<PAGE>   1



                                  EXHIBIT 10.33











                                       1.
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                              AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT


     THIS AGREEMENT is entered into as of the 1st day of October, 1995 by ad
between HORSESHOE GAMING, INC., a Nevada corporation ("Employer" or "Company")
and Mr. JOHN MICHAEL ALLEN ("Employee"), and is made with reference to the
following recitals of fact:

                                    RECITALS

     WHEREAS, Employer is the Manger of Horseshoe Gaming LLC, a Delaware limited
liability company (the "LLC"), whose subsidiaries and affiliates have developed
and are currently operating casino facilities in Tunica County, Mississippi (the
"Tunica Facility") and in Bossier City, Louisiana (the "Bossier City Facility"),
and intends to develop numerous other casino facilities in emerging gaming
jurisdictions;

     WHEREAS, Employee has heretofore served as the General Manager of the
Tunica Facility pursuant to an Employment Agreement dated May 11, 1994 by and
between Robinson Property Group Limited Partnership and Employee (the "Prior
Employment Agreement"), which Prior Employment Agreement is being terminated
concurrent with the effectiveness of this Agreement;

     WHEREAS, Employee has extensive experience in the gaming industry, and
based upon his knowledge, experience and skill is capable of performing each and
all of the duties and responsibilities to be assigned to Employee pursuant to
the terms of this Agreement; and

     WHEREAS, Employer wishes to hire and employ Employee, and Employee desires
to accept such employment pursuant to the terms of this Agreement;

     NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, and in consideration of the mutual
covenants, promises and agreements herein contained, the parties hereto agree as
follows:

                                    AGREEMENT

     1. Definitions. All capitalized words referenced or used in this Agreement
and not specifically defined herein shall have the meaning set forth on Exhibit
"A", attached hereto and made a part hereof.

     2. Term. This Agreement shall become effective and Employee's term of
employment with Employer shall commence, for all purposes, on October 1, 1995
(the "Commencement Date") and shall terminate on May 11, 1999, unless terminated
sooner by


                                       2.
<PAGE>   3

Employer or Employee pursuant to the terms set forth herein.

     3. Position to be Held by Employee. Employee is hereby employed and hired b
Employer to serve and act as the Senior Vice President-Operations of Employer
and shall perform each and all of the duties and shall have all of the
responsibilities described herein. Employee shall at all times report directly
to and take directives from the Chief Executive Officer ("CEO") of the Company,
which presently is Mr. Jack B. Binion.

     4. Duties and Responsibilities.

        A. General Duties. In his capacity as Senior Vice President-Operations
of the Company, Employee shall have responsibility for overseeing the operations
of the Tunica Facility and assisting in the opening of any to-be-developed
casino and hotel facilities owned by subsidiaries or affiliates of Horseshoe
Gaming, LLC (the "LLC") for which Employer is the Manager (individually, a
"Facility" and collectively, the "Facilities") in a manner so as to maximize, to
the best of his ability, the profitability of each Facility, for and on behalf
of the LLC in accordance with applicable laws and regulations. The authority of
Employee to bind Employer shall be as broad or as limited as may be determined
from time to time by the Board of Directors of the Company. Within salary and
policy guidelines established by the CEO and/or the Board and with the
reasonable concurrence of the CEO, Employee, while performing as General Manager
of a Facility, shall have the authority to hire and fire employees of each
Facility at all levels below departmental head positions, and with the
concurrence of the CEO, departmental heads as well.

        B. Specific Duties.

           (i) Employee shall continue to serve and act as the General manager
and Chief Operating Officer of the casino and hotel owned by Robinson Property
Group Limited Partnership in Tunica, Mississippi (the "Tunica Facility"), having
responsibility for supervising and directing the day-to-day activities and
affairs of the Tunica Facility, including, without limitation, customer
relations, marketing, employee relations, service and quality of the casino and
hotel operation, service and quality of all food and beverage facilities, cash
management, compliance with all Governmental Requirements, and all other similar
functions typically performed by a general manager of a major casino and hotel
facility. In all instances, Employee shall coordinate with and oversee the
various department heads charged with direct responsibility for various facets
of the casino and hotel operations, and assure that all such employees are
performing their respective assignments and such departments are consequently
being run in a thorough, competent, efficient and professional manner.


                                       3.

<PAGE>   4

          (ii) Employer understands and agrees that it is intended that Employee
will not remain the General Manager of the Tunica Facility, but rather, as the
operations of the Tunica Facility become stabilized and companies or
partnerships owned or controlled by the LLC continue to expand into other new
gaming jurisdictions, Employee shall be involved actively in assisting in the
acquisition, development and opening of such new facility, including, if
determined necessary by the CEO of the Company, serving as General manager of a
new facility until such time as the operations of the new facility become
stabilized. Accordingly, Employee may be relocated to different cities (other
than the city in which the Company's headquarters are located) and assigned
significantly different responsibilities from those set forth herein.

