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EXHIBIT 10.2    
    

STOCK OPTION AGREEMENT  

        AGREEMENT, made as of the 6th day of May, 2003, by and between Midway Games Inc., a Delaware
corporation, with its principal executive offices at 2704 West Roscoe Street, Chicago, Illinois 60618 ("the Corporation"), and David Zucker, residing
at                        Illinois ("Optionee"). 

W I T N E S S E T H:  

        WHEREAS, Optionee, who has not previously been employed by the Corporation, is accepting an offer of employment to
serve the Corporation as its President and Chief Executive Officer; and 

        WHEREAS, on May 6, 2003 Optionee and the Corporation entered into an Executive Employment Agreement (the "Employment Agreement")
that, among other matters, requires the Corporation to grant the options provided for in this Agreement and in a separate Stock Option Agreement under the Corporation's 2002 Stock Option Plan (the
"2002 Plan Option Agreement") of even date herewith. 

        NOW, THEREFORE, in consideration of the foregoing and the mutual agreements herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, as a material inducement to Optionee's entering into the Employment Agreement the Corporation is hereby granting to Optionee an option to
purchase common stock of the Corporation, par value $.01 per share ("Common Stock") on the following terms and conditions: 

        1.     Option. The Corporation hereby grants to Optionee an option (the "Option") to purchase, at any time prior to
5:00 p.m. on May 5, 2013, up to One Million (1,000,000) fully paid and non-assessable shares of Common Stock (the "Initial Shares") at a price of $3.57 per share. Under
applicable provisions of the Internal Revenue Code of 1986, as amended, the Option is treated as a non-qualified stock option. The Optionee shall have the right to receive options (the
"Additional Options") to purchase additional shares of Common Stock (the "Additional Shares"), as described in Paragraph 9 hereof. The term "Shares", as used hereafter, shall refer to the
Initial Shares with respect to the Option and to Additional Shares with respect to any Additional Options. 

        2.     Vesting. (a) Subject to paragraph 4 hereof, the Option may be exercised for up to 62,500 Initial Shares on
or after November 1, 2004 and the remaining 937,500 Initial Shares shall become exercisable in ten equal quarterly installments on the first day of each February, May, August and November
thereafter. 

        (b)   In
the event of the occurrence of a Change of Control, as provided in Section 15 of the Employment Agreement, the Option shall immediately become vested and fully
exercisable with respect to all Shares issuable under the Option and any Additional Options. 

        3.     Exercise of Option. Optionee may exercise the Option in whole or in part (but not as to fractional shares), to the extent
vested, by delivering to the Corporation a written notice of exercise in the form attached hereto as Exhibit 1, together with payment of the
exercise price for the Shares to be purchased and any taxes required to be paid upon exercise. As soon as practicable thereafter, but in no event later than 30 days, the Corporation shall cause
to be delivered to or at the order of Optionee certificates evidencing the Shares purchased. 

        4.     Option Conditioned on Continued Service. If the services of Optionee to the Corporation shall be terminated for "cause",
or if Optionee terminates services to the Corporation without "good reason", as such terms are defined in the Employment Agreement, the Option shall expire immediately upon such termination. If such
services shall terminate for any other reason, the Option may be exercised at any time within three (3) months after such termination (or within one year after death by Optionee's executor or
administrator); provided that the Option may not be exercised pursuant to this Paragraph except to the extent that Optionee was entitled to exercise the Option at the time of termination of services
or death; and in any event, the Option may not be exercised after the original expiration date of the Option. 

 

        5.     Reservation and Listing. The Corporation shall cause to be reserved and kept available out of authorized and unissued
shares of Common Stock, from time to time, the number of Shares then issuable upon exercise of the Option (collectively the "Reserved Shares"). So long as any shares of Common Stock are listed on any
national securities exchange or automated quotation system, the Corporation will use its best efforts to cause all of the Reserved Shares to be listed on such exchange or quotation system upon
official notice of issuance. 

