SECURITY AGREEMENT

                               September 29, 2000

                                      From

                           GB PROPERTY FUNDING CORP.,
                       GREATE BAY HOTEL AND CASINO, INC.,
                                       AND
                                GB HOLDINGS, INC.

                                       to

                WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION

                                   as Trustee

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                               TABLE OF CONTENTS

                                                                         PAGE(s)
                                                                         -------
SECTION 1
        Grant of Security......................................................2
SECTION 2
        Security for Obligations...............................................4
SECTION 3
        Grantors Remain Liable.................................................4
SECTION 4
        Delivery of Security Collateral and Account Collateral.................4
SECTION 5
        Maintaining the Pledged Accounts.......................................4
SECTION 6
        Investing of Amounts in the Pledged Accounts...........................5
SECTION 7
        Release of Amounts.....................................................5
SECTION 8
        Representations and Warranties.........................................5
SECTION 9
        Certain Covenants......................................................6
SECTION 10
        As to Equipment and Inventory..........................................7
SECTION 11
        Insurance..............................................................8
SECTION 12
        Place of Perfection; Records; Collection of Receivables................8
SECTION 13
        Voting Rights; Dividends; Etc..........................................9
SECTION 14
        As to the Assigned Agreements.........................................10
SECTION 15
        Payments Under the Assigned Agreements................................10
SECTION 16
        Trustee Appointed Attorney-in-Fact....................................10
SECTION 17
        Trustee May Perform...................................................11
SECTION 18
        The Trustee's Duties..................................................11
SECTION 19
        Remedies..............................................................11
SECTION 20
        Registration Rights...................................................12

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SECTION 21
        Expenses..............................................................13
SECTION 22
        Security Interest Absolute............................................13
SECTION 23
        Amendments; Waivers; Etc..............................................13
SECTION 24
        Addresses for Notices.................................................13
SECTION 25
        Continuing Security Interest; Assignments Under the Indenture.........13
SECTION 26
        Release and Termination...............................................14
SECTION 27
        Casino Control Act....................................................15
SECTION 28
        Regulatory Matters....................................................15
SECTION 29
        The Mortgages.........................................................16
SECTION 30
        Governing Law; Terms..................................................16

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Schedule I       -    Pledged Shares and Pledged Debt

Schedule II      -    Assigned Agreements

Schedule III     -    Locations of Equipment and Inventory

Schedule IV      -    Trade Names

<PAGE>

                               SECURITY AGREEMENT

            SECURITY AGREEMENT dated September __, 2000 made by each of GB
PROPERTY FUNDING CORP., a Delaware corporation having its principal office at
c/o Sands Hotel and Casino (the "Company"), GREATE BAY HOTEL AND CASINO, INC., a
New Jersey corporation ("GBHC") and GB HOLDINGS, INC., a Delaware corporation
("Holdings"), each with an office at Indiana Avenue & Brighton Park, Atlantic
City, New Jersey 08401 to WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association, as trustee (the "Trustee") (in such capacity,
together with any successor appointed pursuant to the Indenture, the "Trustee")
for the Holders under an Indenture dated as of September 29, 2000 among the
Company, as Issuer, the Trustee and each of GBHC and Holdings, as Guarantors
(such Indenture, as it may be amended, supplemented or otherwise modified from
time to time in accordance with its terms, the "Indenture"). Each of the
Company, GBHC, and Holding and each Additional Collateral Grantor is hereinafter
referred to, individually, as a "Grantor" and, collectively, the "Grantors".
Capitalized terms not otherwise defined in this Agreement shall have the
meanings set forth in the Indenture.

            PRELIMINARY STATEMENTS.

            (1) Each of the Company, the Trustee, GBHC and Holdings has entered
into the Indenture pursuant to which the Company will issue, and GBHC and
Holdings will each guarantee, on the date hereof up to $110,000,000 aggregate
principal amount of 11% First Mortgage Notes Due 2005 (the "First Mortgage
Notes"or the "Securities").

            (2) The First Mortgage Notes are being issued in replacement of
those certain 10 7/8% First Mortgage Notes of the Company in the original
principal amount of $185,000,000 due 2004 (the "Original First Mortgage Notes")
that are being discharged and replaced by The First Mortgage Notes as a result
of the Confirmation of the Fifth Amended Joint Plan (the "Reorganization") of
Reorganization under Chapter 11 prepared by the Official Committee of Unsecured
Creditors and High River, by the United States Bankruptcy Court for the District
of New Jersey (the "Bankruptcy Court") on August 11, 2000.

            (3) GBHC has also opened a special account (the "Collateral
Account") with PNC Bank (the "Bank") at its offices at Edison, New Jersey,
Account No. 8102693449, in the name of GBHC but under the sole dominion and
control of the Trustee and subject to the terms of this Agreement. GBHC will
deposit upon receipt thereof, Collateral Proceeds, if any, received by it from
Asset Sales and Events of Loss in the Collateral Account, as provided in the
Indenture. The Collateral Account is hereinafter referred to as the "Pledged
Account".

            (4) Each Grantor is the owner of the shares of stock (the "Shares")
described opposite such Grantor's name in Part I of Schedule I hereto and issued
by the entity set forth therein.

            (5) It is a condition precedent to the execution of the Indenture by
the Trustee that each of the Grantors shall have granted to the Trustee the
assignment and security interest and made the pledge and assignment contemplated
by this Agreement.