        C. Fiduciary Duty. In every instance, Employee shall carry out his
various duties and responsibilities in a fiduciary capacity on behalf of
Employer, in an effort to maximize the profitability of the Facilities. In no
event whatsoever shall Employee enter into any commitments or obligations,
written or verbal, or take any other action or omit to take any action, the
result of which would be to create a conflict of interest between Employer and
Employee, or the result of which would benefit Employee, or any person
associated with or affiliated with Employee, to the detriment of Employer.

        D. Full Time Effort. Employee acknowledges and agrees that the duties
and responsibilities to be discharged by Employee require a full time effort on
the part of Employee, and accordingly, Employee agrees to devote his full time
effort and resources for and on behalf of Employer, and agrees that he will not,
during the term hereof, enter into any other business activities or ventures,
other than those which are passive in nature and which will not require the
active participation of Employee.

        E. Directives from CEO. In all instances, Employee agrees to carry out
all of his duties and responsibilities as set forth herein pursuant to the
guidance, reasonable and lawful directives and instructions of the CEO of the
Company, Mr. Jack B. Binion, or his successor, and agrees that at all times his
authority shall be subordinate to such CEO. Any decisions as to which there is a
disagreement between Employee and the CEO, the wishes and directives of the CEO
shall prevail in all instances, and Employee shall carry out any and all
reasonable and lawful directives from the CEO to the best of his ability.

     5. Compensation. As compensation for the services to be rendered by
Employee pursuant to the terms of this Agreement, Employee shall be entitled to
receive the following:


                                       4.
<PAGE>   5





        (a) a base salary of Three Hundred and Fifty Thousand Dollars
($350,000) per year (the "Base Compensation"), payable semi-monthly; plus

        (b) a one time bonus of Sixty-Seven Thousand Dollars ($67,000),
payable on or before January 15, 1996;

        (c) Employer and Employee acknowledge that Employee has held a one
percent (1%) partnership interest in Robinson Property Group Limited Partnership
and a one-half percent (.5%) partnership interest in New Gaming Capital
Partnership pursuant to the terms of the prior Employment Agreement, and that
such interests have been contributed to the LLC pursuant to the terms of that
certain Assignment Agreement dated effective September 1, 1995, executed by
Employee in favor of the LLC in exchange for a .805506% interest in the LLC or
815,714 Units in the LLC (the "Old Units"). Subject to the provisions of Section
11 hereof, Employee's interest in the LLC shall increase to 1.293423% by the
grant, as of the date hereof, of 500,849 Units in the LLC (the "New Units"; the
Old Units and the New Units constitute the "Ownership Interest"). Such Ownership
Interest shall entitle Employee to receive an interest in the Net Profits
generated by the LLC, in accordance with the Limited Liability Agreement of the
LLC to which Employee is a party, including those Net Profits generated as a
result of the LLC's Ownership Interest in the Bossier City, Louisiana and
Tunica, Mississippi casinos presently in operation as well as all other future
operating subsidiaries to be owned in whole or in part by the LLC.

            The Ownership Interest in the Old Units granted hereunder to
Employee shall include for all purposes hereunder and under the terms of the
Operating Agreement for the LLC, a right to distributions based upon a share of
Net Profits from and after the date of grant of the Old Units(the "Old Units
Grant Date"), including appreciation in the assets of the LLC over their fair
market value as of the Old Units Grant Date, but not including a share of the
then capital of the LLC, including any appreciation in the assets of the LLC up
to the Old Units Grant Date.

            The Ownership Interest in the New Units granted hereunder to
Employee shall including for all purposes hereunder and under the terms of the
Operating Agreement for the LLC, a right to distributions based upon a share of
Net Profits from and after the date of grant of the New Units(the "New Units
Grant Date"), including appreciation in the assets of the LLC over their fair
market value as of the New Units Grant Date, but not including a share of the
then capital of the LLC, including any appreciation in the assets of the LLC up
to the New Units Grant Date.


                                       5.

<PAGE>   6

     6. Fringe Benefits. Employee shall be entitled to participate in such
health and pension plans as Employer shall adopt for all of the executives of
the company; it being understood and agreed that the only retirement plan that
Employer anticipates adopting at this time is a Section 401(k) form of
retirement plan. In addition, it is understood and agreed that the Base
Compensation to be received by Employee is to be all-inclusive of other typical
fringe benefits provided to executives in a similar position as Employee;
provided, however, that Employee shall be entitled to the following benefits at
no cost to Employee and/or entitled to reimbursement for all reasonable
out-of-pocket expenses incurred in connection with the following:

        (a) to the extent Employer establishes (a) bonus plan(s) offering cash
and/or equity ownership in the LLC, Employee shall be eligible to be considered
for a bonus under such plan(s). Employee understands that the grant of any
bonus, however, shall be in the sole discretion of the Board of Directors of
Horseshoe Gaming, Inc.;

