**Exhibit 10.46**Execution Copy**CONTINUING GUARANTY**THIS CONTINUING GUARANTY (“Guaranty”), dated as of February 29, 2008, is executed and delivered byMidway Games Inc., a Delaware corporation (“Parent”), Midway Games West Inc., a Californiacorporation, Midway Interactive Inc., a Delaware corporation, Midway Sales Company, LLC, a Delawarelimited liability company, Midway Home Studios Inc., a Delaware corporation, Surreal Software Inc.,a Washington corporation, Midway Studios – Austin Inc., a Texas corporation and Midway Studios –Los Angeles Inc., a California corporation (collectively, the “Guarantors”, and each individually,a “Guarantor”) in favor of National Amusements, Inc., a Maryland corporation (“Lender”) and inlight of the following:          **FACT ONE**: Midway Home Entertainment Inc., a Delaware corporation, and MidwayAmusement Games, LLC, a Delaware limited liability company (together, the “Borrowers” and each,individually, a “Borrower”), the Guarantors as credit parties and Lender are, contemporaneouslyherewith, entering into the Secured Loan Documents (as hereinafter defined); and          **FACT TWO****:**In order to induce Lender to extend loans or other financial accommodationsto Borrowers pursuant to the Secured Loan Documents, and in consideration thereof, each Guarantorhas agreed to guarantee the Guaranteed Obligations.          NOW, THEREFORE, in consideration of the foregoing, each Guarantor hereby agrees, in favor ofLender, as follows:          1. Definitions and Construction.          (a) Definitions. The following terms, as used in this Guaranty, shall have thefollowing meanings:          “Bankruptcy Code” means The Bankruptcy Reform Act of 1978 (11 U.S.C. Sections101-1330), as amended or supplemented from time to time, and any successor statute, and any and allrules issued or promulgated in connection therewith.          “Guaranteed Obligations” means any and all obligations, indebtedness, or liabilitiesof any kind or character owed by any Borrower to Lender pursuant to the Secured Loan Documents(but, for the absence of doubt, expressly excluding any obligations under the Unsecured LoanAgreement and the Subordinated Loan Agreement and all documents and instruments entered into by theParent in connection therewith), including all such obligations, indebtedness, or liabilities,whether for principal, interest (including any interest which, but for the application of theprovisions of the Bankruptcy Code, would have accrued on such amounts), premium, reimbursementobligations, fees, costs, expenses (including, attorneys’ fees), or indemnity obligations, whetherheretofore, now, or hereafter made, incurred, or created, whether
 

 
voluntarily or involuntarily made, incurred, or created, whether secured or unsecured (and ifsecured, regardless of the nature or extent of the security), whether absolute or contingent,liquidated or unliquidated, determined or indeterminate, whether any Borrower is liableindividually or jointly with others, and whether recovery is or hereafter becomes barred by anystatute of limitations or otherwise becomes unenforceable for any reason whatsoever, including anyact or failure to act by Lender.          “Secured Loan Agreement” shall mean that certain Loan and Security Agreement dated asof February 29, 2008 by and among Lender, Borrowers and each of the Guarantors, as amended,restated, supplemented or otherwise modified and in effect from time to time.          “Secured Loan Documents” shall mean the Secured Loan Agreement, any promissory notesissued by any Borrower in connection therewith, and any documents, instruments, and agreements madeor issued by any Guarantor or any Borrower in connection therewith which either now or in thefuture exist, but expressly excluding the Unsecured Loan Agreement and the Subordinated LoanAgreement and all documents and instruments entered into by the Parent in connection therewith.          “Subordinated Loan Agreement” shall mean that certain Unsecured Subordinated LoanAgreement dated as of February 29, 2008 by and among Parent and Lender, as amended, restated,supplemented or otherwise modified and in effect from time to time.          “Unsecured Loan Agreement” shall mean that certain Unsecured Loan Agreement dated asof February 29, 2008 by and among Parent and Lender, as amended, restated, supplemented orotherwise modified and in effect from time to time.          (b) Construction. Unless the context of this Guaranty clearly requires otherwise,references to the plural include the singular, references to the singular include the plural, andthe term “including” is not limiting. The words “hereof”, “herein”, “hereby”, “hereunder”, andother similar terms refer to this Guaranty as a whole and not to any particular provision of thisGuaranty. Any reference herein to any of the Secured Loan Documents includes any and allalterations, amendments, extensions, modifications, renewals, or supplements thereto or thereof, asapplicable. Neither this Guaranty nor any uncertainty or ambiguity herein shall be construed orresolved against Lender or any Guarantor, whether under any rule of construction or otherwise. Onthe contrary, this Guaranty has been reviewed by each Guarantor, Lender, and their respectivecounsel, and shall be construed and interpreted according to the ordinary meaning of the words usedso as to fairly accomplish the purposes and intentions of Lender and each Guarantor.          2. Guaranteed Obligations. Guarantors hereby irrevocably and unconditionallyguarantee, on a joint and several basis, to Lender, as and for its own debt, until the GuaranteedObligations have been Paid in Full (as defined in the Secured Loan Agreement), (a) payment of theGuaranteed Obligations, in each case when and as the same shall become due and payable, whether atmaturity, pursuant to a mandatory prepayment requirement, by acceleration, or otherwise; it beingthe intent of each Guarantor that the guaranty set forth herein shall be a guaranty of payment andnot a guaranty of collection; and (b) the punctual and faithful
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performance, keeping, observance, and fulfillment by Borrowers of all of the agreements,conditions, covenants, and obligations of Borrowers contained in the Secured Loan Documents.          Notwithstanding any provision of this Guaranty to the contrary, it is intended that thisGuaranty, and any Liens granted by each Guarantor to secure the obligations and liabilities arisingpursuant to this Guaranty, not constitute a “Fraudulent Conveyance” (as defined below).Consequently, each Guarantor agrees that if this Guaranty, or any Liens securing the obligationsand liabilities arising pursuant to this Guaranty, would, but for the application of this sentence,constitute a Fraudulent Conveyance, this Guaranty and each such Lien shall be valid and enforceableonly to the maximum extent that would not cause this Guaranty or such Lien to constitute aFraudulent Conveyance, and this Guaranty shall automatically be deemed to have been amendedaccordingly at all relevant times. For purposes hereof, “Fraudulent Conveyance” means a fraudulentconveyance or fraudulent transfer under Section 548 of the Bankruptcy Code or a fraudulentconveyance or fraudulent transfer under the provisions of any applicable fraudulent conveyance orfraudulent transfer law or similar law of any state, nation or other governmental unit, as ineffect from time to time.          3. Continuing Guaranty. This Guaranty includes Guaranteed Obligations arising undersuccessive transactions continuing, compromising, extending, increasing, modifying, releasing, orrenewing the Guaranteed Obligations, changing the interest rate, payment terms, or other terms andconditions thereof, or creating new or additional Guaranteed Obligations after prior GuaranteedObligations have been satisfied in whole or in part. To the maximum extent permitted by law, eachGuarantor hereby waives any right to revoke this Guaranty as to future indebtedness under theSecured Loan Documents. If such a revocation is effective notwithstanding the foregoing waiver,each Guarantor acknowledges and agrees that (a) no such revocation shall be effective until writtennotice thereof has been received by Lender, (b) no such revocation shall apply to any GuaranteedObligations in existence on such date (including, any subsequent continuation, extension, orrenewal thereof, or change in the interest rate, payment terms, or other terms and conditionsthereof), (c) no such revocation shall apply to any Guaranteed Obligations made or created aftersuch date to the extent made or created pursuant to a legally binding commitment of Lenders inexistence on the date of such revocation, (d) no payment by any Guarantor, any Borrower, or fromany other source, prior to the date of such revocation shall reduce the maximum obligation of anyGuarantor hereunder, and (e) any payment by any Borrower or from any source other than anyGuarantor, subsequent to the date of such revocation, shall first be applied to that portion of theGuaranteed Obligations as to which the revocation is effective and which are not, therefore,guaranteed hereunder, and to the extent so applied shall not reduce the maximum obligation of anyGuarantor hereunder.          4. Performance Under This Guaranty. In the event that any Borrower fails to make anypayment of any Guaranteed Obligations on or before the due date thereof, or if any Borrower shallfail to perform, keep, observe, or fulfill any other obligation referred to in clause (b)of Section 2 hereof in the manner provided in the Secured Loan Documents, each Guarantorimmediately shall cause such payment to be made or each of such obligations to be performed, kept,observed, or fulfilled.          5. Primary Obligations. This Guaranty is a primary and original obligation of eachGuarantor, is not merely the creation of a surety relationship, and is an absolute,
