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EXHIBIT 10.25    
  

 
 

EMPLOYMENT AGREEMENT    
  

    THIS AGREEMENT ("Agreement") is dated as of July 8, 2001, and is by and between Joseph Murphy
("Executive") and Anchor Gaming, a Nevada corporation (herein "South" or "the Company"). 

    WHEREAS, Executive is currently employed by South (which term for purposes of this Agreement shall include all of South's affiliates
and subsidiaries); and 

    WHEREAS, International Game Technology ("North") has entered into an Agreement and Plan of Merger (the "Merger Agreement") with South,
pursuant to which South will, upon consummation of the transactions contemplated in the Merger Agreement, become a direct wholly-owned subsidiary of North (the "Merger"). The Company acknowledges
that, following the Merger, continued access to the experience, knowledge and expertise possessed by Executive will be critical to the Company's success; and 

    WHEREAS, the Company considers it important and in its best interest to foster the employment of key management personnel and desires
to retain the services of Executive on the terms and subject to the conditions in this Agreement; and 

    WHEREAS, the Executive desires to continue employment by the Company after the Merger on the terms and subject to the conditions of
this Agreement. 

    NOW, THEREFORE, in consideration of the premises and the respective undertakings of the Company and Executive set forth below, the
Company and Executive agree as follows: 

    1.  Employment.  The Company hereby employs Executive in the position of Chief
Operating Officer-Gaming Operations, and Executive accepts such employment and agrees to perform services for the Company for the period and upon the other terms and conditions set forth in this
Agreement. 

    2.  Duties of Executive.  

    2.1 Executive
shall report to the Chief Executive Officer of the Company. Executive will have all necessary powers to discharge his duties and responsibilities, which
will include responsibilities for matters as Chief Operating Officer-Gaming Operations of the Company; consultation as needed with officers, managers, employees and other personnel of the Company; and
such other duties as the Chief Executive Officer and/or Board of Directors of the Company may reasonably assign, consistent with duties typically assigned to employees who hold positions similar to
that of Executive. 

    2.2. During
the Term of this Agreement and except as provided below, Executive will perform to the best of his abilities all duties assigned to him hereunder, will
devote substantially all of his primary business time, attention and effort to the affairs of the Company, and will use his reasonable best efforts to promote the interests of the Company.
Notwithstanding the foregoing or anything else in this Agreement, Executive may engage in reasonable charitable, civic or community activities. 

    2.3. Executive
warrants that he has obtained and possesses, or will obtain and possess, and will maintain through the Term of this Agreement, all licenses, approvals,
permits and authorizations (the "Licenses") necessary to perform Executive's duties hereunder, including without limitation, any licenses required by any state, county, Native American Tribe or other
agency having jurisdiction to regulate gaming, lotteries, liquor or the activities undertaken by the Company. Any costs, attorneys' fees, investigation fees or other expenses incurred in connection
with obtaining such Licenses will be borne by the Company. Executive warrants that he is fully eligible, under all standards and requirements, to obtain or possess such licenses and that 

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Executive will commit no acts during the Term or any extension thereof that would jeopardize or eliminate his ability to possess or maintain such licenses. 

    2.4. Executive
agrees to submit to drug testing in accordance with the Company's policy and to execute the Company's standard consent form. 

    3.  Term.  The Executive's employment pursuant to this Agreement shall commence
upon the Effective Time of the Merger as defined in Section 1.3 of the Merger Agreement (the "Effective Date"), and continue therefrom through and until October 16, 2004 (the "Term").
Upon the effectiveness of this
Agreement pursuant to this Section 3, this Agreement will supersede all previous employment agreements by and between South and Executive, including without limitation that certain Employment
Agreement between South and Executive dated as of October 17, 2000 (the "Prior Agreement"). Notwithstanding the foregoing, if the Merger Agreement is terminated pursuant to the terms thereof,
this Agreement shall, from the date of termination of the Merger Agreement forward, be of no further force or effect, and the Prior Agreement shall remain in force pursuant to the terms and conditions
of such Prior Agreement. 

