Document:

EXHIBIT 10.9

                               SECURITY AGREEMENT

      THIS  SECURITY  AGREEMENT  (the  "Agreement"),  is  entered  into and made
effective as of April 14, 2004,  by and between  INSTAPAY  SYSTEMS,  INC.,  (the
"Company"),  and the  BUYER(S)  listed on Schedule I attached to the  Securities
Purchase Agreement dated the date hereof (the "Secured Party").

      WHEREAS,  the  Company  shall  issue  and sell to the  Secured  Party,  as
provided in the Securities  Purchase  Agreement  dated the date hereof,  and the
Secured  Party shall  purchase up to Three  Hundred and Fifty  Thousand  Dollars
($350,000) of five percent (5%) secured convertible debentures (the "Convertible
Debentures"),  which shall be  convertible  into shares of the Company's  common
stock,  par value $.001 (the  "Common  Stock") (as  converted,  the  "Conversion
Shares"),  for a total  purchase price of up to Three Hundred and Fifty Thousand
Dollars  ($350,000),  in the respective amounts set forth opposite each Buyer(s)
name on Schedule I attached to the Securities Purchase Agreement;

      WHEREAS,  to  induce  the  Secured  Party  to enter  into the  transaction
contemplated  by the  Securities  Purchase  Agreement,  the Secured  Convertible
Debenture,  the Investor Registration Rights Agreement, the Irrevocable Transfer
Agent Instructions,  and the Escrow Agreement  (collectively  referred to as the
"Transaction  Documents"),  the Company  hereby  grants to the  Secured  Party a
security  interest  in and to the  pledged  property  identified  on Exhibit "A"
hereto   (collectively   referred  to  as  the  "Pledged  Property")  until  the
satisfaction of the Obligations, as defined herein below.

      NOW, THEREFORE,  in consideration of the premises and the mutual covenants
herein contained,  and for other good and valuable  consideration,  the adequacy
and receipt of which are hereby acknowledged, the parties hereto hereby agree as
follows:

                                   ARTICLE 1.

                         DEFINITIONS AND INTERPRETATIONS

      Section 1.1. Recitals.

      The above recitals are true and correct and are  incorporated  herein,  in
their entirety, by this reference.

      Section 1.2. Interpretations.

      Nothing  herein  expressed or implied is intended or shall be construed to
confer upon any person other than the Secured  Party any right,  remedy or claim
under or by reason hereof.

      Section 1.3. Obligations Secured.

      The obligations  secured hereby are any and all obligations of the Company
to the Secured Party,  whether oral or written and whether arising before, on or
after the date hereof including,  without  limitation,  those obligations of the
Company to the  Secured  Party  under the  Securities  Purchase  Agreement,  the
Secured Convertible  Debenture,  the Investor  Registration Rights Agreement and
Irrevocable  Transfer  Agent  Instructions,  in the  principal  amounts  thereof
outstanding from time to time, and any other amounts payable by or chargeable to
the Company thereunder or hereunder (collectively, the "Obligations.

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                                   ARTICLE 2.

              PLEDGED COLLATERAL, ADMINISTRATION OF COLLATERAL AND
                        TERMINATION OF SECURITY INTEREST

      Section 2.1. Pledged Property.

            (a) Company hereby pledges to the Secured Party,  and creates in the
Secured  Party for its  benefit,  a  security  interest  for such time until the
Obligations  are paid in full,  in and to all of the  property of the Company as
set forth in Exhibit "A" attached hereto (collectively, the "Pledged Property"):

      The Pledged Property, as set forth in Exhibit "A" attached hereto, and the
products thereof and the proceeds of all such items are hereinafter collectively
referred to as the "Pledged Collateral."

            (b)   Simultaneously   with  the  execution  and  delivery  of  this
Agreement,  the  Company  shall make,  execute,  acknowledge,  file,  record and
deliver to the Secured Party any documents  reasonably  requested by the Secured
Party to perfect its security interest in the Pledged  Property.  Simultaneously
with the  execution  and  delivery of this  Agreement,  the Company  shall make,
execute,  acknowledge  and  deliver  to the  Secured  Party such  documents  and
instruments, including, without limitation, financing statements,  certificates,
affidavits  and forms as may, in the Secured  Party's  reasonable  judgment,  be
necessary to effectuate,  complete or perfect, or to continue and preserve,  the
security interest of the Secured Party in the Pledged Property,  and the Secured
Party shall hold such documents and instruments as secured party, subject to the
terms and conditions contained herein.

      Section 2.2. Rights; Interests; Etc.

            (a) So long as no Event of Default (as  hereinafter  defined)  shall
have occurred and be continuing:

                  (i) the Company  shall be  entitled  to  exercise  any and all
rights  pertaining  to the Pledged  Property or any part thereof for any purpose
not inconsistent with the terms hereof; and

                           (ii) the Company shall be entitled to receive and
retain any and all payments paid
or made in respect of the Pledged Property.

                  (b) Upon the occurrence and during the continuance of an Event
of Default:

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                  (i) All rights of the Company to exercise  the rights which it
would otherwise be entitled to exercise pursuant to Section 2.2(a)(i) hereof and
to receive payments which it would otherwise be authorized to receive and retain
pursuant to Section  2.2(a)(ii)  hereof shall be suspended,  and all such rights
shall thereupon  become vested in the Secured Party who shall thereupon have the
sole right to exercise such rights and to receive and hold as Pledged Collateral
such  payments;  provided,  however,  that if the  Secured  Party  shall  become
entitled  and shall  elect to  exercise  its  right to  realize  on the  Pledged
Collateral  pursuant  to Article 5 hereof,  then all cash sums  received  by the
Secured Party,  or held by Company for the benefit of the Secured Party and paid
over  pursuant  to  Section  2.2(b)(ii)  hereof,  shall be applied  against  any
outstanding Obligations; and

                  (ii) All interest,  dividends,  income and other  payments and
distributions  which are received by the Company  contrary to the  provisions of
Section  2.2(b)(i)  hereof  shall be  received  in trust for the  benefit of the
Secured Party,  shall be segregated from other property of the Company and shall
be forthwith paid over to the Secured Party; or

                  (iii)  The  Secured  Party  in its  sole  discretion  shall be
authorized to sell any or all of the Pledged  Property at public or private sale
in order to recoup all of the outstanding  principal plus accrued  interest owed
pursuant to the Convertible Debenture as described herein

