Exhibit 10.1
EXECUTION VERSION
$75,000,000 Aggregate Principal Amount
MIDWAY GAMES INC.
7.125% Convertible Senior Notes due 2026
PURCHASE AGREEMENT
May 24, 2006

 

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PURCHASE AGREEMENT
May 24, 2006
BANC OF AMERICA SECURITIES LLC
    as Initial Purchaser
9 W. 57th Street, 22nd Floor
New York, New York 10019
Ladies and Gentlemen:
          Midway Games Inc., a Delaware corporation, (the “Company”), proposes
to issue and sell to you, as initial purchaser (the “Initial Purchaser”)
$75,000,000 aggregate principal amount of its 7.125% Convertible Senior Notes
due 2026 (the “Bonds”).
          The Bonds are to be issued pursuant to an indenture (the “Indenture”)
to be dated as of May 30, 2006 between the Company and Wells Fargo Bank, N.A.,
as trustee (the “Trustee”). The Bonds will be convertible in accordance with
their terms and the terms of the Indenture into shares (the “Shares”) of the
common stock of the Company, par value $0.01 per share (the “Common Stock”).
          The Bonds and the Shares will be offered without being registered
under the Securities Act of 1933, as amended (the “Securities Act”), to
“qualified institutional buyers” in compliance with the exemption from
registration provided by Rule 144A under the Securities Act (“Rule 144A”).
          The Initial Purchaser and its direct and indirect transferees will be
entitled to the benefits of a Registration Rights Agreement to be entered into
at or prior to the Time of Purchase (as hereinafter defined) between the Company
and the Initial Purchaser (the “Registration Rights Agreement”).
          In connection with the sale of the Bonds, the Company has prepared a
preliminary offering memorandum dated May 8, 2006 (the “Preliminary Memorandum”)
and will prepare a final offering memorandum (the “Final Memorandum” and, with
the Preliminary Memorandum, each a “Memorandum”) including or incorporating by
reference a description of the terms of the Bonds and the Shares, the terms of
the offering and a description of the Company. As used herein, the term
“Memorandum” shall include in each case the documents incorporated by reference
therein, if any. The terms “supplement,” “amendment” and “amend” as used herein
with respect to a Memorandum shall include all documents deemed to be
incorporated by reference in such Memorandum, if any, that are filed subsequent
to the date of such Memorandum with the Securities and Exchange Commission (the
“Commission”) pursuant to the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). As used herein, “business day” shall mean a day on which the
New York Stock Exchange is open for trading.

 

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          The Company and the Initial Purchaser agree as follows:
          1. Sale and Purchase: Upon the basis of the warranties and
representations and subject to the other terms and conditions herein set forth,
the Company agrees to sell to the Initial Purchaser, and the Initial Purchaser
agrees to purchase from the Company, $75,000,000 aggregate principal amount of
Bonds at a purchase price of 97% of the principal amount thereof plus a payment
of $250,000 pursuant to Section 2 of the letter agreement between them, dated
September 20, 2005.
          2. Payment and Delivery: Payment of the purchase price for the Bonds
shall be made to the Company by Federal (same day) funds, against delivery of
the Bonds to you, at the offices of Cleary Gottlieb Steen & Hamilton LLP in New
York, New York, or at such other place as may be agreed upon by the parties
hereto, for the account of the Initial Purchaser. Such payment and delivery
shall be made at 10:00 A.M., Eastern time, on May 30, 2006 (unless another time
shall be agreed to by you and the Company). The time at which such payment and
delivery are actually made is herein sometimes called the “Time of Purchase.”
          Certificates for the Bonds shall be in definitive form or global form,
as specified by you, and registered in the names and in such denominations as
you shall request in writing not later than one full business day prior to the
Time of Purchase. For the purpose of expediting the checking of the certificates
for the Bonds by you, the Company agrees to make such certificates available to
you for such purpose at least one full business day preceding the Time of
Purchase.
          3. Representations and Warranties of the Company: The Company
represents and warrants to the Initial Purchaser that:
          (a) (i) Each document, if any, filed or to be filed pursuant to the
Exchange Act and incorporated by reference in any Memorandum complied or will
comply when so filed in all material respects with the Exchange Act and the
applicable rules and regulations of the Commission thereunder and (ii) the
Preliminary Memorandum as of its date did not, and the Final Memorandum, as of
its date and at the Time of Purchase, as amended or supplemented prior to the
Time of Purchase, in each case when read in conjunction with the Company's press
release, dated May 3, 2006 and furnished to the Commission on the Company's
Current Report on Form 8-K (the “May 3 Release”) of even date therewith, did not
and will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that any representations and warranties set forth in this paragraph do not apply
to statements or omissions in any Memorandum based upon information relating to
the Initial Purchaser furnished to the Company in writing by or on behalf of the
Initial Purchaser expressly for use therein;
          (b) The Disclosure Package (as defined below), as of 9:15 A.M.
(Eastern time) on the date hereof (the “Applicable Time”), when read in
conjunction with the May 3 Release, will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The preceding sentence does not apply to statements in or
omissions from the Disclosure Package based upon information relating to the
Initial Purchaser furnished

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to the Company in writing by or on behalf of the Initial Purchaser expressly for
use therein. The term “Disclosure Package” shall mean (i) the Preliminary
Memorandum, (ii) a final term sheet containing solely a description of the final
terms of the Bonds and the offering thereof, in the form approved by the Initial
Purchaser and in substantially the form attached as Schedule A hereto and
(iii) any additional writings that the parties expressly agree in writing prior
to their use to treat as part of the Disclosure Package.
          (c) As of the date of this Agreement, the Company has an authorized
and outstanding capitalization as set forth under the column heading entitled
“Actual” in the section of each Memorandum entitled “Capitalization” and, as
adjusted to give effect to the offering of the Bonds and the application of the
net proceeds therefrom as described in the “Use of Proceeds” section of the
Final Memorandum, the Company would, as of March 31, 2006, have had an
authorized and outstanding capitalization as set forth under the column heading
entitled “As Adjusted” in the section of the Final Memorandum entitled
“Capitalization”; all of the issued and outstanding securities of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable, have been issued in compliance with all federal and state
securities laws and were not issued in violation of any statutory or contractual
preemptive rights, resale rights, rights of first refusal or similar rights;
other than as described in the Disclosure Package and the Final Memorandum, no
options, warrants or other rights to purchase, agreements or other obligations
to issue or other rights to convert any obligation into shares of capital stock
or ownership interests in the Company are outstanding;
          (d) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware, with
full corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Disclosure Package and the Final
Memorandum;
          (e) The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the ownership or
leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified and in good standing
would not, individually or in the aggregate, have a material adverse effect on
the business, properties, financial condition, results of operation or prospects
of the Company and the Subsidiaries (as hereinafter defined) taken as a whole (a
“Material Adverse Effect”); and the Company is in compliance in all respects
with the laws, orders, rules, regulations and directives issued or administered
by such jurisdictions, except where the failure to be in compliance would not
have a Material Adverse Effect;
          (f) The Company has no subsidiaries other than Midway Home
Entertainment Inc., Midway Amusements Games, LLC, Midway Interactive Inc.,
Midway Sales Company, LLC, Midway Games (Europe) GmbH, Surreal Software Inc.,

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Midway Studios — Austin Inc., Midway Studios — Los Angeles Inc., Midway Games
Limited, K.K. Midway Games, Midway Home Studios Inc., Midway Games GmbH, Midway
Games Canada Corp, Midway Games West Inc. and Midway Games SAS (collectively,
the “Subsidiaries”); the subsidiaries of the Company, other than Midway Home
Entertainment Inc., Midway Amusements Games, LLC, Surreal Software Inc., Midway
Studios — Austin Inc., Midway Studios — Los Angeles Inc., Midway Games Limited
and Midway Games West Inc., would not, individually or in the aggregate, be a
“significant subsidiary” of the Company as defined by Rule 1-02 of
Regulation S-X; other than the capital stock or other ownership interests of the
Subsidiaries, the Company does not own, directly or indirectly, any shares of
stock or any other equity or long-term debt securities of any corporation or
have any equity interest in any firm, partnership, joint venture, association or
other entity; each Subsidiary has been duly organized and is validly existing as
a corporation or limited liability company in good standing under the laws of
the jurisdiction of its organization, with full corporate or limited liability
company, as applicable, power and authority to own, lease and operate its
properties and to conduct its business as described in the Disclosure Package
and the Final Memorandum; each Subsidiary is duly qualified to do business as a
foreign corporation or limited liability company and is in good standing in each
jurisdiction where the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where the failure to be so
qualified and in good standing would not, individually or in the aggregate, have
a Material Adverse Effect; each of the Subsidiaries are in compliance in all
respects with the laws, orders, rules, regulations and directives issued or
administered by such jurisdictions, except where the failure to be in compliance
would not have a Material Adverse Effect; all of the issued and outstanding
shares of capital stock or other ownership interests of the Subsidiaries have
been duly and validly authorized and issued, are fully paid and non-assessable
and are owned directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims, and no options, warrants, or other
rights to purchase, agreements or other obligations to issue or other rights to
convert any obligation into shares of capital stock or other ownership interests
in any Subsidiary are outstanding;
          (g) Neither the Company nor any of the Subsidiaries is in breach or
violation of, or in default under (nor has any event occurred which with notice,
lapse of time, or both would result in any breach or violation of, constitute a
default under) its respective charter or by-laws or other organizational
documents; neither the Company nor any of the Subsidiaries is in breach or
violation of, or in default under (nor has any event occurred which with notice,
lapse of time, or both would result in any breach or violation of, constitute a
default under or give the holder of any indebtedness (or person action on such
holder’s behalf), the right to require the repurchase, redemption or repayment
of all or part of such indebtedness under) any indenture, mortgage, deed of
trust, bank loan or credit agreement or other evidence of indebtedness, or any
license, lease, contract or other agreement or instrument to which the Company
or any of the Subsidiaries is a party or by which any of them or their
respective properties may be bound or affected, or under any federal, state,
local or foreign law, regulation or rule or

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any decree, judgment or order applicable to the Company or any of the
Subsidiaries, except where such breach, violation or default would not have a
Material Adverse Effect; and the execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Indenture and the Bonds and
consummation of the transactions contemplated hereby and thereby including the
issuance of the Bonds and the issuance of the Shares upon conversion of the
Bonds, will not conflict with, result in any breach or violation of or
constitute a default under (nor constitute any event which with notice, lapse of
time or both would result in any breach or violation of or constitute a default
under), the charter or by-laws or other organizational documents of the Company
or any of the Subsidiaries or any indenture, mortgage, deed of trust, bank loan
or credit agreement or other evidence of indebtedness, or any license, lease,
contract or other agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which any of them or their respective properties
may be bound or affected, or any federal, state, local or foreign law,
regulation or rule or any decree, judgment or order applicable to the Company or
any of the Subsidiaries;
          (h) The Indenture has been duly authorized by the Company and when
duly executed and delivered by the Company and duly authorized, executed and
delivered by the Trustee will be a legal, valid and binding agreement of the
Company, enforceable in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or similar laws affecting creditors’ rights generally and
general principles of equity;
          (i) The Registration Rights Agreement has been duly authorized by the
Company and when executed and delivered by the Company and duly authorized,
executed and delivered by the Initial Purchaser will be a legal, valid and
binding agreement of the Company, enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or similar laws affecting
creditors’ rights generally and general principles of equity;
          (j) The Bonds have been duly authorized by the Company and when
executed and delivered by the Company and duly authenticated by the Trustee in
accordance with the terms of the Indenture and delivered to and paid for by the
Initial Purchaser in accordance with the terms hereof will constitute legal,
valid and binding obligations of the Company, enforceable in accordance with
their terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or similar laws
affecting creditors’ rights generally and general principles of equity, and will
be entitled to the benefits of the Indenture and the Registration Rights
Agreement; the Shares initially issuable upon conversion of the Bonds have been
duly authorized and validly reserved for issuance upon conversion of the Bonds,
and upon conversion of the Bonds in accordance with their terms and the terms of
the Indenture will be issued free of statutory and contractual preemptive rights
and are sufficient in number to meet the current conversion requirements, and
such

