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                                                                    EXHIBIT 4.57

                        GUARANTEE AND SECURITY AGREEMENT


                          Dated as of November 12, 1997


                                      From

                         NEW GAMING CAPITAL PARTNERSHIP,
                          A NEVADA LIMITED PARTNERSHIP,

                                  as Guarantor


                                   in Favor of

                       CANADIAN IMPERIAL BANK OF COMMERCE,

                                    as Agent

                                       and

                               CERTAIN COMMERCIAL
                              LENDING INSTITUTIONS

                                   as Lenders
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                        GUARANTEE AND SECURITY AGREEMENT


         This GUARANTEE AND SECURITY AGREEMENT dated as of November 12, 1997
(this "Guarantee" or this "Agreement"), is made by New Gaming Capital
Partnership, a Nevada limited partnership, with an office located at 4024
Industrial Road, Las Vegas, Nevada 89103 (the "Company"), in favor of the
Lenders (as herein defined) and Canadian Imperial Bank of Commerce ("CIBC"), in
its capacity as agent for the Lenders (in such capacity, the "Agent").

                                R E C I T A L S:

         WHEREAS, on October 10, 1995, Horseshoe Gaming, L.L.C., a Delaware
limited liability company (the "Borrower") authorized the issuance of up to
$150,000,000 of its Senior Secured Credit Facility Notes due September 30, 1999
pursuant to a Senior Secured Credit Facility Note Purchase Agreement dated as of
October 10, 1995, between the Borrower and the Purchasers named therein (the
"Note Purchasers"), as amended prior to the date hereof (as so amended, the
"Senior Secured Credit Facility Note Purchase Agreement");

         WHEREAS, pursuant to that certain letter agreement dated as of the date
hereof among the remaining Note Purchaser and CIBC, the remaining Note Purchaser
assigned to CIBC all of the rights, duties and obligations of the Note
Purchasers in connection with the Senior Secured Credit Facility Note Purchase
Agreement and the security documents and other documents executed in connection
therewith;

         WHEREAS, pursuant to an Amended and Restated Credit Facility Agreement
of even date herewith, (the "Amended and Restated Credit Agreement"), the
Borrower, various financial institutions as are or may become parties thereto
(the "Lenders") and the Agent amended and restated the Senior Secured Credit
Facility Note Purchase Agreement in its entirety;

         WHEREAS, the Company directly owns a 99% limited partnership interest
in the Guarantor;

         WHEREAS, the Company will derive substantial economic benefit from the
availability of credit to the Borrower pursuant to the Amended and Restated
Credit Agreement; and

         WHEREAS, it is a condition precedent to the execution, delivery and
performance of the Amended and Restated Credit Agreement by the Lenders and the
Agent that the Company execute this Agreement on the terms, and subject to the
conditions set forth herein;

         NOW, THEREFORE, in consideration of, and in order to induce, the
execution, delivery and performance of the Amended and Restated Credit Agreement
by the Lenders and the Agent, including the extension of availability of credit
to the Borrower and for other good
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and valuable consideration, the receipt and adequacy of which is hereby
acknowledged by the Company, the Company hereby agrees as follows:

         SECTION 1. TERMS AND DEFINITIONS.

         Section 1.1 Definitions. Except as otherwise specified or as the
context may otherwise require, the following terms shall have the respective
meanings set forth below whenever used in this Agreement:

         "Chattel Paper" has the meaning provided in the UCC.

         "Contract Rights" means all rights of the Company (including, without
limitation, all rights to payment) under each Contract.

         "Contracts" means all contracts between the Company and one or more
additional parties.

         "Copyrights" means any copyright registered with the United States
Copyright Office, as well as any application for a United States copyright
registration made with the United States Copyright Office.

         "Documents" has the meaning provided in the UCC.

         "Equipment" means any "equipment," as such term is defined in the UCC
and, in any event, shall include, but shall not be limited to, all machinery,
equipment, furnishings, movable trade fixtures and vehicles and any and all
additions, substitutions and replacements of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto.

         "General Intangibles" has the meaning provided in the UCC and in any
event includes all claims, rights, powers, privileges, authority, options,
security interests, liens and remedies under any partnership agreement to which
the Company is a party or with respect to any partnership of which the Company
is a partner.

         "Goods" has the meaning provided in the UCC.

         "Instrument" has the meaning provided in Article 9 of the UCC.

         "Intercompany Notes" means a promissory note evidencing indebtedness of
a Subsidiary of the Company to the Company.

         "Inventory" means merchandise, inventory and goods, and all additions,
substitutions and replacements thereof, wherever located, together with all
goods, supplies, incidentals, packaging materials, labels, materials and any
other items used or usable in manufacturing, processing,

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packaging or shipping same; in all stages of production--from raw materials
through work-in-process to finished goods--and all products and proceeds of
whatever sort and wherever located and any portion thereof which may be
returned, rejected, reclaimed or repossessed by the Agent, and shall
specifically include all "inventory" as such term is defined in the UCC.

         "Marks" means any trademarks and service marks registered in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any state thereof or any political subdivision thereof any
application for such trademarks and service marks, as well as any unregistered
marks used in the United States and trade dress, logos, designs, trade names,
company names, business names, fictitious business names and other business
identifiers used in the United States.

         "Patents" means any patent registered with the United States Patent and
Trademark Office, as well as any application for a United States patent
registration made with the United States Patent and Trademark Office.

         "Pledged Stock" means the shares of capital stock described in Schedule
A hereto, as it may, from time to time, be supplemented in accordance with the
terms of the Agreement.

         "Proceeds" shall mean all "proceeds", as such term is defined in the
UCC and, in any event, shall mean and include, but not be limited to (i) any and
all proceeds of any insurance, indemnity, warranty or guarantee payable to the
Company from time to time with respect to any of the Pledged Collateral (as
defined in Section 3), (ii) any and all payments (in any form whatsoever) made
or due and payable to the Company from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Pledged Collateral by any governmental authority, bureau or agency
(or any Person acting under color of governmental authority) and (iii) any and
all other amounts from time to time paid or payable under or in connection with
any of the Pledged Collateral.

