUR RESERVES.
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. These reserves are established according to estimates of the 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.
WE FACE RISKS ASSOCIATED WITH OUR 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 acquisition opportunities;
- control costs and liabilities incurred with the acquisition of the new
businesses or assets;
- effectively manage growth from acquisitions; or
- anticipate and evaluate the numerous risks involved in acquiring and
operating a new business or asset.
The focus on an acquisition strategy could divert our management's
resources from more valuable projects. The acquisition of a costly or
unproductive business or asset could materially and adversely affect our
business.
WE DEPEND ON DEDICATED GAME PLATFORM MANUFACTURERS.
We depend heavily on the manufacturers of dedicated video game platforms,
who are our competitors. In fiscal 1998, 86% of our unit sales of software
products for the home market were for use on the following 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,
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as well as for portable game systems. We expect that an increasing portion of
our revenues in the coming years will be from 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 manufacturing. Rejection or
substantial delay 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 these
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 DEPEND ON THIRD PARTIES TO MANUFACTURE OUR PRODUCTS.
We depend on third parties to manufacture the game cartridges and CD-ROMs
for our home games. The manufacturing of our coin-operated games is performed
for us by WMS Industries Inc. and its subsidiaries under contracts. We have not
experienced any material delays or interruptions in the delivery of our products
due to manufacturing delays or interruptions. It is possible, however, that
manufacturing delays or interruptions could cause delays or interruptions in
product delivery. If any significant delays occur, and we cannot substitute
another manufacturer in time, delays could materially and adversely affect our
business, operating results and financial condition. Unanticipated price
increases from these manufacturers also could adversely affect our business.
WE RELY ON THIRD PARTIES TO DEVELOP SOME OF OUR HOME VIDEO GAME TITLES.
Some of our home video games are designed by third parties. The number of
titles developed by third parties varies from quarter to quarter. We cannot
assure you that the number of titles that we acquired in any previous period
will be sustained in the future. The failure to identify and acquire suitable
titles from third party designers could adversely affect our revenues and
business.
WE MAY BE UNABLE TO OBTAIN LICENSES FOR INTELLECTUAL PROPERTY.
Some 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 obtain licenses for additional
popular intellectual properties. There is competition for such 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 we submit new
products developed under licenses 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.
WE DEPEND ON OUR 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
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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.
WE MAY HAVE CONFLICTS OF INTEREST WITH WMS INDUSTRIES INC.
Some of our officers and directors are also officers, directors and
stockholders of WMS and may be subject to various conflicts of interest. These
conflicts include, 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.
We may also be subject to 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 of WMS and various of its
affiliates, are also officers and employees of Midway. Mr. Bach and Mr. Fedesna
are also directors of Midway. Each of Messrs. Bach, Fedesna and Edidin has
duties and responsibilities with WMS that may conflict with time which might
otherwise be devoted to his duties with Midway.
LITIGATION AGAINST US MAY HAVE UNFAVORABLE RESULTS.
From time to time, we may be sued by third parties. Litigation against us,
with or without merit, or instituted by us to enforce our licenses or to protect
our trade secrets or know-how, is costly and time consuming. An adverse
determination in a judicial or administrative proceeding could divert the
attention of our management from more productive activities and could have a
materially adverse effect on our business, financial condition and results of
operations.
On January 25, 1999, GT Interactive Software Corp., or GTIS, filed a
lawsuit against us alleging breach of contract, tortious interference with
prospective business relations, defamation and other related claims arising from
the licensing arrangements between GTIS and us. In its complaint, GTIS sought
compensatory and punitive damages and injunctive relief. On February 24, 1999,
we filed motions to dismiss the suit. While we intend to defend ourselves
vigorously against this suit, we cannot assure you that we will prevail.
WE MAY EXPERIENCE ADVERSE EFFECTS OF THE YEAR 2000 COMPUTER PROBLEM.
