Exhibit 10.2


 


INCENTIVE
STOCK OPTION AGREEMENT


THIS INCENTIVE STOCK OPTION AGREEMENT (the “Agreement”)
is entered into and effective June 29, 2006 (the “Date of Grant”), by and
between Southwest Casino Corporation (the “Company”) and Tracie Wilson (the “Optionee”).


A.                                   The
Company has adopted its 2004 Stock Option Plan (the “Plan”) which authorizes
the Board of Directors of the Company, or a committee as provided for in the
Plan (the Board or this committee are referred to as the “Committee” in this
Agreement), to grant incentive stock options to employees of the Company and
its Subsidiaries (as defined in the Plan).


B.                                     The
Company desires to give the Optionee an inducement to acquire a proprietary
interest in the Company and an added incentive to advance the interests of the
Company by granting to the Optionee an option to purchase shares of common
stock of the Company under the Plan.


C.                                     Terms
stated but not otherwise defined in this Agreement have the meanings assigned
to those terms in the Plan.


Accordingly, the parties agree as follows:


1.                                      Grant of Option.


The Company hereby grants to the Optionee the right,
privilege, and option (the “Option”) to purchase 50,000 shares (the “Option
Shares”) of the Company’s common stock, $.001 par value (the “Common Stock”),
according to the terms and subject to the conditions stated in this Agreement
and as stated in the Plan.  Subject to
the provisions of Section 10 of this Agreement, the Option is intended to be an
“incentive stock option,” as that term is used in Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”).


2.                                      Option Exercise Price.


The per share price to be paid by Optionee upon
exercise of this Option will be $0.75.


3.                                      Duration of Option and Time of Exercise.


3.1                                 Initial
Period of Exercisability.  Subject to
Sections 3.2 and 3.3 below, this Option will become exercisable with respect to
the Option Shares in 12 installments beginning on the last day of each fiscal
quarter of the Company, as provided in the table below.  The table below states the initial dates of
exercisability of each installment and the number of Option Shares as to which
this Option will become exercisable on those dates:


	
  Initial Date of

  Exercisability

  	
   

  	
  Number of Option Shares

  Available for Exercise

  
	
  June 30, Sept. 30 & Dec. 31, 2006

  	
   

  	
  4,167

  
	
  March 31, June 30, Sept. 30 and Dec. 31, 2007

  	
   

  	
  4,167

  
	
  March 31, June 30, Sept. 30 and Dec. 31, 2008

  	
   

  	
  4,166

  
	
  March 31, 1 2009

  	
   

  	
  4,167

  



The right to exercise
this Option is cumulative with respect to the Option Shares becoming
exercisable on the dates stated above; provided, however, that in no event will
this Option be









 



 


exercisable after, and this Option will become void
and expire as to all unexercised Option Shares at, 5:00 p.m. (Minnesota time)
on June 28, 2016 (the “Time of Termination”).


3.2                                 Termination
of Employment.


(a)                                  Termination
Due to Death or Disability or Retirement. 
If Optionee’s employment with the Company and all Subsidiaries is
terminated by reason of the Optionee’s death, Disability or Retirement, this
Option will become immediately exercisable in full as of the date of death,
Disability or Retirement and remain exercisable for a period of 12 months after
such termination (but not after the Time of Termination).


(b)                                 Termination
for Reasons Other Than Death, Disability or Retirement.  Except as provided in Section 3.3, if
Optionee’s employment with the Company and all Subsidiaries is terminated for
any reason other than death, Disability or Retirement, or Optionee is in the
employ of a Subsidiary and the Subsidiary ceases to be a Subsidiary of the
Company (unless the Optionee continues in the employ of the Company or another
Subsidiary), all rights of the Optionee under the Plan and this Agreement will
terminate immediately without notice of any kind and no portion of the Option
will be exercisable; provided, however, that if Optionee’s termination is due
to any reason other than voluntary termination by the Optionee or termination
by the Company or any Subsidiary for “Cause” (or Optionee’s death, Disability
or Retirement), this Option will remain exercisable to the extent exercisable
on the date of Optionee’s termination for a period of 90 days.


