Document:

Prepared by MERRILL CORPORATION

QuickLinks
 -- Click here to rapidly navigate through this document

 
 

EXHIBIT 10.7    
  

 
  PLEDGE AND SECURITY AGREEMENT
  (E-T-T, Inc.)    
  

    This
PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated as of August 24, 2001, is entered into by
E-T-T, Inc., a Nevada corporation ("Pledgor"), in favor of The Bank of New York, a New York banking corporation, as
trustee ("Trustee"), for the benefit of the holders of the 103/4% Senior Secured Notes due 2008 (the
"Notes") issued by Herbst Gaming, Inc. (the "Issuer") pursuant to the Indenture dated as of August 24, 2001 (the
"Indenture"), among Issuer, each of the Guarantors thereunder (including Pledgor) and the Trustee. 

RECITALS  

    A.  Pledgor
is the legal and beneficial owner of all the issued and outstanding capital stock of each of Cardivan Company, a Nevada corporation, Corral
Coin, Inc., a Nevada corporation, and Corral Country Coin, Inc., a Nevada corporation (collectively, the "Pledged Subsidiaries"). 

    B.  The
holders of the Notes (collectively, the "Noteholders") are willing to purchase the Notes for the purposes of,
among other things, providing Pledgor and its subsidiaries funds to repay existing indebtedness and to provide working capital. 

    C.  Pledgor
will derive substantial benefit from the purchase of the Notes by the Noteholders. 

    D.  As
a condition precedent to purchasing the Notes, the Noteholders require that Pledgor pledge 100% of its interest in each of the Pledged Subsidiaries for the
benefit of the Noteholders as security for Pledgor's obligations under the Indenture, pursuant to the terms of this Agreement. 

AGREEMENT  

    NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Pledgor hereby agrees with the Trustee as follows: 

    1.  Definitions.  

    1.1  "Escrow Agent"  shall mean Wilmington Trust FSB as escrow agent under the Escrow Agreement. 

    1.2  "Escrow Agreement"  shall mean that certain Escrow Agreement dated August 24, 2001 by and
among Escrow Agent, the Pledgors (as defined therein including the Pledgors hereunder) and the Trustee. 

    1.3  "Obligations"  shall mean and include all obligations, howsoever arising, owed by Pledgor to the
Noteholders of every kind and description, pursuant to the terms of the Indenture (whether or not evidenced by any note or instrument and whether or not for the payment of money), direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising, including without limitation all interest, fees, charges, expenses, attorneys' fees and other professional fees
chargeable to Pledgor hereunder or thereunder. 

    1.4  "Stock"  shall mean all shares, options, warrants, interests, participations or other equivalents
(regardless of how designated or of what class) of or in the Pledged Subsidiaries held by Pledgor, including, without limitation, the capital stock listed on Schedule A  attached hereto, whether
voting or nonvoting, common or preferred. 

    1.5  "UCC"  shall mean the Uniform Commercial Code as the same may, from time to time, be in effect in
the State of Nevada. 

    1.6 All
capitalized terms used, but not otherwise defined herein, shall have the meanings provided in the Indenture. 

 

    2.  Assignment, Pledge and Grant of Security Interest.  To secure the timely payment and performance of
the Obligations, Pledgor hereby assigns and pledges to Trustee, for the equal and ratable benefit of the Noteholders, and grants to Trustee, for the equal and ratable benefit of the Noteholders, a
security interest in all the estate, right, title and interest of Pledgor in and to the Stock, whether now owned or hereafter acquired, and all proceeds thereof and any income, dividends, gain,
profit, loss or other items received or receivable by Pledgor in connection with the Stock (collectively, the "Collateral"). During the term of this Agreement and other than after the occurrence and
during the continuance of a Default or an Event of Default, the Pledgor shall be entitled to receive any principal, interest, dividends and other income payable on or with respect to the Stock. 

    3.  Representations and Warranties of Pledgor.  Pledgor represents and warrants to Trustee, for the
benefit of the Noteholders, as follows: 

    3.1 Pledgor
(i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada with all requisite corporate power
and authority under the laws of such State to enter into this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby, (ii) is duly qualified,
authorized to do business and in good standing in each jurisdiction where the character of its properties or the nature of its activities makes such qualification necessary and (iii) has the
full right, power and authority (A) to carry on its business as now being conducted and as proposed to be conducted by it, (B) to execute and deliver, and perform its obligations under
the Indenture, this Agreement and any other agreements to which it is a party pursuant to the Indenture, (C) to take all action as may be necessary to consummate the transactions contemplated
under the Indenture and (D) to pledge and assign the Stock. 