Many currently installed software programs and embedded programs in
electronic systems will not work properly when processing dates later than
December 31, 1999. This problem results from using only two digits in a computer
program to represent the year in a date and assuming 19 to be the first two
digits of the year. Methods of correcting the problem include replacing the
system or rewriting the program to provide four digits to express the year in
any dates.
Readiness and Costs. Since 1996, we have worked with WMS, which provides
our Chicago information services, to make our hardware and software systems year
2000 compliant. We have made the systems used by one of our subsidiaries, Atari
Games Corporation, compliant with a software upgrade, and we expect to complete
testing of the systems by June 1999 at a nominal cost. Also, we have made the
accounting and finance systems used by our other major subsidiary, Midway Home
Entertainment, Inc., year 2000 compliant at a nominal cost. We plan to make the
remaining systems, such as the customer interface and shipping systems,
compliant by July 1999 with a software upgrade at a nominal cost.
We believe that there are no year 2000 issues with the functionality of any
of our products that we have sold in the past or will sell in the future.
WMS provides contract manufacturing services to us. WMS has assured us in
writing that the systems used in their contract manufacturing are year 2000
compliant. WMS also has notified us that the assembly of our coin-operated video
games should not be affected by malfunctioning tools or equipment using embedded
microprocessors,
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because the assembly process does not heavily rely on these tools or equipment.
We may be exposed to year 2000 problems because we rely on distributors,
large customers, utilities and coin-operated video game component suppliers. We
are in the process of contacting our suppliers and major customers to assess the
potential problem, if any. We have not determined our customers' or suppliers'
levels of year 2000 readiness at this time.
Risks and Contingency Plans. If any of our systems should fail as a result
of any undetected year 2000 problems, we do not have an advance contingency
plan. We intend to correct any problems resulting from these failures
immediately, if they occur. We cannot determine the effect of any unforeseen
failure. If any of our suppliers experience a year 2000 problem affecting us, at
worst we would expect a short-term delay in shipments of affected products. In
addition, our large customers are sophisticated, and we believe that they would
quickly remedy any year 2000 problems. Therefore, we do not believe that orders
would be delayed significantly.
This discussion of year 2000 readiness and exposure contains some
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 year 2000 readiness and exposure could differ materially
from that anticipated in the forward-looking statements as a result of these
risks and uncertainties, among others:
- our ability to obtain parts and essential utilities;
- our ability to make deliveries;
- our ability to communicate with business partners;
- the level of year 2000 readiness of suppliers, customers and other
business partners; and
- the other risks described elsewhere in this Risk Factors section.
EFFECTS OF ANTI-TAKEOVER PROVISIONS COULD INHIBIT THE ACQUISITION OF MIDWAY.
Midway's 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 the common stock:
Blank Check Preferred Stock. Our certificate of incorporation, as amended,
authorizes the issuance of 5,000,000 shares of preferred stock with
designations, rights and preferences that may be determined from time to time by
the board of directors. Accordingly, our board has broad 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. Our board has no current
plans, agreements or commitments to issue any shares of preferred stock.
Rights Plan. Under a rights agreement with The Bank of New York, each share
of our common stock has an accompanying right to purchase, upon acquisitions of
beneficial ownership of 15% 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 $0.01 per right, subject to certain conditions, at any
time. The rights expire in 2007.
Classified Board. Our 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 our board until the second annual stockholders' meeting
after acquiring a majority of the voting stock.
Other Charter Provisions. Our certificate of incorporation also provides
that:
- directors may be removed only for cause and only by an affirmative vote
of at least 80% of outstanding common stock;
- any vacancy on the board may be filled only by a vote of a majority of
the remaining directors then in office;
- there may be no stockholder action by written consent;
- only the President, the Chairman of the Board or the board 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;
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- 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;
- 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 our
bylaws; and
- 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 before the person acquires the
15% ownership or later by the board and two-thirds of the stockholders of the
public corporation.
VOLATILITY OF OUR STOCK PRICE COULD ADVERSELY AFFECT THE PRICE OF OUR STOCK.