         "Receivables" means any "account" as such term is defined in the UCC,
and, in any event, shall include, but shall not be limited to, all rights to
payment for goods sold or leased or services performed, whether now in existence
or arising from time to time hereafter, including, without limitation, such
rights evidenced by an account, note, contract, security agreement, chattel
paper, or other evidence of indebtedness or security, together with (i) all
security pledged, assigned, hypothecated or granted to or held to secure the
foregoing; (ii) all right, title and interest in and to any goods, the sale of
which gave rise thereto; (iii) all guarantees, endorsements and indemnifications
on, or of, any of the foregoing; (iv) all powers of attorney for the execution
of any evidence of indebtedness or security or other writing in connection
therewith; (v) all books, records, ledger cards, and invoices relating thereto;
(vi) all evidences of the filing of financing statements and other statements
and the registration of other instruments in connection therewith and amendments
thereto, notices to other creditors or secured parties, and certificates from
filing or other registration officers; (vii) all credit information reports and
memoranda relating thereto; and (viii) all other writings related in any way to
the foregoing.

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         "UCC" shall mean the Uniform Commercial Code as in effect in the State
of New York.

         Section 1.2 Additional Terms. All other capitalized terms used herein
but not otherwise defined herein shall have the respective meanings ascribed
thereto in the Amended and Restated Credit Agreement.

         Section 1.3 Action by the Agent or the Lenders. Whenever any action is
required or permitted to be taken by the Agent or the Lenders, except for such
action which is expressly provided herein to be taken by an individual Lender or
by all the Lenders, such action, including, without limitation, in connection
with the exercise of any remedy granted herein, shall be taken by the Agent,
acting at the direction of Majority Lenders or the Required Lenders, as provided
in the Amended and Restated Credit Agreement.

         SECTION 2. GUARANTEE.

         Section 2.1 Guaranteed Obligations. The Company, jointly and severally
with any other guarantors, hereby absolutely, unconditionally and irrevocably
guarantees to the Agent and the Lenders on a continuing basis the full, complete
and punctual payment when due, whether at stated maturity, by acceleration or
otherwise, of any and all sums due from, and any and all Obligations of the
Borrower to the Agent and the Lenders now or hereafter existing under the Notes,
the Letters of Credit, the Secured Hedging Obligations and the Amended and
Restated Credit Agreement, without regard to the Borrower's use of the proceeds
of the Loans, the Letters of Credit or the Secured Hedging Obligations, whether
for principal, premium, interest, fees, costs, expenses or otherwise, including,
without prejudice to the generality of the foregoing, the prompt payment of the
Notes and payment of interest and premium thereon at the times and in the manner
specified in the Notes and the Amended and Restated Credit Agreement, prompt
payment of amounts owing pursuant to the issuance of the Letters of Credit,
prompt payment of the Secured Hedging Obligations at the times and in the manner
specified in the documentation therefor and the payment of any and all expenses
(including reasonable counsel fees and expenses) incurred by the Agent and the
Lenders in enforcing any rights under the Notes, the Letters of Credit, the
Secured Hedging Obligations, the Amended and Restated Credit Agreement and this
Agreement. Without limiting the generality of the foregoing, the Company's
liability shall extend to all amounts that would be owed by the Borrower to the
Agent and the Lenders under the Amended and Restated Credit Agreement but for
the fact that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the Borrower. Each of
the obligations guaranteed as set forth in this Section 2.1 is hereinafter
referred to severally as a "Guaranteed Obligation" and collectively as the
"Guaranteed Obligations".

         Section 2.2 Guarantee Absolute. This Guarantee is a guarantee of
payment and not of collection, is in no way conditioned or contingent upon any
attempt to collect from or proceed against the Borrower, any other guarantors or
sureties, any other person or entity or

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any collateral security, or upon any other event, contingency or circumstance
whatsoever and shall be binding upon and against the Company without regard to
the validity, regularity or enforceability of the Amended and Restated Credit
Agreement or any other instrument or agreement. The Company guarantees that the
Guaranteed Obligations will be paid strictly in accordance with the term of the
Amended and Restated Credit Agreement and the documentation evidencing the
Secured Hedging Obligations, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Agent or the Lenders with respect thereto. The obligations of the
Company hereunder are independent of the Guaranteed Obligations, and a separate
action or actions may be brought and prosecuted against the Company to enforce
this Agreement, irrespective of whether any action is brought against the
Borrower or whether the Borrower is joined in any such action or actions. If for
any reason whatsoever the Borrower shall fail or be unable duly, punctually and
fully to pay the Guaranteed Obligations or any part thereof as and when the same
shall become payable in accordance with the terms of the Amended and Restated
Credit Agreement, the Company, immediately upon demand, will pay or cause to be
paid the Guaranteed Obligations or such part thereof.

         Section 2.3 Subordination. Until payment in full of all sums due to the
Agent and the Lenders under, or in connection with such party's rights relating
to, the Amended and Restated Credit Agreement and the Secured Hedging
Obligations and all other instruments, documents and agreements contemplated
therein and performance of all other obligations thereunder, the Company hereby
covenants and agrees with the Agent and the Lenders that:

         (a) the Company shall and does hereby subordinate, to the obligations
of the Borrower to the Agent and the Lenders, all present and future
indebtedness due to the Company from (and shall cause to be subordinated to the
obligations of the Company to the Agent and the Lenders hereunder all present
and future indebtedness due from the Company to) the Borrower; and

         (b) the Company shall deliver to the Agent and the Lenders, and shall
cause the Borrower to deliver to the Agent and the Lenders, such agreements and
other evidence of such subordination as the Agent or the Lenders reasonably may
request from time to time.

         SECTION 3. GRANT OF SECURITY.

         Section 3.1 Pledged Collateral.

