Document:

<PAGE>
                                                                     EXHIBIT 4.5

                              SECURITY AGREEMENT
                              ------------------
                        (Shreveport Capital/Co-Issuer)

                                    Made by

                        SHREVEPORT CAPITAL CORPORATION,

                                   as Debtor

                                      to

                     STATE STREET BANK AND TRUST COMPANY,
                       as New Trustee and Secured Party

               Acting on behalf of the Holders of the New Notes

                                 June 15, 2001

<PAGE>

                              SECURITY AGREEMENT
                              ------------------
                        (Shreveport Capital/Co-Issuer)

          THIS SECURITY AGREEMENT (this "Agreement") is made as of June 15,
                                         ---------
2001, by SHREVEPORT CAPITAL CORPORATION, a Louisiana corporation (the "Debtor"),
                                                                       ------
in favor of STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company,
as trustee (the "New Trustee"), acting on behalf of the holders of the New Notes
                 -----------
under the New Indenture referred to and defined below (the "Secured Party").
                                                            -------------

                              W I T N E S S E T H:
                              - - - - - - - - - -

          A.   Debtor and Hollywood Casino Shreveport, a Louisiana general
partnership ("Partnership," and together with the Debtor, the "Issuers"), have
              -----------                                      -------
entered into an Indenture dated as of the date hereof (as may be amended,
supplemented, restated or otherwise modified from time to time, the "New
                                                                     ---
Indenture") with the New Trustee, pursuant to which the Issuers will issue
---------
$39,000,000 in the aggregate principal amount of 13% Senior Secured Notes due
2006 with Contingent Interest (as the same may be amended, supplemented,
restated, exchanged, replaced or otherwise modified from time to time,
collectively, the "New Notes").
                   ---------

          B.   Previously, the Issuers and certain Guarantors (as defined in the
Existing Indenture) entered into an indenture dated as of August 10, 1999 (the
"Existing Indenture") with State Street Bank and Trust Company, a Massachusetts
 ------------------
trust company, acting on behalf of the holders of the Existing Notes under the
Existing Indenture (the "Existing Trustee"), pursuant to which the Issuers
                         ----------------
issued $150,000,000 of their 13% First Mortgage Notes due 2006 with Contingent
Interest (as amended, supplemented, restated, exchanged, replaced or otherwise
modified from time to time, collectively, the "Existing Notes").
                                               --------------

          C.   As a condition precedent to the purchase of the New Notes under
the New Indenture, Debtor must execute and deliver this Agreement granting
Secured Party a security interest in the Collateral (as hereinafter defined).

          D.   Certain of the Collateral is subject to one or more Liens in
favor of the holders of the Existing Notes. The nature and priority of the Liens
in favor of the holders of the New Notes and the holders of the Existing Notes
are governed in certain respects by the Pari Passu Intercreditor Agreement (as
hereinafter defined).

          Based on the foregoing premises, and in order to comply with the terms
and conditions of the New Indenture and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Debtor hereby agrees with Secured Party as follows:

          NOW THEREFORE, in order to comply with the terms and conditions of the
Indenture and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Debtor hereby agrees with Secured
Party as follows:
<PAGE>

                                   ARTICLE 1
                                  DEFINITIONS
                                  -----------

     Section 1.01  Definitions.  When used herein, (a) the terms Certificated
                   -----------
Security, Chattel Paper, Deposit Account, Document, Equipment, Financial Asset,
Fixture, Goods, Inventory, Instrument, Investment Property, Security, Security
Entitlement and Uncertificated Security have the respective meanings assigned
thereto in the Code (as defined below); (b) capitalized terms which are not
otherwise defined have the respective meanings assigned thereto in the New
Indenture; and (c) the following terms have the following meanings (such
definitions to be applicable to both the singular and plural forms of such
terms):

          Account Debtor means the party who is obligated on or under any
          --------------
Account Receivable, Contract Right or General Intangible.

          Account Receivable means any right of Debtor to payment for goods sold
          ------------------
or leased or for services rendered.

          Code means the Uniform Commercial Code as in effect from time to time
          ----
in the State of New York; provided that, if by reason of mandatory provisions of
                          -------- ----
law, the perfection or the effect of perfection or non-perfection of the
security interests in any Collateral is governed by the Uniform Commercial Code
as in effect in any jurisdiction other than the State of New York, "Code" means
the Uniform Commercial Code as in effect in such other jurisdiction for purposes
of the provisions hereof relating to such perfection or the effect of perfection
or non-perfection.

          Collateral means all property and rights of Debtor in which a security
          ----------
interest is granted hereunder.

          Computer Hardware and Software means all of Debtor's rights (including
          ------------------------------
rights as licensee and lessee) with respect to (i) computer and other electronic
data processing hardware, including all integrated computer systems, central
processing units, memory units, display terminals, printers, computer elements,
card readers, tape drives, hard and soft disk drives, cables, electrical supply
hardware, generators, power equalizers, accessories, peripheral devices and
other related computer hardware; (ii) all software programs designed for use on
the computers and electronic data processing hardware described in clause (i)
                                                                   ----------
above, including all operating system software, utilities and application
programs in whatsoever form (source code and object code in magnetic tape, disk
or hard copy format or any other listings whatsoever); (iii) any firmware
associated with any of the foregoing; and (iv) any documentation for hardware,
software and firmware described in clauses (i), (ii) and (iii) above, including
                                   -----------  ----     -----
flow charts, logic diagrams, manuals, specifications, training materials, charts
and pseudo codes.

          Contract Rights means any rights of Debtor (including, without
          ---------------
limitation, all rights to payment) under each Contract.

          Contracts means all contracts or other agreements between Debtor and
          ---------
one or more additional parties.

          Event of Default has the meaning set forth in Section 6.01 hereof.
          ----------------

                                       2
<PAGE>

          Existing Collateral Documents means the Collateral Documents (as
          -----------------------------
defined in the Existing Indenture).

          General Intangibles means all of Debtor's "general intangibles" as
          -------------------
defined in the Code and, in any event, includes (without limitation) all of
Debtor's trademarks and goodwill of the business relating thereto, trade names,
patents, copyrights, trade secrets, customer lists, inventions, designs,
software programs, mask works, registrations, licenses, franchises, tax refund
claims, guarantee claims, security interests, rights to indemnification, all
contractual rights and obligations or indebtedness owing to Debtor from whatever
source arising, all things in action, rights represented by judgments, claims
arising out of tort and other claims relating to the Collateral (including the
right to assert and otherwise be the proper party of interest to commence and
prosecute actions), and all rights in respect of any pension plan or similar
arrangement maintained for employees of Debtor.

          Intellectual Property means all past, present and future:  trade
          ---------------------
secrets and other proprietary information; trademarks, service marks, business
names, designs, logos, indicia and other source and/or business identifiers, and
the goodwill of the business relating thereto and all registrations or
applications for registrations which have heretofore been or may hereafter be
issued thereon throughout the world; copyrights (including copyrights for
computer programs) and copyright registrations or applications for registrations
which have heretofore been or may hereafter be issued throughout the world and
all tangible property embodying the copyrights; unpatented inventions (whether
or not patentable); patent applications and patents; industrial designs,
industrial design applications and registered industrial designs; license
agreements related to any of the foregoing and income therefrom; books, records,
writings, computer tapes or disks, flow diagrams, specification sheets, source
codes, object codes and other physical manifestations, embodiments or
incorporations of any of the foregoing; the right to sue for all past, present
and future infringements of any of the foregoing; and all common law and other
rights throughout the world in and to all of the foregoing.