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Shares, when so issued upon such conversion in accordance with the terms of the
Indenture, will be duly and validly issued and fully paid and non-assessable;
          (k) This Agreement has been duly authorized, executed and delivered by
the Company and is a legal, valid and binding agreement of the Company
enforceable in accordance with its terms, except as rights to indemnification
and contribution hereunder may be limited by applicable law and except as
enforceability may be limited by bankruptcy, insolvency or other laws affecting
the rights of creditors generally or by general equitable principles;
          (l) The terms of the Bonds, the Registration Rights Agreement, the
Indenture and the capital stock of the Company, including the Shares, conform in
all material respects to the description thereof contained or incorporated by
reference in the Disclosure Package and the Final Memorandum;
          (m) No approval, authorization, consent or order of or filing with any
federal, state, local or foreign governmental or regulatory commission, board,
body, authority or agency, or of or with the rules of the New York Stock
Exchange, or approval of stockholders of the Company, is required in connection
with the issuance and sale by the Company of the Bonds or the issuance of Shares
upon conversion of the Bonds or the consummation of the transactions as
contemplated hereby and by the Indenture, the Registration Rights Agreement and
the Bonds other than (i) as may be required under the securities or blue sky
laws of the various jurisdictions in which the Bonds and the Shares are being
offered by the Initial Purchaser and (ii) as may be required by federal and
state securities laws with respect to the Company’s obligations under the
Registration Rights Agreement and the listing of the Shares on the New York
Stock Exchange in connection therewith; there are no stamp or other issuance or
transfer taxes or duties or other similar fees or charges required to be paid in
connection with the execution and delivery of this Agreement or the issuance or
sale by the Company of the Bonds or upon the issuance of Shares upon the
conversion thereof;
          (n) The Company has obtained for the benefit of the Initial Purchaser
the agreement (a “Lock-Up Agreement”), in the form set forth as Exhibit D
hereto, of each of its executive officers and directors;
          (o) Except as described in the Disclosure Package and the Final
Memorandum, (i) no person has the right, contractual or otherwise, to cause the
Company to issue or sell to it any securities of the Company, (ii) no person has
any preemptive rights, resale rights, rights of first refusal or other rights to
purchase any securities of the Company and (iii) no person has the right to act
as an initial purchaser or as a financial advisor to the Company in connection
with the offer and sale of the Bonds, in the case of each of the foregoing
clauses, whether as a result of the sale of the Bonds as contemplated hereby or
otherwise; and except as described in the Disclosure Package and the Final
Memorandum, no person has the right, contractual or otherwise, to cause the
Company to register under the Securities Act any securities of the Company or to
include

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any shares of Common Stock or shares of any other capital stock or other
securities of the Company in the registration statement to be filed with the
Commission pursuant to the Registration Rights Agreement, whether as a result of
the sale of the Bonds as contemplated hereby or otherwise;
          (p) Ernst & Young LLP, whose reports on the consolidated financial
statements of the Company and the Subsidiaries are included or incorporated by
reference in the Disclosure Package and the Final Memorandum, are independent,
registered public accountants with respect to the Company as required by the
Securities Act, and the applicable published rules and regulations thereunder;
          (q) Each of the Company and the Subsidiaries has all necessary
licenses, authorizations, permits, consents and approvals (collectively,
“Consents”) and has made all necessary filings required under any federal,
state, local or foreign law, regulation or rule and has obtained all necessary
Consents from other persons, in order to conduct its respective business, except
to the extent that failure to have any such Consents or make any such filings
would not, individually or in the aggregate, have a Material Adverse Effect;
neither the Company nor any of the Subsidiaries is in violation of, or in
default under, nor has the Company or any of the Subsidiaries received notice of
any proceedings relating to revocation or modification of any such Consent or
any federal, state, local or foreign law, regulation or rule or any decree,
order or judgment applicable to the Company or any of the Subsidiaries, except
where such violation, default, revocation or modification would not,
individually or in the aggregate, have a Material Adverse Effect; the Company,
and each of its officers and directors in their capacities as such, is in
compliance in all respects with the provisions of the Sarbanes-Oxley Act of 2002
and the rules and regulations promulgated thereunder, including without
limitation Sections 302 and 906 related to certifications, and the Company is in
compliance with all applicable listing standards of the New York Stock Exchange;
          (r) Except as described in the Disclosure Package and the Final
Memorandum, there are no actions, suits, claims, investigations or proceedings
pending or threatened or, to the knowledge of the Company, after due inquiry,
contemplated to which the Company or any of the Subsidiaries or any of their
respective officers is or would be a party or of which any of their respective
properties is or would be subject at law or in equity, or before or by any
federal, state, local or foreign governmental or regulatory commission, board,
body, court, authority or agency, except any such action suit, claim,
investigation or proceeding which would not result in a judgment, decree or
order either (i) having, individually or in the aggregate, a Material Adverse
Effect or (ii) preventing the consummation of the transactions contemplated
hereby and by the Indenture, the Registration Rights Agreement and the Bonds;
          (s) All material tax returns required to be filed by the Company and
each of the Subsidiaries have been filed, and all material taxes and other
assessments of a similar nature (whether imposed directly or through
withholding) including any interest,

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additions to tax or penalties applicable thereto due or claimed to be due from
such entities have been paid, other than those being contested in good faith and
for which adequate reserves have been provided;
          (t) The Company and each of the Subsidiaries maintains insurance
covering its properties, operations, personnel and businesses as the Company
deems adequate; such insurance insures against such losses and risks to an
extent which is adequate to protect the Company and the Subsidiaries and their
respective businesses; all such insurance is fully in force on the date hereof
and will be fully in force at the Time of Purchase;
          (u) Except as disclosed in the Disclosure Package and the Final
Memorandum, neither the Company nor any of the Subsidiaries has sustained since
the date of the last audited financial statements included or incorporated by
reference in the Disclosure Package and the Final Memorandum any loss or
interference with its respective business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree;
          (v) The Company has not sent or received any communication regarding
termination of, or intent not to renew, any of the contracts or agreements that
are, individually or in the aggregate, material to the Company and that are
referred to, described in or incorporated by reference in the Disclosure Package
and the Final Memorandum, and no such termination or non-renewal has been
threatened by the Company or, to the Company’s knowledge after due inquiry, any
other party to any such contract or agreement;
          (w) Neither the Company nor the Subsidiaries are engaged in any unfair
labor practice, except as would not, individually or in the aggregate have a
Material Adverse Effect; except for matters which would not, individually or in
the aggregate, have a Material Adverse Effect, (i) there is (A) no unfair labor
practice complaint pending or, to the Company’s knowledge after due inquiry,
threatened against the Company or any of the Subsidiaries before the National
Labor Relations Board, and no grievance or arbitration proceeding arising out of
or under collective bargaining agreements is pending or threatened, (B) no
strike, labor dispute, slowdown or stoppage pending or, to the Company’s
knowledge after due inquiry, threatened against the Company or any of the
Subsidiaries and (C) no union representation dispute currently existing
concerning the employees of the Company or any of the Subsidiaries and (ii) to
the Company’s knowledge after due inquiry, (A) no union organizing activities
are currently taking place concerning the employees of the Company or any of the
Subsidiaries and (B) there is no violation of any federal, state, local or
foreign law relating to discrimination in the hiring, promotion or pay of
employees, any applicable wage or hour laws or any provision of the Employee
Retirement Income Security Act of 1974 (“ERISA”) or the rules and regulations
promulgated thereunder concerning the employees of the Company or any of the
Subsidiaries;

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          (x) Each of the Company and the Subsidiaries owns or has obtained
valid licenses for the patents, patent applications, inventions, technology,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information systems or procedures), trademarks,
trademark registrations service marks, service mark registrations, mask work
rights, trade names, copyrights, and other rights which are described in the
Disclosure Package and the Final Memorandum as being owned or used by or
licensed to the Company or its Subsidiaries or which are necessary or used for
the conduct of their respective businesses as currently conducted (collectively,
the “Intellectual Property”), except as would not, individually or in the
aggregate, have a Material Adverse Effect; except as would not, individually or
in the aggregate, have a Material Adverse Effect, each of the Company and the
Subsidiaries has taken all customary and commercially reasonable steps to
protect its trade secrets and to ensure that it will own, or have rights
sufficient for the conduct of its business in, the work product (and all
Intellectual Property relating thereto) of its employees and consultants
produced in the course of their work for the Company or any Subsidiary; except
as set forth in the Disclosure Package and the Final Memorandum: (i) to the best
knowledge of the Company, there are no rights of third parties to any such
Intellectual Property inconsistent with the rights of the Company related to
such Intellectual Property except as would not, individually or in the
aggregate, have a Material Adverse Effect, (ii) to the best knowledge of the
Company, there is no infringement by third parties of any such Intellectual
Property owned or licensed by the Company or any of the Subsidiaries except as
would not, individually or in the aggregate, have a Material Adverse Effect,
(iii) there is no pending or, to the knowledge of the Company, threatened
action, suit, proceeding or claim by others challenging the rights of the
Company or any of the Subsidiaries in or to any Intellectual Property except as
would not, individually or in the aggregate, have a Material Adverse Effect,
(iv) there is no pending or, to the knowledge of the Company, threatened action,
suit, proceeding or claim by others challenging the validity or scope of any
Intellectual Property except as would not, individually or in the aggregate,
have a Material Adverse Effect, (v) there is no pending or, to the knowledge of
the Company, threatened action, suit, proceeding or claim by others that the
Company or any of its Subsidiaries infringes or otherwise violates, or would
infringe or otherwise violate upon commercialization of its products and product
candidates described in the Disclosure Package and the Final Memorandum, any
patent, trademark, copyright, trade secret or other proprietary rights of others
except as would not, individually or in the aggregate, have a Material Adverse
Effect, and (vi) to the best knowledge of the Company there is no patent or
patent application which contains claims that conflict or interfere with or may
conflict or interfere with any Intellectual Property except as would not,
individually or in the aggregate, have a Material Adverse Effect;
          (y) The financial statements included or incorporated by reference in
the Disclosure Package and the Final Memorandum, together with the related notes
and schedules, present fairly the consolidated financial position of the Company
and the Subsidiaries as of the dates indicated and the consolidated results of
operations and cash flows of the Company and the Subsidiaries for the periods
specified and have been

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prepared in compliance in all material respects with the requirements of the
Exchange Act and in compliance with the requirements of generally accepted
accounting principles applied on a consistent basis during the periods involved;
the other financial and statistical data set forth or incorporated by reference
in the Disclosure Package and the Final Memorandum are accurately presented and
prepared on a basis consistent with the financial statements and books and
records of the Company; neither the Company nor the Subsidiaries have any
material liabilities or obligations, direct or contingent (including any
off-balance sheet obligations), not disclosed in the Disclosure Package and the
Final Memorandum, including any obligations under Title IV of ERISA arising from
the Company or any Subsidiary being part of a “controlled group” (within the
meaning of Section 4062 of ERISA) with a contributing sponsor of any pension
plan, including without limitation being part of a “brother-sister group of
trades or businesses under common control” (within the meaning of Treas. Reg.
1.414(c)-2) under the Internal Revenue Code of 1986, as amended); all
disclosures contained or incorporated by reference in the Disclosure Package and
the Final Memorandum regarding “non-GAAP financial measures” (as such term is
defined by the rules and regulations of the Commission) comply with Regulation G
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (collectively, the “Exchange Act”) and Item 10 of
Regulation S-K under the Act; and except as disclosed in the Disclosure Package
and the Final Memorandum, there are no material off-balance sheet transactions,
arrangements, obligations (including contingent obligations) or any other
relationships with unconsolidated entities or other persons, that may have a
material current or future effect on the Company’s or any of its Subsidiaries’
financial condition, changes in financial condition, results in operations,
liquidity, capital expenditures, capital resources, or significant components of
revenues or expenses;
          (z) Subsequent to the respective dates as of which information is
given in the Disclosure Package and the Final Memorandum, and except as may be
otherwise stated or incorporated by reference in the Disclosure Package and the
Final Memorandum, there has not been (i) any material adverse change, or any
development involving a prospective material adverse change, in the business,
properties, prospects, regulatory environment, management, financial condition
or results of operations of the Company and the Subsidiaries, taken as a whole,
(ii) any transaction which is material to the Company and the Subsidiaries,
taken as a whole, (iii) any obligation, direct or contingent (including any
off-balance sheet obligations), incurred by the Company or any of the
Subsidiaries, which is material to the Company and the Subsidiaries, taken as a
whole, (iv) any change in the capital stock or outstanding indebtedness of the
Company or the Subsidiaries or (v) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company;
          (aa) The Company and the Subsidiaries and their properties, assets and
operations are in compliance with, and hold all permits, authorizations and
approvals required under, Environmental Laws (as defined below), except to the
extent that failure to so comply or to hold such permits, authorizations or
approvals would not, individually