         (a) The Company, to secure its punctual payment and performance
hereunder in respect of the Guaranteed Obligations hereby pledges, assigns and
transfers unto the Agent, and does hereby grant to the Agent, for the benefit of
the Lenders, a continuing security interest of first priority in, all of the
right, title and interest of the Company in, to and under all of the following,
whether now existing or hereafter from time to time acquired: (i) all cash,
accounts, deposits, securities and insurance policies now or at any time
hereafter in the possession or under

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control of the Company or its respective bailees and any interest therein, (ii)
each and every Receivable, (iii) all Contract Rights arising under all
Contracts, and all equity and debt securities and other interests in any and all
Subsidiaries (other than Unrestricted Subsidiaries), (iv) all Inventory, (v) all
Equipment, (vi) all Marks, together with the registrations and right to all
renewals thereof, and the goodwill of the business of the Company symbolized by
the Marks, (vii) all Patents and Copyrights, and all reissues, renewals or
extensions thereof, (viii) all computer programs and all intellectual property
rights therein and all other proprietary information, (ix) (A) the indebtedness
of the Company's Subsidiaries to the Company; (B) all Intercompany Notes listed
on Schedule A (as it may, from time to time, be supplemented in accordance with
the terms hereof) and all promissory notes which are pledged to the Agent; and
(C) all shares of capital stock described in Schedule A (as it may, from time to
time, be supplemented in accordance with the terms hereof) and all other shares
of capital stock or other equity interests, (x) all books and records, customer
lists, ledger cards, credit files, print-outs, and other materials and records
pertaining to any of the foregoing, whether now owned or hereafter acquired,
(xi) all other Goods, General Intangibles, investment property (as defined in
Article 9 of the UCC), Chattel Paper, Documents and Instruments, (xiii) all
other personal property of the Company, whether now owned or hereafter acquired,
(xiv) all documents of title evidencing or issued with respect to any of the
foregoing, and (xv) all Proceeds and products of any and all of the foregoing
(collectively, the "Pledged Collateral").

         (b) The Pledged Collateral secures the payment of all obligations of
every kind and character now or hereafter existing (whether matured or
unmatured, contingent or liquidated) of the Company under Section 2 with respect
to the Guaranteed Obligations and under each other provision of this Agreement
(in each case as this Agreement hereafter may be amended, supplemented or
otherwise modified from time to time), whether for principal, interest, premium,
fees, expenses, reimbursement, indemnification or otherwise.

         (c) The Intercompany Notes and the certificates representing the
Pledged Stock listed on Schedule A shall be delivered to the Agent
contemporaneously herewith together with appropriate undated note powers and
stock powers duly executed in blank. Neither the Agent nor any Lender shall be
obligated to preserve or protect any rights with respect to the Intercompany
Notes or the Pledged Stock or to receive or give any notice with respect thereto
whether or not the Agent or any Lender is deemed to have knowledge of such
matters.

         (d) The assignments and security interests under this Agreement granted
to the Agent shall not relieve the Company from the performance of any term,
covenant, condition or agreement on the Company's part to be performed or
observed under or in respect of the Pledged Collateral or from any liability to
any Person under or in respect of any of such Pledged Collateral or impose any
obligation on the Agent to perform or observe any such term, covenant, condition
or agreement on the Company's part to be so performed or observed or impose any
liability on the Agent for any act or omission on the part of the Company
relative thereto or for any breach of any representation or warranty on the part
of the Company contained in this Agreement or any other Loan Document, or in
respect of the Pledged Collateral or made in

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connection herewith or therewith. The obligations of the Company contained in
this paragraph shall survive the termination of this Agreement and the discharge
of the Company's other obligations hereunder.

         SECTION 4. OBLIGATIONS UNCONDITIONAL.

         The obligations of the Company set forth in this Agreement and all
rights of the Agent and the Lenders shall be absolute and unconditional, shall
not be subject to any counterclaim, set-off, deferment, reduction or diminution
of any obligation or defense of any kind or nature (other than full,
indefeasible and timely payment of the Guaranteed Obligations) based upon any
claim the Company or any other party may have against the Agent, the Lenders,
the Borrower, any of their Affiliates, or any other party, shall remain in full
force and effect without regard to, and shall not be released, discharged or in
any way affected by, any circumstance or condition whatsoever (whether or not
the Agent, the Lenders, or the Company shall have any knowledge or notice
thereof), including without limitation:

         (a) any compromise, settlement, release, accord and satisfaction,
termination, modification, amendment, waiver, consent or other change, addition,
deletion or supplement of or to, or any forbearance or indulgence with respect
to, any or all of the obligations, duties, covenants or agreements under the
Amended and Restated Credit Agreement or the Secured Hedging Obligations, or any
other instrument or agreement whatsoever (whether or not referred to in the
Amended and Restated Credit Agreement or applicable to any of the parties to the
Amended and Restated Credit Agreement), or any assignment or transfer of any
interest in any of the foregoing, or any furnishing, acceptance, substitution or
exchange of, any release of or failure to protect, perfect or to continue
perfected, or any other action or inaction in respect of, any direct or indirect
security for or guarantee with respect to the Guaranteed Obligations or any part
thereof (including, without limitation, the Pledged Collateral);

         (b) any failure, omission or delay on the part of the Agent or the
Lenders or any party claiming by, through or under any of the foregoing to
conform or comply with any term of any instrument or agreement referred to in
subsection (a) above, or to exercise any right, remedy or power thereunder,
including, but not limited to, the failure to give notice to the Company of the
occurrence of any Event of Default;

         (c) any renewal, refinancing or refunding of the Guaranteed Obligations
in whole or in part or extension of the time for payment of any Guaranteed
Obligation or for the payment of any other amount payable under the Amended and
Restated Credit Agreement or any Secured Hedging Obligation or of the time for
performance of any other obligations, covenants or agreements under or arising
out of the Amended and Restated Credit Agreement, any Secured Hedging Obligation
or any other instrument or agreement or the extension or the renewal of any of
the foregoing;