          New Collateral Documents means this Agreement and all other Collateral
          ------------------------
Documents (as defined in the New Indenture).

          Non-Tangible Collateral means collectively, Debtor's Accounts
          -----------------------
Receivable, Contract Rights and General Intangibles.

          Obligations means (i) the payment when due of indebtedness evidenced
          -----------
by the New Notes in the principal sum not to exceed at any time outstanding of
$10,000,000, interest (including post-petition interest) as set forth in the New
Indenture and the New Notes, and premiums, penalties, and late charges thereon;
(ii) all other indebtedness and other sums (including, without limitation, all
expenses, attorneys' fees, other fees, indemnifications, reimbursements,
damages, other monetary liabilities, and other charges) and obligations that may
or shall become due hereunder or under the New Notes, the New Indenture or the
Collateral Documents; and (iii) any and all renewals, modifications, amendments,
extensions for any period, supplements or restatements of any of the foregoing.

                                       3
<PAGE>

          Obligor means any Person, other than Debtor, liable (whether directly
          -------
or indirectly, primarily or secondarily) for the payment or performance of any
of the Obligations whether as maker, co-maker, endorser, guarantor,
accommodation party, general partner or otherwise.

          Pari Passu Intercreditor Agreement means that certain Pari Passu
          ----------------------------------
Intercreditor Agreement, dated as of June 15, 2001, among the Existing Trustee,
the New Trustee and the Debtor.

          Vessel means any vessel owned by Debtor, whether now owned or acquired
          ------
or delivered to Debtor in the future, whether or not such Vessel is a vessel
within the meaning of 46 U.S.C. (S) 31322(a), and all rights of the Debtor
therein, including all equipment, parts and accessories, including, but not
limited to, all of its boilers, engines, generators, air compressors, machinery,
masts, spars, sails, riggings, boats, anchors, cables, chains, tackle, tools,
pumps and pumping equipment, motors, apparel, furniture, computer equipment,
electronic equipment used in connection with the operation of the Vessel and
belonging to the Vessel, all machinery, equipment, engines, appliances and
fixtures for generating or distributing air, water, heat, electricity, light,
fuel or refrigeration, or for ventilating or sanitary purposes, fittings and
equipment, supplies, spare parts, fuel, and all other appurtenances thereunto
appertaining or belonging, whether now owned or hereafter acquired, whether or
not on board said Vessel, and all extensions, additions, accessions,
improvements, renewals, substitutions, and replacements hereafter made in or to
said Vessel or any part thereof, or in or to any said appurtenances.

                                   ARTICLE 2
                               SECURITY INTEREST
                               -----------------

     Section 2.01  Grant of Security Interest.  As security for the prompt and
                   --------------------------
complete payment and performance of the Obligations, Debtor grants to Secured
Party a continuing security interest in, Lien upon, and right of set-off against
the following, whether now or hereafter existing or acquired:

          All of Debtor's right, title and interest in, to and under the
following:

          (i)       Accounts Receivable;

          (ii)      Certificated Securities;

          (iii)     Chattel Paper;

          (iv)      Computer Hardware and Software and all rights with respect
                    thereto, including, any and all licenses, options,
                    warranties, service contracts, program services, test
                    rights, maintenance rights, support rights, improvement
                    rights, renewal rights and indemnifications, and any
                    substitutions, replacements, additions or model conversions
                    of any of the foregoing;

          (v)       all Contracts, together with all Contract Rights arising
                    thereunder;

                                       4
<PAGE>

          (vi)      Deposit Accounts;

          (vii)     Documents;

          (viii)    Financial Assets;

          (ix)      General Intangibles;

          (x)       Goods (including all of its Equipment, Fixtures and
                    Inventory) and all accessions, additions, attachments,
                    improvements, substitutions and replacements thereto and
                    therefor;

          (xi)      Instruments;

          (xii)     Intellectual Property;

          (xiii)    Investment Property;

          (xiv)     letters of credit and letter of credit rights;

          (xv)      money (of every jurisdiction whatsoever);

          (xvi)     proceeds of any litigation, arbitration or similar
                    proceeding;

          (xvii)    Security Entitlements;

          (xviii)   Uncertificated Securities; and

          (xix)     to the extent not included in the foregoing, all other
                    personal property of any kind or description, wherever
                    located and whenever acquired;

          together with all books, records, writings, data bases, information
          and other property relating to, used or useful in connection with, or
          evidencing, embodying, incorporating or referring to any of the
          foregoing, and all proceeds, products, offspring, rents, issues,
          profits and returns of and from any of the foregoing; provided that to
                                                                --------
          the extent that the provisions of any lease or license of Computer
          Hardware and Software or Intellectual Property expressly prohibit
          (which prohibition is enforceable under applicable law) the grant of a
          security interest therein, Debtor's rights in such lease or license
          shall be excluded from the foregoing grant for so long as such
          prohibition continues, it being understood that upon request of the
                                 -------------------
          New Trustee, Debtor will in good faith use reasonable efforts to
          obtain consent for the creation of a security interest in favor of the
          New Trustee in Debtor's rights under such lease or license.

          Notwithstanding the foregoing provisions of this Section 2.01, such
          grant of security interest shall not extend to, and the term
          "Collateral" shall not include  any of the foregoing property that is,
          pursuant to mandatory provisions of applicable law, prohibited from
          being pledged as security; provided that, upon the
                                     --------

                                       5
<PAGE>

          termination of such prohibitions for any reason whatsoever or in the
          event such prohibitions are or become unenforceable under applicable
          law, such foregoing property shall automatically become Collateral
          hereunder and, provided further, that upon request of the New Trustee,
                         -------- -------
          Debtor will in good faith use reasonable efforts to obtain consent for
          the creation of a security interest in favor of the New Trustee in
          Debtor's rights under such lease or license. Notwithstanding the
          foregoing, so long as no Event of Default shall have occurred and be
          continuing, all dividends, distributions, interest and principal
          payments, cash, instruments, and other property and proceeds made upon
          or with respect to or of the Collateral may be used by such Debtor
          subject to the terms and conditions of the New Indenture. Upon the
          occurrence and during the continuance of an Event of Default, all
          rights of such Debtor to receive all such dividends, distributions,
          interest and principal payments, cash, instruments and other property
          and proceeds shall cease, and such dividends, distributions, interest
          and principal payments, cash, instruments and other property and
          proceeds shall be paid or otherwise delivered to the Secured Party. It
          is expressly contemplated that additional property may from time to
          time be pledged, assigned or granted to Secured Party as additional
          security for the Obligations, and the term "Collateral" as used herein
          shall be deemed for all purposes hereof to include all such additional
          property, together with all other property of the types described
          above related thereto.