3.3                                 Change
in Control.


(a)                                  Impact
of Change in Control.  If a Change in
Control of the Company occurs whereby the acquiring entity or successor to the
Company does not assume this Option or replace it with a substantially
equivalent incentive award, then, as of the date of the Change of Control, this
Option will vest as to all shares and become immediately exercisable in full
and will remain exercisable until the Time of Termination, regardless of
whether the Optionee remains in the employ of the Company or any
Subsidiary.  In addition, if a change in
control occurs, the Committee, in its sole discretion and without consent of
the Optionee, may determine that the Optionee will receive, with respect to
some or all of the Option Shares, cash in the amount of the excess of the Fair
Market Value (as defined in the Plan) of those Option Shares immediately before
the effective date of the Change in Control over the per share exercise price
of this Option.


(b)                                 Limitation
on Change in Control Payments. 
Notwithstanding anything in this Section 3.3 to the contrary, if,
with respect to the Optionee, the acceleration of the vesting of this Option as
provided above (which acceleration could be deemed a “payment” within the
meaning of Section 280G(b)(2) of the Code), together with any other
payments that the Optionee has the right to receive from the Company or any
corporation which is a member of an “affiliated group” (as defined in
Section 1504(a) of the Code without regard to Section 1504(b) of the
Code) of which the Company is a member, would constitute a “parachute payment”
(as defined in Section 280G(b)(2) of the Code), the payments to the Optionee
stated herein will be reduced to the largest amount that will result in no
portion of the payments being subject to the excise tax imposed by
Section 4999 of the Code; provided, however, that if the Optionee is
subject to a separate agreement with the Company or a Subsidiary that expressly
addresses the



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potential
application of Sections 280G or 4999 of the Code (including, without
limitation, that “payments” under such agreement or otherwise will be reduced,
that the Optionee will have the discretion to determine which “payments” will
be reduced, that such “payments” will not be reduced or that such “payments”
will be “grossed up” for tax purposes), then this Section 3.3(b) will not
apply, and any payments to the Optionee under Section 3.3(a) of this Agreement
will be treated as payments arising under such separate agreement.


4.                                      Manner of Option Exercise.


4.1                                 Notice.  Optionee may exercise this Option, in whole
or in part from time to time, subject to the conditions in the Plan and in this
Agreement, by delivery, in person, by facsimile or electronic transmission (if
confirmed) or through the mail, to the Company at its principal executive
office (Attention: Chief Financial Officer), of a written notice of exercise.  This notice must (a) be in a form
substantially similar to the form attached to this Agreement as Exhibit A,
or such other form as is satisfactory to the Committee, (b) identify this
Option, (c) specify the number of Option Shares with respect to which this
Option is being exercised, and (d) be signed by the person or persons so
exercising this Option.  The notice must
be accompanied by payment in full of the total purchase price of the Option
Shares purchased.  If this Option is
being exercised as provided by the Plan and Section 3.2 above, by any person or
persons other than the Optionee, the notice must be accompanied by appropriate
proof of right of that person or persons to exercise this Option.  As soon as practicable after the effective
exercise of this Option, the Optionee will be recorded on the stock transfer
books of the Company as the owner of the Option Shares purchased, and the
Company will deliver to the Optionee one or more duly issued stock certificates
evidencing ownership.


4.2                                 Payment.  At the time of exercise of this Option, the
Optionee must pay the total purchase price of the Option Shares to be purchased
entirely in cash (including a check, bank draft or money order, payable to the
order of the Company); provided, however, that the Committee, in its sole
discretion, may allow such payment to be made, in whole or in part, by tender
of a promissory note (on terms acceptable to the Committee in its sole
discretion) or a Broker Exercise Notice or Previously Acquired Shares, or by a
combination of such methods.  If Optionee
is permitted to pay the total purchase price of this Option in whole or in part
with Previously Acquired Shares, the value of those shares will equal their
Fair Market Value on the date of exercise, in whole or in part, of this Option.


5.                                      Rights of Optionee; Transferability.


5.1                                 Employment.  Nothing in this Agreement will be construed
to (a) limit in any way the right of the Company to terminate the employment or
service of the Optionee at any time, or (b) be evidence of any agreement or understanding,
express or implied, that the Company will retain the Optionee in any particular
position, at any particular rate of compensation or for any particular period
of time.


