SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use of the
Commission only
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

MIDWAY GAMES INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:
2

MIDWAY LOGO

MIDWAY GAMES INC.
------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 25, 2000
------------------------

To the Stockholders of
MIDWAY GAMES INC.

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Midway
Games Inc. will be held on Tuesday, January 25, 2000 at 10:00 a.m. Central
Standard Time at The Standard Club, Chicago Room, 4th Floor, 320 South Plymouth
Court, Chicago, Illinois 60604, to consider and act upon the following matters:

1. Electing four (4) Class II Directors;

2. Ratifying the appointment of Ernst & Young LLP as independent auditors for
our fiscal year ending June 30, 2000; and

3. Transacting such other business as may properly come before the meeting or
any adjournment or adjournments thereof.

The close of business on December 8, 1999 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
meeting and any adjournments thereof. A list of the stockholders entitled to
vote at the annual meeting will be open to the examination of any stockholder of
Midway for any purpose germane to the annual meeting during regular business
hours at the offices of Midway for the ten-day period prior to the annual
meeting.

YOU ARE REQUESTED, WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE ANNUAL
MEETING, TO MARK, DATE, SIGN AND RETURN PROMPTLY THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE. NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES.

By Order of the Board of Directors,

Chicago, Illinois ORRIN J. EDIDIN
December 13, 1999 Vice President, Secretary and General Counsel

ANNUAL MEETING OF STOCKHOLDERS
OF
MIDWAY GAMES INC.

PROXY STATEMENT

INTRODUCTION

Midway Games Inc. ("we", "us" or "Midway") is furnishing this proxy
statement to you in connection with the solicitation by the Board of Directors
of proxies to be voted at our Annual Meeting of Stockholders. The meeting is
scheduled to be held at The Standard Club, Chicago Room, 4th Floor, 320 South
Plymouth Court, Chicago, Illinois 60604, on Tuesday, January 25, 2000 at 10:00
a.m. Central Standard Time, or at any proper adjournments.

If you properly execute and return your proxy form, it will be voted in
accordance with your instructions. If you return your proxy but give us no
instructions as to any matters, the proxy will be voted on those matters in
accordance with the recommendations of the Board as indicated in this proxy
statement. You may revoke your proxy, at any time prior to its exercise, by
written notice to us, by submission of another proxy bearing a later date or by
voting in person at the meeting. Your revocation will not affect a vote on any
matters already taken. Your mere presence at the meeting will not revoke your
proxy.

The mailing address of our principal executive offices is 3401 North
California Avenue, Chicago, Illinois 60618. We are mailing this proxy statement
and the accompanying form of proxy to our stockholders on or about December 13,
1999.

Only holders of our common stock, $.01 par value per share, of record at
the close of business on December 8, 1999 (the "Record Date") will be entitled
to vote at our annual meeting or any adjournments. There were 38,039,030 shares
of our common stock outstanding on the Record Date (excluding 713,000 treasury
shares). Each share of our common stock entitles the holder to one vote on each
matter at the meeting.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL STOCKHOLDERS

The following table sets forth information as of the Record Date, except as
otherwise footnoted, about persons which, to our knowledge, beneficially own
more than 5% of the outstanding shares of our common stock:

NUMBER OF
SHARES OF PERCENTAGE OF
COMMON STOCK OUTSTANDING
BENEFICIALLY COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) STOCK(1)
- ------------------------------------ ------------ -------------

Sumner M. Redstone and National Amusements, Inc. ........... 9,618,636(2) 25.3%
200 Elm Street
Dedham, MA 02026
Merrill Lynch & Co., Inc. .................................. 2,624,557(3) 6.9%
World Financial Center, North Tower
250 Vesey Street
New York, NY 10381
Neil D. Nicastro
Midway Games Inc. ........................................ 2,246,758(4) 5.7%
3401 North California Avenue
Chicago, IL 60618
Capital Guardian Trust Company.............................. 2,030,000(5) 5.3%
11100 Santa Monica Blvd.
Los Angeles, CA 90025

- ---------------
(1) Under Rule 13d-3(d)(1) of the Securities Exchange Act of 1934, shares
underlying options are deemed to be beneficially owned if the holder of the
option has the right to acquire beneficial ownership of the underlying
shares within 60 days.

(2) Based upon a Form 4 filed with the SEC by Sumner M. Redstone on July 9,
1999. Mr. Redstone and National Amusements, Inc., a Maryland corporation,
reported beneficial ownership of and sole investment power with respect to
5,495,865 and 4,122,771 shares, respectively, of our common stock. As a
result of his stock ownership in National Amusements, Inc., Mr. Redstone is
deemed the beneficial owner of the shares of common stock owned by National
Amusements, Inc.

(3) Based upon Schedule 13G filed with the SEC by Merrill Lynch & Co., Inc. as
the parent holding company of Merrill Lynch Asset Management Group ("AMG")
on February 4, 1999. AMG reported that it is the beneficial owner of the
shares as a result of its subsidiaries' acting as investment advisers to
various investment companies. AMG reported that it has shared voting and
dispositive power over the shares.

(4) Includes 1,471,850 shares of common stock underlying stock options.

(5) Based upon Schedule 13G filed with the SEC by Capital Guardian Trust Company
on February 12, 1999. The filer reported that it is deemed to be the
beneficial owner of the shares as a result of its acting as the investment
manager of various institutional accounts. The filer reported that it has
sole voting power over 1,703,000 of the shares and sole dispositive power
over all of the shares.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth, as of the Record Date, information about
the beneficial ownership of our common stock by each of our directors and the
executive officers named in the Summary Compensation Table below and by all of
our directors and executive officers as a group:

NUMBER OF
SHARES OF PERCENTAGE OF
COMMON STOCK OUTSTANDING
BENEFICIALLY COMMON
NAME OF BENEFICIAL OWNER OWNED(1) STOCK(1)
- ------------------------ ------------ -------------

Harold H. Bach, Jr. ....................................... 210,130(2) **
William C. Bartholomay..................................... 80,370(3) **
Byron C. Cook.............................................. 568,529(4) 1.5%
Orrin J. Edidin............................................ 39,072(5) **
Kenneth J. Fedesna*........................................ 201,435(6) **
William E. McKenna*........................................ 51,958(3) **
Norman J. Menell........................................... 52,506(3) **
Louis J. Nicastro.......................................... 50,547(3) **
Neil D. Nicastro........................................... 2,246,758(7) 5.7%
Harvey Reich*.............................................. 51,277(3) **
Ira S. Sheinfeld*.......................................... 56,801(3) **
Gerald O. Sweeney, Jr. .................................... 35,000(3) **
Richard D. White........................................... 35,000(3) **
Directors and Executive Officers as a group (14 persons)... 3,679,383(8) 9.1%

- ---------------
* Nominee for Director

** Less than 1%

2
5

(1) Under Rule 13d-3(d)(1) of the Securities Exchange Act of 1934, shares
underlying options are deemed to be beneficially owned if the holder of the
option has the right to acquire beneficial ownership of the underlying
shares within 60 days.

(2) Includes 163,842 shares of common stock underlying stock options.

(3) Includes 35,000 shares of common stock underlying stock options.

(4) Includes 404,955 shares of common stock underlying stock options.

(5) Includes 29,804 shares of common stock underlying stock options.

(6) Includes 149,229 shares of common stock underlying stock options.

(7) Includes 1,471,850 shares of common stock underlying stock options.

(8) Includes an aggregate of 2,499,680 shares of common stock underlying stock
options.

PROPOSAL 1 -- ELECTION OF CLASS II DIRECTORS

Our Board of Directors is divided into three classes. Directors are elected
for staggered three year terms to succeed those directors whose terms expire.

Upon the recommendation of the Nominating Committee, the following four (4)
directors are nominated for election to serve as Class II Directors for a term
of three (3) years and until their respective successors are elected and shall
qualify. All of the nominees are at present Class II Directors, whose term
expires at the annual meeting. If any of the nominees are unable to serve or
refuse to serve as directors, an event which the Board does not anticipate, the
proxies will be voted in favor of those nominees who do remain as candidates,
except as you otherwise specify, and may be voted for substituted nominees.

