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                                                             Exhibit 4(ii)(a)(7)



                             PREFERRED SHIP MORTGAGE


                     ON 100.000% OF THE VESSEL "DELTA QUEEN"
                             OFFICIAL NUMBER 225875


                                   EXECUTED BY
                         GREAT RIVER CRUISE LINE, L.L.C.


                                   IN FAVOR OF
                            THE CHASE MANHATTAN BANK,
                   AS AGENT AND TRUSTEE FOR THE BENEFIT OF THE
                    FINANCIAL INSTITUTIONS DESIGNATED IN THE
                                 TRUST INDENTURE
                          DATED AS OF FEBRUARY 25, 1999

                   EXECUTED ON THE 25TH DAY OF FEBRUARY, 1999


                    OBLIGATIONS SECURED, DIRECT OR CONTINGENT
             (EXCLUSIVE OF INTEREST, EXPENSES AND FEES) PURSUANT TO
           46 U.S.C.A. SECTION 31321(b)(3) AND 46 CFR SECTION 67.235,
                           MAXIMUM PRINCIPAL BALANCE:
                                   $70,000,000


VESSEL NAME:                  DELTA QUEEN
HOME PORT:                    NEW ORLEANS, LOUISIANA
GROSS TONNAGE:                3,360 TONS
NET TONNAGE:                  1,160 TONS
YEAR BUILD:                   1926


OWNER AND MORTGAGOR:                  MORTGAGEE:

GREAT RIVER CRUISE LINE, L.L.C.       THE CHASE MANHATTAN BANK,
ROBIN STREET WHARF                       AS AGENT AND TRUSTEE FOR THE BENEFIT OF
1380 PORT OF NEW ORLEANS PLACE           THE FINANCIAL INSTITUTIONS DESIGNATED
NEW ORLEANS, LOUISIANA 70130-1890        HEREIN (TIN: 13-499-4650)
                                      270 PARK AVENUE
                                      NEW YORK, NEW YORK 10017


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                                                                 EXECUTION COPY

PREFERRED SHIP MORTGAGE                                UNITED STATES OF AMERICA

BY:                                                           STATE OF ILLINOIS

GREAT RIVER CRUISE LINE, L.L.C.                                  COUNTY OF COOK

IN FAVOR OF:

THE CHASE MANHATTAN BANK, A NEW YORK BANKING
CORPORATION, AS AGENT AND TRUSTEE (IN SUCH
CAPACITY, "AGENT") FOR ITSELF AND THE
FINANCIAL INSTITUTIONS DESIGNATED IN THE
TRUST INDENTURE DATED AS OF FEBRUARY 25,
1999


BE IT KNOWN, that on the 25th day of February, 1999, in the presence of the
undersigned competent witnesses;

PERSONALLY CAME AND APPEARED:

    GREAT RIVER CRUISE LINE, L.L.C. , a Delaware limited liability company (the
    "Owner") whose Louisiana mailing address is Robin Street Wharf, 1380 Port of
    New Orleans Place, New Orleans, Louisiana 70130, whose taxpayer
    identification number is 72-1353488, successor by merger to GREAT RIVER
    CRUISE LINE, INC., a Delaware corporation, as evidenced by Certificate of
    Merger filed with the Delaware Secretary of State on December 27, 1996, but
    effective as of December 31, 1996, represented herein by and through The
    Delta Queen Steamboat Co., a Delaware corporation, a managing member, itself
    appearing through Jordan Allen, its executive vice president and duly
    authorized representative pursuant to a resolution of its board of
    directors, a certified copy of which is attached hereto, and DQSB II, Inc.,
    a Delaware corporation, a managing member, itself appearing through Jordan
    Allen, its executive vice president and duly authorized representative
    pursuant to a resolution of its board of directors, a certified copy of
    which is attached hereto; which managing members are authorized under the
    terms of Owner's operating agreement and a unanimous consent resolution of
    its members, a certified copy of which is attached hereto;

WHO DECLARED THAT:


                             PRELIMINARY STATEMENT:

    A. The Owner is the sole owner of the whole of the Vessel "DELTA QUEEN", of
    3,360 gross tons, 1,160 net tons, official number 225875, documented in the
    name of the Owner under and


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    pursuant to the laws of the United States of America, having its home port
    at New Orleans, Louisiana (hereinafter called the "Vessel").

    B. Pursuant to the terms of that certain Credit Agreement, dated as of
    February 25, 1999 (as amended, restated, supplemented or otherwise modified
    from time to time, the "Credit Agreement"), by and among THE DELTA QUEEN
    STEAMBOAT CO. ("Borrower"), the owner of a 99% direct interest and a 1%
    indirect beneficial interest in the Owner, THE FINANCIAL INSTITUTIONS LISTED
    ON THE SIGNATURE PAGES THEREOF and each other financial institution which
    from time to time becomes a party thereto in accordance with Section
    11.02(a) (together with their respective successors and assigns,
    individually, a "Lender" and, collectively, the "Lenders") and the Agent (a
    copy of which is attached hereto as Exhibit A (without exhibits and
    schedules) and incorporated by reference herein, with the same force and
    effect as if fully set forth to herein), the Lenders have agreed to provide
    the Borrower (subject to the conditions set forth in the Credit Agreement)
    Revolving Loans with the maximum amount that may be outstanding (exclusive
    of interest, expenses and fees) at any one time being the aggregate amount
    of Seventy Million Dollars ($70,000,000), which the Borrower has agreed to
    repay pursuant to the terms stated therein. Capitalized terms used herein
    without definition and otherwise defined in the Credit Agreement shall have
    the same meanings used herein as therein.