            (c) Each of the  following  events shall  constitute a default under
this Agreement (each an "Event of Default"):

                  (i) any default,  whether in whole or in part,  shall occur in
the payment to the Secured Party of principal, interest or other item comprising
the  Obligations as and when due or with respect to any other debt or obligation
of the Company to a party other than the Secured Party;

                  (ii) any default,  whether in whole or in part, shall occur in
the due observance or performance of any obligations or other  covenants,  terms
or provisions to be performed under this Agreement or the Transaction Documents;

                  (iii) the Company shall: (1) make a general assignment for the
benefit  of its  creditors;  (2) apply for or consent  to the  appointment  of a
receiver,  trustee,  assignee,  custodian,  sequestrator,  liquidator or similar
official  for  itself  or any of its  assets  and  properties;  (3)  commence  a
voluntary case for relief as a debtor under the United States  Bankruptcy  Code;
(4) file with or otherwise  submit to any  governmental  authority any petition,
answer or other document seeking:  (A)  reorganization,  (B) an arrangement with
creditors or (C) to take advantage of any other present or future applicable law
respecting bankruptcy, reorganization, insolvency, readjustment of debts, relief
of debtors,  dissolution or liquidation; (5) file or otherwise submit any answer
or other document admitting or failing to contest the material  allegations of a
petition  or other  document  filed or  otherwise  submitted  against  it in any
proceeding  under any such  applicable  law, or (6) be adjudicated a bankrupt or
insolvent by a court of competent jurisdiction; or

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                  (iv) any case,  proceeding  or other action shall be commenced
against  the  Company for the  purpose of  effecting,  or an order,  judgment or
decree shall be entered by any court of  competent  jurisdiction  approving  (in
whole or in part)  anything  specified  in Section  2.2(c)(iii)  hereof,  or any
receiver,  trustee,  assignee,  custodian,  sequestrator,  liquidator  or  other
official shall be appointed  with respect to the Company,  or shall be appointed
to take or shall otherwise acquire possession or control of all or a substantial
part of the assets and properties of the Company, and any of the foregoing shall
continue unstayed and in effect for any period of thirty (30) days.

                                   ARTICLE 3.

                          ATTORNEY-IN-FACT; PERFORMANCE

         Section 3.1.      Secured Party Appointed Attorney-In-Fact.

      Upon the occurrence of an Event of Default,  the Company  hereby  appoints
the Secured Party as its attorney-in-fact,  with full authority in the place and
stead of the Company and in the name of the Company or  otherwise,  from time to
time in the  Secured  Party's  discretion  to take any action and to execute any
instrument  which the Secured Party may reasonably  deem necessary to accomplish
the purposes of this Agreement,  including,  without limitation,  to receive and
collect all instruments made payable to the Company representing any payments in
respect of the Pledged Collateral or any part thereof and to give full discharge
for the same.  The  Secured  Party may demand,  collect,  receipt  for,  settle,
compromise,  adjust, sue for,  foreclose,  or realize on the Pledged Property as
and when the Secured Party may determine. To facilitate collection,  the Secured
Party may notify account debtors and obligors on any Pledged Property or Pledged
Collateral to make payments directly to the Secured Party.

      Section 3.2. Secured Party May Perform.

      If the  Company  fails to perform  any  agreement  contained  herein,  the
Secured Party, at its option, may itself perform,  or cause performance of, such
agreement,  and  the  expenses  of the  Secured  Party  incurred  in  connection
therewith shall be included in the Obligations secured hereby and payable by the
Company under Section 8.3.

                                   ARTICLE 4.

                         REPRESENTATIONS AND WARRANTIES

      Section 4.1. Authorization; Enforceability.

      Each of the parties  hereto  represents and warrants that it has taken all
action  necessary to authorize the execution,  delivery and  performance of this
Agreement  and the  transactions  contemplated  hereby;  and upon  execution and
delivery,  this Agreement shall constitute a valid and binding obligation of the
respective party, subject to applicable bankruptcy, insolvency,  reorganization,
moratorium  and similar laws  affecting  creditors'  rights or by the principles
governing the availability of equitable remedies.

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      Section 4.2. Ownership of Pledged Property.

      The Company  warrants and  represents  that it is the legal and beneficial
owner of the Pledged  Property  free and clear of any lien,  security  interest,
option  or  other  charge  or  encumbrance  except  for the  security  interests
identified  on  Exhibit  A hereto  and the  security  interest  created  by this
Agreement.

                                   ARTICLE 5.

                    DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL

      Section 5.1. Default and Remedies.

            (a) If an Event of Default  described in Section  2.2(c)(i) and (ii)
occurs,  then in each such case the Secured Party may declare the Obligations to
be due and payable immediately,  by a notice in writing to the Company, and upon
any such declaration,  the Obligations shall become immediately due and payable.
If an Event of Default  described in Sections  2.2(c)(iii) or (iv) occurs and is
continuing  for the  period  set  forth  therein,  then  the  Obligations  shall
automatically  become  immediately due and payable without  declaration or other
act on the part of the Secured Party.

            (b) Upon the  occurrence  of an Event of Default,  the Secured Party
shall,: (i) be entitled to receive all distributions with respect to the Pledged
Collateral,  (ii) to cause the Pledged  Property to be transferred into the name
of the Secured Party or its nominee,  (iii) to dispose of the Pledged  Property,
and (iv) to realize upon any and all rights in the Pledged Property then held by
the Secured Party.

      Section  5.2.  Method  of  Realizing  Upon the  Pledged  Property  : Other
Remedies.

      Upon the occurrence of an Event of Default,  in addition to any rights and
remedies  available at law or in equity,  the following  provisions shall govern
the Secured Party's right to realize upon the Pledged Property:

            (a) Any item of the Pledged  Property  may be sold for cash or other
value in any number of lots at brokers board, public auction or private sale and
may be sold without  demand,  advertisement  or notice  (except that the Secured
Party shall give the Company ten (10) days' prior written notice of the time and
place  or of the  time  after  which  a  private  sale  may be made  (the  "Sale
Notice")),  which  notice  period  shall in any  event is  hereby  agreed  to be
commercially  reasonable.  At any  sale or sales of the  Pledged  Property,  the
Company may bid for and purchase  the whole or any part of the Pledged  Property
and, upon compliance with the terms of such sale, may hold,  exploit and dispose
of the same without  further  accountability  to the Secured Party.  The Company
will  execute  and  deliver,  or  cause  to  be  executed  and  delivered,  such
instruments,  documents,  assignments, waivers, certificates, and affidavits and
supply or cause to be supplied  such further  information  and take such further
action as the Secured Party reasonably shall require in connection with any such
sale.