The market price of our common stock has experienced and may continue to
experience wide fluctuations. Factors affecting our stock price may include:
- actual or anticipated variations in our operating results;
- variations in the level of market acceptance of our products;
- delays and timing of product introductions;
- changes in recommendations or earning estimates by securities analysts;
- conditions and trends in our industry;
- general market or economic conditions; or
- other factors.
SHARES AVAILABLE FOR SALE IN THE FUTURE COULD HAVE AN ADVERSE EFFECT ON THE
MARKET PRICE OF OUR COMMON STOCK.
We have 100,000,000 authorized shares of common stock, of which 37,802,000
shares were issued and outstanding as of March 3, 1999, excluding 698,000
treasury shares. If all of our issued and outstanding stock options were
exercised as of that date, approximately 42,510,000 shares of common stock would
be outstanding. Our 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. If we seek
financing through the sale of our securities, our then current stockholders may
suffer dilution in their percentage ownership of our common stock. In addition,
the future issuance, or even the potential issuance, of shares at a price below
the then current market price may have a depressive effect on the future market
price of our common stock.
OUTSTANDING STOCK OPTIONS MAY DILUTE OUR COMMON STOCK AND DEPRESS ITS MARKET
PRICE.
As of March 3, 1999, we had outstanding options to purchase an aggregate of
approximately 4,700,000 shares of common stock exercisable at an average
exercise price of approximately $13.60 per share. Our stock option and stock
incentive plans also authorize the grant of options to purchase approximately an
additional 2,000,000 shares of common stock. During the terms of our outstanding
options, the holders are given the opportunity to profit from a rise in the
market price of the common stock. The terms of our outstanding options currently
average approximately nine years. 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.
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DOCUMENTS INCORPORATED BY REFERENCE
We are incorporating information into this prospectus by this reference.
This means that we can disclose important information to you by referring you to
those documents. Information incorporated by reference is part of this
prospectus. Later information filed with the SEC will update and supersede this
information.
The information incorporated by reference includes the following:
- our Annual Report on Form 10-K for the fiscal year ended June 30, 1998,
including the exhibits thereto;
- our Quarterly Reports on Form 10-Q for the fiscal quarters ended
September 30, 1998 and December 31, 1998; and
- the description of our common stock and accompanying rights contained in
our registration statement on Form 8-A (File No. 1-12367) filed on October 30,
1996 and amended on Form 8-A/A filed on April 20, 1998.
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 of 1934, as amended (the
"Exchange Act") prior to the termination of this offering are considered to be
incorporated by reference in this prospectus and to be a part of this prospectus
from the date that they are filed. 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) modifies or supersedes that statement.
We will provide to each person, including any beneficial owner, to whom
a copy of this prospectus is delivered, a copy of any or all of the information
that we have incorporated by reference in this prospectus. You may request
copies of this information in writing or orally, and we will provide it at no
cost. You may contact us at our principal executive office: 3401 North
California Avenue, Chicago, IL 60618 (773) 961-2222, Attention: Vice
President--Finance.
WHERE YOU CAN FIND MORE INFORMATION
We have filed four 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, 333-68373 and 333-__________. This
prospectus constitutes a part of each of these registration statements. The SEC
rules allow us to omit from this prospectus some of the information set forth in
or filed with those registration statements. 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. Our filings are also
available over the Internet at the SEC's web site at: www.sec.gov and can be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
You should rely only on the information contained, or incorporated by
reference, in this prospectus. We have not authorized any other person to
provide you with different information. You should assume that the information
appearing, or incorporated by reference, in this prospectus is accurate as of
the date on the front cover of this prospectus only. Our business, financial
condition, results of operations and prospects may have changed since that date.
-9-
<PAGE> 11
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 exercise price upon
the exercise of any 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".
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 may resell any or all of the Shares at any time they choose while
this prospectus is effective.
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 March 3, 1999, 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
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.