5.2                                 Rights
as a Shareholder.  The Optionee has
no rights as a shareholder with respect to the Option Shares issuable upon
exercise of this Option unless and until all conditions to the effective
exercise of this Option (including, without limitation, the conditions stated
in Sections 4 and 6 of this Agreement) have been satisfied and the Optionee has
become the holder of record of the Option Shares.  No adjustment will be made for dividends or
distributions for which the record Date precedes the date the Optionee becomes
the holder of record of the Option Shares,



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except as may otherwise be provided in the
Plan or determined by the Committee in its sole discretion.


5.3                                 Restrictions
on Transfer.  Except under
testamentary will or the laws of descent and distribution or as otherwise
expressly permitted by the Plan, no right or interest of the Optionee in this
Option before exercise may be assigned or transferred, or subjected to any
lien, during the lifetime of the Optionee, either voluntarily or involuntarily,
directly or indirectly, by operation of law or otherwise.  The Optionee will, however, be entitled to
designate a beneficiary to receive this Option upon Optionee’s death, and, in
the event of the Optionee’s death, exercise of this Option (to the extent
permitted under Section 3.2(a) of this Agreement) may be made by the Optionee’s
legal representatives, heirs and legatees.


5.4                                 Breach
of Confidentiality, Assignment of Inventions or Non-Compete Agreements.  Notwithstanding anything in this Agreement or
the Plan to the contrary, if Optionee materially breaches the terms of any written
confidentiality, assignment of inventions or non-compete agreement entered into
with the Company or any Subsidiary, whether such breach occurs before or after
termination of the Optionee’s employment with the Company or any Subsidiary,
the Committee may immediately terminate all rights of the Optionee under the
Plan and this Agreement.


6.                                      Securities Law and Other Restrictions.


6.1                                 Securities
Law Restrictions.  Notwithstanding
any other provision of the Plan or this Agreement, the Optionee may not sell, assign,
transfer or otherwise dispose of, any Option Shares unless (a) there is in
effect with respect to the Option Shares a registration statement under the
Securities Act and any applicable state or foreign securities laws or an
exemption from such registration, and (b) there has been obtained any other
consent, approval or permit from any other regulatory body that the Committee,
in its sole discretion, deems necessary or advisable.  The Company may condition a sale or transfer
by Optionee upon the receipt of any representations or agreements from the
parties involved, and the placement of any legends on certificates representing
Option Shares, as may be deemed necessary by the Company in order to comply
with such securities law or other restrictions.


7.                                      Withholding Taxes.


The Company is entitled to (a) withhold and deduct
from future wages of the Optionee (or from other amounts that may be due and
owing to the Optionee from the Company), or make other arrangements for the
collection of, all legally required amounts necessary to satisfy any federal,
state or local withholding and employment-related tax requirements attributable
to this Option including, without limitation, the grant or exercise of this
Option or a disqualifying disposition of any Option Shares, or (b) require the
Optionee promptly to remit the amount of such withholding to the Company before
acting on the Optionee’s notice of exercise of this Option.  If the Company is unable to withhold such
amounts, for whatever reason, the Optionee agrees to pay to the Company an
amount equal to the amount the Company would otherwise be required to withhold
under federal, state or local law.


8.                                      Adjustments.


If any reorganization, merger, consolidation,
recapitalization, liquidation, reclassification, stock dividend, stock split,
combination of shares, rights offering, divestiture or extraordinary dividend
(including a spin-off), or any other similar change in the corporate structure
or shares of



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the Company occurs, the
Committee (or, if the Company is not the surviving corporation in any such
transaction, the board of directors of the surviving corporation), in order to
prevent dilution or enlargement of the rights of the Optionee, must make
appropriate adjustment to the number and kind of securities or other property
(including cash) subject to, and the exercise price of, this Option.