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unconditional, and continuing guaranty of payment and performance which shall remain in fullforce and effect without respect to future changes in conditions, including any change of law orany invalidity or irregularity with respect to the issuance of the notes, if any, issued inconnection with the Secured Loan Agreement. Each Guarantor agrees that it is directly, jointly andseverally with any other guarantor of the Guaranteed Obligations, liable to Lender, that theobligations of each Guarantor hereunder are independent of the obligations of any Borrower or anyother guarantor, and that a separate action may be brought against each Guarantor whether suchaction is brought against any Borrower or any other guarantor or whether any Borrower or any suchother guarantor is joined in such action. Each Guarantor agrees that its liability hereunder shallbe immediate and shall not be contingent upon the exercise or enforcement by Lender of whateverremedies it may have against any Borrower or any other guarantor, or the enforcement of any lien orrealization upon any security Lender may at any time possess. Each Guarantor agrees that anyrelease that may be given by Lender to any Borrower or any other guarantor shall not release suchGuarantor. Each Guarantor consents and agrees that Lender shall be under no obligation to marshalany assets of any Borrower or any other guarantor in favor of any Guarantor, or against or inpayment of any or all of the Guaranteed Obligations.          6. Waivers.          (a) To the maximum extent permitted by law, each Guarantor hereby waives: (1) notice ofacceptance hereof; (2) notice of any loans or other financial accommodations made or extended underthe Secured Loan Documents or the creation or existence of any Guaranteed Obligations; (3) noticeof the amount of the Guaranteed Obligations, subject, however, to each Guarantor’s right to makeinquiry of Lender to ascertain the amount of the Guaranteed Obligations at any reasonable time; (4)notice of any adverse change in the financial condition of any Borrower or of any other fact thatmight increase any Guarantor’s risk hereunder; (5) notice of presentment for payment, demand,protest, and notice thereof as to any promissory notes or other instruments among the Secured LoanDocuments; (6) notice of any event of default under the Secured Loan Documents; and (7) all othernotices (except if such notice is specifically required to be given to any Guarantor hereunder orunder any Secured Loan Document to which any Guarantor is a party) and demands to which anyGuarantor might otherwise be entitled.          (b) To the maximum extent permitted by law, each Guarantor hereby waives the right by statuteor otherwise to require Lender to institute suit against any Borrower or to exhaust any rights andremedies, which Lender has or may have against any Borrower. In this regard, each Guarantor agreesthat it is bound to the payment of all Guaranteed Obligations, whether now existing or hereafteraccruing, as fully as if such Guaranteed Obligations were directly owing to Lender by each suchGuarantor. Each Guarantor further waives any defense arising by reason of any disability or otherdefense (other than the defense that the Guaranteed Obligations shall have been fully and finallyperformed and indefeasibly paid) of any Borrower or by reason of the cessation from any causewhatsoever of the liability of any Borrower in respect thereof.          (c) To the maximum extent permitted by law, each Guarantor hereby waives: (1) any rights toassert against Lender any defense (legal or equitable), set-off, counterclaim, or claim which eachGuarantor may now or at any time hereafter have against any Borrower or any other party liable toLender; (2) any defense, set-off, counterclaim, or claim, of any kind or nature, arising directlyor indirectly from the present or future lack of perfection, sufficiency,