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         (d) any voluntary or involuntary liquidation, dissolution, winding-up,
sale or other disposition of all or substantially all the assets, marshaling of
assets and liabilities, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition with creditors or
readjustment of the debts of, or other similar events or proceedings affecting,
the Borrower or any of its assets or of any other party, or any action taken by
any trustee or receiver or by any court in any such proceeding, or any
allegation of invalidity of this Guarantee in any such proceeding;

         (e) to the extent permitted by law, any release or discharge by
operation of law of the Borrower, or any other party from the performance or
observance of any obligation, covenant or agreement contained in the Amended and
Restated Credit Agreement, any documentation evidencing the Secured Hedging
Obligations or any other instrument or agreement;

         (f) any merger or consolidation of the Borrower into or with any entity
or any sale, lease or transfer of any of the assets of the Borrower to any other
party, or any change in the name, objects or governing documents of the Borrower
or otherwise in the Company's relationship to the Borrower;

         (g) any impossibility or illegality of performance on the part of the
Borrower of its obligations under the Amended and Restated Credit Agreement or
the Secured Hedging Obligations;

         (h) any lack of validity or enforceability of any provisions of the
Amended and Restated Credit Agreement, the documentation for the Secured Hedging
Obligations or any other Loan Document; or

         (i) any other occurrence or circumstance whatsoever, whether similar or
dissimilar to the foregoing, and any other circumstance which might otherwise
constitute a legal or equitable defense or discharge of the liabilities of a
Company or surety or which might otherwise limit recourse against the Pledged
Collateral.

         SECTION 5. APPOINTMENT AS ATTORNEY-IN-FACT.

         (a) Effective upon the occurrence and during the continuance of an
Event of Default, the Company hereby irrevocably constitutes and appoints the
Agent, its agents, representatives and designees, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Company and in the name of the
Company or in its own name, from time to time in the Agent's discretion, for the
purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement
(except, without limiting the generality of the foregoing, that the Agent shall
not ratify any of its own actions pursuant to this power of

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attorney), and, without limiting the generality of the foregoing, hereby gives
the Agent in its sole discretion the power and right, on behalf of the Company,
without notice to or assent by the Company, to do the following:

                  (i) to ask, demand, collect, receive and give acquittances and
         receipts for any and all monies due and to become due under any Pledged
         Collateral and, in the name of the Company or its own name or
         otherwise, to take possession of and endorse and collect any checks,
         drafts, notes, acceptances or other instruments for the payment of
         monies due under any Pledged Collateral and to file any claim or to
         take any other action or proceeding in any court of law or equity or
         otherwise deemed appropriate by the Agent for the purpose of collecting
         any and all such monies due under any Pledged Collateral whenever
         payable and to file any claim or to take any other action or proceeding
         in any court of law or equity or otherwise deemed appropriate by the
         Agent for the purpose of collecting any and all such moneys due under
         any Pledged Collateral whenever payable; and

                  (ii) to pay or discharge taxes, liens, security interests or
         other encumbrances levied or placed on or threatened against the
         Pledged Collateral.

         The Company hereby ratifies all that said attorney shall lawfully do or
cause to be done by virtue hereof and acknowledges that this power of attorney
is a power coupled with an interest and shall be irrevocable.

         (b) The powers conferred on the Agent hereunder are solely to protect
the Agent's and the Lenders' interests in the Pledged Collateral and shall not
impose any duty upon the Agent to exercise any such powers. The Agent shall be
accountable only for amounts that it actually receives as a result of the
exercise of such powers and neither the Agent nor any of its agents,
representatives or designees shall be responsible to the Company for any act or
failure to act, except for any act involving their gross negligence or willful
misconduct.

         (c) Nothing in this Agreement shall authorize the Agent, prior to an
Event of Default (i) to participate in the management of or to operate any
facility owned or operated by the Company or (ii) to control decisions regarding
the disposal or other management of hazardous substances generated, used or
handled by the Company or any of its Affiliates.

         SECTION 6. WAIVERS.

         (a) The Company hereby irrevocably waives promptness, diligence, notice
of acceptance, nonpayment, nonperformance, dishonor or protest and any other
notice with respect to any of the Guaranteed Obligations and this Agreement and
any other circumstance which might otherwise constitute a legal or equitable
discharge, release or defense of a guarantor or surety or which might otherwise
limit the obligations of the Company under this Agreement. The Company hereby
irrevocably waives any requirement that the Agent or the

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Lenders protect, secure, perfect or insure any Lien on the Pledged Collateral or
exhaust any right or take any action against the Borrower, or any other Person
or mitigate the damages resulting from default by the Borrower under the Amended
and Restated Credit Agreement or any Secured Hedging Obligations, or by the
Company under this Agreement.

         (b) The Company hereby irrevocably waives all right to trial by jury in
any action, proceeding or counterclaim based upon, arising out of, or relating
to, this Agreement, the transactions contemplated by the Amended and Restated
Credit Agreement or the Secured Hedging Obligations or the actions of the Agent
and the Lenders in the negotiation, administration, performance or enforcement
thereof. The scope of this waiver is intended to be all-encompassing of any and
all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including, without limitation, contract claims, tort
claims, breach of duty claims and all other common law and statutory claims. The
Company acknowledges that this waiver is a material inducement to the Agent and
the Lenders to enter into a business relationship with the Company and its
Subsidiaries and Affiliates and that the Agent and the Lenders have each already
relied on this waiver in entering into this Agreement and the Loan Documents and
that each will continue to rely on this waiver in their related future dealings.
The Company further warrants and represents that it has reviewed this waiver
with its legal counsel, and that it knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. NOTWITHSTANDING ANYTHING
CONTAINED HEREIN TO THE CONTRARY, THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT OR ANY OTHER DOCUMENTS OR AGREEMENTS RELATING HERETO. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.