<PAGE>

            NOW, THEREFORE, in consideration of the premises, each Grantor
hereby agrees with the Trustee for its benefit and the ratable benefit of the
Holders as follows:

            SECTION 1. Grant of Security. Each Grantor, hereby assigns and
pledges to the Trustee, as secured party, for its benefit and the ratable
benefit of the Holders, and hereby grants to the Trustee, as secured party, for
its benefit and the ratable benefit of the Holders, a security interest in (and
only in and to), the following, to the extent owned by such Grantor as of the
date hereof (collectively, the "Collateral"):

            (a) all of such Grantor's right, title and interest owned as of the
      date hereof, in and to all equipment in all of its forms, wherever
      located, including, but not limited to, all plant furnishings, fixtures,
      gaming equipment, computers, electric data processing equipment,
      telecommunications equipment, office equipment, transportation equipment
      (including, without limitation, the "People Mover", as such term is
      defined in the Mortgage), other fixed assets, handling and delivery
      equipment, furniture, appliances, vehicles and books and records, parts
      (including spare parts) and accessories, whether installed thereon or
      affixed thereto (any and all of the foregoing being the "Equipment");

            (b) all of such Grantor's right, title and interest owned as of the
      date hereof, in and to inventory of such Grantor, including, but not
      limited to, all goods, merchandise, raw materials, work in process,
      finished goods, goods held for manufacture, processing, the providing of
      services or sale, use or consumption in the operation of such Grantor's
      business (including, without limitation, provisions in storerooms,
      refrigerators, kitchens, pantries, beverages in wine cellars or bars,
      fuel, supplies and similar items), goods in which such Grantor has an
      interest in mass or a joint or other interest or right of any kind
      (including, without limitation, goods in which such Grantor has an
      interest or right as consignee) and goods that are returned to or
      repossessed by such Grantor, and all accessions thereto and products
      thereof and documents therefor (any and all of the foregoing being the
      "Inventory");

            (c) all of such Grantor's right, title and interest owned as of the
      date hereof, in all accounts receivables, contract rights, chattel paper,
      general intangibles, intellectual property, goodwill, tradenames,
      copyrights, trademarks, permits, licenses, authorizations, plans and
      specifications, and all rights now existing in and to all security
      agreements, leases and other contracts securing or otherwise relating to
      the foregoing, (any and all of the foregoing, to the extent not referred
      to in clause (d), (e) or (f) below, being the "Receivables," and any and
      all such leases, security agreements, and other contracts being the
      "Related Contracts");

            (d) all of such Grantor's right, title and interest owned as of the
      date hereof, in all of the following (the "Security Collateral"):

                  (i) the Shares (such Shares, being, collectively, the "Pledged
            Shares"), the certificates representing the Pledged Shares, and all
            dividends paid in additional shares of stock of GBHC or the Company,
            from time to time received,


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<PAGE>

            receivable or otherwise distributed in respect of or in exchange for
            any or all of the Pledged Shares; and

                  (ii) and any other indebtedness for borrowed money owed to
            Holdings, GBHC, the Company or any other Grantor by any obligor and
            the instruments evidencing the same other than: (x) Indebtedness
            between or among any of Holdings, GBHC and the Company and (y)
            Gaming Related Items (collectively, the "Pledged Debt");

            (e) all of such Grantor's right, title and interest owned as of the
      date hereof, in and to the agreements listed on Schedule II, to which such
      Grantor is now a party, in each case as such agreements may be amended or
      otherwise modified from time to time (collectively, the "Assigned
      Agreements"), including, without limitation, (i) all rights of such
      Grantor under such Assigned Agreements to assert claims arising out of or
      for breach of or default under the Assigned Agreements and (ii) the right
      of such Grantor to terminate the Assigned Agreements, to perform
      thereunder and to compel performance and otherwise exercise all remedies
      thereunder (all such Collateral being the "Agreement Collateral");

            (f) all of the following (collectively, the "Account Collateral"):

                  (i) the Collateral Account, all funds held therein and all
            certificates and instruments, if any, from time to time representing
            or evidencing the Collateral Account or any instrument thereof;

                  (ii) all notes, certificates of deposit, checks and other
            instruments from time to time hereafter delivered to or otherwise
            possessed by the Trustee or the Pledged Account for or on behalf of
            the relevant Grantor in substitution for or as an addition to any or
            all of the then existing Account Collateral; and

                  (iii) all interest, dividends, cash, instruments and other
            property from time to time received, receivable or otherwise
            distributed in respect of any or all of the then existing Account
            Collateral; and

            (g) to the limited extent required under Section 1404 of the
      Indenture to be deposited in the Pledged Account as the result of an Asset
      Sale or Event of Loss: all proceeds of any and all of the foregoing
      Collateral (including, without limitation, proceeds that constitute
      property of the types described in clauses (a) - (f) of this Section 1)
      including proceeds in the form of payments under insurance (whether or not
      the Trustee is the loss payee thereof), or any indemnity, warranty or
      guaranty, payable by reason of loss or damage to or otherwise with respect
      to any of the foregoing Collateral.

            Anything in this Agreement, in the Indenture or any of the other
      Security Documents to the contrary, notwithstanding, the foregoing
      provisions of this Section 1 shall not apply to and the terms
      "Collateral", "Equipment", "Inventory", "Receivables" "Related Contracts",
      "Security Collateral" "Pledged Debt" "Assigned Agreements",


                                       3
<PAGE>

      "Agreement Collateral" and "Account Collateral" shall not include or
      deemed to include to any extent (any and all of the following, the
      "Excluded Property") (i) any CRDA Investments, (ii) any accounts
      receivable consisting solely of gaming debt; (iii) any other revenues,
      receivables or rights of payment arising out of the conduct of casino
      operations or other gaming activities (collectively, the "Gaming Related
      Items"); (iv) cash or cash equivalents other than those held in the
      Collateral Account; (v) any real property or interests therein (except,
      with respect to this clause (v), as specifically set forth in the
      Mortgage); or (vi) any assets or property or interest therein acquired
      after the date hereof.

            SECTION 2. Security for Obligations. This Agreement secures, in the
case of the Company, all of the Company's payment obligations now or hereafter
existing under or with respect to the Securities, the Indenture or any of the
Security Documents and, in the case of GBHC and Holdings, all of its obligations
with respect to their Guarantees, in each case whether for principal, interest
(including, without limitation, interest after the filing of a petition
initiating any proceeding referred to in Section 501(7) or (8) of the
Indenture), premium, fees, expenses or otherwise (all such obligations being the
"Secured Obligations"). Without limiting the generality of the foregoing, this
Agreement secures the payment of all amounts that constitute part of the Secured
Obligations and would be owed by the Company, GBHC or Holdings to the Trustee or
the Holders under or with respect to the Securities, the Indenture, the
Guarantees or any of the Security Documents but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving any Grantor.