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or in the aggregate, have a Material Adverse Effect; there are no past or
present conditions, circumstances, activities, practices, actions, omissions or
plans that could reasonably be expected to give rise to any material costs or
liabilities to the Company or the Subsidiaries under, or to interfere with or
prevent compliance by the Company or the Subsidiaries with, Environmental Laws;
except as would not, individually or in the aggregate, have a Material Adverse
Effect, neither the Company nor any of the Subsidiaries (i) is the subject of
any investigation, (ii) has received any notice or claim, (iii) is a party to
or, to its knowledge, affected by any pending or threatened action, suit or
proceeding, (iv) is bound by any judgment, decree or order or (v) has entered
into any agreement, in each case relating to any alleged violation of any
Environmental Law or any actual or alleged release or threatened release or
cleanup at any location of any Hazardous Materials (as defined below) (as used
herein, “Environmental Law” means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, order, decree, judgment, injunction,
permit, license, authorization or other binding requirement, or common law,
relating to health, safety or the protection, cleanup or restoration of the
environment or natural resources, including those relating to the distribution,
processing, generation, treatment, storage, disposal, transportation, other
handling or release or threatened release of Hazardous Materials, and “Hazardous
Materials” means any material (including, without limitation, pollutants,
contaminants, hazardous or toxic substances or wastes) that is regulated by or
may give rise to liability under any Environmental Law);
          (bb) When the Bonds are issued pursuant to this Agreement, the Bonds
will not be of the same class (within the meaning of Rule 144A) as securities
that are listed on a national securities exchange registered pursuant to
Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer
quotation system;
          (cc) Neither the Company nor any Affiliate (as defined in Rule 501(b)
of Regulation D under the Securities Act) (i) sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of, any security (as defined in
the Securities Act) which is or would be integrated with the sale of the Bonds
in a manner that would require the registration under the Securities Act of the
Bonds or (ii) offered, solicited offers to buy or sold the Bonds by any form of
general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act;
          (dd) It is not necessary in connection with the offer, sale and
delivery of the Bonds to the Initial Purchaser pursuant to this Agreement to
register the Bonds or the Shares deliverable upon conversion of the Bonds under
the Securities Act or to qualify the Indenture under the Trust Indenture Act of
1939, as amended;
          (ee) Neither the Company nor any of the Subsidiaries is, nor after
giving effect to the offering and sale of the Bonds and the application of the
proceeds thereof as described in the Disclosure Package and the Final Memorandum
will any of

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them be, required to register as an “investment company” as defined in the
Investment Company Act of 1940, as amended;
          (ff) Except as described in the Disclosure Package and the Final
Memorandum, the Company and each of the Subsidiaries has good and marketable
title to all property (real and personal) described in, or in a document
incorporated by reference in, the Disclosure Package and the Final Memorandum as
being owned by each of them, free and clear of all liens, claims, security
interests or other encumbrances other than minor encumbrances for easements and
the like that do not interfere with the Company’s use of the property or the
value of the property to the Company; all the property described in, or in a
document incorporated by reference in, the Disclosure Package and the Final
Memorandum as being held under lease by the Company or a Subsidiary is held
thereby under valid, subsisting and enforceable leases;
          (gg) Except for the Registration Rights Agreement, there are no
contracts or agreements between the Company and any person granting such person
the right to require the Company to register any securities with the Commission;
          (hh) The Company and each of the Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorization; (ii) transactions are recorded as necessary (x) to
permit preparation of financial statements in conformity with generally accepted
accounting principles and (y) to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management’s general
or specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences;
          (ii) The Company does not have any significant deficiencies or
material weaknesses in the design or operation of the Company’s internal control
over financial reporting; there has not been any fraud, whether or not material,
that involves management or other employees of the Company who have a
significant role in the Company’s internal control over financial reporting;
since the date of the most recent evaluation of the Company’s disclosure
controls and procedures, there have been no significant changes in internal
controls or in other factors that could significantly affect the Company’s
internal control over financial reporting, including any corrective actions with
regard to significant deficiencies or material weaknesses;
          (jj) The Company has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15 and 15d-15 under the Exchange
Act); such disclosure controls and procedures are designed to ensure that
material information relating to the Company, including its consolidated
subsidiaries, is made known to the Company’s Principal Executive Officer and its
Principal Financial Officer by others within those entities, have been evaluated
for effectiveness as of the end of the

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Company’s most recently completed fiscal quarter, and such disclosure controls
and procedures are effective to perform the functions for which they were
established;
          (kk) The Company has provided you true, correct, and complete copies
of all documentation pertaining to any extension of credit in the form of a
personal loan made, directly or indirectly, by the Company to any director or
executive officer of the Company, or to any family member or affiliate of any
director or executive officer of the Company; and since July 30, 2002, the
Company has not, directly or indirectly, including through any subsidiary:
(i) extended credit, arranged to extend credit, or renewed any extension of
credit, in the form of a personal loan, to or for any director or executive
officer of the Company, or to or for any family member or affiliate of any
director or executive officer of the Company, or (ii) made any material
modification, including any renewal thereof, to any term of any personal loan to
any director or executive officer of the Company, or any family member or
affiliate of any director or executive officer, which loan was outstanding on
July 30, 2002, in each case in violation of the Sarbanes-Oxley Act of 2002;
          (ll) Any statistical and market-related data included or incorporated
by reference in the Disclosure Package and the Final Memorandum are based on or
derived from sources that the Company believes to be reliable and accurate, and
the Company has obtained the written consent to the use of such data from such
sources to the extent required;
          (mm) Neither the Company nor any of the Subsidiaries nor, to the
Company’s knowledge after due inquiry, any employee or agent of the Company or
the Subsidiaries has made any payment of funds of the Company or the
Subsidiaries or received or retained any funds in violation of any law, rule or
regulation;
          (nn) Neither the Company nor any of the Subsidiaries nor any of their
respective directors or officers has taken or will take, directly or indirectly,
any action designed, or which has constituted or might reasonably be expected to
cause or result in, under the Exchange Act or otherwise, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Bonds or the Shares issued upon conversion thereof;
          (oo) The Company is subject to the reporting requirements of either
Section 13 or Section 15(d) of the Exchange Act and files reports with the
Commission via EDGAR;
          (pp) Except as disclosed in the Disclosure Package and the Final
Memorandum, there are no contracts, agreements or understandings between the
Company and any person that would give rise to a valid claim against the Company
or the Initial Purchaser for a brokerage commission, finder’s fee or other like
payment in connection with the offer or sale of the Bonds or the Shares by the
Company; and

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          (qq) The agreements filed as exhibits to the Company’s most recent
annual report on Form 10-K and those filed as exhibits to any subsequent Form
8-K or 10-Q filed by the Company constitute all agreements that are (i) material
to the Company and the Subsidiaries, taken as a whole, and (ii) required to be
filed pursuant to clause (10) of paragraph (b) of Item 601 of Regulation S-K
under the Securities Act.
          In addition, any certificate signed by any officer of the Company or
any of the Subsidiaries and delivered to the Initial Purchaser or counsel for
the Initial Purchaser in connection with the offering of the Bonds shall be
deemed to be a representation and warranty by the Company or Subsidiary, as the
case may be, as to matters covered thereby, to the Initial Purchaser.
          4. Representations, Warranties and Covenants of the Initial Purchaser.
The Initial Purchaser proposes to offer the Bonds for sale upon the terms and
conditions set forth in this Agreement and the Disclosure Package and the Final
Memorandum, and the Initial Purchaser hereby represents and warrants to and
agrees with the Company that:
          (a) It will offer and sell the Bonds only to persons whom it
reasonably believes are “qualified institutional buyers” (“QIBs”) within the
meaning of Rule 144A in transactions meeting the requirements of Rule 144A. Each
purchaser of Bonds shall be deemed to have represented and agreed as provided in
each Memorandum under the caption “Notice to Investors”;
          (b) It is a QIB within the meaning of Rule 144A;
          (c) It has not and will not, directly or indirectly, solicit offers in
the United States for, or offer or sell, the Bonds by any form of general
solicitation, general advertising (as such terms are used in Regulation D) or in
any manner involving a public offering within the meaning of Section 4(2) of the
Securities Act; and
          (d) Without the prior written consent of the Company, it will not use,
authorize use of, refer to or participate in the planning for use of, any
material that would be deemed to be a “free writing prospectus” under the
Securities Act if the offer or sale of the Bonds or Shares were registered under
the Securities Act; provided that such material shall not include the Disclosure
Package, the Final Memorandum and any other offering materials prepared by or
with the prior consent of the Company; and provided further that the Initial
Purchaser may send customary notices in respect of the offering of the Bonds
through the Bloomberg system.
          5. Certain Covenants of the Company: The Company hereby agrees that:
          (a) The Company will prepare the materials contained in the Disclosure
Package and the Final Memorandum in a form approved by the Initial Purchaser and
will make no amendment or supplement to the Disclosure Package or the Final
Memorandum to which the Initial Purchaser reasonably objects;

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          (b) Promptly from time to time, the Company will take such action as
the Initial Purchaser may reasonably request to qualify the Bonds and the Shares
for offering and sale under the securities laws of such jurisdictions as the
Initial Purchaser may request and will comply with such laws so as to permit the
continuance of sales and dealing therein in such jurisdictions for as long as
may be necessary to complete the distribution of the Bonds; provided, that in
connection therewith the Company shall not be required to qualify as a foreign
corporation, to file a general consent to service of process or subject itself
to any tax in any such jurisdiction where it is not now so qualified or subject;
and to promptly advise you of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Bonds or the Shares
for sale in any jurisdiction or the initiation or threatening of any such
proceeding for such purpose;
          (c) The Company will furnish the Initial Purchaser with as many copies
of the materials contained in the Disclosure Package and the Final Memorandum,
any documents incorporated by reference therein and any amendment or supplement
thereto as the Initial Purchaser may from time to time reasonably request, and
if, at any time prior to the completion of the resale of the Bonds by the
Initial Purchaser, any event or development shall have occurred as a result of
which the Disclosure Package and the Final Memorandum as then amended or
supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made or then prevailing, as
the case may be, not misleading, or, if for any other reason it shall be
necessary or desirable during such same period to amend or supplement the
Disclosure Package and the Final Memorandum, the Company will notify the Initial
Purchaser and upon the request of the Initial Purchaser will prepare and furnish
without charge to the Initial Purchaser and to any dealer in securities as many
copies as the Initial Purchaser may from time to time reasonably request of an
amended Memorandum or a supplement to the Disclosure Package and the Final
Memorandum which will correct such statement or omission or effect such
compliance;
          (d) During the period beginning from the date hereof and continuing
until the date 90 days after the date of the Final Memorandum, the Company will
not, without the prior written consent of the Initial Purchaser, issue, offer,
sell, contract to sell, hypothecate, pledge, grant or sell any option, right or
warrant to purchase, or otherwise dispose of, or contract to dispose of, any
Common Stock, any securities substantially similar to the Bonds or the Common
Stock, any securities that are convertible into or exchangeable for shares of
Common Stock and debt securities or any securities that are convertible into or
exchangeable for the Bonds or such other debt securities (other than (i) the
issuance of the Bonds; (ii) the issuance of Shares upon conversion of the Bonds;
(iii) the issuance of shares of Common Stock upon conversion or exercise of
convertible or exercisable or exchangeable securities outstanding as of the date
of this Agreement, (iv) the issuance of shares of Common Stock or options
pursuant to employee stock option or employee stock purchase plans existing on,
or upon exercise of warrants

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outstanding as of, the date of this Agreement, or (v) up to 500,000 shares of
Common Stock in connection with the acquisition of other companies or
businesses), or enter into any swap or other agreement that transfers, in whole
or in part, any of the economic consequences of ownership of the Common Stock or
Bonds irrespective of whether any transaction mentioned above is to be settled
by delivery of the Common Stock, the Bonds or other securities, in cash or
otherwise; in addition, if (1) during the period that begins on the date that is
15 calendar days plus 3 business days before the last day of the 90-day
restricted period and ends on the last day of the 90-day restricted period, the
Company issues an earnings release or material news or a material event relating
to the Company occurs, or (2) prior to the expiration of the 90-day restricted
period, the Company announces that it will release earnings results during the
16-day period beginning on the last day of the 90-day period, the restrictions
imposed by this section shall continue to apply until the expiration of the date
that is 15 calendar days plus 3 business days after the date on which the
issuance of the earnings release or the material news or material event occurs;
          (e) At any time when the Company is not subject to Section 13 or 15(d)
of the Exchange Act and so long as any of the Bonds (or Shares issued upon
conversion thereof) are “restricted securities” within the meaning of
Rule 144(a)(3) under the Securities Act, for the benefit of holders from time to
time of the Bonds, the Company will furnish at its expense, upon request, to
holders and beneficial owners of Bonds and prospective purchasers of Bonds
information satisfying the requirements of subsection (d)(4)(i) of Rule 144A;
          (f) The Company will use its reasonable best efforts to cause the
Bonds to be eligible for trading in PORTAL;
          (g) For so long as the Bonds remain outstanding, the Company will
furnish to the Initial Purchaser copies of all reports or other communications
(financial or other) furnished to stockholders of the Company, and will deliver
to the Initial Purchaser (i) as soon as they are available, copies of any
reports and financial statements furnished to or filed by the Company with the
Commission or any securities exchange on which the Bonds or any class of
securities of the Company is listed; and (ii) such additional information
concerning the business and financial condition of the Company as the Initial
Purchaser may from time to time reasonably request (such financial information
to be on a consolidated basis to the extent the accounts of the Company and the
Subsidiaries are consolidated in reports furnished to its stockholders generally
or to the Commission);
          (h) The Company will use the net proceeds received by it from the sale
of the Bonds pursuant to this Agreement in the manner specified in the
Disclosure Package and the Final Memorandum under the caption “Use of Proceeds”;
          (i) The Company will reserve and keep available at all times free of
preemptive rights, Shares for the purpose of enabling the Company to satisfy any
obligations to issue Shares upon conversion of the Bonds;