<TABLE>
<CAPTION>
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 1,192,408(3) 1,865,800 458,458 3.1% 1.2%
Board, Chief Executive
Officer, President and Chief
Operating Officer and son of Louis
J. Nicastro
Louis J. Nicastro, Director and father 50,547(4) 35,000 15,547 * *
of Neil D. Nicastro
Byron C. Cook, Executive Vice 253,574(5) 529,940 68,589 * *
President--Home Video and Director
Kenneth J. Fedesna, Executive Vice 142,206(5) 188,972 42,463 * *
President-- Coin Op Video and
Director
Harold H. Bach, Jr., Executive Vice 136,288(5) 208,456 31,674 * *
President -- Finance, Treasurer,
Chief Financial and Chief
Accounting Officer and Director
Orrin J. Edidin, Vice President, 9,268 70,072 500 * *
Secretary and General Counsel
William C. Bartholomay, Director 80,370(4) 35,000 45,370 * *
</TABLE>
-10-
<PAGE> 12
<TABLE>
<CAPTION>
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>
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%
(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 37,802,000 shares of common stock outstanding as of March 3,
1999. 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 may sell the common stock only 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".
-11-
<PAGE> 13
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 March 3, 1999, shareholders of Shack &
Siegel, P.C. hold a total of 10,990 shares of common stock and options to
purchase 35,000 shares of common stock.
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.
-12-
<PAGE> 14
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.
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 Reports on
Form 10-Q for the fiscal quarters ended September 30, 1998 and December 31, 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 March 3, 1999, 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 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 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 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 Registrant 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
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
II-1
<PAGE> 15
Registrant's Registration Statement on Form S-1, as
amended, effective October 29, 1996 (File No.
333-11919).
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 "1st 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 1st 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
"2nd 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 2nd Form S-8.
4.5(a) 1998 Stock Incentive Plan, incorporated by reference to
Exhibit 4.5(a) to the Registrant's Registration
Statement on Form S-8, filed with the Commission on
December 4, 1998 (File No. 333-68373) (the "3rd Form
S-8").
4.5(b) Form of Option Agreement under the 1998 Stock Incentive
Plan, incorporated by reference to Exhibit 4.5(b) to
the 3rd Form S-8.
4.5(c) Form of Subscription Agreement under the 1998 Stock
Incentive Plan, incorporated by reference to Exhibit
4.5(c) to the 3rd Form S-8.
4.6(a) 1999 Stock Option Plan.
4.6(b) Form of Option Agreement under the 1999 Stock Option
Plan.
5 Opinion of Shack & Siegel, P.C., counsel for
Registrant.
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).
ITEM 9. UNDERTAKINGS.
a. The undersigned Registrant hereby undertakes:
II-2
<PAGE> 16
(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 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.
II-3
<PAGE> 17
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 3rd day of March,
1999.
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 March 3, 1999 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. March 3, 1999 Executive Vice President - Finance,
- ---------------------- Treasurer (Principal Financial and
Harold H. Bach, Jr. Principal Accounting Officer) and Director
/s/ Byron C. Cook March 3, 1999 Executive Vice President - Home Video and
- ----------------- Director
Byron C. Cook
/s/ Kenneth J. Fedesna March 3, 1999 Executive Vice President - Coin-Op Video and
- ---------------------- Director
Kenneth J. Fedesna
/s/ Louis J. Nicastro March 3, 1999 Director
- ---------------------
Louis J. Nicastro
/s/ William C. Bartholomay March 3, 1999 Director
- --------------------------
William C. Bartholomay
/s/ William E. McKenna March 3, 1999 Director
- ----------------------
William E. McKenna
/s/ Norman J. Menell March 3, 1999 Director
- --------------------
Norman J. Menell
/s/ Harvey Reich March 3, 1999 Director
- ----------------
Harvey Reich
/s/ Ira S. Sheinfeld March 3, 1999 Director
- --------------------
Ira S. Sheinfeld
/s/ Gerald O. Sweeney, Jr. March 3, 1999 Director
- --------------------------
Gerald O. Sweeney, Jr.
/s/ Richard D. White March 3, 1999 Director
- --------------------
Richard D. White
</TABLE>
II-4
<PAGE> 18
EXHIBIT INDEX
Exh. No. Description
-------- -----------
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).