                                   ARTICLE 3
                        REPRESENTATIONS AND WARRANTIES
                        ------------------------------

          In order to induce Secured Party to accept this Agreement, Debtor
represents and warrants to Secured Party (which representations and warranties
will survive the creation and payment of the Obligations) that:

     Section 3.01  Ownership of Collateral; Absence of Encumbrances and
                   ----------------------------------------------------
Restrictions.  After giving effect to the use of the proceeds of the New Notes,
------------
Debtor is, and in the case of property acquired after the date hereof, will be,
the sole legal and beneficial owner of the Collateral holding good and
indefeasible title to the same, free and clear of all Liens except for Permitted
Liens and Debtor has full right, power and authority to assign and grant a
security interest in the Collateral to Secured Party.

     Section 3.02  No Required Consent. Except for such authorizations, consents
                   -------------------
or approvals previously obtained and in effect, no authorization, consent,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body (other than the filing of financing statements and
the other documents required to perfect or maintain the perfection of the Liens
granted hereby) is required for (i) the due execution, delivery and performance
by Debtor of this Agreement, (ii) the grant by Debtor of the security interest
granted by this Agreement, (iii) the perfection of such security interest or
(iv) the exercise by Secured Party of its rights and remedies under this
Agreement, except as may be required by applicable gaming laws or in connection
with the disposition of Collateral or by federal or state securities laws or
antitrust laws.

                                       6
<PAGE>

     Section 3.03  Security Interest. After giving effect to the use of proceeds
                   -----------------
of the New Notes, the grant of the security interest in and Lien on the
Collateral pursuant to this Agreement creates a valid and continuing security
interest in and Lien on the Collateral, enforceable against Debtor, and, upon
the filing of financing statements in the appropriate office for the locations
of the Collateral listed on Exhibit A hereof, the security interests granted
                            ---------
hereby will be perfected, prior to all other Liens except Permitted Liens,
enforceable against third parties and securing payment of the Obligations.

     Section 3.04  No Filings By Third Parties. After giving effect to the use
                   ---------------------------
of proceeds of the New Notes, and other than any financing statement or other
public notice or recording naming Secured Party as the secured party therein or
financing statements with respect to Permitted Liens, no financing statement or
other public notice or recording covering the Collateral is on file in any
public office and Debtor has not signed any document or agreement authorizing
the filing of any such financing statement or other public notice or recording
so long as any of the Obligations are outstanding.

     Section 3.05  Name; No Name Changes. The name of Debtor set forth on
                   ---------------------
Exhibit A hereto is the true and correct legal name of Debtor, and, except as
---------
described on Exhibit A hereto, Debtor has not, during the preceding five (5)
             ---------
years, entered into any contract, agreement, security instrument or other
document using a name other than, or been known by or otherwise used any name
other than, the name used by Debtor herein.

     Section 3.06  Location of Debtor and Collateral; Intellectual Property.
                   --------------------------------------------------------
Debtor's chief executive office, principal place of business and the locations
of Debtor's records concerning the Collateral are set forth on Exhibit A hereto.
                                                               ---------
Any Collateral not at such location(s) nevertheless remains subject to Secured
Party's security interest.  Except as disclosed on Exhibit A hereto, all
                                                   ---------
tangible Collateral of Debtor is located at the locations set forth on Exhibit A
                                                                       ---------
hereto.

     Section 3.07  Collateral.  All statements or other information provided by
                   ----------
Debtor to Secured Party describing or with respect to the Collateral is (or, in
the case of subsequently furnished information, will be when provided) correct
and complete in all material respects.  The delivery at any time by Debtor to
Secured Party of additional descriptions of Collateral shall constitute a
representation and warranty by Debtor to Secured Party hereunder that the
representations and warranties of this Article 3 are correct in all material
respects insofar as they would pertain to such Collateral or the descriptions
thereof, except as indicated therein.

     Section 3.08  Delivery of Documents. With respect to any Collateral covered
                   ---------------------
by one or more certificates of title or other documents of title evidencing
ownership or possession thereof, each of such certificates or documents of title
shall, after the occurrence and during the continuance of an Event of Default
and upon the request of the Secured Party, be delivered to Secured Party
(provided that all certificates of title and documents of title referred to in
Article 2 hereof shall be subject to the security interest created by this
Agreement irrespective of whether or not such delivery shall have been made).

     Section 3.09  Taxpayer Identification Number.  The federal taxpayer
                   ------------------------------
identification number of Debtor is set forth on Exhibit A hereto.
                                                ---------

                                       7
<PAGE>

                                   ARTICLE 4
                           COVENANTS AND AGREEMENTS
                           ------------------------

          Debtor will at all times comply with the covenants and agreements
contained in this Article 4, from the date hereof and for so long as any part of
the Obligations are outstanding.

     Section 4.01  Change in Location of Collateral or Debtor. Except with
                   ------------------------------------------
respect to Collateral under repair or temporarily in transit between locations
(and in any such case, for a period not to exceed four (4) months), Debtor will
not change the location of the Collateral (except for (a) Collateral held by the
New Trustee, (b) motor vehicles and rolling stock, and (c) Collateral
temporarily in transit between locations) to any state, county or other
jurisdiction in which Secured Party has not already filed a financing statement
or taken other necessary steps to perfect or maintain its security interests in
the Collateral without Secured Party's prior written consent and the delivery of
such new financing statements or other documentation as may be reasonably
necessary or required by Secured Party to ensure the continued perfection and
priority of its security interest in the Collateral. Debtor will not change the
location of Debtor's chief executive office, principal place of business or the
locations of Debtor's records concerning the Collateral unless Debtor shall have
given Secured Party at least thirty (30) days prior written notice thereof and
shall have delivered to Secured Party such new financing statements or other
documentation as may be reasonably necessary or required by Secured Party to
ensure the continued perfection and priority of its security interest in the
Collateral.

     Section 4.02  Change in Debtor's Name or Corporate Structure. Debtor will
                   ----------------------------------------------
not change its name, identity, state of organization, or corporate structure
(including, without limitation, any merger, consolidation or sale of
substantially all of its assets) unless Debtor shall have given Secured Party at
least thirty (30) days prior written notice thereof and shall have delivered to
Secured Party such new financing statements or other documentation as may be
reasonably necessary or required by Secured Party to ensure the continued
perfection and priority of its security interest on the Collateral.

     Section 4.03  Documents; Collateral in Possession of Third Parties.  If
                   ----------------------------------------------------
certificates of title or other documents evidencing ownership or possession of
the Collateral are issued or outstanding, Debtor will, after the occurrence and
during the continuance of an Event of Default and upon the request of the
Secured Party, cause the interest of Secured Party to be properly noted thereon
and will, forthwith upon receipt, deliver same to Secured Party.  If any
material portion of the Collateral is at any time in the possession or control
of any warehouseman, bailee, agent or independent contractor, Debtor shall
notify such Person of Secured Party's security interest in such Collateral.
Upon Secured Party's request, Debtor shall instruct any such Person to hold all
such Collateral for Secured Party's account subject to Debtor's instructions,
or, if an Event of Default shall have occurred, subject to Secured Party's
instructions.