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          (j) Between the date hereof and the Time of Purchase, the Company will
not do or authorize any act or thing that would result in an adjustment of the
conversion price;
          (k) The Company will use its reasonable best efforts to list, as
promptly as practicable but in no event later than the time that the
registration statement is declared effective in accordance with the Registration
Rights Agreement, and subject to notice of issuance, the Shares on the New York
Stock Exchange;
          (l) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, the Company will pay or cause to be
paid all expenses incident to the performance of its obligations under this
Agreement, including, without limitation, (i) the fees, disbursements and
expenses of the Company’s counsel and the Company’s accountants in connection
with the issuance and sale of the Bonds and all other fees and expenses in
connection with the preparation of the materials contained in the Disclosure
Package and the Final Memorandum and all amendments and supplements thereto,
including all printing costs associated therewith, and the furnishing of copies
thereof to the Initial Purchaser and to dealers (including costs of mailing and
shipment), (ii) all costs related to the preparation, issuance, execution,
authentication and delivery of the Bonds and the Shares, (iii) all costs related
to the transfer and delivery of the Bonds to the Initial Purchaser, including
any transfer or other taxes payable thereon, (iv) all expenses in connection
with the qualification of the Bonds and the Shares for offering and sale under
state laws and the cost of printing and furnishing of copies of any blue sky or
legal investment memorandum to the Initial Purchaser and to dealers (including
filing fees and the fees and disbursements of counsel for the Initial Purchaser
in connection with such qualification and in connection with such blue sky or
legal investment memorandum), (v) any fees payable to investment rating agencies
with respect to the rating of the Bonds, (vi) the costs and charges of the
Trustee and any transfer agent, registrar or depositary, (vii) the fees and
expenses, if any, incurred in connection with the admission of the Bonds for
trading in PORTAL or any appropriate market system, (viii) the costs and
expenses of the Company relating to presentations on any “road show” undertaken
in connection with the marketing of the offering of the Bonds, including,
without limitation, expenses associated with the production of road show slides
and graphics, fees and expenses of any consultants engaged in connection with
the road show presentations, travel and lodging expenses of the representatives
and officers of the Company and any such consultants, and the cost of any
aircraft chartered in connection with the road show, and (ix) all other cost and
expenses incident to the performance of the Company’s obligations hereunder for
which provision is not otherwise made in this Section 5(k);
          (m) Without the prior written consent of the Initial Purchaser, it
will not use, authorize use of, refer to or participate in the planning for use
of, any material that would be deemed to be a “free writing prospectus” under
the Securities Act if the offer or sale of the Bonds or Shares were registered
under the Securities Act; provided

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that such material shall not include the Disclosure Package, the Final
Memorandum and any other offering materials prepared by or with the prior
consent of the Initial Purchaser.
          (n) Neither the Company nor any Affiliate will sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in the Securities Act) which could be integrated with the sale of the
Bonds in a manner which would require the registration under the Securities Act
of the offer and sale of the Bonds pursuant to this Agreement;
          (o) The Company will not to solicit any offer to buy or offer or sell
the Bonds or the Shares by means of any form of general solicitation or general
advertising (as those terms are used in Regulation D) or in any manner involving
a public offering within the meaning of Section 4(2) of the Securities Act;
          (p) During the period after the Time of Purchase the Company will not,
and will not permit Affiliates, to resell any of the Bonds or the Shares which
constitute “restricted securities” under Rule 144 under the Securities Act that
have been reacquired by any of them except pursuant to an effective registration
statement under the Securities Act;
          (q) Neither the Company nor any of its directors or officers will take
any action prohibited by Regulation M under the Exchange Act in connection with
the distribution of the Bonds contemplated hereby; and
          (r) The Company and each Subsidiary will comply in all material
respects with all applicable securities and other laws, rules and regulations,
including without limitation, the Sarbanes-Oxley Act, and use its best efforts
to cause the officers and directors of the Company and each Subsidiary, as the
case may be, in their capacities as such, to comply with such laws, rules and
regulations, including without limitation, the provisions of the Sarbanes-Oxley
Act.
          6. Reimbursement of Initial Purchaser Expenses: If the Bonds are not
delivered for any reason other than the default by the Initial Purchaser in its
obligations hereunder, the Company will reimburse the Initial Purchaser for all
of its out-of-pocket expenses (including the reasonable fees and disbursements
of its counsel) reasonably incurred by the Initial Purchaser in connection with
this Agreement or the offering contemplated hereunder.
          7. Conditions of Initial Purchaser Obligations: The obligations of the
Initial Purchaser hereunder are subject to the accuracy of the representations
and warranties on the part of the Company on the date hereof and at the Time of
Purchase. Additionally, the obligations of the Initial Purchaser hereunder are
subject to performance by the Company of its obligations hereunder and to the
following conditions:

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          (a) The Company shall furnish to the Initial Purchaser at the Time of
Purchase an opinion of its General Counsel, addressed to the Initial Purchaser
and dated the date of the Time of Purchase, substantially in the form set forth
in Exhibit A hereto;
          (b) The Company shall furnish to the Initial Purchaser at the Time of
Purchase an opinion of Jones Day, counsel for the Company, addressed to the
Initial Purchaser and dated the date of the Time of Purchase, substantially in
the form set forth in Exhibit B hereto;
          (c) The Initial Purchaser shall have received on the date of this
Agreement and at the Time of Purchase from Ernst & Young LLP customary comfort
letters dated as of the date of this Agreement and the date of the Time of
Purchase and addressed to the Initial Purchaser, in form and substance
satisfactory to counsel for the Initial Purchaser;
          (d) The Initial Purchaser shall have received at the Time of Purchase
the opinion of counsel for the Initial Purchaser, dated the date of the Time of
Purchase, in form and substance reasonably satisfactory to the Initial
Purchaser;
          (e) No amendment or supplement to the Disclosure Package or the Final
Memorandum, or any document which upon filing with the Commission would be
incorporated by reference in the Disclosure Package or the Final Memorandum,
shall at any time have been made or filed to which the Initial Purchaser has
reasonably objected in writing;
          (f) At the Time of Purchase, neither the Disclosure Package nor the
Final Memorandum, in each case when read in conjunction with the May 3 Release,
shall contain an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
          (g) Between the time of execution of this Agreement and the Time of
Purchase, (i) no material adverse change or any development involving a
prospective material adverse change in the business, prospects, properties,
management, financial condition or results of operations of the Company and the
Subsidiaries, taken as a whole shall occur or become known and (ii) no
transaction which is material and unfavorable to the Company (other than as
disclosed in the Disclosure Package and the Final Memorandum) shall have been
entered into by the Company or any of the Subsidiaries;
          (h) The Company will at the Time of Purchase deliver to you a
certificate of its Chief Executive Officer and its Chief Financial Officer in
the form attached as Exhibit C hereto;
          (i) You shall have received copies, duly executed by the Company and
the other parties thereto, of the Registration Rights Agreement and the
Indenture;

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          (j) Each executive officer and director of the Company shall have
entered into Lock-Up Agreements in the form attached as Exhibit D hereto on or
prior to the date hereof, and each such Lock-Up Agreement shall have been
delivered to you and shall be in full force and effect at the Time of Purchase;
          (k) The Company shall have furnished to you such other documents and
certificates, including documents and certificates as to the accuracy and
completeness of any statement in the Disclosure Package and the Final Memorandum
as of the Time of Purchase, as you may reasonably request;
          (l) The Bonds shall have been designated for trading on PORTAL,
subject only to notice of issuance at or prior to the Time of Purchase; and
          (m) Between the time of execution of this Agreement and the Time of
Purchase, there shall not have occurred any downgrading, nor shall any notice
have been given of (i) any intended or potential downgrading or (ii) any review
or possible change that does not indicate an improvement, in the rating accorded
any securities of or guaranteed by the Company or any Subsidiary of the Company
by any “nationally recognized statistical rating organization”, as that term is
defined in Rule 436(g)(2) promulgated under the Securities Act.
          8. Termination: The obligations of the Initial Purchaser hereunder
shall be subject to termination in the absolute discretion of the Initial
Purchaser, if, (x) since the time of execution of this Agreement or the earlier
respective dates as of which information is given in the Disclosure Package and
the Final Memorandum, there has been any material adverse change or any
development involving a prospective material adverse change in the business,
prospects, properties, management, financial condition or results of operations
of the Company and the Subsidiaries taken as a whole, which would, in the
judgment of the Initial Purchaser, make it impracticable or inadvisable to
proceed with the offering or the delivery of the Bonds on the terms and in the
manner contemplated in the Disclosure Package and the Final Memorandum; (y) at
any time prior to the Time of Purchase there shall have occurred: (i) a
suspension or material limitation in trading in securities generally on the New
York Stock Exchange, the American Stock Exchange or the Nasdaq National Market;
(ii) a suspension or material limitation in trading in the Company’s securities
on the New York Stock Exchange; (iii) a general moratorium on commercial banking
activities declared by either federal or New York State authorities or a
material disruption in commercial banking or securities settlement or clearance
services in the United States; (iv) an outbreak or escalation of hostilities or
acts of terrorism involving the United States or a declaration by the United
States of a national emergency or war; or (v) any other calamity or crisis or
any change in financial, political or economic conditions in the United States
or elsewhere, if the effect of any such event specified in clause (iv) or (v) in
the judgment of the Initial Purchaser makes it impracticable or inadvisable to
proceed with the offering or the delivery of the Bonds on the terms and in the
manner contemplated in the Disclosure Package and the Final Memorandum; or
(z) at any time prior to the Time of Purchase there shall have occurred any
downgrading, or any notice or announcement shall have been given or made of (i)

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any intended or potential downgrading or (ii) any watch, review or possible
change that does not indicate an affirmation or improvement in the rating
accorded any securities of or guaranteed by the Company or any Subsidiary by any
“nationally recognized statistical rating organization,” as that term is defined
in Rule 436(g)(2) under the Securities Act.
          If you elect to terminate this Agreement as provided in this
Section 8, the Company shall be notified as provided for herein.
          If the sale to the Initial Purchaser of the Bonds, as contemplated by
this Agreement, is not carried out by the Initial Purchaser for any reason
permitted under this Agreement or if such sale is not carried out because the
Company shall be unable to comply and does not comply with any of the terms of
this Agreement, the Company shall not be under any obligation or liability under
this Agreement (except to the extent provided in Sections 5(k), 6 and 9 hereof),
and the Initial Purchaser shall be under no obligation or liability to the
Company under this Agreement (except to the extent provided in Section 9 hereof)
or to one another hereunder.
          9. Indemnity by the Company and the Initial Purchaser:
          (a) The Company agrees to indemnify, defend and hold harmless the
Initial Purchaser, its partners, directors and officers, and any person who
controls the Initial Purchaser within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (each, an “Initial Purchaser
Indemnified Party”), and the successors and assigns of all the foregoing
persons, from and against any loss, damage, expense, liability or claim
(including the reasonable cost of investigation) which, jointly or severally,
any such Initial Purchaser Indemnified Party or any such person may incur under
the Securities Act, the Exchange Act, the common law or otherwise, insofar as
such loss, damage, expense, liability or claim arises out of or is based upon
any untrue statement or alleged untrue statement of a material fact contained in
the materials contained in the Disclosure Package (including, for this purpose,
the May 3 Release), the Final Memorandum (including, for this purpose, the May 3
Release), or in any amendment or supplement thereto, or arises out of or is
based upon any omission or alleged omission to state a material fact necessary
to make the statements made therein, in the light of the circumstances under
which they were made, not misleading, except insofar as any such loss, damage,
expense, liability or claim arises out of or is based upon any untrue statement
or omission or alleged untrue statement or omission of a material fact contained
in or omitted from and in conformity with information furnished in writing by or
on behalf of the Initial Purchaser to the Company expressly for use therein.
          (b) The Initial Purchaser agrees to indemnify, defend and hold
harmless the Company, its directors and officers and any person who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act (each, a “Company Indemnified Party”) from and against any
loss, damage, expense, liability or claim (including the reasonable cost of
investigation) which such Company Indemnified Party may incur under the
Securities Act, the Exchange Act or otherwise, insofar as such loss, damage,
expense, liability or claim arises out of or is based upon any untrue statement
or alleged untrue statement of a material fact contained