NAME OF CLASS II DIRECTOR POSITION WITH COMPANY AND DIRECTOR
NOMINEE (AGE) PRINCIPAL OCCUPATION SINCE
------------------------- ------------------------- --------

Kenneth J. Fedesna (50)................... Executive Vice President -- Coin-Op Video and 1996
Director
William E. McKenna (80)................... Director; General Partner, MCK Investment 1996
Company
Harvey Reich (70)......................... Director; Attorney 1996
Ira S. Sheinfeld (61)..................... Director; Attorney, Squadron, Ellenoff, Plesent 1996
& Sheinfeld LLP

KENNETH J. FEDESNA became our Executive Vice President -- Coin-Op Video in
August 1996. Mr. Fedesna served as our Vice President and General Manager from
1988 to August 1996. He also served as Vice President and General Manager of
Williams Electronics Games, Inc., a subsidiary of WMS Industries Inc. ("WMS"),
our former parent company, for over five years until August 1999.

WILLIAM E. MCKENNA has served as a General Partner of MCK Investment
Company, Beverly Hills, California for over five years. He also is a director of
California Amplifier, Inc., Drexler Technology Corporation, Safeguard Health
Enterprises, Inc. and WMS.

HARVEY REICH was a member of the law firm of Robinson Brog Leinwand Greene
Genovese & Gluck, P.C., New York, New York and its predecessor firms for over
five years until his retirement from that firm in July 1998. He is a director of
WMS.

IRA S. SHEINFELD has been a member of the law firm of Squadron, Ellenoff,
Plesent & Sheinfeld LLP, New York, New York for over five years. He is a
director of WMS.

3
6

The remaining incumbent directors, whose terms of office have not expired,
are as follows:

POSITION WITH COMPANY AND DIRECTOR
NAME OF DIRECTOR (AGE) PRINCIPAL OCCUPATION SINCE
---------------------- ------------------------- --------

Class I Directors: Term expiring at our 2001 Annual Meeting
Neil D. Nicastro (43)..................... Chairman of the Board, President, Chief
Executive Officer and Chief Operating Officer 1988
William C. Bartholomay (71)............... Director; President of Near North National Group 1996
Norman J. Menell (68)..................... Director; Vice Chairman of the Board of WMS 1996
Louis J. Nicastro (71).................... Director; Chairman of the Board, President and
Chief Executive Officer of WMS 1988
Class III Directors: Term expiring at our 2002 Annual Meeting
Harold H. Bach, Jr. (67).................. Executive Vice President -- Finance, Treasurer
and Chief Financial Officer and Director 1990
Byron C. Cook (45)........................ Executive Vice President -- Home Video and
Director 1996
Richard D. White (46)..................... Director; Managing Director, CIBC Capital
Partners 1996
Gerald O. Sweeney, Jr. (47)............... Director; Attorney, Lord, Bissell & Brook 1996

NEIL D. NICASTRO has been our President and Chief Operating Officer since
1991. In July 1996, Mr. Nicastro became Chairman of our Board of Directors and
Chief Executive Officer, having served as Co-Chief Executive Officer and Chief
Operating Officer since 1994. Mr. Nicastro also served as our Treasurer from
1988 to 1994 and in other executive positions for us in the past. Mr. Nicastro
has served as a Director of WMS since 1986 and as consultant to WMS since April
1998. Mr. Nicastro was Chief Executive Officer, President and Chief Operating
Officer until he resigned his offices with WMS in April 1998.

WILLIAM C. BARTHOLOMAY is President of Near North National Group, Chicago,
Illinois (insurance brokers) and Chairman of the Board of the Atlanta Braves
(National League Baseball). He has served as Vice Chairman of Turner
Broadcasting System, Inc., a division of Time Warner Inc. for more than five
years. Mr. Bartholomay is a director of WMS.

NORMAN J. MENELL has been Vice Chairman of the Board of Directors of WMS
since 1990 and is a director of WMS. He previously held various executive
offices at WMS from 1981 to 1990, including President.

LOUIS J. NICASTRO has been the President and Chief Executive Officer of WMS
since April 1998. He has served as Chairman of the Board of Directors of WMS
since its incorporation in 1974. Mr. Nicastro has also served WMS as Chief
Executive Officer or Co-Chief Executive Officer from 1974 to June 1996,
President (1985-1988 and 1990-1991) and Chief Operating Officer (1985-1986 and
1998). He also served as Chairman of the Board and Chief Executive Officer of
WHG Resorts & Casinos Inc. and its predecessors from 1983 until January 1998.
Mr. Nicastro also served as our Chairman of the Board and our Chief Executive
Officer or Co-Chief Executive Officer from 1988 to June 1996 and as our
President between 1988 and 1991. He is Neil D. Nicastro's father.

HAROLD H. BACH, JR. became our Executive Vice President -- Finance and
Chief Financial Officer in August 1996. Previously, Mr. Bach served as our
Senior Vice President -- Finance and Chief Financial Officer from 1990 to August
1996, and he has served as Treasurer continuously since 1994. Mr. Bach also
served as Vice President -- Finance, Chief Financial and Chief Accounting
Officer of WMS for over five years until October 1999. Prior to joining WMS, Mr.
Bach was a partner in the accounting firms of Ernst & Young (1989-1990) and
Arthur Young & Company (1967-1989).

BYRON C. COOK became our Executive Vice President -- Home Video in August
1996. Since 1994, Mr. Cook has been the President and Chief Operating Officer of
our subsidiary, Midway Home Entertainment Inc. From 1989 to 1994, Mr. Cook was
President of Tradewest Inc., a company which he co-founded and which we acquired
in 1994.

RICHARD D. WHITE has been a Managing Director of CIBC Capital Partners, New
York, New York, an affiliate of CIBC World Markets Corp. and its predecessor,
for over five years. Mr. White is a director of Vestcom International, Inc.

4
7

GERALD O. SWEENEY, JR. has been a member of the law firm Lord, Bissell &
Brook, Chicago, Illinois for over five years.

REQUIRED VOTE

The affirmative vote of a plurality of the shares of our common stock
present in person or by proxy at the annual meeting is required to elect the
Class II directors.

THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES FOR ELECTION AS CLASS
II DIRECTORS.

THE BOARD OF DIRECTORS

The Board of Directors is responsible for managing our overall affairs. To
assist it in carrying out its duties, the Board has delegated specific authority
to several committees. Eight of our twelve directors are neither officers nor
employees of Midway.

During fiscal 1999, the Board held five meetings. Each director attended at
least 75% of the aggregate number of meetings of the Board and committees on
which he served during the fiscal year.

DIRECTOR COMPENSATION

We pay a fee of $32,500 per year to each director who is not also our
employee. Each director who serves as the chairman of any committee of our Board
receives a further fee of $2,500 per year for his services in that capacity, and
each other member of our Audit Committee receives an additional fee of $2,500
per year.

Under our stock option plans, we have granted options to purchase 35,000
shares of our common stock to each of our non-employee directors. See "Stock
Option Plans" below.

COMMITTEES OF THE BOARD OF DIRECTORS

The Audit Committee is currently composed of four members: Messrs. McKenna
(Chairman), Bartholomay, Sheinfeld and White. This Committee meets periodically
with the independent auditors and internal personnel to consider the adequacy of
internal accounting controls, to receive and review the recommendations of the
independent auditors, to recommend the appointment of auditors, to review the
scope of the audit and the compensation of the independent auditors, to review
our consolidated financial statements and, generally, to review our accounting
policies and to resolve potential conflicts of interest. During fiscal 1999,
this Committee held two meetings.

The Nominating Committee is currently composed of Messrs. L.J. Nicastro
(Chairman) and Bartholomay. This Committee makes recommendations about the
nomination of candidates for election to the Board and does not accept
recommendations from stockholders. During fiscal 1999, this Committee did not
hold any meetings, taking all action by the unanimous written consent of its
members.