    3.2 None
of Pledgor's execution and delivery of this Agreement, its consummation of the transactions contemplated hereby or its compliance with the terms thereof
(a) violate any requirement of law, regulation or statute, (b) violate any provision of, or result in the breach or acceleration of or entitle any Person to accelerate any material
obligation under, any indenture, mortgage, lien, lease, agreement, license, pledge, guarantee or other document to which Pledgor is a party or by which Pledgor or its property is bound,
(c) does or will contravene or result in any breach of or constitute any default under, or result in or require the creation of any lien upon any of its property under, any agreement or
instrument to which it is a party or by which it or any of its properties may be bound or affected or (d) violate the certificate or articles of incorporation or by-laws (or other
organizational documents) of Pledgor. 

    3.3 This
Agreement has been duly authorized, executed and delivered by Pledgor, has not been amended or otherwise modified, is in full force and effect, and is binding
upon and enforceable against Pledgor in accordance with its terms, except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement of creditors' rights and by the effect of general equitable principles. 

    3.4 Except
as has been previously obtained and are in full force and effect, no consent of any other party (including, without limitation, any creditor, shareholder or
partner of Pledgor) and no consent, authorization, approval, order, registration, or other action by, and no notice to or filing with, any governmental authority or regulatory body is required either
(i) for the pledge by Pledgor of the Collateral pursuant to this Agreement or for the execution, delivery or performance of this Agreement by Pledgor or (ii) for the exercise by the
Trustee of the voting or other rights provided for in this Agreement or the remedies in respect of the Collateral pursuant to this Agreement. 

    3.5 Pledgor
is the beneficial, lawful and record owner of and has full right, title and interest in and to the Stock, free and clear of any mortgages, liens, charges,
or encumbrances of any kind. All of the outstanding shares of Stock are validly issued, fully paid and nonassessable securities. 

2

 

There are no outstanding options, warrants or other rights to subscribe or purchase stock or other equitable interests in any of the Pledged Subsidiaries. 

    3.6 Pledgor
has not executed and is not aware of any effective financing statement, security agreement or other instrument similar in effect covering all or any part of
the Collateral on file in any recording office, except such as may have been filed pursuant to this Agreement and the Indenture. 

    3.7 Upon
filing the UCC-1 financing statements executed by Pledgor with respect to this Agreement at the office of the Secretary of State for the State of
Nevada and the delivery to the Escrow Agent of all certificates or instruments representing or evidencing the Stock, Trustee (for the benefit of the Noteholders) will have a valid and perfected first
priority security interest in the Stock, securing payment and performance of the Obligations. 

    3.8 Neither
Pledgor nor any of its Affiliates is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended. 

    3.9 The
chief executive offices of Pledgor are located at the address set forth in Section 15 below. 

    4.  Covenants of Pledgor.  Pledgor covenants and agrees as follows: 

    4.1 Pledgor
shall perform and comply with all obligations and conditions on its part to be performed hereunder, and as may be necessary to maintain, preserve, protect
and perfect the Collateral and the lien granted to Trustee hereunder. 

    4.2 Pledgor
shall promptly deliver to Trustee or its agents all originals of certificates and other documents, instruments and agreements evidencing the Stock which are
now held or hereafter received by Pledgor, together with such blank stock powers executed by Pledgor as Trustee may request from time to time. 

    4.3 Pledgor
shall, so long as any Obligations shall be outstanding, defend its title to the Collateral and the interest of Trustee in the Collateral pledged hereunder
against the claims and demands of all other Persons. 

    4.4 Pledgor
shall not directly or indirectly create, incur, assume or suffer to exist any Liens on or with respect to any part of the Collateral (other than the Lien
created by this Agreement). 

    4.5 Pledgor
will not file or authorize or permit to be filed in any jurisdiction any financing statements under the UCC or any like statement relating to the Collateral
in which Trustee is not named as the sole secured party. 

    4.6 Except
as permitted by the Indenture or this Agreement, Pledgor will not cause, suffer or permit the sale, assignment, conveyance or other transfer of all or any
portion of Pledgor's ownership interest or interests in the Pledged Subsidiaries. 

    5.  Events of Default.  The occurrence of any of the following events (each, an "Event of Default," and
collectively the "Events of Default"), whatever the reason for such Event of Default, and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any administrative or governmental body, shall entitle Trustee to exercise any and all of its rights and remedies hereunder, under the
Indenture and at law: 

    5.1 The
occurrence of an Event of Default (as "Event of Default" is defined under the Indenture) under the Indenture; or 

3

 

    5.2 The failure on the part of Pledgor to observe or perform any covenant contained in this Agreement on its part to be observed or performed, and such failure shall
continue unremedied for a period of 30 days after Pledgor becomes aware thereof or receives written notice thereof from Trustee; or 

    5.3 Any
representation or warranty of Pledgor contained in this Agreement shall contain an untrue or misleading statement of a material fact or shall fail to state a
material fact necessary to make the statements therein not misleading as of the date made; or 

