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                                                                     EXHIBIT 4.2

                             MULTIMEDIA GAMES, INC.

                     1998 SENIOR EXECUTIVE STOCK OPTION PLAN


Section 1. General Purpose of Plan; Definitions.

         The name of this plan is the Multimedia Games, Inc. 1998 Senior
Executive Stock Plan (the "Plan"). The purpose of the Plan is to enable the
Company to attract and retain Timothy R. Stuart, George J. Akmon and Gary L.
Loebig as senior executive personnel who will contribute to the Company's
success by their ability, ingenuity and industry by providing incentives that
are linked directly to increases in stockholder value and will therefore inure
to the benefit of all stockholders of the Company.

         For purposes of the Plan, the following terms shall be defined as set
forth below:

         "Act" means Securities Exchange Act of 1934, as amended.

         "Administrator" means the Board, or if the Board does not administer
the Plan, the Committee in accordance with Section 2.

         "Board" means the Board of Directors of the Company.

         "Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto.

         "Committee" means the Committee of the Board designated from time to
time by the Board to be the Administrator.

         "Commission" means Securities and Exchange Commission to be effective
as of August 15, 1996, and as such Rule may be amended from time to time, or any
successor definition adopted by the Commission. If at any time the Board shall
not administer the Plan, then the functions of the Board specified in the Plan
shall be exercised by the Committee.

         "Company" means Multimedia Games, Inc., a Texas corporation (or any
successor corporation).

         "Disability" means the inability of a Participant to perform
substantially his duties and responsibilities to the Company by reason of a
physical or mental disability or infirmity (i) for a continuous period of six
months, or (ii) at such earlier time as the Participant submits medical evidence
satisfactory to the Company that he has a physical or mental disability or
infirmity which will likely prevent him from returning to the performance of his
work duties for six months or longer. The date of such Disability shall be on
the last day of such six-month period or the day on which the Participant
submits such satisfactory medical evidence, as the case may be.

         "Effective Date" shall mean the date provided pursuant to Section 9.

         "Eligible Employee" means each of Timothy R. Stuart, George J. Akmon
and Gary L. Loebig.


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         "Fair Market Value" means, as of any given date, with respect to any
awards granted hereunder, at the discretion of the Administrator and subject to
such limitations as the Administrator may impose, (A) if the Stock is publicly
traded, the closing sale price of the Stock on such date as reported in the Wall
Street Journal, or the average of the closing price of the Stock on each day on
which the Stock was traded over a period-of up to twenty trading days
immediately prior to such date, (B) the fair market value of the Stock as
determined in accordance with a method prescribed in the agreement evidencing
any award hereunder, or (C) the fair market value of the Stock as otherwise
determined by the Administrator in the good faith exercise of its discretion.

         "Incentive Stock Option" or "ISO" means any Stock Option intended to be
designated as an "incentive stock option" within the meaning of Section 422 of
the Code (and any successor provision of the Code having a similar intent).

         "Non-Qualified Stock Option" or "NQSO" means any Stock Option that is
not an Incentive Stock Option, including any Stock Option that provides (as of
the time such option is granted) that it will not be treated as an Incentive
Stock Option.

         "Parent Corporation" means any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company, if each of the
corporations in the chain (other than the Company) owns stock possessing 50% or
more of the combined voting power of all classes of stock in one of the other
corporations in the chain.

         "Participant" means any Eligible Employee that has received the grant
of a Stock Option.

         "Stock" means the Common Stock, $0.01 par value, of the Company.

         "Stock Option" means any option to purchase shares of Stock granted
pursuant to Section 5.

         "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations (other than the last corporation) in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.

Section 2. Administration.

         The Plan shall be administered by the Board or by the Committee which
shall be appointed by the Board and which shall serve at the pleasure of the
Board.

         The Administrator shall have the power and authority to grant Stock
Options to Eligible Employees pursuant to the terms of the Plan.

         In particular, the Administrator shall have the authority:

                  (a) to determine whether and to what extent Stock Options are
to be granted hereunder to Eligible Employees;

                  (b) to determine the number of shares to be covered by each
Stock Option granted hereunder;

                  (c) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Stock Option granted hereunder; and


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                  (d) to determine the terms and conditions, not inconsistent
with the terms of the Plan, which shall govern all written instruments
evidencing the Stock Options.

         The Administrator shall have the authority, in its discretion, to
adopt, alter and repeal such administrative rules, guidelines and practices
governing the Plan as it shall from time to time deem advisable; to interpret
the terms and provisions of the Plan and any award issued under the Plan (and
any agreements relating thereto); and to otherwise supervise the administration
of the Plan.

         All decisions made by the Administrator pursuant to the provisions of
the Plan shall be final and binding on all persons, including the Company and
the Participants.

Section 3. Stock Subject to Plan.

         The total number of shares of Stock reserved and available for issuance
under the Plan (and the total number of shares that may be granted as ISO's)
shall be 205,000 of shares of Stock. Such shares may consist, in whole or in
part, of authorized and unissued shares or treasury shares.

