<PAGE>   1
                                                                   Exhibit 10.46
                          EXECUTIVE SEVERANCE AGREEMENT


        THIS AMENDED AGREEMENT, dated as of August 21, 2000 (this "Agreement"),
by and between Horseshoe Gaming Holding Corp., a Delaware corporation (the
"Company"), and Floyd B. Hannon (the "Executive").

        WHEREAS, the purpose of this Agreement is to afford the Executive
additional security concerning his employment with the Company by providing for
certain payments to the Executive in the event that there is a Change in Control
(as defined below) of the Company; and

        WHEREAS, the provisions of this Agreement shall only be effective in the
event that there is a Change in Control, and nothing in this Agreement extends
or expands the Executive's present rights concerning employment with the Company
in the absence of a Change in Control or is intended to create a contract,
guarantee or promise of continued employment by the Company or alter the
compensation that the Executive could reasonably expect in the absence of a
Change in Control.

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

        SECTION 1. Term of Agreement; Certain Definitions.

        1.1 Term of Agreement. This Agreement shall be effective immediately
upon its execution by the parties hereto and shall remain in effect until the
earliest of: (A) the termination of the Executive's employment with the Company
for any reason whatsoever prior to the announcement of a transaction which, if
consummated, would constitute a Change in Control; (B) the termination of
Executive's employment with the Company following the announcement of a
transaction which, if consummated, would constitute a Change in Control by
reason of death or Disability (as defined in the Employment Agreement) or by the
Company for Cause; (C) the termination of Executive's employment with the
Company for Cause within ninety (90) days following a Change in Control; or (D)
ninety (90) days after the date of a Change in Control.

        1.2 Certain Definitions. The following terms, as used in this Agreement,
shall be deemed to mean the following:

               (A) "Cause" shall mean the occurrence of one or more of the
following events:

                      (i) The failure of Executive to obtain any of the gaming
        licenses required pursuant to Section 7 of the Employment Agreement,
        dated as of July 5, 1999, by and between Horseshoe Gaming, Inc. ("HGI")
        and Executive (the "Employment Agreement"), within a reasonable period
        of time following employment, or obtain any of the gaming licenses
        required for Executive to perform his duties under the Employment
        Agreement,


<PAGE>   2

        within a reasonable period of time, or the revocation, suspension or
        failure to renew for a period in excess of ninety (90) days, of any such
        gaming license for any reason;

                      (ii) Failure or refusal by Executive to observe or perform
        any of the material provisions of the Employment Agreement, or any
        written agreement with the Company, or to perform in a reasonably
        satisfactory manner all of the material duties required of Executive
        under the Employment Agreement or any written agreement with the
        Company;

                      (iii) Executive being charged with or indicted for the
        commission of fraud, misappropriation, embezzlement or other acts of
        dishonesty, or conviction or please of nolo contendere for any crime
        punishable as a felony or a gross misdemeanor involving dishonesty, or
        moral turpitude or the use of illegal drugs while on duty for the
        Company or HGI or on the premises of the operating casino and hotel
        facilities in Tunica, Mississippi, Bossier City, Louisiana, Hammond,
        Indiana and Joliet, Illinois; and/or

                      (iv) Unreasonable refusal or failure to comply with the
        proper and lawful directives of and/or procedures established by the CEO
        or the Board of Directors of the Company or HGI (or persons of
        comparable or senior position).

        Termination of Executive's employment for Cause under Subsections
1.2(A)(i) or 1.2(A)(iii) above shall be effective immediately upon notice
thereof by the Company or HGI to Executive. Termination of Executive's
employment for Cause under Subsections 1.2(A)(ii) or 1.2(A)(iv) above shall be
effective upon fourteen (14) days' prior notice thereof by the Company or HGI to
Executive. The factual basis for termination for cause shall be included within
any such notice of termination.

               (B) "Change in Control" shall mean each of the following
occurring:

                      (i) prior to the completion of an Initial Public Offering
        by the Company, the failure at any time of (a) Jack B. Binion, (b)
        Phyllis Cope, (c) Peri Cope Howard or any Affiliate of the persons
        described in clause (a), (b) or (c) above (collectively, "Excluded
        Persons") as a group to own and control at least forty percent (40%) of
        the issued and outstanding Equity Interests of the Company;

                      (ii) after the completion of an Initial Public Offering by
        the Company, the acquisition, in one or more transactions, of beneficial
        ownership by (i) any person or entity (other than an Excluded Person) or
        (ii) any group of persons or entities (excluding any group in which
        Excluded Persons beneficially own in the aggregate at least seventy-five
        percent (75%) of the equity and voting interests beneficially owned by
        the group) who constitute a group (within the meaning of Section
        13(d)(3) of the Securities Exchange Act of 1934, as amended (the
        "Exchange Act")), in either case, of Equity Interests of the Company
        such that, as a result of such acquisition, such person, entity or group
        beneficially owns (within the meaning of Rule 13d-3 under the Exchange
        Act), directly or indirectly, thirty percent (30%) or more of the voting
        power of Equity Interests of the Company entitled to vote in the
        election of directors of the Company then outstanding; provided,
        however, that no Change of Control shall be deemed to have occurred if
        (x) Excluded Persons beneficially own, in the


