Document:

<Page>

                                                                   EXHIBIT 10.1

                                                                   EXECUTED COPY

                          SECURITIES PURCHASE AGREEMENT

          SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of May 16,
2003, by and among Midway Games Inc., a Delaware corporation, with headquarters
located at 2704 West Roscoe Street, Chicago, Illinois 60618 (the "COMPANY"), and
the investors listed on the Schedule of Buyers attached hereto (individually, a
"BUYER" and collectively, the "BUYERS").

                                    WHEREAS:

          A.   The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 ACT").

          B.   The Company has authorized the following new series of its
preferred stock, par value $0.01 per share: the Company's Series C Convertible
Preferred Stock (the "PREFERRED STOCK"), which shall be convertible into shares
of the Company's common stock, par value $0.01 per share (the "COMMON STOCK")
(as converted, the "CONVERSION SHARES"), in accordance with the terms of the
Company's Certificate of Designations, Preferences and Rights of the Series C
Convertible Preferred Stock, in the form attached hereto as EXHIBIT A (the
"CERTIFICATE OF DESIGNATIONS").

          C.   The Buyers severally wish to purchase, upon the terms and
conditions stated in this Agreement, initially (i) an aggregate of 3,500 shares
of Preferred Stock (the "INITIAL PREFERRED SHARES") in the respective amounts
set forth opposite each Buyer's name on the Schedule of Buyers and (ii) warrants
(the "WARRANTS") to purchase up to 326 shares of Common Stock (as exercised
collectively, the "WARRANT SHARES") for each Initial Preferred Share purchased
by such Buyer on the Initial Closing Date (as defined below), such Warrants to
be substantially in the form attached hereto as EXHIBIT B.

          D.   The Buyers will have the option, subject to the terms and
conditions stated in this Agreement, to purchase in the aggregate up to an
additional 1,250 shares of Preferred Stock (the "ADDITIONAL PREFERRED SHARES")
(pro-rata based on the number of Initial Preferred Shares that each Buyer
purchased in relation to the total number of Initial Preferred Shares issued).
The Initial Preferred Shares and the Additional Preferred Shares collectively
are referred to in this Agreement as the "PREFERRED SHARES."

          E.   Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement substantially in the form attached hereto as EXHIBIT C (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.

          F.   The location of defined terms in this Agreement is set forth on
the Index of Terms attached hereto.

          NOW THEREFORE, the Company and the Buyers hereby agree as follows:

<Page>

          1.   PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.

               a.      PURCHASE OF PREFERRED SHARES AND WARRANTS. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6(a) and 7(a)
below, the Company shall issue and sell to each Buyer, and each Buyer severally
agrees to purchase from the Company, the respective number of Initial Preferred
Shares, together with the related Warrants, set forth opposite such Buyer's name
on the Schedule of Buyers (the "INITIAL CLOSING"). Subject to the terms stated
herein, within twelve (12) months following the Initial Closing Date (as defined
below), subject to the satisfaction (or waiver) of the conditions set forth in
Sections 6(b) and 7(b) below, each Buyer in its sole discretion may notify the
Company (the "ADDITIONAL PREFERRED SHARES EXERCISE NOTICE") that it wishes to
purchase up to its pro rata share of the Additional Preferred Shares (the
maximum pro rata share amount is listed opposite each Buyer's name on the
Schedule of Buyers) and the Company shall issue and sell to such Buyer such
number of Additional Preferred Shares (each, an "ADDITIONAL CLOSING"). The
Initial Closing and each Additional Closing are each sometimes referred to
herein as a "CLOSING." The purchase price (the "PURCHASE PRICE") of (i) each
Initial Preferred Share and related Warrants at the Initial Closing shall be
$10,000 per Initial Preferred Share and related Warrants and (ii) each
Additional Preferred Share at an Additional Closing shall be $10,000 per
Additional Preferred Share. Notwithstanding the foregoing, in the event that at
any time following the effective date of the Registration Statement filed
pursuant to Section 2(a) of the Registration Rights Agreement, the Conditions to
Cancellation of Right to Purchase Additional Preferred Shares (as defined below)
are satisfied, then the Company shall have the right to send a written notice to
the Buyers on the Business Day (as defined below) immediately after the
Measuring Period (as defined below) indicating that the right of the Buyers to
further exercise their option to purchase any Additional Preferred Shares will
terminate on the twentieth (20th) trading day (the "ADDITIONAL PREFERRED SHARE
PURCHASE CANCELLATION DATE") following receipt of such written notice as to the
Additional Preferred Shares for which the Buyer has not delivered an Additional
Preferred Shares Exercise Notice as of such termination date. "CONDITIONS TO
CANCELLATION OF RIGHT TO PURCHASE ADDITIONAL PREFERRED SHARES" means the
following conditions: (i) on each day during the period beginning on the first
day of the Measuring Period and ending on the Additional Preferred Share
Purchase Cancellation Date, the Registration Statement registering the Initial
Registrable Securities (as defined in the Registration Rights Agreement) shall
be effective and available for the sale of at least all of the Registrable
Securities required to be included in such Registration Statement and there
shall not have been any Grace Periods (as defined in the Registration Rights
Agreement); (ii) on each day during the period beginning on the Initial Issuance
Date (as defined in the Certificate of Designations) and ending on the
Additional Preferred Share Purchase Cancellation Date, the Common Stock is
designated for listing on The New York Stock Exchange, Inc. (the "NYSE") or
quotation on the NASDAQ National Market ("NASDAQ") and shall not have been
suspended from trading on such exchange or market (other than suspensions of not
more than one day and occurring prior to the Additional Preferred Share Purchase
Cancellation Date due to business announcements by the Company; (iii) during the
period beginning on the first day of the Measuring Period and ending on the
Additional Preferred Share Purchase Cancellation Date, there shall not have
occurred (A) an event constituting a Triggering Event (as defined in the
Certificate of Designations), (B) an event that with the passage of time and
without being cured would constitute a Triggering Event, or (C) the public
announcement of a pending, proposed or intended Change of Control (as

                                      - 2 -
<Page>

defined in the Certificate of Designations), unless such pending, proposed or
intended Change of Control has been terminated, abandoned or consummated and the
Company has publicly announced such termination, abandonment or consummation of
such Change of Control; (iv) during the period beginning on the Initial Issuance
Date and ending on and including the Additional Preferred Share Purchase
Cancellation Date, the Company shall have delivered Conversion Shares upon
conversion of the Preferred Shares and Warrant Shares upon exercise of the
Warrants to the holders on a timely basis as set forth in Section 2(d) of the
Certificate of Designations and Sections 2(a) and 2(b) of the Warrants,
respectively; provided, however, that for purposes of this Section 1(a) only,
the Company shall be deemed to have satisfied the conditions set forth in this
clause (iv) if on not more than two occasions prior to the Additional Preferred
Share Purchase Cancellation Date the Company has failed to meet the requirements
set forth in Section 2(d)(ii) of the Certificate of Designations and Sections
2(a) and 2(b) of the Warrants by no more than three days; (v) the Company shall
have received the Stockholder Approval (as defined below) or satisfied the
holders of the Preferred Shares that the Stockholder Approval is not required in
connection with the 19.99% Rule (as defined below); (vi) the Company shall not
have failed to timely make any payments within 5 Business Days of when such
payment is due, whether as interest or penalty payments, pursuant to this
Agreement, the Certificate of Designations, the Registration Rights Agreement or
the Warrants; and (vii) the Weighted Average Price (as defined in the
Certificate of Designations) of the Common Stock for any ten (10) consecutive
trading days after the effectiveness of the Registration Statement (the
"MEASURING PERIOD") is equal to or greater than $7.58 (subject to adjustment for
stock splits, stock dividends, recapitalizations, combinations, reverse stock
splits or other similar events).

               b.      THE CLOSINGS. The date and time of the Initial Closing
(the "INITIAL CLOSING DATE") shall be 10:00 a.m., New York City time, on May 16,
2003, and the date and time of each Additional Closing shall be on the third
Business Day following receipt by the Company of the applicable Additional
Preferred Shares Exercise Notice (or such later date as is mutually agreed to by
the Company and the applicable Buyer or Buyers)(each, an "ADDITIONAL CLOSING
DATE"), in each case subject to the satisfaction (or waiver) of the conditions
set forth in Sections 6(a) and 7(a), or 6(b) and 7(b), as applicable. The
Initial Closing Date and each Additional Closing Date each shall be referred to
as a "CLOSING DATE." Each Closing shall occur on the applicable Closing Date at
the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York
10022. "BUSINESS DAY" means any day other than Saturday, Sunday or other day on
which commercial banks in The City of New York or in Chicago, Illinois are
authorized or required by law to remain closed.

               c.      FORM OF PAYMENT. On each Closing Date, (A) each Buyer
shall pay the Purchase Price to the Company for the Preferred Shares and, in the
case of the Initial Closing, the related Warrants to be issued and sold to such
Buyer on such Closing Date by wire transfer of immediately available funds in
accordance with the Company's written wire instructions, less any amount
withheld at the Initial Closing for expenses pursuant to Section 4(l), and (B)
the Company shall deliver to each Buyer stock certificates (in the denominations
as such Buyer shall request) (the "PREFERRED STOCK CERTIFICATES") representing
such number of the Preferred Shares which such Buyer is then purchasing
hereunder, along, in the case of the Initial Closing, with warrants representing
the related Warrants, in each case, duly executed on behalf of the Company and
registered in the name of such Buyer.

                                      - 3 -
<Page>

          2.   BUYER'S REPRESENTATIONS AND WARRANTIES.

          Each Buyer represents and warrants with respect to only itself that:

               a.      INVESTMENT PURPOSE. Such Buyer (i) is acquiring the
Preferred Shares and the Warrants, (ii) upon conversion of the Preferred Shares
owned by it, will acquire the Conversion Shares then issuable and (iii) upon
exercise of the Warrants held by it, will acquire the Warrant Shares issuable
upon exercise thereof (the Preferred Shares, the Conversion Shares, the Warrants
and the Warrant Shares collectively are referred to herein as the "SECURITIES")
for its own account for investment only and not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; provided, however,
that by making the representations herein, such Buyer does not agree to hold any
of the Securities for any minimum or other specific term and reserves the right
to dispose of the Securities at any time, provided further, however, that such
disposition shall be in accordance with or pursuant to a registration statement
or an exemption under the 1933 Act.

               b.      ACCREDITED INVESTOR STATUS. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D under the
1933 Act.

               c.      RELIANCE ON EXEMPTIONS. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of the United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.

               d.      INFORMATION. Such Buyer and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by such Buyer. Such Buyer and its advisors,
if any, have been afforded the opportunity to ask questions of the Company.
Neither such inquiries nor any other due diligence investigations conducted by
such Buyer or its advisors, if any, or its representatives shall modify, amend
or affect such Buyer's right to rely on the Company's representations and
warranties contained in this Agreement.

               e.      NO GOVERNMENTAL REVIEW. Such Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

               f.      TRANSFER OR RESALE. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall

                                      - 4 -
<Page>

have delivered to the Company an opinion of counsel, in a form reasonably
acceptable to the Company, to the effect that such Securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration, or (C) such Buyer provides the Company with
reasonable assurance that such Securities can be sold, assigned or transferred
pursuant to Rule 144 promulgated under the 1933 Act (or a successor rule
thereto) ("RULE 144"); (ii) any sale of the Securities made in reliance on Rule
144 may be made only in accordance with the terms of Rule 144 and further, if
Rule 144 is not applicable, any resale of the Securities under circumstances in
which the seller (or the person through whom the sale is made) may be deemed to
be an underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register the Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder. The Securities may be pledged in connection with a bona
fide margin account or other loan secured by the Securities. As used herein,
"Person" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.

               g.      LEGENDS. Such Buyer understands that the certificates or
other instruments representing the Preferred Shares and Warrants and, until such
time as the sale of the Conversion Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Conversion Shares and the
Warrant Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):

          THE SECURITIES REPRESENTED BY THIS CERTIFICATE
          HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
          OF 1933, AS AMENDED, OR APPLICABLE STATE
          SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
          FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
          ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
          FOR THE SECURITIES UNDER THE SECURITIES ACT OF
          1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
          LAWS OR (B) AN OPINION OF COUNSEL, IN A FORM
          REASONABLY ACCEPTABLE TO THE COMPANY, THAT
          REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
          APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS
          SOLD PURSUANT TO RULE 144 UNDER SAID ACT. THE
          SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
          BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY
          THE SECURITIES.

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, (i) such Securities are registered for resale under the 1933 Act,
(ii) in connection with a sale transaction, such holder provides the Company
with an opinion of counsel, in a form reasonably acceptable to the

                                      - 5 -
<Page>

Company, to the effect that a public sale, assignment or transfer of the
Securities may be made without registration under the 1933 Act, or (iii) such
holder provides the Company with reasonable assurances that the Securities can
be sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold.

               h.      AUTHORIZATION; ENFORCEMENT; VALIDITY. This Agreement and
the Registration Rights Agreement have been duly and validly authorized,
executed and delivered on behalf of such Buyer and are valid and binding
agreements of such Buyer enforceable against such Buyer in accordance with their
terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.

               i.      RESIDENCY. Such Buyer is a resident of that country or
state specified in its address on the Schedule of Buyers.