9.                                      Subject to Plan.


This Option and the Option Shares granted and issued
under this Agreement have been granted and issued under, and are subject to the
terms of, the Plan.  The terms of the
Plan are incorporated by reference in this Agreement in their entirety, and the
Optionee, by execution of this Agreement, acknowledges having received a copy
of the Plan.  The provisions of this
Agreement will be interpreted as to be consistent with the Plan, and any
ambiguities in this Agreement will be interpreted by reference to the
Plan.  If any provision of this Agreement
is inconsistent with the terms of the Plan, and the Plan does not permit that
provision to vary from the terms of the Plan, the terms of the Plan will
prevail.


10.                               Incentive Stock Option
Limitations.


10.1                           Limitation
on Amount.  To the extent that the
aggregate Fair Market Value (determined as of the date of grant) of the shares
of Common Stock with respect to which one or more incentive stock options
(within the meaning of Section 422 of the Code) are exercisable for the first
time by the Optionee during any calendar year (under the Plan and any other
incentive stock option plans of the Company or any subsidiary or parent
corporation of the Company (within the meaning of the Code)) exceeds $100,000
(or such other amount as may be prescribed by the Code from time to time),
excess incentive stock options will be treated as non-statutory stock options
in the manner stated in the Plan.


10.2                           Limitation
on Exercisability; Disposition of Option Shares.  If and to the extent the Option remains
unexercised more than one year after Optionee’s termination of employment by
reason of death or Disability, or more than 3 months after Optionee’s
termination for any reason other than death or Disability, the Option shall be
deemed to be a non-statutory stock option. 
In addition, if a disposition (as defined in Section 424(c) of the Code)
of shares of Common Stock acquired under the exercise of the Option occurs
before the expiration of 2 years after the Date of grant, or the expiration of
one year after Optionee’s exercise and acquisition of shares acquired under
this Option (a “disqualifying disposition”), the Option will, to the extent of
the disqualifying disposition, be treated in a manner similar to a
non-statutory stock option.


10.3                           No
Representation or Warranty.  Section
422 of the Code and the rules and regulations under Section 422 are complex,
and neither the Plan nor this Agreement purports to summarize or otherwise
stated all of the conditions that need to be satisfied in order for this Option
to qualify as an incentive stock option. 
In addition, this Option may contain terms and conditions that allow for
exercise of this Option beyond the periods permitted by Section 422 of the
Code, including, without limitation, the periods described in Section 10.2 of
this Agreement.  Accordingly, the Company
makes no representation or warranty regarding whether the exercise of this
Option will qualify as the exercise of an incentive stock option, and the
Company recommends that the Optionee consult with the Optionee’s own advisors
before making any determination regarding the exercise of this Option or the
sale of the Option Shares.



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11.                               Miscellaneous.


11.1                           Binding
Effect.  This Agreement will be
binding upon the heirs, executors, administrators and successors of the parties
to this Agreement.


11.2                           Governing
Law.  This Agreement and all rights
and obligations under this Agreement will be construed in accordance with the
Plan and governed by the laws of the State of Minnesota, without regard to
conflicts of laws provisions.  Any legal
proceeding related to this Agreement will be brought in an appropriate
Minnesota court and the parties to this Agreement consent to the exclusive
jurisdiction of the court for this purpose.


11.3                           Entire
Agreement.  This Agreement and the
Plan state the entire agreement and understanding of the parties to this
Agreement with respect to the grant and exercise of this Option and the
administration of the Plan and supersede all prior agreements, arrangements,
plans and understandings relating to the grant and exercise of this Option and
the administration of the Plan.


11.4                           Amendment
and Waiver.  Other than as provided in
the Plan, this Agreement may be amended, waived, modified or canceled only by a
written instrument executed by the parties to this Agreement or, in the case of
a waiver, by the party waiving compliance.


The parties to this Agreement have executed this Agreement
effective the day and year first above written.


	
  

  	
   

  	
  SOUTHWEST CASINO CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Its

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By execution of
  this Agreement,

  the Optionee acknowledges having

  received a copy of the Plan.

  	
   

  	
  OPTIONEE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Name and Address)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


To qualify for incentive stock option treatment, the
Optionee must not dispose of the Option Shares purchased upon exercise of this
Option until at least two (2) years from the Date of Grant and at least one (1)
year from the Date of Exercise.  If these
holding periods are not met, the sale or other disposition of the Option Shares
will be a disqualifying disposition under Section 422(a) of the United States
Tax Code.



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