The Negotiating Committee is currently composed of Messrs. Sweeney
(Chairman) and White. This Committee reviews and authorizes any agreement to be
entered into in the future and any modification to any existing agreement
between WMS and Midway. During fiscal 1999, this Committee did not hold any
meetings, taking all action by unanimous written consent.

The Stock Option Committee is currently composed of Messrs. Reich
(Chairman) and McKenna. This Committee determines the timing, pricing and the
amount of option grants under the provisions of our stock option plans. During
fiscal 1999, this Committee held one meeting.

The Compensation Committee is currently composed of Messrs. Bartholomay
(Chairman), McKenna and Reich. This Committee makes recommendations regarding
the compensation of senior management personnel. During fiscal 1999, this
Committee did not hold any meetings, taking all action by unanimous written
consent.

5
8

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of our Compensation Committee or Stock Option Committee is an
employee or officer of Midway, and no officer, director or other person had any
interlock relationship required to be disclosed in this proxy statement.

EXECUTIVE OFFICERS

The following individuals were elected to serve in the capacities set forth
below until the 2000 Annual Meeting of the Board of Directors and until their
respective successors are elected and shall qualify.

NAME AGE POSITION
- ---- --- --------

Neil D. Nicastro......... 43 Chairman of the Board of Directors, President, Chief
Executive Officer and Chief Operating Officer
Harold H. Bach, Jr. ..... 67 Executive Vice President -- Finance, Treasurer and Chief
Financial Officer
Byron C. Cook............ 45 Executive Vice President -- Home Video
Kenneth J. Fedesna....... 50 Executive Vice President -- Coin-Op Video
Michael A. Ribero........ 43 Executive Vice President
Orrin J. Edidin.......... 38 Vice President, Secretary and General Counsel

The current principal occupation or employment of each of Messrs. Nicastro,
Bach, Cook and Fedesna during the last five years is set forth on pages 3 and 4
above.

Mr. Ribero joined us as Executive Vice President in July 1999. From
November 1998 to June 1999, Mr. Ribero was Senior Vice President and General
Manager, EA Sports of Electronic Arts, a video game publisher. From August 1996
to November 1998, he was Chairman and Chief Executive Officer of Radical
Entertainment Ltd., an interactive entertainment company. From February 1995 to
August 1996, he was an Executive Vice President of Sega of America, and from
1988 until February 1995, he was employed by Hilton Hotels Corporation in
various positions, most recently as Executive Vice President, Marketing &
Strategic Planning.

Mr. Edidin has served as our Vice President, Secretary and General Counsel
since June 1997. He has also served as Vice President, Secretary and General
Counsel of WMS since May 1997. Mr. Edidin was Associate General Counsel of Fruit
of the Loom, Inc. from 1992 until May 1997.

EXECUTIVE COMPENSATION

To provide stockholders with an understanding of our executive compensation
program, the following are presented below: (i) the Summary Compensation Table;
(ii) the Stock Option Tables; (iii) the Joint Report by the Compensation and
Stock Option Committees of the Board of Directors on Fiscal 1999 Executive
Compensation; (iv) the Corporate Performance Graph; and (v) a description of
employment agreements.

The Summary Compensation Table below sets forth the compensation paid for
service in all capacities during the fiscal years ended June 30, 1999, 1998 and
1997 to each of our executive officers whose fiscal 1999 compensation exceeded
$100,000. Where an officer served as an employee of both WMS and Midway, the
table sets forth the aggregate compensation paid by WMS and Midway. The table
reflects compensation paid by Midway to Mr. Cook during fiscal 1999, 1998 and
1997 and, after the date of our April 1998 spinoff from WMS, to Mr. Nicastro.
Until the spinoff, Mr. Nicastro was paid by both Midway and WMS under employment
agreements with each company, and the combined amount is shown on the table.
Until the spinoff, the compensation paid by WMS to the other executive officers
who served both companies was allocated to WMS or Midway based upon estimates by
management of the percentage of time devoted to each company. After the spinoff,
compensation that one party pays to these executive officers is reimbursed by
the other party in amounts equal to the allocated cost under the Temporary
Support Services Agreement dated as of April 6, 1998 between WMS and Midway. Our
management believes that these executive officers devoted, from time to time,
40% to 70% of their time to Midway during fiscal 1999 and 1998. See "Certain

6
9

Relationships and Related Transactions" below for a description of the Temporary
Support Services Agreement.

SUMMARY COMPENSATION TABLE

LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------------- -------------------
SECURITIES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)(1) ($)(2)
--------------------------- ---- --------- --------- -------------- ------------

Neil D. Nicastro(3)....................... 1999 600,000 202,700 911,850 133,521(4)
Chairman of the Board, Chief Executive 1998 575,000 1,387,820 150,000 47,074(4)
Officer, President and Chief Operating 1997 600,000 969,160 500,000 54,632(4)
Officer
Harold H. Bach, Jr. ...................... 1999 315,000 -- 43,842 --
Executive Vice President -- Finance, 1998 300,000 220,000 50,000 --
Treasurer and Chief Financial Officer 1997 300,000 175,000 100,000 --
Byron C. Cook............................. 1999 325,000 -- 284,955 --
Executive Vice President -- Home Video 1998 300,000 350,000 50,000 --
1997 300,000 250,000 100,000 --
Kenneth J. Fedesna........................ 1999 325,000 -- 29,229 2,500(5)
Executive Vice President -- Coin-Op 1998 310,000 150,000 50,000 2,500(5)
Video
1997 310,000 150,000 100,000 2,500(5)
Orrin J. Edidin........................... 1999 200,000 --(6) 41,304 --
Vice President, Secretary and General 1998 180,000 75,000 35,000 --
Counsel

- ---------------
(1) Excludes options to purchase shares of WMS common stock, all of which were
granted at an exercise price equal to market value on the date of grant. In
fiscal 1998, Mr. Nicastro received options to purchase 250,000 shares of WMS
common stock, and Mr. Edidin received 25,000 options to purchase WMS common
stock. In fiscal 1997, Mr. Edidin received 25,000 options to purchase WMS
common stock. Grants of Midway stock options in fiscal 1999 are from the
1998 Stock Incentive Plan, which required certain purchases of our common
stock by these officers, except for 15,000 options granted to Mr. Edidin.

(2) Excludes the value of adjustments to WMS options of these holders due to the
spinoff. These amounts are as follows: Neil D. Nicastro received WMS common
stock valued at $6,079,497 and cash in the amount of $12,428,476; Harold H.
Bach, Jr. received WMS common stock valued at $534,722 and cash in the
amount of $1,093,193; Byron C. Cook received WMS common stock valued at
$1,153,488 and cash in the amount of $3,485,699; Kenneth J. Fedesna received
WMS common stock valued at $940,058 and cash in the amount of $1,921,830;
and to date Orrin J. Edidin received cash in the amount of $155,190.
Additional cash adjustment payments to Mr. Edidin for the unvested portion
of the options ($343,260 if Mr. Edidin is still serving WMS or Midway
through the end of the vesting period) will be made in the fiscal years in
which such options would have vested. The WMS common stock was valued for
purposes of these adjustments, at the average of the high and low prices for
WMS common stock on the NYSE on April 3, 1998, the last day of trading prior
to the spinoff.

(3) Mr. Nicastro also received severance payments from WMS in fiscal 1998
consisting of $2,500,000 in addition to the stock options described in
footnote 1 above.

(4) Includes, for fiscal 1999, 1998 and 1997, life insurance premiums of $1,679,
$1,571 and $1,467, respectively, and $131,842, $45,503 and $53,165 for
fiscal 1999, 1998 and 1997, respectively, accrual for contractual retirement
benefits.

(5) Represents life insurance premiums.

(6) Excludes a bonus of $75,000 paid by WMS to Mr. Edidin.

7
10

STOCK OPTION TABLES

The following table sets forth information about options to purchase common
stock granted in fiscal 1999 under our stock option plans to persons named in
the Summary Compensation Table above.

