Document:

EXHIBIT
10.1

EMPLOYMENT
AGREEMENT

THIS
EMPLOYMENT AGREEMENT IS SUBJECT TO THE

PROVISIONS OF SECTION 181.78 OF THE MINNESOTA STATUTES

Southwest
Casino and Hotel Corp., a Minnesota corporation (the “Company”),
and Tracie L. Wilson (“Employee”)
enter into this Employment Agreement (“Agreement”) effective June 7, 2006 (“Effective
Date”). Company and Employee
are collectively referred to in this Agreement as the “Parties”.

BACKGROUND:

A.   Employee wishes to be employed by Company and
Company wishes to employ Employee; and

B.   The Parties wish to set forth the final
binding terms of Employee’s employment by Company in this Agreement; and

C.   The Parties agree to the term and conditions
of Employee’s employment by Company as stated in this Agreement.

AGREEMENT:

NOW, THEREFORE, in consideration
of the Parties’ agreement as to Employee’s commencement or continuation of
employment, the payment of compensation and other benefits (as defined in this
Agreement), the Parties’ mutual agreements stated in this Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which
Company and Employee acknowledge, the Parties agree as follows:

1.                 EMPLOYMENT
TERMS AND DUTIES

Section 1.1 
Term. 
Subject to the provisions of Section 5 of this Agreement regarding
termination, Company agrees to employ Employee and Employee agrees to be
employed by Company for a term ending June 1, 2007, which will renew
automatically for additional one year terms subject to termination by either
Party in accordance with Section 5 below.

Section 1.2 
Duties.

a.    Company will employ Employee on substantially a full-time basis.
Employee’s primary responsibility will be acting as the chief financial and
accounting officer of the Company. 
Initially, Employee’s title will be Chief Financial Officer (although
Employee will not serve as the Company’s principal financial and accounting
officer for purposes of filings with the United States Securities and Exchange
Commission until approved for that role by the Board of Directors).  Employee will perform any and all other
duties as the Chief Executive Officer, President, or Board of Directors may
reasonably direct.

b.    During the term of Employee’s employment by Company, Employee
will devote her attention, and energy to the performance of Employee’s duties
to Company.  Employee will perform
Employee’s duties under the supervision of

 

and report to the Chief Executive Officer and the
President of Company. Employee and Company further agree and understand that
Employee may engage in other activities during her employment under this
Agreement, provided such activities do not conflict or interfere with the
rendition of Employee’s duties and responsibilities as contemplated under this
Agreement.

c.    Employee represents and warrants to the Company, and acknowledges
that the Company has expressly relied on this representation and warranty in
hiring Employee, that Employee is not subject to any non-competition or other
agreement that limits or prohibits Employee from serving the Company in the
capacity described in this Agreement.

2.                 COMPENSATION

Section 2.1 
Salary. 
For all services rendered by Employee, Company will pay Employee an
annual salary of $140,000.00 (the “Salary”).  Employee’s Salary will be subject to annual
performance reviews and merit increases as determined by the Compensation
Committee of the Company’s Board of Directors. Company will pay the Salary in
equal semi-monthly installments on the fifteenth and the last day of each month
during the term of this Agreement (or, if the fifteenth or last day falls on a
Saturday, Sunday or holiday, on the last business day preceding the fifteenth
or last day of each month).

Section 2.2  Stock
Option.  Upon the execution of this Agreement by the
Parties, the Company shall grant Employee, under the terms of the Company’s
2004 Stock Incentive Plan, an incentive stock option, exercisable for 10 years,
to purchase 50,000 shares of Employer’s Common Stock at an exercise price equal
to the closing share price of the Company’s common stock on the
Over-the-Counter Bulletin Board market on that date (the “Option”). 
The option will become exercisable (“vest”) over three years in
12 equal installments on the last day of each fiscal quarter of the Company
during which Employee is employed. 
Except as otherwise stated in the written option agreement, the Option
will be subject to all terms and conditions of the 2004 Stock Incentive Plan.