     Section 4.04  Delivery of Letters of Credit and Instruments.  After the
                   ---------------------------------------------
occurrence and during the continuance of an Event of  Default and upon the
request of the Secured Party, Debtor will deliver each letter of credit, if any,
included in the Collateral to Secured Party, in each case forthwith upon receipt
by or for the account of Debtor.  After the occurrence and during the
continuance of an Event of Default and upon the request of the Secured Party, if
any Non-

                                       8
<PAGE>

Tangible Collateral becomes evidenced by a promissory note, trade acceptance or
any other instrument for the payment of money (other than checks or drafts in
payment of Non-Tangible Collateral collected by Debtor in the ordinary course of
business prior to notification by Secured Party under Section 6.02(g)), Debtor
will immediately deliver such instrument to Secured Party appropriately endorsed
and, regardless of the form of presentment, demand, notice of dishonor, protest
and notice of protest with respect thereto, Debtor will remain liable thereon
until such instrument is paid in full.

     Section 4.05  Sale, Disposition or Encumbrance of Collateral.  Except as
                   ----------------------------------------------
expressly permitted pursuant to the provisions of the New Indenture or with
Secured Party's prior written consent, Debtor will not in any way encumber any
of the Collateral (or permit or suffer any of the Collateral to be encumbered)
or sell, assign, lend, rent, lease or otherwise dispose of or transfer any of
the Collateral to or in favor of any Person other than Secured Party.

     Section 4.06  Records and Information. Debtor shall keep accurate and
                   -----------------------
complete records of the Collateral (including proceeds). Secured Party may at
any time upon reasonable prior notice have access during normal business hours
to examine, audit, make extracts from and inspect without hindrance or delay
Debtor's records, files and the Collateral. Debtor will promptly provide written
notice to Secured Party of all information which in any way relates to or
affects the filing of any financing statement or other public notices or
recordings, or the delivery and possession of items of Collateral, for the
purpose of perfecting a security interest in the Collateral. Debtor will also
promptly furnish such information as Secured Party may from time to time
reasonably request regarding the Collateral or Secured Party's rights or
remedies with respect thereto.

     Section 4.07  Reimbursement of Expenses. Debtor hereby assumes all
                   -------------------------
liability for the Collateral, the security interests created hereunder and any
use, possession, maintenance, management, enforcement or collection of any or
all of the Collateral. Debtor agrees to indemnify and hold Secured Party
harmless from and against and covenants to defend Secured Party against any and
all losses, damages, claims, costs, penalties, liabilities and expenses,
including, without limitation, court costs and reasonable attorneys' fees,
incurred because of, incident to, or with respect to the Collateral (including,
without limitation, any use, possession, maintenance or management thereof, or
any injuries to or deaths of Persons or damage to property, except to the extent
caused by the gross negligence or willful misconduct of the Secured Party). All
amounts for which Debtor is liable pursuant to this Section 4.07 shall be due
and payable by Debtor to Secured Party upon demand. If Debtor fails to make such
payment upon demand (or if demand is not made due to an injunction or stay
arising from bankruptcy or other proceedings) and Secured Party pays such
amount, the same shall be due and payable by Debtor to Secured Party, plus
interest thereon from the date of Secured Party's demand (or from the date of
Secured Party's payment if demand is not made due to such proceedings) at the
interest rate applicable to overdue principal as provided in the New Notes.

     Section 4.08  Further Assurances. Upon the request of Secured Party, Debtor
                   ------------------
shall (at Debtor's expense) execute and deliver all such assignments,
certificates, financing statements or other documents and give further
assurances and do all other acts and things as Secured Party

                                       9
<PAGE>

may reasonably request to perfect Secured Party's interest in the Collateral or
to protect, enforce or otherwise effect Secured Party's rights and remedies
hereunder.

     Section 4.09  Inventory. Debtor may use the Inventory in any lawful manner
                   ---------
not inconsistent with this Agreement and the New Indenture and with the terms of
insurance thereon.

     Section 4.10  Use, Possession and Control of Collateral. Debtor will not
                   -----------------------------------------
use any Collateral in violation in any material respect of any law, statute,
ordinance, regulation or administrative order, or suffer it to be so used.
Debtor shall procure and maintain in effect all material licenses,
registrations, certificates, permits, approvals and consents required of it by
applicable law or any governmental authority in connection with the ownership,
delivery, installation, use and/or operation of the Collateral. The Collateral
will at all times be and remain in the possession and control of Debtor.

     Section 4.11  Collateral Attached to Other Property.  In the event that the
                   -------------------------------------
Collateral may be considered attached or affixed to any immovable (real)
property or may be considered an appurtenance of the Vessel, Debtor hereby
agrees that this Agreement may be filed for record in any appropriate records as
a financing statement which is a fixture filing, and the interests granted
herein may be further perfected by the filing of a mortgage and a ship mortgage
(as contemplated by the New Indenture).  In connection therewith, Debtor will
take whatever action is required by Section 4.08.  If Debtor is not the record
owner of such immovable (real) property, Debtor will provide Secured Party with
any additional security agreements or financing statements necessary for the
perfection of Secured Party's security interest in the Collateral.  If the
Collateral is wholly or partly affixed to the immovable (real) property or
installed in or affixed to other goods, Debtor will, on demand of Secured Party,
use its commercially reasonable efforts to furnish Secured Party with landlord's
waivers, signed by all Persons having an interest in the immovable (real)
property or other goods to which the Collateral may have become affixed,
permitting the Secured Party to have access to the Collateral at all reasonable
times and granting the Secured Party a reasonable period of time in which to
remove the Collateral after the occurrence and during the continuance of an
Event of Default.

                                   ARTICLE 5
                  RIGHTS, DUTIES AND POWERS OF SECURED PARTY
                  ------------------------------------------

          Secured Party shall have the following rights, duties and powers:

     Section 5.01  Discharge Encumbrances.  After the occurrence and during the
                   ----------------------
continuance of an Event of Default, Secured Party may, at its option, discharge
any taxes, Liens, security interests or other encumbrances at any time levied or
placed on the Collateral, and may pay for insurance on the Collateral to the
extent required by this Agreement or the New Indenture and not obtained by
Debtor.  Debtor agrees to reimburse Secured Party upon demand for any payment so
made, plus interest thereon from the date of Secured Party's demand at the
interest rate applicable to overdue principal as provided in the New Notes.

     Section 5.02  Licenses and Rights to Use Collateral. After the occurrence
                   -------------------------------------
and during the continuance of an Event of Default, in connection with any
transfer or sale (to Secured Party or

                                       10
<PAGE>

any other Person) of the Collateral, Secured Party is hereby granted a
transferable license or other right to use, without any charge, any of Debtor's
Intellectual Property in completing production, advertising or selling such
Collateral except any of the foregoing property which is expressly prohibited by
its terms from being assigned or licensed. After the occurrence and during the
continuance of an Event of Default, Debtor's rights under all licenses and
franchise agreements shall inure to the benefit of Secured Party and any
transferee of all or any part of the Collateral.

     Section 5.03  Cumulative and Other Rights. The rights, powers and remedies
                   ---------------------------
of Secured Party hereunder are in addition to all rights, powers and remedies
given by law or in equity. The exercise by Secured Party of any one or more of
the rights, powers and remedies herein shall not be construed as a waiver of any
other rights, powers and remedies, including, without limitation, any other
rights of set-off (which set-off rights may be exercised only after the
occurrence and during the continuance of an Event of Default). If any of the
Obligations are given in renewal, extension for any period or rearrangement, or
applied toward the payment of debt secured by any Lien, Secured Party shall be,
and is hereby, subrogated to all the rights, titles, interests and liens
securing the debt so renewed, extended, rearranged or paid.

     Section 5.04  Disclaimer of Certain Duties.
                   ----------------------------

          (a)  The powers conferred upon Secured Party by this Agreement are to
     protect its interest in the Collateral and shall not impose any duty upon
     Secured Party to exercise any such powers.  Debtor hereby agrees that
     Secured Party shall not be liable for, nor shall the indebtedness evidenced
     by the Obligations be diminished by, Secured Party's delay or failure to
     collect upon, foreclose, sell, take possession of or otherwise obtain value
     for the Collateral.  Nothing herein shall affect any obligation of Secured
     Party to the Holders under the New Indenture or under applicable law.

          (b)  Except as may be required by the New Indenture, and to the
     fullest extent permitted by applicable law, Secured Party shall be under no
     duty whatsoever to make or give any presentment, notice of dishonor,
     protest, demand for performance, notice of non-performance, notice of
     intent to accelerate, notice of acceleration, or other notice or demand in
     connection with any Collateral or the Obligations, or to take any steps
     reasonably necessary to preserve any rights against any Obligor, Account
     Debtor or other Person. Debtor waives any right of marshaling in respect of
     any and all Collateral, and waives any right to require Secured Party to
     proceed against any Obligor, Account Debtor or other Person, exhaust any
     Collateral or enforce any other remedy which Secured Party now has or may
     hereafter have against any Obligor or other Person.

     Section 5.05  Modification of Obligations; Other Security.  Except as
                   -------------------------------------------
specifically provided for in the New Indenture, Debtor waives (i) any and all
notice of acceptance, creation, modification, rearrangement, renewal or
extension for any period of any instrument executed by any Obligor in connection
with the Obligations and (ii) any defense of any Obligor by reason of
disability, lack of authorization, cessation of the liability of any Obligor or
for any other reason.  Debtor authorizes Secured Party, without notice or demand
and without any reservation of rights against Debtor and without affecting
Debtor's liability hereunder or on the Obligations, from time to time to (x)
after the occurrence and during the continuance of an Event of Default and after
the acceleration of the New Notes, apply the Collateral in the manner permitted
by this Agreement or New Indenture and (y) after the occurrence and during the
continuance of an Event of Default and

                                       11
<PAGE>

after the acceleration of the New Notes, apply the Collateral in the manner
permitted by this Agreement or New Indenture and (y) after the occurrence and
during the continuance of an Event of Default and after the acceleration of the
New Notes, renew, extend for any period, accelerate, amend or modify,
supplement, enforce, compromise, settle, waive or release the obligations of any
Obligor or any instrument or agreement of such other Person with respect to any
or all of the Obligations or Collateral.

                                   ARTICLE 6
                               EVENTS OF DEFAULT
                               -----------------

     Section 6.01  Events of Default. It shall constitute an Event of Default
                   -----------------
under this Agreement if an Event of Default occurs and is continuing under the
New Indenture.

     Section 6.02  Remedies. Upon the occurrence and during the continuance of
                   --------
an Event of Default, Secured Party may (with no obligation to do so) take any or
all of the following actions without notice (except where expressly required
below or in the New Indenture) or demand to Debtor:

          (a)  Take possession of the Collateral, or at Secured Party's request
     Debtor shall, at Debtor's cost, assemble the Collateral and make it
     available at a location to be specified by Secured Party which is
     reasonably convenient to Debtor and Secured Party.  In any event, Debtor
     shall bear the risk of accidental loss or damage to or diminution in value
     of the Collateral, and Secured Party shall have no liability whatsoever for
     failure to obtain or maintain insurance, nor to determine whether any
     insurance ever in force is adequate as to amount or as to risk insured.

          (b)  Sell, in one or more sales and in one or more parcels, or
     otherwise dispose of any or all of the Collateral in its then condition or
     in any other commercially reasonable manner as Secured Party may elect, in
     a public or private transaction, at any location as deemed reasonable by
     Secured Party (including, without limitation, Debtor's premises), for cash
     at such price as Secured Party may deem fair, and (unless prohibited by the
     Code, as adopted in any applicable jurisdiction) Secured Party may be the
     purchaser of any or all Collateral so sold and may apply upon the purchase
     price therefor any Obligations secured hereby. Any such sale or transfer by
     Secured Party either to itself or to any other Person shall be absolutely
     free from any claim of right by Debtor, including any equity or right of
     redemption, stay or appraisal which Debtor has or may have under any rule
     of law, regulation or statute now existing or hereafter adopted. Upon any
     such sale or transfer, Secured Party shall have the right to deliver,
     assign and transfer to the purchaser or transferee thereof the Collateral
     so sold or transferred. It shall not be necessary that the Collateral or
     any part thereof be present at the location of any such sale or transfer.
     Secured Party may, at its discretion, provide for a public sale, and any
     such public sale shall be held at such time or times within ordinary
     business hours and at such place or places as Secured Party may fix in the
     notice of such sale. Secured Party shall not be obligated to make any sale
     pursuant to any such notice. Secured Party may, without notice or
     publication, adjourn any public or private sale by announcement at any time
     and place fixed for such sale, and such sale may be made at any time or
     place to

                                       12
<PAGE>

     which the same may be so adjourned. In the event any sale or transfer
     hereunder is not completed or is defective in the opinion of Secured Party,
     such sale or transfer shall not exhaust the rights of Secured Party
     hereunder, and Secured Party shall have the right to cause one or more
     subsequent sales or transfers to be made hereunder. If only part of the
     Collateral is sold or transferred such that the Obligations remain
     outstanding (in whole or in part), Secured Party's rights and remedies
     hereunder shall not be exhausted, waived or modified, and Secured Party is
     specifically empowered to make one or more successive sales or transfers
     until all the Collateral shall be sold or transferred and all the
     Obligations are paid. In the event that Secured Party elects not to sell
     the Collateral, Secured Party retains its rights to lease or otherwise
     dispose of or utilize the Collateral or any part or parts thereof in any
     manner authorized or permitted by law or in equity, and to apply the
     proceeds of the same towards payment of the Obligations. Each and every
     method of disposition of the Collateral described in this subsection or in
     subsection (e) shall constitute disposition in a commercially reasonable
     manner.

          (c)  Take possession of all books and records of Debtor pertaining to
     the Collateral. Secured Party shall have the authority to enter upon any
     real property or improvements thereon in order to obtain any such books or
     records, or any Collateral located thereon, and remove the same therefrom
     without liability.

          (d)  Apply proceeds of the disposition of the Collateral to the
     Obligations in any manner elected by Secured Party and permitted by the
     Code or otherwise permitted by law or in equity and in accordance with the
     provisions of the New Indenture.  Such application may include, without
     limitation, the reasonable expenses of retaking, holding, preparing for
     sale or other disposition, and the reasonable attorneys' fees and legal
     expenses incurred by Secured Party.

          (e)  Appoint any Person as agent to perform any act or acts necessary
     or incident to any sale or transfer by Secured Party of the Collateral.
     Additionally, any sale or transfer hereunder may be conducted by an
     auctioneer or any officer or agent of Secured Party.

          (f)  Execute, assign and endorse negotiable and other instruments for
     the payment of money, documents of title or other evidences of payment,
     shipment or storage for any form of Collateral on behalf of and in the name
     of Debtor; provided, however, Secured Party may specifically disclaim any
     warranties of title.

          (g)  Notify or require Debtor to notify Account Debtors that the Non-
     Tangible Collateral been assigned to Secured Party and direct such Account
     Debtors to make payments on the Non-Tangible Collateral directly to Secured
     Party.  To the extent Secured Party does not so elect, Debtor shall
     continue to collect the Non-Tangible Collateral.  Secured Party or its
     designee shall also have the right, in its own name or in the name of
     Debtor, to do any of the following:  (i) to demand, collect, receipt for,
     settle, compromise any amounts due, give acquittances for, prosecute or
     defend any action which may be in relation to any monies due, or to become
     due by virtue of, the Non-Tangible Collateral; (ii) to sell, transfer or
     assign or otherwise deal in the Non-Tangible

                                       13
<PAGE>

     Collateral or the proceeds thereof or the related goods, as fully and
     effectively as if Secured Party were the absolute owner thereof; (iii) to
     extend the time of payment of any of the Non-Tangible Collateral, to grant
     waivers and make any allowance or other adjustment with reference thereto;
     (iv) to take control of cash and other proceeds of any Collateral; (v) to
     send a request for verification of the Non-Tangible Collateral to any
     Account Debtor; and (vi) to do all other acts and things necessary to carry
     out the intent of this Agreement.

          (h)  The Secured Party, instead of exercising the power of sale herein
     conferred upon it, may proceed by a suit or suits to foreclose the security
     interest and sell the Collateral or any portion thereof under a judgment of
     a court or courts of competent jurisdiction.  For purposes of Louisiana
     executory process procedures, Debtor acknowledges the Obligations and does
     hereby confess judgment in favor of the Secured Party for the full amount
     of the Obligations.  Debtor agrees that upon the occurrence of an Event of
     Default the Secured Party may cause the Collateral to be seized and sold
     under executory or ordinary process, at the Secured Party's sole option,
     without appraisement, appraisement hereby being expressly waived, as an
     entirety or in parcels as the Secured Party may determine, to the highest
     bidder for cash, and otherwise exercise the rights, powers and remedies
     afforded herein and under applicable Louisiana law.  Any and all
     declarations of fact made by authentic act before a Notary Public in the
     presence of two witnesses by a person declaring that such facts lie within
     his knowledge shall constitute authentic evidence of such facts for the
     purpose of executory process.  Debtor hereby waives in favor of the Secured
     Party:  (i) the benefit of appraisement as provided in Louisiana Code of
     Civil Procedure Articles 2332, 2336, 2723 and 2724, and all other laws
     conferring the same; (ii) the demand and three (3) days delay accorded by
     Louisiana Code of Civil Procedure Articles 2639 and 2721; (iii) the notice
     of seizure required by Louisiana Code of Civil Procedure Articles 2293 and
     2721; (iv) the three (3) days delay provided by Louisiana Code of Civil
     Procedure Articles 2331 and 2722; and (v) the benefit of the other
     provisions of Louisiana Code of Civil Procedure Articles 2331, 2722 and
     2723 not specifically mentioned above.  In the event the Collateral or any
     part thereof is seized as an incident to an action for the recognition or
     enforcement of this Agreement by executory process, ordinary process,
     sequestration, writ of fieri facias, or otherwise, Debtor and Secured Party
     agree that the court issuing such order shall, if petitioned for by Secured
     Party, direct the applicable sheriff to appoint as a keeper of the
     Collateral the Secured Party or any agent designated by the Secured Party
     at the time such seizure is effected.  This designation is pursuant to
     Louisiana Revised Statutes 9:5136-9:5140.2 and the Secured Party shall be
     entitled to all of the rights and benefits afforded thereunder, as the same
     may be amended.  It is hereby agreed that the keeper shall be entitled to
     receive as compensation, in excess of its costs and expenses incurred in
     the administration or preservation of the Collateral, an amount equal to
     $250.00 per day, which shall be payable monthly on the first day of each
     month.  The designation of keeper made herein shall not be deemed to
     require the Secured Party to provoke the appointment of such a keeper.

          (i)  Exercise all other rights and remedies permitted by law or in
     equity.

                                       14
<PAGE>

     Section 6.03  Attorney-in-Fact.  Debtor hereby irrevocably appoints Secured
                   ----------------
Party as Debtor's attorney-in-fact, with full authority in the place and stead
of Debtor and in the name of Debtor or otherwise, from time to time in Secured
Party's discretion upon the occurrence and during the continuance of an Event of
Default, but at Debtor's cost and expense and without notice to Debtor:

          (a)  To obtain, adjust, sell and cancel any insurance with respect to
     the Collateral, and endorse any draft drawn by insurers of the Collateral.
     Secured Party may apply any proceeds or unearned premiums of such insurance
     to the Obligations (whether or not due).

          (b)  To take any action and to execute any assignment, certificate,
     financing statement, notification, document or instrument which Secured
     Party may reasonably deem necessary or advisable to accomplish the purposes
     of this Agreement, including, without limitation, to receive, endorse and
     collect all instruments made payable to Debtor representing any payment or
     other distribution in respect of the Collateral or any part thereof and to
     give full discharge for the same.

     Section 6.04  Account Debtors.  Any payment or settlement of Non-Tangible
                   ---------------
Collateral made by an Account Debtor will be, to the extent of such payment or
to the extent provided under such settlement, a release, discharge and
acquittance of the Account Debtor with respect to such Non-Tangible Collateral,
and Debtor shall take any action as may reasonably be required by Secured Party
in connection therewith.  No Account Debtor on any Non-Tangible Collateral will
ever be bound to make inquiry as to the termination of this Agreement or the
rights of Secured Party to act hereunder, but shall be fully protected by Debtor
in making payment directly to Secured Party.

     Section 6.05  Liability for Deficiency. If any sale or other disposition of
                   ------------------------
Collateral by Secured Party or any other action of Secured Party hereunder
results in reduction of the Obligations, such action will not release Debtor
from its liability to Secured Party for any unpaid Obligations, including costs,
charges and expenses incurred in the liquidation of Collateral, together with
interest thereon at the rate then applicable under the New Indenture, and the
same shall be immediately due and payable to Secured Party at Secured Party's
address set forth in the New Indenture.

     Section 6.06  Reasonable Notice.  If any applicable provision of any law
                   -----------------
requires Secured Party to give reasonable notice of any sale or disposition or
other action, Debtor hereby agrees that ten days' prior written notice shall
constitute reasonable notice thereof.  Such notice, in the case of public sale,
shall state the time and place fixed for such sale and in the case of private
sale, the time after which such sale is to be made.

     Section 6.07  Non-judicial Enforcement. Secured Party may enforce its
                   ------------------------
rights hereunder without prior judicial process or judicial hearing, and to the
extent permitted by law Debtor expressly waives any and all legal rights which
might otherwise require Secured Party to enforce its rights by judicial process.

                                       15
<PAGE>

                                   ARTICLE 7
                           MISCELLANEOUS PROVISIONS
                           ------------------------

     Section 7.01  Notices. Any notice required or permitted to be given under
                   -------
or in connection with this Agreement shall be given in accordance with the
notice provisions of the New Indenture.

     Section 7.02  Amendments and Waivers. Secured Party's acceptance of partial
                   ----------------------
or delinquent payments or any forbearance, failure or delay by Secured Party in
exercising any right, power or remedy hereunder shall not be deemed a waiver of
any obligation of Debtor or any Obligor, or of any right, power or remedy of
Secured Party, and no partial exercise of any right, power or remedy shall
preclude any other or further exercise thereof Secured Party may remedy any
Event of Default hereunder or in connection with the Obligations without waiving
the Event of Default so remedied. Debtor hereby agrees that if Secured Party
agrees to a waiver of any provision hereunder, or an exchange of or release of
the Collateral or the addition or release of any Obligor or other Person, any
such action shall not constitute a waiver of any of Secured Party's other rights
or of Debtor's obligations hereunder. This Agreement may be amended only by an
instrument in writing executed jointly by Debtor and Secured Party and may be
supplemented only by documents delivered or to be delivered in accordance with
the express terms hereof.

     Section 7.03  Copy as Financing Statement. A photocopy or other
                   ---------------------------
reproduction of this Agreement or any financing statement covering the
Collateral is sufficient as a financing statement, and the same may be filed
with any appropriate filing authority for the purpose of perfecting Secured
Party's security interest in the Collateral.

     Section 7.04  Possession of Collateral. Secured Party shall be deemed to
                   ------------------------
have possession of any Collateral in transit to it or set apart for it (or, in
either case, any of its agents, affiliates or correspondents).

     Section 7.05  Redelivery of Collateral. If any sale or transfer of
                   ------------------------
Collateral by Secured Party results in full satisfaction of the Obligations, and
after such sale or transfer and discharge there remains a surplus of proceeds,
Secured Party will deliver to Debtor such excess proceeds in a commercially
reasonable time; provided, however, that Secured Party shall not be liable for
any interest, cost or expense in connection with any reasonable delay in
delivering such proceeds to Debtor.

     Section 7.06  Governing Law; Jurisdiction.  This Agreement and the security
                   ---------------------------
interest granted hereby shall be construed in accordance with and governed by
the laws of the State of New York (except to the extent that the laws of any
other jurisdiction govern the perfection and priority of the security interests
granted hereby).

     Section 7.07  Gaming Laws and Regulations. (a) Each of the provisions of
                   ---------------------------
this Agreement is subject to, and shall be enforced in compliance with, any
requirements imposed by any applicable Gaming Authority.

                                       16
<PAGE>

          (b)  To the extent required under applicable law, the consummation of
the transactions contemplated hereby and the exercise of remedies hereunder may
be subject to the Louisiana Riverboat Economic Development and Gaming Control
Act, La. R.S. 27:41, et seq., and the Louisiana Gaming Control Law, La. R.S.
                     -- ----
27:1, and the regulations promulgated pursuant to each such law, all as amended
from time to time.  The Gaming License held by Debtor is not part of the
Collateral of this Agreement and, under the above described legislation and
rules promulgated thereunder, the New Trustee may be precluded from or otherwise
limited in taking possession of or in selling the Collateral of this Agreement
under the defaults and remedies provisions of this Agreement.  Due to various
legal restrictions, including, without limitation, licensing of operators of
gaming facilities and prior approval of the sale or disposition of assets of a
licensed gaming operation, the sale of Collateral may be denied by Gaming
Authorities or delayed pending Gaming Authority approval.

     Section 7.08  Continuing Security Agreement
                   -----------------------------

          (a)  Except as may be expressly applicable pursuant to Section 9-505
     of the Code (or any successor provision), no action taken or omission to
     act by Secured Party hereunder, including, without limitation, any action
     taken or inaction pursuant to Section 6.02 hereof, shall be deemed to
     constitute a retention of the Collateral in satisfaction of the Obligations
     or otherwise to be in full satisfaction of the Obligations, and the
     Obligations shall remain in full force and effect, until Secured Party
     shall have applied payments (including, without limitation, collections
     from Collateral) towards the Obligations in the full amount then
     outstanding or until such subsequent time as is hereinafter provided in
     subsection (b) below.

          (b)  To the extent that any payments on the Obligations or proceeds of
     the Collateral are subsequently invalidated, declared to be fraudulent or
     preferential set aside or required to be repaid to a trustee, debtor in
     possession, receiver or other Person under any bankruptcy law, common law
     or equitable cause, then to such extent the Obligations so satisfied shall
     be revived and continue as if such payment or proceeds had not been
     received by Secured Party, and Secured Party's security interests, rights,
     powers and remedies hereunder shall continue in full force and effect.  In
     such event, this Agreement shall be automatically reinstated if it shall
     theretofore have been terminated pursuant to Section 7.09.

     Section 7.09  Termination. The grant of a security interest hereunder and
                   -----------
all of Secured Party's rights, powers and remedies in connection therewith shall
unless otherwise provided in the New Indenture or this Agreement, remain in full
force and effect until payment in full of (A) the New Notes under the terms of
the New Indenture, (B) all obligations then due and owing under the New
Indenture, the New Notes and the Collateral Documents and (C) all other
Obligations; provided, however, (i) the security interest hereunder in Pari
             --------  -------
Passu Collateral shall terminate upon application of proceeds from the Pari
Passu Collateral to the Obligations pursuant to Section 6.02 of this Agreement
or the corresponding provisions of any other New Collateral Document in an
amount equal to the sum of $10,000,000 in principal amount of the New Notes,
plus all related Obligations, and (ii) that after receipt from the Debtor by the
New Trustee of a request for a release of any Collateral permitted under the New
Indenture upon the sale, transfer, assignment, exchange or other disposition of
such Collateral not prohibited by the New Indenture or this Agreement (and upon
receipt by the New Trustee of all proceeds of such sale, transfer,

                                       17
<PAGE>

assignment, exchange or other disposition to the extent required to be remitted
to the New Trustee under the New Indenture or otherwise), such Collateral shall
be released from the lien and security interest created hereunder in accordance
with the provisions of the New Indenture and shall no longer constitute
Collateral. Upon the payment in full of (A) the New Notes under the terms of the
New Indenture (B) all obligations then due and owing under the New Indenture and
the Collateral Documents, and (C) all other Obligations, the Debtor shall be
entitled to the return, upon its request and at its expense, of such of the
Collateral pledged by it as shall not have been sold or otherwise applied
pursuant to the terms hereof. Notwithstanding the foregoing, the reimbursement
and indemnification provisions of Section 4.07 and the provisions of subsection
7.08(b) shall survive the termination of this Agreement.

          Upon any termination of this Agreement or release of any Collateral as
permitted by the New Indenture the New Trustee will, at the expense of the
Debtor, execute and deliver to the Debtor such documents and take such other
actions as the Debtor shall reasonably request to evidence the termination of
this Agreement or the release of such Collateral, as the case may be.  Any such
action taken by the New Trustee shall be without warranty by or recourse to the
New Trustee, except as to the absence of any prior assignments by the New
Trustee of its interests in the Collateral, and shall be at the expense of the
Debtor.  The New Trustee may conclusively rely on any certificate delivered to
it by the Debtor stating that the execution of such documents and release of the
Collateral is in accordance with and permitted by the terms of the New Indenture
and this Agreement.