            SECTION 3. Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements of such Grantor included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Trustee of any of the rights hereunder shall not release any Grantor from any of
its duties or obligations under the contracts and agreements included in the
Collateral and (c) neither the Trustee nor any Holder shall have any obligation
or liability under the contracts and agreements included in the Collateral by
reason of this Agreement, nor shall the Trustee or any Holder be obligated to
perform any of the obligations or duties of any person thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.

            SECTION 4. Delivery of Security Collateral and Account Collateral.
All certificates or instruments representing or evidencing Security Collateral
or Account Collateral shall be delivered to and held by or on behalf of the
Trustee pursuant hereto and shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to the
Trustee.

            SECTION 5. Maintaining the Pledged Account. Until such time as the
Indenture shall have been satisfied or discharged in accordance with Sections
401 or 1302 thereof, BHC will maintain the Pledged Account with the Bank, or
such other bank that is acceptable to the Trustee (the Bank, or any other such
bank being the "Pledged Account Bank"). The Pledged Account shall be subject to
such applicable laws, and such applicable regulations of the Board of Governors
of the Federal Reserve System and of any other appropriate banking or
governmental authority, as may now or hereafter be in effect.


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<PAGE>

            SECTION 6. Investing of Amounts in the Pledged Account. The Trustee
will upon receipt of the written instructions of GBHC from time to time, subject
to the provisions of Sections 7 and 20 hereof, instruct the Pledged Account Bank
to (a) invest amounts on deposit in the Pledged Account in such Cash Equivalents
(as such term is defined in the Indenture, except that, as used herein, such
definition shall not be limited to the extent owned by Holdings or any of its
Subsidiaries) in the name of the Trustee as GBHC may select and (b) invest
interest paid on the Cash Equivalents referred to in clause (a) above, and
reinvest other proceeds of any such Cash Equivalents that may mature or be sold
in each case in such Cash Equivalents in the name of the Trustee as to which all
actions required by Section 9(e) shall have been taken as GBHC may select (the
Cash Equivalents referred to in clauses (a) and (b) above being, collectively,
the "Collateral Investments").

            SECTION 7. Interest. Interest and proceeds that are not invested or
reinvested in Collateral Investments as provided in the immediately preceding
Section shall be deposited and held in the Pledged Account.

            SECTION 8. Representations and Warranties. Each Grantor represents
and warrants as follows:

            (a) All of the Equipment and Inventory are located at the places
      specified in Schedule III hereto. The chief place of business and chief
      executive office of such Grantor and the office where such Grantor keeps
      its records concerning the Receivables, and all originals of all chattel
      paper that evidence Receivables, are located at the address first
      specified above with respect to such Grantor. None of the Receivables is
      evidenced by a promissory note or other instrument.

            (b) Such Grantor is the legal and beneficial owner of the Collateral
      with respect to which it is granting a security interest pursuant to this
      Agreement free and clear of any Lien, except for the security interest
      created by this Agreement, Liens in favor of the Trustee and Liens
      permitted by the Indenture. No effective financing statement or other
      instrument similar in effect covering all or any part of the Collateral is
      on file in any recording office, except such as may have been filed in
      favor of the Trustee relating to this Agreement or any other Security
      Document. All of the Trade Names of such Grantor are listed on Schedule IV
      hereto.

            (c) The Pledged Shares have been duly authorized and validly issued
      and are fully paid and non-assessable.

            (d) The Shares constitute all of the issued and outstanding shares
      of the Company and GBHC. On the date hereof Holdings has no Subsidiaries
      with substantial operations or more than de minimis assets, other than
      GBHC, the Company, and Lieber Check Cashing, LLC, whose sole member is
      GBHC.

            (e) This Agreement, the pledge of the Security Collateral pursuant
      hereto and the pledge and assignment of the Agreement Collateral and the
      Account Collateral


                                       5
<PAGE>

      pursuant hereto create a valid and perfected first priority security
      interest in the Collateral, except as otherwise permitted or contemplated
      herein, or under the Indenture or the Security Documents. All filings and
      other actions necessary or desirable to perfect the security interest
      granted hereunder have been duly taken.

            (f) No consent of any other Person and no authorization, approval or
      other action by (except for such consents, authorizations, approvals or
      other actions as shall have been obtained and shall be in full force and
      effect on or before the date hereof), and no notice to or filing with, any
      governmental authority or regulatory body or other third party is required
      either (i) for the grant by such Grantor of the assignment and security
      interest granted hereby, or for the execution, delivery or performance of
      this Agreement by such Grantor, (ii) for the perfection or maintenance of
      the pledge, assignment and security interest created hereby, except for
      the filing of financing and continuation statements under the Uniform
      Commercial Code, which financing statements have been duly filed, or (iii)
      for the exercise by the Trustee of its voting or other rights provided for
      in this Agreement or the remedies in respect of the Collateral pursuant to
      this Agreement, except as may be required by applicable law or in the
      Indenture, or in connection with the disposition of any portion of the
      Security Collateral by laws affecting (A) the offering and sale of
      securities generally and (B) the Gaming Laws.

            (g) The Inventory in which GBHC is granting a security interest
      pursuant to this Agreement has been produced by GBHC in compliance with
      all requirements of the Fair Labor Standards Act.

            SECTION 9. Certain Covenants. Until such time as the Indenture shall
have been satisfied or discharged in accordance with Sections 401 or 1302
thereof, each Grantor will:

            (a) Compliance with Laws, Etc. Comply, and cause each of its
      Subsidiaries to comply, in all material respects, with all applicable
      laws, rules, regulations and orders, such compliance to include, without
      limitation, compliance with the Employment Retirement Income Security Act
      of 1974, as amended, and the Racketeer Influenced and Corrupt
      Organizations Chapter of the Organized Crime Control Act of 1970.