        (b) reasonable rental housing expenses, air transportation expenses
and other similar expense, incurred by Employee and/or Employee's spouse during
Employee's temporary relocations as General Manager of any new Facility;

        (c) on an ongoing basis, all reasonable entertainment, traveling and
other similar expenses incurred in the performance of his duties and
responsibilities as Senior Vice President-Operations and as General Manager of a
Facility, such expenses to be subject to budgets established for such purpose;

        (d) participation in Employer's health coverage plan for Employee and
all members of his immediate family, with such policy to be on terms and
conditions typically provided by major gaming companies, and subject to the
maximum benefit limitations typically included in such plans, such insurance
coverage shall include insurance for disability in an amount and upon terms to
be reasonably agreed upon and determined by Employer and Employee within sixty
(60) days from and after the date hereof. Employer and Employee agree that
Employer shall be obligated to continue the payment of Employee's base salary
during any short term disability, i.e. one continuing for a period of 180 days
or less, provided that such payments and obligations shall be reduced by the
amount of any disability insurance payments Employee is entitled to receive
during such period of time; and

        (e) paid vacation of three (3) weeks per year; provided that Employee
may not accumulate more than six (6) of vacation, regardless of the amount of
vacation actually taken by Employee during the course of his employment.



                                       6.


<PAGE>   7

     7. Gaming License. Employer and Employee understand that it may be
necessary for Employee to apply for and obtain, and maintain in full force and
effect at all times, a gaming license in various jurisdictions in which
subsidiaries or affiliates of the LLC are conducting gaming operations for
persons serving in a similar capacity as Employee. Accordingly, Employee agrees,
promptly after the date hereof, to make application for any and all of such
required gaming licenses, to fully cooperate in the investigation or
investigations to be conducted in connection therewith, and otherwise use his
best efforts to obtain such gaming licenses in a timely fashion. Employer agrees
to fully cooperate with Employee in such regard and provide all necessary
information required in connection therewith and otherwise use his best efforts
to obtain such gaming licenses in a timely fashion. Employer agrees to fully
cooperate with Employee in such regard and provide all necessary information
required in connection therewith, and to pay for all costs associated with
Employee obtaining such gaming licenses, including application fees,
investigation fees, or any other similar expenses such as attorneys' fees,
reasonably approved by Employer and incurred in connection therewith. In the
event that Employee should fail to obtain any such license due to his lack of
suitability or failure to submit information in a timely manner (the "License
Denial"), and such License Denial prevents Employee from being able to carry
out, in a reasonable manner, his duties and responsibilities set forth herein,
then this Agreement may be immediately terminated by Employer, in which event
Employee shall have no right to any further compensation hereunder and the
divestiture provisions set forth in Section 11 hereof shall become effective.
During the course of his employment, Employee agrees to fully comply with all
requirements of applicable Gaming Authorities and Governmental Authorities.

     8. Termination.

        A. Termination for Cause. Employee may be terminated by Employer for
"cause" in which event the provisions of Section 8A(i) through (iv) below shall
apply.

     For purposes or this agreement "cause" is herein defined as one or more of
the following events:

     (a) the failure of Employee to initially obtain a gaming license or the
revocation, or suspension for a period in excess of ninety (90) days, of any of
Employee's gaming licenses due to an act or omission of Employee, which was not
caused by Employer or any of its representatives;




                                       7.
<PAGE>   8


     (b) failure or refusal by Employee to observe or perform any of the
material provisions of this Agreement or any other written agreement with
Employer, or to perform in a reasonably satisfactory manner all of the material
duties required of Employee under this agreement or any other written agreement
with Employer;

     (c) commission of fraud, misappropriation, embezzlement or other acts of
dishonesty, alcoholism, drug addition or dependency or conviction for any crime
punishable as a felony or a gross misdemeanor involving dishonesty or moral
turpitude, or the commission of any act or acts which have a material adverse
effect upon Employee's ability to perform the duties which are assumed or
assigned to him pursuant to this Agreement, or which actions or occurrences are
materially adverse to the interests of Employer;

     (d) failure or refusal by Employee to comply with the reasonable and lawful
directives of and/or procedures established by the CEO, Jack B. Binion, or his
successor, or the Board of Directors: or

     (e) the death of Employee or the "long-term" mental or physical disability
of Employee to such a degree that Employee, in the reasonable judgment of
responsible physicians retained by Employer, is unable to carry out all of his
obligations, duties and responsibilities set forth herein. For purposes of this
Agreement, "long-term" shall be defined as exceeding a period of one hundred and
eighty (180) days.

     Termination of Employee's employment for cause under Subsections 8A(c) or
(e) above shall be effective upon notice. Termination of Employee's employment
for cause under subsections 8A(a), (b) or (d) above shall be effective upon
thirty (30) days prior written notice to Employee; provided that prior to the
giving of such notice of termination, Employer shall notify Employee that a
factual basis for termination for cause exists, specifying such basis.