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validity, or enforceability of the Guaranteed Obligations or any security therefor; and (3)any defense arising by reason of any claim or defense based upon an election of remedies by Lenderincluding any defense based upon an election of remedies by Lender under the provisions of Sections580d and 726 of the California code of Civil Procedure, or any similar law of California or anyother jurisdiction.          (d) To the maximum extent permitted by law, until the Guaranteed Obligations are Paid in Full,each Guarantor hereby agrees not to exercise its right of subrogation any Guarantor has or may haveas against any Borrower with respect to the Guaranteed Obligations. In addition, until theGuaranteed Obligations are Paid in Full, each Guarantor hereby agrees not to proceed against anyBorrower, now or hereafter, for contribution, indemnity, reimbursement, and any other suretyshiprights and claims, whether direct or indirect, liquidated or contingent, whether arising underexpress or implied contract or by operation of law, which any Guarantor may now have or hereafterhave as against any Borrower with respect to the Guaranteed Obligations. Until the GuaranteedObligations are Paid in Full, each Guarantor also hereby waives any rights to recourse to or withrespect to any asset of any Borrower.          7. Releases. Each Guarantor consents and agrees that, without notice to or by anyGuarantor and without affecting or impairing the obligations of any Guarantor hereunder, Lendermay, by action or inaction:     (i) compromise, settle, extend the duration or the time for the payment of, ordischarge the performance of, or may refuse to or otherwise not enforce the SecuredLoan Documents;     (ii) release all or any one or more parties to any one or more of the SecuredLoan Documents or grant other indulgences to any Borrower in respect thereof;     (iii) amend or modify in any manner and at any time (or from time to time) anyof the Secured Loan Documents; or     (iv) release or substitute any other guarantor, if any, of the GuaranteedObligations, or enforce, exchange, release, or waive any security for the GuaranteedObligations (including, the collateral referred to in Section 18 hereof) orany other guaranty of the Guaranteed Obligations, or any portion thereof.          8. No Election. Lender shall have the right to seek recourse against any Guarantor tothe fullest extent provided for herein, and no election by Lender to proceed in one form of actionor proceeding, or against any party, or on any obligation, shall constitute a waiver of Lender’sright to proceed in any other form of action or proceeding or against other parties unless Lenderhas expressly waived such right in writing. Specifically, but without limiting the generality ofthe foregoing, no action or proceeding by Lender under any document or instrument evidencing theGuaranteed Obligations shall serve to diminish the liability of any Guarantor under this Guarantyexcept to the extent that Lender finally and unconditionally shall have realized indefeasiblepayment by such action or proceeding.
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          9. Indefeasible Payment. The Guaranteed Obligations shall not be considered Paid inFull for purposes of this Guaranty unless and until all payments to Lender are no longer subject toany right on the part of any person, including any Borrower, any Borrower as a debtor inpossession, or any trustee (whether appointed under the Bankruptcy Code or otherwise) of anyBorrower’s assets to invalidate or set aside such payments or to seek to recoup the amount of suchpayments or any portion thereof, or to declare same to be fraudulent or preferential. Upon suchfull and final performance and payment of the Guaranteed Obligations whether by any Guarantor orany Borrower, Lender shall have no obligation whatsoever to transfer or assign its interest in theSecured Loan Documents to any Guarantor. In the event that, for any reason, any portion of suchpayments to Lender is set aside or restored, whether voluntarily or involuntarily, after the makingthereof, then the obligation intended to be satisfied thereby shall be revived and continued infull force and effect as if said payment or payments had not been made, and each Guarantor shall beliable for the full amount Lender is required to repay plus any and all costs and expenses(including attorneys’ fees) paid by Lender in connection therewith.          