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                                                                    EXHIBIT 10.3


                                MIDWAY GAMES INC.
                             2704 WEST ROSCOE STREET
                                CHICAGO, IL 60618


                                  June 29, 2004


Mr. Neil D. Nicastro
999 North Sheridan Road
Lake Forest, IL 60045

Dear Mr. Nicastro:

         Reference is made to the Severance Agreement between Midway Games Inc.
and you dated May 6, 2003 (the "Severance Agreement"). Capitalized terms used
herein and not otherwise defined shall have the same meaning ascribed to such
terms in the Severance Agreement.

         The Severance Agreement is hereby amended, effective June 9, 2004, to
delete Section 9 thereof in its entirety and to add a new Section 9 which reads
as follows:

                  "9. OPTIONS. The parties acknowledge that there are no options
                  to be purchased by Midway pursuant to Section 9(b) of the
                  Employment Agreement and that all Midway options held by
                  Nicastro ("Nicastro Stock Options") shall remain in effect in
                  accordance with their terms. If Nicastro is no longer a member
                  of Midway's Board of Directors while any Nicastro Stock
                  Options remain outstanding (the date of such occurrence being
                  hereafter referred to as the "Director Termination Date"), all
                  such outstanding Nicastro Stock Options that are
                  out-of-the-money on the Director Termination Date shall,
                  without further action on the part of Midway or Nicastro, be
                  modified, effective on the date preceding the Director
                  Termination Date, as follows: (i) all unvested
                  out-of-the-money Nicastro Stock Options shall become vested on
                  the Director Termination Date, and (ii) the period during
                  which any out-of-the-money Nicastro Stock Option may be
                  exercised shall continue from the Director Termination Date
                  until the original expiration date of such option. For
                  example, if a ten year option had been granted to Nicastro on
                  February 12, 2000, the original expiration date of such option
                  would be February 12, 2010. All Nicastro Stock Options that
                  are not out-of-the-money shall not be modified. An
                  out-of-the-money stock

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                  option shall be any Nicastro Stock Option with respect to
                  which the option exercise price is equal to or greater than
                  the closing price of Midway Common Stock on the New York
                  Stock Exchange on the Director Termination Date."

         As additional consideration for your agreement to the foregoing, Midway
is immediately paying to you the amount of $277,235.

         Midway confirms that all provisions of your Employment Agreement
relating to your obligations not to compete with Midway or not to solicit
employees of Midway, including Section 8(a) of your Employment Agreement, have
expired and you have no obligations thereunder.

         It is understood that you will have no obligation to serve Midway as a
consultant or advisor after the Director Termination Date.

         In all other respects, the Severance Agreement shall remain in full
force and effect.

         If the foregoing correctly sets forth your understanding, please sign
this letter in the place provided below.

                                                Very truly yours,

                                                MIDWAY GAMES INC.


                                                By: /s/ DAVID F. ZUCKER
                                                    -----------------------
                                                     Name:  David F. Zucker
                                                     Title: President

Accepted and Agreed to:


/s/ NEIL D. NICASTRO
--------------------
Neil D. Nicastro