    5.4 The
impairment of the priority of the security interest in the Collateral granted herein. 

    6.  Remedies Upon Event of Default.  

    6.1 If
any Event of Default has occurred and is continuing, subject to Nevada Gaming Law, Trustee shall have the right, at its election, but not the obligation, to do
any of the following, subject to compliance with applicable gaming laws: (i) notify the Pledged Subsidiaries to pay all dividends on the Stock to Trustee, for the benefit of the Noteholders;
(ii) receive and collect all such dividends and make application thereof to the Obligations in such order as Trustee may determine; (iii) register all of the Stock in the name of Trustee
or its nominee, for the benefit of the Noteholders, and Trustee or its nominee may thereafter exercise (A) all voting, corporate and other rights pertaining to the Stock at any meeting of
shareholders of the Pledge Subsidiaries or otherwise, and (B) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to the Stock as if
Trustee were the absolute owner thereof; (iv) demand, sue for, collect or receive any money or property at any time payable to or receivable by Pledgor on account of or in exchange for all or
any part of the Collateral; (v) cause any action at law or suit in equity or other proceeding to be instituted and prosecuted to (A) collect or enforce any Obligations or rights
hereunder or included in the Collateral, including specific enforcement of any covenant or agreement contained herein, (B) foreclose or enforce the security interest in all or any part of the
Collateral granted herein, or (C) enforce any other legal or equitable right vested in it by this Agreement or by law; (vi) sell or otherwise dispose of all or any part of the Collateral
or cause all or any part of the Collateral to be sold or otherwise disposed of in one or more sales or transactions, at such prices and in such manner as Trustee may deem appropriate, and for cash or
on credit or for future delivery, at any broker's board or at public or private sale, without demand of performance or notice of intention to sell or of time or place of sale (except such notice which
under applicable law cannot be waived), it being agreed that Trustee may be a purchaser on behalf of the Noteholders or on its own behalf at any such sale and that Trustee or any other Person who may
be a bona fide purchaser for value and without notice of any claims of any or all of the Collateral so sold shall thereafter hold the same absolutely free from any claim or right of whatsoever kind,
including any equity of redemption, of Pledgor or the Pledged Subsidiaries, any such demand, notice or right and equity being hereby expressly waived and released; (vii) incur expenses,
including reasonable attorneys' fees, consultants' fees, and other costs appropriate to the exercise of any right or power under this Agreement; (viii) perform any obligation of Pledgor
hereunder; (ix) secure the appointment of a receiver for Pledgor without notice to the Pledgor or the Pledged Subsidiaries; or
(x) exercise any other or additional rights or remedies granted to a secured party under the UCC. If, pursuant to applicable law, prior written notice of any such action is required to be given
to Pledgor or the Pledged Subsidiaries, Pledgor and the Pledged Subsidiaries hereby acknowledge and agree that the minimum time required by such applicable law, or if no minimum is specified, of five
business days, shall be deemed a reasonable notice period. 

    6.2 All
costs and expenses (including, without limitation, attorneys' fees, consultants' fees and other related costs) incurred by Trustee in connection with exercising
any remedy provided for herein or at law, or performing any of Pledgor's agreements contained herein or in respect of any 

4

 

part of the Collateral, together with interest thereon at the maximum rate permitted by law computed from the date on which such costs or expenses are incurred to the date of payment thereof, shall
constitute part of the Obligations secured by this Agreement and shall be paid by the Pledgor to Trustee on demand. 

    6.3 If
Trustee shall decide to exercise its right to sell any or all of the Collateral for the benefit of the Noteholders, and if in the opinion of counsel for the
Trustee it is necessary to have such Collateral, or that portion thereof to be sold, registered under the provisions of the Securities Act of 1933, as amended, or otherwise registered or qualified
under any federal or state securities laws or regulations (collectively, the "Securities Laws"), Pledgor and the Pledged Subsidiaries will execute and
deliver, all at Pledgor's expense, all such instruments and documents which, in the opinion of Trustee, are necessary to register or qualify such Collateral, or that portion thereof to be sold, under
the provisions of the Securities Laws. Pledgor and the Pledged Subsidiaries will execute and will use best efforts to cause any registration statement relating thereto to become effective and to
remain effective for a period of not less than six months from the date of the first public offering of such Collateral, or that portion thereof to be sold, and to make all amendments thereto and/or
to any related prospectus or similar document which, in the reasonable opinion of Trustee, are necessary, all in conformity with the Securities Laws applicable thereto. Without limiting the generality
of the foregoing, Pledgor agrees to comply with the provisions of the securities or "Blue Sky" laws of any jurisdiction(s) which Trustee shall reasonably designate and to make available to its
security holders, as soon as practicable, an earnings statement which will satisfy the provisions of Section 11(a) of the Securities Act of 1933. 

    6.4 So
long as no Event of Default has occurred and is continuing, Pledgor reserves the right to exercise all of its rights as the holder of the Stock (except as
limited by the terms of the Indenture) and to receive all income and other distributions arising therefrom (except as limited by the Indenture). 