          3.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

          The Company represents and warrants to each of the Buyers that:

               a.      ORGANIZATION AND QUALIFICATION. The Company and its
"SUBSIDIARIES" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest which ownership entitles the Company to elect a majority of the
board of directors or similar governing body of such entity) are corporations or
limited liability companies duly organized and validly existing in good standing
under the laws of the jurisdiction in which they are incorporated, and have the
requisite corporate or other power and authorization to own their properties and
to carry on their business as now being conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign corporation or limited liability
company to do business and is in good standing in every jurisdiction in which
its ownership of property or the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "MATERIAL ADVERSE EFFECT" means any material adverse
effect on the business, properties, assets, operations, results of operations,
prospects or financial condition of the Company and its Subsidiaries, if any,
taken as a whole, or on the transactions contemplated hereby or by the
agreements and instruments to be entered into in connection herewith, or on the
authority or ability of the Company to perform its obligations under the
Transaction Documents (as defined below) or the Certificate of Designations. A
complete list of entities in which the Company, directly or indirectly, owns
capital stock or holds an equity or similar interest is set forth on SCHEDULE
3(a).

               b.      AUTHORIZATION; ENFORCEMENT; VALIDITY. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Warrants, the Registration Rights
Agreement, the Irrevocable Transfer Agent Instructions (as defined in Section 5)
and each of the other agreements entered into by the parties hereto in
connection with the transactions contemplated by this Agreement (collectively,
the "TRANSACTION DOCUMENTS"), and to issue the Securities in accordance with the
terms hereof and

                                      - 6 -
<Page>

thereof. The execution and delivery of the Transaction Documents by the Company
and the execution and filing of the Certificate of Designations by the Company
and the consummation by it of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Preferred Shares, the
reservation for issuance and the issuance of the Conversion Shares issuable upon
conversion thereof, the issuance of the Warrants and the reservation for
issuance and the issuance of the Warrant Shares issuable upon exercise of the
Warrants, have been duly authorized by the Company's Board of Directors and no
further consent or authorization is required by the Company, its Board of
Directors or its stockholders (except to the extent that stockholder approval
may be required pursuant to the rules of the NYSE for the issuance of a number
of Conversion Shares and the Warrant Shares in connection with the transactions
contemplated by this Agreement greater in the aggregate than 19.99% of the
number of shares of Common Stock outstanding immediately prior to the Initial
Closing Date (the "19.99% RULE")). The Transaction Documents have been duly
executed and delivered by the Company. The Transaction Documents constitute the
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies. The
Certificate of Designations has been filed on or prior to the Initial Closing
Date with the Secretary of State of the State of Delaware and will be in full
force and effect, enforceable against the Company in accordance with its terms
and shall not have been amended unless in compliance with its terms.

               c.      CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company consists of (i) 100,000,000 shares of Common Stock,
of which as of the date hereof 46,469,310 shares are issued and outstanding,
125,000 shares are issued to David Zucker as restricted stock under his
restricted stock agreement, 2,930,000 shares are held in treasury, 14,001,669
shares are reserved for issuance pursuant to the Company's stock option,
retirement, purchase and employee benefit plans, and 3,848,794 shares are
issuable and reserved for issuance pursuant to securities (other than the
Preferred Shares and the Warrants) exercisable or exchangeable for, or
convertible into, shares of Common Stock of which 1,857,312 relate to the Series
B Convertible Preferred Stock and will cease to be reserved upon redemption of
such stock, (ii) 5,000,000 shares of preferred stock, of which as of the date
hereof, 5,512.5 shares are designated as Series B Convertible Preferred Stock
(the "Series B Preferred Stock"), of which 1,312.5 shares are issued and
outstanding and being redeemed concurrently herewith. All of such outstanding
shares have been, or upon issuance or when restrictions lapse will be, validly
issued fully paid and nonassessable. Except as disclosed in SCHEDULE 3(c), (A)
no shares of the Company's capital stock are subject to preemptive rights or any
other similar rights (arising under Delaware law, Illinois law, the Company's
Certificate of Incorporation or By-laws or any agreement or instrument to which
the Company is a party) or any liens or encumbrances granted or created by the
Company; (B) there are no outstanding debt securities issued by the Company; (C)
there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital

                                      - 7 -
<Page>

stock of the Company or any of its Subsidiaries; (D) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the 1933 Act (except the
Registration Rights Agreement); (E) there are no outstanding securities or
instruments of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (F) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement; and (G) the Company does not have
any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement. The Company has furnished to each Buyer true and
correct copies of the Company's Certificate of Incorporation, as amended and as
in effect on the date hereof (the "CERTIFICATE OF INCORPORATION"), and the
Company's By-laws, as amended and as in effect on the date hereof (the
"BY-LAWS"), and the terms of all securities convertible into or exercisable or
exchangeable for Common Stock and the material rights of the holders thereof in
respect thereto except for stock options granted under any benefit plan or stock
option plan of the Company approved by the Board of Directors of the Company.

               d.      ISSUANCE OF SECURITIES. The Preferred Shares and the
Warrants are duly authorized and, upon issuance in accordance with the terms
hereof, shall be (i) validly issued, fully paid and non-assessable, (ii) free
from all taxes, liens and charges with respect to the issuance thereof and (iii)
as to the Preferred Shares, entitled to the rights and preferences set forth in
the Certificate of Designations. As of the Initial Closing, at least 16,552,170
shares of Common Stock (subject to adjustment pursuant to the Company's covenant
set forth in Section 4(f) below) will have been duly authorized and reserved for
issuance upon conversion of the Preferred Shares and exercise of the Warrants.
Upon conversion or issuance in accordance with the Certificate of Designations
or the Warrants, as applicable, the Conversion Shares and the Warrant Shares, as
the case may be, will be validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of Common Stock.
Based, in part, on reliance on the representations and warranties of each of the
Buyers in the Transaction Documents, the issuance by the Company of the
Securities is exempt from registration under the 1933 Act.

               e.      NO CONFLICTS. The execution, delivery and performance of
the Transaction Documents by the Company, the performance by the Company of its
obligations under the Certificate of Designations and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without
limitation, the reservation for issuance and issuance of the Conversion Shares
and the Warrant Shares) will not (i) result in a violation of the Certificate of
Incorporation or the By-laws; (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to which the
Company or any of its Subsidiaries is a party; (iii) result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of the
Principal Market (as defined below)) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected. Neither the Company nor its Subsidiaries is
in violation of any term of its Certificate of Incorporation or its By-laws or
their

                                      - 8 -
<Page>

organizational charter or by-laws, respectively, other than with respect to the
holding of annual shareholder and/or Board of Directors meetings of Subsidiaries
(which violations would not result, either individually or in the aggregate, in
a Material Adverse Effect). Except as disclosed in SCHEDULE 3(e), neither the
Company nor any of its Subsidiaries is in violation of any term of or in default
under any contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to the
Company or its Subsidiaries, except where such violations and defaults would not
result, either individually or in the aggregate, in a Material Adverse Effect.
The business of the Company and its Subsidiaries is not being conducted, and
shall not be conducted, in violation of any law, ordinance or regulation of any
governmental entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect. Except as
specifically contemplated by this Agreement, as required under the 1933 Act, as
required by Blue Sky filings or as required by the 19.99% Rule, the Company is
not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency or any regulatory
or self-regulatory agency in order for it to execute, deliver or perform any of
its obligations under or contemplated by the Transaction Documents or to perform
its obligations under the Certificate of Designations in accordance with the
terms hereof or thereof. Except as disclosed in SCHEDULE 3(e), all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company and its Subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing. The
Company is not in violation of the listing requirements of the Principal Market,
and has no actual knowledge of any facts which would reasonably lead to
delisting or suspension of the Common Stock by the Principal Market in the
foreseeable future.

               f.      SEC DOCUMENTS; FINANCIAL STATEMENTS. Since December 31,
2001, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
DOCUMENTS"). As of the date of filing of such SEC Documents, such SEC Documents,
as it may have been subsequently amended by filings made by the Company with the
SEC prior to the date hereof, complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents. None of the SEC
Documents, as of the date filed and as they may have been subsequently amended
by filings made by the Company with the SEC prior to the date hereof, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of

                                      - 9 -
<Page>

the dates thereof and the results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). No other information provided by or on behalf of
the Company to the Buyers which is not included in the SEC Documents, including,
without limitation, information referred to in Section 2(d), contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they are or were made, not misleading. Neither the Company nor any of its
Subsidiaries nor any of their officers, directors, employees or agents have
provided the Buyers with any material, nonpublic information. As of the date
hereof, the Company meets the requirements for use of Form S-3 for registration
of the resale of Registrable Securities (as defined in the Registration Rights
Agreement). The Company is not required to file and will not be required to file
any agreement, note, lease, mortgage, deed or other instrument entered into
prior to the date hereof and to which the Company is a party or by which the
Company is bound which has not been previously filed as an exhibit to its
reports filed with the SEC under the 1934 Act.

               g.      ABSENCE OF CERTAIN CHANGES. Except as disclosed in the
Company's Annual Report on Form 10-K for the year ended December 31, 2002 or
Quarterly Report on Form 10-Q for the period ended March 31, 2003, since
December 31, 2002, there has been no change or development that has had or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so. Other than the Series B Preferred Stock
dividend paid on April 1, 2003 and except as disclosed in the Company's Annual
Report on Form 10-K for the year ended December 31, 2002 or the Quarterly Report
on Form 10-Q for the period ended March 31, 2003, since December 31, 2002, the
Company has not declared or paid any dividends, and as of the date hereof, has
not sold any assets, individually or in the aggregate, in excess of $500,000
outside of the ordinary course of business or had capital expenditures,
individually or in the aggregate, in excess of $6,000,000 and, as of any
Additional Closing, except as disclosed in the Company's Annual Report on Form
10-K and or its Quarterly Report on Form 10-Q most recently filed prior to the
Additional Closing, the Company shall not have sold any assets, individually or
in the aggregate, in excess of $500,000 outside of the ordinary course of
business or had capital expenditures, individually or in the aggregate, in
excess of $6,000,000.

               h.      ABSENCE OF LITIGATION. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company, the Common Stock or any of the Company's Subsidiaries or
any of the Company's or the Company's Subsidiaries' officers or directors in
their capacities as such, except as expressly set forth in SCHEDULE 3(h) or,
with respect to the Company and its Subsidiaries, to the extent that any such
action or threatened action does not set forth potential liability, claims or
charges individually in excess of $500,000, or in the aggregate in excess of
$2,000,000. Except as set forth in SCHEDULE 3(h), to the knowledge of the
Company, none of the directors or officers of the Company have been a party to
any securities related litigation during the past five years.

                                     - 10 -
<Page>

               i.      ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF SECURITIES.
The Company acknowledges and agrees that each of the Buyers is acting solely in
the capacity of an arm's length purchaser with respect to the Transaction
Documents and the Certificate of Designations and the transactions contemplated
hereby and thereby. The Company further acknowledges that each Buyer is not
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to the Transaction Documents and the Certificate of
Designations and the transactions contemplated hereby and thereby and any advice
given by any of the Buyers or any of their respective representatives or agents
in connection with the Transaction Documents and the Certificate of Designations
and the transactions contemplated hereby and thereby is merely incidental to
such Buyer's purchase of the Securities. The Company further represents to each
Buyer that the Company's decision to enter into the Transaction Documents has
been based solely on the independent evaluation by the Company and its
representatives.

               j.      NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES. Except for the issuance of the Preferred Shares and the Warrants
contemplated by this Agreement, no event, liability, development or circumstance
has occurred or exists, or is contemplated to occur, with respect to the Company
or its Subsidiaries or their respective business, properties, operations or
financial condition, that would be required to be disclosed by the Company under
applicable securities laws and which has not been publicly disclosed.

               k.      NO GENERAL SOLICITATION. Neither the Company, nor any of
its affiliates, nor any Person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities.

               l.      NO INTEGRATED OFFERING. Neither the Company, nor any of
its affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
issuance by the Company of any of the Securities under the 1933 Act or cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of the 1933 Act or, except as set forth on SCHEDULE 3(l),
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated, nor will
the Company or any of its Subsidiaries take any action or steps that would
require registration of the issuance by the Company of any of the Securities
under the 1933 Act or, except as set forth on SCHEDULE 3(l), cause the offering
of the Securities to be integrated with other offerings.

               m.      EMPLOYMENT MATTERS; ERISA MATTERS. (i) Neither the
Company nor any of its Subsidiaries is involved in any union labor dispute nor,
to the knowledge of the Company or any of its Subsidiaries, is any such dispute
threatened. None of the Company's or its Subsidiaries' employees is a member of
a union which relates to such employee's relationship with the Company, neither
the Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their relations
with their employees are good. No executive officer (as defined in Rule 501(f)
of the 1933 Act) has notified the Company that such officer intends to leave the
Company or otherwise terminate such

                                     - 11 -
<Page>

officer's employment with the Company. No executive officer, to the best
knowledge of the Company and its Subsidiaries, is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or
any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company or any of
its Subsidiaries to any liability with respect to any of the foregoing matters.

               (ii)    The Company and its Subsidiaries are in compliance with
all federal, state, local and foreign laws and regulations respecting employment
and employment practices, terms and conditions of employment and wages and
hours, except where failure to be in compliance would not, either individually
or in the aggregate, have a Material Adverse Effect. There are no pending
investigations involving the Company or any of its subsidiaries by the U.S.
Department of Labor or any other governmental agency responsible for the
enforcement of such federal, state, local or foreign laws and regulations. There
is no unfair labor practice charge or complaint against the Company or any of
its Subsidiaries pending before the National Labor Relations Board or any
strike, picketing, boycott, dispute, slowdown or stoppage pending or threatened
against or involving the Company or any of its Subsidiaries. No representation
question exists respecting the employees of the Company or any of its
subsidiaries, and no collective bargaining agreement or modification thereof is
currently being negotiated by the Company or any of its Subsidiaries. No
grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company or any of its Subsidiaries. No
material labor dispute with the employees of the Company or any of its
Subsidiaries exists or, to the knowledge of the Company, is imminent. SCHEDULE
3(m)(ii) sets forth a list of every employee benefit plan (whether or not
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) maintained or contributed to by the Company or any of member of its
controlled group (determined in accordance with Section 4001(a)(14) of ERISA)
(collectively the "PLANS"). Except for such failures that would not, either
individually or in the aggregate, result in a Material Adverse Effect, each of
the Plans have been maintained and administered in accordance with their terms,
ERISA, the Internal Revenue Code of 1986, as amended (the "CODE"), and other
applicable laws. None of the Plans is subject to Title IV of ERISA and no Plan
is a multiemployer plan (within the meaning of Section 3(37) of ERISA). Each
Plan intended to qualify under Section 401(a) or 501(c)(9) of the Code has
received a favorable determination or approval letter from the Internal Revenue
Service regarding its qualification under such section and no event has occurred
which cause any such Plan to lose its qualification.

               n.      INTELLECTUAL PROPERTY RIGHTS. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights necessary
to conduct their respective businesses as now conducted, except where the
failure to own or possess such rights would not result, either individually or
in the aggregate, in a Material Adverse Effect. None of the Company's
trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets or other intellectual property rights
have expired or terminated, or are expected to expire or terminate within two
years from the date of this Agreement, except where such expiration or
termination would not result, either individually or

                                     - 12 -
<Page>

in the aggregate, in a Material Adverse Effect. Except as would not have a
Material Adverse Effect, the Company and its Subsidiaries do not have any
knowledge of any infringement by the Company or its Subsidiaries of trademarks,
trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, trade secrets or other
intellectual property rights of others, or of any development of similar or
identical trade secrets or technical information by others and, except as set
forth on SCHEDULE 3(n), and except as would not have a Material Adverse Effect,
there is no claim, action or proceeding being made or brought against, or to the
knowledge of the Company, being threatened against, the Company or its
Subsidiaries regarding its trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, trade secrets, or infringement of other intellectual property rights.
The Company and its Subsidiaries have taken reasonable security measures to
protect the secrecy, confidentiality and value of all of their intellectual
properties.

               o.      TITLE. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in SCHEDULE 3(o) or such
as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company and any of
its Subsidiaries. Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and facilities by the
Company and its Subsidiaries.

               p.      ENVIRONMENTAL LAWS. (i) The Company and its Subsidiaries
(A) are in compliance with any and all Environmental Laws (as defined below),
(B) have received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses, and
(C) are in compliance with all terms and conditions of any such permit, license
or approval, except in each case where the failure of the Company and its
subsidiaries would not, either individually or in the aggregate, have a Material
Adverse Effect. Except as would not have a Material Adverse Effect, with respect
to the Company and/or its Subsidiaries (1) there are no past or present releases
of any material into the environment, actions, activities, circumstances,
conditions, events, incidents, or contractual obligations which may give rise to
any common law environmental liability or any liability under any Environmental
Law and (2) neither the Company nor any of its Subsidiaries has received any
notice with respect to the foregoing, nor is any action pending or, to the
knowledge of the Company, threatened in connection with the foregoing. The term
"ENVIRONMENTAL LAWS" means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or toxic
or hazardous substances or wastes (collectively, "HAZARDOUS MATERIALS") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

                                     - 13 -
<Page>

               (ii)    Except as set forth on SCHEDULE 3(p)(ii), other than
those that are or were stored, used or disposed of in compliance with applicable
law, to the knowledge of the Company, no Hazardous Materials are contained on or
about any real property currently owned, leased or used by the Company or any of
its Subsidiaries, and no Hazardous Materials were released on or about any real
property previously owned, leased or used by the Company or any of its
Subsidiaries during the period the property was owned, leased or used by the
Company or any of its Subsidiaries.