        6.     Non-Assignability of the Option. Optionee may not sell, assign or otherwise encumber or dispose of the Option
or any interest therein, except by Will or the laws of descent and distribution. 

        7.     Registration or Exemption. The Corporation shall not be obligated to issue any Shares if, in the opinion of counsel to the
Corporation, the Shares to be so issued are required to be registered or otherwise qualified under the Securities Act of 1933, as amended, or under any other applicable statute, regulation or
ordinance affecting the sale of securities, unless and until such shares have been so registered or otherwise qualified. The Corporation shall promptly prepare and file a registration statement
under the Securities Act of 1933, as amended (the "Act") with respect to the issuance of the Shares and shall cause such registration statement to become effective as promptly as practical but in no
event later than 180 days following the date hereof and shall cause such registration statement to remain in effect (together with a resale prospectus at all times meeting the requirements of
the Act) until all of the Shares have been issued to Optionee or his right to receive any Shares terminates or expires, and, with respect to the resale prospectus, until such registration statement is
no longer required for Optionee to publicly offer and sell such Shares. 

        8.     Adjustments; Merger or Consolidation. (a) New option rights may be substituted for the Option, or the Corporation's
duties under the Option may be assumed by a corporation other than the Corporation, or by a parent or subsidiary of the Corporation or such corporation, in connection with any merger, consolidation,
acquisition, separation, reorganization, liquidation or other similar corporate transaction in which the Corporation is involved. Notwithstanding the foregoing or the provisions of this
Paragraph 8, in the event such corporation, or parent or subsidiary of the Corporation or such corporation, does not substitute new option rights for, and substantially equivalent to, the
Option, or assume the Option, the Option shall terminate and thereupon become null and void (i) upon dissolution or liquidation of the Corporation, or similar occurrence, (ii) upon any
merger, consolidation, acquisition, separation, reorganization, or similar occurrence, where the Corporation will not be a surviving entity or (iii) upon a transfer of substantially all of the
assets of the Corporation or more than 80% of the outstanding Common Stock in a single transaction; provided, however, that Optionee shall have the right immediately prior to or concurrently with such
dissolution, liquidation, merger, consolidation, acquisition, separation, reorganization or other similar corporate transaction, to exercise any unexpired Option whether or not then exercisable. 

        (b)   In
the event that the Corporation determines that any dividend or other distribution (whether in the form of cash, shares, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of shares or other
securities of the Corporation, issuance of warrants or other rights to purchase shares or other securities of the Corporation, or other corporate transaction or event affects the Shares such that an
adjustment is determined by the Corporation to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Option, then the
Corporation shall, in such manner as it may deem equitable, adjust any or all of (i) the number of Shares or other securities of the Corporation (or number and kind of other securities or
property) subject to the Option and (ii) the purchase or other price with respect to the Option or, if deemed appropriate by the Corporation, make provision for a cash payment to Optionee
including, if necessary, the termination of the Option. Without limiting the generality of the foregoing, any such adjustment shall be deemed to have prevented any dilution and enlargement of
Optionee's rights if Optionee 

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receives
in any such adjustment rights which are substantially similar (after taking into account the fact that Optionee has not paid the applicable exercise price) to the rights that Optionee would
have received had he exercised the Option and become a stockholder of the Corporation immediately prior to the event giving rise to such adjustment. 

        (c)   Adjustments
and elections under this Paragraph 8 shall be made by the Corporation's Stock Option Committee, whose determination as to what adjustments, if any,
shall be made and the extent thereof shall be final, binding and conclusive. 

        (d)   In
applying the provisions of this Paragraph 8, actions taken or determinations made by the Corporation or the Stock Option Committee shall be taken or made
reasonably and in good faith, in accordance with the terms of this Paragraph 8, and such actions or determinations shall be made in the same manner as they are made for other executive officers
of the Corporation. 

