MIDWAY GAMES INC
2ND AMENDMENT TO CREDIT AGREEMENT
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>c62379ex10-2.txt
<DESCRIPTION>2ND AMENDMENT TO CREDIT AGREEMENT
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 10.2


                      SECOND AMENDMENT TO CREDIT AGREEMENT
                    AND FIRST AMENDMENT TO SECURITY AGREEMENT
                           DATED AS OF APRIL 30, 2001

         This Second Amendment to Credit Agreement and First Amendment to
Security Agreement (this "AMENDMENT"), dated as of April 30, 2001, is made by
and among MIDWAY GAMES INC., a Delaware corporation (the "COMPANY"), the
financial institutions parties hereto (the "BANKS"), subsidiaries of the Company
parties hereto (the "GUARANTORS") and BANK OF AMERICA, N.A., as letter of credit
issuing bank and as agent for the Banks (in its capacity as agent, together with
any successors and assigns, the "AGENT"). Terms used but not defined herein have
the meanings specified in the Credit Agreement referenced below.

                              W I T N E S S E T H:
                              - - - - - - - - - -

         WHEREAS, the Company, the Banks, the Issuing Bank and the Agent are
parties to that certain Credit Agreement, dated as of September 20, 2000 (as
amended or modified and in effect on the date hereof, the "CREDIT AGREEMENT");

         WHEREAS, each of the Guarantors is a party to such Guarantor's Guaranty
dated as of September 25, 2000 (each, a "GUARANTY" and collectively,
"GUARANTIES") in favor of the Agent;

         WHEREAS, the Company and the Guarantors are parties to that certain
Security Agreement, dated as of November 24, 2000 (as amended or modified and in
effect on the date hereof, the "SECURITY AGREEMENT," and together with the
Credit Agreement and the Guaranties, the "LOAN DOCUMENTS") in favor of the
Agent;

         WHEREAS, the Company and the Guarantors have requested that the Banks,
the Issuing Bank and the Agent agree to amend or modify the Loan Documents as
set forth herein; and

         WHEREAS, the Agent, the Banks and the Issuing Bank are willing to amend
and modify the Loan Documents, subject to the terms and conditions contained
herein.

         NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein contained and other good and valuable consideration (the receipt,
adequacy and sufficiency of which are hereby acknowledged), the parties hereto,
intending legally to be bound, hereby agree as follows:



<PAGE>   2




                                    SECTION 1

                       AMENDMENTS TO THE CREDIT AGREEMENT

               The Credit Agreement is hereby amended as follows:

                  (a) Section 1.1 of the Credit Agreement is amended so that
definition of "Consolidated Net Worth" reads in its entirety as follows:

                  "Consolidated Net Worth" means as of any date of
                  determination, shareholders equity for the Company and its
                  Subsidiaries as of that date on a consolidated basis
                  determined in accordance with GAAP. With respect to any
                  conversion or exchange of Subordinated Debt of the Company
                  issued after April 30, 2001 into or for equity of the Company,
                  Consolidated Net Worth shall include such equity.

                  (b) Section 1.1 of the Credit Agreement is further amended so
that definition of "L/C Commitment" reads in its entirety as follows:

                  "L/C Commitment" means the commitment of the Issuing Bank to
                  Issue, and the commitment of the Banks severally to
                  participate in, Letters of Credit (including the Existing Bank
                  of America Letters of Credit) from time to time Issued or
                  outstanding under Article III, in an aggregate amount not to
                  exceed the following amounts during the following periods:

                     PERIOD                                          AMOUNT
                     -------                                       -----------
                     Closing Date through March 30, 2001           $40,000,000
                     March 31, 2001 and thereafter                 $3,500,000


                  as the same shall be reduced as a result of a reduction in the
                  L/C Commitment pursuant to Section 2.5; it being understood
                  that the L/C Commitment is a part of the Total Commitment,
                  rather than a separate, independent commitment.

                  (c) Section 1.1 of the Credit Agreement is further amended by
deleting the definition of "Trigger Event."