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in information concerning the Initial Purchaser furnished in writing by or on
behalf of the Initial Purchaser to the Company expressly for use in the
Disclosure Package, the Final Memorandum, or in any amendment or supplement
thereto, or arises out of or is based upon any omission or alleged omission to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, in
connection with such information.
          (c) If any action, suit or proceeding (each, a “Proceeding”) is
brought against any person in respect of which indemnity may be sought pursuant
to either subsection (a) or (b) of this Section 9, such person (the “Indemnified
Party”) shall promptly notify the person against whom such indemnity may be
sought (the “Indemnifying Party”) in writing of the institution of such
Proceeding and such Indemnifying Party shall assume the defense of such
Proceeding, including the employment of counsel reasonably satisfactory to such
Indemnified Party and payment of all fees and expenses; provided, however, that
the omission to so notify such Indemnifying Party shall not relieve such
Indemnifying Party from any liability which it may have to such Indemnified
Party or otherwise. Such Indemnified Party shall have the right to employ its
own counsel in any such case, but the fees and expenses of such counsel shall be
at the expense of such Indemnified Party unless the employment of such counsel
shall have been authorized in writing by such Indemnifying Party in connection
with the defense of such Proceeding or such Indemnifying Party shall not have
employed counsel to have charge of the defense of such Proceeding within 30 days
of the receipt of notice thereof or such Indemnified Party shall have reasonably
concluded that there may be defenses available to it that are different from,
additional to, or in conflict with those available to such Indemnifying Party
(in which case such Indemnifying Party shall not have the right to direct the
defense of such Proceeding on behalf of such Indemnified Party, but such
Indemnifying Party may employ counsel and conduct the defense thereof and the
fees and expenses of such counsel shall be at the expense of such Indemnifying
Party), in any of which events such fees and expenses shall be borne by such
Indemnifying Party and paid as incurred (it being understood, however, that such
Indemnifying Party shall not be liable for the expenses of more than one
separate counsel in any one Proceeding or series of related Proceedings together
with reasonably necessary local counsel representing the Indemnified Parties who
are parties to such Proceeding). An Indemnifying Party shall not be liable for
any settlement of any Proceeding effected without its written consent, but if
settled with the written consent of such Indemnifying Party, such Indemnifying
Party agrees to indemnify and hold harmless an Indemnified Party from and
against any loss or liability by reason of such settlement. Notwithstanding the
foregoing sentence, if at any time an Indemnified Party shall have requested an
Indemnifying Party to reimburse such Indemnified Party for fees and expenses of
counsel as contemplated by the second sentence of this paragraph, then such
Indemnifying Party agrees that it shall be liable for any settlement of any
Proceeding effected without its written consent if (i) such settlement is
entered into more than 60 business days after receipt by such Indemnifying Party
of the aforesaid request, (ii) such Indemnifying Party shall not have fully
reimbursed such Indemnified Party in accordance

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with such request prior to the date of such settlement and (iii) such
Indemnified Party shall have given such Indemnifying Party at least 30 days’
prior notice of its intention to settle. An Indemnifying Party shall not,
without the prior written consent of any Indemnified Party, effect any
settlement of any pending or threatened Proceeding in respect of which such
Indemnified Party is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding and does not include an admission
of fault, culpability or a failure to act, by or on behalf of such Indemnified
Party.
          (d) If the indemnification provided for in this Section 9 is
unavailable to an Indemnified Party under subsections (a) and (b) of this
Section 9 or insufficient to hold an indemnified party harmless in respect of
any losses, damages, expenses, liabilities or claims referred to therein, then
each applicable Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such losses, damages, expenses, liabilities or claims (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Initial Purchaser on the other hand from the
offering of the Bonds or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and of the Initial Purchaser on
the other in connection with the statements or omissions which resulted in such
losses, damages, expenses, liabilities or claims, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Initial Purchaser on the other shall be deemed to be in the
same proportion as the total proceeds from the offering (net of the Initial
Purchaser’s discounts and commissions but before deducting expenses) received by
the Company bear to the discounts and commissions received by the Initial
Purchaser. The relative fault of the Company on the one hand and of the Initial
Purchaser on the other shall be determined by reference to, among other things,
whether the untrue statement or alleged untrue statement of a material fact or
omission or alleged omission relates to information supplied by the Company or
by the Initial Purchaser and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, damages,
expenses, liabilities and claims referred to in this subsection shall be deemed
to include any reasonable legal or other fees or expenses reasonably incurred by
such party in connection with investigating, preparing to defend or defending
any Proceeding.
          (e) The Company and the Initial Purchaser agree that it would not be
just and equitable if contribution pursuant to this Section 9 were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in subsection (d) above.
Notwithstanding the provisions of this Section 9, the Initial Purchaser shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Bonds resold by it

23

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in the initial placement of such Bonds were offered to investors exceeds the
amount of any damages which the Initial Purchaser has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The remedies
provided for in this Section 9 are not exclusive and shall not limit any rights
or remedies which may otherwise be available to any indemnified party at law or
in equity.
          (f) The indemnity and contribution agreements contained in this
Section 9 and the covenants, warranties and representations of the Company and
the Initial Purchaser contained in this Agreement shall remain in full force and
effect (regardless of any investigation made by on behalf of the Initial
Purchaser, its partners, directors or officers or any person (including each
partner, officer or director of such person) who controls the Initial Purchaser
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, or by or on behalf of the Company, its directors and officers or
any person who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act), and shall survive any
termination of this Agreement or the issuance and delivery of the Bonds. The
Company and the Initial Purchaser agree promptly to notify each other of the
commencement of any litigation or proceeding against it and, in the case of the
Company, against any of the Company’s officers and directors, in connection with
the issuance and sale of the Bonds, or in connection with any Memorandum or the
Disclosure Package.
          10. Effectiveness: This Agreement shall become effective upon the
execution and delivery hereof by the parties hereto.
          11. Information Furnished by the Initial Purchaser: The statements
(a) set forth in the last paragraph on the cover page of each Memorandum and the
statements set forth in the second-to-last paragraph regarding overallotment and
stabilization under the caption “Plan of Distribution” in each Memorandum and
(b) with respect to any material contained in the Disclosure Package, agreed to
in writing by the Initial Purchaser as being information furnished by or on
behalf of the Initial Purchaser, constitute the only information furnished by or
on behalf of the Initial Purchaser.
          12. Notices: Except as otherwise herein provided, all statements,
requests, notices and agreements shall be in writing or by facsimile and, if to
the Initial Purchaser, shall be sufficient in all respects if delivered or sent
to Banc of America Securities LLC, 9 W. 57th Street, 22nd Floor, New York, New
York 10019, Attention: Syndicate Department, Telecopy No.: (212) 933-2217, with
a copy to (for informational purposes only): Attention: Legal Department,
Telecopy No.: (212) 457-3745, and, if to the Company, shall be sufficient in all
respects if delivered or sent to the Company at the offices of the Company at
2704 West Roscoe Street, Chicago, Illinois 60618, Attention: Deborah Fulton,
Telecopy No. (773) 961-2299.

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          13. Governing Law and Construction: THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES. THE SECTION HEADINGS IN THIS AGREEMENT
HAVE BEEN INSERTED AS A MATTER OF CONVENIENCE OF REFERENCE AND ARE NOT A PART OF
THIS AGREEMENT.
          14. Parties at Interest: The Agreement herein set forth has been and
is made solely for the benefit of the Initial Purchaser and the Company and the
controlling persons, directors and officers referred to in Section 9 hereof, and
their respective successors, assigns, executors and administrators. No other
person, partnership, association or corporation (including a purchaser, as such
purchaser, from the Initial Purchaser) shall acquire or have any right under or
by virtue of this Agreement.
          15. Counterparts: This Agreement may be signed by the parties in
counterparts which together shall constitute one and the same agreement among
the parties. Delivery of an executed counterpart by facsimile shall be effective
as delivery of a manually executed counterpart thereof.
          16. Submission to Jurisdiction: Except as set forth below, no
Proceeding may be commenced, prosecuted or continued in any court other than the
courts of the State of New York located in the City and County of New York or in
the United States District Court for the Southern District of New York, which
courts shall have jurisdiction over the adjudication of such matters, and the
Company hereby consents to the jurisdiction of such courts and personal service
with respect thereto. The Company hereby consents to personal jurisdiction,
service and venue in any court in which any Proceeding arising out of or in any
way relating to this Agreement is brought by any third party against the Initial
Purchaser. The Company hereby waives all right to trial by jury in any
Proceeding (whether based upon contract, tort or otherwise) in any way arising
out of or relating to this Agreement. The Company agrees that a final judgment
in any such Proceeding brought in any such court shall be conclusive and binding
upon the Company and may be enforced in any other courts in the jurisdiction of
which the Company is or may be subject, by suit upon such judgment.
          17. Relationship Between the Parties. The Company hereby acknowledges
that the Initial Purchaser is acting solely as initial purchaser in connection
with the purchase and sale of the Company’s securities; the Company further
acknowledges that the Initial Purchaser is acting pursuant to a contractual
relationship created solely by this Purchase Agreement entered into on an arm’s
length basis and in no event do the parties intend that the Initial Purchaser
act or be responsible as a fiduciary to the Company, its management,
stockholders, creditors or any other person in connection with any activity that
the Initial Purchaser may undertake or has undertaken in furtherance of the
purchase and sale of the Company’s securities, either before or after the date
hereof. The Initial Purchaser hereby expressly disclaims any fiduciary or
similar obligations to the Company, either in connection with the transactions
contemplated by this Purchase Agreement or any matters leading up to such
transactions, and the Company hereby

25

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confirms its understanding and agreement to that effect. The Company and the
Initial Purchaser agree that they are each responsible for making their own
independent judgments with respect to any such transactions, and that any
opinions or views expressed by the Initial Purchaser to the Company regarding
such transactions, including but not limited to any opinions or views with
respect to the price or market for the Company’s securities, do not constitute
advice or recommendations to the Company. The Company hereby waives and
releases, to the fullest extent permitted by law, any claims that the Company
may have against the Initial Purchaser with respect to any breach or alleged
breach of any fiduciary or similar duty to the Company in connection with the
transactions contemplated by this Purchase Agreement or any matters leading up
to such transactions.

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          If the foregoing correctly sets forth the understanding between the
Company and the Initial Purchaser, please so indicate in the space provided
below for the purpose, whereupon this letter and your acceptance shall
constitute a binding agreement between the Company and the Initial Purchaser.

            Very truly yours,

MIDWAY GAMES INC.
      By:   /s/ David F. Zucker         Name:   David F. Zucker        Title:  
President and CEO     

Accepted and agreed to as of the date first
above written

          BANC OF AMERICA SECURITIES LLC    
 
       
By:
  /s/ Derek Dillon    
 
       
 
  Name: Derek Dillon    
 
  Title: Managing Director    

27

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Schedule A
FORM OF FINAL TERM SHEET
Banc of America Securities LLC
Midway Games Inc.
7.125% Convertible Senior Notes due 2026

     
Issuer:
  Midway Games Inc.
Title of securities:
  7.125% Convertible Senior Notes due 2026 
Issue price:
  100% 
Aggregate principal amount offered:
  $75,000,000. The initial purchaser does not have an option to purchase
additional notes. 
Net proceeds:
  Approximately $72.3 million after deducting Banc of America’s discount and
commission and the estimated offering expenses payable by Midway 
Maturity:
  May 31, 2026 
Annual interest rate:
  7.125% per annum 
Interest payment dates:
  May 31 and November 30 of each year, beginning on November 30, 2006 
Call dates:
  Midway may from time to time, at its option, redeem the notes, in whole or in
part, on or after June 6, 2013 at a redemption price payable in cash equal to
100% of the principal amount of the notes redeemed, plus any accrued and unpaid
interest and additional interest to, but excluding, the redemption date. See
“Description of the Notes — Redemption of Notes at our Option.”
Put dates:
  Holders may generally require Midway to repurchase all or a portion of their
notes on each of May 31, 2010, May 31, 2016 and May 31, 2021 at a price in cash
equal to 100% of the principal amount of the notes to be repurchased, plus any
accrued and unpaid interest and additional interest, if any, to, but excluding,
the repurchase date, or if a “fundamental change,” as defined in the Preliminary
Offering Memorandum dated May 8, 2006, occurs. See “Description of the Notes —
Repurchase of Notes by us at the Option of the Holder” and “— Holders May
Require us to Repurchase their Notes upon a Fundamental Change.”
Initial conversion price:
  $10.86 per share of common stock 
Initial conversion rate:
  92.0810 shares of common stock per $1,000 aggregate principal amount of notes 
Settlement:
  May 30, 2006 
 
   
Registration rights:
  Midway has agreed to file, within 90 days of the date on which it first issues
the notes, a shelf registration statement relating to the resale of the notes
and the shares of common stock issuable upon conversion of the notes. See
“Description of the Notes — Registration Rights, Additional Interest.”

