**Exhibit 10.7**

 

**STOCK OPTION AGREEMENT**

** **
| Optionee:                  |  Richard Haddrill              | ** ** | Grant  Date:       | October  27, 2004           |
|----------------------------|-------------------------------------|------------|--------------------|-----------------------------|
| Per  Share Exercise Price: | $17.16                              | ** ** | Number  of Shares: | 95,000                      |
| Plan:                      |  2001 Long-Term Incentive Plan | ** ** | Option  Type:      | Nonqualified  Stock Options |
|                            |                                     |            |                    |                             |  |  |  |  |

 

**STOCK OPTION****AGREEMENT** (this “Agreement”)dated as of the Grant Date specified above between Alliance Gaming Corporation,a Nevada corporation (the “Company”), and the Optionee specified above,pursuant to the Plan specified above as in effect and as amended from time totime.

 

1.   *Incorporation By Reference*   ThisAgreement is subject in all respects to the terms and provisions of the Plan,all of which are by this reference made a part of and incorporated in thisAgreement. Any capitalized term not defined in this Agreement shall have themeaning ascribed to it in the Plan. If and to the extent this Agreement and thePlan conflict, the Plan shall control.

 

2.   *Grant of Option.*   The Company grantsto the Optionee, as of the Grant Date specified above, an option (the “Option”)to acquire the Number of Shares of the Company’s common stock specified above(the “Option Shares”) from the Company at the Per Share Exercise Pricespecified above. The Option is not intended to qualify as an incentive stockoption within the meaning of Section 422 of the Intemal Revenue Code.

 

3.   *Exercise of the Option.*   Subject tothe relevant provisions of the Plan and the Agreement dated June 30, 2004,between the Company and the Optionee, as amended or extended from time to time,the Option shall become exercisable on October 1, 2012, if the Optionee is anemployee of the Company on October 1, 2012, and shall remain exercisable untilOctober 1, 2014, at which time any unexercised Options shall expire. Optionsshall become exercisable earlier than October 1, 2012, as follows:

 

(a)   One twelfth of suchOptions shall become exercisable on the later of (i) the first date on whichthe Fair Market Value (as defined below) of the Company’s common stock is atleast $30 and (ii) October 1, 2005; but only if the Fair Market Value of theCompany’s common stock is at least $30 on or before October 1, 2007.

 

(b)   An additionalone-twelfth of such Options shall become exercisable on the later of (i) thefirst date on which the Fair Market Value of the Company’s common stock is atleast $35 and (ii) October 1,2005; but only if the Fair Market Value of the Company’s common stock is atleast $35 on or before October1, 2007.

 

(c)   An additionalone-twelfth of such Options shall become exercisable on the later of (i) thefirst date on which the Fair Market Value of the Company’s stock is at least$40 and (ii) October 1, 2005; but only if the Fair Market value ofthe Company’s common stock is at least $40 on or before October 1, 2008.

 

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(d)   An additionalone-twelfth of such Options shall become exercisable on the later of (i) thefirst date on which the Fair Market Value of the Company’s common stock is atleast $45 and (ii) October 1, 2005; but only if (x) the Fair Market Value of the Company’scommon stock is at least $45 on or beforeOctober 1, 2008, or (y) the Fair Market Value of the Company’s stock is atleast $40 on or before October 1, 2008, and at least $45 on or before October 1, 2009.

 

(e)   An additionalone-twelfth of such Options shall become exercisable on the later of (i) thefirst date on which the Fair Market Value of the Company’s common stock is atleast $30 and (ii) October 1, 2006; but only if the Fair Market Value of theCompany’s common stock is at least $30 on or before October 1, 2007.

 

(f)   An additionalone-twelfth of such Options shall become exercisable on the later of (i) thefirst date on which the Fair Market Value of the Company’s common stock is atleast $35 and (ii) October 1, 2006; but only if the Fair Market Value of theCompany’s stock is at least $35 on or before October 1, 2007.

 

(g)   An additionalone-twelfth of such Options shall become exercisable on the later of (i) thefirst date on which the Fair Market Value of the Company’s stock is at least$40 and (ii) October 1, 2006; but only if the Fair Market Value of the Company’scommon stock is at least $40 on or before October 1, 2008.

 

(h)   An additionalone-twelfth of such Options shall become exercisable on the later of (i) thefirst date on which the Fair Market Value of the Company’s common stock is atleast $45 and (ii) October 1, 2006; but only if (x) the Fair Market Value ofthe Company’s common stock is at least $45 on or before October 1, 2008, or (y)the Fair Market Value of the Company’s common stock is at least $40 on orbefore October 1, 2008, and at least $45 on or before October 1, 2009.