               (iii)   To the knowledge of the Company, there are no underground
storage tanks on or under any real property owned, leased or used by the Company
or any of its Subsidiaries that are not in compliance with applicable law.

               q.      INSURANCE. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.

               r.      REGULATORY PERMITS. Except for Permits (as defined below)
the absence of which would not result, either individually or in the aggregate,
in a Material Adverse Effect, the Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses (the "PERMITS"), and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such Permit.

               s.      INTERNAL ACCOUNTING CONTROLS. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.

               t.      DILUTIVE EFFECT. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Preferred
Shares will increase in certain circumstances. The Company further acknowledges
that its obligation to issue Conversion Shares upon conversion of the Preferred
Shares in accordance with this Agreement and Certificate of Designations is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the company.

                                     - 14 -
<Page>

               u.      NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company
nor any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.

               v.      TAX STATUS. The Company and each of its Subsidiaries (i)
has made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes), (ii) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and for which the Company has made appropriate reserves for on its
books, and (iii) has set aside on its books provisions reasonably adequate for
the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations (referred to in clause (i) above) apply. There
are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.

               w.      TRANSACTIONS WITH AFFILIATES. Except as set forth on
SCHEDULE 3(w) and in the SEC Documents, and other than the grant of stock
options described on SCHEDULE 3(c), none of the officers, directors or employees
of the Company is presently a party to any transaction with the Company or any
of its Subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any such
officer, director or employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.

               x.      APPLICATION OF TAKEOVER PROTECTIONS. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation or the laws of
the state of its incorporation which is or could become applicable to the Buyers
as a result of the transactions contemplated by this Agreement, including,
without limitation, the Company's issuance of the Securities and the Buyers'
ownership of the Securities.

               y.      RIGHTS AGREEMENT. Except as set forth on Schedule 3(y),
the Company has not adopted a shareholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of Common Stock or a change in
control of the Company.

               z.      NO OTHER AGREEMENTS. The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents.

                                     - 15 -
<Page>

               aa.     INVESTMENT COMPANY STATUS. The Company is not, and upon
consummation of the sale of the Securities will not be, an "investment company,"
a company controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.

               bb.     FOREIGN CORRUPT PRACTICES. To the Company's knowledge,
neither the Company nor any of its Subsidiaries, nor any director, officer,
agent, employee or other person acting on behalf of the Company or any
Subsidiary has, in the course of his actions for, or on behalf of, the Company
or any Subsidiary used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977; or made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.

               cc.     SOLVENCY. The Company individually and together with its
Subsidiaries on a consolidated basis (both before and after giving effect to the
transactions contemplated by the Transaction Documents) is solvent (i.e., its
assets have a fair market value in excess of the amount required to pay its
probable liabilities on its existing debts as they become absolute and matured)
and currently the Company has no information that would lead it to reasonably
conclude that the Company would not have, nor does it intend to take any action
that would impair, its ability to pay its debts from time to time incurred in
connection therewith as such debts mature.

               dd.     SARBANES-OXLEY ACT. The Company is in compliance with any
and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are
effective as of the date hereof, and any and all applicable rules and
regulations promulgated by the SEC thereunder that are effective as of the date
hereof, except where such noncompliance would not have, individually or in the
aggregate, a Material Adverse Effect.

          4.   COVENANTS.

               a.      BEST EFFORTS. Each party shall use its best efforts to
timely satisfy each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.

               b.      FORM D AND BLUE SKY. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before each of the Closing Dates, take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for, or to
qualify the Securities for, sale to the Buyers at each of the Closings pursuant
to this Agreement under applicable securities or "Blue Sky" laws of the states
of the United States, and shall provide evidence of any such action so taken to
the Buyers on or prior to each of the Closing Dates. The Company shall make all
filings and reports relating to the offer and sale of the Securities required
under applicable securities or "Blue Sky" laws of the states of the United
States following each of the Closing Dates.

                                     - 16 -
<Page>

               c.      REPORTING STATUS. Until the later of (i) the date which
is one year after the date as of which the Investors (as that term is defined in
the Registration Rights Agreement) may sell all of the Conversion Shares and the
Warrant Shares without restriction pursuant to Rule 144(k) promulgated under the
1933 Act (or successor thereto) and (ii) the date on which (A) the Investors
shall have sold all the Conversion Shares and the Warrant Shares and (B) none of
the Preferred Shares or Warrants is outstanding (the "Reporting Period"), the
Company shall timely file all reports required to be filed with the SEC pursuant
to the 1934 Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would otherwise permit such termination.

               d.      USE OF PROCEEDS. The Company will use the proceeds from
the sale of the Preferred Shares for substantially the same purposes and in
substantially the same amounts as indicated in SCHEDULE 4(d).

               e.      FINANCIAL INFORMATION. The Company agrees to send the
following to each Investor (as that term is defined in the Registration Rights
Agreement) during the Reporting Period: (i) within two (2) days after the filing
thereof with the SEC, a copy of its Annual Reports on Form 10-K, its Quarterly
Reports on Form 10-Q, any Current Reports on Form 8-K and any registration
statements (other than on Form S-8) or amendments filed pursuant to the 1933
Act, provided that if any such report is not filed with the SEC through EDGAR
then the Company shall deliver a copy of such report to each Investor by
facsimile on the same day it is filed with the SEC; (ii) on the same day as the
release thereof, facsimile copies of all press releases issued by the Company or
any of its Subsidiaries; and (iii) copies of any notices and other information
made available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders.

               f.      RESERVATION OF SHARES. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than the sum of 150% of the number of shares of Common Stock
needed to provide for the issuance of the shares of Common Stock upon conversion
of all outstanding Initial Preferred Shares (without regard to any limitations
on conversions), (ii) 150% of the number of shares of Common Stock needed to
provide for the issuance of the shares of Common Stock upon conversion of all
outstanding Additional Preferred Shares (without regard to any limitations on
conversions) and (iii) 125% of the number of shares of Common Stock needed to
provide for the issuance of the shares of Common Stock upon exercise of all
outstanding Warrants (without regard to any limitations on exercises).

               g.      LISTING. The Company shall promptly secure the listing of
all of the Registrable Securities upon each national securities exchange and
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all
Registrable Securities from time to time issuable under the terms of the
Transaction Documents and the Certificate of Designations. So long as any
Securities are outstanding, the Company shall maintain the Common Stock's
authorization for listing on the NYSE or quotation on the NASDAQ (as applicable,
the "PRINCIPAL MARKET"). Until five (5) years from the date of this Agreement
and other than in connection with Organic Changes (as

                                     - 17 -
<Page>

defined in the Certificate of Designations), neither the Company nor any of its
Subsidiaries shall take any action which would be reasonably expected to result
in the delisting or suspension of the Common Stock from the Principal Market.
The Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(g).

               h.      FILING OF FORM 8-K. On or before 8:30 a.m., New York City
time, on the Business Day following the Initial Closing Date, the Company shall
file a Current Report on Form 8-K with the SEC describing the terms of the
transactions contemplated by the Transaction Documents and including as exhibits
to such Current Report on Form 8-K this Agreement, the Certificate of
Designations, the form of Warrants and the Registration Rights Agreement, and
the schedules hereto and thereto in the form required by the 1934 Act. On or
before 8:30 a.m., New York City time, on the Business Day following each
Additional Closing Date, if any, the Company shall file a Current Report on Form
8-K with the SEC describing the transaction consummated on such Additional
Closing Date.

               i.      PROXY STATEMENT. Unless the Company shall have provided
the Buyers with evidence satisfactory to the Buyers that the Stockholder
Approval is not required by the Principal Market in connection with the 19.99%
Rule, the Company shall provide each stockholder entitled to vote at a special
meeting of stockholders of the Company, which meeting shall occur on or before
October 31, 2003 (the "STOCKHOLDER MEETING DEADLINE"), a proxy statement, which
has been previously reviewed by the Buyers and a counsel of their choice,
soliciting each such stockholder's affirmative vote at such stockholder meeting
for approval of the Company's issuance of all of the Securities as described in
this Agreement in accordance with applicable law and the rules and regulations
of the Principal Market (such affirmative approval being referred to herein as
the "STOCKHOLDER APPROVAL"), and the Company shall use its best efforts to
solicit its stockholders' approval of such issuance of the Securities and to
cause the Board of Directors of the Company to recommend to the stockholders
that they approve such proposal. If the Company fails to hold a meeting of its
stockholders by the Stockholder Meeting Deadline, then, as partial relief (which
remedy shall not be exclusive of any other remedies available at law or in
equity), the Company shall pay to each holder of Preferred Shares an amount in
cash per Preferred Share convertible into Conversion Shares that would violate
the provisions of the 19.99% Rule equal to the product of (i) $10,000;
multiplied by (ii) .02; multiplied by (iii) the quotient of (x) the number of
days after the Stockholder Meeting Deadline that a meeting of the Company's
stockholders is not held, divided by (y) 30. The Company shall make the payments
referred to in the immediately preceding sentence within five days of the
earlier of (I) the holding of the meeting of the Company's stockholders, the
failure of which resulted in the requirement to make such payments, and (II) the
last day of each 30-day period beginning on the Stockholder Meeting Deadline. In
the event the Company fails to make such payments in a timely manner, such
payments shall bear interest at the rate of 1.5% per month (pro rated for
partial months) until paid in full.

               j.      CORPORATE EXISTENCE. So long as a Buyer beneficially owns
any Preferred Stock, the Company shall maintain its corporate existence and
shall not sell all or substantially all of the Company's assets, except in the
event of a merger or consolidation or sale of all or substantially all of the
Company's assets, (x) which is a Cash Transaction (as defined in the Certificate
of Designations) pursuant to which the Company has made a Cash Transaction
Redemption Election (as defined in the Certificate of Designations) and for
which the Company

                                     - 18 -
<Page>

has delivered the Cash Transaction Redemption Price (as defined in the
Certificate of Designations) or (y) where the surviving or successor entity in
such transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) such
surviving or successor entity or its parent into whose stock the Preferred
Shares and Warrants will be convertible or exercisable is a publicly traded
corporation whose common stock is listed for trading on or quoted on the NYSE or
NASDAQ.

               k.      PLEDGE OF SECURITIES. The Company acknowledges and agrees
that the Securities may be pledged in compliance with applicable securities laws
by an Investor in connection with a bona fide margin agreement or other loan
secured by the Securities. The pledge of Securities shall not be deemed to be a
transfer, sale or assignment of the Securities hereunder, and no Investor
effecting a pledge of Securities shall be required to provide the Company with
any notice thereof or otherwise make any delivery to the Company pursuant to
this Agreement, any other Transaction Document or the Certificate of
Designations, including, without limitation, Section 2(f) of this Agreement;
provided that an Investor and its pledgee shall be required to comply with the
provisions of Section 2(f) hereof in order to effect a sale, transfer or
assignment of Securities to such pledgee. The Company hereby agrees to execute
and deliver such reasonable documentation as a pledgee of the Securities may
reasonably request in connection with a pledge of the Securities to such pledgee
by an Investor.

               l.      EXPENSES. Subject to Section 9(l) below, at the Initial
Closing, the Company shall pay all legal fees and airfare expenses, to the
extent incurred, up to $50,000 to Portside Growth and Opportunity Fund (a
Buyer), which amount, less any amount paid prior to the Initial Closing, shall
be withheld by such Buyer from its Purchase Price to be paid at the Initial
Closing.

               m.      ADDITIONAL PREFERRED STOCK. So long as any Preferred
Shares remain outstanding, the Company shall not create, authorize or issue (x)
any Preferred Stock other than to the Buyers as contemplated hereby or (y) any
other securities of the Company other than in compliance with Sections 9 and 11
of the Certificate of Designations.

               n.      TRANSACTIONS WITH AFFILIATES. So long as Preferred Shares
with an aggregate Stated Value (as defined in the Certificate of Designations)
of no less than $1 million are outstanding, the Company shall not, and shall
cause each of its Subsidiaries not to, enter into, amend, modify or supplement,
or permit any Subsidiary to enter into, amend, modify or supplement, any
agreement, transaction, commitment or arrangement with any of its or any
Subsidiary's officers, directors, person who were officers or directors at any
time during the previous two years, stockholders who beneficially own 5% or more
of the Common Stock, or their affiliates, or with any individual related by
blood, marriage or adoption to any such individual or with any entity in which
any such entity or individual owns a 5% or more beneficial interest (each, a
"RELATED PARTY"), except for (a) customary employment arrangements and benefit
programs on reasonable terms, (b) any agreement, transaction, commitment or
arrangement which is approved by a majority of the disinterested directors of
the Company or (c) any agreement, transaction, commitment or arrangement on an
arm's-length basis on terms no less favorable than terms which would have been
obtainable from a Person other than such Related Party. For purposes hereof, any
director who is also an officer of the Company or any Subsidiary of the Company
shall not be a disinterested director with respect to any such