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 "1st 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 1st 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 "2nd 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 2nd Form
S-8.
4.5(a) 1998 Stock Incentive Plan, incorporated by reference to Exhibit
4.5(a) to the Registrant's Registration Statement on Form S-8, filed
with the Commission on December 4, 1998 (File No.
333-68373) (the "3rd Form S-8").
4.5(b) Form of Option Agreement under the 1998 Stock Incentive Plan,
incorporated by reference to Exhibit 4.5(b) to the 3rd Form S-8.
4.5(c) Form of Subscription Agreement under the 1998 Stock Incentive Plan,
incorporated by reference to Exhibit 4.5(c) to the 3rd Form S-8.
4.6(a) 1999 Stock Option Plan.
4.6(b) Form of Option Agreement under the 1999 Stock Option Plan.
5 Opinion of Shack & Siegel, P.C., counsel for Registrant.
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).
<PAGE> 1
Exhibit 4.5(a)
MIDWAY GAMES INC.
1999 STOCK OPTION PLAN
ARTICLE XVIII
Purpose of the Plan
The 1999 Stock Option Plan (the "Plan") is intended to provide a
method whereby "Employees," "Directors" and "Consultants and Advisers" of
Midway Games Inc. (the "Company") and its "Subsidiaries" (as such quoted terms
are 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 such Employees, Directors and
Consultants and Advisers 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, from
time to time on or before February 2, 2009, options to purchase shares of
Common Stock and related Stock Appreciation Rights may be granted to such
persons as may be selected in the manner hereinafter provided on the terms and
subject to the conditions hereinafter set forth. Capitalized terms are defined
in Article XV hereof.
ARTICLE XIX
ADMINISTRATION OF THE PLAN
SECTION 1. Subject to the authority as described herein of the Board
of Directors (the "Board") of the Company, 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,
directors and optionees.
SECTION 2. All authority delegated to the Committee pursuant to the
Plan, may also be exercised by the Board except with respect to matters which
under Section 162(m) of the Code are required to be determined in the absolute
discretion of the Committee. 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 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
<PAGE> 2
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
STOCK SUBJECT TO THE PLAN
SECTION 1. The shares to be issued or delivered upon exercise of
options or rights granted under the Plan shall be made available, at the
discretion of the Board, either from the authorized but unissued shares of
Common Stock of the Company or from shares of Common Stock reacquired by the
Company, including shares purchased by the Company in the open market or
otherwise obtained.
SECTION 2. Subject to the provisions of Article X hereof, the
aggregate number of shares of Common Stock which may be purchased pursuant to
options granted at any time under the Plan shall not exceed 1,750,000. Such
number shall be reduced by the aggregate number of shares covered by options
in respect of which Stock Appreciation Rights are exercised. The maximum
number of shares with respect to which options may be granted under the Plan
in any calendar year to any one employee shall be 500,000 as such number may
be adjusted by the Committee in accordance with Article X hereof. The
Committee shall calculate such limit in a manner consistent with Section
162(m) of the Code. Shares subject to any options which are canceled, lapse or
are otherwise terminated shall be immediately available for reissuance under
the Plan.
ARTICLE IV
PURCHASE PRICE OF OPTIONED SHARES
In the case of Incentive Stock Options, or unless the Committee shall
fix a greater or lesser purchase price, the purchase price per share of Common
Stock under each option granted to Employees, Directors, Consultants and
Advisers shall not be less than one hundred percent (100%) of the Fair Market
Value (as hereinafter defined) of the Common Stock at the time such option is
granted, but in no case shall such price be less than the greater of the par
value of the Common Stock or 85% of the Fair Market Value of the Common Stock
as of the time of grant; provided, however, that in the case of an Incentive
Stock Option granted to an Employee who, at the time of the grant, owns stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company (a "Ten Percent Stockholder"), such
purchase price per share shall be at least one hundred and ten percent (110%)
of the Fair Market Value.