         To the extent that a Stock Option expires or is otherwise terminated
without being exercised, such shares shall not thereafter be available for
issuance in connection with future awards under the Plan. If any shares of Stock
have been pledged as collateral for indebtedness incurred by a Participant in
connection with the exercise of a Stock Option and such shares are returned to
the Company in satisfaction of such indebtedness, such shares shall not
thereafter be available for issuance in connection with future awards under the
Plan. To the extent that a Participant is eligible to use, and uses, shares of
Stock to exercise a Stock Option, the number of Shares of Stock so used shall
not be available for issuance in connection with future awards under the Plan.

         In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend or other change in corporate structure
affecting the Stock, an appropriate substitution or adjustment shall be made in
the aggregate number of shares reserved for issuance under the Plan as may be
determined by the Administrator, in its sole discretion. Any other substitutions
or adjustments shall be made as may be determined by the Administrator, in its
sole discretion. In connection with any event described in this paragraph, the
Administrator may provide, in its discretion, for the cancellation of any
outstanding awards and payment in cash or other property therefor.

Section 4. Eligibility.

         Timothy R. Stuart, George J. Akmon and Gary L. Loebig are the only
employees of the Company that are eligible to be granted Stock Options.

Section 5. Stock Options.

         Any Stock Option granted under the Plan shall be in such form as the
Administrator may from time to time approve, and the provisions of Stock Option
awards need not be the same with respect to each optionee. Recipients of Stock
Options shall enter into a subscription and/or award agreement with the Company,
in such form as the Administrator shall determine which agreement shall set
forth, among other things, the exercise price of the option, the term of the
option and provisions regarding exercisability of the option granted thereunder.

         The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options.


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         The Administrator shall have the authority to grant any Eligible
Employee Incentive Stock Options, Non-Qualified Stock Options, or both types of
Stock Options. Consultants and advisors may only be granted Non-Qualified Stock
Options. To the extent that any Stock Option does not qualify as an Incentive
Stock Option, it shall constitute a separate Non-Qualified Stock Option. More
than one option may be granted to the same optionee and be outstanding
concurrently hereunder.

         Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Administrator shall deem
desirable:

         (1) Option Price. The option price per share of Stock purchasable under
a Stock Option shall be determined by the Administrator in its sole discretion
at the time of grant but shall not, in any case, be less than 100% of the Fair
Market Value of the Stock on such date. If an employee owns or is deemed to own
(by reason of the attribution rules applicable under Section 425(d) of the Code)
more than 10% of the combined voting power of all classes of stock of the
Company or any Parent Corporation and an Incentive Stock Option is granted to
such employee, the option price of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no less than 110% of the
Fair Market Value of the Stock on the date such Incentive Stock Option is
granted.

         (2) Option Term. The term of each Stock Option shall be fixed by the
Administrator, but no Stock Option shall be exercisable more than ten years
after the date such Stock Option is granted; provided, however, that if an
employee owns or is deemed to own (by reason of the attribution rules of Section
425(d) of the Code) more than 10% of the combined voting power of all classes of
stock of the Company or any Parent Corporation and an Incentive Stock Option is
granted to such employee, the term of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no more than five years from
the date of grant.

         (3) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Administrator at or after grant. The Administrator may provide, in its
discretion, that any Stock Option shall be exercisable only in installments, and
the Administrator may waive such installment exercise provisions at any time in
whole or in part based on such factors as the Administrator may determine, in
its sole discretion.

         (4) Method of Exercise. Subject to Section 5(3) above, Stock Options
may be exercised in whole or in part at any time during the option period, by
giving written notice of exercise to the Company satisfying the number of shares
to be purchased, accompanied by payment in full of the purchase price in cash or
in such other form of consideration as is set forth in the related Stock Option
agreement as determined by the Administrator. As determined by the
Administrator, in its sole discretion, payment in whole or in part may also be
made in the form of unrestricted Stock already owned by the optionee; provided,
however, that the right to make payment in the form of already owned shares may
be authorized only at the time of grant. An optionee shall generally have the
rights to dividends and any other rights of a stockholder with respect to the
Stock subject to the option only after the optionee has given written notice of
exercise, has paid in full for such shares, and, if requested, has given the
representation described in paragraph (1) of Section 10.

         The Administrator may require the voluntary surrender of all or a
portion of any Stock Option granted under the Plan as a condition precedent to
the grant of a new Stock Option. Subject to the provisions of the Plan, such new
Stock Option shall be exercisable at the price, during such period and on such
other terms and conditions as are specified by the Administrator at the time the
new Stock Option is granted. Upon their surrender, Stock Options shall be
canceled and the shares previously subject to such canceled Stock Options shall
again be available for grants of Stock Options and other awards hereunder.