                                     - 19 -
<Page>

agreement, transaction, commitment or arrangement. "AFFILIATE" for purposes
hereof means, with respect to any Person, another Person that, directly or
indirectly, (i) has a 5% or more equity interest in that Person, (ii) has 5% or
more common ownership with that Person, (iii) controls that Person, or (iv)
shares common control with that Person. "CONTROL" or "CONTROLS" for purposes
hereof means that a Person has the power, direct or indirect, to conduct or
govern the policies of another Person.

               o.      ACQUISITIONS. So long as any Preferred Shares remain
outstanding, other than in connection with business acquisitions where the
aggregate cash consideration paid for all such transactions does not exceed $15
million, the Company covenants and agrees that it will not enter into or
complete any business acquisitions, whether stock or asset transactions, where
any portion of the acquisition price will be paid in cash.

               p.      INDEBTEDNESS. So long as any Preferred Shares remain
outstanding, the Company covenants and agrees that it shall not, and the Company
shall not permit any of its Subsidiaries to, directly or indirectly, incur,
guarantee, assume, suffer to exist, repay, prepay, redeem, defease or otherwise
make any payment on any Indebtedness (other than (x) Permitted Indebtedness, (y)
Purchase Money Indebtedness and (z) Capitalized Lease Obligations incurred in
the ordinary course of business in an amount not to exceed an aggregate of
$5,000,000). For purposes of this Agreement: (v) "INDEBTEDNESS" of any Person
means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby, is
classified as a capital lease ("CAPITALIZED LEASE OBLIGATIONS"), (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, change, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (w) "CONTINGENT OBLIGATION" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; (x)
"PERMITTED INDEBTEDNESS" means Indebtedness incurred in an amount not to exceed
$40 million at any one time outstanding; PROVIDED, HOWEVER, that if (i) the
Closing Sale

                                     - 20 -
<Page>

Price of the Common Stock (as defined in the Certificate of Designations) for
any ten consecutive trading days after the eighteen (18) month anniversary of
the Closing Date (the "PERMITTED INDEBTEDNESS CANCELLATION MEASURING PERIOD") is
equal to or greater than $8.00 (subject to adjustment for stock splits, stock
dividends, recapitalizations, combinations, reverse stock splits or other
similar events), and (ii) on each day during the period beginning on the first
day of the Permitted Indebtedness Cancellation Measuring Period and ending on
the last day of the Permitted Indebtedness Cancellation Measuring Period, all
Registration Statements registering any Registrable Securities shall be
effective and available for the sale of at least all of the Registrable
Securities required to be included in such Registration Statements and there
shall not have been any Grace Periods, then there shall be no limit on Permitted
Indebtedness; and (y) "PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the
Company or any Subsidiary incurred in the ordinary course of business solely for
the purpose of financing all or any part of the purchase price of equipment,
furniture or fixtures or the cost of construction or improvement of any
property; PROVIDED, HOWEVER, that the aggregate principal amount of any such
Indebtedness does not exceed the lesser of the fair market value of such
property, as determined in the good faith judgment of the Company's Board of
Directors, or such purchase price or cost, including any refinancing of such
Indebtedness that does not increase the aggregate principal amount (or accreted
amount, if less) thereof as of the date of refinancing.

               q.      FOREIGN SUBSIDIARIES. Notwithstanding Section 7(a)(x) to
the contrary, the Company shall deliver to the Buyers as soon as practicable
following the Initial Closing, a certificate evidencing the incorporation and
good standing of each non-U.S. Subsidiary in such entity's state of
incorporation or organization issued by the Secretary of State of such state of
incorporation or organization.

          5.   TRANSFER AGENT INSTRUCTIONS.

          The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates or credit shares
to the applicable balance accounts at DTC, registered in the name of each Buyer
or its respective nominee(s), for the Conversion Shares and Warrant Shares in
such amounts as specified from time to time by each Buyer to the Company upon
conversion of the Preferred Shares, or exercise of the Warrants, as applicable
(the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"), a form of which is attached as
EXHIBIT D hereto. Prior to registration of the Conversion Shares and the Warrant
Shares under the 1933 Act, all such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5 and stop transfer instructions to give effect to Section 2(f)
hereof (in the case of the Conversion Shares and the Warrant Shares, prior to
registration of the Conversion Shares and the Warrant Shares under the 1933 Act)
will be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement, the Warrants and the Registration
Rights Agreement. If a Buyer provides the Company with an opinion of counsel, in
a form reasonably acceptable to the Company, to the effect that a public sale,
assignment or transfer of Securities may be made without registration under the
1933 Act or the Buyer provides the Company with reasonable assurances that the
Securities can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold, the Company shall permit the transfer, and, in the case of the

                                     - 21 -
<Page>

Conversion Shares and the Warrant Shares, promptly instruct its transfer agent
to issue one or more certificates, or credit shares to one or more balance
accounts at DTC, in such name and in such denominations as specified by such
Buyer and without any restrictive legend. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Buyers by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5 will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this Section
5, that the Buyers shall be entitled, in addition to all other available
remedies, to an order and/or injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.

          6.   CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

               a.      THE INITIAL CLOSING. The obligation of the Company to
issue and sell the Initial Preferred Shares and the Warrants to each Buyer at
the Initial Closing is subject to the satisfaction, at or before the Initial
Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Buyer with prior written
notice thereof:

                       (i)     Such Buyer shall have executed each of the
     Transaction Documents to which it is a party and delivered the same to the
     Company.

                       (ii)    The Certificate of Designations shall have been
     filed with the Secretary of State of the State of Delaware;

                       (iii)   Such Buyer shall have delivered to the Company
     the Purchase Price (less in the case of Portside Growth & Opportunity Fund,
     the amounts withheld pursuant to Section 4(l)) for the Initial Preferred
     Shares and the Warrants being purchased by such Buyer at the Initial
     Closing by wire transfer of immediately available funds pursuant to the
     wire instructions provided by the Company.

                       (iv)    The representations and warranties of such Buyer
     shall be true and correct as of the date when made and as of the Initial
     Closing Date as though made at that time (except for representations and
     warranties that speak as of a specific date), and such Buyer shall have
     performed, satisfied and complied with the covenants, agreements and
     conditions required by the Transaction Documents to be performed, satisfied
     or complied with by such Buyer at or prior to the Initial Closing Date.

                       (v)     Such Buyer shall have delivered to the Company
     such other documents relating to the transactions contemplated by this
     Agreement as the Company or its counsel may reasonably request.

                       (vi)    Each holder of any shares of Series B Preferred
     Stock and any holder of warrants (the "SERIES B WARRANTS") that were issued
     in connection with the issuance of the Series B Preferred Stock shall have
     signed a waiver of any anti-dilution protection set forth in the
     Certificate of Designations, Preferences and Rights of the

                                     - 22 -
<Page>

     Series B Convertible Preferred Stock (the "SERIES B CERTIFICATE OF
     DESIGNATIONS") and in the Series B Warrants that may be triggered in
     connection with the issuance of the Preferred Stock and Warrants, in the
     form of EXHIBIT E attached hereto (the "ANTI-DILUTION WAIVERS").

               b.      THE ADDITIONAL CLOSINGS. The obligation of the Company
hereunder to issue and sell the Additional Preferred Shares to a Buyer at an
Additional Closing for such Buyer is subject to the satisfaction, at or before
the applicable Additional Closing Date, of each of the following conditions,
provided that these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion by providing such Buyer
with prior written notice thereof:

                       (i)     Such Buyer shall have delivered to the Company
     the Purchase Price for the Additional Preferred Shares being purchased by
     such Buyer at such Additional Closing by wire transfer of immediately
     available funds pursuant to the wire instructions provided by the Company.

                       (ii)    The representations and warranties of such Buyer
     shall be true and correct as of the date when made and as of such
     Additional Closing Date as though made at that time (except for
     representations and warranties that speak as of a specific date), and such
     Buyer shall have performed, satisfied and complied with the covenants,
     agreements and conditions required by the Transaction Documents to be
     performed, satisfied or complied with by such Buyer at or prior to such
     Additional Closing Date.

                       (iii)   Such Buyer shall have delivered to the Company
     such other documents relating to the transactions contemplated by this
     Agreement as the Company or its counsel may reasonably request.

          7.   CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.

               a.      THE INITIAL CLOSING. The obligation of each Buyer
hereunder to purchase the Initial Preferred Shares and the Warrants from the
Company at the Initial Closing is subject to the satisfaction, at or before the
Initial Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer's sole benefit and may be waived by such Buyer at
any time in its sole discretion by providing the Company with prior written
notice thereof:

                       (i)     The Company shall have executed each of the
     Transaction Documents and delivered the same to such Buyer.

                       (ii)    The Certificate of Designations shall have been
     filed with the Secretary of State of the State of Delaware, and a copy
     thereof certified by the Secretary of State of the State of Delaware shall
     have been delivered to such Buyer.

                       (iii)   The Common Stock (x) shall be designated for
     quotation or listed on the Principal Market and (y) shall not have been
     suspended by the SEC or the Principal Market from trading on the Principal
     Market nor shall suspension by the SEC or

                                     - 23 -
<Page>

     the Principal Market have been threatened either (A) in writing by the SEC
     or the Principal Market or (B) by falling below the minimum listing
     maintenance requirements of the Principal Market; and the Conversion Shares
     issuable upon conversion of the Initial Preferred Shares (without regard to
     any limitations on conversions) and the Warrant Shares issuable upon
     exercise of the Warrants (without regard to any limitations on exercises)
     shall be listed (subject to official notice of issuance) upon the Principal
     Market.

                       (iv)    The representations and warranties of the Company
     shall be true and correct as of the date when made and as of the Initial
     Closing Date as though made at that time (except for representations and
     warranties that speak as of a specific date) and the Company shall have
     performed, satisfied and complied with the covenants, agreements and
     conditions required by the Transaction Documents to be performed, satisfied
     or complied with by the Company at or prior to the Initial Closing Date.
     Such Buyer shall have received a certificate, executed by the Chief
     Executive Officer of the Company, dated as of the Initial Closing Date, to
     the foregoing effect and as to such other matters as may be reasonably
     requested by such Buyer, including, without limitation, an update as of the
     Initial Closing Date regarding the representation contained in Section 3(c)
     above.

                       (v)     Such Buyer shall have received the opinion of
     Shack Siegel Katz & Flaherty P.C., dated as of the Initial Closing Date, in
     the form of EXHIBIT F-1, attached hereto, and an opinion of the General
     Counsel to the Company as to contracts and agreements not attached to the
     SEC Documents, in the form of EXHIBIT F-2, attached hereto.

                       (vi)    The Company shall have executed and delivered to
     such Buyer the Preferred Stock Certificates and Warrants (in such
     denominations as such Buyer shall request) for the Initial Preferred Shares
     and the Warrants being purchased by such Buyer at the Initial Closing.

                       (vii)   The Board of Directors of the Company shall have
     adopted resolutions consistent with Section 3(b) above and in a form
     reasonably acceptable to such Buyer (the "RESOLUTIONS").

                       (viii)  As of the Initial Closing Date, the Company shall
     have reserved out of its authorized and unissued Common Stock, solely for
     the purpose of effecting the conversion of the Initial Preferred Shares,
     and the exercise of the Warrants, at least 12,839,294 shares of Common
     Stock.

                       (ix)    The Irrevocable Transfer Agent Instructions, in
     the form of EXHIBIT D attached hereto, shall have been delivered to and
     acknowledged in writing by the Company's transfer agent.

                       (x)     The Company shall have delivered to such Buyer a
     certificate evidencing the incorporation and good standing of the Company
     and each U.S. Subsidiary in such entity's state of incorporation or
     organization issued by the Secretary

                                     - 24 -
<Page>

     of State of such state of incorporation or organization as of a date within
     ten days of the Initial Closing Date.

                       (xi)    The Company shall have delivered a good standing
     certificate to such Buyer, certifying the Company's qualification to do
     business and the good standing of the Company in the State of Illinois as
     certified by the Secretary of State of the State of Illinois as of a date
     within ten days of the Initial Closing Date.

                       (xii)   The Company shall have delivered to such Buyer a
     certified copy of the Certificate of Incorporation as certified by the
     Secretary of State of the State of Delaware as of a date within ten days of
     the Initial Closing Date.

                       (xiii)  The Company shall have delivered to such Buyer a
     secretary's certificate, dated as of the Initial Closing Date, certifying
     as to (A) the Resolutions, (B) the Certificate of Incorporation and (C) the
     By-laws, each as in effect at the Initial Closing.

                       (xiv)   The Company shall have made all filings under all
     applicable federal and state securities laws necessary to consummate the
     issuance of the Securities pursuant to this Agreement in compliance with
     such laws.

                       (xv)    The Company shall have delivered to such Buyer a
     letter from the Company's transfer agent certifying the number of shares of
     Common Stock outstanding as of a date within five days of the Initial
     Closing Date.

                       (xvi)   The Company shall have delivered to the Buyers
     such other documents relating to the transactions contemplated by the
     Transaction Documents as the Buyers or their counsel may reasonably
     request.

                       (xvii)  The Company shall have redeemed all outstanding
     shares of Series B Preferred Stock for an amount per each share of Series B
     Preferred Stock equal to the Maturity Date Redemption Price (as such term
     is defined in the Series B Certificate of Designations).

                       (xviii) All holders of Series B Preferred Stock and
     Series B Warrants shall have executed the Anti-Dilution Waivers.