            (b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
      Subsidiaries to pay and discharge, before the same shall become delinquent
      (i) all taxes, assessments and governmental charges or levies imposed upon
      it or upon the Collateral and (ii) all lawful claims that, if unpaid,
      might by law become a Lien upon the Collateral in accordance with, and to
      the extent required under, Section 1005 of the Indenture.

            (c) Production of Inventory. Produce, and cause each of its
      Subsidiaries to produce, all Inventory, if any, in which such Grantor is
      granting a security interest in compliance with all requirements of the
      Fair Labor Standards Act.

            (d) Visitation Rights: Maintenance of Books and Records. Permit the
      Trustee or any agents or representatives thereof at any reasonable time
      and from time to time to examine and make copies of and abstracts from the
      records and books of account of, and


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<PAGE>

      visit the properties of, such Grantor and any of its subsidiaries, and to
      discuss the affairs, finances and accounts of such Grantor and any of its
      subsidiaries with any of their officers or directors and with their
      independent public accountants and, at its own cost and expense, keep
      reasonably satisfactory and reasonably complete records of the Collateral
      including, without limitation, all payment received or receivable with
      respect thereto and all other dealings with the Collateral.

            (e) Further Assurances. From time to time at the sole expense of
      such Grantor:

            (i) promptly execute and deliver all further instruments and
      documents, and take all further action, that may be necessary or
      desirable, or that the Trustee 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 Trustee to exercise and enforce its
      rights and remedies hereunder with respect to any Collateral; and

            (ii) furnish to the Trustee statements and schedules further
      identifying and describing the Collateral and such other reports in
      connection with the Collateral as the Trustee may reasonably request, all
      in reasonable detail.

            Each Grantor hereby authorizes the Trustee to file one or more
      financing or continuation statements, and amendments thereto, relating to
      all or any part of the Collateral without the signature of such Grantor
      where permitted by law. A photocopy or other reproduction of this
      Agreement or any financing statement covering the Collateral or any part
      thereof shall be sufficient as a financing statement where permitted by
      law.

            SECTION 10. As to Equipment and Inventory. (a) Each Grantor shall
keep the Equipment and Inventory with respect to which such Grantor is granting
a security interest pursuant to this Agreement at the places therefor specified
in Section 8(a) or, upon 30 days' prior written notice to the Trustee, at such
other places in a jurisdiction where all action required by Section 9(e) shall
have been taken with respect to such Equipment and Inventory.

            (b) Each Grantor shall cause the Equipment with respect to which
such Grantor is granting a security interest pursuant to this Agreement to be
maintained and preserved in the good condition, repair and working order. Each
Grantor shall promptly furnish to Trustee a statement with respect to any
material loss or material damage to any of such Equipment.

            (c) Each Grantor shall pay promptly when due all property and other
taxes, assessments and governmental charges or levies imposed upon, and all
claims (including claims for labor, materials and supplies) against, the
Equipment and Inventory with respect to which such Grantor is granting a
security interest pursuant to this Agreement; provided, however, that Holdings
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings. In producing the
Inventory with respect to which such Grantor is granting a security interest
pursuant to this Agreement, such Grantor shall comply with all requirements of
the Fair Labor Standards Act.


                                       7
<PAGE>

            SECTION 11. Insurance. (a) Each Grantor shall, at its own expense,
maintain insurance with respect to the Equipment and Inventory with respect to
which it is granting a security interest pursuant to this Agreement in such
amounts, against such risks and in such form, as is usually carried by companies
engaged in a business similar to the business conducted by such Grantor and in
the case of GBHC, by companies engaged in business in Atlantic City, New Jersey
similar to the business conducted by GBHC. Each policy for liability insurance
shall, to the extent available on a commercially reasonable basis, provide for
all losses to be paid on behalf of the Trustee, the Holders and such Grantor as
their interests may appear, and each policy for property damage insurance shall
provide that all losses (A) in excess of $1,000,000 or (B) which are paid or
incurred while a Default under the Indenture is in existence and continuing,
shall be paid directly to the Trustee. Each such policy shall in addition, to
the extent available on a commercially reasonable basis, (i) name such Grantor
and the Trustee as insured parties thereunder (without any representation or
warranty by or obligation upon the Trustee) as their interests may appear, (ii)
contain the agreement by the insurer that any loss thereunder shall be payable
to the Trustee notwithstanding any action, inaction or breach of representation
or warranty by such Grantor (other than the failure to make required payments),
(iii) provide that there shall be no recourse against the Trustee for payment of
premiums or other amounts with respect thereto and (iv) provide that at least 10
days' prior written notice of cancellation or of lapse shall be given to the
Trustee by the insurer. Each Grantor shall, if so requested by the Trustee,
deliver to the Trustee original or duplicate policies of such insurance and, as
often as the Trustee may reasonably request, a report of a reputable insurance
broker with respect to such insurance. Further, each Grantor shall, at the
request of the Trustee, duly execute and deliver instruments of assignment of
such insurance policies to comply with the requirements of Section 9(e) and
cause the insurers to acknowledge notice of such assignment.

            (b) Reimbursement under any liability insurance maintained by any
Grantor pursuant to this Section 11 may be paid directly to the Person who shall
have incurred liability covered by such insurance. In case of any Event of Loss
involving Collateral Trustee shall make the proceeds of any insurance available
to Grantor to permit compliance with the terms of the Indenture and the Security
Documents and such Grantor shall make or cause to be made the necessary repairs
to or replacements of such Equipment or Inventory to the extent required by
Section 1006 of the Indenture.

            SECTION 12. Place of Perfection; Records; Collection of Receivables.
(a) Each Grantor shall keep its chief place of business and chief executive
office and the office where it keeps its records concerning the Collateral, and
the original copies of documents included in the Collateral and all originals of
all chattel paper that evidence Receivables, at the location therefor specified
in Section 8(a) or, upon 30 days' prior written notice to the Trustee, at such
other locations in a jurisdiction where all actions required by Section 9(e)
shall have been taken with respect to the Collateral. Each Grantor will hold and
preserve such records, documents and chattel paper and will permit
representatives of the Trustee at any time during normal business hours to
inspect and make abstracts from such records and chattel paper.