    C. The Revolving Loans are evidenced by certain Notes of the Borrower dated
    the 25th day of February, 1999, due and payable in the amounts and upon the
    terms and conditions therein recited, to the order of the payee therein
    named, with interest as set forth in or by reference in said Notes, a form
    of which is attached hereto and incorporated by reference herein as Exhibit
    B, with the same force and effect as if fully set forth herein.

    D. The Owner has executed a Subsidiary Guaranty ("Guaranty") dated February
    25, 1999 pursuant to which it has guaranteed payment and performance of the
    Obligations, a form of which Guaranty is attached hereto and incorporated
    herein by reference as Exhibit C, with the same force and effect as if fully
    set forth herein.

    E. The Owner, in order to secure the payment of the Obligations, and such
    additional sums as the Owner may be obligated to pay pursuant to the
    Guaranty and under the covenants, terms and conditions in this Preferred
    Ship Mortgage (this "Mortgage"), and in order to secure the performance and
    observance of and compliance with all agreements, covenants, terms and
    conditions in the Guaranty and this Mortgage, has duly authorized the
    execution and delivery of this Mortgage under and pursuant to Title 46
    U.S.C.A. Section 31301 et seq in favor of The Chase Manhattan Bank, as Agent
    and Trustee for the benefit of the Lenders (the "Mortgage") pursuant to a
    Trust Indenture dated as of February 25, 1999 (the "Indenture").

        NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING, THIS
MORTGAGE WITNESSETH:

    That in consideration of the premises and of the sums loaned as above
recited, and of other good and valuable consideration, the receipt whereof is
hereby acknowledged, and in order to secure the payment of the Obligations, and
such additional sums as the Owner may be obligated to pay under the agreements,
covenants, terms and conditions in the Guaranty and this Mortgage, and in order
to


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secure the performance and observance of and compliance with all the agreements,
covenants, terms and conditions in the Credit Agreement, the Notes, the Guaranty
and this Mortgage, the Owner has granted, conveyed, mortgaged, pledged, set over
and confirmed and does by these presents grant, convey, mortgage, pledge, set
over and confirm unto the Mortgagee, its successors and assigns, the whole of
the Vessel, together with all engines, machinery, masts, boats, anchors, cables,
chains, rigging, tackle, apparel, furniture, spare parts and gear and all other
appurtenances thereunto appertaining or belonging, whether now owned or
hereafter acquired, whether on board or not, and any and all additions,
improvements and replacements hereafter made in or to the Vessel, or any part
thereof, or in or to the equipment and appurtenances aforesaid (said Vessel and
all items thereof above enumerated being included in the term "Vessel" as used
in this Mortgage);

    TO HAVE AND TO HOLD all and singular the above mortgaged and described
Vessel unto the Mortgagee, and its successors and assigns, forever; upon the
terms herein set forth for the enforcement of the payment of the Obligations in
accordance with the terms of the Credit Agreement and the Notes and to secure
the performance and observance of, and compliance with, all agreements,
covenants, terms and conditions in the Guaranty and this Mortgage;

    PROVIDED ONLY, and the condition of these presents is such, that if the
Owner and the Borrower, or their respective successors or assigns, shall fully
discharge the Obligations, including, without limitation, the indefeasible
payment and satisfaction in full of all of the indebtedness evidence by the
Notes and all interest, expenses and fees thereon, and all other such sums as
may hereafter become secured by this Mortgage and shall perform, observe and
comply with all agreements, covenants, terms and conditions in this Mortgage,
expressed or implied, to be performed, observed or complied with by and on the
part of the Owner and the Borrower, then these presents and the rights hereunder
shall cease, determine and be void, and otherwise shall be and remain in full
force and effect.

    IT IS HEREBY COVENANTED, DECLARED AND AGREED that the Vessel is to be held
subject to the further covenants, conditions, provisions, terms and uses
hereinafter set forth:


                                    ARTICLE I
                             COVENANTS OF THE OWNER

    The Owner represents to, and covenants and agrees with, the Mortgagee as
follows:

    SECTION 1.1. The Owner will observe, perform and comply with all the
covenants, terms and conditions herein and in the Guaranty, expressed or
implied, on its part to be observed, performed or complied with in accordance
with the terms thereof.

    SECTION 1.2. The Owner was duly organized and is now validly existing as a
limited liability company under the laws of the State of Delaware with a
principal place of business at Robin Street Wharf, 1380 Port of New Orleans
Place, New Orleans, Louisiana 70130-1890. The Owner is now, and shall so remain
during the life of this Mortgage, a citizen of the United States as defined in
Section 2 of the Shipping Act of 1916, as amended, for the purpose of operating
a vessel in the



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coastwise trade in accordance with the provisions of said Section 2. The Owner
is duly authorized to mortgage the Vessel; all action of the Owner necessary for
the execution and delivery of the Guaranty and this Mortgage has been duly and
effectively taken; and the Guaranty and this Mortgage in the hands of the holder
thereof are the valid and enforceable obligations of the Owner in accordance
with their terms.

    SECTION 1.3. The Owner lawfully owns and is lawfully possessed of the
Vessel, free from any lien, encumbrance, security interest or charge of any kind
(except liens arising out of trade debt incurred in the ordinary course of
business none of which shall be (a) outstanding longer than sixty (60) days and
(b) greater than $250,000 in the aggregate, unless covered by a bond, or a
letter of undertaking issued by an insurance underwriter or its authorized
agent, or unless an adequate funded reserve is maintained, none of which shall
be permitted to have priority over this Mortgage), and the Owner warrants, and
will defend the title and possession thereto and to every part thereof for the
benefit of the Mortgagee against the claims and demands of all Persons
whosoever. The Vessel is tight, staunch and strong and well and sufficiently
tackled, appareled, furnished and equipped and in all respects seaworthy.