    4.  Compensation.  

    4.1  Base Salary.  As compensation in full for the services to be rendered by
Executive under this Agreement during the Term, the Company shall pay to Executive a base salary of Three Hundred Sixty Thousand Dollars ($360,000.00) per year ("Base Salary"), which Base Salary shall
be paid in accordance with the Company's normal payroll policies and procedures. 

    4.2  Bonus.  In addition to the Base Salary set forth in paragraph 4.1
above, the Company will pay Executive an annual bonus in an amount to be determined by, and subject to the sole discretion of, the Chief Executive Officer of North (who shall consult about such
matters with the Chief Operating Officer of North and the President and Chief Executive Officer of South), up to a maximum of one hundred twenty-five percent (125%) of Executive's Base
Salary, such bonus to be paid at a time and in a manner consistent with payment of such bonuses to other officers and/or executives of the Company. 

    4.3  Participation in Benefit Plan.  Executive shall be entitled to participate
in all employee benefit plans or programs of the Company to the extent that his position, title, tenure, salary, age, health and other qualifications make him eligible to participate in accordance
with the terms of the applicable plans or programs. The Company does not guarantee the adoption or continuance of any particular employee benefit plan or program during the Term, and Executive's
participation in any such plan or program shall be subject to the provisions, rules and regulations applicable thereto. 

    4.4  Stock Options.  Concurrent with the Effective Date of this Agreement, the
Company shall grant to Executive an option to purchase 100,000 shares of common stock of the Company at an exercise price equal to the closing trading price of the Company's common stock on the
Effective Date, such grant to be governed by the provisions of the Company's 1993 Stock Option Plan, as amended (the "Stock Option"). One-fifth (1/5) of the Stock Option
will vest on each of the first five (5) anniversaries of the Effective Date. 

    4.5  Withholding Taxes.  The Company may withhold from any benefits payable under
this Agreement, all federal, state, city or other taxes as shall be required to be withheld pursuant to any law or governmental regulation or ruling. 

    5.  Confidential Information.  Except as permitted or directed by the Company's
Chief Executive Officer or required by an order of a court having jurisdiction or under subpoena from an appropriate government agency, during the Term or at any time thereafter, Executive shall not
divulge, furnish or make accessible to anyone or use in any way other than in the ordinary course of the business of the 

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Company (which shall, for purposes of this paragraph, include the Company's subsidiaries and affiliates, before and after the Merger) any confidential or secret knowledge or information of the
Company, which Executive has acquired or become acquainted with or will acquire or become acquainted with prior to the termination of the period of his employment by the Company (including employment
by the Company or any affiliated or predecessor companies prior to the date of this Agreement), whether developed by himself or by others, concerning any trade secrets, confidential or secret designs,
processes, formulae, plans, devices or material (whether or not patented or patentable) directly or indirectly useful in any aspect of the business of the Company, any customer or supplier lists of
the Company, any confidential or secret development or research work of the Company, or any other confidential information or secret aspects of the business of the Company. Executive acknowledges that
the above-described knowledge or information constitutes a unique and valuable asset of the Company and represents a substantial investment of time and expense by the Company, and that any disclosure
or other use of such knowledge or information other than for the sole benefit of the Company would be wrongful and would cause irreparable harm to the Company. Both during and after the Term,
Executive shall refrain from any acts or omissions that would reduce the value of such knowledge or information to the Company. The foregoing obligations of confidentiality, however, shall not apply
to any knowledge or information which is now published or which subsequently becomes generally publicly known, other than as a direct or indirect result of the breach of this Agreement by Executive. 

    6.  Ventures.  If, during the Term, Executive is engaged or associated with the
planning or implementing of any project, program or venture involving the Company and/or its subsidiaries and affiliates, and a third party or parties, all rights with respect to such project, program
or venture shall belong to the Company, its subsidiaries and/or affiliates, as applicable. Except as approved by the Chief Executive Officer of the Company, Executive shall not be entitled to any
interest in such project, program or venture or to any commission, finder's fee or other compensation in connection therewith other than the compensation to be paid by Executive as provided in this
Agreement. 