    7.  Remedies Cumulative; Delay Not Waiver.  

    7.1 No
right, power or remedy herein conferred upon or reserved to Trustee is intended to be exclusive of any other right, power or remedy, and every such right, power
and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right, power and remedy given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Resort to any or all security now or
hereafter held by Trustee, may be taken concurrently or successively and in one or several consolidated or independent judicial actions or lawfully taken nonjudicial proceedings, or both. 

    7.2 No
delay or omission of Trustee to exercise any right or power accruing upon the occurrence and during the continuance of any Event of Default as aforesaid shall
impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein. Every power and remedy given by this Agreement may be exercised from time
to time, and as often as shall be deemed expedient, by Trustee. 

    7.3 All
notice and cure periods provided herein, in the Indenture or in any other Loan Document shall run concurrently with any notice or cure periods provided by law. 

    8.  Nevada Gaming Law.  This Agreement will be governed by the Nevada Gaming Control Act. Without
limiting the generality of the foregoing, the parties agree to the following: 

    8.1 The
pledges of the Stock provided for herein will be subject to the approval of the Nevada State Gaming Control Board and the Nevada Gaming Commission
(collectively, the "Nevada Gaming Authorities"); 

5

 

    8.2 Notwithstanding the approval by the Nevada Gaming Authorities pursuant to paragraph 8.1 above, other approvals of the Nevada Gaming Authorities may, and in
some cases will, be required before certain transactions relating to this Agreement may occur, including but not limited to the following: 

    a.  any
re-registration or action similar to re-registration of the Stock (or any distribution in respect of, in addition to, in substitution
of, or in exchange for, the Stock or any part thereof); 

    b.  any
foreclosure, sale, transfer or other disposition of the Stock, except a transfer back to the Pledgor; and 

    c.  pursuant
to Regulation 8.050 of the Nevada Gaming Commission, the payment or receipt of any money or other thing of value constituting any part of the
consideration for the transfer or acquisition of the Stock, except that such consideration may be placed in escrow pending receipt of the necessary approvals. 

    8.3 Trustee
or its agents shall physically retain all evidence of ownership of the Stock or any distribution of additional securities in respect of, in addition to, in
substitution of, or in exchange for, such Stock or any part thereof, within the State of Nevada at a location designated to the Nevada Gaming Authorities, and shall make such evidence of ownership
available for inspection by agents of the Nevada Gaming Authorities immediately upon request during normal business hours. 

    8.4 Notwithstanding
any other provision contained herein to the contrary, the Trustee agrees that prior to exercising any remedies set forth in Section 6 hereof
or elsewhere with respect to the Collateral it shall obtain any and all consents and approvals required under such statute or regulations. 

    9.  Attorney-in-Fact.  Pledgor hereby irrevocably constitutes and appoints
Trustee as its true and lawful attorney-in-fact with full power and authority in the place and stead of Pledgor and in the name of Pledgor, Trustee or otherwise, from time to
time in Trustee's discretion to take any action and to execute any instrument to enforce all rights of Pledgor with respect to the Collateral, including, without limitation, the right to ask, require,
demand, receive and give acquittance for any and all moneys and claims for money due and to become due under or arising out of the Collateral; to elect remedies thereunder, to endorse any checks or
other instruments or orders in connection therewith; to vote, demand, receive and enforce Pledgor's rights with respect to the Collateral; to give appropriate receipts, releases and satisfactions for
and on behalf of and in the name of Pledgor or, at the option of Trustee, in the name of Trustee, with the same force and effect as Pledgor could do if this Agreement had not been made; and to file
any claims or take any action or institute any proceedings in connection therewith which Trustee may reasonably deem to be necessary or advisable; provided, however, Trustee shall not exercise such
rights unless upon the occurrence and during the continuation of an Event of Default. This power of attorney is a power coupled with an interest and shall be irrevocable. 

    10.  Perfection.  

    10.1 Pledgor
shall (i) deliver the Collateral or any part thereof to Trustee, as Trustee may request, accompanied by such duly executed instruments of transfer
or assignment as Trustee may request, and (ii) execute and file such financing or continuation statements, or amendments thereto, and such other instruments, endorsements or notices, as may be
reasonably necessary or desirable or as Trustee may request, in order to perfect and preserve the assignments and security interests granted or purported to be granted hereby. 

    10.2 Pledgor
hereby authorizes Trustee to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral
without the signature of Pledgor where permitted by law. 

6

 

    10.3 Pledgor shall, promptly upon request, provide to Trustee all information and evidence it may reasonably request concerning the Collateral to enable Trustee to
enforce the provisions of this Agreement. 

    11.  Termination of Security Interest.  This Agreement and the security interest and all other rights
granted hereby shall terminate and all rights to the Collateral shall revert to Pledgor upon either (i) the indefeasible payment and performance in full of the Obligations or (ii) the
agreement to such termination by the parties to the Indenture in accordance with the provisions of thereof. Upon any such termination, Trustee will return all certificates evidencing ownership
interests in the Pledged Subsidiaries to Pledgor and will, at Pledgor's expense, execute and deliver to Pledgor such documents (including, without limitation, UCC-3 termination statements)
as Pledgor may reasonably request to evidence such termination. 