ARTICLE V
ELIGIBILITY OF RECIPIENTS
Options will be granted only to Persons who are Employees, Directors,
Consultants or Advisers of the Company or a Subsidiary.
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ARTICLE VI
DURATION OF THE PLAN
Unless previously terminated by the Committee or the Board, the Plan
will terminate on February 2, 2009. Such termination will not terminate any
option or Stock Appreciation Right then outstanding.
ARTICLE VII
GRANT OF OPTIONS TO EMPLOYEES,
DIRECTORS, CONSULTANTS AND ADVISERS
SECTION 1. Each option granted under the Plan to Employees shall
constitute either an Incentive Stock Option or a Non-Qualified Stock Option, as
determined in each case by the Committee and each option granted under the Plan
to Directors, Consultants and Advisers shall constitute a Non-Qualified Stock
Option. With respect to Incentive Stock Options granted to Employees, to the
extent that the aggregate Fair Market Value (determined at the time an option is
granted) of Common Stock of the Company with respect to which such Incentive
Stock Options are exercisable for the first time by any individual during any
calendar year (under the Plan and any other stock option plan of the Company)
exceeds $100,000, such Incentive Stock Options shall be treated as Non-Qualified
Stock Options to the extent of such excess. The foregoing rule shall be applied
by taking Incentive Stock Options into account in the order in which they were
granted. In the event outstanding Incentive Stock Options become immediately
exercisable under the terms hereof, such Incentive Stock Options will, to the
extent the aggregate Fair Market Value thereof exceeds $100,000, be treated as
Non-Qualified Stock Options.
SECTION 2. The Committee shall from time to time determine the
Employees, Directors, Consultants and Advisers to be granted options, it being
understood that options may be granted at different times to the same person,
provided, however, that no one person may receive an option or options under the
Plan covering more than fifty percent (50%) of the total number of shares
subject to the Plan. In addition, the Committee shall determine subject to the
terms of the Plan (a) the number of shares subject to each option, (b) the time
or times when the options will be granted, (c) whether such options shall be
Incentive Stock Options, Non-Qualified Stock Options or both, (d) whether Stock
Appreciation Rights will be granted in connection with the grant of options, (e)
the purchase price of the shares subject to each option, which price shall be
not less than that specified in Article IV hereof, (f) the time or times when
each option and any related Stock Appreciation Rights may be exercised and (g)
any other matters which the Committee shall deem appropriate.
SECTION 3. All instruments evidencing options granted to Employees,
Directors, Consultants and Advisers under the Plan shall be in such form as the
Committee shall from time to time determine, which form shall be consistent with
the Plan and any applicable determinations, orders, resolutions or other actions
of the Committee or the Board.
SECTION 4. The Committee, in its sole discretion, on the granting of an
option to an Employee, Director, Consultant or Adviser under the Plan may also
grant Stock Appreciation Rights relating to any number of shares but, except as
hereinafter provided, not more than fifty percent (50%) of the number of shares
covered by such option shall include Stock Appreciation Rights. Such options
shall be subject to such
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terms and conditions, not inconsistent with the Plan, that the Committee shall
impose, including the following:
(i) Stock Appreciation Rights may be granted only in writing
and only attached to an underlying option at the time of the grant of
the option;
(ii) Stock Appreciation Rights may be exercised only at the
time when the option to which it is attached is exercisable;
(iii) Stock Appreciation Rights shall entitle the optionee (or
any person entitled to act under the provisions of the Plan) to
surrender unexercised all or part of the then exercisable portion of
the option to which the Stock Appreciation Rights are attached to the
Company and to receive from the Company in exchange therefor a payment
in cash equal to the excess, if any, of the then value of one share
covered by such portion over the option price per share specified in
such option, multiplied by the number of shares covered by the portion
of the option so surrendered (which excess is herein called the
"Appreciated Value"). For purposes of computation of the Appreciated
Value, the value of one share shall be deemed to be the average Fair
Market Value of such share during the four-week period immediately
preceding the date of notice of exercise of the Stock Appreciation
Rights;
(iv) if Stock Appreciation Rights attached to an option are
exercised, such option shall be deemed to have been canceled to the
extent of the number of shares surrendered on exercise of the Stock
Appreciation Rights and no further options may be granted covering such
shares; and
(v) if an option to which Stock Appreciation Rights are
attached is exercised, such Stock Appreciation Rights shall be canceled
to the extent necessary to cause the number of shares to which such
Stock Appreciation Rights relate not to exceed the number of remaining
shares subject to such option.