Section 2.3  Bonus.
Employee will be eligible for bonus compensation if and when
determined by the CEO and President of the Company and approved by its
Compensation Committee of the Board of Directors.  Employee acknowledges that the Compensation
Committee is in the process of evaluating the Company’s overall compensation
and benefits policies and may adopt bonus or incentive plans applicable to
Employee.  If the Company adopts such a
bonus or incentive plan or plans, Employee’s bonus compensation, if any, will
be determined in accordance with the bonus or incentive compensation plan or
plans established by the Company.  All
bonus compensation will be at the discretion of the Company.

Section 2.4 Benefits.  During Employee’s employment under this
Agreement, Employee is entitled to participate in those employee benefits or
benefit plans Company provides from time to time to other full-time employees,
including, but not limited to, health insurance coverage.  Company is not required to provide any
benefit or benefit plans.  Company
reserves the right to unilaterally add to, amend or terminate all or any of
Employee’s benefits without prior notice, subject to the terms and conditions
of such plans and to applicable laws.

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Section 2.5  Vacation.  Employee will receive three weeks of paid
vacation per year.  The Company has
established its paid vacation policy based on the belief that both the employee
and the employer benefit when employees take vacations.  For that reason, Southwest prefers strongly
that employees take their entire allotted vacation each year.  Unused vacation time will not carry forward
into subsequent years.

Section 2.6  Reimbursement of Expenses.  Company will reimburse Employee for all
reasonable and necessary out-of-pocket expenses incurred at the request of
Company in the performance of employee’s duties under this Agreement subject to
providing adequate written documentation of such expenses.

3.                 REPRESENTATIONS,
WARRANTIES AND ACKNOWLEDGMENTS

Section 3.1 
Licensing.  Employee represents and warrants
to the Company that Employee does not know of any reason, whether from Employee’s
professional or personal life, that Employee will be unable to receive a gaming
license from any gaming regulatory body that has jurisdiction over the Company
or any of its operations.  Employee
represents and warrants to the Company that Employee has not been charged with
or convicted of fraud; been convicted of or plead guilty or no contest to any
criminal offense (other than minor traffic violations), has not been found to
have violated any gaming law, regulation or rule in any jurisdiction, and has
not had any gaming license revoked or any application for a gaming license
denied.  Employee acknowledges that the
Company expressly relied on Employee’s representations that Employee was not
aware of any reason Employee would not be able to receive a gaming license in
offering to employ or continuing to employ Employee.  Employee further acknowledges that failure to
receive any gaming license may be grounds, at the sole discretion of the
Company, for demotion or termination of Employee with cause.

Section 3.2 
Insider Trading Policy.  Employee
acknowledges that the Company is a wholly-owned subsidiary of Southwest Casino
Corporation and that securities of Southwest Casino Corporation are traded in
the public markets and subject to the periodic reporting requirements of the
Commission.  Employee further
acknowledges that, in her role as Chief Financial Officer, Employee will
frequently possess material non-public information regarding the Company and
Southwest Casino Corporation.  Employee
agrees that she will not engage in any transaction in Southwest Casino
Corporation securities while in possession of material non-public information
regarding the Company or Southwest Casino Corporation.  Employee acknowledges that engaging in any
transaction in Southwest Casino Corporation securities while in possession of
material non-public information, or providing material non-public information
to any third party who engages in any transaction in Southwest Casino
Corporation securities, may violate federal securities laws.  Employee agrees to abide the provisions of
Southwest Casino Corporation’s insider trading policy for executive officers in
connection with any transaction in Southwest Casino Corporation securities by
Employee or members of Employee’s immediate family.

Section 3.3. 
Third-Party Information. Employee understands and acknowledges that
the Company has a policy prohibiting the receipt by the Company of any
confidential information in breach of the Employee’s obligations to third
parties and does not desire to receive any confidential information under such
circumstances. Accordingly, the Employee will not disclose to the Company or
use in the performance of any duties for the Company any confidential
information in breach of an obligation to any third party. The Employee
represents that the Employee has provided the Company with a copy of any
agreement by which the

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Employee is bound that restricts the Employee’s use of any third party’s
confidential information.

Section 3.4. 
Non-Competition Agreements. 
Employee represents and warrants to the Company that the Employee is not
currently subject to a non-competition, confidentiality or other similar
agreement with a former employer that prohibits the Employee from working for
the Company.