            (b) Except as otherwise provided in this subsection (b), each
Grantor shall continue to collect, at its own expense, all amounts due or to
become due such Grantor under the Receivables. In connection with such
collections, such Grantor may take (and, at the Trustee's


                                       8
<PAGE>

direction, shall take) such action as such Grantor or the Trustee may deem
necessary or advisable to enforce collection of the Receivables; provided,
however, that the Trustee shall have the right at any time, upon the occurrence
and during the continuance of an Event of Default and upon written notice to
such Grantor of its intention to do so, to notify the obligors under any
Receivables of the assignment of such Receivables to the Trustee and to direct
such obligors to make payment of all amounts due or to become due to such
Grantor thereunder directly to the Trustee and, upon such notification and at
the expense of such Grantor, to enforce collection of any such Receivables, and
to adjust, settle or compromise the amount or payment thereof, in the same
manner and to the same extent as such Grantor might have done. After receipt by
such Grantor of the notice from the Trustee referred to in the proviso to the
immediately preceding sentence, (i) all amounts and proceeds (including
instruments) received by such Grantor in respect of the Receivables shall be
received in trust for the benefit of the Trustee hereunder, shall be segregated
from other funds of such Grantor and shall be forthwith paid over to the Trustee
in the same form as so received (with any necessary indorsement) to be deposited
at the option of the Trustee in the Collateral Account or another special
pledged account maintained by the Trustee and, thereafter, applied in accordance
with Section 19(b) hereof, other than amounts to be used to cure any such Event
of Default or otherwise make any payment in respect of the Securities or make
any payment or perform any obligation under the Indenture or other Security
Documents (all of which, whether paid to the Grantor or the Trustee, shall be
made available to the Grantor for such purposes) and (ii) such Grantor shall not
adjust, settle or compromise the amount or payment of any Receivable, release
wholly or partly any obligor thereof, or allow any credit or discount thereon.

            SECTION 13. Voting Rights; Dividends; Etc.:

            (a) (i) Each Grantor shall continue to be and shall be entitled to
      be, the record owner of all of the Security Collateral and shall be
      entitled to exercise or refrain from exercising any and all voting and
      other consensual rights pertaining to the Security Collateral or any part
      thereof.

            (ii) Each Grantor shall be entitled to receive and retain any and
      all cash dividends and interest paid in respect of the Security
      Collateral. All certificates distributed in respect of any stock dividends
      shall be, and shall be forthwith delivered to the Trustee to hold as,
      Security Collateral and shall, if received by such Grantor, be received in
      trust for the benefit of the Trustee, be segregated from the other
      property of any Grantor and be forthwith delivered to the Trustee as
      Security Collateral in the same form as so received. Each Grantor shall,
      upon the request of the Trustee, promptly execute such documents and
      perform such acts as may be necessary or advisable to give effect to this
      paragraph (ii).

            (iii) The Trustee shall execute and deliver (or cause to be executed
      and delivered) to any Grantor all such proxies and other instruments as
      such Grantor may reasonably request for the purpose of enabling such
      Grantor to exercise the voting and other rights that it is entitled to
      exercise pursuant to paragraph (i) above and to receive the dividends or
      interest payments that it is authorized to receive and retain pursuant to
      paragraph (ii) above.


                                       9
<PAGE>

            (b) Upon the occurrence and during the continuance of an Event of
Default:

            (i) All rights of each Grantor to receive the dividends and interest
      payments that it would otherwise be authorized to receive and retain
      pursuant to Section 13(a)(ii) shall automatically cease, and all such
      rights shall thereupon become vested in the Trustee, which shall thereupon
      have the sole right to receive and hold as Security Collateral such
      dividends and interest payments, in each case other than amounts to be
      used by a Grantor to cure any such Event of Default or otherwise make any
      payment in respect of the Securities or make any payment or perform any
      obligation under the Indenture or other Security Documents (all of which,
      whether paid to the Grantor or the Trustee, shall be made available to the
      Grantor for such purposes).

            (ii) All dividends and interest payments that are received by any
      Grantor contrary to the provisions of paragraph (i) of this Section 13(b)
      shall be received in trust for the benefit of the Trustee, shall be
      segregated from other funds of any Grantor and shall be forthwith paid
      over to the Trustee as Security Collateral in the same form as so received
      (with any necessary indorsement).

            SECTION 14. As to the Assigned Agreements. Each Grantor shall, at
its own expense furnish to the Trustee promptly upon receipt thereof copies of
all notices, and, upon the written request of the Trustee, copies of all
requests and other documents received by such Grantor under or pursuant to the
Assigned Agreements, and from time to time (A) furnish to the Trustee such
information and reports regarding the Collateral as the Trustee may reasonably
request and (B) upon request of the Trustee, make to each other party to any
Assigned Agreement such demands and requests for information and reports or for
action as such Grantor is entitled to make thereunder.

            SECTION 15. Payments Under the Assigned Agreements. Upon the
occurrence and during the continuation of an Event of Default, all payments due
or to become due under or in connection with such Assigned Agreement shall be
received in trust for the benefit of the Trustee hereunder, shall be segregated
from other property and funds of any Grantor and shall be forthwith paid over to
the Trustee in the same form as so received (with any necessary indorsement) to
be deposited in the Collateral Account and, thereafter, applied by the Trustee
in accordance with Section 19(b) hereof, in each case other than amounts to be
used by the Grantors to cure any such Event of Default or otherwise make any
payment in respect of the Securities or make any payment or perform any
obligation under the Indenture or the other Security Documents (all of which,
whether paid to the Grantor or the Trustee shall be made available to the
Grantor for such purposes).

            SECTION 16. Trustee Appointed Attorney-in-Fact. Effective upon and
during the continuance of an Event of Default, each Grantor hereby irrevocably
appoints the Trustee as its attorney-in-fact, with full authority in the place
and stead of such Grantor and in the name of such Grantor, to take any action
and to execute any instrument that is necessary to accomplish the purposes of
this Agreement.