     Upon any termination of Employee's employment with Employer, the following
shall apply:


          i) Employee shall be paid his use Compensation through the effective
date of such termination;


          ii) Employee shall be entitled to retain his Fully Vested Ownership
Interest in the LLC (as hereinafter defined in Section 12;

          iii) The covenant not to compete and confidentiality agreement set
forth in Sections 9 and 10


                                       8.

<PAGE>   9
herein below shall apply in the manner and to the extent set forth herein; and

          iv) The put/call option described in Section 12 hereinbelow shall
become effective for all purposes.

     B. Additional Benefit. Upon the termination of Employee from his employment
with Employer for whatever reason (including a failure to renew this Employment
Agreement or to enter into a new Employment Agreement with Employer), Employee
shall also be paid the following amounts (the "Severance Benefits");

        (a) (i) $0, if Employee is terminated before May 15, 1997; (ii)
$486,630, if Employee is terminated on or after May 15, 1997, but before May 15,
1998; (iii) $1,025,606, if Employee is terminated on or after May 15, 1998, but
before May 11, 1999 and (iv) $1,366,923, if Employee is terminated after May 11,
1999.

        (b) Notwithstanding the foregoing, within ninety (90) days of the
occurrence of a Binion Disposition Event (defined in Section 11 below), unless
Employee has been previously paid a Severance Benefit, Employee shall be paid
$1,366,923 and Employee shall have no further right to receive a Severance
Benefit.

     9. Covenant Not to Compete.

        A. Covenant. Upon any resignation by Employee or germination of the
employment of Employee with cause, Employee agrees that for a period not to deed
one year from and after the date of such termination he will not serve in any
capacity, whether as an officer, director, employee or consultant, to any other
casino company which is either, (i) competing directly against the LLC, the
Company or any of their subsidiaries or affiliates at the time of such
termination; or (ii) in any "REP" process or any other similar competitive
process in which a limited number of gaming licenses are available for issuance
to one or more gaming companies selected out a group of competing companies,
such as the competitive licensing process which one of the LLC's subsidiaries is
presently engaged in Harrison County, Indiana. Employer and Employee agree that
such covenant not to compete has been given by Employee to Employer for full and
adequate consideration, including, without limitation, Employee's Ownership
Interest described in section 5(c) hereinabove, and that such covenant not to
compete will expire on the earlier to occur of: (i) one year; or (ii) the date
upon which the competitive licensing process was completed and a specific
company was selected for award of such license.

        B. Modification. In the event that any court of competent jurisdiction
determines that the term or the business or geographic scope of the covenant
contained in Subsection 9A


                                       9.



<PAGE>   10

above is impermissible due to the extent thereof, said covenant shall be
modified to reduce its term, business scope or geographic scope, as the case may
be, to the extent necessary to make such covenant valid, and said covenant shall
be enforced as modified.

        C. Injunctive Relief. Employee understands and agrees that it would be
difficult or impossible to ascertain the measure of damages to Employer
resulting from any breach of this covenant not to compete and that injury to
Employer from any such breach may be irreparable, and that money damages
therefor may be an inadequate remedy. Accordingly, in the event of a breach or
threatened breach by Employee of the provisions of this Section 9, Employer
shall be entitled to seek and obtain, in addition to monetary damages,
injunctive relief against Employee, in a court of competent jurisdiction,
restraining Employee from engaging in such competitive situation with Employer.

     10. Disclosure of Confidential Information.

         A. Definition of Confidential Information. For purposes of this
Agreement, "Confidential Information" means any information that is not
generally known to the public that relates to the existing or reasonably
foreseeable business of Employer and/or the LLC which has been expressly or
implicitly protected by Employer and/or the LLC or which, from all of the
circumstances, Employee knows or has reason to know that Employer or the LLC
intend or expect the secrecy of such information to be maintained. Confidential
Information includes, but is not limited to, information contained in or
relating to the customer lists, account lists, price lists, product designs,
marketing plans or proposals, customer information, merchandising, selling,
accounting, finances, knowhow, trademarks, trade names, trade practices, trade
secrets and other proprietary information of Employer.

         B. Employee Shall Not Disclose Confidential Information. Employee will
not, during the term of Employee's employment and for two (2) years following
the termination of Employee's employment with Employer, use, show, display,
release, discuss, communicate, divulge or otherwise disclose Confidential
Information to any unauthorized person, firm, corporation, association or other
entity for any reason or purpose whatsoever, without the prior written consent
or authorization of Employer. Nothing contained herein shall be interpreted or
construed as restraining or preventing Employee from using Confidential
Information in the proper conduct of services to be rendered by Employee on
behalf of Employer pursuant to this Agreement.

         C. Scope. Employee's covenant in Subsection 10B above to not disclose
Confidential Information shall not apply to information which, at the time of
such disclosure, may be obtained from sources outside of Employer, or from its
agents, lawyers or accountants, so long as those sources did not receive


                                      10.