Sch.-A-1

 

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Use of proceeds:
  Midway intends to use the net proceeds for general corporate purposes,
including working capital and capital expenditures. Midway may also use a
portion of the net proceeds to fund possible future acquisitions of, or
strategic alliances with, development companies or other companies involved in
the development or production of video games. See “Use of Proceeds.”
 
   
Reset of conversion rate:
  The section in the Preliminary Offering Memorandum under “Description of Notes
— Adjustment to the Conversion Rate on May 31, 2008” and any related discussion
elsewhere in the Preliminary Offering Memorandum is deleted in its entirety. In
its place, the following section is added:
 
   
 
  If, on any date (such date, the “Reset Determination Date”) prior to May 31,
2008, (1) the arithmetic average of the daily volume-weighted average price
(“VWAP”) of the common stock for any 20 trading days within a period of 30
consecutive trading days ending on the Reset Determination Date is below $8.00
(as adjusted for Anti-Dilution Conversion Rate Adjustments, if any) and (2) 110%
of the closing sale price on the Reset Determination Date is less than or equal
to $8.80 (as adjusted for Anti-Dilution Conversion Rate Adjustments, if any),
the conversion rate shall be increased as of such Reset Determination Date such
that the conversion price would be $8.80 (as adjusted for Anti-Dilution
Conversion Rate Adjustments, if any).
 
   
 
  In addition, if, on any date (such date, the “Additional Reset Determination
Date”) prior to May 31, 2008, (1) the VWAP of the common stock for any 20
trading days within a period of 30 consecutive trading days ending on the
Additional Reset Determination Date is below $6.00 (as adjusted for
Anti-Dilution Conversion Rate Adjustments, if any) and (2) 110% of the closing
sale price on the Additional Reset Determination Date is less than or equal to
$6.60 (as adjusted for Anti-Dilution Conversion Rate Adjustments, if any), the
conversion rate shall be increased as of such Reset Determination Date such that
the conversion price would be $6.60 (as adjusted for Anti-Dilution Conversion
Rate Adjustments, if any).
 
   
 
  A Reset Determination Date does not need to have occurred in order for an
Additional Reset Determination Date to occur.
 
   
 
  Furthermore, if, on May 31, 2008 or May 31, 2009, 110% of the VWAP of the
common stock for any 20 trading days within a period of 30 consecutive trading
days ending on such date is below the conversion price in effect at that time,
the conversion rate shall be increased as of such Reset Determination Date such
that the conversion price would be 110% of such VWAP. The conversion rate will
not be adjusted on May 31, 2008 or May 31, 2009 if 110% of the VWAP of the
common stock for such 20 trading days within such period of 30 consecutive
trading days ending on such date is equal to or greater than the conversion
price in effect at that time.
 
   
 
  In no event shall the conversion rate be increased such that the conversion
price would be less than $6.60 (as adjusted for Anti-Dilution Conversion Rate
Adjustments, if any).
 
   
Additional adjustment to the conversion price:
  In addition to the adjustments to the Conversion Rate described under
“Description of Notes — Adjustments to the Conversion Rate”, Midway will adjust
the conversion price for the following:
 
   
 
  At any time prior to May 31, 2010, if Midway issues (1) any shares of its
common stock, (2) any securities exchangeable or convertible into its common
stock, or (3) any rights or warrants to purchase or subscribe for its common
stock or securities exchangeable or convertible into its common stock, in each
case at a price below the then-effective conversion price (each such issuance, a

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  “Dilutive Equity Issuance”), the conversion price will be reduced to a new
conversion price calculated as follows:
 
   
 
  a) if Midway issues common stock, then by dividing (i) an amount equal to the
sum of (A) the product obtained by multiplying the aggregate number of shares of
common stock outstanding immediately prior to such issue by the conversion price
in effect immediately prior to such issue, and (B) the consideration, if any,
received by Midway upon such issue by (ii) the aggregate number of shares of
common stock outstanding immediately after such issue;
 
   
 
  b) if Midway issues any securities exchangeable or convertible into its common
stock, whether or not the right to exchange or convert is immediately
exercisable, and the price per share for which shares of common stock are
issuable upon such exchange or conversion (determined by dividing (i) the sum of
the total amount received or receivable by Midway as consideration for the issue
of such securities and the minimum aggregate amount of additional consideration,
if any, payable to Midway upon the exchange or conversion thereof, by (ii) the
maximum aggregate number of shares of common stock issuable upon the exchange or
conversion of all such securities) shall be less than the conversion price in
effect immediately prior to such issue, then the maximum aggregate number of
shares of common stock issuable upon the exchange or conversion of all such
exchangeable or convertible securities shall (as of the date of the issue of
such securities) be deemed to be outstanding and to have been issued for such
price per share, and the new conversion price shall be calculated as described
in clause (a) on the basis of such deemed issuance; and
 
   
 
  c) if Midway issues any rights or warrants described above (all such rights or
warrants being herein called “Rights” and all such convertible or exchangeable
securities being herein called “Convertible Securities”, whether or not such
Rights are immediately exercisable or any such Convertible Securities are
convertible or exchangeable immediately upon issuance), and the price per share
for which shares of common stock are issuable upon the exercise of such Rights
or upon conversion or exchange of such Convertible Securities (determined by
dividing (i) the sum of the total amount, if any, received or receivable by
Midway as consideration for such Rights, and (x) in the case of Rights
exercisable for shares of Common Stock, the minimum aggregate amount of
additional consideration, if any, payable to Midway upon the exercise of all
such Rights for shares of common stock, or (y) in the case of Rights exercisable
for Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the maximum
aggregate number of shares of common stock issuable upon the exercise of such
Rights or upon the conversion or exchange of all such Convertible Securities)
shall be less than the conversion price in effect immediately prior to the time
of the issue of such Rights, then the maximum aggregate number of shares of
common stock issuable upon the exercise of all such Rights or upon the
conversion or exchange of all such Convertible Securities shall (as of the date
of issue of such initial Rights) be deemed to be outstanding and to have been
issued for such price per share, and the new conversion price shall be
calculated as described in clause (a) on the basis of such deemed issuance.
 
   
 
  For the avoidance of doubt, the adjustment to the conversion price described
hereunder shall be made on the issue date for the Dilutive Equity Issuance and
in case of (b) or (c) above, the conversion price shall not be subject to
adjustment at the time common stock or Convertible Securities are issued upon
the exercise of any Rights or at the time common stock is issued upon conversion
or exchange of any Convertible Securities.

3

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  If the exchange, conversion or exercise price of any securities described in
(b) or (c) above is subsequently reduced by Midway, other than as a result of
the anti-dilution adjustments provided for in the terms of the securities at
time of issuance, the conversion price of the notes will be further reduced by
applying the applicable formula provided above.
 
   
 
  Notwithstanding the foregoing, the term “Dilutive Equity Issuance” shall not
include issuances (A) described in “Description of the Notes — Adjustments to
the Conversion Rate, (B) of any common stock, Convertible Securities or Rights
issuable to any employees, directors or consultants pursuant to any future or
existing equity compensation plan, (C) of any common stock, Convertible
Securities or Rights existing on the date of issuance of the notes, including
without limitation, the 6.0% Convertible Senior Notes due 2025, (D) of any
common stock, Convertible Securities or Rights issuable under the existing
rights agreement or that may be issued pursuant to any rights plan that may
replace the existing rights agreement or (E) of common stock or securities
exchangeable or convertible into its common stock issued in connection with an
acquisition by Midway of stock or assets of another company, in connection with
a licensing or other strategic relationship or joint venture with another
company or in connection with a strategic investment in Midway.
 
   
Adjustment to conversion rate upon 90% beneficial ownership by controlling
shareholder or his related parties:
  If Midway’s controlling shareholder or any of his related parties is the
beneficial owner of 90% or more of the aggregate fair market value of all of
Midway’s outstanding capital stock, then Midway will increase the conversion
rate applicable to all notes by 7.2495 shares per $1,000 principal amount of
notes. See “Description of the Notes — Conversion Rights — Adjustment to the
Conversion Rate upon 90% Beneficial Ownership by Mr. Redstone or his Related
Parties.”
 
   
Adjustment to conversion rate upon certain fundamental changes:
  The following is the completed table titled “Number of Additional Shares”
included in the Preliminary Offering Memorandum under the caption “Description
of the Notes — Conversion Rights — The Increase in the Conversion Rate”:

                                                                               
                                  Stock Price  
Effective Date
  $ 9.87     $ 10.50     $ 10.86     $ 11.00     $ 11.50     $ 12.00     $ 13.00
    $ 14.00     $ 15.00     $ 16.00     $ 18.00     $ 20.00     $ 22.50     $
25.00  
23-May-06
    9.23       9.23       8.63       8.34       7.37       6.51       5.08      
3.90       3.23       2.47       1.21       0.52       0.07       0.00  
31-May-07
    9.23       9.23       8.59       8.31       7.31       6.46       5.04      
3.86       3.12       2.36       1.20       0.52       0.05       0.00  
31-May-08
    9.23       9.08       8.35       8.09       7.21       6.41       4.93      
3.64       3.02       2.28       1.19       0.51       0.03       0.00  
31-May-09
    9.23       7.92       7.28       7.06       6.33       5.68       4.53      
3.58       2.79       2.12       1.14       0.51       0.03       0.00  
31-May-10
    9.23       7.26       6.75       6.56       5.93       5.34       4.32      
3.44       2.70       2.07       1.11       0.49       0.02       0.00  
31-May-11
    6.40       5.62       5.24       5.10       4.64       4.21       3.47      
2.83       2.29       1.81       1.01       0.44       0.01       0.00  
31-May-12
    2.66       1.84       1.58       1.52       1.33       1.19       0.98      
0.80       0.65       0.51       0.29       0.10       0.00       0.00  
6-Jun-13
    1.96       0.35       0.00       0.00       0.00       0.00       0.00      
0.00       0.00       0.00       0.00       0.00       0.00       0.00  

4

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  The numbers of additional shares set forth in the table above are based on a
closing sale price of $9.87 per share of Midway’s common stock on May 23, 2006
and certain pricing assumptions.
 
   
 
  The exact applicable price and effective date may not be as set forth in the
table above, in which case:

  •   if the actual applicable price is between two applicable prices listed in
the table above, or the actual effective date is between two dates listed in the
table above, Midway will determine the number of additional shares by linear
interpolation between the numbers of additional shares set forth for the two
applicable prices, or for the two dates based on a 365-day year, as applicable;
    •   if the actual applicable price is greater than $25.00 per share (subject
to adjustment), Midway will not increase the conversion rate; and     •   if the
actual applicable price is less than $9.87per share (subject to adjustment),
Midway will not increase the conversion rate.

     
 
  Notwithstanding anything in the indenture to the contrary, Midway may not
increase the conversion rate by more than 9.2361 shares per $1,000 principal
amount of notes pursuant to the events described in the “Description of the
Notes — Conversion Rights — The Increase in the Conversion Rate” section of the
Preliminary Offering Memorandum,” but Midway will adjust such number of shares
in the same manner in which, and for the same events for which, it must adjust
the conversion rate as described under “Description of the Notes — Conversion
Rights — Adjustments to the Conversion Rate.”
 
   
Limitation on the Incurrence of Additional Indebtedness:
  Neither Midway nor any of its subsidiaries will incur any Indebtedness (as
defined below) except for:
 
   
 
  (1) unsecured Indebtedness, which, by its terms, is made expressly subordinate
to Midway’s senior indebtedness and which at the time of incurrence has a final
maturity no earlier than four years from the date of issuance of the notes
offered hereby; 
 
   
 
  (2) other unsecured Indebtedness that ranks pari passu with or subordinated to
the notes in an aggregate principal amount not to exceed $40 million at any one
time outstanding; 
 
   
 
  (3) Refinancing Indebtedness (as defined below); 
 
   
 
  (4) Indebtedness in an amount not to exceed $30 million at any one time
outstanding under Midway’s existing credit facility with Wells Fargo or any
other facility that renews refunds, refinances, restructures, replaces, repays
or extends such facility, in each case as such facility may be amended,
restated, modified or supplemented from time to time; 
 
   
 
  (5) Indebtedness (including obligations under Capital Leases) incurred at the
time of, or within 20 days after, the acquisition of any fixed assets for the
purpose of financing all or any part of the acquisition cost thereof; 
 
   
 
  (6) intercompany Indebtedness between or among Midway and any of its
subsidiaries; 

5

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  (7) Indebtedness under Hedge Agreements entered into in the ordinary course of
business to hedge or mitigate risks to which Midway or any of its subsidiaries
is exposed in the conduct of its business or the management of its liabilities
and not for speculative purposes; 
 
   
 
  (8) Indebtedness of a target assumed in an acquisition (but not incurred in
connection with such acquisition); 
 
   
 
  (9) endorsement of instruments or other payment items for deposit; 
 
   
 
  (10) lease payment obligations incurred in connection with a Sale Leaseback
Transaction. 
 