4.                 RESTRICTIVE
COVENANTS

Section 4.1 
Confidential Information.  Employee acknowledges that the confidential
information and data obtained by her during the course of her performance under
this Agreement (or her work prior to the date hereof for Company, if any)
concerning the business or affairs of Company (the “Confidential
Information”) are the property of Company.  Employee agrees that she will not disclose to
any unauthorized persons or use for her own account or for the benefit of any
third party any of such Confidential Information or data without the written consent
of the President of the Company, either during the term of her employment or
after the termination thereof for a period of three years.  Employee agrees to deliver to Company at the
termination of her employment all memoranda, notes, plans, records, reports and
other documentation (and copies thereof) relating to the business of Company or
the Enterprise which she may then possess or have under her control.

Section 4.2 
Title. 
Subject to the provisions of the attached Exhibit B, all documents,
inventions, designs or other tangible property relating in any way to the
business of Company, which are conceived or generated by Employee or come into
Employee’s possession during the Initial Term or any extension of employment
under this Agreement, are automatically assigned to and remain the exclusive
property of Company, and Employee agrees to return all such documents and
tangible property including, but not limited to, all records, manuals, books,
blank forms, documents, letters, memoranda, notes, notebooks, reports, data,
financial information or copies thereof, which are the property of Company or
which relate in any way to the business, practices or techniques of Company,
and all other property of Company, including, but not limited to, all documents
which in whole or in part contain any Confidential Information of Company,
which are in the possession or under the control of Employee, to Company upon
termination of this Agreement or at any earlier time that Company requests such
return.

All
ideas, designs, graphics, logos, slogans, copies, software, derivative works
and all other materials or intellectual property relating to the Enterprise or
other endeavor of the Company created by or, on the behalf of, Employee in the
course of her employment under this Agreement automatically becomes the
property of and is solely owned by Company, its successors, assigns, and
licensees, in perpetuity, without reservation. 
Furthermore, all rights of whatever nature affixed to such ideas,
designs, graphics, logos, slogans, copies, software, derivative works and other
materials or intellectual property relating to any Enterprise or other endeavor
of the Employee, including, without limitation, any trademark or service mark
rights or copyrights and any goodwill appurtenant thereto, any right of
publicity, and any rights, title or interest which may affix under any
copyright laws now or hereafter in force and effect in the United States or any
other country or countries, automatically become the property of and are solely
owned by Company, its successors, assigns and licensees, in perpetuity, without
reservation.

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Section 4.3 
Non-Solicitation Covenant.  In consideration of the covenants of the
Company in this Agreement, the receipt and sufficiency of which are
acknowledged by Employee, Employee agrees that for a period of one (1) year
after termination of Employee’s employment with the Company, the Employee must
not directly or indirectly:

(a)           Hire
or solicit, or cause or induce others to hire or solicit for employment, any employee
of the Company or encourage any employee (including persons who were employed
by the Company within 90 days of the Employee’s termination date) to leave the
employment of the Company.

(b)           Disparage
or defame the Company or request or advise any customer, client, prospective
client or vendor to curtail or cancel such person’s business relationship with
the Company.

Section 4.4 
Remedies. 
Employee acknowledges that any violation of Article 3 or 4 of this
Agreement by Employee would result in immediate and irreparable injury to
Company for which an award of money damages would not be an adequate remedy,
Employee agrees that employer has the right to obtain equitable relief
including an injunction to specifically enforce the terms of this Agreement, and
to obtain any other legal or equitable remedies that may be available to
Company.  In the event of any violation
by Employee of this Agreement, Employee agrees to pay reasonable costs and
legal fees incurred by Company in pursuit of any of its rights with respect to
this Agreement, in addition to any damages sustained by Company by reason of
such breach.

Section 4.5 
Assignment. 
The transfer of Employee from Company to any subsidiary or affiliate or
to a successor company that results from any acquisition, merger or
reorganization thereof shall operate as an assignment to such company of
Company’s rights under this Agreement. 
Such assignment shall not operate to terminate or modify this Agreement,
except that the company to which Employee is transferred shall be construed,
for the purpose of this Agreement, as standing in the same place as Company as
of the date of such transfer.  All
covenants and agreements under this Agreement shall inure to the benefit of and
be enforceable by the successors and assigns of Company, including assignees by
operation of law.