                       (xix)   The Company (and its rights agent) shall have
     executed an amendment to its Amended and Restated Rights Agreement in the
     form of EXHIBIT G attached hereto.

               b.      THE ADDITIONAL CLOSINGS. The obligation of each Buyer
hereunder to purchase the Additional Preferred Shares from the Company at any
Additional Closing is subject to the satisfaction, at or before such Additional
Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer's sole benefit and may be waived by such Buyer at
any time in its sole discretion (and, provided that the Company has acted in
good faith and has used its best efforts to satisfy the below conditions by not
taking any action or omitting to take any action necessary to satisfy the below
conditions, the failure of the

                                     - 25 -
<Page>

representations and warranties to be true or the failure of the Company to
fulfill these conditions on the applicable Additional Closing Date shall only
permit a Buyer to elect not to close, the failure to meet such conditions in
itself shall not constitute a breach):

                       (i)     The Certificate of Designations shall be in full
     force and effect and shall not have been amended since the Initial Closing
     Date, and a copy thereof certified by the Secretary of State of the State
     of Delaware shall have been delivered to such Buyer.

                       (ii)    The Common Stock (x) shall be designated for
     quotation or listed on the Principal Market and (y) shall not have been
     suspended by the SEC or the Principal Market from trading on or delisted
     from the Principal Market nor shall delisting or suspension by such
     Principal Market have been threatened either (A) in writing by the SEC or
     the Principal Market or (B) by falling below the minimum listing
     maintenance requirements of the Principal Market; and all of the Conversion
     Shares issuable upon conversion of the applicable Additional Preferred
     Shares (without regard to any limitations on conversions) shall be listed
     (subject to official notice of issuance) upon the Principal Market.

                       (iii)   The representations and warranties of the Company
     shall be true and correct as of the date when made and as of such
     Additional Closing Date as though made at that time (except for
     representations and warranties that speak as of a specific date) and the
     Company shall have performed, satisfied and complied with the covenants,
     agreements and conditions required by the Transaction Documents or the
     Certificate of Designations to be performed, satisfied or complied with by
     the Company at or prior to such Additional Closing Date. Such Buyer shall
     have received a certificate, executed by the Chief Executive Officer of the
     Company, dated as of such Additional Closing Date, to the foregoing effect
     and as to such other matters as may be reasonably requested by such Buyer,
     including, without limitation, an update as of such Additional Closing Date
     regarding the representation contained in Section 3(c) above.

                       (iv)    Such Buyer shall have received the opinions of
     Shack Siegel Katz & Flaherty P.C. dated as of such Additional Closing Date,
     in the form of EXHIBIT F-1, attached hereto, and an opinion of the General
     Counsel to the Company as to contracts and agreements not attached to the
     SEC Documents, in the form of EXHIBIT F-2, attached hereto, with such
     changes to such opinions as are reasonably acceptable to such Buyer.

                       (v)     The Company shall have executed and delivered to
     such Buyer the Preferred Stock Certificates (in such denominations as such
     Buyer shall request) for the Additional Preferred Shares being purchased by
     such Buyer at such Additional Closing.

                       (vi)    The Board of Directors of the Company shall have
     adopted, and shall not have amended, the Resolutions.

                                     - 26 -
<Page>

                       (vii)   As of such Additional Closing Date, the Company
     shall have reserved out of its authorized and unissued Common Stock, solely
     for the purpose of effecting the conversion of the Preferred Shares and
     exercise of the Warrants, a number of shares of Common Stock equal to at
     least the sum (A) 150% of the number of shares of Common Stock which would
     be issuable upon conversion in full of the then outstanding Initial
     Preferred Shares (without regard to any limitations on conversions), (B)
     150% of the number of shares of Common Stock which would be issuable upon
     conversion in full of the Additional Preferred Shares to be outstanding
     after such Additional Closing Date (without regard to any limitations on
     conversions) and (C) 125% of the number of shares of Common Stock which
     would be issuable upon exercise in full of the then outstanding Warrants
     (without regard to any limitations on exercises).

                       (viii)  The Irrevocable Transfer Agent Instructions shall
     remain in effect as of such Additional Closing Date and the Company shall
     cause its Transfer Agent to deliver a letter to the Buyers to that effect.

                       (ix)    The Company shall have delivered to such Buyer a
     certificate evidencing the incorporation and good standing of the Company
     and each Subsidiary in the state of such entity's state of incorporation or
     organization issued by the Secretary of State of such state of
     incorporation or organization as of a date within ten days of such
     Additional Closing Date.

                       (x)     The Company shall have delivered a good standing
     certificate to such Buyer, certifying the Company's qualification to do
     business and the good standing of the Company in the State of Illinois as
     certified by the Secretary of State of the State of Illinois as of a date
     within ten days of the Additional Closing Date.

                       (xi)    The Company shall have delivered to such Buyer a
     certified copy of the Certificate of Incorporation as certified by the
     Secretary of State of the State of Delaware as of a date within ten days of
     the Additional Closing Date.

                       (xii)   The Company shall have delivered to such Buyer a
     secretary's certificate, dated as of such Additional Closing Date,
     certifying as to (A) the Resolutions, (B) the Certificate of Incorporation
     and (C) the Bylaws, each as in effect at such Additional Closing.

                       (xiii)  The Company shall have delivered to such Buyer a
     letter from the Company's transfer agent certifying the number of shares of
     Common Stock outstanding as of a date within five days of such Additional
     Closing Date.

                       (xiv)   The Company shall have made all filings required
     to be made on or prior to the applicable Additional Closing Date under all
     applicable federal and state securities laws necessary to consummate the
     issuance of the Securities pursuant to this Agreement in compliance with
     such laws.

                       (xv)    The Company shall have delivered to such Buyer
     such other documents relating to the transactions contemplated by this
     Agreement as such Buyer or its counsel may reasonably request.

                                     - 27 -
<Page>

          8.   INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents and the Certificate of Designations, the Company shall defend,
protect, indemnify and hold harmless each Buyer and each other holder of the
Securities and all of their stockholders, officers, directors, employees and
direct or indirect investors and any of the foregoing persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents, the Certificate of Designations or any
other certificate, instrument or document contemplated hereby or thereby, (b)
any breach of any covenant, agreement or obligation of the Company contained in
the Transaction Documents, the Certificate of Designations or any other
certificate, instrument or document contemplated hereby or thereby, (c) any
cause of action, suit or claim brought or made against such Indemnitee (other
than a cause of action, suit or claim which is (x) brought or made by the
Company and (y) is not a shareholder derivative suit) and arising out of or
resulting from (i) the execution, delivery, performance or enforcement of the
Transaction Documents, the Certificate of Designations or any other certificate,
instrument or document contemplated hereby or thereby, (ii) any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Securities or (iii) the status of such Buyer or
holder of the Securities as an investor in the Company. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
Except as otherwise set forth herein, the mechanics and procedures with respect
to the rights and obligations under this Section 8 shall be the same as those
set forth in Sections 6(a) and (d) of the Registration Rights Agreement,
including, without limitation, those procedures with respect to the settlement
of claims and the Company's rights to assume the defense of claims.

          9.   MISCELLANEOUS.

               a.      GOVERNING LAW; JURISDICTION; JURY TRIAL. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York. Each party hereby irrevocably submits to the non-exclusive jurisdiction of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and

                                     - 28 -
<Page>

consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.

               b.      COUNTERPARTS. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.

               c.      HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.

               d.      SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.

               e.      ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes
all other prior oral or written agreements between each Buyer, the Company,
their affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended or waived other than by an instrument in writing signed
by the Company and the holders of at least 80% of the Preferred Shares then
outstanding. No such amendment shall be effective to the extent that it applies
to less than all of the holders of the Preferred Shares then outstanding. No
consideration shall be offered or paid to any person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents or
the Certificate of Designations unless the same consideration also is offered to
all of the parties to the Transaction Documents or holders of Preferred Shares,
as the case may be.

               f.      NOTICES. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one (1) Business Day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:

                                     - 29 -
<Page>

          If to the Company:

                       Midway Games Inc.
                       2704 West Roscoe Street
                       Chicago, Illinois   60618
                       Telephone:  (773) 961-2222
                       Facsimile:  (773) 961-2299
                       Attention:  General Counsel

          With a copy to:

                       Shack Siegel Katz & Flaherty P.C.
                       530 Fifth Avenue
                       New York, New York 10036
                       Telephone:  (212) 782-0700
                       Facsimile:  (212) 730-1964
                       Attention:  Jeffrey N. Siegel, Esq.

          If to the Transfer Agent:

                       The Bank of New York
                       101 Barclay Street, 12W
                       New York, New York 10286
                       Telephone:  (212) 815-2371
                       Facsimile:  (212) 815-3201
                       Attention:  Robert J. Rinaudo

          If to a Buyer, to it at the address and facsimile number set forth on
the Schedule of Buyers, with copies to such Buyer's representatives as set forth
on the Schedule of Buyers, or at such other address and/or facsimile number
and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.

               g.      SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Preferred Shares. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the holders of at least 80% of the Preferred Shares then
outstanding, including by merger or consolidation, except pursuant to a Change
of Control (as defined in Section 4(b) of the Certificate of Designations) with
respect to which the Company is in compliance with Section 4 of the Certificate
of Designations and Section 4(j) of this Agreement. A Buyer may assign some or
all of its rights hereunder without

                                     - 30 -
<Page>

the consent of the Company; provided, however, that the transferee has agreed in
writing to be bound by the applicable provisions of this Agreement. The Buyers
shall be entitled to pledge the Securities in connection with a bona fide margin
account or other loan secured by the Securities.

               h.      NO THIRD PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.

               i.      SURVIVAL. Unless this Agreement is terminated under
Section 9(l), the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8,
shall survive the Closings. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.

               j.      PUBLICITY. The Company and each Buyer shall have the
right to approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of any
Buyer, to make any press release or other public disclosure with respect to such
transactions as is required by applicable law and regulations (although each
Buyer shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be provided
with a copy thereof).

               k.      FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

               l.      TERMINATION. In the event that the Initial Closing shall
not have occurred with respect to a Buyer on or before five (5) Business Days
from the date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6(a) and 7(a) above (and the nonbreaching
party's failure to waive such unsatisfied condition(s)), the nonbreaching party
shall have the option to terminate this Agreement with respect to such breaching
party at the close of business on such date without liability of any party to
any other party; provided, however, that if this Agreement is terminated
pursuant to this Section 9(l), the Company shall remain obligated to reimburse
any nonbreaching Buyer for the expenses described in Section 4(l) above.

               m.      PLACEMENT AGENT. The Company acknowledges that it has not
engaged a placement agent in connection with the sale of the Preferred Shares,
however the Company has engaged UBS Warburg LLC as financial advisor in
connection with the sale of the Preferred Shares. The Company shall be
responsible for the payment of any placement agent's fees, financial advisory
fees, or brokers' commissions (other than for Persons engaged by any Buyer or
its investment advisor) relating to or arising out of the transactions
contemplated hereby. The Company shall pay, and hold each Buyer harmless
against, any liability, loss or expense (including, without limitation,
attorney's fees and out-of-pocket expenses) arising in connection with any such
claim.

                                     - 31 -
<Page>

               n.      NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.

               o.      REMEDIES. Each Buyer and each holder of the Securities
shall have all rights and remedies set forth in the Transaction Documents and
the Certificate of Designations and all rights and remedies which such holders
have been granted at any time under any other agreement or contract and all of
the rights which such holders have under any law. Any person having any rights
under any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.

               p.      PAYMENT SET ASIDE. To the extent that the Company makes a
payment or payments to any Buyer hereunder or pursuant to the Registration
Rights Agreement, the Certificate of Designations or the Buyers enforce or
exercise their rights hereunder or thereunder, and such payment or payments or
the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

               q.      INDEPENDENT NATURE OF BUYERS' OBLIGATIONS AND RIGHTS. The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Buyers are
in any way acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. Each Buyer confirms
that it has independently participated in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors. Each Buyer
shall be entitled to independently protect and enforce its rights, including,
without limitations, the rights arising out of this Agreement or out of any
other Transaction Documents, and it shall not be necessary for any other Buyer
to be joined as an additional party in any proceeding for such purpose.

                            [signature page follows]

                                     - 32 -
<Page>

          IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

COMPANY:                                   BUYERS:

MIDWAY GAMES INC.                          PORTSIDE GROWTH AND
                                           OPPORTUNITY FUND

                                           By:   Ramius Capital Group, LLC
                                           Its:  Investment Adviser

By:    /s/ David F. Zucker
   --------------------------------
Name:  David F. Zucker                     By:       /s/ Andrew M. Strober
Title: President and Chief Executive             -------------------------------
                       Officer                   Name: Andrew M. Strober
                                                 Title:

                                           SMITHFIELD FIDUCIARY LLC

                                           By:       /s/ Adam J. Chill
                                                 -------------------------------
                                                 Name:  Adam J. Chill
                                                 Title: Authorized Signatory

                                           LIGHTHOUSE LLC

                                           By:       /s/ Adam J. Chill
                                                 -------------------------------
                                                 Name:  Adam J. Chill
                                                 Title: Authorized Signatory

                                     - 33 -
<Page>

                                                                   EXECUTED COPY

                               SCHEDULE OF BUYERS

<Table>
<Caption>
                                                        Number                 Maximum
                                                         of                   Number of
                                                       Initial                Additional
                          Buyer Address               Preferred   Number of   Preferred    Buyer's Representatives' Address
   Buyer Name          and Facsimile Number             Shares    Warrants      Shares           and Facsimile Number
-------------------   -----------------------------   ---------   ---------   ----------   --------------------------------
<S>                   <C>                                <C>       <C>            <C>      <C>
Portside Growth       c/o Ramius Capital Group,          1750      570,500        625      Schulte Roth & Zabel LLP
and Opportunity       L.L.C.                                                               919 Third Avenue
Fund                  666 Third Avenue, 26th Floor                                         New York, NY 10022
                      New York, NY 10017                                                   Attn: Eleazer Klein, Esq.
                      Attention: Jeffrey M. Solomon                                        Telephone: (212) 756-2000
                                 Jeffrey Smith                                             Facsimile: (212) 593-5955
                      Telephone: (212) 845-7917
                      Facsimile: (212) 845-7999
                      Residence: Cayman Islands

Smithfield            c/o Highbridge Capital             1250      407,500        446      Schulte Roth & Zabel LLP
Fiduciary LLC         Management, LLC                                                      919 Third Avenue
                      9 West 57th Street, 27th                                             New York, NY 10022
                      Floor                                                                Attn: Eleazer Klein, Esq.
                      New York, NY 10019                                                   Telephone: (212) 756-2000
                      Attention: Ari J. Storch                                             Facsimile: (212) 593-5955
                                 Adam J. Chill
                      Facsimile: (212) 751-0755
                      Telephone: (212) 287-4720
                      Residence: Cayman Islands