ARTICLE VIII
TRANSFERABILITY OF OPTIONS
No Incentive Stock Option or any related Stock Appreciation Rights
granted under the Plan shall be transferable by the optionee otherwise than by
will or by the laws of descent and distribution, and any such Incentive Stock
Option or any related Stock Appreciation Rights shall be exercised during the
lifetime of the optionee solely by him or her. Any Non-Qualified Stock Option
granted under the Plan may be transferable by the optionee 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. Except to
the extent permitted by such instrument, no Non-Qualified Stock Option shall be
transferable except by will or by the laws of descent and distribution.
ARTICLE IX
EXERCISE OF OPTIONS
SECTION 1. Each option (and any related Stock Appreciation Rights)
granted under the Plan shall terminate on the date specified by the Committee
which date shall be not later than the expiration of ten years
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from the date on which it was granted; provided, however, that in the case of an
Incentive Stock Option granted to an Employee who, at the time of the grant is a
Ten Percent Stockholder, such period shall not exceed five (5) years from the
date of grant.
SECTION 2. A person electing to exercise an option or Stock
Appreciation Rights then exercisable shall give written notice to the Company of
such election and, if electing to exercise an option, 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 IX, 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 Fair Market Value on the date of 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, distributee or
transferee 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
granted under the Plan, the Committee may, in its discretion, authorize, either
at the time of the grant 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 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, in the case of incentive stock options, shall be not less than the
higher of (i) the "prime rate" as from time to time in effect at a commercial
bank of recognized standing, and (ii) 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 or
desirable as a condition of or in connection with, the granting 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
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<PAGE> 6
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.
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 X
ADJUSTMENTS
SECTION 1. New option rights may be substituted for the options granted
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 X, 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 granted hereunder, or assume the options granted hereunder, the options
granted 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 granted 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 granted 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 grant or exercise or target 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; provided, in each case, that with respect to
Incentive Stock Options no such adjustment shall be authorized to the extent
that such authority would cause the Plan to violate Section 422 of the Code.
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
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<PAGE> 7
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 and elections under this Article X shall be made
by the Committee whose determination as to what adjustments, if any, shall be
made and the extent thereof shall be final, binding and conclusive. Adjustments
required under this Article X shall also be deemed to increase by a like number
the aggregate number of shares authorized for purchase pursuant to options
granted under the Plan as set forth in Section 2 of Article III hereof.
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 SERVICE OR EMPLOYMENT
SECTION 1. In the event that an optionee shall cease his or her
relationship with the Company or a Subsidiary by voluntarily terminating such
relationship without the written consent of the Company or a Subsidiary, or if
the Company or a Subsidiary shall terminate for cause such relationship, unless
otherwise provided in the instrument evidencing such option, the option and any
associated Stock Appreciation Rights held by such optionee shall terminate
forthwith.
SECTION 2. If the holder of an option shall voluntarily terminate his
or her relationship with the Company or a Subsidiary with the written consent of
such entity, 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's relationship with the Company or a
Subsidiary shall have terminated by the Company or a Subsidiary for reasons
other than cause, unless otherwise provided in the instrument evidencing such
option, 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 grant, whichever shall first occur. Options granted 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 or a
Director.
SECTION 3. Should an optionee die during the existence of the
optionee's relationship with the Company or after the cessation of the
optionee's relationship with the Company, unless otherwise provided in the
instrument evidencing such option, all of the optionee's options shall be
terminated, except that any option (and any related Stock Appreciation Rights),
to the extent exercisable by the optionee at the time of such death, 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.