<PAGE>   11

the information in an improper manner or against the wishes of Employer.

         D. Title. All documents and other tangible or intangible property
(including business opportunities which Employer and/or the LLC is pursuing)
relating in any way to the business of Employer and/or the LLC which are
conceived or generated by Employee or come into Employee's possession or
knowledge during the employment period shall be and remain the exclusive
property of Employer and/or the LLC, and Employee agrees to return immediately
to Employer and/or the LLC, upon their request, all such documents and tangible
and intangible property, including, but not limited to, all records, manuals,
books, blank forms, documents, letters, memoranda, notes, notebooks, reports,
data, tables, magnetic tapes, computer disks, calculations or copies thereof,
which are the property of Employer and/or the and which relate in anyway to the
business, customers, products, practices or techniques of Employer and/or the
LLC, as well as all other property of Employer and/or the LLC, including but not
limited to, all documents which in whole or in part contain any confidential
information of Employer and/or the LLC which in any of these cases are in
Employee's possession or under Employee's control.

         E. Compelled Disclosure. In the event a third party seed to compel
disclosure of confidential information by Employee by judicial or administrative
process, Employee shall promptly notify Employer of such occurrence and furnish
to Employer a copy of the demand, summons, subpoena or other process served upon
Employee to compel such disclosure, and will permit Employer to assume, at its
expense, but with Employee's cooperation, defense of such disclosure demand. In
the event that Employer refuses to contest such a third party disclosure demand
under judicial or administrative process, or a final judicial judgment is issued
compelling disclosure of Confidential Information by the Employee, Employee
shall be entitled to disclose such information in compliance with the terms of
such administrative or judicial process or order.

         F. Injunctive Relief. Employee understands and agrees that the
disclosure, use or usurpation of Confidential Information would cause
significant economic detriment to the business of Employer and/or the LLC which
may be irreparable and for which monetary damages may be an inadequate remedy.
Accordingly, Employee understands and agrees that Employer shall be entitled to
seek and obtain, in addition to monetary damages, injunctive relief against
Employee, in a court of competent jurisdiction restraining Employee from the
disclosure, use or usurpation in any manner of any confidential Information.

     11. Possible Divestiture of Partnership Interest in Employer. Employee's
Ownership Interest in the LLC, which Employee is entitled to receive in
accordance with the terms of this Agreement shall be conveyed in its entirety to
and held by



                                      11.

<PAGE>   12

Employee within thirty (30) days after the date of execution of this
Agreement, subject to the approval of applicable Gaming Authorities and
compliance with Governmental requirements. A portion of the ownership Interest
of Employee shall, nevertheless, be subject to divestiture based upon the
following terms and conditions.

         (a) Forty-five percent (45%) of such Ownership Interest, represented
by 592,453 Old Units, shall not be subject to divestiture and shall be deemed
fully vested for all purposes upon execution of this Agreement; provided that
the remaining fifty-five percent (55%) shall be subject to possible divestiture
and shall only become fully vested based upon the following provisions;

         (b) Fifteen percent (15%) of such Ownership Interest of Employee
represented by 197,485 Old Units in the LLC shall be subject to divestiture in
the event that Employee is terminated or voluntarily resigns prior to May 15,
1996;

         (c) Fifteen percent (15%) of such Ownership Interest of Employee,
represented by 25,776 Old Units and 171,484 New Units in the LLC shall be
subject to divestiture in the event at Employee is terminated or voluntarily
resigns prior to May 15, 1997;

         (d) Fifteen percent (15%) of Such Ownership Interest of Employee,
represented by 197,484 New Units, in the LLC shall be subject to divestiture in
the event that Employee is terminated or voluntarily resigns prior to May 15,
1998;

         (e) The final ten percent (10%) of such Ownership Interest of Employee
represented by 131,656 New Units in the shall be subject to divestiture in the
event that Employee is terminated or voluntarily resigns prior to May 11, 1999.

     The Ownership Interest of Employee in the LLC which is not subject to
divestiture pursuant to the provisions set forth above is referred to herein as
the "Fully Vested Ownership Interest".

     Such divestiture of Employee's Ownership Interest in the shall be automatic
upon the occurrence of the event giving rise to such divestiture, and shall not
require the consent, acknowledgement or concurrence of Employee. Upon any such
event causing divestiture of all or a portion of Employee's Ownership Interest
in the LLC, Employer shall send a written notice to Employee specifying the
amount of Ownership Interest that has been divested and the reason for such
divestiture. Employee agrees to execute any and all documents reasonably
requested by counsel for Employer to evidence such divestiture. Such divestiture
shall be made without payment of any type whatsoever to Employee, and shall be
effective for all purposes from the date of the event giving rise to such
divestiture. In no event



                                      12.