OPTION GRANTS IN LAST FISCAL YEAR

INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE AT
PERCENT OF ASSUMED ANNUAL RATE OF
NUMBER OF TOTAL OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OPTION TERM (1)
OPTIONS FISCAL PRICE EXPIRATION ----------------------
NAME GRANTED(#)(2) YEAR(%) ($/SHARE) DATE 5%($) 10%($)
---- ------------- ------------- --------- ---------- --------- ----------

Neil D. Nicastro....... 911,850(3) 36.2 8.00 01/28/09 4,587,517 11,626,088
Harold H. Bach, Jr. ... 43,842(3) 1.7 8.00 01/28/09 220,569 558,986
Byron C. Cook.......... 284,955(3) 11.3 8.00 01/28/09 1,433,609 3,633,176
Kenneth J. Fedesna..... 29,229(3) 1.2 8.00 01/28/09 147,051 372,670
Orrin J. Edidin........ 41,304(4) 1.6 (4) (4) 232,565 589,386

- ---------------
(1) The assumed appreciation rates are set under the rules and regulations under
the Securities Exchange Act of 1934 and are not derived from the historical
or projected prices of our common stock. Total potential stock price
appreciation for all stockholders for the remaining terms of their options,
based on the price of $12.94 per share of common stock on June 30, 1999
would be $309,469,032 and $784,284,903 at assumed rates of stock
appreciation of 5% and 10%, respectively.

(2) Grants of stock options in fiscal 1999 are from our 1998 Stock Incentive
Plan, which required certain purchases of our common stock by these
officers, except for 15,000 options granted to Mr. Edidin.

(3) These options become exercisable on January 29, 2000.

(4) Of these options, 26,304 become exercisable on January 29, 2000, and 15,000
become exercisable up to 10%, 30%, 60% and 100% of that number upon the
first, second, third and fourth anniversaries, respectively, of the date of
the grant. The exercise price per share of 26,304 of these options is $8.00
and of 15,000 of these options is $10.625. 26,304 of these options expire on
January 28, 2009, and 15,000 expire on May 23, 2009.

The following table sets forth information about the number and assumed
values of options to purchase our common stock owned by persons named in the
Summary Compensation Table above.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
SHARES AT 6/30/99(#) 6/30/99($)(1)
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- -------------- ----------- -------------------- -------------

Neil D. Nicastro............... -- -- 460,000/1,101,850 --/4,504,539
Harold H. Bach, Jr. ........... -- -- 100,000/ 93,842 --/ 216,579
Byron C. Cook.................. -- -- 100,000/ 334,955 --/1,407,678
Kenneth J. Fedesna............. -- -- 100,000/ 79,229 --/ 144,391
Orrin J. Edidin................ -- -- 3,500/ 72,804 --/ 164,667

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

(1) Based on the closing price of our common stock on the New York Stock
Exchange on June 30, 1999, which was $12.94.

8
11

STOCK OPTION PLANS

We have adopted a 1999 Stock Option Plan, a 1998 Stock Incentive Plan, a
1998 Non-Qualified Stock Option Plan and a 1996 Stock Option Plan (collectively,
the "Plans"). The Plans are intended to encourage stock ownership by our
directors, officers, employees, consultants and advisors and thereby enhance
their proprietary interest in Midway. Under the Plans, the Stock Option
Committee determines which of the eligible directors, officers, employees,
consultants and advisors receive stock options, the terms, including the option
price and vesting period, of each option, and the number of shares for which
options are granted.

The total number of shares of our common stock that may be purchased under
stock options under the Plans shall not exceed, in the aggregate, 6,747,970
shares. Under the Plans, we may grant stock options to purchase shares of our
common stock to our directors, officers, employees, consultants and advisors.
The 1998 Stock Incentive Plan requires that participants purchase shares of our
common stock at the market price in order to be eligible to receive options. The
option price per share is generally not less than 100% of the fair market value
of our common stock on the date the option is granted as determined by the
Committee. The Plans each have a term of ten years, unless terminated earlier.

At December 3, 1999, there were 708,000 options outstanding under the 1999
Stock Option Plan, 2,209,383 outstanding under the 1998 Stock Incentive Plan,
734,696 outstanding under the 1998 Non-Qualified Stock Option Plan and 1,890,746
outstanding under the 1996 Stock Option Plan. The average exercise price of the
outstanding exercisable options at December 8, 1999, was approximately $13.25.
Of the 5,542,825 options outstanding, 2,499,860 were held by officers and
directors of Midway (including 1,471,850 held by Neil D. Nicastro).

EXECUTIVE INCENTIVE PLAN

In 1998, we adopted an Executive Incentive Plan (the "EIP"). Eligible
participants in the EIP include the business unit heads and the Chief Financial
Officer and employees reporting directly to these persons and other key
employees selected by the Chief Executive Officer. The EIP provides annual bonus
award opportunities, which are expressed as a percentage of the participant's
base salary. Target awards under the EIP are 50% of base salary for business
unit heads and the Chief Financial Officer and from 20% to 35% of base salary
for employees who directly report to unit business heads. The maximum award
under the EIP for any plan year is two times the target award. No payments were
accrued under the EIP for fiscal 1999. The EIP expires on June 30, 2000.

Awards under the EIP are calculated based upon increases in our operating
income and that of the particular business unit as compared to previous average
earnings for the prior three-year period. Target awards are met if Midway and
the business units achieve a 30% increase in operating income, and no bonus is
paid under the EIP unless at least 5% growth is achieved. Awards may be
increased or decreased in the discretion of the Chief Executive Officer by up to
25% based upon individual participant performance factors, consistency of
quarter-to-quarter business unit earnings growth and other performance elements
determined by the Chief Executive Officer.

JOINT REPORT OF THE COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE
ON FISCAL 1999 EXECUTIVE COMPENSATION

The Compensation Committee is responsible for making recommendations to the
Board of Directors regarding the compensation of senior management personnel. To
the extent that stock options form a portion of a compensation package, the
Compensation Committee works together with the Stock Option Committee, which is
responsible for making recommendations regarding stock option grants and awards.

It is the policy of the Compensation and Stock Option Committees to provide
attractive compensation packages to senior management so as to motivate them to
devote their full energies to our success, to reward them for their services and
to align the interests of senior management with the interests of stockholders.
Our executive compensation packages are comprised primarily of base salaries;
annual bonuses based on the Executive Incentive Plan (the "EIP"), under
employment agreements and discretionary cash bonuses; stock
9
12

options; and retirement and other benefits. It is the philosophy of the
Compensation Committee that Midway be staffed with a small number of
well-compensated senior management personnel.

In general, the level of base salary is intended to provide appropriate
basic pay to senior management taking into account their historical
contributions to our success, each person's unique value and the recommendation
of the Chief Executive Officer. The amount of any discretionary bonus is
subjective but is generally based on our actual financial performance in the
preceding fiscal year, the special contribution of the executive to this
performance and the overall level of the executive's compensation including
other elements of the compensation package. Bonuses under the EIP and employment
agreements are likewise designed to give effect to one or more of these factors.
We also have used stock options, which increase in value only if our common
stock increases in value, and which terminate a short time after an executive
leaves, as a means of long-term incentive compensation. The Stock Option
Committee determines the size of stock option grants to our executive officers
and other employees on an individual, discretionary basis in consideration of
financial corporate results and each recipient's performance, contributions and
responsibilities without assigning specific weight to any of these factors.

Our CEO, Neil D. Nicastro, under a negotiated formula set forth in his
employment agreement, receives a salary, a bonus of a percentage of our pre-tax
income and various retirement and other benefits. Mr. Nicastro's employment
agreement reflects the same compensation philosophy described above.

The Omnibus Budget Reconciliation Act of 1993 (the "Budget Act") generally
provides that publicly-held corporations will only be able to deduct, for income
tax purposes, compensation paid to the chief executive officer or any of the
four most highly paid senior executive officers in excess of one million dollars
per year if it is paid pursuant to qualifying performance-based compensation
plans approved by stockholders. Compensation as defined by the Budget Act
includes, among other things, base salary, incentive compensation and gains on
stock option transactions. Total compensation of some of our officers may be
paid pursuant to plans or agreements that have not been approved by stockholders
and may exceed one million dollars in a particular fiscal year. We will not be
able to deduct these excess payments for income tax purposes. The Compensation
Committee intends to consider, on a case by case basis, how the Budget Act will
affect our compensation plans and contractual and discretionary cash
compensation.