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<PAGE> 8
ARTICLE XIII
AMENDMENTS TO PLAN
The Board may at any time terminate or from time to time amend, modify
or suspend the Plan; provided, however, that no such amendment or modification
without the approval of the stockholders of the Company shall:
(i) materially increase the benefits accruing to
participants under the Plan;
(ii) materially increase the maximum number (determined as
provided in the Plan) of shares of Common Stock which may be purchased
pursuant to options granted under the Plan; or
(iii) materially modify the requirements as to eligibility for
participation in the Plan.
The amendment or termination of the Plan shall not, without the written consent
of an optionee, adversely affect any rights or obligations under any option
theretofore granted to such optionee under the Plan.
ARTICLE XIV
EFFECTIVE DATE OF PLAN
The Plan shall be effective on February 3, 1999, subject to the
ratification of the Plan by the stockholders of the Company.
ARTICLE XV
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.
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.
Consultants and Advisers: Such term includes any third party retained
or engaged by the Company or any Subsidiary to provide services to the Company
or such Subsidiary, including any employee of such third party providing such
services.
Director: Such term includes any director of the Company.
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<PAGE> 9
Employee: Such term includes any officer as well as any full-time
salaried executive, managerial, professional, administrative or other employee
of the Company or a Subsidiary. Such term also includes an employee on approved
leave of absence provided such employee's right to continue employment with the
Company or a Subsidiary upon expiration of such employee's leave of absence is
guaranteed either by statute or by contract with or by a policy of the Company
or a Subsidiary and any consultant, independent contractor, professional advisor
or other person who is paid by the Company or a Subsidiary for rendering
services or furnishing materials or goods to the Company or a Subsidiary.
Fair Market Value: The fair market value as of any date shall be
determined by the Committee or Board after giving consideration to the price of
the Common Stock in the public market and shall be determined otherwise in a
manner consistent with the provisions of the Code.
Incentive Stock Option: An option intended to qualify under Section 422
of the Code.
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 and who also qualifies as an outside director within the meaning of
Section 162(m) and the related regulations under the Code, except as otherwise
determined by the Board of Directors.
Non-Qualified Stock Option: An option which does not qualify under
Section 422 of the Code.
Person: Such term has the meaning ascribed to it under the 1934 Act.
Plan: Such term is defined in Article I hereof and includes all
amendments hereof.
Stock Appreciation Rights: The rights granted by the Committee pursuant
to Section 4 of Article VII hereof.
Subsidiary: A "Subsidiary Corporation" of the Company as defined in
Section 424 of the Code.
Ten Percent Stockholder: Such term is defined in Article IV hereof.
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<PAGE> 1
Exhibit 4.5(b)
OPTION AGREEMENT
[Date of Option]
TO: [Name of Optionee]
Re: Non-Qualified Stock Option granted pursuant to
The 1999 Stock Option Plan of Midway Games Inc.
This letter will evidence the grant to you on ___________ (the "Grant
Date") by the Stock Option Committee of the Board of Directors of Midway Games
Inc. (the "Company") of an option pursuant to the Company's 1999 Stock Option
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" means 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 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.
<PAGE> 2
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.
This Option may be exercised as follows:____________________________.
This Option, to the extent not previously exercised, shall expire on the day
preceding the tenth anniversary of the Grant Date.
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]
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<PAGE> 3
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") granted to me on __________ under the terms of the Company's
1999 Stock Option 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]
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<PAGE> 1
Exhibit 5
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
(212) 782-0700
March 4, 1999
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 on Form S-8 (the "Registration Statement") registering
1,750,000 shares of the Company's common stock, par value $.01 per share
("Common Stock"), underlying options that may be granted pursuant to the
Company's 1999 Stock Option 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 issuance of the shares underlying options to be granted in accordance with
the terms of the Plan has been duly authorized and that 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 of Common Stock and options to purchase an aggregate
of 35,000 shares of Common Stock.
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> 1
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
March 2, 1999