10. Financial Condition of Borrowers. Each Guarantor represents and warrants toLender that each such Guarantor is currently informed of the financial condition of each Borrowerand of all other circumstances which a diligent inquiry would reveal and which bear upon the riskof nonpayment of the Guaranteed Obligations. Each Guarantor further represents and warrants toLender that each such Guarantor has read and understands the terms and conditions of the SecuredLoan Documents. Each Guarantor hereby covenants that each such Guarantor will continue to keepinformed of each Borrower’s financial condition, the financial condition of other guarantors, ifany, and of all other circumstances that bear upon the risk of nonpayment or nonperformance of theGuaranteed Obligations.          11. Subordination. Each Guarantor hereby agrees that any and all present and futureindebtedness of any Borrower owing to any Guarantor is subject to that certain IntercompanySubordination Agreement, dated as of February 29, 2008, by and among the Guarantors, the Borrowersand Lender and postponed in favor of and subordinated to payment, in full, in cash, of theGuaranteed Obligations.          12. Payments; Application. All payments to be made hereunder by any Guarantor shallbe made in lawful money of the United States of America at the time of payment, shall be made inimmediately available funds, and shall be made without deduction (whether for taxes or otherwise)or offset. All payments made by any Guarantor hereunder shall be applied as follows: first, to allcosts and expenses (including attorneys’ fees) incurred by Lender in enforcing this Guaranty or incollecting the Guaranteed Obligations; second, to all accrued and unpaid interest, premium, if any,and fees owing to Lender constituting Guaranteed Obligations; and third, to the balance of theGuaranteed Obligations.          13. Attorneys’ Fees and Costs. Each Guarantor agrees to pay, on demand, allreasonable attorneys’ fees and all other costs and expenses which may be incurred by Lender in theenforcement of this Guaranty or in any way arising out of, or consequential to the protection,assertion, or enforcement of the Guaranteed Obligations (or any security therefor), whether or notsuit is brought.          14. Contribution with Respect to Guaranteed Obligations.
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          (a) To the extent that any Guarantor shall make a payment under this Guaranty (a “GuarantorPayment”) which, taking into account all other Guarantor Payments then previously or concurrentlymade by any other Guarantor, exceeds the amount which otherwise would have been paid by orattributable to such Guarantor if each Guarantor had paid the aggregate Guaranteed Obligationssatisfied by such Guarantor Payment in the same proportion as such Guarantor’s “Allocable Amount”(as defined below) (as determined immediately prior to such Guarantor Payment) bore to theaggregate Allocable Amounts of each of the Guarantors as determined immediately prior to the makingof such Guarantor Payment, then, from and after the time the Guaranteed Obligations have been Paidin Full, such Guarantor shall be entitled to receive contribution and indemnification paymentsfrom, and be reimbursed by, each other Guarantor for the amount of such excess, pro rata based upontheir respective Allocable Amounts in effect immediately prior to such Guarantor Payment.          (b) As of any date of determination, the “Allocable Amount” of any Guarantor shall be equal tothe maximum amount of the claim which could then be recovered from such Guarantor under thisGuaranty without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of theBankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform FraudulentConveyance Act or similar statute or common law.          (c) This Section 14 is intended only to define the relative rights of the Guarantors, andnothing set forth in this Section 14 is intended to or shall impair the obligations of theGuarantors, jointly and severally, to pay any amounts as and when the same shall become due andpayable in accordance with the terms of this Guaranty.          (d) The parties hereto acknowledge that the rights of contribution and indemnificationhereunder shall constitute assets of the Guarantor or Guarantors to which such contribution andindemnification is owing.          15. Notices. All notices or demands by any Guarantor or Lenders to the other relatingto this Guaranty shall be in writing and either personally served or sent by registered orcertified mail, postage prepaid, return receipt requested, or by prepaid telefacsimile, and shallbe deemed to be given for purposes of this Guaranty on the day that such writing is received by theparty to whom it is sent. Unless otherwise specified in a notice sent or delivered in accordancewith the provisions of this section, such writing shall be sent, if to a Guarantor, then to theaddress of Guarantors as set forth on the signature page hereof, and if to Lender, then as follows:National Amusements, Inc.