                                      -2-
<PAGE>   3

        aggregate, at such time, a greater percentage of the total voting power
        of Equity Interests of the Company entitled to vote in the election of
        directors of the Company than such other person, entity or group or (y)
        at the time of such acquisition, Excluded Persons (or any of them)
        possess the ability (by contract or otherwise) to elect, or cause the
        election of, a majority of the members of the Board of Directors of the
        Company;

                      (iii) any merger or consolidation of the Company with or
        into any person or any sale, transfer or other conveyance, whether
        direct or indirect, of all or substantially all of the assets of the
        Company on a consolidated basis, in one transaction or a series of
        related transactions, if immediately after giving effect to such
        transaction or transactions, any person or group (excluding any group in
        which Excluded Persons beneficially own in the aggregate at least
        seventy-five percent (75%) of the equity and voting interests
        beneficially owned by the group) is or becomes the beneficial owner,
        directly or indirectly, of thirty percent (30%) or more of the total
        voting power of Equity Interests of the surviving or transferee person;
        provided, however, that no Change of Control shall be deemed to have
        occurred if (A) Excluded Persons beneficially own, in the aggregate, at
        such time, (x) forty percent (40%) or more of the total voting power of
        Equity Interests of the surviving or transferee person and (y) a greater
        percentage of the total voting power of Equity Interests of the
        surviving or transferee Person than such other person or group or (B)
        after giving effect to such transaction, Excluded Persons (or any of
        them) possess the ability (by contract or otherwise) to elect, or cause
        the election of, a majority of the members of the Board of Directors of
        the Company;

                      (iv) during any period of twelve (12) consecutive months
        after January 1, 1999, individuals who at the beginning of any such
        twelve (12) month period constituted the Board of Directors of the
        Company (together with any new directors whose election by such Board of
        Directors or whose nomination for election by shareholders of the
        Company was approved by a vote of a majority of the directors then still
        in office who were either directors at the beginning of such period or
        whose election or nomination for election was previously so approved,
        including new directors designated in or provided for in an agreement
        regarding the merger, consolidation or sale, transfer or other
        conveyance, of all or substantially all of the assets of the Company, if
        such agreement was approved by a vote of such majority of directors),
        cease for any reason to constitute a majority of the Board of Directors
        of the Company then in office;

                      (v) the Company adopts a plan of liquidation; or

                      (vi) any sale, transfer or other conveyance, whether
        direct or indirect, of all or substantially all of the assets (whether
        consisting of stock of subsidiaries, interests in partnerships or
        limited liability partnerships or companies or real or personal,
        tangible and intangible property) comprising any three (3) of the
        Company's four (4) current casinos in any one transaction or a series of
        related transactions to a person other than an Excluded Person.

               For all purposes of this Agreement, a Change in Control shall be
        considered "announced" on the date the Company (or a person authorized
        by the Company) shall issue


                                      -3-
<PAGE>   4

        a press release or otherwise make a statement intended for public
        dissemination describing or announcing the execution of a definitive
        agreement relating to a transaction which, if consummated, will
        constitute a Change in Control, provided that either that transaction or
        another transaction constituting a Change in Control and resulting from
        such announcement is subsequently consummated.

               For purposes of the foregoing, the "Equity Interest" of any
        person means any shares, interests, participations or other equivalents
        (however designated) in such person's equity, and shall in any event
        include any and all shares, interests, rights to purchase (other than
        convertible or exchangeable Indebtedness that is not itself otherwise
        capital stock), warrants, options, participations or other equivalents
        of or interests (however, designated) in stock issued by, or
        partnership, participation or membership interests in such person.

               For purposes of the foregoing, "Affiliate", as applied to any
        person, means any other person directly or indirectly controlling,
        controlled by, or under common control with, that person, any spouse,
        immediate family member or relative of such person or any trust for the
        benefit of, or established by, any of such persons. For the purposes of
        this definition, "control" (including, with correlative meanings, the
        terms "controlling", "controlled by" and "under common control with"),
        as applied to any person, means the possession, directly or indirectly,
        of the power to direct or cause the direction of the management and
        policies of that person, whether through the ownership of voting
        securities or by contract or otherwise.


        SECTION 2. Compensation Upon Change in Control.