         (c) The Company hereby irrevocably waives, until the end of the term of
this Agreement as set forth in Section 12.9, any claim or other rights that it
may now or hereafter acquire against the Borrower or any other guarantor of the
obligations of the Borrower that arise from the existence, payment, performance
or enforcement of the Guaranteed Obligations, including, without limitation, any
right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of the Agent
or the Lenders against the Borrower or any other guarantor or any collateral,
whether or not such claim, remedy or right arises in equity or under contract,
statute or common law, including, without limitation, the right to take or
receive from the Borrower or any other guarantor directly or indirectly, in cash
or other property or by set-off or in any other manner, payment or security on
account of such claim, remedy or right. If any amount shall be paid to the
Company in violation of the preceding sentence at any time prior to the payment
in full in cash of the Guaranteed Obligations, such amount shall be held in
trust for the benefit of the Agent and the Lenders and shall forthwith be paid
to the Agent to be credited and applied to the Guaranteed Obligations, whether
matured or unmatured, in accordance with the terms of this Agreement and the
Amended and Restated Credit Agreement or to be held as Pledged

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Collateral for any Guaranteed Obligations thereafter arising. The Company
acknowledges it will derive substantial economic benefits from the financing
arrangements contemplated by the Amended and Restated Credit Agreement and the
Secured Hedging Obligations and that the waiver set forth in this subsection (c)
is knowingly made in contemplation of such benefits.

         SECTION 7. EFFECT OF BANKRUPTCY PROCEEDINGS, ETC.; REINSTATEMENT. The
obligations of the Company under this Agreement shall continue to be effective,
or be automatically reinstated, as the case may be, if at any time payment, in
whole or in part, of any of the Guaranteed Obligations is rescinded or must
otherwise be restored or returned by the Agent or the Lenders (as a preference,
fraudulent conveyance or otherwise) upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Borrower or any other person
or entity or upon or as a result of the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to the Borrower, or
any other party, or any substantial part of its property, or otherwise, all as
though such payments had not been made. If an Event of Default shall at any time
have occurred and be continuing or shall exist and declaration of default or
acceleration under or with respect to the Amended and Restated Credit Agreement
or the Secured Hedging Obligations, or any Guaranteed Obligation shall at such
time be prevented by reason of the pendency against the Borrower or any other
Person or entity of a case or proceeding under a bankruptcy or insolvency law,
the Company agrees that, for purposes of this Agreement and its obligations
hereunder, the Amended and Restated Credit Agreement, the Secured Hedging
Obligations and such Guaranteed Obligation shall be deemed to have been declared
in default or accelerated with the same effect as if the Amended and Restated
Credit Agreement, the Secured Hedging Obligations and such Guaranteed Obligation
had been declared in default and accelerated in accordance with their respective
terms and the Company shall forthwith pay the amounts specified to be paid
thereunder in accordance with their respective terms and all other Guaranteed
Obligations without further notice or demand.

         SECTION 8. REPRESENTATIONS OF THE COMPANY. The Company hereby
represents and warrants to the Agent and the Lenders as follows:

         Section 8.1 Location. The chief place of business and chief executive
office of the Company is located at the address first specified above for the
Company.

         Section 8.2 Security Interest. This Agreement and the pledge and
delivery of the Pledged Collateral pursuant hereto constitute a valid and
continuing Lien on the Pledged Collateral and create a valid and perfected first
priority security interest in the Pledged Collateral in favor of the Agent
securing the payment of the Guaranteed Obligations, and all filings and other
actions necessary or desirable to perfect and protect such security interest
have been duly taken.

                                      -11-
<PAGE>   13
         SECTION 9. COVENANTS. The Company hereby covenants and agrees that on
and after the date hereof, so long as this Agreement shall remain in effect, it
shall comply with the following provisions:

         Section 9.1 Continuous Perfection. The Company shall not change its
name, identity or structure in any manner which might make any financing or
continuation statement filed hereunder misleading within the meaning of Section
9-402(7) of the UCC (or any other then applicable provision of the UCC) unless
the Company shall have given the Agent and the Lenders at least 90 days' prior
written notice thereof of its intention to so change and shall have taken all
action (or made arrangements to take such action substantially simultaneously
with such change if it is impossible to take such action in advance) necessary,
or reasonably requested by the Agent and the Lenders, to amend such financing or
continuation statement so that it is not misleading.

         Section 9.2 Amendment of Organization Documents. The Company shall not
amend its [Limited Partnership Agreement] in a manner that affects adversely the
Agent or the Lenders.

         Section 9.3 Further Assurances.

         (a) From time to time, at the expense of the Company, the Company will
promptly execute and deliver all further instruments and documents and take all
further action, that may be necessary or desirable, or that the Agent or the
Lenders reasonably may request, in order to perfect and protect any pledge,
assignment or security interest granted or purported to be granted hereby or to
enable the Agent or the Lenders to exercise and enforce their rights and
remedies hereunder with respect to any Pledged Collateral. Without limiting the
generality of the foregoing, the Company will execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as the Agent or the Lenders may
request, in order to perfect and preserve the pledge, assignment and security
interest granted or purported to be granted hereby.

         (b) The Company hereby authorizes the Agent or the Lenders to file one
or more financing or continuation statements, and assignments thereof and
amendments thereto, relating to all or any part of the Pledged Collateral
without the signature of the Company where permitted by law. A photocopy or
other reproduction of this Agreement or any financing statement covering the
Pledged Collateral or any part thereof shall be sufficient as a financing
statement where permitted by law.

         (c) The Company will furnish to the Agent and the Lenders from time to
time statements and schedules further identifying and describing the Pledged
Collateral and such other reports in connection with the Pledged Collateral as
the Agent, the Lenders or the Company reasonably may request, all in reasonable
detail.

