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                                                                    EXHIBIT 10.7

                             INNOVATIVE GAMING, INC.
                               SECURITY AGREEMENT

THIS SECURITY AGREEMENT, is made as of this 1st day of June, 1999, by Innovative
Gaming, Inc., a Nevada corporation (the "Debtor") in favor of Wayne W. Mills
("Secured Party"), in his capacity as agent under that certain Intercreditor
Agreement of even date herewith by and among WAYNE W. MILLS, RICHARD C.
LOCKWOOD, CRAIG C. AVERY COMPANY MONEY PURCHASE PENSION PLAN. CRAIG C. AVERY AND
HENRY Fong(the "Noteholders").

         In order to secure the payment of the Convertible Notes, of even date
herewith executed by the Debtor and payable to the order of Noteholders (the
"Notes") (said Notes herein referred to as the "Secured Obligations"), Debtor
hereby agrees as follows:

1.       SECURITY INTEREST AND COLLATERAL. In order to secure the payment and
performance of the Secured Obligations, Debtor hereby grants to Secured Party a
security interest (herein called the "Security Interest") in and to the
following property (hereinafter collectively referred to as the "Collateral"):

any and all goods, machinery, equipment, furniture, fixtures, improvements,
inventory, patents, patent rights, copyrights, trademarks, tradenames, and
royalty rights now owned or hereafter acquired by Debtor;

together with all substitutions and replacements for and products and proceeds
of any of the foregoing property and, in the case of all tangible Collateral,
together with (i) all accessories, attachments, parts, equipment, accessions and
repairs now or hereafter attached or affixed to or, used in connection with any
such goods, and (ii) all warehouse receipts, bills of lading and other documents
of title now or hereafter covering such goods, provided that any security
interest in assets of the Debtor consisting of slot machines or other gaming
devices shall be subject to applicable gaming laws.

2.       REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Debtor hereby represents
and warrants to, and covenants and agrees with, Secured Party as follows:

(a)      The Collateral will be used primarily for business purposes. The
         Collateral which constitutes inventory shall be located at its
         principal place of business.

(b)      Debtor's principal place of business and chief executive office is and
         it is anticipated that it will continue to be located in Reno, Nevada.
         Debtor's records concerning its accounts are kept at such address.
         Since its inception, Debtor has not changed its name or operated or
         conducted business under any trade name or "d/b/a" which is different
         from its corporate name. Debtor shall promptly notify Secured Party of
         any change in such name or if it operates or conducts business under
         any trade name or "d/b/a" which is different from such name.




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(c)      Debtor has (or will have at the time Debtor acquires rights in
         Collateral hereafter acquired or arising) and will maintain absolute
         title to each item of Collateral free and clear of all security
         interests, liens and encumbrances, except the Security Interest, and
         such other security interests as are permitted by the Secured Party in
         writing pursuant to Exhibit A hereto (the Security Interest and the
         security interests listed on Exhibit A are hereinafter collectively
         referred to as the "Permitted Interests"), and will defend the
         Collateral against all claims or demands of all persons other than
         Secured Party and those holding Permitted Interests. Debtor will not
         sell or otherwise dispose of the Collateral or any interest therein,
         except that, until a Default (as defined in the Notes) occurs, Debtor
         may sell any Inventory constituting Collateral to buyers in the
         ordinary course of its business, replace worn-out or obsolete equipment
         with equipment of equal or greater value and dispose of excess or
         obsolete inventory and equipment.

(d)      The tangible Collateral is presently located in the state of Nevada,
         except for immaterial amounts of inventory that may be located from
         time-to-time in other states. Except for such immaterial amounts of
         Inventory, Debtor will not permit Collateral to be located in any state
         (and, if a county filing is required, in any county) in which a
         financing statement covering such Collateral is required to be, but has
         not in fact been, filed.

(e)      Debtor will (i) keep all tangible Collateral in good repair, working
         order and condition, normal wear and tear excepted, and will, from time
         to time, replace any worn, broken or defective parts thereof; (ii)
         other than taxes and other governmental charges contested in good faith
         and by appropriate proceedings, promptly pay all taxes and other
         governmental charges levied or assessed upon or against any Collateral
         or upon or against the creation, perfection or continuance of the
         Security Interest; (iii) keep all Collateral free and clear of all
         security interests, liens and encumbrances except the Permitted
         Interests; (iv) at all reasonable times, permit Secured Party or its
         representatives to examine or inspect any Collateral, wherever located,
         and to examine, inspect and copy Debtor's books and records pertaining
         to the Collateral and its business and financial condition; (v) keep
         accurate and complete records pertaining to the Collateral and
         pertaining to Debtor's business and financial condition and will submit
         to Secured Party such periodic reports concerning the Collateral and
         Debtor's business and financial condition as Secured Party may from
         time to time reasonably request; (vi) promptly notify Secured Party of
         any material loss of or material damage to any Collateral or of any
         adverse change, known to Debtor, in the prospect of payment of any sums
         due on or under any instrument, chattel paper or account constituting
         Collateral; (vii) at all times keep all tangible Collateral insured
         against risks of fire (including so called extended coverage), theft,
         collision (in case of collateral consisting of motor vehicles) and such
         other risks and in such amounts as Secured Party may reasonably
         request, and notify the Bank in writing of any loss or damage to the
         Collateral or any part; (viii) from time to time execute such financing
         statements as Secured Party may reasonably deem required to be filed in
         order to perfect the Security Interest and, if any Collateral is
         covered by a certificate of title, execute such documents as may be
         required to have the Security Interest properly noted on a certificate