        9.     Right to Acquire Additional Options. (a) If the Corporation issues additional shares of Common Stock to persons
other than Optionee after the date hereof under any circumstances whatsoever, whether pursuant to the exercise of options, warrants or similar rights or otherwise, but prior to the second anniversary
of the date hereof, and Optionee remains employed pursuant to the Employment Agreement at the time of such issuance, then, on each such occasion, the Corporation shall promptly grant to Optionee an
option to purchase, at any time prior to 5:00 p.m. on May 5, 2013, Additional Shares in an amount (a) equal to 3.23% of the shares so issued if such issuance occurs prior to the
first anniversary of the date hereof, and (b) equal to the percentage of such shares so issued (but not to exceed 3.23%) determined by dividing (i) the number of Shares then issuable
under unexercised options to purchase Common Stock held by Optionee granted under this Agreement or under the 2002 Plan Option Agreement (collectively, the "Original Option Agreements") immediately
prior to such issuance by (ii) the number of outstanding shares of Common Stock immediately prior to such issuance. In each case, the exercise price of each such Additional Option shall be the
closing price on the New York Stock Exchange on the date of issue of such Additional Shares. The number of Additional Shares so issued shall be rounded up (if it includes a fraction that equals or
exceeds .5 shares) or down (if it includes a fraction that is less than .5 shares) to the nearest whole number of shares. In no event will the aggregate number of Additional Shares exceed 2,250,000
shares of Common Stock (subject to adjustment as provided in Paragraph 8 hereof). If prior to the second anniversary of the date hereof, Optionee's employment under the Employment Agreement is
terminated by the Corporation without "cause", as such term is defined in the Employment Agreement, or Optionee resigns his employment for "good reason" under clauses (i), (ii) or
(iii) of Section 14.4 of the Employment Agreement, Optionee's right to receive Additional Options hereunder shall continue until the earlier of (i) 90 days after such
termination or resignation, and (ii) the second anniversary of the date hereof. 

        (b)   Each
Additional Option shall become vested and may be exercised in accordance with the provisions of this Paragraph 9(b). If none of the options granted under the
Original Option Agreements have been exercised, then each Additional Option may be exercised for up to 25% of the Shares subject thereto on or after May 6, 2004, and the remaining 75% of such
Shares shall become exercisable in twelve equal quarterly installments on the first day of each August, November, February and May thereafter. If any options granted under the Original Option
Agreements have been exercised, then each Additional Option may be exercised on the vesting dates of the remaining unexercised Shares issuable under the Original Option Agreements in the proportion
that the remaining unexercised Shares issuable under the Original Option Agreements on such vesting dates bear to the total remaining unexercised Shares. For example, if of the 1,500,000 Shares
issuable under the Original Option Agreements, 300,000 have been exercised leaving 1,200,000 Shares remaining unexercised, and if under the vesting schedule for the Original Options 375,000 Shares
would have been exercisable on May 6, 2004, and the balance would have become exercisable as to 93,750 Shares on the first day of each August, November, February and 

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May
thereafter, then with respect to the Original Options, 75,000 (or 6.25%) of the 1,200,000 remaining Shares would have become exercisable on May 6, 2004, and 93,750 (or 7.8125%) of the
1,200,000 remaining Shares would have become exercisable on each August, November, February and May thereafter. Accordingly, with respect to Additional Options, 6.25% would be exercisable on or after
May 6, 2004, and the remaining 93.75% would become exercisable in twelve equal quarterly installments of 7.8125% on each August, November, February and May thereafter. If any installment
includes a fraction of a share, such fraction shall be carried forward to subsequent installments. In the event of a "Change of Control," as such term is defined in the Employment Agreement, all
Additional Options shall immediately become fully exercisable. 

        (c)   Other
than as specified in this Paragraph 9, Optionee shall have the same rights under each Additional Option as he has under this Agreement. 

        10.   No Rights in Option Stock. Optionee shall have no rights as a stockholder in respect of Shares as to which the Option
shall not have been exercised and payment made as herein provided. 