Lighthouse LLC        c/o Highbridge Capital              500      163,000        179      Schulte Roth & Zabel LLP
                      Management, LLC                                                      919 Third Avenue
                      9 West 57th Street, 27th                                             New York, NY 10022
                      Floor                                                                Attn: Eleazer Klein, Esq.
                      New York, NY 10019                                                   Telephone: (212) 756-2000
                      Attention: Ari J. Storch                                             Facsimile: (212) 593-5955
                               Adam J. Chill
                      Facsimile: (212) 751-0755
                      Telephone: (212) 287-4720
                      Residence: Cayman Islands
</Table>

<Page>

                                                                   EXECUTED COPY

                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                          Page
                                                                          ----
<S>                                                                      <C>
1.   PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS...................2

2.   BUYER'S REPRESENTATIONS AND WARRANTIES...............................4

3.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................6

4.   COVENANTS...........................................................16

5.   TRANSFER AGENT INSTRUCTIONS.........................................21

6.   CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL......................22

7.   CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE...................23

8.   INDEMNIFICATION.....................................................28

9.   MISCELLANEOUS.......................................................28
</Table>

                                      - i -
<Page>

                                      INDEX

<Table>
<Caption>
                                                                              Page
                                                                              ----
<S>                                                                             <C>
19.99% Rule......................................................................7
1933 Act.........................................................................1
1934 Act.........................................................................9
Additional Closing...............................................................2
Additional Closing Date..........................................................3
Additional Preferred Share Purchase Cancellation Date............................2
Additional Preferred Shares......................................................1
Additional Preferred Shares Exercise Notice......................................2
Affiliate.......................................................................20
Agreement........................................................................1
Anti-Dilution Waivers...........................................................23
Business Day.....................................................................3
Buyer............................................................................1
By-laws..........................................................................8
Capitalized Lease Obligations...................................................20
Certificate of Designations......................................................1
Certificate of Incorporation.....................................................8
Closing..........................................................................2
Closing Date.....................................................................3
Code............................................................................12
Common Stock.....................................................................1
Company..........................................................................1
Conditions to Cancellation of Right to Purchase Additional Preferred Shares......2
Contingent Obligation...........................................................20
Conversion Shares................................................................1
Environmental Laws..............................................................13
ERISA...........................................................................12
Hazardous Materials.............................................................13
Indebtedness....................................................................20
Indemnified Liabilities.........................................................28
Indemnitees.....................................................................28
Initial Closing..................................................................2
Initial Closing Date.............................................................3
Initial Preferred Shares.........................................................1
Irrevocable Transfer Agent Instructions.........................................21
Material Adverse Effect..........................................................6
Measuring Period.................................................................3
NASDAQ...........................................................................2
NYSE.............................................................................2
Permits.........................................................................14
Permitted Indebtedness..........................................................20
Permitted Indebtedness Cancellation Measuring Period............................21
</Table>

                                     - ii -
<Page>

<Table>
<S>                                                                             <C>
Plans...........................................................................12
Preferred Shares.................................................................1
Preferred Stock..................................................................1
Preferred Stock Certificates.....................................................3
Principal Market................................................................17
Purchase Money Indebtedness.....................................................21
Purchase Price...................................................................2
Registration Rights Agreement....................................................1
Regulation D.....................................................................1
Related Party...................................................................19
Reporting Period................................................................17
Resolutions.....................................................................24
Rule 144.........................................................................5
SEC..............................................................................1
SEC Documents....................................................................9
Securities.......................................................................4
Series B Certificate of Designations............................................23
Series B Warrants...............................................................22
Stockholder Approval............................................................18
Stockholder Meeting Deadline....................................................18
Subsidiaries.....................................................................6
Transaction Documents............................................................6
Warrant Shares...................................................................1
Warrants.........................................................................1
</Table>

                                     - iii -
<Page>

                            LIST OF OMITTED SCHEDULES

Schedule 3(a)     -  Subsidiaries
Schedule 3(c)     -  Capitalization
Schedule 3(e)     -  Conflicts
Schedule 3(h)     -  Litigation
Schedule 3(l)     -  Integration
Schedule 3(m)(ii) -  Employee Matters
Schedule 3(n)     -  Intellectual Property
Schedule 3(o)     -  Liens
Schedule 3(p)(ii) -  Environmental
Schedule 3(w)     -  Transactions with Affiliates
Schedule 3(y)     -  Rights Agreement
Schedule 4(d)     -  Use of Proceeds

                            LIST OF OMITTED EXHIBITS

Exhibit A -  Form of Certificate of Designations
Exhibit B -  Form of Warrant
Exhibit C -  Form of Registration Rights Agreement
Exhibit D -  Form of Irrevocable Transfer Agent Instructions
Exhibit E -  Form of Anti-Dilution Waiver
Exhibit F-1- Form of Company Counsel Opinion
Exhibit F-2- Form of Company General Counsel Opinion
Exhibit G-   Form of Amendment to Rights Agreement

                                     - iv -<Page>

                                                                   EXHIBIT 10.2

                                                                   EXECUTED COPY

                         REGISTRATION RIGHTS AGREEMENT

          REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of May 16,
2003, by and among Midway Games Inc., a Delaware corporation, with headquarters
located at 2704 West Roscoe Street, Chicago, Illinois 60618 (the "COMPANY"), and
the undersigned buyers (each, a "BUYER" and collectively, the "BUYERS").

          WHEREAS:

          A.   In connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the "SECURITIES PURCHASE AGREEMENT"),
the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Buyers an aggregate of
(i) 3,500 shares (the "INITIAL PREFERRED SHARES") of the Company's Series C
Convertible Preferred Stock (the "PREFERRED STOCK"), which will be convertible
into shares of the Company's common stock, par value $0.01 per share (the
"COMMON STOCK") (as converted, the "INITIAL CONVERSION SHARES") in accordance
with the terms of the Company's Certificate of Designations, Preferences and
Rights of the Preferred Stock (the "CERTIFICATE OF DESIGNATIONS") and (ii)
warrants (the "WARRANTS") to purchase up to 1,141,000 shares of Common Stock
(the "WARRANT SHARES");

          B.   In connection with the Securities Purchase Agreement, the Company
has granted the Buyers an option, upon the terms and subject to the conditions
of the Securities Purchase Agreement, to buy from the Company an aggregate of up
to an additional 1,250 shares of the Preferred Stock (the "ADDITIONAL PREFERRED
SHARES" and collectively with the Initial Preferred Shares, the "PREFERRED
SHARES"), which will be convertible into shares of Common Stock (as converted,
the "ADDITIONAL CONVERSION SHARES" and collectively with the Initial Conversion
Shares, the "CONVERSION SHARES") in accordance with the Certificate of
Designations; and

          C.   To induce the Buyers to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws.

          D.   The location of defined terms in this Agreement is set forth on
the Index of Terms attached hereto.

          NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Buyers hereby agree as follows:

          1.   DEFINITIONS.

          As used in this Agreement, the following terms shall have the
following meanings:

               a.    "ADDITIONAL REGISTRABLE SECURITIES" means (i) the
Additional Conversion Shares issued or issuable upon conversion of all of the
Additional Preferred Shares

<Page>

and (ii) any shares of capital stock issued or issuable with respect to the
Additional Conversion Shares or the Additional Preferred Shares as a result of
any stock split, stock dividend, recapitalization, exchange or similar event or
otherwise, without regard to any limitations on conversions of Additional
Preferred Shares.

               b.    "ADDITIONAL REGISTRATION STATEMENT" means a registration
statement or registration statements of the Company filed under the 1933 Act
covering the Additional Registrable Securities.

               c.    "EFFECTIVENESS DEADLINE" means the Initial Effectiveness
Deadline (as defined below) and the Additional Effectiveness Deadline (as
defined below).

               d.    "FILING DEADLINE" means the Initial Filing Deadline (as
defined below) and the Additional Filing Deadline (as defined below).

               e.    "INITIAL REGISTRABLE SECURITIES" means (i) the Initial
Conversion Shares issued or issuable upon conversion of the Initial Preferred
Shares, (ii) the Warrant Shares issued or issuable upon exercise of the Warrants
and (iii) any shares of capital stock issued or issuable with respect to the
Initial Conversion Shares, the Initial Preferred Shares, the Warrant Shares or
the Warrants as a result of any stock split, stock dividend, recapitalization,
exchange or similar event or otherwise, without regard to any limitations on
conversions of the Initial Preferred Shares or exercises of Warrants.

               f.    "INITIAL REGISTRATION STATEMENT" means a registration
statement or registration statements of the Company filed under the 1933 Act
covering the Initial Registrable Securities.

               g.    "INVESTOR" means a Buyer, any transferee or assignee
thereof to whom a Buyer assigns its rights under this Agreement and who agrees
to become bound by the provisions of this Agreement in accordance with Section 9
and any transferee or assignee thereof to whom a transferee or assignee assigns
its rights under this Agreement and who agrees to become bound by the provisions
of this Agreement in accordance with Section 9.

               h.    "PERSON" means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated
organization and governmental or any department or agency thereof.

               i.    "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis ("RULE 415"), and the declaration or
ordering of effectiveness of such Registration Statement(s) by the United States
Securities and Exchange Commission (the "SEC").

               j.    "REGISTRABLE SECURITIES" means the Initial Registrable
Securities and the Additional Registrable Securities.

                                        2
<Page>

               k.    "REGISTRATION STATEMENT" means the Initial Registration
Statement and the Additional Registration Statement.

          Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.

          2.   REGISTRATION.

               a.    INITIAL MANDATORY REGISTRATION. The Company shall prepare,
and, as soon as practicable but in no event later than 45 days after the Initial
Closing Date (as defined in the Securities Purchase Agreement) (the "INITIAL
FILING DEADLINE"), file with the SEC the Initial Registration Statement on Form
S-3 covering the resale of all of the Initial Registrable Securities. In the
event that Form S-3 is unavailable for such a registration, the Company shall
use such other form as is available for such a registration, subject to the
provisions of Section 2(e). The Initial Registration Statement prepared pursuant
hereto shall register for resale at least that number of shares of Common Stock
equal to the sum of (I) the product of (x) 1.50 and (y) the number of Initial
Conversion Shares issued or issuable upon conversion of the Initial Preferred
Shares and (II) the product of (x) 1.25 and (y) the number of Warrant Shares
issued or issuable upon exercise of the Warrants, in each case calculated as of
the trading day immediately preceding the date the Initial Registration
Statement is initially filed with the SEC, subject to adjustment as provided in
Section 2(f). The Company shall use its best efforts to have the Initial
Registration Statement declared effective by the SEC as soon as practicable, but
in no event later than the date which is 120 days after the Initial Closing Date
(the "INITIAL EFFECTIVENESS DEADLINE).

               b.    ADDITIONAL MANDATORY REGISTRATION. The Company shall
prepare, and, as soon as practicable but in no event later than 30 days after
the earlier of (i) an Additional Closing Date (as defined in the Securities
Purchase Agreement) after which no additional Additional Preferred Shares are
available to be subscribed for pursuant to the Securities Purchase Agreement or
(ii) twelve months after the Initial Closing Date (the "ADDITIONAL FILING
DEADLINE"), file with the SEC the Additional Registration Statement on Form S-3
covering the resale of all of the Additional Registrable Securities actually
purchased, if any. In the event that Form S-3 is unavailable for such a
registration, the Company shall use such other form as is available for such a
registration, subject to the provisions of Section 2(e). The Additional
Registration Statement prepared pursuant hereto shall register for resale at
least that number of shares of Common Stock equal to the product of (x) 1.5 and
(y) the number of Additional Registrable Securities as of the trading day
immediately preceding the date the Additional Registration Statement is
initially filed with the SEC, subject to adjustment as provided in Section 2(f).
The Company shall use its best efforts to have the Additional Registration
Statement declared effective by the SEC as soon as practicable, but in no event
later than the date which is 90 days after the Additional Filing Deadline (the
"ADDITIONAL EFFECTIVENESS DEADLINE").

               c.    ALLOCATION OF REGISTRABLE SECURITIES. The initial number of
Registrable Securities included in any Registration Statement and each increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time the Registration Statement

                                        3
<Page>

covering such initial number of Registrable Securities or increase thereof is
declared effective by the SEC. In the event that an Investor sells or otherwise
transfers any of such Investor's Registrable Securities, each transferee shall
be allocated a pro rata portion of the then remaining number of Registrable
Securities included in such Registration Statement for such transferor. Any
shares of Common Stock included in a Registration Statement and which remain
allocated to any Person which ceases to hold any Registrable Securities covered
by such Registration Statement shall be allocated to the remaining Investors,
pro rata based on the number of Registrable Securities then held by such
Investors which are covered by such Registration Statement.

               d.    LEGAL COUNSEL. Subject to Section 5 hereof, the Buyers
holding at least 80% of the Registrable Securities shall have the right to
select one legal counsel to review and oversee any offering pursuant to this
Section 2 ("LEGAL COUNSEL"), which shall be Schulte Roth & Zabel LLP or such
other counsel as thereafter designated by the holders of at least 80% of the
Registrable Securities. The Company and Legal Counsel shall reasonably cooperate
with each other in performing the Company's obligations under this Agreement.

               e.    INELIGIBILITY FOR FORM S-3. In the event that Form S-3 is
not available for the registration of the resale of Registrable Securities
hereunder, the Company shall (i) register the resale of the Registrable
Securities on another appropriate form reasonably acceptable to the holders of
at least 80% of the Registrable Securities and (ii) undertake to register the
Registrable Securities on Form S-3 as soon as such form is available, provided
that the Company shall maintain the effectiveness of the Registration Statement
then in effect until such time as a Registration Statement on Form S-3 covering
the Registrable Securities has been declared effective by the SEC.

               f.    SUFFICIENT NUMBER OF SHARES REGISTERED. In the event the
number of shares available under a Registration Statement filed pursuant to
Section 2(a) or 2(b) is insufficient to cover all of the Registrable Securities
required to be covered by such Registration Statement or an Investor's allocated
portion of the Registrable Securities pursuant to Section 2(c), the Company
shall amend the Registration Statement, or file a new Registration Statement (on
the short form available therefor, if applicable), or both, so as to cover at
least 150% of the number of such Registrable Securities as of the trading day
immediately preceding the date of the filing of such amendment or new
Registration Statement, in each case, as soon as practicable, but in any event
not later than fifteen (15) days after the necessity therefor arises. The
Company shall use it best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof. For purposes of the foregoing provision, the number of shares
available under a Registration Statement shall be deemed "insufficient to cover
all of the Registrable Securities" if at any time the number of Registrable
Securities issued or issuable upon conversion of the Preferred Shares and upon
exercise of the Warrants, if any, covered by such Registration Statement is
greater than the quotient determined by dividing (i) number of shares of Common
Stock available for resale under such Registration Statement by (ii) 1.25. The
calculation set forth in the foregoing sentence shall be made without regard to
any limitations on the conversion of the Preferred Shares or the exercise of the
Warrants and such calculation shall assume that the Preferred Shares and the
Warrants are then convertible into shares of Common Stock at the then prevailing
Conversion Rate (as defined in