        2.1 Payment Upon Change in Control. If Executive is employed by the
Company on the date of the announcement of a transaction which, if consummated,
would constitute a Change in Control and either (i) Executive is employed by the
Company ninety (90) days after the date the Change in Control shall occur or
(ii) the Executive's employment is terminated by the Company for any reason
other than Cause within ninety (90) days after the Change in Control or by
reason of the Executive's death or Disability (as defined in the Employment
Agreement), then ninety (90) days following the closing of the transaction
constituting the Change in Control the Company shall pay to the Executive (or in
the event of the Executive's death, the Executive's estate) a lump-sum cash
amount equal to the product of (x) 2.99 and (y) the sum of (1) Executive's
annual base salary as then in effect and (2) the maximum amount of any bonus or
incentive compensation to which the Executive would be entitled for the year in
which the Change in Control occurred (calculated by assuming that all
performance goals or targets are satisfied and that the Executive was employed
for the entire year).

        2.2 Re-instatement of Equity Incentives. In the event of a Change in
Control where the Executive's employment by the Company had been terminated for
any reason other than Cause after the date of the announcement of a transaction
which, if consummated, would constitute a Change in Control, then,
notwithstanding any term or provision in any stock option or stock appreciation
right or any equity incentive plan or agreement to the contrary, on the date of
the Change of Control any stock options or stock appreciation rights which were
canceled by reason of such termination of employment shall be re-instated and
instead treated as if for all purposes of such stock options or


                                      -4-
<PAGE>   5

stock appreciation rights the Executive had remained in the employ of the
Company until one day after such Change in Control.

        2.3 Termination of Employment Agreement and Rights to Other Severance
Payments. In the event of a Change in Control, then notwithstanding any
inconsistent term or provision of the Employment Agreement, the Executive and
the Company agree that the Executive's Employment Agreement shall terminate as
of the date of such Change of Control. Thereupon, the Executive shall become an
"at will" employee of the Company, and neither the Company nor the Executive
shall have any further duties, obligations or liabilities to the other under, or
by reason of, such Employment Agreement. Furthermore, the receipt by the
Executive of the payments under this Agreement shall be in lieu of any other
payments then or thereafter required to be made to the Executive as a result of
the termination of his employment, whether provided under the Employment
Agreement, under any other contract or agreement to which the Company, HGI and
Executive are a party or under any severance policy, practice or plan of the
Company or HGI. The foregoing is not intended to diminish, reduce or eliminate
any other benefits or payments to which the Executive is otherwise entitled
under any benefit plan or arrangement of the Company or any affiliate, including
by way of illustration and not by way of limitation, any pension,
profit-sharing, 401(k), stock bonus or deferred compensation plan or any
medical, dental, hospitalization, life insurance or other welfare benefit plan
or program of the Company.

        2.4 Limitation on Payments. Notwithstanding any other provision herein
to the contrary, in the event that the Executive becomes entitled to any
payments under this Agreement and any portion of such payments or benefits, when
combined with any other payments or benefits provided to the Executive
(including, without limiting the generality of the foregoing, by reason of any
stock options), in the absence of this Section 2.4, would be subject to the tax
(the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), then the amount payable to the Executive under this
Agreement shall be reduced such that none of the amounts payable to the
Executive under this Agreement and any other payments or benefits received or to
be received by the Executive in connection with a Change in Control or the
termination of the Executive's employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
person whose actions result in a Change in Control or any person having such a
relationship with the Company or such person as to require attribution of stock
ownership between the parties under Section 318(a) of the Code) shall be treated
as "parachute payments" within the meaning of Section 280G(b)(2) of the Code.
For purposes of applying the foregoing sentence, if in the opinion of tax
counsel selected by the Company's independent auditors and acceptable to the
Executive, such payments or benefits (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code, then such amounts shall be excluded from any such
calculation. Furthermore, in determining the maximum amount of the payments to
the Executive which would not constitute a parachute payment within the meaning
of Sections 280G(b)(1) and (4), the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's independent
auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the
Code. Further, it is the intent of the parties that this Section 2.4 shall be
applied to the payments to the Executive notwithstanding the benefits of any
exemptions provided in Section 280G(b)(5) of the Code for any payments by reason
of the Company's status immediately before the Change in


                                      -5-
<PAGE>   6

Control.

        2.5 Escrow. To facilitate and ensure the payment of the amount provided
in Section 2.1 hereof to Executive and other executives of the Company who are
parties to executive severance agreements with the Company substantially similar
to this Agreement (collectively, the "Affected Executives"), the Company agrees
to establish, at the time of any Change in Control, an escrow arrangement to
provide for the payment upon satisfaction of the applicable conditions of all
amounts payable to the Affected Executives by reason of any Change in Control.
The escrow agent therefore and the terms and provisions of the escrow agreement
shall be mutually satisfactory to the Company and a majority of the Affected
Executives. The Company shall pay all of the costs and expenses associated with
any such escrow arrangement.