        11.   Representations of the Corporation. The Corporation represents and warrants as follows: 

        (a)   The
entering into and performance of this Agreement by the Corporation has been duly authorized by all necessary corporate action, and this Agreement represents the
valid and binding obligation of the Corporation enforceable in accordance with its terms. 

        (b)   The
Shares have been duly authorized and reserved for issuance in accordance with the terms of this Agreement. 

        12.   Enforceability. Should a court of competent jurisdiction deem any of the provisions in this Agreement to be unenforceable
in any respect, it is the intention of the parties to this Agreement that this Agreement be enforced to the greatest extent deemed to be enforceable. 

        13.   Governing Law; Attorneys Fees to Prevailing Party. This Agreement shall be governed, interpreted and construed in
accordance with the substantive laws of the State of Illinois applicable to agreements entered into and to be performed entirely therein. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts located in Cook County, Illinois and waives any claims based on forum non-conveniens. In the event any legal proceedings are commenced by the
Corporation against the Executive or by the Executive against the Corporation for any actual or threatened violation of this Agreement, the prevailing party in such proceeding shall be entitled to
recover from the losing party all costs and expenses of any kind, including reasonable attorneys fees, incurred in connection with such proceedings. 

        14.   Withholding. The Corporation may establish, from time to time, appropriate procedures to provide for payment or
withholding of such income or other taxes as may be required by law to be paid or withheld in connection with the exercise of the Option. Optionee shall pay to the Corporation all such amounts
requested by the Corporation to permit the Corporation to take any tax deduction available to it resulting from the exercise of the Option. Optionee shall also comply with any procedures established
from time to time by the Corporation to ensure that the Corporation receives prompt notice of the occurrence of any event which may create, or affect the timing or amount of, any 

4

 

obligation
to pay or withhold any such taxes or which may make available to the Corporation any tax deduction resulting from the occurrence of such event. 

	 	 	MIDWAY GAMES INC.
	

 	
 	

By:	
 	

/s/  NEIL D. NICASTRO      

	 	 	Name:	 	Neil D. Nicastro
	 	 	Title:	 	Chief Executive Officer
	
ACCEPTED AND AGREED TO
 this 6th day of May, 2003.	
 	

 	
 	

 
	

/s/  DAVID ZUCKER      
David Zucker	
 	

 	
 	

 

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    EXHIBIT 1    
    

Dated:                        

MIDWAY
GAMES INC.

2704 West Roscoe Street

Chicago, IL 60618

Attn: Deborah K. Fulton, Esq. 

Ladies and Gentlemen: 

        Notice
is hereby given of my election to purchase            shares of common stock, par value $.01 per share, of Midway Games Inc. (the "Corporation") at a price of
                        per share under the provisions of the stock option ("Option") granted to me on
May            , 2003. 

        Enclosed
is my check made payable to Midway Games Inc. in the amount of $                        in payment of the exercise price of
the Option and my check in the amount of
$                        also made payable to Midway Games Inc. in payment of the tax due on exercise of the Option.

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

	 	 	Number of certificates requested:	

	 	 	Denomination of each certificate:	

	 	 	Full Name:	

	 	 	Name to be printed on each certificate, if different:	

	 	 	Address:	

	 	 	Address of holder, if different:	

	 	 	Social Security Number of holder:	

	 	 	Very truly yours,
	

 	
 	

6

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EXHIBIT 10.2

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EXHIBIT 10.3    
    

STOCK OPTION AGREEMENT

UNDER 2002 STOCK OPTION PLAN  

        AGREEMENT, made as of the 6th day of May, 2003, by and between Midway Games Inc., a Delaware
corporation, with its principal executive offices at 2704 West Roscoe Street, Chicago, Illinois 60618 ("the Corporation"), and David Zucker, residing at    Illinois ("Optionee"). 

W I T N E S S E T H:  

        WHEREAS, Optionee, who has not previously been employed by the Corporation, is accepting an offer of employment to
serve the Corporation as its President and Chief Executive Officer; and 

        WHEREAS, on May 6, 2003 Optionee and the Corporation entered into an Executive Employment Agreement (the "Employment Agreement")
that, among other matters, requires the Corporation to grant the options provided for in this Agreement and in a separate Stock Option Agreement of even date herewith. 