    7.  Noncompetition Covenant  

    7.1.  Agreement Not to Compete.  Executive agrees that during the Term of this
Agreement and for one (1) year after termination of Executive for any reason, Executive shall not, without the written consent of the Chief Executive Officer of the Company, directly or
indirectly, engage in competition with the Company in any manner or capacity (e.g., as an advisor, principal, agent, partner, officer, director, stockholder, employee, member of any association or
otherwise), in any phase of the business which the Company, its subsidiaries and/or affiliates is conducting during the Term, including the design, development, manufacture, distribution, marketing,
leasing, financing or selling of accessories, devices, or systems related to the products or services being sold by the Company, its subsidiaries and/or affiliates. 

    7.2  Geographic Extent of Covenant.  The obligations of Executive under
Section 7.1 shall apply to any geographic area in which the Company has engaged in business during the Term. 

    7.3  Non-Solicitation.  Executive agrees that during the Term and for
a period of twelve (12) months thereafter, he will not, without the prior written approval of the Chief Executive Officer of the Company, hire, solicit or endeavor to entice away from the
Company, its subsidiaries and affiliates, or, following termination of Executive's employment, otherwise interfere with the relationship of the Company, its subsidiaries and affiliates with any
management employee of the Company, its subsidiaries and affiliates, or any person or entity who was, within the then most recent prior twelve-month period, a customer, supplier or contractor of the
Company, its subsidiaries and affiliates. 

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    8.  Termination.  This Agreement shall terminate in accordance with the following
provisions: 

    8.1  Expiration of the Term.  Unless earlier terminated in accordance with the
provisions hereof, this Agreement shall terminate upon expiration of the Term as provided in paragraph 3 above. After the expiration of the Term, the Chief Executive Officer or Board of
Directors of the Company may continue the employment of Executive and Executive may accept the employment on an at-will basis. 

    8.2  Death.  If the Executive dies during the Term, this Agreement shall
terminate, with the Termination Date being the date of the Executive's death. 

    8.3  Disability.  If the Executive has been absent from service to the Company as
required in this Agreement for a period of ninety (90) days or more during any one hundred eighty (180) day period during the Term as a result of any physical or mental disability, the
Company has the right to terminate this Agreement, the Termination Date being ten (10) days after notice thereof is given to Executive. 

    8.4  Termination by the Company for Cause.  The Company has the right to
terminate this Agreement for Cause as defined herein, such termination to be effective immediately upon notice thereof from the Company to Executive. For purposes of this Agreement, "Cause" shall
mean: 

  8.4.1. The
willful and material failure of Executive to perform his duties hereunder (other than any such failure due to Executive's physical or mental illness) or the
willful and material breach by Executive of his obligations hereunder; 

   8.4.2 Executive
engaging in willful and serious misconduct that has cause or is reasonably expected to result in material injury to the Company; 

   8.4.3 Executive
is convicted of, or enters a plea of guilty or nolo contendre, to a crime that constitutes a felony; or 

   8.4.4 The
failure or inability of Executive to obtain or retain any license required to be obtained or retained by him in any jurisdiction in which the Company does or
proposes to do business. 

    8.5  Termination by the Company Without Cause.  If at any time the Chief
Executive Officer or Board of Directors of the Company decides to terminate this Agreement during the Term, it may do so under the following terms and conditions: 

   8.5.1 The
Company shall pay Executive an amount equal to one (1) year of Executive's base salary and any applicable Deferred Bonus in existence at the time of
termination. Such payment will be based upon the Base Salary in existence as of the date of termination. 

   8.5.2 The
Company will pay the premiums for Executive's health benefits under the Consolidated Omnibus Budget Reconciliation Act (COBRA) to the extent that he is
eligible for COBRA benefits, for the shorter of a period of one (1) year following termination without cause, or until Executive secures new employment. 

   8.5.3 In
the event of the death of the Executive during the Term of the Agreement, the one year of Base Salary and Deferred Bonus shall be paid to the estate of
Executive or as he shall otherwise direct in writing. 

   8.5.4 Executive's
Stock Options described in paragraph 4.4 above, shall have their vesting accelerated in full so as to become one hundred percent (100%) vested
as of the date of termination. 