                                        4
<Page>

the Certificate of Designations) or Warrant Exercise Price (as defined in the
Warrants), if applicable.

               g.    EFFECT OF FAILURE TO FILE AND OBTAIN AND MAINTAIN
EFFECTIVENESS OF REGISTRATION STATEMENT. If (i) a Registration Statement
covering all the Registrable Securities and required to be filed by the Company
pursuant to this Agreement is not declared effective by the SEC on or before the
respective Effectiveness Deadline or (ii) on any day after the Registration
Statement has been declared effective by the SEC sales of all the Registrable
Securities required to be included on such Registration Statement cannot be made
(other than during an Allowable Grace Period (as defined in Section 3(r))
pursuant to the Registration Statement (including, without limitation, because
of a failure to keep the Registration Statement effective, to disclose such
information as is necessary for sales to be made pursuant to the Registration
Statement or to register sufficient shares of Common Stock), then, as partial
relief for the damages to any holder by reason of any such delay in or reduction
of its ability to sell the underlying shares of Common Stock (which remedy shall
not be exclusive of any other remedies available at law or in equity), the
Company shall pay to each holder of Preferred Shares relating to such
Registration Statement an amount in cash per such Preferred Share held equal to
the product of (i) $10,000 multiplied by (ii) the sum of (A) .015, if the
Registration Statement is not declared effective by the applicable Effectiveness
Deadline, plus (B) the product of (I) .0005 multiplied by (II) the sum of (x)
the number of days after the applicable Effectiveness Deadline that the
Registration Statement is not declared effective by the SEC, plus (y) the number
of days after the Registration Statement has been declared effective by the SEC
that such Registration Statement is not available (other than during an
Allowable Grace Period) for the sale of at least all the Registrable Securities
required to be included on such Registration Statement. The payments to which a
holder shall be entitled pursuant to this Section 2(f) are referred to herein as
"REGISTRATION DELAY PAYMENTS." Registration Delay Payments shall be paid on the
earlier of (I) the last day of the calendar month during which such Registration
Delay Payments are incurred and (II) the third Business Day after the event or
failure giving rise to the Registration Delay Payments is cured. In the event
the Company fails to make Registration Delay Payments in a timely manner, such
Registration Delay Payments shall bear interest at the rate of 1.5% per month
(prorated for partial months) until paid in full. Notwithstanding the foregoing,
the Company shall not be required to make any Registration Delay Payments for
the period of time that the effectiveness of the Registration Statement is
delayed, or that sales of Registrable Securities cannot be made after the
Registration Statement is declared effective, as a result of the failure of the
holder of Registrable Securities entitled to such payments to have provided the
Company with any necessary information as set forth in Section 4(a).

          3.   RELATED OBLIGATIONS.

          At such time as the Company is obligated to file a Registration
Statement with the SEC pursuant to Section 2(a), 2(b) or 2(f), the Company will
use its best efforts to effect the registration of the Registrable Securities in
accordance with the intended method of disposition thereof and, pursuant
thereto, the Company shall have the following obligations:

               a.    The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (but in no
event later than the applicable Filing Deadline) and use its best efforts to
cause such Registration Statement relating

                                        5
<Page>

to the Registrable Securities to become effective as soon as practicable after
such filing (but in no event later than the applicable Effectiveness Deadline).
The Company shall keep each Registration Statement effective pursuant to Rule
415 at all times until the earlier of (i) the date as of which the Investors may
sell all of the Registrable Securities covered by such Registration Statement
without restriction pursuant to Rule 144(k) (or successor thereto) promulgated
under the 1933 Act or (ii) the date on which the Investors shall have sold all
the Registrable Securities covered by such Registration Statement (the
"REGISTRATION PERIOD"), which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in the light of
the circumstances in which they were made, not misleading. The term "best
efforts" shall mean, among other things, that the Company shall submit to the
SEC, within two (2) Business Days after the Company learns that no review of a
particular Registration Statement will be made by the staff of the SEC or that
the staff has no further comments on the Registration Statement, as the case may
be, and the approval of Legal Counsel pursuant to Section 3(c), a request for
acceleration of effectiveness of such Registration Statement to a time and date
not later than 48 hours after the submission of such request.

               b.    Subject to Section 3(r), the Company shall prepare and file
with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with such Registration Statement, which prospectus is to be filed pursuant to
Rule 424 promulgated under the 1933 Act, as may be necessary to keep such
Registration Statement effective at all times during the Registration Period,
and, during such period, comply with the provisions of the 1933 Act with respect
to the disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant to
this Section 3(b)) by reason of the Company filing a report on Form 10-K, Form
10-Q or Form 8-K or any analogous report under the Securities Exchange Act of
1934, as amended (the "1934 ACT"), the Company shall have incorporated such
report by reference into the Registration Statement, if applicable, or shall
file such amendments or supplements with the SEC on the same day on which the
1934 Act report is filed which created the requirement for the Company to amend
or supplement the Registration Statement.

               c.    The Company shall (A) permit Legal Counsel to review and
comment upon (i) the Registration Statement at least two (2) Business Days prior
to its filing with the SEC and (ii) all other Registration Statements and all
amendments and supplements to all Registration Statements (except for Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K and any similar or successor reports) within a reasonable number of days
prior to their filing with the SEC, and (B) not file any Registration Statement
or amendment or supplement thereto in a form to which Legal Counsel reasonably
objects. The Company shall not submit a request for acceleration of the
effectiveness of a Registration Statement or any amendment or supplement thereto
without the prior approval of Legal Counsel, which consent shall not be
unreasonably withheld. The Company shall furnish to

                                        6
<Page>

Legal Counsel, without charge, (i) any correspondence from the SEC or the staff
of the SEC to the Company or its representatives relating to any Registration
Statement, (ii) promptly after the same is prepared and filed with the SEC, one
copy of any Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, if requested by an Investor, and all exhibits and (iii) upon the
effectiveness of any Registration Statement, one copy of the prospectus included
in such Registration Statement and all amendments and supplements thereto. The
Company shall reasonably cooperate with Legal Counsel in performing the
Company's obligations pursuant to this Section 3.

               d.    The Company shall furnish to each Investor whose
Registrable Securities are included in any Registration Statement, without
charge, (i) promptly after the same is prepared and filed with the SEC, at least
one copy of such Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, if requested by an Investor, all exhibits and each preliminary
prospectus, (ii) upon the effectiveness of any Registration Statement, ten (10)
copies of the prospectus included in such Registration Statement and all
amendments and supplements thereto (or such other number of copies as such
Investor may reasonably request) and (iii) such other documents, including
copies of any preliminary or final prospectus, as such Investor may reasonably
request from time to time in order to facilitate the disposition of the
Registrable Securities owned by such Investor.

               e.    Subject to Section 3(r), the Company shall use its
reasonable best efforts to (i) register and qualify, unless an exemption from
registration and qualification applies, the resale by Investors of the
Registrable Securities covered by a Registration Statement under such other
securities or "blue sky" laws of all applicable jurisdictions in the United
States, (ii) prepare and file in those jurisdictions, such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (x) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(e), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such jurisdiction.
The Company shall promptly notify Legal Counsel and each Investor who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or "blue sky" laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.

               f.    The Company shall notify Legal Counsel and each Investor in
writing of the happening of any event, as promptly as practicable after becoming
aware of such event, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be

                                       7
<Page>

stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (provided that in no
event shall such notice contain any material, nonpublic information), and,
subject to Section 3(r), promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and deliver
ten (10) copies of such supplement or amendment to Legal Counsel and each
Investor (or such other number of copies as Legal Counsel or such Investor may
reasonably request). The Company shall also promptly notify Legal Counsel and
each Investor in writing (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and when a Registration Statement or
any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to Legal Counsel and each Investor by facsimile
on the same day of such effectiveness and by overnight mail), (ii) of any
request by the SEC for amendments or supplements to a Registration Statement or
related prospectus or related information, and (iii) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate.

               g.    Subject to Section 3(r), the Company shall use its
reasonable best efforts to prevent the issuance of any stop order or other
suspension of effectiveness of a Registration Statement, or the suspension of
the qualification of any of the Registrable Securities for sale in any
jurisdiction and, if such an order or suspension is issued, to obtain the
withdrawal of such order or suspension at the earliest possible moment and to
notify Legal Counsel and each Investor who holds Registrable Securities being
sold of the issuance of such order and the resolution thereof or its receipt of
actual notice of the initiation or threat of any proceeding for such purpose.

               h.    In connection with the reasonable determination by any
Investor that it requires the following in connection with its obligation
relating to the disposition of any Registrable Securities, at the reasonable
request of any Investor, the Company shall furnish to such Investor, on the date
of the effectiveness of the Registration Statement and thereafter from time to
time on such dates as an Investor may reasonably request (i) a letter, dated
such date, from the Company's independent certified public accountants in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
Investors, and (ii) an opinion, dated as of such date, of counsel representing
the Company for purposes of such Registration Statement, in form, scope and
substance as is customarily given in an underwritten public offering, addressed
to the Investors.

               i.    In connection with the satisfaction of any due diligence
requirement of any Investor, the Company shall make available for inspection by
(i) any Investor, (ii) Legal Counsel and (iii) one firm of accountants or other
agents retained by the Investors (collectively, the "INSPECTORS"), all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request;
provided, however, that each Inspector shall agree to hold in strict confidence
and shall not make any disclosure (except to an Investor) or use of any Record
or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement

                                        8
<Page>

or omission in any Registration Statement or is otherwise required under the
1933 Act, (b) the release of such Records is ordered pursuant to a final,
non-appealable subpoena or order from a court or government body of competent
jurisdiction, or (c) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement of which the Inspector has knowledge. Each Investor agrees that
it shall, upon learning that disclosure of such Records is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential.

               j.    The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.

               k.    The Company shall use its reasonable best efforts either to
(i) cause all the Registrable Securities covered by a Registration Statement to
be listed on each securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the NASDAQ National Market, or (iii) if,
despite the Company's reasonable best efforts to satisfy the preceding clause
(i) or (ii), the Company is unsuccessful in satisfying the preceding clause (i)
or (ii), to secure the inclusion for quotation on The NASDAQ SmallCap Market for
such Registrable Securities and, without limiting the generality of the
foregoing, to use its reasonable best efforts to arrange for at least two market
makers to register with the National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Registrable Securities. The Company shall
pay all fees and expenses in connection with satisfying its obligation under
this Section 3(k).

               l.    The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, facilitate
the timely preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the Investors may reasonably request and
registered in such names as the Investors may request.

               m.    If requested by an Investor, the Company shall (i) as soon
as practicable incorporate in a prospectus supplement or post-effective
amendment such information as an Investor reasonably requests to be included
therein relating to the sale and

                                        9
<Page>

distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being offered
or sold, the purchase price being paid therefor and any other terms of the
offering of the Registrable Securities to be sold in such offering; (ii) as soon
as practicable make all required filings of such prospectus supplement or
post-effective amendment after being notified of the matters to be incorporated
in such prospectus supplement or post-effective amendment; and (iii) as soon as
practicable, supplement or make amendments to any Registration Statement if
reasonably requested by an Investor of such Registrable Securities.

               n.    The Company shall use its reasonable best efforts to cause
the Registrable Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.

               o.    The Company shall make generally available to its security
holders as soon as practical, but not later than 90 days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.

               p.    The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC in connection with any
registration hereunder.

               q.    Within two (2) Business Days after a Registration Statement
which covers Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as Exhibit A.

               r.    Notwithstanding anything to the contrary herein, at any
time after the Registration Statement has been declared effective by the SEC,
the Company may delay the disclosure of material non-public information
concerning the Company the disclosure of which at the time is not, in the good
faith opinion of the Board of Directors of the Company and its counsel, in the
best interest of the Company and, in the opinion of counsel to the Company,
otherwise required (a "GRACE PERIOD"); provided, that the Company shall promptly
(i) notify the Investors in writing of the existence of material non-public
information giving rise to a Grace Period (provided that in each notice the
Company will not disclose the content of such material non-public information to
the Investors) and the date on which the Grace Period will begin, and (ii)
notify the Investors in writing of the date on which the Grace Period ends; and,
provided further, that no Grace Period shall exceed 15 consecutive days and
during any 365 day period such Grace Periods shall not exceed an aggregate of 30
days and the first day of any Grace Period must be at least two trading days
after the last day of any prior Grace Period (an "ALLOWABLE GRACE PERIOD"). For
purposes of determining the length of a Grace Period above, the Grace Period
shall begin on and include the date the holders receive the notice referred to
in clause (i) and shall end on and include the later of the date the holders
receive the notice referred to in clause (ii) and the date referred to in such
notice. The provisions of Section 3(g) hereof

                                       10
<Page>

shall not be applicable during the period of any Allowable Grace Period. Upon
expiration of the Grace Period, the Company shall again be bound by the first
sentence of Section 3(f) with respect to the information giving rise thereto
unless such material non-public information is no longer applicable.

          4.   OBLIGATIONS OF THE INVESTORS.

               a.    At least two (2) Business Days prior to the first
anticipated filing date of a Registration Statement, the Company shall notify
each Investor in writing of the information the Company requires from each such
Investor if such Investor elects to have any of such Investor's Registrable
Securities included in such Registration Statement. It shall be a condition
precedent to the obligations of the Company to complete the registration
pursuant to this Agreement with respect to the Registrable Securities of a
particular Investor that such Investor shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it, and any
changes in any such information that would require an amendment or supplement to
any such registration, as shall be reasonably required to effect and maintain
the effectiveness of the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. To the extent that any Investor fails to timely provide such
information, the Company shall not be subject to any penalties hereunder for the
period of time that such Investor has failed to timely provide such information.

               b.    Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from such Registration Statement.

               c.    Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(g)
or the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(g) or the
first sentence of 3(f) or receipt of notice that no supplement or amendment is
required. Notwithstanding anything to the contrary, the Company shall cause its
transfer agent to deliver unlegended shares of Common Stock to a transferee of
an Investor in accordance with the terms of the Securities Purchase Agreement in
connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale prior to the Investor's receipt of
a notice from the Company of the happening of any event of the kind described in
Section 3(g) or the first sentence of 3(f) and for which the Investor has not
yet settled.