    SECTION 1.4. The Owner will comply with and satisfy all the provisions of
Title 46 U.S.C.A. Section 31301 et seq. in order to establish and maintain this
Mortgage as a first preferred mortgage thereunder upon the Vessel.

     SECTION 1.5. The Owner will at all times operate the Vessel as a United
States inland waterway vessel, engaged exclusively in the passenger cruise trade
in the Mississippi, Missouri, Tennessee, Cumberland and Ohio Rivers, the
Intercoastal Waterway, their tributaries and connecting waterways, and in
compliance, in all material respects with the requirements of 46 U.S.C.A.
Section 3503 and all orders and regulations promulgated thereunder
(collectively, the "Exemptive Order"); and pursuant to the provisions of such
Exemptive Order, the Vessel is in compliance with all applicable governmental
requirements for domestic transportation of passengers for hire. The Owner will
neither cause nor permit the Vessel to be operated in any manner contrary to the
applicable law or to carry any cargo that will expose the Vessel to penalty,
forfeiture or capture and will not do or suffer or permit anything to be done
which can or might adversely affect the documentation of the Vessel under the
laws and regulations of the United States of America and will at all times keep
the Vessel duly documented thereunder.

    SECTION 1.6. The Owner will pay and discharge or cause to be paid and
discharged, when due and payable from time to time, all taxes, assessments,
governmental charges, fines and penalties imposed on the Vessel or any income
therefrom and all lawful claims which if unpaid might become a lien or charge
upon the Vessel, except that it shall be entitled to contest any such taxes,
assessments, governmental charges, fines and penalties in good faith, provided
it obtains a bond, or an insurance underwriter's letter of undertaking or sets
aside on its books adequate reserves with respect thereto.

    SECTION 1.7. Except as otherwise provided in Section 1.3 hereof, neither the
Owner, the Master of the Vessel, any charterer nor any other Person has or shall
have any right, power or authority to suffer to continue, create, incur or
permit to be placed or imposed upon the Vessel, its


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freights, profits or hire, any liens, encumbrance, security interest or charge
whatsoever other than liens for crew's wages and salvage and the lien of this
Mortgage.

    SECTION 1.8. The Owner will carry or cause to be carried a properly
certified copy of this Mortgage on board the Vessel with its documents and will
cause such certified copy and the documents of the Vessel to be exhibited to any
and all Persons having business with the Vessel which might give rise to a
maritime lien thereon or to any sale, conveyance, mortgage or lease thereof, and
to any representative of the Mortgagee; and will cause to be placed and kept
prominently displayed in the chart room and in the Master's cabin of the Vessel
a notice, framed under glass, printed in plain type of such size that the
paragraph of reading matter shall cover a space not less than four inches wide
and six inches long, reading as follows:

        NOTICE OF PREFERRED SHIP MORTGAGE

        This Vessel is owned by Great River Cruise Line, L.L.C. and is subject
        to a Preferred Ship Mortgage, dated February 25, 1999, in favor of The
        Chase Manhattan Bank, as Agent and Trustee pursuant to a Trust Indenture
        dated as of February 25, 1999 among the aforesaid Agent and Trustee, as
        Mortgagee, and the financial institutions designated therein, under
        authority of Title 46 U.S.C.A. Section 31301 et seq. Under the terms of
        said Mortgage neither the Owner, any charterer, the Master, nor any
        other Person has any right, power or authority to create, incur or
        permit to be placed or imposed upon this Vessel, its freights, profits
        or hire, any lien whatsoever, other than the lien of, and liens
        permitted by, said Mortgage.

    SECTION 1.9. If a notice of claim of lien be recorded against the Vessel, or
a libel be filed against the Vessel and the Vessel be attached, levied upon or
taken into custody as a result thereof, or if the Vessel be otherwise attached,
levied upon or taken into custody by virtue of any proceedings in any court or
tribunal, the Owner will promptly notify the Mortgagee thereof by telecopy or
telex, confirmed by letter; and within thirty (30) days of such recording,
filing, attachment, levy, or taking, will cause a certificate of discharge to be
recorded in the case of any such recording of notice of claim or will cause the
Vessel to be released in the case of any such attachment, levy or other taking
into custody and will cause all liens thereon relating to such recording, libel,
attachment, levy or other taking into custody to be discharged and will promptly
notify the Mortgagee thereof.

    SECTION 1.10. The Owner will at all times and without cost and expense to
the Mortgagee maintain and preserve or cause to be maintained and preserved the
Vessel in good running order and repair, and will cause all equipment and parts
thereof which become worn out, broken or damaged to be repaired or replaced and
will keep the Vessel, or cause it to be kept, in such condition that is in the
highest state of maintenance for vessels of like age and type. The Vessel shall,
and the Owner covenants that it will, at all times comply with all applicable
United States law, treaties and conventions, and rules and regulations issued
thereunder, and shall have on board, when required thereby, valid certificates
showing compliance therewith. The Owner will not make, or permit to be made, any
substantial change in the structure, type or speed of the Vessel or change in
its rig without first receiving the written approval thereof by the Mortgagee.


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    SECTION 1.11. The Owner will at all reasonable times and upon reasonable
prior notice afford the Mortgagee or its authorized representatives full and
complete access to the Vessel where located for the purpose of inspecting the
same and its cargoes and papers and, at the request of the Mortgagee, will
deliver for inspection copies of any and all contracts and documents relating to
the Vessel, whether on board or not.