    8.6  Termination Due to Change of Control.  If at any time during the Term, a
third party acquires a controlling interest in the Company, Executive may at his discretion, elect to sever his 

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relationship with the Company. In this instance, the provisions of paragraph 8.5 above shall apply. A "Controlling Interest" or "Change of Control" shall be defined as a transfer of ownership
of forty percent (40%) or more of the outstanding shares of the Company. In the event of a Change of Control of the Company occurring while Executive is employed by the Company, Executive's stock
options granted pursuant to paragraph 4.4 above shall have their vesting accelerated in full so as to become one hundred percent (100%) vested as of the date of the Change of Control. 

    9.  Miscellaneous  

    9.1  Entire Agreement.  This Agreement, and the agreements in the forms of
exhibits attached hereto, constitute the entire agreement and understanding between the parties with respect to the subject matter hereof and supersede and preempt any prior written or prior or
contemporaneous oral understandings, agreements or representations by or between the parties, written or oral, which may have related in any manner to the subject matter hereof, including the Prior
Agreement, and the parties hereto have made no agreements, representations or warranties relating to the subject matter of this Agreement which are not set forth herein. Executive hereby acknowledges
and confirms that the Prior Agreement shall terminate as of the Effective Date, without any requirement or obligation that the Company make any payments to Executive in connection with such
termination or as a result of the Merger, and Executive hereby releases the Company of all of its obligations of any kind thereunder. 

    9.2  Governing Law.  This Agreement and all rights and obligations hereunder,
including without limitation matters of construction, validity and performance, is made under and shall be governed by and construed in accordance with the internal laws of the State of Nevada,
without regard to principles of conflict of laws. 

    9.3  Amendments.  No amendment or modification of this Agreement shall be deemed
effective unless made in writing and signed by all of the parties hereto. 

    9.4  No Waiver.  No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel to enforce any provisions of this Agreement, except by a statement in writing signed by the party against whom enforcement of the waiver or estoppel is
sought. Any written waiver shall not be deemed a continuing waiver unless specifically stated, shall operate only as to the specific term or condition waived and shall not constitute a waiver of such
term or condition for the future or as to any act other than that specifically waived. 

    9.5  Severability.  To the extent any provision of this Agreement shall be
invalid or unenforceable, it shall be considered deleted herefrom and the remainder of such provision and of this Agreement shall be unaffected and shall continue in full force and effect. In
furtherance and not in limitation of the foregoing, should the duration or geographical extent of, or business activities covered by, any provision of this Agreement be in excess of that which is
valid and enforceable under applicable law, then such provision shall be construed to cover only that duration, extent or activities which may validly and
enforceably be covered. Executive acknowledges the uncertainty of the law in this respect and expressly stipulates that this Agreement be given the construction which renders its provisions valid and
enforceable to the maximum extent (not exceeding its express terms) possible under applicable law. 

    9.6  Assignment.  This Agreement may be assigned by the Company in connection
with a Change of Control or sale of all or substantially all of the Company's assets. This Agreement shall not be assignable, in whole or in part, by Executive without the prior written consent of the
Company. 

    9.7  Injunctive Relief.  Executive agrees that it would be difficult to
compensate the Company fully for damages for any violation of the provisions of this Agreement, especially the provisions of paragraphs 4 and 6 above. Accordingly, Executive specifically agrees that
the Company shall be 

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entitled to temporary and permanent injunctive relief to enforce the provisions of this Agreement and that such relief may be granted without the necessity of proving actual damages. This provision
with respect to injunctive relief shall not, however, diminish the right of the Company to claim and recover damages in addition to injunctive relief. 

    9.8  Arbitration.  Any controversy or claim arising out of or relating to this
Agreement or breach thereof, except for claims for injunctive relief set out in paragraph 9.7 above, shall be settled by arbitration in accordance with the rules of the American Arbitration
Association relating to employment, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. In reaching his or her decision, the arbitrator
shall have no authority to change or modify any provision of this Agreement. 

    IN WITNESS WHEREOF, the Company and Executive have executed this Agreement as of the date set forth in the first paragraph. 