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         of title; (ix) pay when due or reimburse Secured Party on demand for
         all costs of collection of any of the Secured Obligations and all other
         out-of-pocket expenses (including in each case all reasonable
         attorneys' fees) incurred by Secured Party in connection with the
         creation, perfection, satisfaction or enforcement of the Security
         Interest or the execution or creation, continuance or enforcement of
         this Agreement or any or all of the Secured Obligations; (x) execute,
         deliver or endorse any and all instruments, documents, assignments,
         security agreements and other agreements and writings which Secured
         Party may at any time reasonably request in order to secure, protect,
         perfect or, enforce the Security Interest and Secured Party's rights
         under this Agreement; (xi) not use or keep any Collateral, or permit it
         to be used or kept, for any unlawful purpose or in violation of any
         federal, state or local law, statute or, ordinance; and (xii) not
         permit any tangible Collateral to become part of or to be affixed to
         any real property, without first assuring to the reasonable
         satisfaction of Secured Party that the Security Interest will be prior
         and senior to any interest or lien then held or thereafter acquired by
         any mortgagee of such real property or the owner or purchaser of any
         interest therein. If Debtor at any time falls to perform or observe any
         agreement contained in this Section 2(g), and if such failure shall
         continue for a period of ten (10) calendar days after Secured Party
         gives Debtor written notice thereof (or, in the case of the agreements
         contained in clauses (viii) and (ix) of this Section 2(g), immediately
         upon the occurrence of such failure, without notice or, lapse of time)
         Secured Party may (but need not) perform or observe such agreement on
         behalf and in the name, place and stead of Debtor (or, at Secured
         Party's option, in Secured Party's own name) and may (but need not)
         take any and all other actions which Secured Party may reasonably deem
         necessary to cure or correct such failure (including, without
         limitation, the payment of taxes, the satisfaction of security
         interests, liens or encumbrances (other than Permitted Interests), the
         performance of obligations under contracts or agreements with account
         debtors or other obligors, the procurement and maintenance of
         insurance, the execution of financing statements, the endorsement of
         instruments, and the procurement of repairs, transportation or
         insurance); and, except to the extent that the effect of such payment
         would be to render any loan or forbearance of money usurious or
         otherwise illegal under any applicable law, Debtor shall thereupon pay
         Secured Party on demand the amount of all moneys expended and all costs
         and expenses (including reasonable attorneys' fees) incurred by Secured
         Party in connection with or as a result of Secured Party's performing
         or observing such agreements or taking such actions, together with
         interest thereon from the date expended or incurred by Secured Party at
         a rate equal to two percent in excess of the rate provided for in the
         Notes. To facilitate the performance or observance by Secured Party of
         such agreements of Debtor, Debtor hereby irrevocably appoints (which
         appointment is coupled with an interest) Secured Party, or its
         delegate, as the attorney-in-fact of Debtor with the right (but not the
         duty) from time to time to create, prepare, complete, execute, deliver,
         endorse or file, in the name and on behalf of Debtor, any and all
         instruments, documents, financing statements, applications for
         insurance and other agreements and writings required to be obtained,
         executed, delivered or endorsed by Debtor, under this Section 2.


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3.       ASSIGNMENT OF INSURANCE. Debtor hereby assigns to Secured Party, as
additional security for the payment of the Secured Obligations, any and all
proceeds derived from, or due or to become due under, any and all policies of
insurance in connection with any loss or damage to any of the Collateral, and
Debtor hereby directs the issuer of any such policy to pay any such moneys to
the Secured Party and Borrower jointly. Provided no Default has occurred and is
then continuing, the Debtor shall have the right to repair or replace any of its
damaged or destroyed Collateral. Secured Party may (but need not), in its own
name or in Debtor's name, execute and deliver proofs of claim, receive all such
moneys (subject to Borrower's rights), endorse checks and other instruments
representing payment of such moneys, and adjust, litigate, compromise or release
any claim against the issuer of any such policy.