                  (d) Section 7.15 of the Credit Agreement is amended to read in
its entirety as follows:

                           7.15 Collateral. The Company (i) shall grant and
                  cause each of its Subsidiaries to grant to the Agent, for the
                  prorata benefit of the Banks, as security for the Obligations,
                  and subject to Permitted Liens, a first lien upon and security
                  interest in all of the assets of every description (whether
                  now or hereafter existing or acquired) of the Company and its
                  Subsidiaries, and (ii) at


<PAGE>   3

                  its expense, execute and deliver and cause to be executed and
                  delivered to the Agent such security agreements, pledge
                  agreements, UCC financing statements, stock or bond powers,
                  waivers and consents, opinions of counsel and other documents
                  as the Agent or the Required Banks shall request
                  (collectively, "Collateral Documents"), and take such further
                  action as may be required under applicable law, or as the
                  Agent or the Required Banks may request, in order to grant,
                  preserve, protect and perfect the validity and first priority
                  of the security interests created pursuant to such Collateral
                  Documents. Notwithstanding the foregoing, the Company shall
                  not be required to grant or cause any of its Subsidiaries to
                  grant to the Agent a lien upon or security interest in real
                  property (except, however, insofar as personal property
                  constitutes fixtures).

                  (e) Article VII of the Credit Agreement is further amended by
adding thereto Section 7.16 as follows:

                           7.16 Lien Searches. The Company shall deliver to the
                  Agent on or before June 1, 2001 such Lien and judgment
                  searches as the Agent shall have requested, together with such
                  termination statements or other documents as may be necessary
                  to confirm that the Collateral (as defined in the Security
                  Agreement) furnished by the Company and the Grantors is
                  subject to no Liens (other than Liens in favor of the Agent
                  and Permitted Liens).

                  (f) Section 8.5 of the Credit Agreement is amended by adding
Section 8.5(h) as follows:

                           (h) Subordinated Debt.

                  (g) Section 8.11 of the Credit Agreement is amended to read in
its entirety as follows:

                           8.11 Restricted Payments. The Company shall not
                  declare or make any dividend payment or other distribution of
                  assets, properties, cash, rights, obligations or securities on
                  account of any shares of any class of its capital stock
                  (whether common or preferred stock), or purchase, redeem or
                  otherwise acquire for value any shares of its capital stock or
                  any warrants, rights or options to acquire such shares, now or
                  hereafter outstanding; except that the Company may (i) declare
                  and make dividend payments or other distributions payable
                  solely in its common stock, (ii) make distributions of its
                  equity securities to effect a conversion or exchange of any
                  preferred stock for such equity security, or (iii) declare and
                  pay cash or in-kind dividends on the preferred stock issued by
                  the Company after April 30, 2001, provided, however, that no
                  Default or Event of Default shall exist immediately before or
                  immediately after such action.

                  (h) Section 8.16 of the Credit Agreement is amended to read in
its entirety as follows:


<PAGE>   4

                           8.16 Subordinated Debt. The Company shall not, and
                  shall not permit any Subsidiary to: (a) prepay any
                  Subordinated Debt or make any distribution, whether in cash,
                  property, securities or a combination thereof (other than (i)
                  scheduled payments of interest as and when due, and (ii)
                  distributions of equity securities of the Company to effect a
                  conversion or exchange of Subordinated Debt or any portion
                  thereof into or for such equity securities) in respect of, or
                  pay, or offer or commit to pay, or directly or indirectly
                  redeem, repurchase, retire or otherwise acquire for
                  consideration, or set apart any sum for the aforesaid
                  purposes, any Subordinated Debt, or (b) modify the terms of
                  any Subordinated Debt.

                  (i) Section 9.1 of the Credit Agreement is amended to read in
its entirety as follows:

                           9.1 Minimum Net Worth. The Company shall not permit
                  at any time its Consolidated Net Worth to be less than
                  $130,000,000 prior to March 31, 2001 and less than $90,000,000
                  at any time thereafter.

                  (j) Section 9.2 of the Credit Agreement is amended to read in
its entirety as follows:

                           9.2 Minimum Liquidity. The Company shall not permit
                  its Liquidity to be less than (i) $5,000,000 through July 31,
                  2001, and (ii) $10,000,000 thereafter. For purposes hereof,
                  "Liquidity" means the sum of (i) the aggregate unused
                  Commitments under this Agreement to the extent then available
                  to the Company plus (ii) the aggregate of all nonrestricted
                  and unencumbered cash and cash equivalents of the Company and
                  its Subsidiaries.

                  (k) Section 9.3 of the Credit Agreement is amended so that the
last paragraph reads as follows:

                  For purposes hereof, "Quick Ratio" means the ratio of (i) the
                  aggregate accounts receivable of the Company and its
                  subsidiaries net of reserves for doubtful accounts consistent
                  with the historical levels and past practices, to (ii) the
                  aggregate Effective Amount of Revolving Loans (and, prior to
                  March 31, 2001, L/C Obligations) under this Agreement.

                  (l) Section 10.1 of the Credit Agreement is further amended by
adding thereto Section 10.1(m) as follows:

                           (m) Newly Issued Equity and Subordinated Debt. On or
                  before July 31, 2001, the Company shall fail to receive a
                  minimum of $30,000,000 of net cash proceeds from the issuance
                  by the Company after April 30, 2001 of equity securities or
                  Subordinated Debt.



<PAGE>   5



                                    SECTION 2

                      AMENDMENTS TO THE SECURITY AGREEMENT

         The Security Agreement is hereby amended as follows:

                  (a) Paragraph 6 of the Preliminary Statement of the Security
Agreement is amended by deleting the following:

                           (whether before or after the Trigger Event referred
                  to in the Credit Agreement)

                  (b) Section 1 of the Security Agreement is amended so that
first paragraph reads as follows:

                           Each Grantor hereby assigns and pledges to the Agent
                  for the benefit of the Secured Parties, and hereby grants to
                  the Agent for the benefit of the Secured Parties a security
                  interest in, such Grantor's right, title and interest in and
                  to the following, in each case, as to each type of property
                  described below, whether now owned or hereafter acquired by
                  such Grantor, wherever located, and whether now or hereafter
                  existing or arising (collectively, the "COLLATERAL"):

                  (c) Section 1 of the Security Agreement is further amended so
that subsection (b) reads as follows:

                           (b) (i) all inventory in all of its forms and raw
                  materials and work in process therefor, finished goods thereof
                  and materials used or consumed in the manufacture, production,
                  preparation or shipping thereof, (ii) goods in which such
                  Grantor has an interest in mass or a joint or other interest
                  or right of any kind (including, without limitation, goods in
                  which such Grantor has an interest or right as consignee) and
                  (iii) goods that are returned to or repossessed or stopped in
                  transit by such Grantor), and all accessions thereto and
                  products thereof and documents therefor (any and all such
                  inventory, accessions, products and documents being the
                  "INVENTORY"). Inventory shall not include inventory which is
                  expressly subject to an intellectual property licensing
                  agreement which permits the licensor to terminate such
                  agreement in the event a security interest is granted by the
                  licensee in such inventory without the consent of the licensor
                  (the "EXCLUDED INVENTORY");

                  (d) Sections 4(a) and 12(a) of the Security Agreement are
amended by deleting "or a Trigger Event" from each Section.

                  (e) Sections 9 of the Security Agreement is amended so that
subsection (p) reads in its entirety as follows:


<PAGE>   6

                           (p) (i) The Inventory that has been produced or
                  distributed by such Grantor has been produced in compliance in
                  all material respects with all requirements of applicable law,
                  including, without limitation, the Fair Labor Standards Act;
                  and (ii) the aggregate value of Excluded Inventory will not at
                  any time exceed $2,000,000.

                  (f) Sections 11 of the Security Agreement is amended by adding
thereto subsection (d) as follows:

                           (d) The Company will not permit the aggregate value
                  of Excluded Inventory to exceed at any time $2,000,000.

                                    SECTION 3

                                     WAIVER

         The Banks hereby waive any Default or Event of Default arising from
noncompliance by the Company as of March 31, 2001 with Section 9.1 (Minimum Net
Worth) of the Credit Agreement (as in effect before giving effect to this
Amendment); it being understood that the foregoing waiver is specific in time
and in intent and does not constitute, nor shall it be construed as, a waiver of
any other right, power or privilege under the Credit Agreement, or under any
agreement, contract, indenture, document or other instrument mentioned in the
Credit Agreement.

                                    SECTION 4

                                   WARRANTIES

                  The Company and each Guarantor warrants to the Agent and the
Banks as of the date hereof that:

                  (a) After giving effect to this Amendment, all representations
and warranties contained in the Credit Agreement, the Security Agreement and the
Guaranties are true and correct in all material respects on and as of the date
hereof with the same effect as if made on the date hereof (except to the extent
such representations and warranties expressly refer to an earlier date).

                  (b) After giving effect to this Amendment, no Default or Event
of Default has occurred and is continuing or will result from this Amendment.

                  (c) The execution, delivery and performance by the Company and
each of the Guarantors of this Amendment have been duly authorized by all
necessary corporate and other action and do not and will not require any
registration with, consent or approval of, notice to or action by, any Person
(including any Governmental Authority) in order to be effective and enforceable.

                  (d) The Loan Documents as modified by this Amendment
constitute the legal, valid and binding obligation of the Company and each of
the Guarantors, enforceable


<PAGE>   7

against each of them in accordance with the Loan Documents' terms as modified by
the terms of this Amendment, except as enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting the enforcement of
creditor's rights generally or by equitable principles relating to
enforceability.

                  (e) The grant of the Company and the Guarantors of a security
interest in the Collateral pursuant to the Security Agreement is effective as of
April 30, 2001.

                                    SECTION 5

                      CONDITIONS PRECEDENT TO EFFECTIVENESS

                  This Amendment shall become effective as of April 30, 2001
(the "EFFECTIVE DATE"), provided, however, that the effectiveness of the
provisions of Sections 1(h), 1(i) and 3 hereof is subject to the receipt by the
Agent of the following, each appropriately completed and duly executed as
required and otherwise in form and substance reasonably satisfactory to the
Agent:

                  (a) counterparts of this Amendment, executed by the Company
and the Guarantors.

                  (b) an opinion of Deborah K. Fulton, in her capacity as Vice
President, Secretary and General Counsel of the Company and addressed to the
Agent and the other Secured Parties (as defined in the Security Agreement), in
form and substance satisfactory to the Agent;

                  (c) acknowledgment copies of all UCC-l financing statements
filed, registered or recorded to perfect the security interests of the Agent, or
other evidence satisfactory to the Agent that there has been filed, registered
or recorded all financing statements and other filings, registrations and
recordings necessary and advisable to perfect the Liens of the Agent in
accordance with applicable law;

                  (d) evidence of the payment of (i) an amendment fee to be
shared by the Banks in accordance with each Bank's Pro Rata Share, as required
by the letter agreement between the Company and the Banks dated April 30, 2001,
and (ii) all legal fees and expenses of the Agent and the Banks heretofore
billed to the Company;

                  (e) a certificate of the Secretary or Assistant Secretary of
the Company and each Guarantor certifying as to (A) resolutions of the board of
directors or members, as the case may be, of the Company and each Guarantor
authorizing the execution, delivery and performance of this Amendment, and (B)
the name(s) of the officer(s) of the Company and each Guarantor authorized to
sign this Amendment and the documents related hereto on behalf of the Company
and each Guarantor; and

                  (f) such other instruments, agreements and documents as the
Agent may reasonably request, in each case duly executed as required and
otherwise in form and substance reasonably satisfactory to the Agent.


<PAGE>   8

                                    SECTION 6

                                     GENERAL

                  (a) As hereby modified, the Credit Agreement and the Security
Agreement shall remain in full force and effect and is hereby ratified, approved
and confirmed in all respects.

                  (b) The Company and each Guarantor acknowledges and agrees
that the execution and delivery by the Agent and the Banks of this Amendment
shall not be deemed to create a course of dealing or otherwise obligate the
Agent or the Banks to execute similar modifications under the same or similar
circumstances in the future.

                  (c) Upon execution and delivery of this Amendment, this
Amendment shall be binding upon and shall inure to the benefit of the Company,
the Guarantors, the Agent and the Banks and their respective successors and
assigns.