	 	 	COMPANY:
	

 	
 	

ANCHOR GAMING, a Nevada corporation
	

 	
 	

By:	

/s/ T. J. MATTHEWS     

	 	 	Name:	T. J. Matthews

	 	 	Its:	Chief Executive Officer

	

 	
 	
EXECUTIVE:
	

 	
 	

/s/ JOSEPH MURPHY     

	 	 	Joseph Murphy

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EXHIBIT 10.25

EMPLOYMENT AGREEMENTPrepared by MERRILL CORPORATION

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EXHIBIT 10.26    
  

 
 

STOCK OPTION AGREEMENT    
  

    THIS STOCK OPTION AGREEMENT (this "Agreement"), effective as of December 31, 1997, is made and entered into by and between Anchor Gaming, a Nevada
corporation (the "Company"), and the person named on the signature page to this Agreement as the Optionee (the "Optionee"). 

RECITALS:

    The
Company has adopted the Anchor Gaming 1995 Employee Stock Option Plan (as amended, the "Plan"), and pursuant to the Plan is authorized to grant to the Optionee an option granted
by this Agreement (the "Option") to purchase shares of Common Stock, $.01 par value, of the Company (the "Common Stock"); 

    The
the Board of Directors has approved the grant of the Option. 

    The
parties hereto desire to evidence in writing the terms and conditions of the Option. 

    NOW, THEREFORE, in consideration of the premises and mutual covenants and promises set forth herein, and other good and valuable
consideration the receipt and sufficiency of which are mutually acknowledged, the parties agree as follows: 

TERMS: 

    1.  Definitions.  For purposes of this Agreement, the following terms have the meanings indicated: 

    Disability.  Any medically determinable physical or mental impairment that, in the opinion of the Company's Board of
Directors or the Compensation Committee of the Board of Directors, based upon medical reports and other evidence satisfactory to the Board of Directors or the Compensation Committee of the Board of
Directors, can reasonably be expected to prevent the Optionee from performing substantially all of the Optionee's customary duties of employment for a continuous period of not less than
6 months. 

    Fair Market Value as of any given date means the average high and low sales price of the Common Stock on the primary
market on which it is traded for the five trading days immediately preceding such date, and, if no such market exists, the fair market value as determined by the Compensation Committee of the Board of
Directors. 

    Termination for Substantial Misconduct.  Termination of employment for actions involving moral turpitude, theft,
dishonesty in a material matter, material breach of obligations under any employment, consulting, or similar agreement or arrangement, or failure by Optionee to carry out the directions, instructions,
policies, rules, regulations, or decisions of the Board of Directors or officers of the Company. 

    2.  Grant of Option.  The Company hereby grants to the Optionee, upon the terms and subject to the
conditions, limitations and restrictions set forth in this Agreement, the Option to acquire      shares (the "Option Number") of Common Stock, at an exercise price per share of $55.75
(the "Exercise Price"), effective as of December 31, 1997 (the "Effective Date") (which was the date on which the Option was granted to the Optionee by the Compensation Committee of the Board
of Directors of the Company). The Optionee hereby accepts the Option from the Company. The Option is granted subject to the terms of the Plan. 

    3.  Vesting.  

    (a) The
shares of Common Stock subject to the Option will vest in increments of 5,000 (five thousand) of the Option Amount on December 31, 1999, 10,000 (ten
thousand) of the Option 

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Amount on June 30, 2001, and 10,000 (ten thousand) of the Option Amount on December 31, 2002. The Option will cease to vest immediately on termination of the employment of the Optionee
by the Company. 

    (b) Notwithstanding
the foregoing, if the Optionee is still an employee of the Company or a subsidiary of the Company on the date of a change of control of the Company
or sale of all or substantially all of the assets of the Company, the Board of Directors of the Company or the Compensation Committee of the Board of Directors may make such adjustments to the vesting
provisions of this Agreement as they, in their sole discretion, may determine to be desirable in the circumstances. 

    4.  Exercise.  In order to exercise the Option with respect to any vested portion, the Optionee will
provide written notice (the "Exercise Notice") to the Company at its principal executive office stating the number of shares in respect of which the option is being exercised. The Exercise Notice must
be signed by the Optionee and must include his complete address and social security number. If the Person exercising the Option is a transferee of the Optionee by will or under the laws of descent and
distribution, the Exercise Notice must be accompanied by appropriate proof of the right of such transferee to exercise this Option. At the time of exercise, the Optionee must pay to the Company the
Exercise Price per share times the number of vested shares as to which the Option is being exercised. The Optionee will make such payment (i) by certified check or (ii) at the Company's
option, by the delivery of, or cancellation of the Option with respect to, shares of Common Stock having a Fair Market Value on the date immediately preceding the exercise date equal to the aggregate
exercise price. If the Option is exercised in full, the Optionee will surrender this Agreement to the Company at the Company's option for cancellation. If the Option is exercised in part, the Optionee
will surrender this Agreement to the Company at the Company's option so that the Company may make appropriate notation on this Agreement or cancel this Agreement and issue a new agreement representing
the unexercised portion of the Option. The Optionee may not exercise this Option for less that 100 shares of Common Stock (or, if fewer than 100 shares of Common Stock remain purchasable under the
Option, such number of shares) at any one time 