        NOW, THEREFORE, in consideration of the foregoing and the mutual agreements herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, as a material inducement to Optionee's entering into the Employment Agreement the Corporation is hereby granting to Optionee an option to
purchase common stock of the Corporation, par value $.01 per share ("Common Stock") on the following terms and conditions: 

        1.    Option.    The Corporation hereby grants to Optionee an option (the "Option") pursuant to the Corporation's 2002
Stock Option Plan (the "Plan") to purchase, at any time prior to 5:00 p.m. on May 5, 2013, up to Five Hundred Thousand (500,000) fully paid and non-assessable shares of
Common Stock (the "Shares") at a price of $3.57 per share. Under applicable provisions of the Internal Revenue Code of 1986, as amended, the Option is treated as a non-qualified stock
option. 

        2.    Vesting.    (a) Subject to paragraph 4 hereof, the Option may be exercised for up to 375,000
Shares on or after the first anniversary of the date hereof, for up to an additional 93,750 Shares on or after August 1, 2004, and for the remaining 31,250 Shares on or after November 1,
2004. 

        (b)   In
the event that the Corporation shall terminate the Employment Agreement without "cause", as such term is defined in the Employment Agreement, or Optionee shall resign
for "good reason" under clauses (i), (ii) or (iii) of Section 14.4 of the Employment Agreement, within the first year after the Commencement Date of the Employment Agreement, the
Option shall immediately become exercisable with respect to 150,000 of the Shares. 

        (c)   In
the event of the occurrence of a Change of Control, as provided in Section 15 of the Employment Agreement, the Option shall immediately become vested and fully
exercisable. 

        3.    Exercise of Option.    Optionee may exercise the Option in whole or in part (but not as to fractional shares),
to the extent vested, by delivering to the Corporation a written notice of exercise in the form attached hereto as Exhibit 1, together with payment of the exercise price for the Shares to be
purchased and any taxes required to be paid upon exercise. As soon as practicable thereafter, but in no event later than 30 days, the Corporation shall cause to be delivered to or at the order
of Optionee certificates evidencing the Shares purchased. 

        4.    Option Conditioned on Continued Service.    If the services of Optionee to the Corporation shall be terminated
for "cause", or if Optionee terminates services to the Corporation without "good reason", as such terms are defined in the Employment Agreement, the Option shall expire immediately upon such
termination. If such services shall terminate for any other reason, the Option may be 

1

 

exercised
at any time within three (3) months after such termination (or within one year after death by Optionee's executor or administrator); provided that the Option may not be exercised
pursuant to this Paragraph except to the extent that Optionee was entitled to exercise the Option at the time of termination of services or death; and in any event, the Option may not be exercised
after the original expiration date of the Option. 

        5.    Registration or Exemption.    The Corporation shall not be obligated to issue any Shares if, in the opinion of
counsel to the Corporation, the Shares to be so issued are required to be registered or otherwise qualified under the Securities Act of 1933, as amended, or under any other applicable statute,
regulation or ordinance affecting the sale of securities, unless and until such shares have been so registered or otherwise qualified. The Corporation shall promptly prepare and file a
registration statement under the Securities Act of 1933, as amended (the "Act") with respect to the issuance of the Shares and shall cause such registration statement to become effective as promptly
as practical but in no event later than 180 days following the date hereof and shall cause such registration statement to remain in effect (together with a resale prospectus at all times
meeting the requirements of the Act) until all of the Shares have been issued to Optionee or his right to receive any Shares terminates or expires, and, with respect to the resale prospectus, until
such registration statement is no longer required for Optionee to publicly offer and sell such Shares. 

        6.    Adjustments; Merger or Consolidation.    In applying the provisions of Article X of the Plan to the
Option, actions taken or determinations made by the Corporation or the Stock Option Committee shall be taken or made reasonably and in good faith, in accordance with the terms of such
Article X, and such actions or determinations shall be made in the same manner as they are made for other executive officers of the Corporation. 