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            (b) Any cash being held by the Secured  Party as Pledged  Collateral
and all cash  proceeds  received  by the  Secured  Party in respect of, sale of,
collection  from,  or other  realization  upon  all or any  part of the  Pledged
Collateral shall be applied as follows:

                  (i) to the payment of all  amounts  due the Secured  Party for
the expenses  reimbursable to it hereunder or owed to it pursuant to Section 8.3
hereof;

                  (ii) to the payment of the Obligations then due and unpaid.

                  (iii) the balance,  if any, to the person or persons  entitled
thereto, including, without limitation, the Company.

            (c) In addition to all of the rights and remedies  which the Secured
Party may have pursuant to this  Agreement,  the Secured Party shall have all of
the rights and remedies provided by law, including,  without  limitation,  those
under the Uniform Commercial Code.

                  (i) If the  Company  fails  to pay such  amounts  due upon the
occurrence  of an Event of Default which is  continuing,  then the Secured Party
may institute a judicial  proceeding  for the  collection of the sums so due and
unpaid,  may  prosecute  such  proceeding  to judgment  or final  decree and may
enforce the same against the Company and collect the monies  adjudged or decreed
to be payable in the manner  provided  by law out of the  property  of  Company,
wherever situated.

                  (ii)  The  Company  agrees  that it shall  be  liable  for any
reasonable fees,  expenses and costs incurred by the Secured Party in connection
with  enforcement,  collection and  preservation of the  Transaction  Documents,
including,  without  limitation,  reasonable  legal fees and expenses,  and such
amounts shall be deemed  included as  Obligations  secured hereby and payable as
set forth in Section 8.3 hereof.

      Section 5.3. Proofs of Claim.

      In case of the  pendency  of any  receivership,  insolvency,  liquidation,
bankruptcy,  reorganization,   arrangement,  adjustment,  composition  or  other
judicial proceeding relating to the Company or the property of the Company or of
such other obligor or its creditors,  the Secured Party (irrespective of whether
the  Obligations  shall  then be due and  payable  as  therein  expressed  or by
declaration  or otherwise  and  irrespective  of whether the Secured Party shall
have made any demand on the Company for the payment of the Obligations), subject
to the rights of Previous Security Holders, shall be entitled and empowered,  by
intervention in such proceeding or otherwise:

                  (i) to file and  prove a claim  for the  whole  amount  of the
Obligations  and to file such other  papers or  documents as may be necessary or
advisable in order to have the claims of the Secured Party  (including any claim
for the  reasonable  legal fees and expenses and other expenses paid or incurred
by the Secured  Party  permitted  hereunder  and of the Secured Party allowed in
such judicial proceeding), and

                  (ii) to  collect  and  receive  any  monies or other  property
payable or  deliverable  on any such claims and to distribute  the same; and any
custodian,  receiver,  assignee,  trustee,  liquidator,  sequestrator  or  other
similar  official in any such judicial  proceeding  is hereby  authorized by the
Secured  Party to make such payments to the Secured Party and, in the event that
the Secured Party shall  consent to the making of such payments  directed to the
Secured  Party,  to pay to the Secured  Party any amounts  for  expenses  due it
hereunder.

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      Section 5.4. Duties Regarding Pledged Collateral.

      The Secured Party shall have no duty as to the collection or protection of
the Pledged  Property  or any income  thereon or as to the  preservation  of any
rights pertaining thereto, beyond the safe custody and reasonable care of any of
the Pledged Property actually in the Secured Party's possession.

                                   ARTICLE 6.

                              AFFIRMATIVE COVENANTS

      The Company  covenants and agrees that, from the date hereof and until the
Obligations  have been fully paid and satisfied,  unless the Secured Party shall
consent otherwise in writing (as provided in Section 8.4 hereof):

      Section 6.1. Existence, Properties, Etc.

            (a) The  Company  shall  do,  or cause to be done,  all  things,  or
proceed with due  diligence  with any actions or courses of action,  that may be
reasonably necessary (i) to maintain Company's due organization, valid existence
and good  standing  under  the laws of its state of  incorporation,  and (ii) to
preserve  and keep in full  force and effect all  qualifications,  licenses  and
registrations in those  jurisdictions in which the failure to do so could have a
Material Adverse Effect (as defined below); and (b) the Company shall not do, or
cause to be done, any act impairing the Company's  corporate  power or authority
(i) to carry on the Company's business as now conducted,  and (ii) to execute or
deliver this Agreement or any other document  delivered in connection  herewith,
including,  without limitation,  any UCC-1 Financing  Statements required by the
Secured Party (which other loan instruments collectively shall be referred to as
the "Loan Instruments") to which it is or will be a party, or perform any of its
obligations  hereunder or thereunder.  For purpose of this  Agreement,  the term
"Material  Adverse  Effect"  shall  mean any  material  and  adverse  affect  as
determined by Secured Party in its sole discretion,  whether  individually or in
the aggregate, upon (a) the Company's assets, business,  operations,  properties
or condition,  financial or otherwise;  (b) the Company's to make payment as and
when due of all or any part of the Obligations; or (c) the Pledged Property.

      Section 6.2. Financial Statements and Reports.

      The Company shall furnish to the Secured Party such  financial data as the
Secured  Party may  reasonably  request.  Without  limiting the  foregoing,  the
Company  shall  furnish to the Secured  Party (or cause to be  furnished  to the
Secured Party) the following:

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            (a) as soon as practicable  and in any event within ninety (90) days
after the end of each  fiscal  year of the  Company,  the  balance  sheet of the
Company as of the close of such fiscal  year,  the  statement  of  earnings  and
retained  earnings  of the  Company  as of the close of such  fiscal  year,  and
statement of cash flows for the Company for such fiscal year,  all in reasonable
detail,  prepared in accordance with generally  accepted  accounting  principles
consistently  applied,  certified  by the chief  executive  and chief  financial
officers  of the  Company  as  being  true  and  correct  and  accompanied  by a
certificate of the chief executive and chief financial  officers of the Company,
stating  that the Company  has kept,  observed,  performed  and  fulfilled  each
covenant,  term and condition of this  Agreement and the other Loan  Instruments
during such fiscal year and that no Event of Default  hereunder has occurred and
is  continuing,  or if an Event  of  Default  has  occurred  and is  continuing,
specifying  the nature of same,  the period of  existence of same and the action
the Company proposes to take in connection therewith;

            (b) within  thirty (30) days of the end of each  calendar  month,  a
balance  sheet of the Company as of the close of such month,  and  statement  of
earnings and retained earnings of the Company as of the close of such month, all
in reasonable  detail,  and prepared  substantially in accordance with generally
accepted  accounting  principles  consistently  applied,  certified by the chief
executive and chief financial officers of the Company as being true and correct;
and

      t 12 (c) promptly upon receipt thereof, copies of all accountants' reports
and  accompanying  financial  reports  submitted  to the Company by  independent
accountants in connection with each annual examination of the Company.

      t 6 0 Section 6.3. Accounts and Reports.