    12.  Security Interest Absolute.  All rights of Trustee and the security interests hereunder, and all
obligations of Pledgor hereunder, shall be absolute and unconditional irrespective of: 

    12.1 Any
lack of validity or enforceability of the Indenture, the Subsidiary Guarantee or any other agreement or instrument relating thereto; 

    12.2 Any
change in the time, manner or place of payment of, or in any other term of the Obligations (including any increase in the amount thereof), or any other
amendment or waiver of or any consent to any departure from the Indenture or the Subsidiary Guarantee; 

    12.3 Any
exchange, surrender, release or non-perfection of any Collateral; 

    12.4 Any
bankruptcy or insolvency of Pledgor or any other Person; or 

    12.5 Any
other circumstance which might otherwise constitute a defense available to, or a discharge of, Pledgor or a third party pledgor. 

    13.  Limitation on Duty of Trustee with Respect to the Collateral.  The powers conferred on Trustee
hereunder are solely to protect its interest in the Collateral and shall not impose any duty on it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the
accounting for monies actually received by it hereunder, Trustee shall have no duty with respect to any Collateral. Trustee shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded treatment that is substantially equivalent to that which Trustee accords its own property, it being expressly agreed, to
the maximum extent permitted by law, that Trustee shall have no responsibility for (a) taking any necessary steps to preserve rights against any parties with respect to any Collateral, but
Trustee may do so and all expenses incurred in connection therewith shall be part of the Obligations or (b) taking any action to protect against any diminution in value of the Collateral.
Trustee shall have no obligation or duty to file financing statements and in acting hereunder the Trustee shall be accorded all benefits, privileges, protections, immunities and indemnities given to
it under the Indenture. 

    14.  Amendments; Waivers; Consents.  No amendment, modification, termination or waiver of any provision
of this Agreement, or consent to any departure by Pledgor therefrom, shall in any event be effective without the written concurrence of Pledgor and Trustee. 

    15.  Notices.  All notices required or permitted under the terms and provisions hereof shall be in
writing and any such notice shall be effective if given in accordance with the provisions of Section 12.02 

7

 

of the Indenture. Notices to Trustee may be given at the address set forth in such Section 12.02. Notices to Pledgor or the Pledged Subsidiaries may be given at the following address: 

Herbst
Gaming, Inc.

3440 West Russell Road

Las Vegas, Nevada 89118

Telecopier No.: (702) 740-4630

Attention: Mary E. Higgins 

    With
a copy to: 

Kummer
Kaempfer Bonner & Renshaw

3800 Howard Hughes Parkway

Seventh Floor

Las Vegas, Nevada 89109

Telecopier No.: (702) 796-7181

Attention: John N. Brewer, Esq. 

or
such other address as notified by a party pursuant to the terms hereof. 

    16.  Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the
State of New York, except (i) as the Nevada Gaming Control Act may apply, (ii) as required by mandatory provisions of Nevada law and (iii) to the extent that the validity or
perfection of the lien and security interest hereunder, or remedies hereunder, in respect of any particular portion of the Collateral are governed by the laws of the State of Nevada. 

    17.  Severability.  The provisions of this Agreement are severable, and if any clause or provision shall
be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction and
shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Agreement in any jurisdiction. 

    18.  Survival of Provisions.  All agreements, representations and warranties made herein shall survive
the execution and delivery of this Agreement and the Indenture. Notwithstanding anything in this Agreement or implied by law to the contrary, the representations and warranties of Pledgor set forth
herein shall terminate only upon payment and complete satisfaction of the Obligations. 

    19.  Headings Descriptive.  The headings in this Agreement are for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. 

    20.  Entire Agreement.  This Agreement, together with any other agreement executed in connection
herewith, is intended by the parties as a final expression of their agreement and is intended as a complete and exclusive statement of the terms and conditions thereof. 

    21.  Time.  Time is of the essence of this Agreement. 

    22.  Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be
deemed an original but all of which shall together constitute one and the same agreement. 

    23.  Attorneys' Fees.  In the event any legal action or proceeding (including, without limitation, any of
the remedies provided for herein or at law) is commenced to enforce or interpret this Agreement or any provision hereof, unless Pledgor is the prevailing party, Pledgor shall indemnify each of Trustee
and the Noteholders for their attorneys' fees and other costs and expenses incurred therein, and if a judgment or award is entered in any such action or proceeding, such reasonable attorneys' fees and
other costs and expenses may be made a part of such judgment or award. 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK] 

8

 

    IN WITNESS WHEREOF, each of the undersigned has caused this Pledge and Security Agreement to be duly executed and delivered as of the day and year first above written. 

	 	 	PLEDGOR:
	

 	
 	

E-T-T, INC.
	