        SECTION 3. Arbitration. In the event of any dispute or controversy
between the Company and Executive with respect to any of the matters set forth
herein, both the Company and Executive agree to submit such dispute or
controversy to binding arbitration, to be conducted in Illinois pursuant to the
then prevailing rules and regulations of the American Arbitration Association.
In such arbitration, the prevailing party shall be entitled, in addition to any
award made in such proceeding, to recover all of its costs and expenses incurred
in connection therewith, including, without limitation, attorneys' fees.

        SECTION 4. No Mitigation. The Executive shall have no obligation to take
any action to mitigate or offset any amounts payable by the Company hereunder by
seeking other employment or otherwise, nor shall the amount of any payment
provided for in this Agreement be reduced by any compensation earned by the
Executive as the result of employment by another employer after the date of
termination of the Executive's employment or otherwise.

        SECTION 5. Notices. All notices required or desired to be given under
this Agreement shall be in writing and shall be deemed to have been duly given:
(i) on the date of service if served personally on the party to whom notice is
to be given; (ii) on the date of receipt by the party to whom notice is to be
given if transmitted to such party by courier or by telefax, provided that in
the case of a copy sent by telefax, a copy is mailed as set forth below on the
date of transmission; or (iii) on the third day after mailing if mailed to the
party to whom notice is given by registered or certified mail, return receipt
requested, postage prepaid to the following addresses, or to such other address
as may be provided from time to time by one party to the other:

               To the Company:

                      Horseshoe Gaming Holding Corp.
                      Empress Casino Joliet
                      2300 Empress Drive
                      Joliet, IL  60436
                      Attention:  Mr. Jack B. Binion

               with a copy to:

                      Swidler Berlin Shereff Friedman, LLP


                                      -6-
<PAGE>   7

                      The Chrysler Building
                      405 Lexington Avenue
                      New  York, New York 10714
                      Attention:  Martin Nussbaum, Esq.
                      Fax: (212) 891-9598

               To the Executive:

                      Mr. Floyd B. Hannon
                      2274 N. 30 W
                      Greenfield, IN. 46140

        SECTION 6. General Provisions

        6.1 Amendments. This Agreement is intended to amend and restate the
Agreement between the Company and the Executive, dated February 2000, and the
terms and provisions of this amendment and restatement sets forth the sole
obligations and liabilities of the Company upon a Change of Control. This
Agreement may be further amended only pursuant to a written instrument executed
by the Company and Executive. It shall not be reasonable for either the Company
or Executive to rely on any oral statements or representations by the other
party that are in conflict with the terms of this Agreement.

        6.2 Severability. If any provision of this Agreement shall be determined
to be invalid or unenforceable by a court of competent jurisdiction, the
remaining provisions of this Agreement shall remain in full force and effect to
the fullest extent permitted by law.

        6.3 Successors and Assigns. This Agreement and the obligations of the
Company hereunder shall be binding upon and shall be assumed by any successor of
the Company including without limitation, any corporation or corporations
acquiring directly or indirectly all or substantially all of the assets of the
Company, whether by merger, consolidation, sale or otherwise (and such successor
shall thereafter be deemed "the Company" for purposes of this Agreement), but
shall not otherwise be assignable by the Company. The Company shall take all
actions necessary to insure that such corporation or transferee is bound by the
provisions of this Agreement. The term "the Executive" shall wherever
appropriate be interpreted to include the Executive's estate.

        6.4 Governing Law. This Agreement shall be construed, interpreted and
governed in accordance with the internal laws of the State of Illinois, without
reference to rules relating to conflicts of law.

        6.5 Inconsistencies. The terms of this Agreement supersede any
inconsistent prior promises, policies, representations, understandings,
arrangements or agreements between the parties, whether by employment contract,
stock option agreement or otherwise.

        6.6 Headings. The section headings contained in this Agreement are for
the convenience of reference only and shall not affect the construction of any
provision of this Agreement.


                                      -7-
<PAGE>   8

        6.7 Survival. Notwithstanding the termination of the term of this
Agreement, the duties and obligations of the Company, if any, following the
termination of the Executive's employment following a Change in Control shall
survive indefinitely.

        6.8 Withholding. The Company may deduct and withhold from any payments
hereunder the amount which the Company, in its reasonable judgment, is required
to deduct and withhold for any federal, state or local income or employment
taxes.

        6.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute a single instrument.


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


                                     HORSESHOE GAMING HOLDING CORP.


                                     By:
                                        ---------------------------------------
                                     Name:  Jack B. Binion
                                     Title: Chief Executive Officer


                                     EXECUTIVE


                                     ------------------------------------------
                                     Floyd B. Hannon



                                      -8-