The Compensation Committee The Stock Option Committee
William C. Bartholomay, Chairman Harvey Reich, Chairman
Harvey Reich William E. McKenna
William E. McKenna

This Joint Report of the Compensation Committee and Stock Option Committee on
Executive Compensation shall not be deemed to be incorporated by reference into
any of our filings under the Securities Act of 1933 or the Securities Exchange
Act of 1934, except to the extent that we specifically incorporate this
information by reference.

10
13

CORPORATE PERFORMANCE GRAPH

The following graph compares, for the period beginning October 29, 1996
(the date trading of our common stock on the New York Stock Exchange commenced)
and ending June 30, 1999, the yearly percentage change in cumulative total
stockholder return on our common stock with (1) the cumulative total return of
the Standard and Poor's 500 Stock Index ("S&P 500") and (2) the cumulative total
return of the Standard and Poor's Leisure Time Index ("S&P Leisure"). The graph
assumes an investment of $100 on October 29, 1996 in our common stock and $100
invested at that time in each of the indexes and the reinvestment of dividends
where applicable.

[PERFORMANCE GRAPH]

- ---------------------------------------------------------------------------------------------------------------------
10/30/96 06/30/97 06/30/98 06/30/99
- ---------------------------------------------------------------------------------------------------------------------

- ---
M Midway $100 $102 $ 74 $ 62
- ---------------------------------------------------------------------------------------------------------------------
- ---
O S&P 500 $100 $128 $167 $204
- ---------------------------------------------------------------------------------------------------------------------
- ---
-- S&P - Leisure $100 $122 $147 $119
- ---------------------------------------------------------------------------------------------------------------------

This table shall not be deemed to be incorporated by reference into any of
our filings under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent that we specifically incorporate this information by
reference.

11
14

EMPLOYMENT AGREEMENTS

We employ Neil D. Nicastro under the terms of an Employment Agreement dated
as of July 1, 1996. The agreement was amended effective on April 6, 1998 and
November 5, 1999. Prior to May 1, 1998, the employment agreement provided for
salaried compensation at the rate of $300,000 per year. On May 1, 1998, Mr.
Nicastro's base salary was increased to $600,000 per year. The agreement
provides for bonus compensation in an amount equal to two percent of our pre-tax
income. The employment agreement expires October 30, 2004, subject to automatic
extensions in order that the term of Mr. Nicastro's employment shall at no time
be less than three years. Upon Mr. Nicastro's retirement or death, or the
termination of the agreement by Midway, Midway is required to pay to Mr.
Nicastro or his designee, or if no designation is made, to his estate, for a
period of ten years, an annual benefit equal to one-half of the aggregate of (a)
his annual base salary upon his termination, retirement or death and (b) his
average bonus over the three years prior to his termination, retirement or
death, but in no event less than $300,000 per year nor more than his annual base
salary upon his termination, retirement or death.

The employment agreement provides that Mr. Nicastro shall devote such time
to our business and affairs as is reasonably necessary to perform the duties of
his position. Mr. Nicastro may continue to serve as a director of and consultant
to WMS Industries as he deems appropriate.

The employment agreement also provides that Mr. Nicastro may participate
and receive the benefits of all pension and retirement plans, bonus plans,
health, life, hospital, medical and dental insurance (including reimbursement
for all medical and dental expenses incurred by him, his spouse and his children
under the age of twenty-one, to the extent that these expenses are not otherwise
reimbursed by insurance provided by us) and all other employee benefits and
perquisites generally made available to our employees. Additionally, we
currently provide Mr. Nicastro with $2,000,000 of life insurance coverage in
addition to the standard amount provided to our employees.

Mr. Nicastro's employment agreement further provides for full compensation
during periods of illness or incapacity. We may, however, give 30 days' notice
of termination if illness or incapacity disables Mr. Nicastro from performing
his duties for a period of more than six months. The termination notice becomes
effective if full performance is not resumed within 30 days after the notice is
given and maintained for a period of two months thereafter.

Mr. Nicastro may terminate the employment agreement if any of the following
happen without his consent:

- the placement of Mr. Nicastro in a position of lesser stature or the
assignment to Mr. Nicastro of duties, performance requirements or working
conditions significantly different from or at variance with those
presently in effect;

- the treatment of Mr. Nicastro in a manner which is in derogation of his
status as a senior executive;

- the cessation of service of Mr. Nicastro as a member of our Board of
Directors;

- the discontinuance or reduction of amounts payable or personal benefits
available to Mr. Nicastro under the agreement; or

- the requirement that Mr. Nicastro work outside his agreed upon
metropolitan area.

If Mr. Nicastro terminates the agreement for any of these reasons, or if we
wrongfully terminate Mr. Nicastro's employment agreement, or if current Board
members, or successors approved by current Board members, cease for any reason
to constitute at least a majority of the Board, then upon notice by Mr.
Nicastro, we are obligated (a) to make a lump sum payment to Mr. Nicastro equal
in amount to the sum of the aggregate base salary during the remaining term of
his employment agreement (but in no event less than three times the highest base
salary payable to him during the one-year period prior to such event), the bonus
payable during the remaining term of the agreement (assuming that Midway pre-tax
income during the remainder of the term of the employment agreement is earned at
the highest level achieved in either of the last two full fiscal years prior to
such termination) and the retirement benefit (assuming the date of termination
is

12
15

his retirement date) otherwise payable under the terms of the employment
agreement and (b) to purchase at the election of Mr. Nicastro all stock options
held by him with respect to our common stock at a price equal to the spread
between the option price and the fair market price of the stock as defined in
the agreement.

If payments made to Mr. Nicastro under the employment agreement after a
change of control are considered "excess parachute payments" under Section 280G
of the Internal Revenue Code of 1986 (the "Code"), we must pay additional
compensation to Mr. Nicastro to the extent necessary to eliminate the economic
effect on him of the resulting excise tax. Under Section 4999 of the Code, in
addition to income taxes, the recipient is subject to a 20% nondeductible excise
tax on excess parachute payments. An excess parachute payment is a compensation
payment which is made because of a change of control and which exceeds the
portion of the base amount (i.e., the average compensation for the five-year
period prior to the change of control) allocable to the payment. These rules
apply only if the present value of all payments of compensation (including
non-taxable fringe benefits) at the time of a change of control is at least
equal to three times the base amount. We cannot deduct excess parachute payments
for income tax purposes.

Byron C. Cook is employed by us under the terms of an employment agreement
dated as of July 1, 1998. This agreement provides for salaried compensation at
the rate of $325,000 per year, or a greater amount as may be determined by the
Board of Directors. It also provides for, among other things, full participation
in all benefit plans and perquisites generally available to executive employees.
Furthermore, the agreement states that we will negotiate in good faith with Mr.
Cook to establish performance criteria upon which an annual discretionary bonus
for Mr. Cook will be based and that we will provide Mr. Cook with $400,000 in
additional life insurance coverage. The agreement expires on June 30, 2001. We
may terminate the agreement upon 30 days' written notice for cause. We may also
terminate the agreement upon 30 days' written notice if Mr. Cook is
substantially unable to perform the duties of his position due to physical or
mental illness or injury and such illness or injury has lasted for 90 days
during any fiscal year. Mr. Cook may terminate the agreement upon 30 days'
written notice for any of the following reasons: (a) placement of Mr. Cook in a
position of lesser stature or different duties, requirements or working
conditions; (b) treatment of Mr. Cook in derogation of his senior executive
status; (c) substantial discontinuance or reduction of salary or personal
benefits available to Mr. Cook; or (d) requirement of Mr. Cook to work away from
Corsicana, Texas, other than during periods of reasonable business travel. Mr.
Cook may also terminate the agreement if the individuals who presently
constitute the Board of Directors, or successors approved by these Board
members, cease for any reason to constitute at least a majority of the Board. If
this happens, and Mr. Cook gives us notice of termination within 60 days, then
in lieu of any other rights under the agreement, all of Mr. Cook's unvested
stock options will immediately vest, and we will be required to pay him a lump
sum of three times his base salary. If any portion of the amount paid to Mr.
Cook is subject to the excise tax imposed by Section 4999 of the Code, then we
must pay additional compensation to Mr. Cook to the extent necessary to
eliminate the economic effect on him of the resulting excise tax.