    SECTION 1.12. The Owner will not sell, mortgage, transfer or demise charter
the Vessel without the prior written consent of the Mortgagee, and any such
written consent to any one sale, mortgage, transfer or demise charter shall not
be construed to be a waiver of this provision with respect to any subsequent
proposed sale, mortgage, transfer or demise charter.

    SECTION 1.13. At all times while and so long as this Mortgage shall be
outstanding:

        (a) The Owner will, at its own expense insure the Vessel and keep the
    same insured (in lawful money of the United States) for hull and machinery,
    general mortgagee's interest, and against protection and indemnity risks,
    generally insured against by prudent shipowners in such form, and with
    reputable and financially sound insurance companies, underwriters, funds,
    mutual insurance associations or clubs.

        (b) Until otherwise required by the Mortgagee, the protection and
    indemnity, hull and machinery and mortgagee's interest insurance required by
    this Section 13 may be on the American Institute forms current at the time
    such insurance takes effect with deductibles or franchises no higher than
    the following:

       Hull and Machinery: All claims,
       each accident or occurrence....................................$750,000

    Protection and indemnity insurance in respect to the Vessel shall be by
    unlimited entry in a British, Scandinavian or Bermuda mutual insurance
    association or placed with underwriters acceptable to the Mortgagee and
    shall include pollution liabilities (including coverage for third party
    claims, statutory and governmental cleanup liabilities, penalties and fines
    in the minimum amount of $500,000,000 for any one occurrence) with
    deductibles or franchises no higher than $200,000.

        For the purposes of insurance against total loss, the Vessel shall be
    insured for and valued at an amount at least equal to the full commercial
    value of the Vessel. For purposes of the broker's reports and opinions
    referred to above, the broker giving the same may rely on a statement as to
    the full commercial value of the Vessel and the gross tonnage of the Vessel
    as furnished annually by the Owner to such broker and the Mortgagee at the
    time insurance is negotiated with underwriters.


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        (c) All insurance other than protection and indemnity insurance shall be
    taken out in the names of the Owner and the Mortgagee as their respective
    interests may appear; the policies or certificates shall provide that there
    shall be no recourse against the Mortgagee for payment of premiums; and all
    insurance shall provide for at least ten (10) days' prior notice to be given
    to the Mortgagee by the underwriters in event of cancellation or any
    material change in coverage. Protection and indemnity insurance cover notes
    shall indicate the interest of the Mortgagee.

        (d) Subject to the terms of the Credit Agreement, all hull and machinery
    and mortgagee's interest insurance policies or certificates shall provide
    that losses thereunder shall be payable to the Mortgagee, and all insurance
    moneys received by the Mortgagee shall be distributed as provided below in
    this Section 1.13. However, the policies or certificates may provide that
    unless the underwriters shall have been otherwise instructed by notice in
    writing from the Mortgagee that an Event of Default shall have occurred and
    is continuing:

               (i) any loss under any insurance on the Vessel with respect to
        protection and indemnity or collision liability risks may be paid
        directly to the Person to whom any liability covered by such insurance
        has been incurred, or to the Owner to reimburse it for any loss, damage
        or expense incurred by it and covered by such insurance, provided that
        in the latter event the underwriter shall have first received evidence
        that the liability insured against has been discharged; and

               (ii) in the case of any loss (other than a loss covered by
        subparagraph (i) above in this paragraph (d) or by paragraph (e) of this
        Section 1.13) under any insurance with respect to the Vessel involving
        any damage to the Vessel or liability of the Vessel, the underwriters
        may pay directly for the repair, salvage, liability or other charges
        involved, or, if the Owner shall have first fully repaired the damage
        and paid the cost thereof or discharged the liability or paid other
        charges and the underwriters shall have first received evidence thereof,
        may pay the Owner as reimbursement therefor; provided, however, that (a)
        if such damage involves a loss in excess of Five Million Dollars
        ($5,000,000), the underwriters shall not make such payment without first
        obtaining the written consent of the Mortgagee (which consent shall not
        be unreasonably withheld, conditioned or delayed), and (b) no payment
        shall be made to the Owner if there shall have occurred an Event of
        Default. Any loss which is paid to the Mortgagee but which should have
        been paid, in accordance with the provisions of this paragraph, directly
        to the Owner, shall be paid by the Mortgagee to or as directed by the
        Owner, but only if there shall not have occurred any Event of Default.

        (e) Subject to the terms of the Credit Agreement, in the event of an
    actual or constructive total loss or an agreed or a compromised constructive
    total loss of or requisition of title to or seizure or forfeiture of the
    Vessel, all amounts payable therefor shall be paid to the Mortgagee and
    shall be applied: first, to the payment of the expenses of the Mortgagee in
    collecting such payments; second, to the payment of the then accrued but
    unpaid interest on the Notes; third, to the payment of the unpaid principal
    indebtedness evidenced by the Notes; fourth, to the payment of such
    additional sums as the Owner may be obligated to pay the Mortgagee or the
    Lenders under the terms of this Mortgage, the Guaranty, the Notes and the
    Credit Agreement; and any


                                     Page 7
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    funds remaining after such payments shall be paid to the Owner, its
    successors in interest or its assigns or to whomsoever may be entitled
    thereto.

        (f) The Owner shall deliver to the Mortgagee the originals of all cover
    notes, binders and certificates of entry in protection and indemnity
    associations, and all endorsements and riders amendatory thereof in respect
    of insurance maintained under this Mortgage.

        (g) The Owner agrees that it will not do any act, or voluntarily suffer
    or permit any act to be done, whereby any insurance required hereunder shall
    or may be suspended, impaired or defeated and will not suffer or permit the
    Vessel to engage in any voyage or to carry any cargo not permitted under the
    policies of insurance in effect, without first covering the Vessel with
    insurance, satisfactory in all respects, including the amount thereof, to
    the Mortgagee in the exercise of its reasonable discretion, for such voyage
    or the carriage of such cargo.

        (h) In the event that any claim or lien is asserted against the Vessel
    for loss, damage or expense which is covered by insurance hereunder, and it
    is necessary for the Owner to obtain a bond or supply other security to
    prevent the arrest of the Vessel or to release the Vessel from arrest on
    account of such claim or lien, the Mortgagee may, in its sole discretion,
    and upon notice to the Owner, assign to any Person, firm or corporation
    executing a surety or guarantee bond or other agreement to save or release
    the Vessel from such arrest, all right, title and interest of the Mortgagee
    in and to said insurance covering said loss, damage or expense, as
    collateral security to indemnify such Person, firm or corporation against
    liability under said bond or other agreement.

    SECTION 1.14. The Owner will, within five (5) days following written demand
therefor, pay or reimburse the Mortgagee, with interest at the Default Rate,
for: (i) any and all expenses or expenditures which the Mortgagee may from time
to time incur or make in connection with insurance premiums, discharge or
purchase of liens, taxes, dues, assessments, governmental charges, fines and
penalties, repairs, attorneys' fees and any other expenses or expenditures which
the Owner is obligated herein to incur or make, but fails to incur or make; and
(ii) all costs, fees and expenses suffered, incurred or made by the Mortgagee in
exercising, protecting or pursuing its rights or remedies under this Mortgage
(including, but not limited to, expenses of any sales or taking of the Vessel,
attorneys' fees and court costs). Such obligation of the Owner to reimburse the
Mortgagee shall be an additional indebtedness due from the Owner, secured by
this Mortgage, and shall be payable by the Owner on demand. The Mortgagee,
though privileged so to do, shall be under no obligation to the Owner or to any
other Person to incur or make any such expenses or expenditures, nor shall the
incurring or making thereof relieve the Owner of any default in that respect.


                                   ARTICLE II
                         EVENTS OF DEFAULT AND REMEDIES

    SECTION 2.1. If any Event of Default shall have occurred and be continuing,
then and in each and every such case the Mortgagee shall have the right to:

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        (a) Exercise all of the rights and remedies in foreclosure and otherwise
    given to mortgagees by the provisions of Title 46 U.S.C.A. Section 31301 et
    seq. and all acts amendatory thereof and supplemental thereto, or the
    applicable law of any other jurisdiction;

        (b) Bring suit at law, in equity or in admiralty to recover judgment for
    any and all outstanding Obligations or any sum secured by this Mortgage, or
    otherwise, and collect the same out of any and all property of the Owner
    whether covered by this Mortgage or otherwise;

        (c) Take and enter into possession of the Vessel, at any time, wherever
    the same may be, without legal process and without being responsible for
    loss or damage; and the Owner or other Person in possession forthwith upon
    demand of the Mortgagee shall surrender to the Mortgagee possession of the
    Vessel, and the Mortgagee may, without being responsible for loss or damage,
    hold, lay up, lease, charter, operate or otherwise use the Vessel, for such
    time and upon such terms as it may deem to be for its best advantage, and
    demand, collect and retain, compromise and sue for all hire, freights,
    earnings, issues, revenues, income, profits, return premiums, salvage awards
    or recoveries, recoveries in general average, and all other sums due or to
    become due in respect of the Vessel, including any amounts payable in
    respect of any insurance in connection with the Vessel, from any Person
    whomsoever, accounting only for the net profits, if any, arising from such
    use of the Vessel and charging upon all receipts from the use of the Vessel
    or from the sale thereof by court proceedings or pursuant to subparagraph
    (4) next following, all costs, expenses, charges, damages or losses by
    reason of such use; and if at any time the Mortgagee shall avail itself of
    the right herein given to take the Vessel, the Mortgagee shall have the
    right to dock the Vessel for a reasonable time at any dock, pier or other
    premises of the Owner without charge, or to dock it at any other place at
    the cost and expense of the Owner;

        (d) Take and enter into possession of the Vessel, at any time, wherever
    the same may be, without legal process, and if it seems desirable to the
    Mortgagee and without being responsible for loss or damage, sell the Vessel
    at public or private sale, at any place and at such time as the Mortgagee
    may deem advisable, free from any claim by the Owner in admiralty, in
    equity, at law or by statute. In the case of a public sale, the Mortgagee
    shall give notice of the time and place of the sale with a general
    description of the property in the following manner:

               (i) By publishing such notice for ten (10) consecutive days in a
        daily newspaper of general circulation such as The Times Picayune,
        published in New Orleans, Louisiana;

               (ii) If the place of sale should not be in New Orleans,
        Louisiana, then also by publication of a similar notice in a daily
        newspaper, if any, published at the place of sale; and

               (iii) By mailing a similar notice to the Owner at least fourteen
        (14) days prior to the date fixed for such sale.

        In the case of a private sale no newspaper publication of notice shall
    be required, but the Mortgagee shall mail written notice of sale to the
    Owner at least fourteen (14) days prior to the date fixed for entering into
    the contract of sale. The Mortgagee may, without notice or


                                     Page 9
<PAGE>   11
    publication, adjourn any public or private sale or cause such sale to be
    adjourned from time to time by announcement at the time and place fixed for
    sale or for entering into a contract of sale, and such sale or contract of
    sale may, without further notice, be made at the time and place to which the
    sale or contract of sale was so adjourned. The Mortgagee shall not be
    obligated to make any sale of the Vessel if it shall determine not to do so,
    regardless of the fact that notice of sale may have been given. Any sale may
    be conducted without bringing the Vessel to the place designated for such
    sale and in such manner as the Mortgagee may deem to be for the best
    advantage of the Mortgagee.

        (e) Instruct the Owner to terminate any existing management agreement
    affecting the Vessel, and the Owner shall, upon the giving of such
    instructions by the Mortgagee, immediately terminate any such management
    agreement and shall appoint other managers satisfactory to the Mortgagee and
    upon terms and conditions satisfactory to the Mortgagee.

        (f) Instruct the Owner to make application, if relevant, to the United
    States Maritime Administration ("MARAD") for permission of MARAD to sell the
    Vessel for purposes of foreign scrapping of the Vessel, and the Owner shall,
    upon the giving of such instructions by the Mortgagee, immediately apply for
    permission of MARAD for such foreign scrapping.

    SECTION 2.2. Any sale of the Vessel made in pursuant of this Mortgage,
whether by exercise of the power of sale granted herein or by virtue of any
judicial proceedings, shall operate to divest all right, title and interest of
any nature whatsoever of the Owner therein and thereto, and shall bar the Owner,
its successors and assigns, and all Persons claiming by, through or under them.
No purchaser shall be bound to inquire whether notice has been given, or whether
any default has occurred, or as to the propriety of the sale, or as to the
application of the proceeds thereof. In the case of any such sale, any purchaser
who is the holder of any of the Notes shall be entitled, for the purpose of
making settlement or payment for the property purchased, to apply the balance
due under such Note or a part thereof as part or all of the purchase price to
the extent of the amount remaining due and unpaid thereon. At any such sale, the
holder of a Note may bid for and purchase such property and upon compliance with
the terms of sale may hold, retain and dispose of such property without further
accountability therefor.

    SECTION 2.3. The Mortgagee is hereby appointed attorney-in-fact of the
Owner, with full power of substitution, upon the occurrence of any Event of
Default, to make application, if relevant, to MARAD for permission of MARAD to
sell the Vessel for purposes of foreign scrapping of the Vessel.

    SECTION 2.4. The Mortgagee is hereby appointed attorney-in-fact of the
Owner, with full power of substitution, upon the occurrence of any Event of
Default, to execute and deliver to any purchaser upon any sale of the Vessel
made in pursuance of this Mortgage, whether by exercise of the power of sale
granted herein or by virtue of any judicial proceedings, and is hereby vested
with full power and authority to make, in the name and on behalf of the Owner, a
good conveyance of the title to the Vessel when so sold. In the event of any
sale of the Vessel by exercise of any power herein contained, the Owner will, if
and when required by the Mortgagee, execute such form of conveyance of the
Vessel as the Mortgagee may direct or approve.


                                    Page 10
<PAGE>   12
    SECTION 2.5. The Mortgagee is hereby irrevocably appointed attorney-in-fact
of the Owner, with full power of substitution, upon the occurrence of any Event
of Default, in the name of the Owner to demand, collect, receive, compromise and
sue for, so far as may be permitted by law, all freights, hire, earnings,
issues, revenues, income and profits of the Vessel, including all amounts due
from underwriters under any insurance thereon as payment of losses or as return
premiums or otherwise, salvage awards and recoveries, recoveries in general
average or otherwise, and all other sums due or to become due at the time of the
occurrence of any Event of Default in respect of the Vessel, or in respect of
any insurance thereon, from any Person whomsoever, and to make, give and execute
in the name of the Owner acquittance, receipts, releases or other discharges for
the same, whether under seal or otherwise, to take possession of, sell or
otherwise dispose of or manage or employ the Vessel, to execute and deliver
charters, and a bill of sale with respect to the Vessel and to endorse and
accept in the name of the Owner all checks, notes, drafts, warrants, agreements
and other instruments in writing with respect to the foregoing.

    SECTION 2.6. Whenever any right to enter and take possession of the Vessel
accrues to the Mortgagee, it may require the Owner to deliver and the Owner
shall on demand, at its own cost and expense, deliver the Vessel to the
Mortgagee. If any legal proceedings shall be taken to enforce any right under
this Mortgage, the Mortgagee shall be entitled as a matter of right to the
appointment of a receiver of the Vessel and the freights, hire, earnings,
issues, revenues and profits due or to become due and arising from the operation
thereof.

    SECTION 2.7. The Owner authorizes and empowers the Mortgagee or its
appointees or any of them to appear in the name of the Owner, its successors and
assigns, in any court of any country or nation of the world where a suit is
pending against the Vessel because of or on account of any alleged lien against
the Vessel from which the Vessel has not been released and to take such
proceedings as to them may seem proper toward the defense of such suit, and the
purchase or discharge of such lien, and all expenditures made or incurred by
them for the purpose of such defense or purchase or discharge shall be a debt
due from the Owner, its successors and assigns, to the Mortgagee and shall be
secured by the lien of this Mortgage.

    SECTION 2.8. Each and every power and remedy herein given to the Mortgagee
shall be cumulative and shall be in addition to every other power and remedy
herein given or now or hereafter existing at law, in equity, in admiralty or by
statute, and each and every power and remedy, whether herein given or otherwise
existing, may be exercised from time to time and as often and in such order as
may be deemed expedient by the Mortgagee, and the exercise or the beginning of
the exercise of any power or remedy shall not be construed to be a waiver of the
right to exercise at the same time or thereafter any other consistent or
inconsistent power or remedy. No delay or omission by the Mortgagee in the
exercise of any right or power or in the prosecution of any remedy accruing upon
any Event of Default shall impair any such right, power or remedy or be
construed to be a waiver of any such Event of Default or to be an acquiescence
therein; nor shall the acceptance by the Mortgagee of any security or of any
payment maturing after any Event of Default or of any payment on account of any
past default be construed to be a waiver of any right arising out of any future
Event of Default or of any past Event of Default not completely cured thereby.


                                    Page 11
<PAGE>   13
    SECTION 2.9. If at any time after the occurrence of an Event of Default and
prior to the actual sale of the Vessel by the Mortgagee or prior to commencement
of any foreclosure proceedings, the Owner offers to cure completely all events
of default and to pay all expenses and advances to the Mortgagee consequent on
such Event of Default, with interest at the Default Rate, then the Mortgagee
may, if it in its sole discretion so elects, accept such offer and payment and
restore the Owner to its former position, but such action shall not affect any
subsequent Event of Default or impair any rights consequent thereon.

    SECTION 2.10. In case the Mortgagee shall have proceeded to enforce any
right, power or remedy under this Mortgage by foreclosure, entry or otherwise,
and such proceedings shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Mortgagee, then, and in every such
case, the Owner and the Mortgagee shall be restored to their former positions
and rights hereunder with respect to the property subject or intended to be
subject to this Mortgage, and all rights, remedies and powers of the Mortgagee
shall continue as if no such proceedings had been taken.

    SECTION 2.11. In the event of any taking of the Vessel by the Mortgagee or
any sale of the Vessel under any of the powers herein specified, the proceeds of
any such sale and the net earnings of any charter operation or other use of the
Vessel by the Mortgagee under any such power, together with any and all moneys
received by the Mortgagee pursuant to or under the terms of this Mortgage or in
any proceedings hereunder or with respect hereto, the application of which has
not elsewhere herein been specifically provided for, shall be applied as
follows:

    FIRST: To the payment of all expenses and charges, including the expenses of
    any sale, the expenses of any taking, attorneys' and paralegals' fees, court
    costs, and any other expenses or advances made or incurred by the Mortgagee
    or any of the Lenders in the protection of their rights or the pursuance of
    their remedies hereunder or under the Credit Agreement;

    SECOND: To the payment of the unpaid interest on the Notes;

    THIRD: To the payment of principal of the Notes then due, by acceleration or
    otherwise;

    FOURTH: To the payment of any additional unpaid Obligations under the Credit
    Agreement;

    FIFTH: To the payment of such additional sums as the Owner may be obligated
    to pay the Mortgagee or the Lenders under the terms of this Mortgage; and

    SIXTH: To the payment of any surplus thereafter remaining to the Owner or to
    whomsoever may be entitled thereto.

    SECTION 2.12. In the event that this Mortgage, the Guaranty, the Credit
Agreement or the Notes, or any provision hereof or thereof, shall be deemed
invalid in whole or in part by reason of any present or future law or any
decision of any court having jurisdiction, or if the documents at any time held
by the Mortgagee shall be deemed by the Mortgagee for any reason insufficient to
carry out the provisions, true intent or spirit of this Mortgage, the Guaranty,
the Credit Agreement or the


                                    Page 12
<PAGE>   14
Notes, then, from time to time, then Owner will execute, on its own behalf, such
other and future assurances and documents as in the opinion of the Mortgagee may
be required more effectually to subject the Vessel to the payment of the
principal sum of the Obligations, as in the Credit Agreement and as herein
provided, and to the performance of the terms and provisions of the Notes, the
Credit Agreement, the Guaranty and this Mortgage.

    SECTION 2.13. Any provision of this Mortgage which is prohibited,
unenforceable or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition, unenforceability
or nonauthorization without invalidating the remaining provisions hereof or
affecting the validity, enforceability or legality of such provision in any
other jurisdiction.

    SECTION 2.14. In the event that the title or ownership of the Vessel shall
be requisitioned, purchased or taken by any government of any country or any
department, agency or representative thereof, pursuant to any present or future
law, proclamation, decree, order or otherwise, the lien of this Mortgage shall
be deemed to attach to the claim for compensation therefor, and the
compensation, purchase price, reimbursement or award for such requisition,
purchase or other taking of such title or ownership is hereby agreed to be
payable to the Mortgagee, who shall be entitled to receive the same and shall
apply it as provided in Section 2.11 of this Article II. In the event of any
such requisition, purchase or taking, and the failure of the Mortgagee to
receive proceeds as herein provided, the Owner shall promptly execute and
deliver to the Mortgagee such documents, if any, and shall promptly do and
perform such acts, if any, as in the opinion of the Mortgagee may be necessary
or useful to facilitate or expedite the collection by the Mortgagee of such part
of the compensation, purchase price, reimbursement or award as is payable to it
hereunder.


                                   ARTICLE III
                                   DEFEASANCE

    SECTION 3.1. If the Owner shall pay and discharge the entire indebtedness
secured hereby by well and truly paying or causing to be paid the principal of
and interest due under the Notes and all of the Obligations under the Credit
Agreement as and when the same becomes due and payable and if the Owner shall
also pay or cause to be paid all other sums payable hereunder by the Owner, all
such payments being indefeasible, then this Mortgage and the lien, rights and
interest hereby granted shall cease, determine and become null and void, and the
Mortgagee shall, at the request of the Owner, execute and deliver such
instrument or instruments of satisfaction as may be necessary to satisfy and
discharge the lien hereof; and forthwith the estate, right, title and interest
of the Mortgagee in and to all property subject to this Mortgage shall thereupon
cease, determine and become null and void.

                                   ARTICLE IV
                            MISCELLANEOUS PROVISIONS

    SECTION 4.1. For purpose of recording of this Mortgage, as required by Title
46 U.S.C.A. Section 31301 et seq., the total amount of the Mortgage is the
principal sum of Seventy Million Dollars ($70,000,000) plus interest, expenses
and fees, plus any additional amounts for which the Owner


                                    Page 13
<PAGE>   15
may become liable in connection with the performance of the covenants of this
Mortgage, the Guaranty and the Credit Agreement. The discharge amount is the
same as the total amount.

    SECTION 4.2. All of the covenants, promises, stipulations and agreements of
the Owner in this Mortgage contained shall bind the Owner and its successors and
assigns and shall inure to the benefit of the Mortgagee and its successors and
assigns.

    SECTION 4.3. Wherever and whenever herein any right, power or authority is
granted or given to the Mortgagee, such right, power or authority may be
exercised in all cases by the Mortgagee or such agent or agents as it may
appoint, and the act or acts of such agent or agents when taken shall constitute
the act or acts of the Mortgagee hereunder.

    SECTION 4.4. Any notice, request, demand, direction, consent or waiver or
other documents in respect of this Mortgage shall be sufficient for every
purpose if in writing and sent either by telecopy or letter (delivered by hand
or sent by registered or certified mail, return receipt requested, postage
prepaid or by reputable overnight courier) or telecopy confirmed by letter (sent
as aforesaid), addressed as follows:

        (a)    To the Owner:

               c/o The Delta Queen Steamboat Co.
               Two North Riverside Plaza, 2nd Floor
               Chicago, IL  60606
               Attention: Jordan Allen
               Telephone:     (312) 466-6202
               Telecopy:      (312) 466-6151

        with a copy to:

               Rosenberg & Liebentritt, P.C.
               Two North Riverside Plaza, Suite 1600
               Chicago, IL  60606
               Attention: Jim Phipps
               Telephone:     (312) 466-3623
               Telecopy:      (312) 575-7000

               and

               Adams and Reese, L.L.P.
               4500 One Shell Square
               New Orleans, Louisiana 70139
               Attention: Louis A. Wilson, Jr.
               Telephone:     (504) 581-3234
               Telecopy:      (504) 566-0210


                                    Page 14
<PAGE>   16
        (b) To the Mortgagee:

               The Chase Manhattan Bank
               c/o Chase Securities Inc.
               10 South LaSalle Street
               Chicago, Illinois  60603
               Attention: Jon Hinard
               Telephone:     (312) 807-4550
               Telecopy:      (312) 807-4046

        with a copy to:

               Sidley & Austin
               One First National Plaza,
               Chicago, Illinois 60603
               Attention: Douglas H. Williams
               Telephone:     (312) 853-7667
               Telecopy:      (312) 853-7036

with notice, request or communication hereunder deemed to have been given when
delivered in person or by courier service, upon receipt of a telecopy or telex
or upon delivery or refusal to accept delivery if deposited in the United States
mail (registered or certified, with postage prepaid and properly addressed). Any
party may change the Person or address to whom or which the notices are to be
given hereunder, by notice duly given hereunder.

    SECTION 4.5. Notwithstanding anything contained in this Mortgage to the
contrary, nothing herein shall waive the preferred status of this Mortgage and
if any provision herein shall be construed to waive such status, then such
provision shall to the extent so construed be void and of no effect.

    IN WITNESS WHEREOF, the Owner has executed this Mortgage on the day, month
and year hereinbefore first written.

WITNESSES:                              GREAT RIVER CRUISE LINE, L.L.C.
                                        By:     The Delta Queen Steamboat Co.,
                                                a Managing Member

                                         /s/ JORDAN B. ALLEN
----------------------------------      ---------------------------------------
                                        Name:   Jordan B. Allen
                                        Title:  Executive Vice President

                                        By:     DQSB II, Inc., a Managing Member



                                         /s/ JORDAN B. ALLEN
----------------------------------      ---------------------------------------
                                        Name:   Jordan B. Allen



                                    Page 15
<PAGE>   17
Title:  Executive Vice President

                                 ACKNOWLEDGMENT


STATE OF ILLINOIS

COUNTY OF COOK



        On this 25th day of February, 1999, before me, the undersigned Notary
Public, personally came and appeared JORDAN B. ALLEN, the duly authorized
Executive Vice President and representative of THE DELTA QUEEN STEAMBOAT CO. and
DQSB II, INC., which said corporations are the sole managing members of GREAT
RIVER CRUISE LINE, L.L.C. ("GREAT RIVER"), who declared under oath that he is
the duly authorized representative of GREAT RIVER and its aforesaid managing
members, and that he signed the foregoing Preferred Ship Mortgage with full
authorization under the articles of organization of GREAT RIVER and the board of
directors of each of the managing members; and that the foregoing Preferred Ship
Mortgage is the free and voluntary act and deed of GREAT RIVER and its managing
members, as well as said appearer in his capacity as the representative of GREAT
RIVER, for the uses, purposes and covenants therein expressed.


                     ---------------------------------------
                                  Notary Public

My Commission expires:
                       --------------.
[SEAL]


                                    Page 16
<PAGE>   18
                                   EXHIBIT "A"

                            FORM OF CREDIT AGREEMENT
                         (WITHOUT EXHIBITS OR SCHEDULES)


                                    Page 17
<PAGE>   19
                                   EXHIBIT "B"

                          FORM OF REVOLVING LOAN NOTES


                                    Page 18