                                      -12-
<PAGE>   14
         (d) If the Company shall acquire in any manner any additional
Intercompany Notes, the Company shall forthwith (and without the necessity for
any request or demand by the Agent) deliver such Intercompany Notes to the Agent
in the same manner as described in Section 1.1(c), together with a supplement to
Schedule A reflecting the addition of such additional Intercompany Notes,
whereupon such additional Intercompany Notes shall be deemed to be pledged
hereunder for all purposes hereunder. If the Company shall at any time acquire
any additional shares of the capital stock of any class of Pledged Stock,
whether such acquisition shall be by purchase, exchange, reclassification,
dividend, or otherwise, or acquire any new shares of capital stock of any newly
formed or acquired Subsidiary (as defined under and to the extent permitted by
the Amended and Restated Credit Agreement), the Company shall forthwith (and
without the necessity for any request or demand by the Agent) deliver such
shares to the Agent in the same manner as described in Section 1.1(c), together
with a supplement to Schedule A reflecting the addition of such additional
shares of stock, whereupon such additional shares of stock shall be deemed to be
Pledged Stock for all purposes hereunder. The Company will hold in trust for the
Agent upon receipt and immediately thereafter deliver to the Agent any
instrument evidencing or constituting Pledged Collateral (except, so long as no
Event of Default has occurred and is continuing, ordinary cash dividends, if
any, paid with respect to the Pledged Stock and payments in respect of the
Intercompany Notes, in each case as permitted by the Amended and Restated Credit
Agreement).

         SECTION 10. EVENTS OF DEFAULT; REMEDIES.

         Section 10.1 Events of Default Defined. If any Event of Default shall
occur and be continuing (for any reason whatsoever and whether it shall be
voluntary or involuntary or by operation of law or otherwise), then (i) all
payments received by the Company under or in connection with any of the Pledged
Collateral shall be held by the Company in trust for the Agent and the Lenders,
shall be segregated from other funds of the Company and shall forthwith upon
receipt by the Company be turned over to the Agent for the ratable benefit of
the Lenders in the same form as received by the Company (duly endorsed by the
Company to the Agent, if required); (ii) any and all such payments so received
by the Lenders (whether from the Company or otherwise) will be applied by the
Lenders against their Guaranteed Obligations; and (iii) any amount remaining
after payment in full of all of the Guaranteed Obligations shall be paid over to
the Company.

         Section 10.2 Remedies.

         (a) If any Event of Default shall occur and be continuing, the Agent
and the Lenders may exercise in addition to all other rights and remedies
granted to the Agent and the Lenders in this Agreement, and under any other
instrument or agreement securing, evidencing or relating to the Guaranteed
Obligations, all rights and remedies of a secured party under the UCC as
applicable to the Pledged Collateral and all the rights granted to the Agent and
the Lenders. Without limiting the generality of the foregoing, the Company
expressly agrees that in any such event the Agent and the Lenders, without
demand of performance or other

                                      -13-
<PAGE>   15
demand, advertisement or notice of any kind (except the notice, specified below
of time and place of public or private sale) to or upon the Company or any other
Person (all and each of which demands, advertisements and/or notices are hereby
expressly waived), may forthwith assume, collect, receive, appropriate and
realize upon the Pledged Collateral, or any part thereof, and/or may forthwith
sell, lease, assign, give an option or options to purchase, or sell or otherwise
dispose of and deliver said Pledged Collateral (or contract to do so), or any
part thereof, in one or more parcels at a public or private sale or sales, at
any exchange broker's board or at its offices or elsewhere at such prices as the
Agent may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Agent and the Lenders shall have the right
upon any such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of said
Pledged Collateral so sold, free of any right or equity of redemption, which
equity of redemption the Company hereby releases, and in lieu of payment of such
actual purchase price may set-off the amount of such purchase price against the
Guaranteed Obligations then owing to such purchaser. The Company further agrees,
at the Agent's request, to assemble the Pledged Collateral and make it available
to the Agent at places which the Agent shall reasonably select, whether at the
Company's premises or elsewhere. The Agent and the Lenders shall retain the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses of every kind
incurred therein or incidental to the care, safe keeping or otherwise of any or
all of the Pledged Collateral or in any way relating to the rights of the Agent
and the Lenders hereunder, including reasonable attorneys' fees and legal
expenses, for application to the payment in whole or in part of the Guaranteed
Obligations, and only after so retaining such net proceeds and after the payment
by the Agent and the Lenders of any other amount required by any provision of
law, including Section 9-504(1)(c) of the UCC, need the Agent and the Lenders
account for the surplus, if any, to the Company. To the extent permitted by
applicable law, the Company waives all claims, damages and demands against the
Agent and the Lenders arising out of the repossession, retention or sale of the
Pledged Collateral, except to the extent that such claims, damages and demands
arise out of the willful misconduct or gross negligence of the Agent or the
Lenders.

         (b) The Company also agrees to pay all costs of the Agent and the
Lenders, including reasonable attorneys' fees, incurred with respect to the
collection of any of the Guaranteed Obligations and the enforcement and
protection of any of the rights of the Agent and the Lenders hereunder. All
costs and expenses incurred by each of the Agent and the Lenders with respect to
the enforcement, collection and protection of the Agent's and the Lenders'
interest in the Pledged Collateral shall be additional Guaranteed Obligations of
the Company to the Agent and the Lenders payable on demand, and secured by the
Pledged Collateral.

         (c) Any notice required to be given by the Agent of a sale, lease or
other disposition or other intended action by it with respect to any of the
Pledged Collateral which is deposited in the United States mails, postage
prepaid and duly addressed to the Company, at least 10 days prior to such
proposed action, shall constitute fair and reasonable notice to the

                                      -14-
<PAGE>   16
Company of any such action. The net proceeds realized by the Agent and the
Lenders upon any such sale or other disposition, after deduction for the expense
of retaking, holding, preparing for sale, selling or the like and the reasonable
attorneys' fees and legal expenses incurred by the Agent and the Lenders in
connection therewith, shall be applied as provided herein toward satisfaction of
the Guaranteed Obligations. The Agent and the Lenders shall account to the
Company for any surplus realized upon such sale or other disposition. The
commencement of any action, legal or equitable, or the rendering of any judgment
or decree for any deficiency shall not affect the Agent's and the Lenders'
security interest in the Pledged Collateral until the Guaranteed Obligations are
fully paid. The Company agrees that the Agent and the Lenders have no obligation
to preserve their rights to the Pledged Collateral against any other parties.
The Agent and the Lenders shall not be obligated to make any sale of Pledged
Collateral regardless of notice of sale having been given. The Agent may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.