      The Company shall  maintain a standard  system of accounting in accordance
with generally accepted accounting principles  consistently applied and provide,
at its sole expense, to the Secured Party the following:

            (a)  as  soon  as   available,   a  copy  of  any  notice  or  other
communication  alleging any nonpayment or other material  breach or default,  or
any  foreclosure or other action  respecting any material  portion of its assets
and properties,  received  respecting any of the  indebtedness of the Company in
excess of $15,000 (other than the  Obligations),  or any demand or other request
for  payment  under any  guaranty,  assumption,  purchase  agreement  or similar
agreement or arrangement respecting the indebtedness or obligations of others in
excess of $15,000,  including  any received  from any person acting on behalf of
the Secured Party or beneficiary thereof; and

            (b) within fifteen (15) days after the making of each  submission or
filing,  a copy of any report,  financial  statement,  notice or other document,
whether periodic or otherwise,  submitted to the shareholders of the Company, or
submitted to or filed by the Company with any governmental  authority  involving
or affecting (i) the Company that could have a Material Adverse Effect; (ii) the
Obligations;  (iii)  any  part of the  Pledged  Collateral;  or (iv)  any of the
transactions contemplated in this Agreement or the Loan Instruments.

      Section 6.4. Maintenance of Books and Records; Inspection.

      The Company shall  maintain its books,  accounts and records in accordance
with generally accepted accounting  principles  consistently applied, and permit
the Secured Party, its officers and employees and any  professionals  designated
by the  Secured  Party in  writing,  at any time to visit and inspect any of its
properties  (including but not limited to the collateral  security  described in
the Loan Instruments), corporate books and financial records, and to discuss its
accounts, affairs and finances with any employee, officer or director thereof.

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      Section 6.5. Maintenance and Insurance.

            (a) The Company shall maintain or cause to be maintained, at its own
expense,  all of its assets and  properties in good working order and condition,
making all necessary repairs thereto and renewals and replacements thereof.

            (b) The Company shall maintain or cause to be maintained, at its own
expense, insurance in form, substance and amounts (including deductibles), which
the Company deems reasonably  necessary to the Company's business,  (i) adequate
to insure all assets and properties of the Company,  which assets and properties
are of a  character  usually  insured by persons  engaged in the same or similar
business  against loss or damage  resulting from fire or other risks included in
an extended coverage policy; (ii) against public liability and other tort claims
that  may be  incurred  by the  Company;  (iii) as may be  required  by the Loan
Instruments or applicable law and (iv) as may be reasonably requested by Secured
Party, all with adequate, financially sound and reputable insurers.

      Section 6.6. Contracts and Other Collateral.

      The Company shall perform all of its obligations  under or with respect to
each  instrument,  receivable,  contract  and other  intangible  included in the
Pledged  Property  to which the Company is now or  hereafter  will be party on a
timely basis and in the manner therein required,  including, without limitation,
this Agreement.

      Section 6.7. Defense of Collateral, Etc.

      The Company shall defend and enforce its right,  title and interest in and
to any part of: (a) the Pledged  Property;  and (b) if not  included  within the
Pledged  Property , those assets and properties whose loss could have a Material
Adverse Effect,  the Company shall defend the Secured  Party's right,  title and
interest in and to each and every part of the Pledged Property, each against all
manner of claims and demands on a timely  basis to the full extent  permitted by
applicable law.

      Section 6.8. Payment of Debts, Taxes, Etc.

      The Company shall pay, or cause to be paid,  all of its  indebtedness  and
other liabilities and perform, or cause to be performed,  all of its obligations
in accordance with the respective terms thereof, and pay and discharge, or cause
to be paid or discharged,  all taxes, assessments and other governmental charges
and levies  imposed upon it, upon any of its assets and  properties on or before
the last day on which the same may be paid without  penalty,  as well as pay all
other  lawful  claims  (whether  for  services,  labor,  materials,  supplies or
otherwise) as and when due

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      Section 6.9. Taxes and Assessments; Tax Indemnity.

      The  Company  shall (a) file all tax  returns  and  appropriate  schedules
thereto that are required to be filed under applicable law, prior to the date of
delinquency,  (b) pay and  discharge  all taxes,  assessments  and  governmental
charges or levies imposed upon the Company,  upon its income and profits or upon
any  properties  belonging  to it, prior to the date on which  penalties  attach
thereto,  and (c) pay all taxes,  assessments and governmental charges or levies
that,  if  unpaid,  might  become a lien or charge  upon any of its  properties;
provided,  however,  that the  Company in good faith may  contest  any such tax,
assessment,  governmental  charge or levy described in the foregoing clauses (b)
and (c) so long as appropriate reserves are maintained with respect thereto.

      Section 6.10. Compliance with Law and Other Agreements.

      The Company shall  maintain its business  operations and property owned or
used in connection  therewith in  compliance  with (a) all  applicable  federal,
state and  local  laws,  regulations  and  ordinances  governing  such  business
operations and the use and ownership of such property,  and (b) all  agreements,
licenses,  franchises,  indentures and mortgages to which the Company is a party
or by which the Company or any of its properties is bound.  Without limiting the
foregoing,  the Company shall pay all of its indebtedness promptly in accordance
with the terms thereof.

      Section 6.11. Notice of Default.

      The  Company  shall  give  written  notice  to the  Secured  Party  of the
occurrence  of any  default  or Event  of  Default  under  this  Agreement,  the
Transaction  Documents or any other Loan  Instrument  or any other  agreement of
Company for the payment of money, promptly upon the occurrence thereof.

      Section 6.12. Notice of Litigation.