Orrin J. Edidin is employed by us under the terms of an employment
agreement dated as of May 24, 1999. This agreement provides for salaried
compensation at the rate of $200,000 per year, or a greater amount as may be
determined by the Board of Directors. It also provides for, among other things,
full participation in all benefit plans and perquisites generally available to
executive employees. The agreement states that we will provide Mr. Edidin with
$400,000 in additional life insurance coverage. The agreement expires on June
30, 2002, subject to automatic extensions so that the term of Mr. Edidin's
employment shall at no time be less than three years. Either party may terminate
the agreement effective upon expiration of the term upon written notice from the
terminating party to the other party dated and received at least three years
prior to the respective termination date. We may terminate the agreement upon 30
days' written notice for cause. Mr. Edidin may terminate the agreement if the
individuals who presently constitute the Board of Directors, or successors
approved by these Board members, cease for any reason to constitute at least a
majority of the Board. If this happens, and Mr. Edidin gives us notice of
termination within 60 days, then in lieu of any other rights under the
agreement, all of Mr. Edidin's unvested stock options will immediately vest, and
we will be required to pay him a lump sum of three times his base salary. If any
portion of the amount paid to Mr. Edidin is subject to the excise tax imposed by
Section 4999 of the Code, then we must pay additional compensation to Mr. Edidin
to the extent necessary to eliminate the economic effect on him of the resulting
excise tax.

13
16

Harold H. Bach, Jr. is employed by us under the terms of an employment
agreement dated as of May 24, 1999. This agreement provides for salaried
compensation at the rate of $315,000 per year, or a greater amount as may be
determined by the Board of Directors. It also provides for, among other things,
full participation in all benefit plans and perquisites generally available to
executive employees. The agreement expires on June 30, 2001, subject to
automatic extensions so that the term of Mr. Bach's employment shall at no time
be less than three years. We may terminate the agreement effective upon
expiration of the term upon written notice from us to Mr. Bach dated and
received at least three years prior to the termination date. We may also
terminate the agreement upon 30 days' written notice for cause. Mr. Bach may
terminate the agreement upon written notice to us dated and received at least
two years prior to the termination date. Mr. Bach may also terminate the
agreement if the individuals who presently constitute the Board of Directors, or
successors approved by these Board members, cease for any reason to constitute
at least a majority of the Board. If this happens, and Mr. Bach gives us notice
of termination within 60 days, then in lieu of any other rights under the
agreement, all of Mr. Bach's unvested stock options will immediately vest, and
we will be required to pay him a lump sum of three times his base salary. If any
portion of the amount paid to Mr. Bach is subject to the excise tax imposed by
Section 4999 of the Code, then we must pay additional compensation to Mr. Bach
to the extent necessary to eliminate the economic effect on him of the resulting
excise tax.

Kenneth J. Fedesna is employed by us under the terms of an employment
agreement dated as of June 1, 1999. This agreement provides for salaried
compensation at the rate of $325,000 per year, or a greater amount as may be
determined by the Board of Directors. It also provides for, among other things,
full participation in all benefit plans and perquisites generally available to
executive employees. The agreement states that we provide Mr. Fedesna with
$400,000 in additional life insurance coverage. The agreement expires on June
30, 2002, subject to automatic extensions so that the term of Mr. Fedesna's
employment shall at no time be less than three years. Either party may terminate
the agreement effective upon expiration of the term upon written notice from the
terminating party to the other party dated and received at least three years
prior to the respective termination date. We may terminate the agreement upon 30
days' written notice for cause. Mr. Fedesna may terminate the agreement if (a)
he is placed in a position of lesser stature; (b) he is assigned duties
significantly different from or incompatible with his position; (c) his
performance requirements or working conditions change; or (d) the business
facility at which he is required to work is relocated more than 50 miles from
our present business location. Mr. Fedesna may also terminate the agreement if
the individuals who presently constitute the Board of Directors, or successors
approved by these Board members, cease for any reason to constitute at least a
majority of the Board. If this happens, and Mr. Fedesna gives us notice of
termination within 60 days, then in lieu of any other rights under the
agreement, all of Mr. Fedesna's unvested stock options will immediately vest,
and we will be required to pay him a lump sum of three times his base salary. If
any portion of the amount paid to Mr. Fedesna is subject to the excise tax
imposed by Section 4999 of the Code, then we must pay additional compensation to
Mr. Fedesna to the extent necessary to eliminate the economic effect on him of
the resulting excise tax.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATIONSHIP WITH WMS INDUSTRIES INC.

Prior to April 1998, we were a subsidiary of WMS. Following our spinoff
from WMS through the distribution of our common stock to WMS stockholders, WMS
does not own any of our common stock. A majority of our directors are directors
of WMS. Additionally, two of the executive officers of WMS are officers or
directors of Midway.

We have the following agreements with WMS, each of which became effective
on April 6, 1998:

Manufacturing Agreement. Williams Electronics Games, Inc. ("WEG"), a wholly
owned subsidiary of WMS, manufactures coin-operated video games and kits for us
under this agreement. The agreement has a term of three years and will
automatically renew for successive terms of six months unless terminated (a) by
either party for any reason upon six months' notice or (b) if there is a
material default under the agreement or under the confidentiality provisions of
the Confidentiality and Non-Competition Agreement discussed below,

14
17

immediately at the election of the non-defaulting party. The agreement requires
WEG to allocate 65% of its combined production and storeroom square footage at
their Waukegan plant to perform its obligations under the agreement. We design
our coin-operated video games, including programming, graphic design, electrical
engineering, sound engineering and model shop engineering. WEG provides some
production engineering activities, such as the design process for the assembly
of each game, creating work station profiles and quality control of incoming
parts and the assembly process. We supply most of the materials used in the
manufacture of coin-operated video games, but WEG supplies about 5% of the
materials and charges us their cost plus 9% for these materials. All labor
costs, including fringe benefits, directly associated with the manufacturing of
coin-operated video games are charged to us at WEG's actual cost plus 9%. The
Waukegan plant's operating costs are either identified as Company costs and
charged to us or allocated as agreed between the parties, plus 9%. The
identified or allocated costs include manufacturing costs, materials management
costs, quality assurance costs and administration costs. The plant operating
costs of WEG paid by us under the agreement are increased by 9%.

Cabinet Supply Agreement. Lenc-Smith Inc., a wholly owned subsidiary of
WMS, supplies to us cabinets for coin-operated video games. We have received a
notice terminating this agreement as of April 25, 2000. Until that date, to
initiate the purchase of video game cabinets, we issue a pricing inquiry to
Lenc-Smith specifying the number of cabinets to be ordered and the cabinet
specifications. Lenc-Smith then provides a formal quote on the pricing inquiry,
and, upon agreement on a final price, a purchase order is issued. Lenc-Smith
ships all cabinets to WEG's Waukegan, Illinois plant for use in the manufacture
of coin-operated video games. We may purchase cabinets from manufacturers other
than Lenc-Smith if they do not meet competitive bona-fide quotes.

Spare Parts Sales and Service Agreement. WEG sells spare parts for our
coin-operated video games. The agreement has a five-year term but is terminable
upon six months notice by either party. We are required to refer our customers
to WEG for spare parts purchases during the term of the agreement.

Sales Agreement. This agreement was amended as of June 15, 1999. We have
received a notice terminating this agreement as of April 25, 2000. Until that
date, we continue to market, sell and field test pinball products for WEG,
coordinating and negotiating print advertising and video presentations with
third-party advertising and media firms, and negotiating distribution and sales
agency agreements with distributors. For these services, WEG pays us $500,000
per year or a higher amount if agreed to between the parties. Through December
31, 1999, WEG has agreed to pay us at the rate of approximately $135,000 per
month, plus a commission of 1.5% on the first $25.0 million of annual net sales
by us of WEG products and 1.0% on annual net sales of WEG products in excess of
$25.0 million. An annual budget for marketing and testing is developed and
agreed upon in advance between the parties annually and modified quarterly by
mutual agreement. Additional services that were not included in the budget are
provided at our cost plus 8.0% for payroll, overhead and expense.