        7.    No Rights in Option Stock.    Optionee shall have no rights as a stockholder in respect of Shares as to which
the Option shall not have been exercised and payment made as herein provided. 

        8.    Subject to Plan; Enforceability.    Except as otherwise provided herein, the Option shall be subject to the
provisions of the Plan. Should a court of competent jurisdiction deem any of the provisions in this Agreement to be unenforceable in any respect, it is the intention of the parties to this Agreement
that this Agreement be enforced to the greatest extent deemed to be enforceable. 

        9.    Representations of the Corporation.    The Corporation represents and warrants as follows: 

        (a)   The
entering into and performance of this Agreement by the Corporation has been duly authorized by all necessary corporate action, and this Agreement represents the
valid and binding obligation of the Corporation enforceable in accordance with its terms. 

        (b)   The
Shares have been duly authorized and reserved for issuance in accordance with the terms of this Agreement. 

        10.    Governing Law.    This Agreement shall be governed, interpreted and construed in accordance with the
substantive laws of the State of Illinois applicable to agreements entered into and to be performed entirely therein. Each party hereby irrevocably submits to the exclusive jurisdiction of the state
and federal courts located in Cook County, Illinois and waives any claims based on forum
non-conveniens. In the event any legal proceedings are commenced by the Corporation against the Executive or by the Executive against the Corporation for any actual or threatened violation
of this Agreement, the prevailing party in such proceeding shall be entitled to recover from the losing party all costs and expenses of any kind, including reasonable attorneys fees, incurred in
connection with such proceedings. 

        11.    Withholding.    The Corporation may establish, from time to time, appropriate procedures to provide for payment
or withholding of such income or other taxes as may be required by law to be paid or withheld in connection with the exercise of the Option. Optionee shall pay to the Corporation all 

2

 

such
amounts requested by the Corporation to permit the Corporation to take any tax deduction available to it resulting from the exercise of the Option. Optionee shall also comply with any procedures
established from time to time by the Corporation to ensure that the Corporation receives prompt notice of the occurrence of any event which may create, or affect the timing or amount of, any
obligation to pay or withhold any such taxes or which may make available to the Corporation any tax deduction resulting from the occurrence of such event. 

	

 	
 	
MIDWAY GAMES INC.
	
 	
 	

By:	
 	

/s/  NEIL D. NICASTRO      

	 	 	Name:	 	Neil D. Nicastro
	 	 	Title:	 	Chief Executive Officer

	
ACCEPTED AND AGREED TO:	
 	

 
	
this 6th day of May, 2003.	
 	

 
	

/s/  DAVID ZUCKER      
David Zucker	
 	

 

3

 
  
 

    EXHIBIT 1    
    

        Dated:                    

MIDWAY
GAMES INC.

2704 West Roscoe Street

Chicago, IL 60618

Attn: Deborah K. Fulton, Esq.

Ladies and Gentlemen: 

        Notice
is hereby given of my election to purchase            shares of common stock, par value $.01 per share, of Midway Games Inc. (the "Corporation") under the Midway
Games Inc. 2002 Stock Option Plan at a price of                        per share under the provisions of the stock option
("Option") granted to me on May            , 2003. 

        Enclosed
is my check made payable to Midway Games Inc. in the amount of $                        in payment of the exercise price of
the Option and my check in the amount of
$                        also made payable to Midway Games Inc. in payment of the tax due on exercise of the Option.

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

	 	 	Number of certificates requested:	

	 	 	Denomination of each certificate:	

	 	 	Full Name:	

	 	 	Name to be printed on each certificate, if different:	

	 	 	Address:	

	 	 	Address of holder, if different:	

	 	 	Social Security Number of holder:	

	 	 	Very truly yours,
	

 	
 	

4

QuickLinks

EXHIBIT 10.3

EXHIBIT 1

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