<PAGE>   13

shall such divestiture be deemed a "forfeiture", but rather the possibility of
such divestiture is part of the bargained for consideration to Employer in
entering into this Agreement; it being clearly understood and agreed that
Employee's performance of services in a manner satisfactory to Employer for the
entire term of this Agreement is the consideration to be provided by Employee to
Employer for the Ownership Interest to be conveyed to Employee pursuant to this
Agreement.

     Notwithstanding the provisions of Section 11(b)-(e) hereof, in the event
Jack B. Binion (including any entities through which Jack B. Binion holds his
ownership interest in the family members of Jack B. Binion and/or trusts
established for the benefit of his heirs) transfers controlling interest in the
to a third party in a transaction other than a public offering (a "Binion
Disposition Event"), the entire Ownership Interest of Employee shall immediately
become a Fully Vested Ownership Interest and no longer subject to divestiture.

     12. Put/Call Option Upon Termination. In the event of termination of
Employee's employment with Employer, for whatever reason, and with or without
cause, then the shall have the right to purchase the Fully Vested Ownership
Interest of Employee at the fair market value or such Ownership Interest as
determined pursuant to the terms of this Agreement (the "call Option"). In a
similar fashion, Employee shall have an option to require the LLC to purchase
back his entire Fully Vested Ownership Interest in the LLC at the fair market
value of such Ownership Interest as determined pursuant to the terms of this
Agreement (the "Put Option"). The LLC or Employee; as the case may be, exercise
their respective options provided for in this Section 12, by tendering written
notice to the other party of its exercise of such option within thirty (30) days
after the date of the termination of this Agreement.

     In the event that either option described herein should be exercised by
Employee or the LLC, then Employee and the LLC agree to promptly convene and
attempt in good faith to determine the fair market value of the Ownership
Interest to be purchased by the LLC from Employee. Such fair market value of the
Fully Vested Ownership Interest shall take into account that such Interest has
an interest only in future profits and asset appreciation, and not capital, all
as provided in Section 5(b) hereof. In the event that the LLC and Employee are
unable to agree upon such fair market value, then the parties hereto agree to
submit such matter to an independent appraisal to be conducted in Las Vegas,
Nevada in accordance with the terms set forth below. Either party may initiate
such appraisal process by delivery of written notice to the other party to such
effect, designating the name of an appraiser that is to represent it in such
appraisal process. Thereafter, within ten (10) days of receipt of such notice,
the other party shall designate an appraiser to represent it in such process.
Within ten (10) days after designation of the second appraiser, the two
appraisers



                                      13.

<PAGE>   14

shall convene and agree upon a third appraiser. In the event that said two
appraisers are unable to agree upon a third appraiser, then the third appraiser
shall be selected by lottery, with each appraiser to submit the name of another
reputable appraiser, and with the appraiser whose name is drawn in such lottery
being designated for all purposes as the third appraiser.

     Within ten (10) days after selection of the third appraiser, the three
appraisers shall convene and attempt to agree upon the fair market value of the
Ownership Interest to be Purchased the LLC. If unable to agree, then each
appraiser shall within thirty (30) days thereafter prepare his own independent
appraisal report and such reports shall be submitted to the LLC and Employee.
Provided that the middle appraisal is within ten percent, (10%) of either the
high or low appraisal, then the middle appraisal (the highest and lowest
appraisals being disregarded) shall be deemed to be the fair market value and
thus the valuation to be used for purposes of the LLC's acquisition of
Employee's Fully vested Ownership Interest.

     In the event that the middle appraisal is not within ten percent (10%) of
either the high or low appraisal, then the determination of the fair market
value of Employee's Ownership Interest shall be submitted to arbitration in
accordance with the provisions of Section 17 hereinbelow, and in such
arbitration, each of the appraisers shall be entitled to submit their appraisal
report and testify on behalf of the LLC or Employee. The arbitration panel,
after hearing all evidence desired to be submitted by the LLC and Employee,
shall determine said fair market value, and such decision by said arbitration
panel shall be binding upon the LLC and Employee.

     The Purchase Price to be paid by the LLC as determined by agreement or
appraisal as described herein, shall be paid in three (3) equal annual principal
installments, with the first payment being due on the first anniversary date of
termination. Such obligation shall bear interest at the prime rate of interest
as quoted from time to time by the largest commercial bank (in terms of assets)
in the State of Nevada, and accrued but unpaid interest shall be due and payable
together with each annual principal payment. Notwithstanding the foregoing, in
the event any of the LLC's lenders prohibit payment of the Purchase Price to be
made over as short as a three (3) year period, then Employee agrees that the
Purchase Price shall be paid in equal principal installments over the time
period permitted by such lender but in no event over a period in excess of five
(5) years.

     The LLC and Employee agree that any persons chosen to represent them as
appraisers shall be qualified and competent MAI appraisers or a certified public
accountant with one of the "Big Six" accounting firms, experienced in valuing
closely held partnerships or corporations. In the event that the LLC is a
publicly traded company at the time of termination, then the provisions of this
Section 12 shall be inapplicable, and


                                      14.