Information Systems Service Agreement. This agreement has a term of three
years with successive renewal periods of 18 months and is terminable by either
party (a) upon 18 months' notice or (b) upon a material default, immediately by
the non-defaulting party. WEG provides us with access to its computer systems
for many of our computing needs, including order entry, financial and
manufacturing modules, marketing and sales and engineering (including
engineering documentation and blueprint systems) as well as support for the
computer system. WEG also coordinates the provision and maintenance of cabling,
wiring, switching components, routers and gateway and the purchasing,
maintaining and upgrading of network services for Midway. These services include
purchasing of desktop computers and related hardware as well as providing some
telecommunications services to Midway. We may also request WEG to provide
services to develop our communications networking, operating and computer system
and other related services. We pay WEG an amount equal to the cost to WEG for
all services provided plus 6.6%.

Confidentiality and Non-Competition Agreement. Under this agreement, WMS or
we may designate business information as confidential, and the other party must
use its best efforts to keep this information confidential. The agreement also
includes five year non-competition and one year post-employment non-
solicitation clauses.

15
18

Right of First Refusal Agreement. WMS granted us the right of first refusal
with respect to any offer to WMS to purchase the Waukegan plant, so long as the
offer is not made in connection with the sale of substantially all of WMS' stock
or assets and business as a going concern, if WMS intends to accept the offer.
The term of the agreement expires April 5, 2008.

Third Parties Agreement. This agreement governs the treatment of the
numerous arrangements with third parties with respect to game development,
licensing and other matters. Under the agreement, WMS and we will allocate the
rights and obligations under third party arrangements so that the party
receiving the benefit will bear the burden of those agreements. The agreement
remains in effect so long as any prior third party arrangements remain
outstanding.

Temporary Support Services Agreement. WMS supplies a portion of our
administrative, accounting, information services and janitorial and other agreed
upon services, including the use of space by us in any WMS facility, as
requested from time to time by Midway. In exchange for these services, we pay
WMS an amount equal to its direct or allocated cost (including wages, salaries,
fringe benefits and materials), as indicated on monthly invoices supplied by
WMS. The agreement continues for successive renewal periods of three months
each; provided, however, that the agreement may be terminated by either party
upon six months' notice, and each party may, upon 60 days' notice, terminate any
one or more of the services provided, except the use of space by us in any WMS
facility.

Tax Separation Agreement. We have been a member of the consolidated group
of corporations of which WMS was the common parent for federal income tax
purposes (the "WMS Group") since 1988. Therefore, Midway is jointly and
severally liable for any federal tax liability of the WMS Group. The agreement
sets forth the parties' respective liabilities for federal, state and local
taxes as well as their agreements as a result of Midway and its subsidiaries
ceasing to be members of the WMS Group. The agreement governs, among other
things, (i) the filing of tax returns with federal, state and local authorities,
(ii) the carryover of any tax benefits of Midway, (iii) the treatment of the
deduction attributable to the exercise of stock options to purchase WMS common
stock which are held by employees or former employees of Midway and any other
similar compensation related tax deductions, (iv) the treatment of certain net
operating loss carrybacks, (v) the treatment of audit adjustments, (vi)
procedures with respect to any proposed audit adjustment or other claim made by
any taxing authority with respect to a tax liability of Midway or any of its
subsidiaries. Some other tax matters are addressed in the Tax Sharing Agreement
described below.

Tax Indemnification Agreement. This agreement provides for indemnification
if the spinoff fails to qualify under Section 355 of the Internal Revenue Code
of 1986 (the "Code"). Each of the parties agreed, among other things, that for a
period of two years after the spinoff, each would continue active conduct of an
historic trade or business as conducted by it during the five-year period prior
to the spinoff. We also agreed that to fund an acquisition, within one year
after the spinoff, we would either (i) raise cash through an offering of shares
of Common Stock or debentures with detachable warrants for shares of Common
Stock or (ii) use shares of Common Stock as acquisition consideration.
Additionally, each party agreed not to: (i) merge or consolidate with another
entity; (ii) liquidate or partially liquidate; (iii) sell or transfer all or
substantially all its assets in a single transaction or a series of
transactions; (iv) redeem or otherwise repurchase any of its capital stock in a
manner contrary to Internal Revenue Service ("IRS") revenue procedures; (v)
enter into any transaction or make any change in its equity structure which may
cause the spinoff to be treated as a plan under which one or more persons
acquire directly or indirectly its common stock representing a "50 percent or
greater interest" within the meaning of Section 355(d)(4) of the Code; or (vi)
in the case of Midway, except in connection with stock issued under an employee
benefit or compensation plan, and except as described in the private letter
ruling issued in connection with the spinoff, issue additional shares of its
capital stock, unless that party first obtains the consent of the other party
and, if applicable, the person or persons acquiring a "50 percent or greater
interest" in the party have agreed to become jointly or severally liable for
payments required to be made by that party under the Tax Indemnification
Agreement.

We will indemnify WMS with respect to any action referred to above which it
takes that causes the spinoff to fail to qualify under Section 355 of the Code,
against any federal, state and local taxes, interest, penalties and additions to
tax imposed upon or incurred by the WMS Group or any member. WMS will

16
19

indemnify Midway and its subsidiaries against federal, state and local taxes,
interest, penalties and additions to tax resulting from the spinoff, other than
liabilities for which Midway is required to indemnify WMS. The agreement also
governs the procedures for indemnification, calculation of the amount of
indemnified liability for income taxes and reduction of indemnity by income tax
benefits from indemnified liabilities.

We also have the following agreements with WMS:

Tax Sharing Agreement. This agreement is dated July 1, 1996 and remains in
effect, except to the extent described in the Tax Separation Agreement referred
to above. Under this agreement, WMS and Midway have agreed upon a method for:
(i) determining the amount which Midway must pay to WMS in respect of federal
income taxes; (ii) compensating any member of the WMS Group for use of its net
operating losses, tax credits and other tax benefits in arriving at the WMS
Group tax liability as determined under the federal consolidated return
regulations; and (iii) providing for the receipt of any refund arising from a
carryback of net operating losses or tax credits from subsequent taxable years
and for payments upon subsequent adjustments. The amount that Midway is required
to pay to WMS for federal income taxes is determined as if Midway was filing a
separate tax return. If any two or more members of the WMS Group are required to
elect, or WMS elects to cause two or more members of the WMS Group to file
combined or consolidated income tax returns under state or local income tax law,
the financial consequences of these filings are determined in a manner as
similar as practicable to those provided for under the Tax Sharing Agreement for
federal taxes. The Tax Sharing Agreement is not binding on the IRS or upon
state, local or foreign taxing authorities. The effectiveness of the Tax Sharing
Agreement is therefore dependent on each member of the WMS Group having the
ability to pay its relative share of taxes. Because the IRS or other taxing
authorities can be expected to seek payment from WMS prior to seeking payment
from the individual group members, it is likely that Midway would seek to
enforce any rights it may have against WMS for sharing at a time when WMS is
unable to pay its proportionate share of taxes.

Patent License Agreement. We entered into a patent license agreement dated
July 1, 1996 with WMS under which each party licensed to the other, on a
perpetual, royalty-free basis, some patents used in the development and
manufacture of both coin-operated video games and video lottery terminals and
other gaming machines.

OTHER RELATED PARTY TRANSACTIONS

Neil D. Nicastro, our Chairman of the Board, Chief Executive Officer,
President and Chief Operating Officer, entered into a termination agreement
under which Mr. Nicastro's employment with WMS was terminated effective at the
time of the spinoff from WMS. Under that agreement, Mr. Nicastro resigned as
President, Chief Executive Officer and Chief Operating Officer of WMS. As full
consideration for payments that would otherwise have been made to Mr. Nicastro
under his employment agreement with WMS with respect to base salary, bonus,
retirement and death benefits, WMS paid Mr. Nicastro a lump sum of $2,500,000,
and granted to him 10-year options to purchase 250,000 shares of WMS common
stock at an exercise price of $5.4375.