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         (5) Loans. The Company may make loans available to Stock Option holders
in connection with the exercise of outstanding options granted under the Plan,
as the Administrator, in its discretion, may determine; provided, however, that
the right to make payment in the form of loans may be authorized only at the
time of grant and the terms of such loans shall be specified in the related
Stock Option agreement. Such loans shall (i) be evidenced by promissory notes
entered into by the Stock Option holders in favor of the Company, (ii) be
subject to the terms and conditions set forth in this Section 5(5) and such
other terms and conditions, not inconsistent with the Plan, as the Administrator
shall determine, (iii) bear interest, if any, at such rate as the Administrator
shall determine, and (iv) be subject to Board approval (or to approval by the
Administrator to the extent the Board may delegate such authority). In no event
may the principal amount of any such loan exceed the sum of (x) the exercise
price less the-par value of the shares of Stock covered by the option, or
portion thereof, exercised by the holder, and (y) any federal, state, and local
income tax attributable to such exercise. The initial term of the loan, the
schedule of payments of principal and interest (if any) under the loan, the
extent to which the loan is to be with or without recourse against the holder
with respect to principal or interest and the conditions upon which the loan
will become payable in the event of the holder's termination of employment shall
be determined by the Administrator. Unless the Administrator determines
otherwise, when a loan is made, shares of Stock having a Fair Market Value at
least equal to the principal amount of the loan shall be pledged by the holder
to the Company as security for payment of the unpaid balance of the loan, and
such pledge shall be evidenced by a pledge agreement, the terms of which shall
be determined by the Administrator, in its discretion; provided, however, that
each loan shall comply with all applicable laws, regulations and rules of the
Board of Governors of the Federal Reserve System and any other governmental
agency having jurisdiction.

         (6) Non-Transferability of Options. Unless otherwise determined by the
Administrator, no Stock Option shall be transferable by the optionee, and all
Stock Options shall be exercisable, during the optionee's lifetime, only by the
optionee.

         (7) Termination of Employment or Service. If an optionee's employment
with or service as a director of or consultant or advisor to the Company
terminates by reason of death, Disability or for any other reason, the Stock
Option may thereafter be exercised to the extent provided in the applicable
subscription or award agreement, or as otherwise determined by the
Administrator.

         (8) Annual Limit on Incentive Stock Options. To the extent that the
aggregate Fair Market Value (determined as of the date the Incentive Stock
Option is granted) of shares of Stock with respect to which Incentive Stock
Options granted to an Optionee under this Plan and all other option plans of the
Company or its Parent Corporation become exercisable for the first time by the
Optionee during any calendar year exceeds $100,000, such Stock Options shall be
treated as Non-Qualified Stock Options.

Section 6. Amendment and Termination.

         The Board may amend, alter or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made that would impair the rights of a
Participant under any award theretofore granted without such Participant's
consent.

         The Administrator may amend the terms of any award theretofore granted,
prospectively or retroactively, but, subject to Section 3 above, no such
amendment shall impair the rights of any holder without his or her consent.


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Section 7. Unfunded Status of Plan.

         The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to a Participant by the
Company, nothing contained herein shall give any such Participant any rights
that are greater than those of a general creditor of the Company.

Section 8. General Provisions.

         (1) The Administrator may require each person purchasing shares
pursuant to a Stock Option to represent to and agree with the Company in writing
that such person is acquiring the shares without a view to distribution thereof.
The certificates for such shares may include any legend which the Administrator
deems appropriate to reflect any restrictions on transfer.

         All certificates for shares of Stock delivered under the Plan shall be
subject to such stock-transfer orders and other restrictions as the
Administrator may deem advisable under the rules, regulations, and other
requirements of the Commission, any stock exchange upon which the Stock is then
listed, and any applicable federal or state securities law, and the
Administrator may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions.

         (2) Nothing contained in the Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan shall
not confer upon any employee, director, consultant or advisor of the Company any
right to continued employment or service with the Company, as the case may be,
nor shall it interfere in any way with the right of the Company to terminate the
employment or service of any of its employees, directors, consultants or
advisors at any time.

         (3) Each Participant shall, no later than the date as of which the
value of an award first becomes includible in the gross income of the
Participant for federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Administrator regarding payment of, any
federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on the making of such payments or arrangements, and the Company
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the Participant.

         (4) No member of the Board or the Administrator, nor any officer or
employee of the Company acting on behalf of the Board or the Administrator,
shall be personally liable for any action, determination, or interpretation
taken or made in good faith with respect to the Plan, and all members of the
Board or the Administrator and each and any officer or employee of the Company
acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination or interpretation.

Section 9. Effective Date of Plan.

         The Plan became effective (the "Effective Date") on November 6, 1998;
provided that, the Plan shall become effective with respect to Incentive Stock
Options on the date the Company's stockholders formally approve the Plan.


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Section 10. Term of Plan.

         No Stock Option shall be granted pursuant to the Plan on or after the
tenth anniversary of the Effective Date, but awards theretofore granted may
extend beyond that date.