<PAGE>   15

accordingly, the Put and Call Option described herein shall terminate for all
purposes.

     In the event that the LLC exercises its call option, then the LLC agrees to
pay for all of the reasonable expenses incurred in connection with such
appraisal process, including the cost associated with the appraiser selected by
Employee, provided that the amount charged by such appraiser is a fair and
reasonable fee. In the event that Employee exercises its Put Option, then
Employer shall bear the cost of its appraiser, Employee shall bear the cost of
its appraiser and the LLC and Employee shall each bear one-half (1/2) of the
cost of the third appraiser.

     13. Distributions; Public Offering. Employee shall become an equity owner
in the LLC subject to all rights, conditions and other provisions of any
member's agreement which shall apply equitably to and govern the relationship
among all of the equity owners of the LLC. Accordingly, Employee shall be
entitled to receive distributions from the LLC with respect to Employee's
Ownership Interest in the same manner and at the same time as other members of
the LLC are entitled to do so under the terms of any member's agreement among
the equity owners of the or the terms of any credit agreement or other financing
to which the LLC, or any of its subsidiaries or affiliates is a party. Employer
and Employee understand and agree that one of the credit agreements currently in
effect restricts the equity owners of the from receiving distributions in an
amount in excess of that intended to be sufficient to discharge federal and
state income taxes that may be levied against the income allocated to each of
such equity owners pursuant to the provisions of applicable law.

     In addition, in the event that the LLC is at some point in the future
involved in a public offering, which public offering involves all or
substantially all of the gaming



                                      15.
<PAGE>   16

interests or ventures owned or controlled by Jack B. Binion, then in such event,
Employee agrees that the valuation to be placed upon the LLC shall be that which
is determined in good faith by the investment banking firm acting as the lead
underwriter in such public offering, and based upon such firm's fair market
appraisal of the value of the LLC in comparison to the other assets to be
included in such public offering. In such event, Employee shall receive an
amount of stock in such public offering equal to the percentage that the value
of the Employee's Ownership Interest (as determined taking into account that
such Interest has an interest only in future profits and asset appreciation, and
not capital, all as provided in Section 5(b) hereof) bears to the value of the
LLC (subject to dilution as a result of such offering) times the amount
determined by dividing the value of the LLC, as determined by such independent
appraisal, by the value of all assets (including the LLC) included in and cash
raised in such public offering. By way of example, if Employee's Ownership
Interest was valued at one-half of one percent (.5%) of the LLC's value and the
cumulative value of the LLC was $400,000, 000 and the value of the other assets
included in the public offering, including cash raised, was $200,000,000, then
the ownership or stock interest of Employee in the public company after the
public offering would be equal to one-third of one percent (.333%) (subject to
dilution as a result of such offering).


     In the event that the should become a publicly traded company at any time
during the term of this Agreement, then that portion of the stock of LLC that
Employee is entitled to receive, but which is still not fully vested and thus
subject to divestiture pursuant to the terms of this Agreement, shall be
escrowed in the custody of Employer and shall not be released to Employee until
such time as such stock becomes free from potential divestiture. Accordingly,
during the time that such stock is escrowed with the LLC, Employee shall not
margin, pledge, sell, transfer or otherwise attempt to encumber or dispose of
such stock, except to the LLC. At the time that such stock is no longer subject
to divestiture, then it shall be immediately released by the LLC to Employee.


     14. Representations and Warranties. Employer, as the following relate to
Employer, and the LLC, as the following relate to the LLC, hereby represent and
warrant to Employee as follows:


         (a) The LLC is a limited liability company, duly organized and validly
existing under the laws of the State of Delaware. Employer is a Nevada
corporation, duly organized and validly existing under the laws of the State of
Nevada;


                                      16.

<PAGE>   17

         (b) This Agreement, when executed by Jack B. Binion, as President and
CEO of the Company, will constitute a legal, valid, and binding agreement on the
part of Employer and the LLC, having been duly authorized by all requisite
corporate and company resolutions or authorizations; and

         (c) This Agreement, when executed by Employer and the LLC, will not
conflict with, violate the terms of or create a default under any other
agreement, contract or other obligation Employer and/or the LLC is a party to or
by which Employer or the is bound.

     Employee hereby represents and warrants to Employer as follows:

     i) this Agreement, when executed by Employee, will not conflict with,
violate the terms of or create a default under Employee's present employment
arrangements and/or agreement, whether oral or written;

     ii) Employee has never been denied a gaming application by any Gaming
Authority and Employee currently knows of no reason why Employee would not be
qualified to receive a gaming license from any jurisdiction in which the LLC
and/or any of its affiliates or subsidiaries conducts gaming operations; and

     iii) Employee is unaware of any mental, physical or emotional condition,
including, without limitation, substance or alcohol abuse problems, which
currently affects Employee, and which might result in Employee's being unable to
carry out all of his duties, obligations and responsibilities set forth herein.