In connection with the spinoff, WMS also entered into a consulting
agreement with Mr. Nicastro under which Mr. Nicastro agreed to make himself
reasonably available, at WMS's request, to render such services concerning WMS
as the Board of Directors or the Chairman of the Board and Chief Executive
Officer of WMS may reasonably request. The term of the Consulting Agreement is
for five years from the date of the spinoff, and is automatically renewable for
successive one year terms unless either party shall give notice of termination
not less than six months prior to the end of the term then in effect. WMS pays
Mr. Nicastro $1,000 per month for his services under the consulting agreement.

Mr. Ira S. Sheinfeld, a director of ours, is a member of the law firm of
Squadron, Ellenoff, Plesent & Sheinfeld LLP, which we retained to provide tax
services during fiscal 1999 and 1998, and which we propose to retain for these
services during the current fiscal year.

17
20

Mr. Richard D. White, a director of ours, is a Managing Director of CIBC
Capital Partners, an affiliate of CIBC World Markets Corp., which renders
financial advisory services to us from time to time, and which was the
underwriter of our 1999 public offering of 250,000 shares of common stock and
1996 initial public offering.

Mr. Gerald O. Sweeney, Jr., a director of ours, is a member of the law firm
of Lord, Bissell & Brook which performs legal services for Midway from time to
time.

PROPOSAL 2 -- APPOINTMENT OF INDEPENDENT AUDITORS

We propose that the stockholders ratify the appointment by the Board of
Directors of Ernst & Young LLP as our independent auditors for fiscal 2000. We
expect that representatives of Ernst & Young LLP will be present at the annual
meeting and that they will be available to respond to appropriate questions
submitted by stockholders at the meeting. They may make any statements that they
may desire.

Approval by the stockholders of the appointment of independent auditors is
not required, but the Board believes that it is desirable to submit this matter
to the stockholders. If holders of a majority of our common stock present and
entitled to vote on the matter should not approve the selection of Ernst & Young
LLP, the selection of independent auditors will be reconsidered by the Board.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT AUDITORS.

OTHER MATTERS

STOCKHOLDER PROPOSALS

As of the date of this proxy statement, the Board has not been informed of
and does not intend to present any other matters for stockholder action.
However, if any other matters are properly brought before the meeting, it is
intended that the persons voting the accompanying proxy will vote the shares
represented by the proxy in accordance with their best judgment.

We must receive any stockholder proposals of matters to be acted upon at
our 2001 Annual Meeting of Stockholders on or before August 23, 2000 in order to
consider including them in our proxy materials for that meeting.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our officers
and directors, and persons who beneficially own more than 10 percent of a
registered class of our equity securities, to file reports of ownership and
changes in ownership with the SEC. These persons are required by regulation to
furnish us with copies of all Section 16(a) reports that they file. Based solely
on our review of the copies of these reports that we have received and on
written representations from some reporting persons that no Form 5 report was
required, we believe that, during fiscal 1999, all of our officers, directors
and greater than 10 percent beneficial owners complied with all of the Section
16(a) filing requirements.

MANNER AND EXPENSES OF SOLICITATION

This solicitation of proxies is made by the Board, and we will bear all
solicitation costs. In addition to the solicitation of proxies by use of the
mails, some of our officers, directors and other employees may also solicit
proxies personally or by mail, telephone or telegraph, but they will not receive
additional compensation for those services. We will request that brokerage
firms, custodians, banks, trustees, nominees or other fiduciaries holding shares
of our common stock in their names forward proxy material to their principals
and will reimburse them for their reasonable out of pocket expenses.

18
21

VOTING PROCEDURES

We will appoint inspectors of election to tabulate the number of shares of
common stock represented at the meeting in person or by proxy, to determine
whether or not a quorum is present and to count all votes cast at the meeting.
The inspectors of election will treat abstentions and broker non-votes as shares
that are present and entitled to vote for purposes of determining the presence
of a quorum. Votes withheld in connection with the election of one or more of
the nominees for director will not be counted in determining the votes cast and
will have no effect on the vote. With respect to the tabulation of votes cast on
a specific proposal presented to the stockholders at the meeting, abstentions
will be considered as present and entitled to vote with respect to that specific
proposal, whereas broker non-votes will not be considered as present and
entitled to vote with respect to that specific proposal. Abstentions with
respect to each proposal that requires approval by holders of a majority of our
outstanding common stock will have the effect of a vote against the proposal.
Broker non-votes will have no effect on the vote for or against these proposals.
The term "broker non-votes" commonly refers to shares held in street name for
customers, where the broker does not have authority to vote on particular items,
and the broker has not received instructions from the beneficial owners.

HOW TO OBTAIN OUR FORM 10-K

We will provide without charge a copy of our Annual Report on Form 10-K for
the fiscal year ended June 30, 1999, including financial statements and
schedules, to each of our stockholders of record on December 8, 1999 and each
beneficial owner of our common stock on that date, upon receipt of a written
request mailed to our offices, 3401 North California Avenue, Chicago, IL 60618,
attention: Treasurer. In the event that exhibits to the Form 10-K are requested,
a reasonable fee will be charged for reproduction of the exhibits. Requests from
beneficial owners of common stock must set forth a good faith representation as
to their ownership.

IT IS IMPORTANT THAT YOU RETURN THE ACCOMPANYING PROXY CARD PROMPTLY.
THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE
EARNESTLY REQUESTED TO MARK, DATE, SIGN AND RETURN YOUR PROXY IN THE ENCLOSED
ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES. YOU
MAY REVOKE THE PROXY AT ANY TIME BEFORE IT IS EXERCISED. IF YOU ATTEND THE
MEETING IN PERSON, YOU MAY WITHDRAW THE PROXY AND VOTE YOUR OWN SHARES.

By Order of the Board of Directors,

ORRIN J. EDIDIN
Vice President, Secretary and General
Counsel

Chicago, Illinois
December 13, 1999

19
22

MIDWAY GAMES INC.

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

THE UNDERSIGNED, revoking all previous proxies, hereby appoints NEIL D.
NICASTRO, HAROLD H. BACH, JR. and ORRIN J. EDIDIN, or any of them, as attorneys,
agents and proxies with power of substitution, and with all powers that the
undersigned would possess if personally present, to vote all shares of common
stock of Midway Games Inc. (the "Company") which the undersigned is entitled to
vote at the Annual Meeting of Stockholders of the Company to be held on January
25, 2000 and at all adjournments thereof.

THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE BY THE UNDERSIGNED UPON THE FOLLOWING PROPOSALS, MORE FULLY
DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT. IF NO INSTRUCTIONS ARE GIVEN BY
THE UNDERSIGNED, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" THE
ELECTION OF THE NOMINEES FOR DIRECTORS DESIGNATED BY THE BOARD OF DIRECTORS AND
"FOR" PROPOSAL 2.

(1) Election of four (4) Class II Directors.

[ ] FOR all nominees listed (except as [ ] WITHHOLD AUTHORITY
marked to the contrary) to vote for all nominees
listed

INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEES,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW:

Kenneth J. Fedesna/William E. McKenna/Harvey Reich/Ira S. Sheinfeld.

(2) Ratification of the appointment of Ernst & Young LLP as independent
auditors for fiscal 2000.

FOR [ ] AGAINST [ ] ABSTAIN [ ]

In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.

Dated:__________,_____

----------------------------------
(Signature)

NOTE: Please sign exactly as your name or names appear hereon,
and when signing as attorney, executor, administrator, trustee or
guardian, give your full title as such. If signatory is a
corporation, sign the full corporate name by a duly authorized
officer. If shares are held jointly, each stockholder named should
sign.

NOTE: PLEASE MARK, DATE, SIGN AND MAIL THIS PROXY IN THE ENVELOPE ENCLOSED FOR
THIS PURPOSE. NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES.