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                                                                   Exhibit 10.27
 
                              SILICON GAMING, INC.
                      1997 NONSTATUTORY STOCK OPTION PLAN
                                        
     1.   ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

          1.1.  ESTABLISHMENT. The Silicon Gaming, Inc. 1997 Nonstatutory Stock
Option Plan is hereby established as of December 10, 1997.

          1.2.  PURPOSE. The purpose of the Plan is to advance the interests of
the Participating Company Group and its shareholders by providing an incentive
to attract, retain and reward persons performing services for the Participating
Company Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group.

          1.3.  TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued and all
restrictions on such shares under the terms of the Plan and the agreements
evidencing Options granted under the Plan have lapsed.

     2.   DEFINITIONS AND CONSTRUCTION.

          2.1.  DEFINITIONS. Whenever used herein, the following terms shall
have their respective meanings set forth below:

          (a) "BOARD" means the Board of Directors of the Company. If one or
more Committees have been appointed by the Board to administer the Plan, "Board"
also means such Committee(s).

          (b) "CODE" means the Internal Revenue Code of 1986, as amended, and
any applicable regulations promulgated thereunder.

          (c) "COMMITTEE" means the Compensation Committee or other committee of
the Board duly appointed to administer the Plan and having such powers as shall
be specified by the Board. Unless the powers of the Committee have been
specifically limited, the Committee shall have all of the powers of the Board
granted herein, including, without limitation, the power to amend or terminate
the Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law.

          (d) "COMPANY" means Silicon Gaming, Inc., a California
corporation, or any successor corporation thereto.

          (e) "CONSULTANT" means any person, including an advisor, engaged by a
Participating Company to render services other than as an Employee or a
Director.

          (f) "DIRECTOR" means a member of the Board or of the board of
directors of any other Participating Company.

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          (g) "EMPLOYEE" means any person treated as an employee (including an
officer or a Director who is also treated as an employee) in the records of a
Participating Company; provided, however, that neither service as a Director nor
payment of a director's fee shall be sufficient to constitute employment for
purposes of the Plan.

          (h) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

          (i) "FAIR MARKET VALUE" means, as of any date, the value of a share of
stock or other property as determined by the Board, in its sole discretion, or
by the Company, in its sole discretion, if such determination is expressly
allocated to the Company herein.

          (j) "OPTION" means a right to purchase Stock (subject to adjustment as
provided in Section 4.2) pursuant to the terms and conditions of the Plan.
Options are intended to be nonstatutory stock options and shall not be treated
as incentive stock options within the meaning of Section 422(b) of the Code.

          (k) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee setting forth the terms, conditions and restrictions of the
Option granted to the Optionee and any shares acquired upon the exercise
thereof.

          (l) "OPTIONEE" means a person who has been granted one or more
Options.

          (m) "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.

          (n) "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation.

          (o) "PARTICIPATING COMPANY GROUP" means, at any point in time, all
corporations collectively which are then Participating Companies.

          (p) "STOCK" means the common stock of the Company, as adjusted
from time to time in accordance with Section 4.2.

          (q) "SUBSIDIARY CORPORATION" means any present or future "subsidiary
corporation" of the Company, as defined in Section 424(f) of the Code.

          2.2.  CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural, the plural shall include the singular, and
the term "or" shall include the conjunctive as well as the disjunctive.

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     3.   ADMINISTRATION.

          3.1.  ADMINISTRATION BY THE BOARD. The Plan shall be administered by
the Board, including any duly appointed Committee of the Board. All questions of
interpretation of the Plan or of any Option shall be determined by the Board,
and such determinations shall be final and binding upon all persons having an
interest in the Plan or such Option. Any officer of a Participating Company
shall have the authority to act on behalf of the Company with respect to any
matter, right, obligation, determination or election which is the responsibility
of or which is allocated to the Company herein, provided the officer has
apparent authority with respect to such matter, right, obligation, determination
or election.

          3.2.  POWERS OF THE BOARD. In addition to any other powers set forth
in the Plan and subject to the provisions of the Plan, the Board shall have the
full and final power and authority, in its sole discretion:

          (a) to determine the persons to whom, and the time or times at which,
Options shall be granted and the number of shares of Stock to be subject to each
Option;

          (b) to determine the Fair Market Value of shares of Stock or other
property;

          (c) to determine the terms, conditions and restrictions applicable to
each Option (which need not be identical) and any shares acquired upon the
exercise thereof including, without limitation, (i) the exercise price of the
Option, (ii) the method of payment for shares purchased upon the exercise of the
Option, (iii) the method for satisfaction of any tax withholding obligation
arising in connection with the Option or such shares, including by the
withholding or delivery of shares of stock, (iv) the timing, terms and
conditions of the exercisability of the Option or the vesting of any shares
acquired upon the exercise thereof (v) the time of the expiration of the Option,
(vi) the effect of the Optionee's termination of employment or service with the
Participating Company Group on any of the foregoing, and (vii) all other terms,
conditions and restrictions applicable to the Option or such shares not
inconsistent with the terms of the Plan;

          (d) to approve one or more forms of Option Agreement;

          (e) to amend, modify, extend, or renew, or grant a new Option in
substitution for, any Option or to waive any restrictions or conditions
applicable to any Option or any shares acquired upon the exercise thereof

          (f) to accelerate, continue, extend or defer the exercisability of any
Option or the vesting of any shares acquired upon the exercise thereof including
with respect to the period following an Optionee's termination of employment or
service with the Participating Company Group;

          (g) to prescribe, amend or rescind rules, guidelines and policies
relating to the Plan, or to adopt supplements to, or alternative versions of the
Plan, including, without limitation, as the Board deems necessary or desirable
to comply with the laws of or to

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accommodate the tax policy or custom of foreign jurisdictions whose citizens may
be granted Options; and

          (h) to correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Option Agreement and to make all other
determinations and take such other actions with respect to the Plan or any
Option as the Board may deem advisable to the extent consistent with the Plan
and applicable law.

     4.  SHARES SUBJECT TO PLAN.

          4.1.  MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be Forty Thousand (40,000) and shall consist
of authorized but unissued or reacquired shares of Stock or any combination
thereof. If any outstanding Option for any reason expires or is terminated or
canceled or shares of Stock acquired, subject to repurchase, upon the exercise
of an Option are repurchased by the Company, the shares of Stock allocable to
the unexercised portion of such Option, or such repurchased shares of Stock,
shall again be available for issuance under the Plan.

          4.2.  ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of
any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, appropriate adjustments shall be made in the number and class of shares
subject to the Plan and to any outstanding Options, and in the exercise price
per share of any outstanding Options. If a majority of the shares which are of
the same class as the shares that are subject to outstanding Options are
exchanged for, converted into, or otherwise become (whether or not pursuant to
an Ownership Change Event, as defined in Section 8.1) shares of another
corporation (the "New Shares"), the Board may unilaterally amend the outstanding
Options to provide that such Options are exercisable for New Shares. In the
event of any such amendment, the number of shares subject to, and the exercise
price per share of the outstanding Options shall be adjusted in a fair and
equitable manner as determined by the Board, in its sole discretion.
Notwithstanding the foregoing, any fractional share resulting from an adjustment
pursuant to this Section 4.2 shall be rounded up or down to the nearest whole
number, as determined by the Board, and in no event may the exercise price of
any Option be decreased to an amount less than the par value, if any, of the
stock subject to the Option. The adjustments determined by the Board pursuant to
this Section 4.2 shall be final, binding and conclusive.

     5.  ELIGIBILITY AND OPTION LIMITATIONS. Options may be granted only to
Employees and Consultants; provided, however, that no Option shall be granted
any person whose eligibility to receive an Option under the Plan at the time of
grant would require the approval of the Company's shareholders pursuant to any
applicable law, regulation or rule, including, without limitation, the rules
applicable to the listing of the Company's securities on the Nasdaq National
Market System. For purposes of the foregoing sentence, "Employees" shall include
prospective Employees to whom Options are granted in connection with written
offers of employment with the Participating Company Group, and "Consultants"
shall include prospective Consultants to

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whom Options are granted in connection with written offers of engagement with
the Participating Company Group. Eligible persons may be granted more than one
(1) Option.

     6.  TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by Option
Agreements specifying the number of shares of Stock covered thereby, in such
form as the Board shall from time to time establish. Option Agreements may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:

          6.1.  EXERCISE PRICE. The exercise price for each Option shall be
established in the sole discretion of the Board; provided, however, that the
exercise price per share for an Option shall be not less than eighty-five
percent (85%) of the Fair Market Value of a share of Stock on the effective date
of grant of the Option. Notwithstanding the foregoing, an Option may be granted
with an exercise price lower than the minimum exercise price set forth above if
such Option is granted pursuant to an assumption or substitution for another
option in a manner qualifying under the provisions of Section 424(a) of the
Code.

          6.2.  EXERCISE PERIOD. Options shall be exercisable at such time or
times, or upon such event or events, and subject to such terms, conditions,
performance criteria, and restrictions as shall be determined by the Board and
set forth in the Option Agreement evidencing such Option; provided, however,
that no Option granted to a prospective Employee or prospective Consultant may
become exercisable prior to the date on which such person commences service with
a Participating Company.

          6.3.  PAYMENT OF EXERCISE PRICE.

                (a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the exercise price for the number of shares of
Stock being purchased pursuant to any Option shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company of shares of Stock
owned by the Optionee having a Fair Market Value (as determined by the Company
without regard to any restrictions on transferability applicable to such stock
by reason of federal or state securities laws or agreements with an
underwriter for the Company) not less than the exercise price, (iii) by the
assignment of the proceeds of a sale or loan with respect to some or all of
the shares being acquired upon the exercise of the Option (including, without
limitation, through an exercise complying with the provisions of Regulation T
as promulgated from time to time by the Board of Governors of the Federal
Reserve System) (a "CASHLESS EXERCISE"), (iv) by the Optionee's promissory
note in a form approved by the Company, (v) by such other consideration as may
be approved by the Board from time to time to the extent permitted by
applicable law, or (vi) by any combination thereof The Board may at any time
or from time to time, by adoption of or by amendment to the standard forms of
Option Agreement described in Section 7, or by other means, grant Options
which do not permit all of the foregoing forms of consideration to be used in
payment of the exercise price or which otherwise restrict one or more forms of
consideration.

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               (b) TENDER OF STOCK. Notwithstanding the foregoing, an Option
may not be exercised by tender to the Company of shares of Stock to the extent
such tender of Stock would constitute a violation of the provisions of any
law, regulation or agreement restricting the redemption of the Company's
stock. Unless otherwise provided by the Board, an Option may not be exercised
by tender to the Company of shares of Stock unless such shares either have
been owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company.

               (c) CASHLESS EXERCISE. The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to establish,
decline to approve or terminate any program or procedures for the exercise of
Options by means of a Cashless Exercise.

               (d) PAYMENT BY PROMISSORY NOTE. No promissory note shall be
permitted if the exercise of an Option using a promissory note would be a
violation of any law. Any permitted promissory note shall be on such terms as
the Board shall determine at the time the Option is granted. The Board shall
have the authority to permit or require the Optionee to secure any promissory
note used to exercise an Option with the shares of Stock acquired upon the
exercise of the Option or with other collateral acceptable to the Company.
Unless otherwise provided by the Board, if the Company at any time is subject
to the regulations promulgated by the Board of Governors of the Federal
Reserve System or any other governmental entity affecting the extension of
credit in connection with the Company's securities, any promissory note shall
comply with such applicable regulations, and the Optionee shall pay the unpaid
principal and accrued interest, if any, to the extent necessary to comply with
such applicable regulations.

          6.4.  TAX WITHHOLDING. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable upon the exercise of an
Option, or to accept from the Optionee the tender of a number of whole shares of
Stock having a Fair Market Value, as determined by the Company, equal to all or
any part of the federal, state, local and foreign taxes, if any, required by law
to be withheld by the Participating Company Group with respect to such Option or
the shares acquired upon the exercise thereof Alternatively or in addition, in
its sole discretion, the Company shall have the right to require the Optionee,
through payroll withholding, cash payment or otherwise, including by means of a
Cashless Exercise, to make adequate provision for any such tax withholding
obligations of the Participating Company Group arising in connection with the
Option or the shares acquired upon the exercise thereof The Company shall have
no obligation to deliver shares of Stock or to release shares of Stock from an
escrow established pursuant to the Option Agreement until the Participating
Company Group's tax withholding obligations have been satisfied by the Optionee.

     7.  STANDARD FORM OF OPTION AGREEMENT.

          7.1.  GENERAL. Unless otherwise provided by the Board at the time the
Option is granted, an Option shall comply with and be subject to the terms and
conditions set forth in the form of Immediately Exercisable Nonstatutory Stock
Option Agreement adopted by the Board concurrently with its adoption of the Plan
and as amended from time to time.

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          7.2.  STANDARD TERM OF OPTIONS. Except as otherwise provided by the
Board in. the grant of an Option, any Option granted hereunder shall have a term
of ten (10) years from the effective date of grant of the Option.

          7.3.  AUTHORITY TO VARY TERMS. The Board shall have the authority from
time to time to vary the terms of any of the standard forms of Option Agreement
described in this Section 7 either in connection with the grant or amendment of
an individual Option or in connection with the authorization of a new standard
form or forms; provided, however, that the terms and conditions of any such new,
revised or amended standard form or forms of Option Agreement are not
inconsistent with the terms of the Plan.

     8.  TRANSFER OF CONTROL.

          8.1.  DEFINITIONS.

                (a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company:

                    (i) the direct or indirect sale or exchange in a single or
series of related transactions by the shareholders of the Company of more than
fifty percent (50%) of the voting stock of the Company;

                    (ii) a merger or consolidation in which the Company is a
party;

                    (iii)  the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or

                    (iv) a liquidation or dissolution of the Company.

                (b) A "TRANSFER OF CONTROL" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, the "TRANSACTION")
wherein the shareholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.

          8.2.  EFFECT OF TRANSFER OF CONTROL ON OPTIONS. In the event of a
Transfer of Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof as the case may be (the "ACQUIRING
CORPORATION"), may either assume the Company's

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rights and obligations under outstanding Options or substitute for outstanding
Options substantially equivalent options for the Acquiring Corporation's stock.
Any Options which are neither assumed or substituted for by the Acquiring
Corporation in connection with the Transfer of Control nor exercised as of the
date of the Transfer of Control shall terminate and cease to be outstanding
effective as of the date of the Transfer of Control. Notwithstanding the
foregoing, shares acquired upon exercise of an Option prior to the Transfer of
Control and any consideration received pursuant to the Transfer of Control with
respect to such shares shall continue to be subject to all applicable provisions
of the Option Agreement evidencing such Option except as otherwise provided in
such Option Agreement. Furthermore, notwithstanding the foregoing, if the
corporation the stock of which is subject to the outstanding Options immediately
prior to an Ownership Change Event described in Section 8. l(a)(i) constituting
a Transfer of Control is the surviving or continuing corporation and immediately
after such Ownership Change Event less than fifty percent (50%) of the total
combined voting power of its voting stock is held by another corporation or by
other corporations that are members of an affiliated group within the meaning of
Section 1504(a) of the Code without regard to the provisions of Section 1504(b)
of the Code, the outstanding Options shall not terminate unless the Board
otherwise provides in its sole discretion.

     9.  PROVISION OF INFORMATION. Each Optionee shall be given access to
information concerning the Company equivalent to that information generally made
available to the Company's common shareholders.

     10.  NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee, an
Option shall be exercisable only by the Optionee or the Optionee's guardian or
legal representative. No Option shall be assignable or transferable by the
Optionee, except by will or by the laws of descent and distribution.

     11.  INDEMNIFICATION. In addition to such other rights of indemnification
as they may have as members of the Board or officers or employees of the
Participating Company Group, members of the Board and any officers or employees
of the Participating Company Group to whom authority to act for the Board is
delegated shall be indemnified by the Company against all reasonable expenses,
including attorneys' fees, actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any right
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such person is liable for gross
negligence, bad faith or intentional misconduct in duties; provided, however,
that within sixty (60) days after the institution of such action, suit or
proceeding, such person shall offer to the Company, in writing, the opportunity
at its own expense to handle and defend the same.

     12.  TERMINATION OR AMENDMENT OF PLAN. The Board may terminate or amend the
Plan at any time. However, no termination or amendment of the Plan may adversely
affect any

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then outstanding Option or any unexercised portion thereof without the consent
of the Optionee, unless such termination or amendment is necessary to comply
with any applicable law or government regulation.

     IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that
the foregoing Silicon Gaming, Inc. 1997 Nonstatutory Stock Option Plan was duly
adopted by the Board on December 10, 1997.

                                    Secretary

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                                  PLAN HISTORY

December 10, 1997  Board adopts Plan with an initial share reserve of 40,000
                    shares.

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