    If
the shares to be purchased are covered by an effective registration statement under the Securities Act of 1933, as amended (the "Act"), the Option may be exercised by a
broker-dealer acting on behalf of the Optionee if (a) the broker-dealer has received from the Optionee or the Company a fully and duly endorsed agreement evidencing the Option, together with
instructions signed by the Optionee requesting the Company to deliver the shares of Common Stock subject to the Option to the broker-dealer on behalf of the Optionee and specifying the account into
which such shares should be deposited, (b) adequate provision has been made with respect to the payment of any withholding taxes due upon such exercise, and (c) the broker-dealer and the
Optionee have otherwise complied with Section 220.3(e)(4) of Regulation T, 12 CFR Part 220, or any successor provision. 

    The
Option will be exercisable during the lifetime of the Optionee only by the Optionee. To the extent exercisable after the Optionee's death, the Option will be exercised only by the
Optionee's representatives, executors, successors, or beneficiaries. 

    5.  Expiration of Option.  

    (a) The
Option will expire with respect to any vested portion of the Common Stock issuable under this Agreement, upon the earlier of: (i) the tenth anniversary
of the Effective Date; (ii) one year after any termination of the Optionee's employment with the Company following a Vesting Event or for any reason other than in a Termination for Substantial
Misconduct (or, if shorter, the remaining term of the Option); or (iii) immediately upon termination of Optionee's employment in a Termination for Substantial Misconduct. 

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    (b) The Option will expire with respect to any unvested portion of the Common Stock issuable under this Option, immediately upon the termination of the Optionee's
employment with the Company for any reason, including death and upon the Disability of the Optionee. 

    6.  Parachute Payment.  Any payment or any portion thereof that would likely be a "parachute payment"
within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, in the opinion of tax counsel selected by the Company, will not be required to be made by the Company to the
Optionee. 

    7.  Tax Withholding.  Any provision of this Agreement to the contrary notwithstanding, the Company may
take such steps as it deems necessary or desirable for the withholding of any taxes that it is required by law or regulation of any governmental authority, federal, state or local, domestic or
foreign, to withhold in connection with any of the shares of Common Stock subject hereto. 

    8.  Dilution.  In the event of a merger, share exchange, recapitalization, stock split, reverse stock
split, extraordinary dividend, or other transaction affecting the Common Stock, the Company will make appropriate adjustment to the Exercise Price and securities issuable on exercise of the option as
it deems appropriate and equitable in the circumstances. 

    9.  Transfer of Option.  The Optionee will not, directly or indirectly, sell, transfer, pledge, encumber
or hypothecate ("Transfer") any unvested portion of the Option or the rights and privileges pertaining thereto. In addition, the Optionee will not, directly or indirectly, Transfer any vested portion
of the Option or any shares of Common Stock acquired upon exercise of the Option other than (i) with the prior written consent of the Company, (ii) by will or the laws of descent and
distribution, (iii) with respect to shares of Common Stock acquired upon exercise of the Option, pursuant to an effective registration statement filed under the Act, or (iv) with respect
to shares of Common Stock acquired upon exercise of the Option, pursuant to an exemption from the registration requirements of the Act. Any permitted transferee to whom the Optionee will Transfer the
Option pursuant to (i) or (ii) above will agree to be bound by this Agreement. Neither the Option nor the underlying shares of Common Stock is liable for or subject to, in whole or in
part, the debts, contracts, liabilities or torts of the Optionee, nor will they be subject to garnishment, attachment, execution, levy or other legal or equitable process. 