 

(i)   An additionalone-twelfth of such Options shall become exercisable on the later of (i) thefirst date on which the Fair Market Value of the Company’s common stock is atleast $30 and (ii) October 1, 2007; but only if the Fair Market Value of theCompany’s common stock is at least $30 on or before October 1, 2007.

 

(j)   An additionalone-twelfth of such Options shall become exercisable on the later of (i) thefirst date on which the Fair Market Value of the Company’s common stock is atleast $35 and (ii) October 1, 2007; but only if the Fair Market Value of theCompany’s common stock is at least $35 on or before October 1, 2007.

 

(k)   An additionalone-twelfth of such Options shall become exercisable on the later of (i) thefirst date on which the Fair Market Value of the Company’s common stock is atleast $40 and (ii) October 1, 2007; but only if the Fair Market Value of theCompany’s common stock is at least $40 on or before October 1, 2008.

 

(1)   An additionalone-twelfth of such Options shall become exercisable on the

 

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later of (i) the first dateon which the Fair Market Value of the Company’s common stock is at least $45 and (ii) October 1, 2007; but only if (x)the Fair Market Value of the Company’s common stock is at least $45 on or before October 1, 2008, or (y) the FairMarket Value of the Company’s common stock is at least $40 on or before October 1,2008, and at least $45 on or beforeOctober 1, 2009.

 

The term “Fair Market Value”with respect to the Company’s common stock as of a particular date shall meanthe average per share closing price of the Company’s common stock on the stockexchange on which the stock is principally traded for the 20 business daysimmediately prior to such date.

 

4.   *Methodof Exercise and Payment.*   To exercise the Option, the Optioneemust deliver a written notice, in such manner and form as the Company mayrequire, to the Company’s corporate secretary or the secretary’s designee onany business day. The notice must specify the number of the Option Shares theOptionee wants to acquire, the date of grant of the Option, the aggregatepurchase price for the shares with respect to which the Option is exercised,and the effective date of exercise (no earlier than the date of receipt of suchnotice by the Company). The notice must be accompanied by payment, made in themanner set forth in the Plan, of (i) the aggregate purchase price for theOption Shares to be acquired, and (ii) unless the Committee administering thePlan determines otherwise, the amount of any taxes (including, but not limitedto, any FICA, FUTA, and similar taxes) required to be withheld and paid by theCompany or its subsidiary in connection with the exercise of the Option, asdetermined by the Committee.

 

*5.*   *Dividends.*   TheOption shall not entitle the Optionee to receive any dividend declared on theCompany’s common stock.

 

6.   *Non-transferability.*   Neitherthe Optionee nor the Optionee’s beneficiaries shall sell, exchange, transfer,assign, or otherwise dispose of the Option or any rights or interests therein,other than by testamentary disposition by the Optionee or the laws of descentand distribution. Neither the Optionee nor the Optionee’s beneficiaries shallpledge, encumber, or otherwise hypothecate the Option or any rights orinterests therein in any way at any time. The Option shall not be subject toexecution, attachment, or similar legal process. Any attempted sale, pledge, orother disposition of the Option in violation of this paragraph shall be voidand of no force or effect.

 

7.   *EntireAgreement; Amendment.*   Except as otherwise provided herein,this Agreement contains the entire agreement between the parties and supersedesother oral and written agreements previously entered into by the partiesconcerning the same subject matter. This Agreement may be modified or rescindedonly with the written consent of both parties. The Options are granted pursuantto the June 30, 2004, Employment Agreement between the Company and theOptionee, the terms of which shall prevail in the event of a conflict with thisStock Option Agreement.

 

8.   *GoverningLaw.*   Nevada law shall govern this Agreement and its interpretation.The issuance of the Option (and the Option Shares upon exercise of this Option)pursuant to this Agreement shall be subject to, and shall comply with, anyapplicable requirements of any federal and state securities laws, rules, andregulations (including but not limited to the Securities Act, the

 

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Exchange Act, and therespective rules and regulations promulgated thereunder) and any otherapplicable law or regulation.

 

*9.*   *BindingEffect.*   This Agreement shall bind and inure to the benefit of theCompany and its successors and assigns.

 

10.   *Counterparts.*   ThisAgreement may be executed in counterparts, each of which shall be deemed anoriginal, and all of which, taken together, shall constitute one and the sameinstrument.

 

 
| ALLIANCE  GAMING CORPORATION |                                                                                                                                     |             |
|------------------------------|------------------------------------------------------------------------------------------------------------------------------------------|------------------|
|                         |                                                                                                                                     |             |
| By:                          |                      /s/ Mark Lerner |             | /s/ Richard Haddrill |
| Mark Lerner, Secretary       |                                                                                                                                     | Richard Haddrill |
|                              |                                                                                                                                          |                  |  |

 

 

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