Employee’s
performance under this Agreement requires Employee’s personal services, unique
skills and experience, and therefore, may not be assigned or transferred by
Employee nor may Employee delegate her duties under this Agreement to another
person without the prior written consent of the Board of Directors of
Company.  Company retains the exclusive
right to withhold consent for any reason.

Section 4.6 
Survival. 
Except as otherwise expressly provided herein, the provisions of this
Section 4 will survive (a) the termination of this Agreement as a result of
breach or otherwise, or (b) the termination of Employee’s employment under this
Agreement, provided further, that in the event of a breach of Company’s
obligation to make any payments to Employee required under this Agreement, the
provisions of Section 4.4 of this Agreement shall not survive a termination of
this Agreement for so long as such breach remains uncured.

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5.                 TERMINATION

Section 5.1 
For Cause Termination.  Employee’s employment under this Agreement
may be terminated by Company at any time for “cause”, which is defined as (a)
the failure of Employee, individually, to meet the licensing requirements of
any jurisdiction in which Employee’s work for the Company requires that
Employee hold a license; (b) the conviction of Employee of any fraudulent or
criminal act; (c) the willful refusal by Employee to comply with or adequately
perform any duty or responsibility imposed upon Company pursuant to the terms
of this Agreement; (d) a determination by a majority of the Board of Directors
of the Company that Employee’s continued employment with Company may result in
(i) the disapproval, modification, or non-renewal of any contract or proposed
contract under which the Company or any of its subsidiaries has sole or shared
authority to develop, license or manage any gaming operations, wherever
located, or (ii) the disapproval, loss, modification, non-renewal or
non-reinstatement of any license, franchise, approval or consent issued by or
sought from any federal, state or tribal governmental authority with respect to
the conduct of any portion of the business of the Company or any subsidiary;
(e) a breach of any material provision of this Agreement by Employee not
otherwise covered by clauses (a), (b) (c) or (d) of this Section 5.1; or (f)
the loss of any tribal or other regulatory approval necessary for the continued
employment of Employee in connection with the operation of the Enterprise.  Company may terminate Employee’s employment
immediately (without any advance notice) in the event of a termination for
cause.  If Employee’s employment is
terminated for cause pursuant to this Section 5.1, no further payments of
Salary, Bonus or other forms of compensation or benefits shall be due or
payable to Employee with respect to any period following or events occurring
after the date of such termination, except as may be required by applicable
law, and all vested options may be exercised for only thirty (30) days.

Section 5.2 
Termination Without Cause.  Employee or Company may terminate Employee’s
employment under this Agreement without cause at any time upon 30 days written
notice of such intent to terminate. 
During the 30-day period following such notice, Employee shall continue
to receive the compensation contemplated by Article II of this Agreement and
shall, at the discretion of the Company, continue to perform the duties set
forth herein during such 30-day period.

Section 5.3  Change
in Control.  Upon
approval by the Board of Directors of the company, Employee and Company will
enter into a separate agreement that provides that if Employee’s employment
terminates in connection with a Change in Control of the Company (as defined in
the separate agreement), Employee will receive post-employment benefits
consistent with those provided to other senior managers of the company,
including salary continuation of not less than 6 months.  Any such agreement must comply with the requirements
of Section 409A of the Internal Revenue Code.

Section 5.3 
Death or Disability.  In the event of Employee’s death or
disability, this Agreement shall terminate except that Company shall pay
Employee’s designated beneficiaries or estate, in the case of death, or
employee, in the case of disability, Employee’s Salary for (a) 60 days; or (b)
the remaining term of this Agreement, whichever is less.  Such payments shall be reduced by the amount
of any death or disability payments which may be payable to Employee under any
death or disability insurance coverage in effect for Company’s employees.  For purposes of this Agreement, “disability”
shall mean a physical or mental impairment which renders Employee incapable of
performing the duties assigned to Employee under this 

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Agreement for a
period of more than thirty (30) consecutive days, as determined solely by a
majority of the Board of Directors of Company.