 	
 	

By:	

/s/ EDWARD J. HERBST   
 Name: Edward J. Herbst

Title: President & CEO
	

 	
 	
TRUSTEE:
	

 	
 	

THE BANK OF NEW YORK
	

 	
 	

By:	

/s/ STACEY POINDEXTER   
 Name: Stacey Poindexter

Title: Assistant Vice President

9

 
SCHEDULE A

LIST OF STOCK  

100%
of the outstanding shares of common stock of Cardivan Company 

100%
of the outstanding shares of common stock of Corral Coin, Inc. 

100%
of the outstanding shares of common stock of Corral Country Coin, Inc. 

10

 
ACKNOWLEDGMENT AND CONSENT OF PLEDGED SUBSIDIARIES  

	 	 	CARDIVAN COMPANY
	

 	
 	

By:	

/s/ EDWARD J. HERBST   
 Name: Edward J. Herbst

Title: President and CEO
	

 	
 	
CORRAL COIN, INC.
	

 	
 	

 	

/s/ EDWARD J. HERBST   
 Name: Edward J. Herbst

Title: President and CEO
	

 	
 	
CORRAL COUNTRY COIN, INC.
	

 	
 	

By:	

/s/ EDWARD J. HERBST   
 Name: Edward J. Herbst

Title: President and CEO

11

QuickLinks

EXHIBIT 10.7

PLEDGE AND SECURITY AGREEMENT (E-T-T, Inc.)EXHIBIT 4.7

THE SECURITIES  REPRESENTED  HEREBY AND THE  SECURITIES  ISSUED UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES  SECURITIES ACT OF
1933,  AS AMENDED (THE  "SECURITIES  ACT") OR UNDER THE  SECURITIES  LAWS OF ANY
STATE. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES,  AGREES FOR THE BENEFIT
OF  THE  COMPANY  THAT  SUCH  SECURITIES  MAY  BE  OFFERED,  SOLD  OR  OTHERWISE
TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE
WITH RULE 903 OR 904 OF REGULATION S UNDER THE  SECURITIES  ACT, (C) PURSUANT TO
THE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 OR
RULE 144A  THEREUNDER,  IF AVAILABLE,  OR (D) IN  COMPLIANCE  WITH CERTAIN OTHER
PROCEDURES  SATISFACTORY  TO THE COMPANY.  DELIVERY OF THIS  CERTIFICATE MAY NOT
CONSTITUTE  "GOOD  DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN
CANADA.  AT ANY TIME THAT THE  COMPANY  IS A  "FOREIGN  ISSUER"  AS  DEFINED  IN
REGULATION S UNDER THE  SECURITIES  ACT, A NEW  CERTIFICATE,  BEARING NO LEGEND,
DELIVERY  OF  WHICH  WILL  CONSTITUTE  "GOOD  DELIVERY"  MAY  BE  OBTAINED  FROM
COMPUTERSHARE  TRUST COMPANY OF CANADA UPON DELIVERY OF THIS  CERTIFICATE  AND A
DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO COMPUTERSHARE TRUST COMPANY
OF  CANADA  AND THE  COMPANY,  TO THE  EFFECT  THAT THE  SALE OF THE  SECURITIES
REPRESENTED  HEREBY IS BEING MADE IN  COMPLIANCE  WITH RULE 904 OF  REGULATION S
UNDER THE SECURITIES ACT.

THE SECURITIES  REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A HOLD PERIOD AND
MAY NOT BE TRADED IN BRITISH COLUMBIA UNTIL JULY 24, 2002 EXCEPT AS PERMITTED BY
THE SECURITIES ACT (BRITISH COLUMBIA) AND RULES MADE THEREUNDER.

                             INFOWAVE SOFTWARE, INC.

                               WARRANT CERTIFICATE

                                                   Date: July 24, 2001

Number of Options: 3,510,455                       Certificate No.: KOLL-1

1. Option to Purchase  Common  Shares.  For value  received by the  undersigned,
Thomas Koll (the "Holder") is entitled to subscribe for and purchase, subject to
the terms  hereof,  one fully paid and  non-assessable  common  share (a "Common
Share") free from any liens, charges or encumbrances of Infowave Software,  Inc.
(the  "Corporation")  at a purchase  price of $1.10 per  Common  Share in lawful
money of Canada at any time up to 4:00 p.m. Vancouver time on or before July 24,
2004 (the "Time of  Expiry"),  for each Warrant  represented  hereby after which
time the Warrants represented hereby shall expire,  unless the time for exercise
of such  Warrants  is  extended,  (the  price at which one  Common  Share of the
Corporation  may be  purchased  hereunder  from time to time  being  hereinafter
referred to as the "Exercise  Price"),  all subject to adjustment as hereinafter
provided, by surrendering this Warrant certificate, together with a subscription
form in the form attached  hereto duly completed and executed,  at the principal
office of the Corporation in the City of Vancouver, British Columbia, Canada.

2. Partial  Exercise.  The Holder may  subscribe  for and purchase less than the
full number of Common Shares of the  Corporation  entitled to be subscribed  for
and  purchased  hereunder.  In the  event  that the  Holder  subscribes  for and
purchases  less than the full number of Common Shares  entitled to be subscribed
for and purchased  under this Warrant  certificate  prior to the Time of Expiry,
the Company shall issue a new Warrant certificate to the Holder in the same form
as this Warrant certificate with appropriate changes.

<PAGE>

                                      -2-

3. Cashless Exercise. The Holder may, at its option,  exchange this Warrant on a
cashless  basis,  in whole or in part into the number of Common  Shares which is
equal to (a) the number of Common Shares specified by the Holder to be exchanged
(the "Total  Number") less (b) the number of Common Shares equal to the quotient
obtained by dividing (i) the product of the Total Number and the Exercise  Price
by (ii) the Current Market Price (as defined below).

4.  Delivery  of Common  Shares.  Within five  business  days of receipt of this
Warrant  certificate  together  with a  subscription  form  duly  completed  and
executed in the form attached hereto,  the Corporation shall deliver or cause to
be  delivered  to  the  Holder  certificates   representing  the  Common  Shares
subscribed for and purchased by the Holder hereunder,  and a replacement Warrant
certificate,  if any,  against payment for such Common Shares  subscribed for by
certified cheque, bank draft or money order in lawful money of Canada payable to
or to the order of the Corporation.

5. No Rights of  Shareholders.  Nothing  contained  in these  Warrants  shall be
construed as  conferring  upon the Holder any right or interest  whatsoever as a
holder of Common Shares of the Corporation or any other right or interest except
as herein expressly provided.

6. Adjustments. In the event the Common Shares as currently constituted shall be
consolidated, subdivided or otherwise altered (other than by increase of capital
but including  the  declartion  or payment of any stock  dividend)  prior to the
subscription by the Holder hereunder, then the number of Common Shares which the
Holder is entitled  to  subscribe  for and  purchase,  shall be  proportionately
adjusted so that the Holder shall be entitled to receive for the Exercise Price,
the number and class of shares of the capital stock of the Corporation  that the
Holder  would  have been  entitled  to  receive  following  such  consolidation,
subdivision,  or  alteration  had the Holder held the shares at the time of such
consolidation, subdivision or alteration.

7. No Fractional  Common Shares.  The Corporation shall not be required to issue
fractional Common Shares upon the exercise of the Warrants  evidenced hereby. If
any  fractional  interest in a Common Share would,  except for the provisions of
this Section, be deliverable upon the exercise of the Warrants evidenced hereby,
the Corporation shall, in lieu of delivering any certificate for such fractional
interest,  satisfy such fractional interest by paying to the Holder an amount in
lawful  money of Canada  equal  (computed  to the  nearest  cent) to the Current
Market Price of the Common Shares multiplied by such fractional interest.

8.  Definition of "Current  Market  Price".  For the purpose of any  computation
under this Warrant certificate,  the "Current Market Price" at any date shall be
the weighted  average price per share for Common  Shares for the 20  consecutive
trading days before such date on the TSE in the Common Shares (or, if the Common
Shares are not listed on such stock  exchange,  on such other stock  exchange on
which the Common  Shares are listed as may be selected  for such  purpose by the
directors  of the  Corporation  or, if the  Common  Shares are not listed on any
stock exchange, then on the over-the-counter market). The weighted average price
shall be determined by dividing the aggregate sale price of all such shares sold
on the said  exchange or market during the said 20  consecutive  trading days by
the total number of such shares so sold.

9. Legending of Common Shares.

     (a)  The Holder hereby  agrees and consents by  acceptance  hereof that the
          certificate  or  certificates  representing  Common Shares issued upon
          exercise  of the  Warrants  shall  be  impressed  with a  legend  (the
          "Legend")  reciting  that the  transfer  thereof  is  restricted  (the
          "Restricted Period"), substantially in the following forms:

<PAGE>

                                      -3-

          "THE SECURITIES  REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A HOLD
          PERIOD AND MAY NOT BE TRADED IN BRITISH  COLUMBIA  UNTIL  AUGUST  [o],
          2002 EXCEPT AS PERMITTED BY THE SECURITIES ACT (BRITISH  COLUMBIA) AND
          RULES MADE THEREUNDER.".