                  (d) The Company agrees to pay all fees and out-of-pocket costs
and expenses of the Agent (including reasonable attorneys' fees and expenses of
counsel to the Agent and the Banks) in connection with the preparation and
execution of this Amendment.

                  (e) This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Amendment.

                  (f) Section 2.1 of the Credit Agreement is corrected by
substituting "Total Commitment" for "Total Commitments."

                                    SECTION 7

                                   GUARANTORS

                  Each Guarantor (i) expressly consents to the amendments and
modifications of the Credit Agreement set forth in this Amendment, (ii)
reaffirms all of its respective covenants, representations, warranties and other
obligations set forth in such Guarantor's Guaranty, the Security Agreement and
other documents to which such Guarantor is a party or which such Guarantor has
delivered in connection therewith, and (iii) acknowledges, represents and agrees
that its respective covenants, representations, warranties and other obligations
set forth in such Guarantor's Guaranty, the Security Agreement and other
documents to which such Guarantor is a party or which such Guarantor has
delivered in connection therewith remain in full force and effect.

Delivered at Chicago, Illinois, as of the date and year first above written.

                       [SIGNATURES ON THE FOLLOWING PAGES]


<PAGE>   9



                  IN WITNESS WHEREOF, the parties hereto have caused the
execution and delivery hereof by their respective representatives thereunto duly
authorized as of this 14th day of May 2001.


                                       COMPANY

                                       MIDWAY GAMES INC.


                                       By:  /s/ Harold H. Bach, Jr.
                                          --------------------------------------
                                       Name:    Harold H. Bach, Jr.
                                       Title:   Executive Vice President -
                                                Chief Financial Officer


                                       GUARANTORS

                                       MIDWAY INTERACTIVE INC.


                                       By:  /s/ Harold H. Bach, Jr.
                                          --------------------------------------
                                       Name:    Harold H. Bach, Jr.
                                       Title:   Vice President - Finance,
                                                Treasurer and Chief Financial
                                                Officer


                                       MIDWAY HOME ENTERTAINMENT INC.


                                       By:  /s/ Harold H. Bach, Jr.
                                          --------------------------------------
                                       Name:    Harold H. Bach, Jr.
                                       Title:   Vice President - Finance and
                                                Treasurer


                                       MIDWAY GAMES WEST INC.

                                       By:  /s/ Harold H. Bach, Jr.
                                          --------------------------------------
                                       Name:    Harold H. Bach, Jr.
                                       Title:   Senior Vice President - Finance


                                       MIDWAY AMUSEMENT GAMES, LLC

                                       By: /s/  Harold H. Bach, Jr.
                                          --------------------------------------
                                       Name:    Harold H. Bach, Jr.
                                       Title:   Vice President - Finance,
                                                Treasurer and Chief Financial
                                                Officer


                                       MIDWAY SALES COMPANY, LLC

                                       By:  /s/ Harold H. Bach, Jr.
                                          --------------------------------------
                                       Name:    Harold H. Bach, Jr.
                                       Title:   Vice President - Finance,
                                                Treasurer and Chief Financial
                                                Officer





<PAGE>   10


                                       AGENT

                                       BANK OF AMERICA, N.A., as Agent

                                       By:  /s/ David A. Johanson
                                          --------------------------------------
                                       Name:    David A. Johanson
                                            ------------------------------------
                                       Title:   Vice President
                                             -----------------------------------


                                       ISSUING BANK

                                       BANK OF AMERICA, N.A., as Issuing Bank

                                       By:  /s/ Brian Ruddy
                                          --------------------------------------
                                       Name:    Brian Ruddy
                                            ------------------------------------
                                       Title:   Vice President
                                             -----------------------------------


                                       BANKS

                                       BANK OF AMERICA, N.A., as a Bank

                                       By:  /s/ Brian Ruddy
                                          --------------------------------------
                                       Name:    Brian Ruddy
                                            ------------------------------------
                                       Title:   Vice President
                                             -----------------------------------


                                       LASALLE BANK NATIONAL ASSOCIATION
                                       as a Bank

                                       By: /s/ David A. Chaika
                                          --------------------------------------
                                       Name:   David A. Chaika
                                            ------------------------------------
                                       Title:  Senior Vice President
                                             -----------------------------------

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