          5.   EXPENSES OF REGISTRATION.

          All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company shall be paid by the

                                       11
<Page>

Company. The Company shall also reimburse the Investors for the fees and
disbursements of Legal Counsel in connection with registration, filing or
qualification pursuant to Sections 2 and 3 of this Agreement which amount shall
be limited to $10,000 for the Initial Registration Statement and $5,000 for the
Additional Registration Statement.

          6.   INDEMNIFICATION.

          In the event any Registrable Securities are included in a Registration
Statement under this Agreement:

               a.    To the fullest extent permitted by law, the Company will,
and hereby does, indemnify, hold harmless and defend each Investor, the
directors, officers, partners, employees, agents, representatives of, and each
Person, if any, who controls any Investor within the meaning of the 1933 Act or
the 1934 Act (each, an "INDEMNIFIED PERSON"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, reasonable
attorneys' fees, amounts paid in settlement or expenses, joint or several,
(collectively, "CLAIMS") incurred in investigating, preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or other
regulatory agency, body or the SEC, whether pending or threatened, whether or
not an indemnified party is or may be a party thereto ("INDEMNIFIED DAMAGES"),
to which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other "blue sky" laws of any jurisdiction in
which Registrable Securities are offered ("BLUE SKY FILING"), or the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in the light of the circumstances under which
the statements therein were made, not misleading, (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement or (iv) any material violation
of this Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, "VIOLATIONS"). Subject to Section 6(c), the Company shall
reimburse the Indemnified Persons, promptly as such expenses are incurred and
are due and payable, for any legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim by an
Indemnified Person arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person for such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus

                                       12
<Page>

was timely made available by the Company pursuant to Section 3(d); (ii) with
respect to any preliminary prospectus, shall not inure to the benefit of any
such person from whom the person asserting any such Claim purchased the
Registrable Securities that are the subject thereof (or to the benefit of any
person controlling such person) if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected in the prospectus, as
then amended or supplemented, if such prospectus was timely made available by
the Company pursuant to Section 3(d), and the Indemnified Person was promptly
advised in writing not to use the incorrect prospectus prior to the use giving
rise to a Violation and such Indemnified Person, notwithstanding such advice,
used it or failed to deliver the correct prospectus as required by the 1933 Act
and such correct prospectus was timely made available pursuant to Section 3(d);
(iii) shall not be available to the extent such Claim is based on a failure of
the Investor to deliver or to cause to be delivered the prospectus made
available by the Company, including a corrected prospectus, if such prospectus
or corrected prospectus was timely made available by the Company pursuant to
Section 3(d); and (iv) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld or delayed. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.

               b.    In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act (each,
an "INDEMNIFIED PARTY"), against any Claim or Indemnified Damages to which any
of them may become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement; and, subject to Section 6(c), such Investor will
reimburse any legal or other expenses reasonably incurred by an Indemnified
Party in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 6(b) and the
agreement with respect to contribution contained in Section 7 shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld or delayed; provided, further, however, that the Investor
shall be liable under this Section 6(b) for only that amount of a Claim or
Indemnified Damages as does not exceed the net proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.

                                       13
<Page>

               c.    Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section
6, deliver to the indemnifying party a written notice of the commencement
thereof, and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for such
Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding at least 80% in interest of
the Registrable Securities included in the Registration Statement to which the
Claim relates. The Indemnified Party or Indemnified Person shall cooperate fully
with the indemnifying party in connection with any negotiation or defense of any
such action or Claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the Indemnified Party
or Indemnified Person which relates to such action or Claim. The indemnifying
party shall keep the Indemnified Party or Indemnified Person fully apprized at
all times as to the status of the defense or any settlement negotiations with
respect thereto. No indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its prior written consent,
provided, however, that the indemnifying party shall not unreasonably withhold,
delay or condition its consent. No indemnifying party shall, without the prior
written consent of the Indemnified Party or Indemnified Person, consent to entry
of any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability
in respect to such Claim or litigation. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.

               d.    The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.

               e.    The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the

                                       14
<Page>

indemnifying party or others, and (ii) any liabilities the indemnifying party
may be subject to pursuant to the law.

          7.   CONTRIBUTION.

          To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no person involved in the sale of Registrable Securities which person is
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) in connection with such sale shall be entitled to contribution
from any person involved in such sale of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (ii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities pursuant to
such Registration Statement.

          8.   REPORTS UNDER THE 1934 ACT.

          Until the later of (i) the date which is one year after the date as of
which the Investors may sell all of the Conversion Shares and the Warrant Shares
without restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or
successor thereto) and (ii) the date on which (A) the Investors shall have sold
all the Conversion Shares and the Warrant Shares and (B) none of the Preferred
Shares or Warrants is outstanding, with a view to making available to the
Investors the benefits of Rule 144 promulgated under the 1933 Act or any other
similar rule or regulation of the SEC that may at any time permit the Investors
to sell securities of the Company to the public without registration ("RULE
144"), the Company agrees to:

               a.    make and keep public information available, as those terms
are understood and defined in Rule 144;

               b.    file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and

               c.    furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company, if true, that it has complied with the reporting requirements of Rule
144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested to
permit the investors to sell such securities pursuant to Rule 144 without
registration.

          9.   ASSIGNMENT OF REGISTRATION RIGHTS.

                                       15
<Page>

          The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of Registrable Securities if: (i) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within ten (10) days after
such assignment; (ii) the Company is, within ten (10) days after such transfer
or assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned; (iii) immediately
following such transfer or assignment the further disposition of such securities
by the transferee or assignee is restricted under the 1933 Act and applicable
state securities laws; (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
contained herein; and (v) such transfer shall have been made in accordance with
the applicable requirements of the Securities Purchase Agreement.

          10.  AMENDMENT OF REGISTRATION RIGHTS.

          Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who then hold at least 80% of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the Registrable
Securities. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.

          11.  MISCELLANEOUS.

               a.    A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the such record owner of such Registrable Securities.

               b.    Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:

          If to the Company:

                                       16
<Page>

                     Midway Games Inc.
                     2704 West Roscoe Street
                     Chicago, Illinois 60618
                     Telephone: (773) 961-2222
                     Facsimile: (773) 961-2299
                     Attention: General Counsel

          With a copy to:

                     Shack Siegel Katz & Flaherty P.C.
                     530 Fifth Avenue
                     New York, NY  10036
                     Telephone: (212) 782-0700
                     Facsimile: (212) 730-1964
                     Attention: Jeffrey N. Siegel, Esq.

          If to Legal Counsel:

                     Schulte Roth & Zabel LLP
                     919 Third Avenue
                     New York, New York 10022
                     Telephone: (212) 756-2000
                     Facsimile: (212) 593-5955
                     Attention: Eleazer Klein, Esq.

If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers attached hereto, with copies to such Buyer's representatives as set forth
on the Schedule of Buyers, or to such other address and/or facsimile number
and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.

               c.    Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.

               d.    All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the non- exclusive jurisdiction of the state and federal courts
sitting the City of New York, borough

                                       17
<Page>

of Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

               e.    This Agreement, the Securities Purchase Agreement, the
Warrants and the Certificate of Designations constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement, the
Securities Purchase Agreement, the Warrant and the Certificate of Designations
supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.

               f.    Subject to the requirements of Section 9, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.

               g.    The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

               h.    This Agreement may be executed in identical counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.

               i.    Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

                                       18
<Page>

               j.    All consents and other determinations required to be made
by the Investors pursuant to this Agreement shall be made, unless otherwise
specified in this Agreement, by Investors holding at least 80% of the
Registrable Securities, determined as if all of the Preferred Shares held by
Investors then outstanding have been converted into Registrable Securities and
all Warrants then outstanding have been exercised for Registrable Securities
without regard to any limitations on conversion of the Preferred Shares or on
exercises of the Warrants.

               k.    The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent and no rules
of strict construction will be applied against any party.

               l.    This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.

                                   * * * * * *

                                       19
<Page>

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

COMPANY:                                       BUYERS:

MIDWAY GAMES INC.                              PORTSIDE GROWTH AND
                                               OPPORTUNITY FUND

By:   /s/ David F. Zucker                      By:  Ramius Capital Group, LLC
    -------------------------------------      Its: Investment Adviser
   Name: David F. Zucker
   Its:  President and Chief Executive
         Officer

                                               By:  /s/ Andrew Strober
                                                  ------------------------------
                                                  Name:  Andrew M. Strober
                                                  Title: Chief Financial Officer

                                               SMITHFIELD FIDUCIARY LLC

                                               By: /s/ Adam J. Chill
                                                  ------------------------------
                                                  Name:  Adam J. Chill
                                                  Title: Authorized Signatory

                                               LIGHTHOUSE LLC

                                               By:  /s/ Adam J. Chill
                                                  ------------------------------
                                               Name:  Adam J. Chill
                                               Title: Authorized Signatory

                                       20
<Page>

                               SCHEDULE OF BUYERS

<Table>
<Caption>
                                         Buyer Address                     Buyer's Representative's Address
         Investor                     and Facsimile Number                      and Facsimile Number
         --------                     --------------------                 --------------------------------
<S>                           <C>                                          <C>
Portside Growth and           c/o Ramius Capital Group, LLC                Schulte Roth & Zabel LLP
Opportunity Fund              666 Third Avenue, 26th Floor                 919 Third Avenue
                              New York, NY 10017                           New York, NY 10022
                              Attention: Jeffrey M. Solomon                Attn:  Eleazer Klein
                                         Jeffrey Smith                     Facsimile: (212) 593-5955
                              Facsimile: (212) 845-7999                    Telephone: (212) 756-2000
                              Telephone: (212) 845-7917

Smithfield Fiduciary LLC      c/o Highbridge Capital Management, LLC       Schulte Roth & Zabel LLP
                              9 West 57th Street, 27th Floor               919 Third Avenue
                              New York, NY  10019                          New York, NY 10022
                              Attention:  Ari J. Storch                    Attn:  Eleazer Klein
                                       Adam J. Chill                       Facsimile: (212) 593-5955
                              Facsimile: (212) 751-0755                    Telephone: (212) 756-2000
                              Telephone: (212) 287-4720

Lighthouse LLC                c/o Highbridge Capital Management, LLC       Schulte Roth & Zabel LLP
                              9 West 57th Street, 27th Floor               919 Third Avenue
                              New York, NY  10019                          New York, NY 10022
                              Attention:  Ari J. Storch                    Attn:  Eleazer Klein
                                       Adam J. Chill                       Facsimile: (212) 593-5955
                              Facsimile: (212) 751-0755                    Telephone: (212) 756-2000
                              Telephone: (212) 287-4720
</Table>

<Page>

                                                                       EXHIBIT A

                        FORM OF NOTICE OF EFFECTIVENESS
                           OF REGISTRATION STATEMENT

The Bank of New York

Attn:

          Re:   Midway Games Inc.

Ladies and Gentlemen:

          We are counsel to Midway Games Inc., a Delaware corporation (the
"COMPANY"), and have represented the Company in connection with that certain
Securities Purchase Agreement (the "PURCHASE AGREEMENT") entered into by and
among the Company and the buyers named therein (collectively, the "HOLDERS")
pursuant to which the Company issued to the Holders shares of its Series C
Convertible Preferred Stock, par value $0.01 per share, (the "PREFERRED SHARES")
convertible into shares of the Company's Common Stock, par value $0.01 per share
(the "COMMON STOCK") and warrants exercisable for shares of its Common Stock
(the "WARRANTS"). Pursuant to the Purchase Agreement, the Company also has
entered into a Registration Rights Agreement with the Holders (the "REGISTRATION
RIGHTS AGREEMENT") pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement), including the shares of Common Stock issuable upon conversion of the
Preferred Shares and exercise of the Warrants under the Securities Act of 1933,
as amended (the "1933 ACT"). In connection with the Company's obligations under
the Registration Rights Agreement, on ____________ ___, 200_, the Company filed
a Registration Statement on Form S-3 (File No. 333-_____________) (the
"REGISTRATION STATEMENT") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities which names each of the Holders as
a selling stockholder thereunder.

          In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.

                                      Very truly yours,

                                      [ISSUER'S COUNSEL]

                                      By:
                                         --------------------------

CC:  [LIST NAMES OF HOLDERS]

<Page>

                                 INDEX OF TERMS

<Table>
<Caption>
                                                                           Page
                                                                           ----
<S>                                                                          <C>
1933 Act......................................................................1
1934 Act......................................................................6
Additional Conversion Shares..................................................1
Additional Effectiveness Deadline.............................................3
Additional Filing Deadline....................................................3
Additional Preferred Shares...................................................1
Additional Registrable Securities.............................................1
Additional Registration Statement.............................................2
Agreement.....................................................................1
Allowable Grace Period.......................................................10
Blue Sky Filing..............................................................12
Buyer.........................................................................1
Certificate of Designations...................................................1
Claims.......................................................................12
Common Stock..................................................................1
Company.......................................................................1
Conversion Shares.............................................................1
Effectiveness Deadline........................................................2
Filing Deadline...............................................................2
Grace Period.................................................................10
Indemnified Damages..........................................................12
Indemnified Party............................................................13
Indemnified Person...........................................................12
Initial Conversion Shares.....................................................1
Initial Effectiveness Deadline................................................3
Initial Filing Deadline.......................................................3
Initial Preferred Shares......................................................1
Initial Registrable Securities................................................2
Initial Registration Statement................................................2
Inspectors....................................................................8
Investor......................................................................2
Legal Counsel.................................................................4
NASD..........................................................................9
Person........................................................................2
Preferred Shares..............................................................1
Preferred Stock...............................................................1
Records.......................................................................8
Register......................................................................2
Registrable Securities........................................................2
Registration Delay Payments...................................................5
</Table>

<Page>

<Table>
<S>                                                                          <C>
Registration Period...........................................................6
Registration Statement........................................................3
Rule 144.....................................................................15
Rule 415......................................................................2
SEC...........................................................................2
Securities Purchase Agreement.................................................1
Violations...................................................................12
Warrant Shares................................................................1
Warrants......................................................................1
</Table>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}]]