      The Company shall give notice, in writing, to the Secured Party of (a) any
actions,  suits or  proceedings  wherein  the  amount  at issue is in  excess of
$50,000,  instituted by any persons against the Company, or affecting any of the
assets of the Company,  and (b) any dispute,  not resolved  within  fifteen (15)
days of the  commencement  thereof,  between the Company on the one hand and any
governmental  or regulatory  body on the other hand,  which might  reasonably be
expected  to have a  Material  Adverse  Effect  on the  business  operations  or
financial condition of the Company.

                                   ARTICLE 7.

                               NEGATIVE COVENANTS

      The Company  covenants  and agrees  that,  from the date hereof  until the
Obligations  have been fully paid and satisfied,  the Company shall not,  unless
the Secured Party shall consent otherwise in writing:

                                       10
<PAGE>

      Section 7.1. Indebtedness.

      The  Company  shall not  directly or  indirectly  permit,  create,  incur,
assume, permit to exist,  increase,  renew or extend on or after the date hereof
any  indebtedness in excess of One Hundred  Thousand  Dollars  ($100,000) on its
part, including commitments,  contingencies and credit availabilities,  or apply
for or offer or agree to do any of the foregoing.

      Section 7.2. Liens and Encumbrances.

      The Company shall not directly or indirectly make, create,  incur,  assume
or permit to exist any assignment, transfer, pledge, mortgage, security interest
or other lien or  encumbrance  of any  nature in, to or against  any part of the
Pledged Property or of the Company's  capital stock, or offer or agree to do so,
or own or acquire or agree to acquire  any asset or  property  of any  character
subject to any of the foregoing  encumbrances  (including any  conditional  sale
contract or other title retention  agreement),  or assign,  pledge or in any way
transfer or encumber  its right to receive any income or other  distribution  or
proceeds from any part of the Pledged  Property or the Company's  capital stock;
or enter into any  sale-leaseback  financing  respecting any part of the Pledged
Property as lessee,  or cause or assist the inception or  continuation of any of
the foregoing.

      Section 7.3. Articles, By-Laws, Mergers, Consolidations,  Acquisitions and
Sales.

      Without the prior  express  written  consent of the Secured  Party,  which
shall  not be  unreasonably  withheld,  the  Company  shall  not:  (a) Amend its
Articles  of  Incorporation  or  By-Laws;  (b)  issue or sell its  stock,  stock
options,  bonds,  notes or other corporate  securities or obligations;  (c) be a
party to any merger, consolidation or corporate reorganization,  (d) purchase or
otherwise  acquire  all or  substantially  all of the assets or stock of, or any
partnership or joint venture interest in, any other person,  firm or entity, (e)
sell,  transfer,  convey,  grant a  security  interest  in or  lease  all or any
substantial  part of its assets,  nor (f) create any subsidiaries nor convey any
of its assets to any subsidiary.

      Section 7.4. Management, Ownership.

      The Company shall not change its ownership,  executive staff or management
without the prior written consent of the Secured Party. The ownership, executive
staff and management of the Company are material  factors in the Secured Party's
willingness to institute and maintain a lending relationship with the Company.

      Section 7.5. Dividends, Etc.

      The Company  shall not declare or pay any dividend of any kind, in cash or
in property, on any class of its capital stock, nor purchase,  redeem, retire or
otherwise  acquire for value any shares of such stock, nor make any distribution
of any kind in respect thereof,  nor make any return of capital to shareholders,
nor make any payments in respect of any  pension,  profit  sharing,  retirement,
stock option,  stock bonus,  incentive  compensation  or similar plan (except as
required  or  permitted  hereunder),  without the prior  written  consent of the
Secured Party.

                                       11
<PAGE>

      Section 7.6. Guaranties; Loans.

      The  Company  shall not  guarantee  nor be liable in any  manner,  whether
directly or  indirectly,  or become  contingently  liable after the date of this
Agreement in connection  with the  obligations or  indebtedness of any person or
persons,  except  for  (i)  the  indebtedness  currently  secured  by the  liens
identified on the Pledged  Property  identified on Exhibit A hereto and (ii) the
endorsement  of  negotiable  instruments  payable to the  Company for deposit or
collection  in the ordinary  course of business.  The Company shall not make any
loan,  advance or  extension  of credit to any  person  other than in the normal
course of its business.

      Section 7.7. Debt.

      The  Company  shall  not  create,  incur,  assume  or  suffer to exist any
additional  indebtedness of any description whatsoever in an aggregate amount in
excess of $25,000  (excluding  any  indebtedness  of the  Company to the Secured
Party,  trade  accounts  payable and accrued  expenses  incurred in the ordinary
course of business and the endorsement of negotiable  instruments payable to the
Company,  respectively  for  deposit or  collection  in the  ordinary  course of
business).

                                       12
<PAGE>

      Section 7.8. Conduct of Business.

      The  Company  will  continue to engage,  in an  efficient  and  economical
manner, in a business of the same general type as conducted by it on the date of
this Agreement.

      Section 7.9. Places of Business.

      The location of the Company's chief place of business is 98 Shoreline Way,
Hampton, GA, 30228. The Company shall not change the location of its chief place
of business,  chief executive  office or any place of business  disclosed to the
Secured  Party or move any of the Pledged  Property  from its  current  location
without  thirty (30) days'  prior  written  notice to the Secured  Party in each
instance.

                                   ARTICLE 8.

                                  MISCELLANEOUS

      Section 8.1. Notices.

      All  notices or other  communications  required or  permitted  to be given
pursuant to this  Agreement  shall be in writing and shall be considered as duly
given on:  (a) the date of  delivery,  if  delivered  in person,  by  nationally
recognized  overnight  delivery  service or (b) five (5) days  after  mailing if
mailed from within the  continental  United  States by  certified  mail,  return
receipt requested to the party entitled to receive the same:

                                       13
<PAGE>

             If to the Secured Party: Cornell Capital Partners, LP
                                      101 Hudson Street-Suite 3606
                                      Jersey City, New Jersey 07302
                                      Attention:        Mark Angelo
                                                        Portfolio Manager
                                      Telephone:        (201) 986-8300
                                      Facsimile:        (201) 985-8266

             With a copy to:          Seth Farbman PC
                                      301 Eastwood Road
                                      Woodmere, NY 11598
                                      Attention:        Seth Farbman, Esq.
                                      Telephone:        (516) 569-6089
                                      Facsimile:        (516) 569-6084

             And if to the Company:   Instapay Systems, Inc.
                                      98 Shoreline Way
                                      Hampton, GA 30228
                                      Attention:        Harry Hargens, President
                                      Telephone:        (770) 471-4944
                                      Facsimile:        (770) 471-5686

             With a copy to:          Kirkpatrick & Lockhart LLP
                                      201 South Biscayne Boulevard-Suite 2000
                                      Miami, Florida  33131-2399
                                      Attention:        Clayton E. Parker, Esq.
                                      Telephone:        (305) 539-3300
                                      Facsimile:        (305) 358-7095

      Any party may  change  its  address  by giving  notice to the other  party
stating its new address.  Commencing on the tenth (10th) day after the giving of
such notice, such newly designated address shall be such party's address for the
purpose of all notices or other communications required or permitted to be given
pursuant to this Agreement.