          "THE  SECURITIES  REPRESENTED  HEREBY AND THE  SECURITIES  ISSUED UPON
          EXERCISE OF THIS  WARRANT  HAVE NOT BEEN  REGISTERED  UNDER THE UNITED
          STATES  SECURITIES ACT OF 1933, AS AMENDED (THE  "SECURITIES  ACT") OR
          UNDER  THE  SECURITIES  LAWS  OF ANY  STATE.  THE  HOLDER  HEREOF,  BY
          PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT
          SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A)
          TO THE COMPANY,  (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE
          903 OR 904 OF REGULATION S UNDER THE  SECURITIES  ACT, (C) PURSUANT TO
          THE EXEMPTION FROM  REGISTRATION  UNDER THE SECURITIES ACT PROVIDED BY
          RULE 144 OR RULE 144A THEREUNDER,  IF AVAILABLE,  OR (D) IN COMPLIANCE
          WITH CERTAIN OTHER PROCEDURES SATISFACTORY TO THE COMPANY. DELIVERY OF
          THIS  CERTIFICATE MAY NOT CONSTITUTE  "GOOD DELIVERY" IN SETTLEMENT OF
          TRANSACTIONS  ON STOCK  EXCHANGES  IN  CANADA.  AT ANY  TIME  THAT THE
          COMPANY IS A "FOREIGN  ISSUER"  AS DEFINED IN  REGULATION  S UNDER THE
          SECURITIES  ACT, A NEW  CERTIFICATE,  BEARING NO LEGEND,  DELIVERY  OF
          WHICH  WILL   CONSTITUTE   "GOOD   DELIVERY"   MAY  BE  OBTAINED  FROM
          COMPUTERSHARE   TRUST   COMPANY  OF  CANADA  UPON   DELIVERY  OF  THIS
          CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO
          COMPUTERSHARE  TRUST COMPANY OF CANADA AND THE COMPANY,  TO THE EFFECT
          THAT THE SALE OF THE  SECURITIES  REPRESENTED  HEREBY IS BEING MADE IN
          COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT."

     (b)  The Holder  acknowledges by acceptance hereof that if any Warrants are
          exercised   during  the   Restricted   Period,   the   certificate  or
          certificates   representing  the  Common  Shares  issuable  upon  such
          exercise  shall also be  impressed  with the  Legend  set forth  above
          unless counsel  reasonably  acceptable to the Corporation  delivers an
          unqualified opinion that such Legend need not be imposed.

10. Governing Law. The Warrants evidenced hereby shall be governed and construed
in accordance with the laws of the Province of British Columbia.

11. Modification  of  Terms  for  Certain  Purposes.   From  time  to  time  the
Corporation  may, and it will,  when so directed by these  presents,  modify the
terms  and  conditions  of  this  Warrant,  for  any  one or  more or all of the
following purposes:

     (a)  the  correction  or   rectification   of  any   ambiguous,   defective
          provisions, errors or omissions herein; and

     (b)  to evidence any  succession of any  corporation  and the assumption by
          any  successor of the  covenants of the  Corporation  contained in the
          Warrants.

<PAGE>

                                      -4-

     IN WITNESS WHEREOF the  Corporation has caused this Warrant  certificate to
be executed by its duly authorized officers.

                                   INFOWAVE SOFTWARE, INC.

                                   By:
                                        ---------------------------------------
                                        Authorized Signatory

<PAGE>

                                SUBSCRIPTION FORM

TO: INFOWAVE SOFTWARE, INC.

     The  undersigned   holder  of  the  attached  Warrant   certificate  hereby
subscribes for common shares ("Common  Shares") of Infowave  Software,  Inc. (or
such number of common shares and/or other  securities  and/or  property to which
such subscription  entitles the Holder in lieu thereof or addition thereto under
the provisions of the Warrants) pursuant to the terms of the Warrant certificate
at the Exercise Price (as defined in the Warrant  certificate)  per Common Share
on the terms specified in the Warrant  certificate and encloses herewith cash or
a bank draft,  certified  cheque or money order payable to the order of Infowave
Software, Inc. in payment therefor.

     The undersigned irrevocably hereby directs that Common Shares be issued and
delivered as follows:

Name in Full                 Address                     Number of Common Shares
----------------------       ----------------------      ----------------------
----------------------       ----------------------      ----------------------

     DATED this --- day -----------------of , 200--.

                                        ---------------------------------------
                                        Name of Holder

                                        ---------------------------------------
                                        Signature

                                        ---------------------------------------
                                        Name
                                        ---------------------------------------
                                        Title
Instructions

1.   The  registered  holder may exercise its right to receive  Common Shares by
     completing this form and  surrendering  this form, the Warrant  certificate
     representing the Warrants being exercised and payment of the Exercise Price
     as specified above to the Corporation at its principal office in Vancouver,
     British  Columbia.  Certificates  for Common  Shares will be  delivered  or
     mailed within five business days after the exercise of the Warrants.

2.   If the Subscription Form indicates that Common Shares are to be issued to a
     person or persons other than the registered holder of the Certificate,  the
     signature of such holder of the Subscription  Form must be guaranteed by an
     authorized  officer  of  a  chartered  bank,  trust  company  or  medallion
     guaranteed by a member of a recognized medallion guarantee program.

3.   If the Subscription Form is signed by a trustee,  executor,  administrator,
     curator, guardian,  attorney, officer of a corporation or any person acting
     in  a  judiciary  or  representative  capacity,  the  certificate  must  be
     accompanied  by  evidence  of  authority  to  sign   satisfactory   to  the
     Corporation.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00031-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00031-of-00352.parquet"}]]