                                       10
<PAGE>

            SECTION 17. Trustee May Perform. If any Grantor fails to perform any
agreement contained herein, the Trustee may itself, but shall have no obligation
to, perform, or cause performance of, such agreement, and the expenses of the
Trustee incurred in connection therewith shall be payable by such Grantor under
Section 21.

            SECTION 18. The Trustee's Duties. The powers conferred on the
Trustee hereunder are solely to protect its interest and the interests of
Holders in the Collateral. Except for (i) duties specifically imposed under this
Agreement, (ii) the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder and (ii) duties imposed
under the Trust Indenture Act of 1939, as amended, and the Indenture, the
Trustee shall have no duty as to any Collateral, as to ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relative to any Security Collateral, whether or not the Trustee or
any Holder has or is deemed to have knowledge of such matters, or as to the
taking of any necessary steps to preserve rights against any parties or any
other rights pertaining to any Collateral.

            SECTION 19. Remedies. If any Event of Default under the Indenture
shall have occurred and be continuing:

            (a) The Trustee may exercise in respect of the Collateral, in
      addition to other rights and remedies provided for herein, in the
      Indenture or any other Security Document or otherwise available to it, all
      the rights and remedies of a secured party upon default under the Uniform
      Commercial Code in effect in the State of New Jersey at such time (the
      "N.J. Uniform Commercial Code") (whether or not the N.J. Uniform
      Commercial Code applies to the affected Collateral) and also may (i)
      require any Grantor to, and such Grantor hereby agrees that it will at its
      expense and upon request of the Trustee forthwith, assemble all or part of
      the Collateral as directed by the Trustee and make it available to the
      Trustee at a place to be designated by the Trustee that is reasonably
      convenient to both parties and (ii) without notice except as specified
      below, sell the Collateral or any part thereof in one or more parcels at
      public or private sale, at any of the Trustee's offices or elsewhere, for
      cash, on credit or for future delivery, and upon such other terms as the
      Trustee may deem commercially reasonable. Each Grantor agrees that, to the
      extent notice of sale shall be required by law, at least ten days' notice
      to such Grantor of the time and place of any public sale or the time after
      which any private sale is to be made shall constitute reasonable
      notification. The Trustee shall not be obligated to make any sale of
      Collateral regardless of notice of sale having been given. The Trustee 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.

            (b) Any cash proceeds received by the Trustee in respect of any sale
      of, collection from, or other realization upon all or any part of the
      Collateral in accordance with this Agreement may, except as otherwise
      contemplated in this Agreement, in the discretion of the Trustee, be held
      by the Trustee as collateral for, and/or then or at any time thereafter
      applied (after payment of any amounts payable to the Trustee pursuant to
      Section 21) in whole or in part by the Trustee for the ratable benefit of
      the Holders


                                       11
<PAGE>

      against, all or any part of the Secured Obligations in the order specified
      by Section 506 of the Indenture. Any surplus of such cash or cash proceeds
      held by the Trustee and remaining after payment in full of all the Secured
      Obligations shall be paid over to Grantor of the security interest created
      hereby with respect to such Collateral or to whomsoever may be lawfully
      entitled to receive such surplus.

            (c) The Trustee may exercise any and all rights and remedies of any
      Grantor under or in connection with the Collateral.

            (d) All payments received by any Grantor in respect of the
      Collateral shall be received in trust for the benefit of the Trustee,
      shall be segregated from other funds of any Grantor and, subject to the
      terms of this Agreement, shall be forthwith paid over to the Trustee in
      the same form as so received (with any necessary indorsement).

            (e) The Trustee may, without notice to any Grantor except as
      required by law and at any time or from time to time, charge, set-off and
      otherwise apply all or any part of the Secured Obligations against the
      Collateral Account.

            SECTION 20. Registration Rights. If the Trustee shall determine to
exercise its right to sell all or any of the Security Collateral pursuant to
Section 19, each Grantor agrees that, upon request of the Trustee, it will, at
its own expense:

            (a) execute and deliver, and cause each issuer of the Security
      Collateral contemplated to be sold and the directors and officers thereof
      to execute and deliver, all such instruments and documents, and do or
      cause to be done all such other acts and things, as may be necessary or,
      in the opinion of the Trustee, advisable to register such Security
      Collateral under the provisions of the Securities Act of 1933, as from
      time to time amended (the "Securities Act"), to cause the registration
      statement relating thereto to become effective and to remain effective for
      such period as prospectuses are required by law to be furnished and to
      make all amendments and supplements thereto as necessary or advisable, all
      in conformity with the requirements of the Securities Act and the rules
      and regulations of the Securities and Exchange Commission applicable
      thereto;

            (b) use its best efforts to qualify the Security Collateral under
      the state securities or "Blue Sky" laws and to obtain all necessary
      governmental approvals for the sale of the Security Collateral, as
      requested by the Trustee;

            (c) cause each such issuer to make available to its security
      holders, as soon as practicable, an earnings statement that will satisfy
      the provisions of Section 11(a) of the Securities Act;

            (d) provide the Trustee with such other information as may be
      necessary or advisable to enable the Trustee to effect the sale of such
      Security Collateral; and

            (e) do or cause to be done all such other acts and things as may be
      necessary to make such sale of the Security Collateral or any part thereof
      valid and binding and in compliance with applicable law.


                                       12
<PAGE>

The Trustee is authorized, in connection with any sale of the Security
Collateral pursuant to Section 19, to deliver or otherwise disclose to any
prospective purchaser of the Security Collateral any registration statement or
prospectus, and all supplements and amendments thereto, prepared pursuant to
clause (a) above provided to it.

            Each Grantor acknowledges the impossibility of ascertaining the
amount of damages that would be suffered by the Trustee or the Holders by reason
of the failure by such Grantor to perform any of the covenants contained in this
Section and, consequently, agrees that, if such Grantor shall fail to perform
any of such covenants, it shall pay, as liquidated damages and not as a penalty,
an amount equal to the value of the Security Collateral on the date the Trustee
shall demand compliance with this Section; provided that such payments shall not
exceed the amount of the Secured Obligations and shall be applied to reduce the
Secured Obligations.