      Section 8.2. Severability.

      If any provision of this Agreement shall be held invalid or unenforceable,
such  invalidity  or  unenforceability  shall attach only to such  provision and
shall not in any  manner  affect or render  invalid or  unenforceable  any other
severable  provision of this Agreement,  and this Agreement shall be carried out
as if any such invalid or unenforceable provision were not contained herein.

      Section 8.3. Expenses.

      In the event of an Event of Default,  the Company  will pay to the Secured
Party the amount of any and all  reasonable  expenses,  including the reasonable
fees  and  expenses  of its  counsel,  which  the  Secured  Party  may  incur in
connection  with: (i) the custody or  preservation  of, or the sale,  collection
from, or other realization upon, any of the Pledged Property;  (ii) the exercise
or enforcement of any of the rights of the Secured Party  hereunder or (iii) the
failure by the Company to perform or observe any of the provisions hereof.

                                       14
<PAGE>

      Section 8.4. Waivers, Amendments, Etc.

      The Secured  Party's  delay or failure at any time or times  hereafter  to
require  strict  performance  by  Company  of any  undertakings,  agreements  or
covenants shall not waiver,  affect,  or diminish any right of the Secured Party
under this Agreement to demand strict compliance and performance  herewith.  Any
waiver by the  Secured  Party of any Event of Default  shall not waive or affect
any other Event of Default, whether such Event of Default is prior or subsequent
thereto and whether of the same or a different type.  None of the  undertakings,
agreements  and  covenants of the Company  contained in this  Agreement,  and no
Event of Default,  shall be deemed to have been waived by the Secured Party, nor
may this  Agreement  be  amended,  changed  or  modified,  unless  such  waiver,
amendment,  change or  modification  is  evidenced by an  instrument  in writing
specifying  such waiver,  amendment,  change or  modification  and signed by the
Secured Party.

      Section 8.5. Continuing Security Interest.

      This Agreement shall create a continuing  security interest in the Pledged
Property and shall: (i) remain in full force and effect until payment in full of
the  Obligations;  and (ii) be binding upon the Company and its  successors  and
heirs and (iii) inure to the benefit of the Secured Party and its successors and
assigns.  Upon the  payment  or  satisfaction  in full of the  Obligations,  the
Company shall be entitled to the return, at its expense,  of such of the Pledged
Property as shall not have been sold in  accordance  with  Section 5.2 hereof or
otherwise applied pursuant to the terms hereof.

      Section 8.6. Independent Representation.

      Each party hereto  acknowledges and agrees that it has received or has had
the opportunity to receive  independent legal counsel of its own choice and that
it has been sufficiently apprised of its rights and responsibilities with regard
to the substance of this Agreement.

      Section 8.7. Applicable Law: Jurisdiction.

      This Agreement shall be governed by and interpreted in accordance with the
laws of the State of Utah without  regard to the principles of conflict of laws.
The parties  further agree that any action between them shall be heard in Hudson
County,  New Jersey,  and expressly consent to the jurisdiction and venue of the
Superior  Court of New Jersey,  sitting in Hudson  County and the United  States
District Court for the District of New Jersey sitting in Newark,  New Jersey for
the adjudication of any civil action asserted pursuant to this Paragraph.

      Section 8.8. Waiver of Jury Trial.

      AS A FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT
AND TO MAKE THE  FINANCIAL  ACCOMMODATIONS  TO THE COMPANY,  THE COMPANY  HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING  RELATED IN ANY WAY TO
THIS AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS TRANSACTION.

      Section 8.9. Entire Agreement.

      This  Agreement  constitutes  the entire  agreement  among the parties and
supersedes any prior agreement or  understanding  among them with respect to the
subject matter hereof.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       15
<PAGE>

      IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

                                                 COMPANY:

                                                 INSTAPAY SYSTEMS, INC.

                                                 By:    /s/ Harry Hargens
                                                 Name:  Harry Hargens
                                                 Title: President

                                                 SECURED PARTY:
                                                 CORNELL CAPITAL PARTNERS, LP

                                                 By:  Yorkville Advisors, LLC
                                                 Its: General Partner

                                                 By:    /s/ Mark Angelo
                                                 Name:  Mark Angelo
                                                 Title: Portfolio Manager

                                       16
<PAGE>

                                    EXHIBIT A

                         DEFINITION OF PLEDGED PROPERTY

      For the purpose of securing prompt and complete payment and performance by
the  Company  of  all  of  the  Obligations,  the  Company  unconditionally  and
irrevocably hereby grants to the Secured Party a continuing security interest in
and to, and lien upon, the following Pledged Property of the Company:

            (a)  all  goods  of  the  Company,  including,  without  limitation,
machinery,  equipment, furniture,  furnishings,  fixtures, signs, lights, tools,
parts,  supplies  and  motor  vehicles  of every  kind and  description,  now or
hereafter owned by the Company or in which the Company may have or may hereafter
acquire any interest, and all replacements, additions, accessions, substitutions
and proceeds thereof,  arising from the sale or disposition  thereof,  and where
applicable,  the proceeds of insurance  and of any tort claims  involving any of
the foregoing;

            (b) all inventory of the Company, including, but not limited to, all
goods, wares,  merchandise,  parts, supplies,  finished products, other tangible
personal  property,  including such inventory as is temporarily out of Company's
custody or  possession  and  including  any returns  upon any  accounts or other
proceeds,  including insurance proceeds,  resulting from the sale or disposition
of any of the foregoing;

            (c) all  contract  rights and general  intangibles  of the  Company,
including, without limitation,  goodwill, trademarks, trade styles, trade names,
leasehold interests,  partnership or joint venture interests, patents and patent
applications,  copyrights,  deposit  accounts  whether  now  owned or  hereafter
created;