         Section 10.3 Limitation on the Agent's and the Lenders' Duty in Respect
of Pledged Collateral. Except as otherwise provided herein, under no
circumstances whatsoever shall the Agent or the Lenders be deemed to assume any
responsibility for, or obligation or duty with respect to, any part or all of
the Pledged Collateral, of any nature or kind whatsoever, or any matter or
proceedings arising out of or relating thereto. The Agent and the Lenders shall
not be required to take any action of any kind to collect or protect any
interest in the Pledged Collateral, including, but not limited to, any action
necessary to preserve the rights of the Agent and the Lenders, and the Company
against prior parties to any of the Pledged Collateral. The Agent and the
Lenders shall not be liable or responsible in any way for the safe keeping, care
or custody of any of the Pledged Collateral if the Pledged Collateral is
accorded the same treatment and level of care as their own property, for any
loss or damages thereto, for any diminution in the value thereof, for any act or
default of any agent or bailee of the Agent, the Lenders, the Company or of any
carrier, forwarding agency or other person whomsoever or for the collection of
any proceeds, except to the extent that the selection of such agent, bailee,
carrier or other person involved gross negligence or willful misconduct. The
Company hereby releases the Agent and the Lenders from any claims, causes of
action and demands at any time arising out of or with respect to this Agreement
or the Guaranteed Obligations and any actions taken or omitted to be taken by
the Agent and the Lenders with respect thereto, and the Company hereby agrees to
hold the Agent and the Lenders harmless from and with respect to any and all
such claims, causes of action and demands. The Company hereby releases the Agent
and the Lenders from any claims, causes of action and demands arising under 42
U.S.C. Section 9607 or 9613 or similar provisions of state or local law.

         Section 10.4 Remedies Cumulative. No remedy conferred upon the Agent
and the Lenders is intended to be exclusive of any other remedy, and each and
every such remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute or otherwise.

                                      -15-
<PAGE>   17
         Section 10.5 Remedies Not Waived. No course of dealing between the
Company and the Agent and the Lenders and no delay or failure in exercising any
rights hereunder in respect thereof shall operate as a waiver of any of the
rights of the Agent and the Lenders.

         SECTION 11. AMENDMENT AND WAIVER. No amendment or waiver of any
provision of this Agreement and no consent to any departure by the Company
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Agent, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given and shall
not be deemed to waive any other breach hereunder; provided, however, that no
amendment, waiver or consent, unless in writing and signed by all the Lenders,
shall (a) limit the liability of the Company hereunder, (b) postpone any date
fixed for payment hereunder or (c) change the number of Lenders required to take
any action hereunder.

         No failure on the part of the Agent or the Lenders to exercise, and no
delay in exercising any right hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right preclude any other, or
further exercise thereof or the exercise of any other right.

         SECTION 12. MISCELLANEOUS.

         Section 12.1 Expenses. The Company will pay the Agent and the Lenders
for any and all sums, costs and expenses which the Agent or the Lenders may pay
or incur by reason of defending, protecting or enforcing the security interest
herein granted or the priority hereof, enforcing payment of the Guaranteed
Obligations, discharging any Lien or claim against the Pledged Collateral or any
part thereof or, if the Company fails to perform or comply with any of its
agreements herein, performing or complying with such terms. Such sums, costs and
expenses shall include, without limitation, all court costs, collection charges,
travel and reasonable attorneys' fees (including fees and expenses incident to
the enforcement of payment of any obligations of the Company by any action or
participation in, or connection with, a case or proceeding under Chapters 7, 11
or 13 of the Bankruptcy Code). All sums, costs and expenses of the Agent and the
Lenders payable by the Company pursuant to this Agreement shall be payable by
the Company to the Agent and the Lenders on demand and shall constitute
Guaranteed Obligations secured by the Pledged Collateral.

         Section 12.2 Reliance on and Survival of Representations. All
agreements, representations and warranties of the Company herein and in any
certificates or other instruments delivered pursuant to this Agreement shall (a)
be deemed to be material and to have been relied upon by the Agent and the
Lenders, notwithstanding any investigation heretofore or hereafter made by the
Agent and the Lenders or on their behalf and (b) survive the execution and
delivery of this Agreement and of the Notes, and shall continue in effect so
long as any Note or Obligation is outstanding and thereafter as provided in
Sections 10 and 12.1.

                                      -16-
<PAGE>   18
         Section 12.3 Successors and Assigns; Transfers of the Notes. This
Agreement shall bind and inure to the benefit of, and be enforceable by, the
Company, the Agent, the Lenders, and their respective permitted successors and
assigns, and, in addition, shall inure to the benefit of, and be enforceable by,
each Person who shall from time to time be a holder of any of the Notes. The
Company may not assign its rights and obligations under this Agreement, except
pursuant to a reorganization permitted under the Amended and Restated Credit
Agreement. The Lenders may transfer the Notes (and any portion thereof) at any
time without the consent of the Company, subject to compliance with all
applicable Gaming Laws and state and federal securities laws and the
requirements of Section 9 of the Amended and Restated Credit Agreement.

         Section 12.4 Notices. All notices and other communications provided for
in this Agreement shall be in writing and delivered, telecopied or mailed, first
class postage prepaid, and addressed to:

         (a)  if to the Company:

              c/o Horseshoe Gaming, Inc.
              4024 Industrial Road
              Las Vegas, Nevada 89103

              Attention: Paul Alanis

              Telephone:  (702) 650-0080
              Telecopy:  (702) 650-0081

              with a copy to:

              RIORDAN & MCKINZIE
              695 Towne Center Drive
              Suite 1500
              Costa Mesa, California 92626

              Attention: Jim Shnell, Esq.

              Telephone:  (714) 433-2616
              Telecopy:  (714) 699-5435

         (b)  if to the Agent or the Lenders, at their respective addresses as
set forth in the Amended and Restated Credit Agreement or at such other address
as shall be provided to the Borrower in accordance to the terms of the Amended
and Restated Credit Agreement.