            SECTION 21. Expenses. Each Grantor will upon demand pay to the
Trustee the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, that the Trustee
may incur in connection with (i) the administration of this Agreement, (ii) the
custody, preservation, use or operation of, or the sale of, collection from or
other realization upon, any of the Collateral, (iii) the exercise or enforcement
of any of the rights of the Trustee or the Holders hereunder or (iv) the failure
by any Grantor to perform or observe any of the provisions hereof, and all
amounts so incurred by the Trustee shall be entitled to the benefits of the
Indenture.

            SECTION 22. Actions. The obligations of each Grantor (other than the
Company) under this Agreement are independent of the Company's obligations under
the Securities, and a separate action or actions may be brought and prosecuted
against any Grantor (other than the Company) to enforce this Agreement,
irrespective of whether any action is brought against the Company or whether the
Company is joined in any such action or actions..

            SECTION 23. Amendments; Waivers; Etc. Amendment or waivers of any
provision of this Agreement shall be governed solely by the terms of the
Indenture.

            SECTION 24. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic, telex or cable communication) and, mailed, telegraphed, telecopied,
telexed, cabled or delivered to any Grantor or to the Trustee, as the case may
be, in each case addressed to it at its address set forth in the Indenture or,
as to any party, at such other address as shall be designated by such party in a
written notice to each other party complying as to delivery with the terms of
this Section. All such notices and other communications shall, when mailed,
telecopied, telegraphed, telexed or cabled, respectively, be effective when
deposited in the mails, telecopied, delivered to the telegraph company,
confirmed by telex answerback or delivered to the cable company, respectively,
addressed as aforesaid.

            SECTION 25. Continuing Security Interest; Assignments Under the
Indenture. This Agreement shall create a continuing security interest in the
Collateral and, except as contemplated in the Indenture shall (a) remain in full
force and effect until the date on which the


                                       13
<PAGE>

Secured Obligations shall have been paid in full or the Indenture shall have
been satisfied and discharged in accordance with the terms thereof, (b) be
binding upon each Grantor, its successors and assigns, (c) inure, together with
the rights and remedies of the Trustee hereunder, to the benefit of the Trustee,
the Holders and their respective successors, transferees and assigns. Without
limiting the generality of the foregoing clause (c), any Holder may assign or
otherwise transfer all or any portion of its rights and obligations under the
Securities held by it to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to such Holder
herein or otherwise, in each case as provided in Section 305 of the Indenture.

            Each Grantor shall have the right to sell, transfer and convey (the
"Sale") the Collateral in whole or in part the Collateral which is the subject
of such Sale is hereinafter referred to as the "Conveyed Property") and in
connection therewith to obtain from the Trustee a release of the Conveyed
Property from the Lien of this Security Agreement provided that such Sale is
made in accordance with the provisions of Section 1017 of the Indenture as if
such Sale was an Asset Sale, as that term is defined in the Indenture regardless
of whether such Sale was in fact an Asset Sale. In connection therewith, the
Trustee shall execute, acknowledge and deliver to Grantor such documents as
Grantor may reasonable require to effectuate such release.

            The parties hereto agree that: (i) all security interest and other
rights in Collateral granted hereunder or under the Indenture or the other
Security Documents shall be, and hereby are, subject and inferior to any Liens
heretofore or hereafter created from time to time in connection with the
incurrence of Working Capital Indebtedness; and (ii) notwithstanding anything to
the contrary hereunder, in the Indenture or in the Security Documents, the
Grantors and their Subsidiaries may incur Liens and Indebtedness (including,
without limitation, Liens on Collateral) permitted by the Indenture. In
connection with any of the foregoing, the Trustee will, at the request of a
Grantor, enter into such intercreditor agreements, standstill agreements,
subordination agreements and other documents as shall be appropriate under the
circumstances for the benefit of the holder of such other Indebtedness or Liens.

            SECTION 26. Release and Termination. (a) On the date on which the
Secured Obligations shall have been paid in full or the Indenture shall have
been satisfied and discharged in accordance with the terms thereof, or as
otherwise contemplated in the Indenture, the pledge, assignment and security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to the Grantors. Upon any such termination, the Trustee, at the
appropriate Grantor's request and expense, will return to such Grantor such of
the Collateral in its possession as shall not have been sold, transferred or
otherwise applied pursuant to the terms of the Securities, the Indenture or any
Security Document, and will execute and deliver to such Grantor such documents
prepared by such Grantor and delivered to the Trustee as such Grantor shall
reasonably request to evidence such termination.

            (b) Upon satisfaction of the applicable conditions set forth in the
Indenture, the Trustee will take the applicable action specified therein
regarding the release of any Collateral.


                                       14
<PAGE>

            SECTION 27. Casino Control Act. Each of the provisions of this
Agreement is subject to, and shall be enforced in compliance with, the
provisions of the Casino Control Act, to the extent applicable, and the
regulations promulgated thereunder, unless such provisions are in conflict with
the TIA, in which case the TIA shall control.

            SECTION 28. Regulatory Matters. (a) Upon the occurrence and during
the continuation of an Event of Default, each Grantor shall take, and shall
cause each issuer of any of the Pledged Shares to take, all action that the
Trustee may request in the exercise of its rights and remedies hereunder, which
includes the right to require such Grantor or any issuer of any of the Pledged
Shares to transfer or assign the Pledged Shares to any party or parties. In
furtherance of this right, each Grantor shall, and shall cause each issuer of
the Pledged Shares, (i) to cooperate fully with the Trustee in obtaining all
approvals and consents from each governmental authority that the Trustee may
deem necessary or advisable to accomplish any such transfer or assignment of any
part of the Pledged Shares and (ii) to prepare, execute and file with any
Governmental Authority any application, request for consent, certificate or
instrument that the Trustee may deem necessary or advisable to accomplish any
such transfer or assignment of any part of the Pledged Shares. If any Grantor
fails to execute, or fails to cause each issuer or owner of the Pledged Shares
to execute, such applications, requests for consent, certificates or
instruments, the clerk of any court that has jurisdiction over the Security
Documents may execute and file the same on behalf of such Grantor.