            (d) all documents, warehouse receipts, instruments and chattel paper
of the Company whether now owned or hereafter created;

            (e) all accounts and other  receivables,  instruments or other forms
of  obligations  and  rights to  payment  of the  Company  (herein  collectively
referred  to as  "Accounts"),  together  with the  proceeds  thereof,  all goods
represented  by such  Accounts  and all such goods that may be  returned  by the
Company's  customers,  and  all  proceeds  of any  insurance  thereon,  and  all
guarantees,  securities  and liens which the Company may hold for the payment of
any such  Accounts  including,  without  limitation,  all rights of  stoppage in
transit,  replevin and reclamation and as an unpaid vendor and/or lienor, all of
which  the  Company  represents  and  warrants  will be bona  fide and  existing
obligations of its respective customers, arising out of the sale of goods by the
Company in the ordinary course of business;

            (f) to the extent assignable,  all of the Company's rights under all
present and future  authorizations,  permits,  licenses and franchises issued or
granted in connection with the operations of any of its facilities;

            (g)  all  products  and  proceeds  (including,  without  limitation,
insurance proceeds) from the above-described Pledged Property.

                                       A-1
<PAGE>

<TABLE>
<CAPTION>

                                   SCHEDULE I

                               SCHEDULE OF BUYERS

                                                                                 ADDRESS/FACSIMILE             AMOUNT OF
               NAME                              SIGNATURE                        NUMBER OF BUYER             SUBSCRIPTION
----------------------------        --------------------------------     ------------------------------      -------------
<S>                                 <C>                                 <C>                       <C>       <C>
Cornell Capital Partners, LP        By:      Yorkville Advisors, LLC     101 Hudson Street - Suite 3606      $ 350,000
                                    Its:     General Partner             Jersey City, NJ  07303
                                                                         Facsimile: (201) 985-8266

                                    By:      ____________________
                                    Name:    Mark A. Angelo
                                    Its:     Portfolio Manager

-------------------------------------------------------------------------------------------------------------------

</TABLE>

                                       A-2Unassociated Document

Exhibit 4.3

FORM OF RESTRICTED STOCK AGREEMENT

THIS RESTRICTED STOCK AGREEMENT (this “Agreement”) is made and entered into as of the 5th day of October, 2004 by and between Midway Games Inc., a Delaware corporation, having its principal executive offices at 2704 West Roscoe Street, Chicago, Illinois 60618 (the “Corporation”) and _______________________ residing at ______________________,
Texas (“Employee”). 

W I T N E S S E T H:

 

WHEREAS, Employee, who has not previously been employed by the Corporation or its subsidiaries, is accepting an offer of employment to serve the Corporation as an employee at the Corporation’s wholly-owned subsidiary; and 

WHEREAS, simultaneously herewith Employee and Inevitable Entertainment, Inc. are entering into an Employment Agreement (the “Employment Agreement”) that, among other matters, requires the Corporation to award the restricted stock provided for in this Agreement. 

 

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 Employee’s entering into the Employment Agreement the Corporation is hereby granting to Employee shares of the Corporation’s common stock, $.01 par value (“Common Stock”), on the terms and conditions, and subject to the restrictions, herein set forth:

Section 1.  Definitions. As used in this Agreement, the following terms shall have the following meanings:

 

A.  “Change of Control” means the acquisition by any person or group, other than Permitted Holders, of more than 50% of the stock of the Corporation having the right to vote for the election of the members of the Corporation’s Board of Directors. For purposes of this definition, the following are “Permitted Holders”: Sumner M. Redstone, Phyllis Redstone, Paula Redstone and National Amusements, Inc. and any entities owned or controlled, directly or indirectly, by any of them.

B.  “Date of Award” means October 5, 2004.

C.  “Period of Restriction” means, with respect to Restricted Shares, the period of time between the Date of Award and the date of vesting as set forth in Section 4 hereof.

D.  “Restricted Shares” means the number of shares of the Corporation’s Common Stock being granted pursuant to Section 2 hereof, as well as any additional shares of Common Stock or other securities that may be issued pursuant to Section 10 hereof.

Section 2.  Award. Effective as of the Date of Award, the Corporation awards to Employee an aggregate of _______________ (_____) Restricted Shares subject to the terms of this Agreement, including, without limitation, the forfeiture provisions set forth in Section 3 hereof and the limitations on transfer set forth in Section 5 hereof.

 

Section 3.  Forfeiture of Shares upon Termination of Employment during Period of Restriction. If the services of Employee to the Corporation shall be terminated during the Period of Restriction for any reason other than a termination by the Corporation without cause (as such term is defined in the Employment Agreement), a termination by Employee for good reason (as such term is defined in the Employment Agreement), or upon a Change of Control, Employee shall immediately forfeit to the Corporation all Restricted Shares that have not previously vested as provided in
Section 4 hereof, without any consideration paid to Employee, and, thereafter, Employee shall have no further rights with respect to such Restricted Shares. 

 

	 
	 	 	 
	

	 

Section 4.  Lapse of the Period of Restriction. The Period of Restriction shall lapse, and the forfeiture provisions of Section 3 hereof shall no longer be applicable as to Restricted Shares held by or on behalf of Employee according to the following schedule, if Employee shall have been continuously employed by the Corporation from the Date of Award through the date of such lapse: as to forty percent (40%) of the Restricted Shares, on or after the date which is five months after the Date of Award; as to twenty percent (20%) of the Restricted Shares, on or after the
date which is eleven months after the Date of Award; as to twenty percent (20%) of the Restricted Shares, on or after the date which is twenty-three months after the Date of Award; as to the remaining twenty percent (20%) of the Restricted Shares, on or after the date which is thirty-five months after the Date of Award. If any installment includes a fraction of a share, the Period of Restriction with respect to such fraction shall not then lapse, and the fraction shall be carried forward and added to subsequent installments. If earlier, the Period of Restriction will lapse with respect to Restricted Shares then held by Employee upon the termination by the Corporation of Employee’s services to the Corporation without cause (as such term is defined in the Employment Agreement) a termination by Employee for good reason (as such term is defined in the Employment Agreement), or upon a Change of Control. 
 