                                      -17-
<PAGE>   19
         Any such notice or communication shall be deemed to have been duly
given when delivered or telecopied and, if mailed, two days after deposit in the
U.S. mail as aforesaid.

         Section 12.5 Severability. If any term or provision hereof or the
application thereof to any circumstance, in any jurisdiction and to any extent,
shall be invalid or unenforceable, such term or such provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable any remaining
terms and provisions hereof or the application of such term or provision to
circumstances other than those as to which it is held invalid or unenforceable.
To the fullest extent permitted by applicable law, the parties hereto hereby
waive any provision of law which renders any term or provision hereof invalid or
unenforceable in any respect.

         Section 12.6 Governing Law. This Agreement and the Notes, the Letters
of Credit, the Secured Hedging Obligations and (unless otherwise provided) all
amendments, supplements, waivers and consents relating hereto or thereto shall
be governed by, and construed in accordance with, the internal laws of the State
of New York.

         Section 12.7 Forum and Jurisdiction. The Company represents and
warrants that it is not entitled to immunity from judicial proceedings and, for
purposes of any action, suit or other proceeding in respect of, or arising out
of or in connection with, this Agreement or any course of conduct, course of
dealing, statements or actions of the Company, the Agent or the Lenders related
thereto, the Company hereby submits and consents to the jurisdiction of the
courts of the State of New York and of the United States District Court for the
Southern District of New York, and the Company agrees that any such action, suit
or proceeding may be brought by the Agent or the Lenders in the Supreme Court of
the State of New York, New York County, or in the United States District Court
for the Southern District of New York, and the service of process may be made
upon the Company by mailing a copy of the summons and any complaint to the
Company by registered mail, at the address specified in Section 12.4. The
Company hereby waives and agrees not to assert, by way of motion or otherwise,
in any action, suit or proceeding, any claim that it is not personally subject
to the jurisdiction of the above-named courts, that the action is brought in an
inconvenient forum or that the venue of the action is improper. The Agent and
the Lenders, nevertheless, may serve, process or commence any such action, suit
or proceeding in such other jurisdiction(s), and in such other manner as may be
permitted by applicable law. The methods of service of process specified in this
paragraph may be used in the alternative or together as the Agent and the
Lenders may see fit.

         Section 12.8 Headings. The headings in this Agreement are for
convenience only and shall not be construed as a part of this Agreement.

         Section 12.9 Term of Agreement. This Agreement and all agreements of
the Company contained herein shall continue in full force and effect and shall
not be discharged until such time as the Guaranteed Obligations shall be
indefeasibly paid or performed in full

                                      -18-
<PAGE>   20
and all of the agreements of (a) the Borrower under the Amended and Restated
Credit Agreement and the Secured Hedging Obligations and (b) the Company
hereunder shall be fully paid or performed; provided, certain provisions of this
Agreement shall survive such termination as expressly set forth herein.

         IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed delivered as of the date first above written.


                                        NEW GAMING CAPITAL PARTNERSHIP
                                        A NEVADA LIMITED PARTNERSHIP

                                        By:    HORSESHOE GP, INC.,
                                               its general partner

                                        By:    ________________________________
                                               Name:  Walter J. Haybert
                                               Title: Treasurer

                                      -19-
<PAGE>   21
                                   SCHEDULE A


Pledged Stock


         General and Limited Partner Interests in Horseshoe Entertainment
(uncertificated).






Intercompany Notes

         None.
<PAGE>   22
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               Page
<S>                                                                                                           <C>
SECTION 1.  TERMS AND DEFINITIONS.................................................................................2
         Section 1.1    Definitions...............................................................................2
         Section 1.2    Additional Terms..........................................................................4
         Section 1.3    Action by the Agent or the Lenders........................................................4

SECTION 2.  GUARANTEE.............................................................................................4
         Section 2.1    Guaranteed Obligations....................................................................4
         Section 2.2    Guarantee Absolute........................................................................4
         Section 2.3    Subordination.............................................................................5

SECTION 3.  GRANT OF SECURITY.....................................................................................5
         Section 3.1    Pledged Collateral........................................................................5

SECTION 4.  OBLIGATIONS UNCONDITIONAL.............................................................................7

SECTION 5.  APPOINTMENT AS ATTORNEY-IN-FACT.......................................................................8

SECTION 6.  WAIVERS...............................................................................................9

SECTION 7.  EFFECT OF BANKRUPTCY PROCEEDINGS, ETC.;  REINSTATEMENT...............................................11

SECTION 8.  REPRESENTATIONS OF THE COMPANY.......................................................................11
         Section 8.1    Location.................................................................................11
         Section 8.2    Security Interest........................................................................11

SECTION 9.  COVENANTS............................................................................................11
         Section 9.1    Continuous Perfection....................................................................12
         Section 9.2    Amendment of Organization Documents......................................................12
         Section 9.3    Further Assurances.......................................................................12

SECTION 10. EVENTS OF DEFAULT; REMEDIES.........................................................................13
         Section 10.1   Events of Default Defined................................................................13
         Section 10.2   Remedies.................................................................................13
         Section 10.3   Limitation on the Agent's and the Lenders' Duty in Respect of Pledged Collateral.........15
         Section 10.4   Remedies Cumulative......................................................................15
         Section 10.5   Remedies Not Waived......................................................................15
</TABLE>

                                       -i-
<PAGE>   23
<TABLE>
<CAPTION>
<S>                                                                                                             <C>
SECTION 11.     AMENDMENT AND WAIVER.............................................................................16

SECTION 12.     MISCELLANEOUS....................................................................................16
         Section 12.1     Expenses...............................................................................16
         Section 12.2     Reliance on and Survival of Representations............................................16
         Section 12.3     Successors and Assigns; Transfers of the Notes.........................................16
         Section 12.4     Notices................................................................................17
         Section 12.5     Severability...........................................................................17
         Section 12.6     Governing Law..........................................................................18
         Section 12.7     Forum and Jurisdiction.................................................................18
         Section 12.8     Headings...............................................................................18
         Section 12.9     Term of Agreement......................................................................18
</TABLE>

                                      -ii-