6.                 PROVISIONS
OF GENERAL APPLICATION

Section 6.1 
Background Checks and Related Information.  Employee acknowledges that Company’s gaming
business is extensively regulated and, as a result, various regulatory bodies
may request or require background investigations and background information
regarding Employee.  During the term of
this Agreement, Employee agrees to comply with any and all background
investigations conducted or requested from time to time by Company or any
federal, state, tribal or other regulatory authority.  Employee acknowledges and agrees that the
provisions of this Section 6.1 are a material part of this Agreement.

Section 6.2 
Notices. 
All notices, requests and other communications from any of the Parties
hereto to any of the others shall be in writing and, except as otherwise
provided herein, shall be considered to have been duly given or served if sent
by certified or registered United States mail, postage prepaid, return receipt
requested, to the respective parties at their address set forth below or to
such other address as such party may hereafter designate by notice to the other
party.

	
  As to Company:

  	
   

  	
  Southwest Casino and Hotel Corp.

  
	
   

  	
   

  	
  2001 Killebrew
  Drive, Suite 350

  
	
   

  	
   

  	
  Minneapolis, MN
  55425

  
	
   

  	
   

  	
   

  
	
  As to Employee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

Section 6.3 
Amendment. 
This Agreement may be amended only by a mutually agreed to writing,
signed by both Company and Employee.

Section 6.4 
Parties in Interest.  This Agreement binds, and the benefits and
obligations provided in this Agreement inure to, the Parties and their
respective heirs, legal representatives, successors, assigns, transferees or
donees.

Section 6.5 
Entire Agreement.  Employee and Company intend this Agreement to
be the final and binding expression of their agreement and as the complete and
exclusive statement of its terms.  This
Agreement supersedes and revokes all other prior negotiations, representations
and agreements, whether oral or written, regarding the employment relationship
between Company and Employee.

Section 6.6 
Enforceability. 
If any provision in this Agreement is declared unenforceable or invalid,
said declaration will not impair any of the Agreement’s other provisions which
must be enforced according to their respective terms.

Section 6.7 
Construction. 
The headings preceding or the labeling of the paragraphs of this
Agreement are for the purpose of identification only and shall not be used for
the construction or interpretation of any portion of this Agreement.  Waiver by any party of any default, violation
or nonperformance under this Agreement shall not be deemed a waiver of

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their right to
seek legal or equitable relief for any subsequent violation of the
Agreement.  As used in this Agreement and
where necessary, the singular includes the plural and vice versa, and
masculine, feminine and neuter expressions are interchangeable.

Section 6.8 
Applicable Law. 
This Agreement was made and entered into in Minnesota, and the laws of
the State of Minnesota shall govern and be applicable to this Agreement and any
enforcement, construction or interpretation thereof.

Remainder
of page intentionally blank.

Signatures on next page.

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IN WITNESS WHEREOF, Company and
Employee have knowingly, voluntarily and with the right to seek independent
counsel, executed this Agreement on the date(s) reflected below with an
Effective Date as set forth above.

	
  EMPLOYEE

  	
  SOUTHWEST CASINO AND

  
	
   

  	
  HOTEL CORP.

  
	
   

  	
  By:

  	
   

  
	
  Tracie L. Wilson

  	
   

  	
  Its:

  	
   

  
				

 

 

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EXHIBIT B

NOTICE
PURSUANT TO

MINNESOTA
STATUTES 181.78 (Subd. 3)

TO:                         Tracie
Wilson

FROM:                  Southwest
Casino and Hotel Corp. (the “Company”)

You
have entered into an Employment Agreement with Company requiring you, among
other things, to assign or offer to assign your rights in certain inventions to
Company.  You are hereby notified that
such Employment Agreement does not apply to any invention for which no
equipment, supplies, facility or trade secret information of Company was used
and which was developed entirely on your own time, and (1) which does not
relate (a) directly to the business of Company, or (b) to Company’s actual or
demonstrably anticipated research or development; or (2) which does not result
from any work performed by you for Company.

	
  

  	
  SOUTHWEST
  CASINO AND HOTEL CORP.

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Its:

  	
   

  

 

I
hereby acknowledge receipt of the foregoing notice.

	
  

  	
  Tracie L. Wilson

  

 

 

 10Exhibit 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

 4
 

 

 

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.

 6

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