   
 
  For purposes of this covenant:
 
   
 
  “Hedge Agreement” means any agreement that provides for an interest rate,
credit, commodity or equity swap, cap, floor, collar, forward foreign exchange
transaction, currency swap, cross currency rate swap, currency option, or any
combination of, or option with respect to, these or similar transactions, for
the purpose of hedging the exposure of Midway or any of its subsidiaries to
fluctuations in interest or exchange rates, loan, credit exchange, security or
currency valuations or commodity prices.
 
   
 
  “Indebtedness” means (a) all obligations for borrowed money, (b) all
obligations evidenced by bonds, debentures, notes, or other similar instruments
and all reimbursement or other obligations in respect of letters of credit or
bankers acceptances; (c) all obligations as a lessee under any lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP, (d) obligations to pay the deferred purchase price of assets (other than
trade payables incurred in the ordinary course of business and repayable in
accordance with customary trade practices); (e) all obligations owing under
Hedge Agreements; and (f) any obligation guarantying or intended to guaranty
(whether directly or indirectly guarantied, endorsed, co-made, discounted, or
sold with recourse) any obligation of any other Person that constitutes
Indebtedness under any of clauses (a) through (e) above.
 
   
 
  “Refinancing Indebtedness” means Indebtedness of Midway or any subsidiary
issued to refinance Indebtedness of Midway or any subsidiary so long as:

     
 
  (1) the aggregate principal amount (or initial accreted value, if applicable)
of such new Indebtedness as of the date of such proposed refinancing does not
exceed the aggregate principal amount (or accreted value as of such date, if
applicable) of the Indebtedness being refinanced (plus the amount of any premium
required to be paid under the terms of the instrument governing such
Indebtedness and the amount of reasonable expenses incurred by Midway in
connection with such refinancing); and 
 
   
 
  (2) such new Indebtedness has: 

     
 
  (a) a weighted average life to maturity that is equal to or greater than the
weighted average life to maturity of the Indebtedness being refinanced, and
 
   
 
  (b) a final maturity that is equal to or later than the final maturity of the
Indebtedness being refinanced; and

     
 
  (3) if the Indebtedness being refinanced is: 

6

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  (a) Indebtedness of Midway, then such Refinancing Indebtedness will be
Indebtedness of Midway; and
 
   
 
  (b) subordinated Indebtedness, then such Refinancing Indebtedness will be
subordinate to the notes offered hereby, at least to the same extent and in the
same manner as the Indebtedness being refinanced.

     
 
  “Sale/Leaseback Transaction” means an arrangement relating to property owned
by Midway or any of its subsidiaries whereby the Company or any such subsidiary
transfers such property to a person, and Midway or such subsidiary leases it
from such person.

This final term sheet supplements and should be read in conjunction with the
Preliminary Offering Memorandum dated May 8, 2006.
This communication is intended for the sole use of the person to whom it is
provided by the sender.
These securities have not been registered under the Securities Act of 1933, as
amended, and may only be sold to qualified institutional buyers pursuant to
Rule 144A or pursuant to another applicable exemption.
ANY DISCLAIMER OR OTHER NOTICES THAT MAY APPEAR BELOW ARE NOT APPLICABLE TO THIS
COMMUNICATION AND SHOULD BE DISREGARDED. SUCH DISCLAIMERS OR OTHER NOTICES WERE
AUTOMATICALLY GENERATED AS A RESULT OF THIS COMMUNICATION BEING SENT VIA
BLOOMBERG OR ANOTHER EMAIL SYSTEM.

7

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EXHIBIT A
OPINION OF GENERAL COUNSEL OF THE COMPANY
     I am the Senior Vice President, Secretary and General Counsel of Midway
Games Inc., a Delaware corporation (the “Company”), and I, and attorneys over
whom I exercise supervision, have acted as counsel for the Company in connection
with the purchase from the Company by Banc of America Securities LLC (the
“Initial Purchaser”), pursuant to the Purchase Agreement, dated as of May 24,
2006 (the “Purchase Agreement”), by and between the Company and the Initial
Purchaser, of $75 million aggregate principal amount of the Company’s 7.125%
Convertible Senior Notes due 2026 (the “Bonds”) issued under the Indenture,
dated as of May 30, 2006, by and between the Company and Wells Fargo Bank, N.A.,
as trustee. This letter is furnished to the Initial Purchaser pursuant to
Section 7(a) of the Purchase Agreement. Except as otherwise defined herein,
terms used in this letter but not otherwise defined herein are used as defined
in the Purchase Agreement.
     In connection with the opinions expressed herein, I have examined such
documents, records and matters of law as I have deemed relevant or necessary for
purposes of such opinions. Based on the foregoing, and subject to the further
limitations, qualifications and assumptions set forth herein, I am of the
opinion that:

1.   The authorized capital stock of the Company as of the date hereof is as set
forth in the section of the Preliminary Memorandum and the Final Memorandum
entitled “Capitalization,” and, as of March 31, 2006, the issued and outstanding
capital stock of the Company was as set forth under the heading entitled
“Actual” in such section.   2.   The outstanding shares of capital stock of the
Company have been authorized by all necessary corporate action of the Company
and are validly issued, fully paid and nonassessable and were not issued in
violation of the Amended and Restated Certificate of Incorporation of the
Company or Amended and Restated By-laws of the Company.   3.   To such counsel’s
knowledge, the holders of shares of the Company’s capital stock are not entitled
to any contractual preemptive rights, resale rights, rights of first refusal or
similar rights.   4.   All of the issued and outstanding shares of capital stock
of Midway Games West Inc., Midway Home Entertainment Inc., Midway Studios —
Austin Inc., Midway Studios — Los Angeles Inc. and Surreal Software Inc. (the
“Corporate Subsidiaries”) have been duly authorized, validly issued and are
fully paid and nonassessable, and all of the outstanding limited liability
company interests in Midway Amusement Games, LLC (the “LLC Subsidiary”) have
been duly authorized, validly issued and are fully paid and nonassessable. All
of the issued and outstanding shares of capital stock of each of the Corporate
Subsidiaries and the outstanding limited liability company interests in the LLC
Subsidiary are owned by the Company, directly or indirectly through
subsidiaries, free and clear of any lien,

Exh.-A-1

 

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    encumbrance, claim or equity (except for those liens arising under the Loan
and Security Agreement by and among the Company, specified Subsidiaries of the
Company and Wells Fargo Foothill, Inc., dated as of March 3, 2004, as amended).
  5.   Except as set forth in the Preliminary Memorandum and the Final
Memorandum, to my knowledge, there are no actions, suits, claims, investigations
or proceedings pending, threatened or contemplated to which the Company or any
of its Subsidiaries or any of its officers is subject or of which any of their
respective properties, is subject at law or in equity or before or by any
federal, state, local or foreign governmental or regulatory commission, board,
body, authority or agency, that would be required to be described in the
Preliminary Memorandum or the Final Memorandum, if such Memorandum were included
in a registration statement filed pursuant to the Securities Act, and are not so
described.   6.   To such counsel’s knowledge, there are no affiliate
transactions, off-balance sheet transactions, contracts, licenses, agreements,
leases or documents of a character required to be disclosed in or filed as an
exhibit to the Company’s filings with the Securities and Exchange Commission
that have not been so disclosed or filed.

     The opinions expressed herein are limited to (i) the laws of the State of
Illinois and (ii) the General Corporation Law of the State of Delaware and the
Delaware Limited Liability Company Act, in each case as currently in effect, and
I express no opinion as to the effect of the laws of any other jurisdiction on
the opinions expressed herein.
     This opinion is furnished to you, as Initial Purchaser, solely for your
benefit with respect to your purchase of the Bonds from the Company upon the
understanding that I am not hereby assuming any professional responsibility to
any other person whatsoever. This opinion may not be relied upon by you for any
other purpose or relied upon by or furnished to any other person without my
prior written consent.
Exh.-A-2

 

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EXHIBIT B
OPINION OF COUNSEL FOR THE COMPANY
     We have acted as special counsel for Midway Games Inc., a Delaware
corporation (the “Company”), in connection with the purchase from the Company by
Banc of America Securities LLC (the “Initial Purchaser”), pursuant to the
Purchase Agreement, dated as of May 24, 2006 (the “Purchase Agreement”), by and
between the Company and the Initial Purchaser, of $75 million aggregate
principal amount of the Company’s 7.125% Convertible Senior Notes due 2026 (the
“Bonds”) issued under the Indenture, dated as of May 30, 2006 (the “Indenture”),
by and between the Company and Wells Fargo Bank, N.A., as trustee (the
“Trustee”). This letter is furnished to the Initial Purchaser pursuant to
Section 7(b) of the Purchase Agreement. Except as otherwise defined herein,
terms used in this letter but not otherwise defined herein are used as defined
in the Purchase Agreement.
     In connection with the opinions and views expressed herein, we have
examined such documents, records and matters of law as we have deemed relevant
or necessary for purposes of such opinions and views. Based on the foregoing,
and subject to the further limitations, qualifications and assumptions set forth
herein, we are of the opinion that:

  1.   The Company is a corporation existing and in good standing under the laws
of the State of Delaware, with the corporate power and authority to conduct its
business and to own or lease its properties as described in the Final Memorandum
and to execute and deliver the Purchase Agreement, the Registration Rights
Agreement, the Indenture and the Bonds and perform its obligations thereunder.
The Company is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction and as of the dates listed on Exhibit A
attached hereto.     2.   Each of the Company’s Subsidiaries listed on Exhibit B
attached hereto (collectively, the “Specified Subsidiaries”) is a corporation or
a limited liability company existing and in good standing under the laws of its
jurisdiction of incorporation or organization as of the date listed opposite
such Specified Subsidiary’s name on Exhibit B attached hereto, with the
corporate or limited liability company power and authority to conduct its
business and to own or lease its properties as described in the Final
Memorandum. Each of the Specified Subsidiaries is qualified to do business and
is in good standing as a foreign corporation or foreign limited liability
company in each jurisdiction and as of the dates listed on Exhibit B attached
hereto.     3.   The Indenture has been authorized by all necessary corporate
action of, and executed and delivered by, the Company and constitutes a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms.

Exh.-B-1

 

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  4.   The Bonds have been authorized by all necessary corporate action of, and
executed by, the Company, and, when the Bonds are authenticated by the Trustee
in accordance with the terms of the Indenture and delivered against payment
therefor in accordance with the terms of the Purchase Agreement, will have been
validly issued and delivered by the Company and will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms.     5.   The Registration Rights Agreement has been
authorized by all necessary corporate action of, and executed and delivered by,
the Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.     6.   The
Purchase Agreement has been authorized by all necessary corporate action of, and
executed and delivered by, the Company.     7.   It is not necessary in
connection with the offer and sale of the Bonds to the Initial Purchaser under
the Purchase Agreement or in connection with the initial resale of the Bonds by
the Initial Purchaser in accordance with the Purchase Agreement to register the
Bonds under the Securities Act of 1933 (the “Securities Act”) or to qualify the
Indenture under the Trust Indenture Act of 1939 (the “Trust Indenture Act”).    
8.   No consent, approval, authorization or order of, or filing with, any
governmental agency or body or any court is required in connection with the
execution, delivery or performance of the Purchase Agreement, the Indenture and
the Registration Rights Agreement by the Company, or in connection with the
issuance or sale of the Bonds by the Company to the Initial Purchaser or the
issuance of Shares by the Company upon conversion of the Bonds pursuant to the
terms and conditions of the Bonds and the Indenture, except as may be required
under (i) state securities or blue sky laws or (ii) the Securities Act, the
Securities Exchange Act of 1934 or the Trust Indenture Act.     9.   The
(i) execution, delivery and performance of (A) the Indenture by the Company,
(B) the Purchase Agreement by the Company and (C) the Registration Rights
Agreement by the Company, (ii) issuance and sale of the Bonds by the Company and
issuance of the Shares by the Company upon conversion of the Bonds pursuant to
the terms and conditions of the Bonds and the Indenture, and (iii) compliance
with the terms and provisions thereof by the Company will not violate any law or
regulation known to us to be generally applicable to transactions of this type,
or any order or decree of any court, arbitrator or governmental agency that is
binding upon the Company or its property or violate or result in a default under
any of the terms and provisions of the Amended and Restated Certificate of
Incorporation or the Amended and Restated By-laws of the Company or any
agreement to which the Company is a party or bound (this opinion being limited
(i) to those orders and

Exh.-B-2

 

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      decrees identified on Exhibit C attached hereto and to those agreements
identified on Exhibit D attached hereto, and (ii) in that we express no opinion
with respect to any violation (a) not readily ascertainable from the face of any
such order, decree or agreement, (b) arising under or based upon any cross
default provision insofar as it relates to a default under an agreement not
identified on Exhibit D attached hereto, or (c) arising as a result of any
violation of any agreement or covenant by failure to comply with any financial
or numerical requirement requiring computation).     10.   The Shares initially
issuable upon conversion of the Bonds have been authorized by all necessary
corporate action of the Company and, when issued upon conversion of the Bonds
pursuant to the terms and conditions of the Bonds and the Indenture, will be
validly issued, fully paid and nonassessable.     11.   The holders of shares of
the Company’s capital stock are not entitled to any statutory pre-emptive rights
pursuant to the laws of the State of Delaware, or any pre-emptive rights
pursuant to the Amended and Restated Certificate of Incorporation or the Amended
and Restated By-laws of the Company.     12.   The Company is not required to
register as an “investment company,” as such term is defined in the Investment
Company Act of 1940.     13.   The statements contained in the Final Memorandum
under the captions “Description of the Notes,” “Description of Capital Stock”
and “Material US Federal Income Tax Consequences,” insofar as such statements
purport to summarize legal matters or provisions of documents referred to
therein, present fair summaries of such legal matters and documents.