    10.  Certain Legal Restrictions.  The Company will not be obligated to sell or issue any shares of Common
Stock upon the exercise of the Option or otherwise unless the issuance and delivery of such shares comply with all relevant provisions of law and other legal requirements including, without
limitation, any applicable federal or state securities and gaming laws and the requirements of any stock exchange upon which shares of the Common Stock may then be listed. As a condition to the
exercise of the Option or the sale by the Company of any additional shares of Common Stock to the Optionee, the Company may require the Optionee to make such representations and warranties as may be
necessary to assure the availability of an exemption from the registration requirements of applicable federal or state securities laws. The Company will not be liable for refusing to sell or issue any
shares if the Company cannot obtain authority from the appropriate regulatory bodies deemed by the Company to be necessary to lawfully sell or issue such shares. In addition, the Company will have no
obligation to the Optionee, express or implied, to list, register or otherwise qualify any of the Optionee's shares of Common Stock. The shares of Common Stock issued upon the exercise of the Option
may not be transferred except in accordance with applicable federal or state securities laws. At the Company's option, the certificate evidencing shares of Common Stock issued to the Optionee will
bear appropriate legends restricting transfer under applicable law. 

    Any
Common Stock issued pursuant to the exercise of Options granted pursuant to this Agreement during the Optionee's service as an officer of the Company under
Rule 16b-3 will not be transferred until at least six months have elapsed from the date of grant of such Option to the date of disposition of the Common Stock underlying such
Option. 

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    11.  Miscellaneous.  

    (a) The
Option is intended to be a non-qualified stock option under applicable tax laws, and it is not to be characterized or treated as an incentive stock
option under the Internal Revenue Code. Optionee acknowledges receipt of a copy of the Plan and further acknowledges that this Agreement is entered into, and the Option is granted, pursuant to the
Plan. In the event that the provisions of the Plan are inconsistent with the provisions of this Agreement, the provisions of the Plan supersede the provisions of this Agreement. 

    (b) The
granting of the Option will impose no obligation upon the Optionee to exercise the Option or any part thereof. Nothing contained in this Agreement will affect
the right of the Company to terminate the Optionee at any time, with or without cause, or will be deemed to create any rights to employment on the part of the Optionee. 

    (c) The
rights and obligations arising under this Agreement are not intended to and do not affect the employment relationship that otherwise exists between the Company
and the Optionee, whether such employment relationship is at will or defined by an employment contract or other arrangement. 

    (d) Neither
the Optionee nor any person claiming under or through the Optionee will be or will have any of the rights or privileges of a stockholder of the Company in
respect of any of the shares issuable upon the exercise of the Option herein unless and until certificates representing such shares have been issued and delivered to the Optionee or such Optionee's
agent. 

    (e) Any
notice to be given to the Company under the terms of this Agreement or any delivery of the Option to the Company will be addressed to the Company at its
principal executive offices, and any notice to be given to the Optionee will be addressed to the Optionee at the address set forth beneath his or her signature hereto, or at such other address for a
party as such party may hereafter designate in writing to the other. Any such notice will be deemed to have been duly given if mailed, postage prepaid, addressed as aforesaid. 

    (f)  Subject
to the limitations in this Agreement on the transferability by the Optionee of the Option and any shares of Common Stock, this Agreement will be binding
upon and inure to the benefit of the representatives, executors, successors or beneficiaries of the parties hereto. 

    (g) The interpretation, performance and enforcement of this Agreement will be governed by the laws of the State of Nevada and the United States,
as applicable, without reference to the conflict of laws provisions thereof.

    (h) If
any provision of this Agreement is declared or found to be illegal, unenforceable or void, in whole or in part, then the parties will be relieved of all
obligations arising under such provision, but only to the extent that it is illegal, unenforceable or void, it being the intent and agreement of the parties that this Agreement will be deemed amended
by modifying such provision to the extent necessary to make it legal and enforceable while preserving its intent or, if that is not possible, by substituting therefor another provision that is legal
and enforceable and achieves the same objectives. 

    (i)  All
section titles and captions in this Agreement are for convenience only, will not be deemed part of this Agreement, and in no way will define, limit, extend or
describe the scope or intent of any provisions of this Agreement. 