4.       REMEDIES. Secured Party may exercise any one or more of the following
rights or remedies if any or all of the Secured Obligations are not paid when
due: (i) exercise and enforce any or all rights and remedies available after
default to a secured party under the Uniform Commercial Code, including but not
limited to the right to take possession of any Collateral, proceeding without
judicial process or by judicial process (without a prior hearing or notice
thereof, which Debtor hereby expressly waives), and the right to sell, lease or
otherwise dispose of or use any or all of the Collateral; (ii) Secured Party may
require Debtor to assemble the Collateral and make it available to Secured Party
at a place to be designated by Secured Party which is reasonably convenient to
both parties; and (iii) exercise or enforce any or all other rights or remedies
available to Secured Party by law or agreement against the Collateral, against
Debtor or against any other person or property. If notice to Debtor of any
intended disposition of Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 6 hereof) at least ten
(10) calendar days prior to the date of intended disposition or other action.

5.       MISCELLANEOUS. This Agreement does not contemplate a sale of accounts
or chattel paper, and, as provided by law, Debtor is entitled to any surplus and
shall remain liable for any deficiency. This Agreement can be waived, modified,
amended, terminated or discharged, and the Security Interest can be released,
only explicitly in a writing signed by Secured Party. A waiver signed by Secured
Party shall be effective only in the specific instance and for the purpose
given. Mere delay or failure to act shall not preclude the exercise or
enforcement of any of Secured Party's rights or remedies. All rights and
remedies of Secured Party shall be cumulative and may be exercised singularly or
concurrently, at Secured Party's option, and the exercise or enforcement of any
one such right or remedy shall neither be a condition to nor bar the exercise or
enforcement of any other. All notices to be given to Debtor shall be deemed
sufficiently given if deposited in the United States mails, registered or,
certified, postage prepaid, or personally delivered to Debtor at its address set
forth below. Secured Party's duty of care with respect to Collateral in its
possession (as imposed by law) shall be deemed fulfilled if Secured Party
exercises reasonable care in physically safe keeping such Collateral or, in the
case of Collateral in the custody or possession of a bailee or other third
person, exercises reasonable care in the selection of the bailee or other third
person, and Secured Party need not otherwise preserve, protect, insure or care
for any Collateral. Secured Party shall not be obligated to preserve any rights
Debtor may have against

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any other party, to realize on the Collateral at all or in any particular manner
or order, or to apply any cash proceeds of Collateral in any particular order of
application. This Agreement shall be binding upon and inure to the benefit of
Debtor and Secured Party and their respective heirs, representatives, successors
and assigns and shall take effect when signed by Debtor and delivered to Secured
Party, and Debtor waives notice of Secured Party's acceptance hereof. Secured
Party may execute this Agreement if appropriate for the purpose of filing, but
the failure of Secured Party to execute this Agreement shall not affect or
impair the validity or effectiveness of this Agreement. Except to the extent
otherwise required by law, this Agreement shall be governed by the laws of the
State of Nevada and, unless the context otherwise requires, all terms used
herein which are defined in Articles 1 and 9 of the Uniform Commercial Code, as
in effect in said state (including but not limited to the terms "inventory",
"equipment", "instrument", "document" "goods", "chattel paper", "account" and
"account debtor") shall have the meanings therein stated and all capitalized
terms used herein which are defined in the Note shall have the meanings therein
stated. If any provision or application of this Agreement is held unlawful or
unenforceable in any respect, such illegality or unenforceability shall not
affect other, provisions or applications which can be given effect, and this
Agreement shall be construed as if the unlawful or unenforceable provision or
application had never been contained herein or prescribed hereby. All
representations and warranties contained in this Agreement shall survive the
execution, delivery and performance of this Agreement and the creation and
payment of the Secured Obligations.

IN WITNESS WHEREOF, Debtor has executed and delivered to Secured Party this
Security Agreement as of the day and year, first above written.


                              INNOVATIVE GAMING, INC.

                              By:  s/ Edward G. Stevenson
                                 ------------------------
                              Name and Title:  Edward Stevenson, Chairman
                                             ----------------------------
                              Address of Debtor:
                              4725 Aircenter Circle
                              Reno, NV 89502

                              Address of Secured Party:
                              Wayne W. Mills
                              The Colonnade, Suite 290
                              5500 Wayzata Boulevard
                              Golden Valley, MN 55416





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                                    EXHIBIT A

                                 PERMITTED LIENS


     Secured Asset Description                        Lien Holder
     -------------------------                        -----------

     1999 Chevrolet Astro Van                         GMAC
       s/n IGCDM19W6XB138966

     IGT Slant Top Slot Machines                      IGT
       Purchased from IGT


















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