     We have not independently verified and are not passing upon, and do not
assume any responsibility for, the accuracy, completeness or fairness (except as
and to the extent set forth in paragraph 13 above) of the information contained
in the Disclosure Package and the Final Memorandum. We have participated in the
preparation of the Disclosure Package and the Final Memorandum. From time to
time, we have had discussions with certain officers, directors and employees of
the Company, with representatives of Ernst & Young LLP, the independent
registered public accounting firm who examined the financial statements of the
Company included or incorporated by reference in the Disclosure Package and the
Final Memorandum, with the Initial Purchaser and with counsel to the Initial
Purchaser. Based upon our participation and discussions described above,
however, no facts have come to our attention that cause us to believe that the
Disclosure Package, as of 9:15 A.M. Eastern time on May 24, 2006 (which is the
time that you have informed us was prior to the first contract of sale of any
Bonds by the Initial Purchaser), when read in conjunction with the May 3
Release, or that the Final Memorandum, as of its date and as of the date hereof,
when read in conjunction with the May 3 Release, included or includes any untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that we express
no view with respect to (i) the financial statements, financial schedules and
other financial data included or incorporated by reference
Exh.-B-3

 

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therein or (ii) the information referred to under the caption “Independent
Registered Public Accounting Firm” as having been included or incorporated by
reference therein on the authority of Ernst & Young LLP.
     The opinions and views set forth above are subject to the following
limitations, qualifications and assumptions:
     We have assumed, for purposes of the opinions and views expressed herein,
the legal capacity of all natural persons executing documents, the genuineness
of all signatures, the authenticity of original and certified documents and the
conformity to original or certified copies of all copies submitted to us as
conformed or reproduction copies. For the purposes of the opinions and views
expressed herein, we also have assumed that each of the Initial Purchaser and
the Trustee has authorized, executed, authenticated and delivered the documents
or securities to which each of them is a party and that each of such documents
or securities is the valid, binding and enforceable obligation of each of the
Initial Purchaser and the Trustee, as applicable.
     As to any facts relevant to our opinions, we have relied upon and assume
the accuracy of the representations and warranties contained in the Purchase
Agreement from the Company and the Initial Purchaser, and compliance on the part
of the Company and the Initial Purchaser with their respective covenants and
agreements contained therein.
     The opinions expressed in paragraph 1 and 2 above with respect to the
existence, good standing and/or foreign qualifications to do business, as the
case may be, of the Company and the Specified Subsidiaries referred to therein,
are based solely on certificates of public officials as to factual matters or
legal conclusions set forth therein.
     Our opinions set forth in paragraphs 3, 4 and 5 above with respect to the
enforceability of the documents or securities referred to in such opinions are
subject to: (i) bankruptcy, insolvency, reorganization, fraudulent transfer and
fraudulent conveyance, voidable preference, moratorium or other similar laws,
and related regulations and judicial doctrines from time to time in effect
relating to or affecting creditors’ rights and remedies generally; (ii) general
equitable principles, whether such principles are considered in a proceeding at
law or in equity; (iii) the qualification that we express no opinion as to the
validity, binding effect or enforceability of any provision in any document
(A) relating to indemnification, contribution or exculpation in connection with
violations of any securities laws or statutory duties or public policy, or in
connection with willful, reckless or unlawful acts or gross negligence of the
indemnified or exculpated party or the party receiving contribution,
(B) relating to forum selection to the extent the forum is a federal court,
(C) relating to forum selection to the extent that any relevant action or
proceeding does not arise out of or relate to such document or to the extent
that the enforceability of any such provision is to be determined by any court
other than a court of the State of New York, (D) relating to choice of governing
law to the extent that the enforceability of any such provision is to be
determined by any court other than a court of the State of New York or may be
subject to constitutional limitations, (E) waiving any rights to trial by jury
or (F) specifying that provisions thereof may be waived only in writing, to the
extent that an oral agreement or an implied agreement by trade practice or
course of conduct has been created that
Exh.-B-4

 

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modifies any provision of such documents; and (iv) the effect of applicable
rules of law that (A) provide that forum selection clauses in contracts are not
necessarily binding on the court(s) in the forum selected, (B) may, where less
than all of a contract may be unenforceable, limit the enforceability of the
balance of the contract to circumstances in which the unenforceable portion is
not an essential part of the agreed exchange, or that permit a court to reserve
to itself a decision as to whether any provision of any agreement is severable,
and (C) govern and afford judicial discretion regarding the determination of
damages and entitlement to attorneys’ fees and other costs.
     In rendering the opinions set forth in paragraph 7 above, we have assumed
(i) that the offer and sale of the Bonds will be conducted solely in the manner
contemplated by the Purchase Agreement and the Final Memorandum; (ii) the
accuracy and completeness of the respective representations and warranties of
the Company and the Initial Purchaser and compliance with their respective
covenants and agreements as set forth in the Purchase Agreement, it being
understood that no opinion is hereby expressed as to any resale of the Bonds
other than the initial resale of the Bonds by the Initial Purchaser as
contemplated by the Purchase Agreement; and (iii) that each subsequent purchaser
of any Bonds will not reoffer or resell any Bonds within the United States or to
U. S. persons (as such term is defined in Regulation S promulgated under the
Securities Act) except in accordance with Rule 144A or Regulation S under the
Securities Act or otherwise pursuant to an exemption from, or in a transaction
not subject to, the registration requirement of the Securities Act.
     The opinions and views expressed herein are limited to (i) the federal
securities laws of the United States of America, (ii) the laws of the State of
New York, (iii) the General Corporation Law of the State of Delaware and
(iv) solely with respect to the opinions set forth in paragraphs 1 and 2 above,
(A) the Delaware Limited Liability Company Act, (B) the laws of the State of
Illinois, (C) the laws of the State of California and (D) the laws of the State
of Texas, in each case as currently in effect, and we express no opinion or view
as to the effect of the laws of any other jurisdiction on the opinions and views
expressed herein.
     We express no opinion or view as to the compliance or noncompliance, or the
effect of the compliance or noncompliance, of the addressee or any other person
or entity with any state or federal laws or regulations applicable to each of
them by reason of their status as or affiliation with a federally insured
depository institution. Our opinions and views are limited to those expressly
set forth herein, and we express no opinions or views by implication.
     This letter is furnished by us to you solely for the benefit of the Initial
Purchaser and solely with respect to the purchase of the Bonds from the Company
by the Initial Purchaser, upon the understanding that we are not hereby assuming
any professional responsibility to any other person whatsoever, and that this
letter is not to be used, circulated, quoted or otherwise referred to for any
other purpose.
Exh.-B-5

 

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EXHIBIT C
OFFICERS’ CERTIFICATE

  1.   I have reviewed the Disclosure Package and the Final Memorandum.     2.  
The representations and warranties of the Company as set forth in the Purchase
Agreement are true and correct as of the Time of Purchase.     3.   The Company
has performed all of its obligations under the Purchase Agreement as are to be
performed at or before the Time of Purchase.     4.   The conditions set forth
in paragraphs (e) and (f) of Section 7 of the Purchase Agreement have been met.
    5.   The financial statements and other financial information included in
the Disclosure Package and the Final Memorandum fairly present in all material
respects the financial condition, results of operations, and cash flows of the
Company as of, and for, the periods presented in the Disclosure Package and the
Final Memorandum.

Exh.-C-1

 

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EXHIBIT D
Midway Games Inc.
Common Stock
($0.01 Par Value)
May __, 2006
BANC OF AMERICA SECURITIES LLC
As Initial Purchaser
9 W. 57th Street, 22nd Floor
New York, New York 10019
Ladies and Gentlemen:
This Lock-Up Letter Agreement is being delivered to you, as Initial Purchaser,
in connection with the consummation of the transactions contemplated by the
proposed Purchase Agreement (the “Purchase Agreement”) to be entered into by
Midway Games Inc. (or its successor, the “Company”) and the Initial Purchaser
named therein, relating to an offering without registration under the Securities
Act of 1933, as amended (the “Act”), in reliance on Rule 144A under the Act (the
“Offering”) of Convertible Senior Notes due 2026 of the Company (the “Notes”).
In order to induce the Initial Purchaser to enter into the Purchase Agreement,
the undersigned agrees that for a period from the date hereof until the end of a
period of 90 days after the date of the Final Memorandum (as defined in the
Purchase Agreement) relating to the Offering the undersigned will not, without
the prior written consent of Banc of America Securities LLC, (i) sell, offer to
sell, contract or agree to sell, hypothecate, pledge, grant any option to
purchase or otherwise dispose of or agree to dispose of, directly or indirectly,
or file (or participate in the filing of) a registration statement with the
Securities and Exchange Commission (the “Commission”) in respect of, or
establish or increase a put equivalent position or liquidate or decrease a call
equivalent position within the meaning of Section 16 of the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the Commission
promulgated thereunder with respect to, any Common Stock of the Company or any
securities convertible into or exercisable or exchangeable for Common Stock, or
warrants or other rights to purchase Common Stock, (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock, or warrants or other
rights to purchase Common Stock, whether any such transaction is to be settled
by delivery of Common Stock or such other securities, in cash or otherwise, or
(iii) publicly announce an intention to effect any transaction specified in
clause (i) or (ii). The foregoing sentence shall not apply to (a) bona fide
gifts, provided the recipient thereof agrees in writing with Banc of America
Securities LLC to be bound by the terms of this Lock-Up Letter Agreement,
(b) dispositions to any trust for the direct or indirect benefit of the
undersigned and/or the immediate family of the undersigned, provided that such
trust agrees in writing with Banc of America Securities LLC to be bound by the
terms of this Lock-Up Letter Agreement, or (c) transfers by will or intestate
succession provided that the transferee agrees in writing with Banc of America
Securities LLC to be bound by the terms of this Lock-Up Letter Agreement. If
Exh.-D-1

 

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  (1)   during the period that begins on the date that is 15 calendar days plus
3 business days before the last day of the 90-day restricted period and ends on
the last day of the 90-day restricted period, the Company issues an earnings
release or material news or a material event relating to the Company occurs; or
    (2)   prior to the expiration of the 90-day restricted period, the Company
announces that it will release earnings results during the 16-day period
beginning on the last day of the 90-day period,

the restrictions imposed by this letter shall continue to apply until the
expiration of the date that is 15 calendar days plus 3 business days after the
date on which the issuance of the earnings release or the material news or
material event occurs.
In addition, the undersigned hereby waives any rights the undersigned may have
to require registration of Common Stock or any other securities in connection
with the filing of a resale registration statement pursuant to the proposed
Registration Rights Agreement among the Company and the Initial Purchaser
relating to the securities sold in the Offering and any rights the undersigned
may have to notice of the proposed filing of such registration statement. The
undersigned further agrees that, for a period of 90 days after the date of the
final offering memorandum relating to the Offering, the undersigned will not,
without the prior written consent of Banc of America Securities LLC, make any
demand for, or exercise any right with respect to, the registration of Common
Stock of the Company or any securities convertible into or exercisable or
exchangeable for Common Stock, or warrants or other rights to purchase Common
Stock.
The undersigned also consents and agrees to the entry of stop transfer
instructions with the Company’s transfer agent and registrar against the
transfer of the undersigned’s securities of the Company except in compliance
with this Lock-Up Letter Agreement.
If (i) the Company notifies you in writing that it does not intend to proceed
with the Offering or (ii) for any reason the Purchase Agreement shall be
terminated prior to the Time of Purchase (as defined in the Purchase Agreement),
this Lock-Up Letter Agreement shall be terminated and the undersigned shall be
released from its obligations hereunder. In addition, if the closing of the
Offering has not occurred prior to September 1, 2006, this Lock-Up Letter
Agreement shall automatically terminate on September 1, 2006 and the undersigned
shall be released from its obligations hereunder.

            Yours very truly,
            Name:    

Exh.-D-2