 

Section 5.  Limitations on Transfer during Period of Restriction. Restricted Shares may not be sold, assigned, transferred, exchanged, pledged, hypothecated, or otherwise encumbered during the Period of Restriction, and no such sale, assignment, transfer, exchange, pledge, hypothecation, or encumbrance, whether made or created by voluntary act of Employee or of any agent of Employee or by operation of law, shall be recognized by, or be binding upon, or shall in any manner affect the rights of, the Corporation or any agent or any custodian holding certificates for
such Restricted Shares during the Period of Restriction.

 

Section 6.  Stockholder Rights during Period of Restriction. Unless and until the Restricted Shares are forfeited as set forth in Section 3 hereof, Employee shall have all of the rights of a stockholder of the Corporation with respect to Restricted Shares, including the right to vote and to receive dividends on the Restricted Shares, during the Period of Restriction. 

 

Section 7.  Registration Rights. The Corporation shall promptly prepare and file a registration statement under the Securities Act of 1933, as amended (the “Act”) with respect to the resale of the Restricted Shares and shall cause such registration statement to become effective as promptly as practical 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 such registration statement is no longer required for Employee to publicly offer and sell the Restricted
Shares.

 

Section 8.  Restricted Shares as Investment. Employee agrees that all Restricted Shares awarded hereunder are being acquired in good faith for investment purposes only and not for sale or distribution, except pursuant to a registration statement or an applicable exemption from registration under the Act. The Corporation may place a “stop transfer” order with respect to the Restricted Shares with its transfer agent unless the Restricted Shares are registered under the Act.

 

Section 9.  Legend. Each certificate evidencing the Restricted Shares shall bear a legend referring to this Agreement and to the fact that such Restricted Shares are subject to the forfeiture provisions of Section 3 hereof during the Period of Restriction. The Corporation shall cause certificates without such legend to be issued for any of the Restricted Shares as and when the Period of Restriction lapses. Each certificate may also bear a restrictive legend, in the discretion of the Corporation, until registered. The form of such legends shall be as
follows:

 

	 
	 	 2	 
	

	 

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN A RESTRICTED STOCK AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR HIS OR HER PREDECESSOR IN INTEREST. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION AND WILL BE FURNISHED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION BY THE HOLDER OF RECORD OF THE SHARES REPRESENTED BY THIS CERTIFICATE. 

THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION OR QUALIFICATION THEREOF UNDER SUCH ACT AND SUCH APPLICABLE STATE OR OTHER JURISDICTION'S SECURITIES LAWS OR AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION AND QUALIFICATION IS NOT REQUIRED.

Employee agrees to deliver to the Corporation for cancellation, upon request of the Corporation, any certificate representing Restricted Shares that have been forfeited.

Section 10.  Adjustment in Certain Events. If there is any change in the Common Stock by reason of stock dividends, split-ups, mergers, consolidations, reorganizations, combinations or exchanges of shares or the like, each Restricted Share under this Agreement shall be adjusted in the same manner as any other share of the Common Stock and the provisions of this Agreement shall extend not only to the number of Restricted Shares awarded hereunder, but also to all additional shares of Common Stock or other securities received by Employee pursuant to any such change with
respect to the Restricted Shares granted hereunder, which additional shares of Common Stock or other securities shall be deemed to be Restricted Shares for purposes of this Agreement.

 

Section 11.  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. 

 

Section 12.  Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Illinois, without giving effect to any conflicts of law rule or principle that might require the application of the laws of another jurisdiction.

 

Section 13.  Withholding. The Corporation may withhold, and 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 Restricted Shares. Employee shall 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.

 

Section 14.  Section 83(b) Tax Election. Employee understands that he may elect to be taxed at the time the Restricted Shares are acquired rather than when such shares cease to be subject to forfeiture restrictions by filing an election under Section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”), with the Internal Revenue Service within thirty (30) days after the Date of Award. A form for making this election is attached as Exhibit 1 hereto. Employee understands that the failure to make this filing within the thirty (30) day period
will result in the recognition of ordinary income by Employee as the forfeiture restrictions on the Restricted Shares lapse measured by the value of the Restricted Shares at that time. Employee agrees that he is relying on his own tax advisors and is not relying on the Corporation with respect to any election that he may make under Section 83(b) of the Code.

 

	 
	 	 3	 
	

	 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day first written above.

 

	 	 	 
	 	MIDWAY GAMES INC.
	 
 	 
 	 
 
	Date: 	By:  	/s/                                                          
	 	Thomas E. Powell
	 	Executive Vice President - Finance, 
	 	Treasurer and Chief Financial Officer

AGREED AND ACCEPTED:

By:_______________________________________                        

Employee

Note: This form was executed by each of the following persons with respect to the following number of shares of restricted stock:

	
Russell L. Byrd 
	
28,654

	
Craig J. Galley 
	
28,654

	
Cyrus L. Lum 
	
28,654

	
James Stiefelmaier 
	
12,704

	
Pete Franco 
	
12,704

	
Daryl Allison 
	
8,599

	
Andy Thyssen 
	
7,449

	
Steve Broumley 
	
7,449

	
Michael Traub 
	
7,355

	
Aaron Smischney 
	
5,441

	
Matt Green 
	
5,161

	  
	 	 4	 
	

	 

EXHIBIT 1

ELECTION UNDER SECTION 83(b) OF

THE INTERNAL REVENUE CODE

The undersigned hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code with respect to the property described below and supplies the following information in accordance with the regulations promulgated thereunder:

1. The name, address and social security number of the undersigned:

 

Name:__________________________________________                            

Address:________________________________________
                _______________________________________________

Social Security No.________________________________                    

2. Description of property with respect to which the election is being made:

 

_______________shares of common stock, par value $.01 per share, of Midway Games Inc., a Delaware corporation, (the “Company”).

3. The date on which the property was transferred is ____________ __, 20___.

 

4. The taxable year to which this election relates is calendar year 2004.

 

5. Nature of restrictions to which the property is subject:

 

The shares of stock are subject to the provisions of a Restricted Stock Agreement between the undersigned and the Company. The shares of stock are subject to forfeiture under the terms of the Agreement.

6. The fair market value of the property at the time of transfer (determined without regard to any lapse restriction) was $__________ per share, for a total of $__________.

 

7. The amount paid by taxpayer for the property was $__________.

 

8. A copy of this statement has been furnished to the Company.

 

Dated: _____________, 2004

 

 

	 	 	 	_______________________________
	 	 	 	
 Taxpayer’s Signature

	 	 	 	_______________________________
	 	 	 	
 Taxpayer’s Printed Name

 

	 
	 	 5

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