    (j)  The
parties will execute all documents, provide all information, and take or refrain from taking all actions as may be necessary or appropriate to achieve the
purposes of this Agreement. 

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    (k) This Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior written and all prior or
contemporaneous oral agreements and understandings pertaining thereto. 

    (l)  No
failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy
consequent upon a breach thereof will constitute waiver of any such breach or any other covenant, duty, agreement or condition. 

    (m) This
Agreement may be executed in counterparts, all of which together will constitute one agreement binding on all the parties hereto, notwithstanding that all such
parties are not signatories to the original or the same counterpart. 

    (n) No
supplement, modification or amendment of this Agreement or waiver of any provision of this Agreement will be binding unless executed in writing by all parties to
this Agreement. No waiver of any of the provisions of this Agreement will be deemed or will constitute a waiver of any other provision of this Agreement (regardless of whether similar), nor will any
such waiver constitute a continuing waiver unless otherwise expressly provided. 

    (o) In
addition to all other rights or remedies available at law or in equity, the Company will be entitled to injunctive and other equitable relief to prevent or
enjoin any violation of the provisions of this Agreement. 

    (p) For
the purposes of this Agreement, the term "Person" will be broadly construed to include any individual or entity, public or private. 

    IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. 

	 	COMPANY:
	

 	

ANCHOR GAMING
	

 	

By:	
 	

/s/ Michael D. Rumbolz
	 	 	 	

	 	Name:	 	Michael D. Rumbolz
	 	Title:	 	President and Chief Operating Officer
	

 	
OPTIONEE:
	

 	

/s/ Geoffrey A. Sage

	 	Name:	 	Geoffrey A. Sage
	 	Address:	 	1855 E. Cougar Ave.

Las Vegas, NV 89123

SSN ###-##-####

5

  

January 13,
2000 

 

Mr. Geoffrey A. Sage

1855 East Cougar Avenue

Las Vegas, Nevada 89123 

	Re:	 	Stock Option Agreement (the "1996 Option") dated May 13, 1996 between Anchor Gaming (the "Company") Geoffrey A. Sage (the
"Optionee")
	

 	
 	

Stock Option Agreement (the "1997 Option") dated December 31, 1997 between the Company and the Optionee

Dear Geoff: 

    This
letter will set forth our understanding relative to the 1996 Option and the 1997 Option (the "Options") and to other employment
related matters. Notwithstanding the provisions of the Options, in the event of a "Change of Control" of the Company (as such term is defined in the
Stock Option Agreement dated January 3, 2000 between the Optionee and the Company), if the Optionee is terminated other than in a Termination for Substantial Misconduct (as such term is defined
in the Stock Option Agreement dated January 3, 2000 between the Optionee and the Company), significantly demoted, or required to relocate to a place of work more than 60 miles from his prior
place of work either (each, a "Termination") in contemplation of a Change of Control or within one year following a Change of Control, then: 

	•
	The
options of the Optionee under the Options will become immediately vested and exercisable and such Options will remain fully vested and exercisable for
one year from the date of the termination, demotion, or requirement to relocate.

	•
	Optionee
will be entitled to resign his employment with the Company and any successor, and thereupon to receive a severance payment equal to six months'
base pay for the Optionee at the rate in effect prior to the Change of Control. In the event that the Company tenders such severance payment,
Optionee agrees that he will thereby completely waive any claims or causes of action for wrongful termination or that otherwise arise out of this letter agreement, 

    Optionee
agrees that this letter will not alter his status as an at-will employee, terminable at any time, subject to the payments set forth above. 

815 Pilot
Road, Suite G  •  Las Vegas, Nevada 89119

Phone: (702) 896-7568  •  Fax: (702) 896-6992 

    Please execute the additional copy of this letter in the space below if it accurately reflects our agreement. 

	 	 	Very truly yours,
	

 	
 	

ANCHOR GAMING
	 	 	

By:	 	

/s/ T. J. MATTHEWS   

	 	 	Its:	 	CEO

	

AGREED AND ACCEPTED	
 	

 	
 	

 
	

/s/ GEOFFREY A. SAGE   
 Geoffrey A. Sage	 	 	 	 

QuickLinks

EXHIBIT 10.26

STOCK OPTION AGREEMENT

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