     Employer, the LLC and Employee understand and agree that each is entering
into this Agreement in strict reliance upon the representations and warranties
set forth herein, and that a breach of any of said representations and
warranties by any of the parties hereto with respect to the subject matter set
forth herein.

     15. Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter set forth herein, and
supersedes any and all previous oral or written agreements, understandings or
discussions between the parties hereto with respect to the subject matter set
forth herein.

     16. All Amendments in Writing. This Agreement may not be amended orally,
but only pursuant to a written instrument executed by Employer, the LLC and
Employee.

     17. Arbitration. In the event of any dispute or controversy between
Employer or Employee with respect to any of the matters set forth herein, then
both Employer and Employee agree to submit such dispute or controversy to
binding



                                      17.

<PAGE>   18

arbitration, to be conducted in Las Vegas, Nevada pursuant to the then
prevailing rules and regulations of the American Arbitration Association. In
such arbitration, the prevailing party shall be entitled, in addition to any
award made in such proceeding, to recover all of its costs and expenses incurred
in connection therewith, including, without limitation, attorneys' fees.

     18. Governing Laws. This agreement shall be governed and construed in
accordance with the laws of the State of Nevada.

     19. Notices. Any notice required or permitted to be given in connection
with this Agreement shall be given by either: (a) depositing the same in the
United States Mail, postage prepaid, registered or certified, return receipt
requested; or (b) by depositing it with a recognized overnight courier service
for delivery the following day to the other party; or (c) by facsimile
transmission, provided the other party acknowledges receipt of such
transmission.

     All such notices shall be deemed received as of the date of acknowledgment
of receipt by the other party. All such notices shall be addressed to the
parties at the following addresses, or to such other address as may be provided
from time to time by one party to the other:

     If to the LLC:           Horseshoe Gaming, LLC
                              330 S. Fourth Street
                              Las Vegas, Nevada 89101
                              Attn:  Jack B. Binion

     If to Employer:          Horseshoe Gaming, Inc.
                              330 S. Fourth Street
                              Las Vegas, Nevada 89101
                              Attn:  Jack B. Binion

     If to Employee:          Mr. J. Michael Allen
                              5111 Breakers Lane
                              Las Vegas, Nevada 89113

     20. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors,
administrators and assigns. Notwithstanding the foregoing, Employee understands
and agrees that the nature of this Agreement is a personal services agreement,
and that Employer is entering into this Agreement based upon the specific
services to be rendered personally by Employee hereunder; and accordingly,
Employee shall not assign, transfer or delegate in any manner any of his duties,
responsibilities or obligations hereunder.

     21. Waiver. No waiver of any term, condition or covenant of this Agreement
by a Party shall be deemed to be a waiver of any subsequent breaches of the same
or other terms, covenants or conditions hereof by such party.


                                      18.




<PAGE>   19

     22. Construction. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective or valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the best of such
prohibition or invalidity without invalidating the remainder of such provision
or the remaining provisions of this Agreement.

     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.

                                            HORSESHOE GAMING, INC.
                                            a Nevada corporation,

                                            By:  _\s\ Paul Alanis______________
                                                 Paul Alanis,  President



"EMPLOYEE"                                  _\s\ J. Michael Allen______________
                                            J. MICHAEL ALLEN


AGREED AND ACCEPTED as of the 1st
day of October, 1995

HORSESHOE GAMING, LLC,
a Delaware Limited Liability Company

By:          HORSESHOE GAMING, INC.
             a Nevada corporation
             Manager

             By:  _\s\ Paul Alanis_________
                  Paul Alanis, President




                                      19.
<PAGE>   20




                                    EXHIBIT A

                                   DEFINITIONS


     All capitalized terms referenced or used in this Agreement and not
specifically defined therein shall have the meaning set forth below in this
Exhibit A, which is attached to and made a part of this Agreement for all
purposes.

     Gaming Authorities. The term "Gaming Authorities" or "Authority" shall mean
all agencies, authorities and instrumentalities of any state, nation or other
governmental entity or any subdivision thereof, regulating gaming or related
activities in the United States or any State.

     Governmental Authority. The term "Governmental Authority" means the
Government of the United States, and any other state, county or political
subdivision in which the any of the company's casino facilities are located, and
any court or political subdivision, agency, commission, board or instrumentality
or officer thereof, whether federal, state or local, having or exercising
jurisdiction over Employer or any of the Company's gaming facilities, including,
without limitation, any Game Authority.

     Governmental Requirements. The term "Governmental Requirements" means all
laws and agreements with any Governmental Authority that are applicable to the
acquisition development, construction and/or operation of any of the Company's
gaming facilities including, without limitation, all required permits, approvals
and any rules, guidelines or restrictions created or imposed by Governmental
Authorities (including, without limitation, any Gaming Authority).

     Net Profits. The term "Net Profits" shall have the same meaning as the term
"Profits" has in the Limited Liability Company Agreement of the LLC.







                                      20.