            (b) To enforce the provisions of this Section 28, upon the
occurrence and during the continuation of an Event of Default, the Trustee is
authorized to request the consent or approval of any Governmental Authority to a
voluntary or an involuntary transfer of control of any issuer of any of the
Pledged Shares. In connection with the exercise of its remedies under this
Agreement, the Trustee may obtain the appointment of a trustee or receiver to
assume, upon receipt of all necessary judicial or other Governmental Authority
consents or approvals, control of any issuer of any of the Pledged Shares. Such
trustee or receiver shall have all rights and powers provided to it by law or by
court order or provided to the Trustee under this Agreement.

            (c) Notwithstanding anything to the contrary contained in this
Agreement:

                  (i) the Trustee will not take any action hereunder that would
      constitute or result in any transfer of control of any issuer of any of
      the Pledged Shares without obtaining all necessary approvals; provided
      that the Trustee and the Holders shall be entitled to rely on the advice
      of regulatory counsel selected by the Trustee to determine whether
      approvals of any Governmental Authority are required; and

                  (ii) the Trustee shall not foreclose on, sell, transfer or
      otherwise dispose of, or exercise any right to vote or consent with
      respect to, any of the Pledged Shares as provided herein or take any other
      action that would affect the operational, voting or other control of the
      issuer of any Pledged Shares, unless such action is taken in accordance
      with the applicable provisions of the Gaming Laws.

            (d) Each Grantor acknowledges that the approval of each appropriate
Governmental Authority to the transfer of control of an issuer of Pledged Shares
may be


                                       15
<PAGE>

required, that the ownership thereof is integral to the Trustee's realization of
the value of such Pledged Shares, that there is no adequate remedy at law for
failure by such Grantor to comply with the provisions of this Section 28 and
that such failure could not be adequately compensatable in damages and,
therefore, each Grantor agrees that the provisions of this Section 28 may be
specifically enforced.

            SECTION 29. The Mortgages. In the event that any of the Collateral
hereunder is also subject to a valid and enforceable Lien under the terms of any
Mortgage and the terms of such Mortgage are inconsistent with the terms of this
Agreement, then with respect to such Collateral, the terms of such Mortgage
shall be controlling in the case of real property and fixtures, and contracts
and agreements relating to the lease of real property, and the terms of this
Agreement shall be controlling in the case of all other Collateral.

            SECTION 30. Governing Law; Terms. This Agreement shall be governed
by and construed in accordance with the laws of the State of New Jersey, except
to the extent that the validity or perfection of the security interest
hereunder, or remedies hereunder, in respect of any particular Collateral are
governed by the laws of a jurisdiction other than the State of New Jersey.
Unless otherwise defined herein or in the Indenture, terms used in Article 9 of
the N.J. Uniform Commercial Code are used herein as therein defined.


                                       16
<PAGE>

            IN WITNESS WHEREOF, the Trustee and each Grantor have caused this
Agreement to be duly executed and delivered by its officer "hereunto duly
authorized as of the date first above written.


                                  GB PROPERTY FUNDING CORP.,
                                  a Delaware corporation

                                  By:_________________________________________
                                     Name: Timothy A. Ebling
                                     Title: Executive Vice-President


                                  GREATE BAY HOTEL AND CASINO, INC.,
                                  a New Jersey corporation

                                  By:_________________________________________
                                     Name: Timothy A. Ebling
                                     Title: Executive Vice-President


                                  GB HOLDINGS, INC., a Delaware corporation

                                  By:_________________________________________
                                     Name: Timothy A. Ebling
                                     Title: Executive Vice-President


                                  WELLS FARGO BANK MINNESOTA,
                                  NATIONAL ASSOCIATION, a national
                                  banking association, as Trustee

                                  By:_________________________________________
                                     Name:____________________________________
                                     Title:___________________________________


                                       17
<PAGE>

                                   SCHEDULE I

                         PLEDGED SHARES AND PLEDGED DEBT

<TABLE>
<CAPTION>
                                                                                      Percentage
                                                               Stock                      of
                                   Class of                 Certificate    Number     Outstanding
Owner            Stock Issuer       Stock      Par Value      No(s).      of Shares     Shares*
-----            ------------      -------     ----------   ----------   ---------    -----------
<S>              <C>                <C>        <C>               <C>         <C>         <C>
GB Holdings,     GB Property        Common     $1.00/share       2           100         100%
Inc.             Funding Corp.

GB Holdings,     Greate Bay         Common       no par          4           100         100%
Inc.             Hotel and                        value
                 Casino, Inc.
                 ("GBHC")
</TABLE>

*  As of September 29, 2000

<PAGE>

                                   SCHEDULE II

                               ASSIGNED AGREEMENTS

1. That certain Software License Agreement dated as of June 27, 1998 between,
among others, Greate Bay Hotel & Casino, Inc. and Advanced Casino Systems
Corporation.

<PAGE>

                                SCHEDULE III

                    LOCATIONS OF EQUIPMENT AND INVENTORY

             1.     Radio and Bay View Roads
                    Mistic Islands, Ocean County,
                    New Jersey 08087

             2.     Sands Hotel and Casino
                    Indiana Avenue and Brighton Park
                    Atlantic City, Atlantic County
                    New Jersey 08401

             (Note: includes the casino-hotel complex, and the parking garages)

             3.     136 South Kentucky Avenue
                    Atlantic City, Atlantic County
                    New Jersey 08401

             4.     30-42 North Texas Avenue
                    Atlantic City, Atlantic County
                    New Jersey 08401

<PAGE>

                                   SCHEDULE IV

                                   TRADE NAMES

The Sands Hotel and Casino

Sands Casino Hotel