     Section 7.10  Counterparts; Effectiveness. This Agreement may be executed
                   ---------------------------
in two or more counterparts. Each counterpart is deemed an original, but all
such counterparts taken together constitute one and the same instrument. This
Agreement becomes effective upon the execution hereof by Debtor and delivery of
the same to Secured Party, and it is not necessary for Secured Party to execute
any acceptance hereof or otherwise signify or express its acceptance hereof.

     Section 7.11  New Indenture.  This Agreement is subject to the terms,
                   -------------
conditions and provisions of the New Indenture.  To the extent a term or
provision of this Agreement conflicts with the New Indenture, the New Indenture
shall control with respect to the subject matter of such term or provision.

     Section 7.12  Rights of Noteholders. No Holder of a New Note shall have any
                   ---------------------
independent rights hereunder other than those rights granted to individual
Holders of New Notes pursuant to Section 6.07 of the New Indenture; provided
that nothing in this Section 7.12 shall limit any rights granted to the New
Trustee under the New Notes, the New Indenture or the Collateral Documents.

     Section 7.13  No Personal Liability of Directors, Officers, Employees and
                   -----------------------------------------------------------
Stockholders.  No past, present or future director, officer, employee,
------------
incorporator or stockholder of the Debtor as such or any successor Person, as
such, shall have any liability for any obligations of the Debtor

                                       18
<PAGE>

under the New Notes, the Collateral Documents, this Agreement or for any claim
based on, in respect of, or by reason of, such obligations or their creation.

     Section 7.14  New Trustee.  State Street Bank and Trust Company is acting
                   -----------
hereunder solely in its capacity as New Trustee under the New Indenture, and all
of the rights of New Trustee set forth in the New Indenture shall apply to New
Trustee's actions hereunder.  To the extent this agreement contemplates payments
by the Secured Party, the New Trustee shall have no liability therefor, such
liability continuing to be the liability of Debtor or realized through the value
of any collateral for the Obligations.

     Section 7.15  Intercreditor Agreement.  Notwithstanding anything to the
                   -----------------------
contrary contained herein, Secured Party acknowledges (a) its status as a Pari
Passu Party (as defined in the Pari Passu Intercreditor Agreement) and (b) that
this Agreement is subject to the terms of the Pari Passu Intercreditor
Agreement.

                            [SIGNATURE PAGE FOLLOWS]

                                       19
<PAGE>

          IN WITNESS WHEREOF, Debtor has caused this Security Agreement to be
executed and delivered as of the date first set forth above.

DEBTOR:                                SHREVEPORT CAPITAL CORPORATION,
------
                                       a Louisiana corporation

                                       By:    ________________________
                                       Name:  Edward T. Pratt III
                                       Title: President

     [Signature Page to Security Agreement (Shreveport Capital/Co-Issuer)]

                                      S-1
<PAGE>

                                   EXHIBIT A
                                   ---------

                                  PERFECTION
                                  ----------

(a)       Legal Name of Debtor:
          --------------------

          Shreveport Capital Corporation, a Louisiana corporation

(b)       Other Names:
          -----------

          None

(c) (i)   Chief Executive Office and Principal Place of Business of Debtor:
          ----------------------------------------------------------------

          Chief Executive Office:       Dallas County, Texas
          Principal Place of Business:  Dallas County, Texas

    (ii)  Other Premises at which Collateral is Stored or Located:
          -------------------------------------------------------

         None

    (iii) Locations of Records Concerning Collateral:
          ------------------------------------------

         Dallas County, Texas

(d)      Federal Taxpayer Identification Number:
         --------------------------------------

         75-2830167

                                      A-1<PAGE>

                                                                     EXHIBIT 4.6

================================================================================

                            PREFERRED SHIP MORTGAGE

                                    Made by

                          HOLLYWOOD CASINO SHREVEPORT

                                  In Favor of

                STATE STREET BANK AND TRUST COMPANY, AS TRUSTEE

                                      ON

                               HOLLYWOOD DREAMS

                             OFFICIAL NO. 1099497

Dated as of June 15, 2001
================================================================================
<PAGE>

                              Preferred Ship Mortgage
                              -----------------------
                              Mortgagor:  Hollywood Casino Shreveport
                                          Two Galleria Tower, Suite 2200
                                          13455 Noel Road, LB 48
                                          Dallas, TX 75240
                              Mortgagor's Interest in the Vessel:  100%
                              Mortgagee:  State Street Bank and Trust
                                          Company, as Trustee
                                          Corporate Trust Administration
                              2 Avenue de Lafayette
                              Boston, Massachusetts 02111-1724
                              Mortgagee's Interest in the Vessel: 100%
                              Amount of Mortgage:  $39,000,000
                              Maturity Date: August 1, 2006

     THIS PREFERRED SHIP MORTGAGE, dated as of June 15, 2001 (as amended,
supplemented or otherwise modified from time to time, the "Mortgage") is made
                                                           --------
and given by Hollywood Casino Shreveport, a Louisiana general partnership, whose
address is set forth above (hereinafter referred to a the "Mortgagor"), to STATE
                                                           ---------
STREET BANK AND TRUST COMPANY, as Trustee for any and all future holders of the
New Notes (as such term is hereinafter defined), whose address is set forth
above (hereinafter referred to, together with its successors and assigns, as the
"Mortgagee" or the "Trustee").
 ---------          -------

                                   RECITALS
                                   --------

     A.   Mortgagor, Shreveport Capital Corporation, a Louisiana corporation
("Shreveport Capital" and, together with Mortgagor, the "Issuers"), and
  ------------------                                     -------
Mortgagee have entered into an Indenture dated as of June 15, 2001 (as the same
may be amended, supplemented, restated or otherwise modified from time to time,
the "Indenture") pursuant to which the Mortgagor will issue up to $39,000,000 of
     ---------
its 13% Senior Secured Notes with Contingent Interest due 2006 (as they may from
time-to-time be amended, modified, restated, exchanged, replaced, supplemented
or extended or renewed, the "New Notes").
                             ---------

     B.   The Trustee has requested pursuant to the terms of the Indenture that
Mortgagor execute and deliver this Mortgage, and Mortgagor has agreed to enter
into this Mortgage on the Hollywood Dreams (Official Number 1099497) (the
"Vessel").
 ------

     C.   Now, therefore, to induce the Trustee to execute the Indenture, in
consideration of the premises and of other valuable consideration, receipt of
which is hereby acknowledged, Mortgagor hereby agrees as follows:

                                       2
<PAGE>

                                  ARTICLE I.
                                  ----------

                        GRANTING CLAUSE AND DEFINITIONS
                        -------------------------------

Section 1.1  Granting Clause.
             ---------------

     To secure the full and timely payment of and the full and timely
performance and discharge of the Obligations (as hereinafter defined), the
Mortgagor has granted, conveyed, mortgaged, pledged, assigned, transferred, set
over and confirmed and by these presents does grant, convey, mortgage, pledge,
assign, transfer, set over and confirm unto the Mortgagee, its successors and
assigns, the following:

     The whole of the Vessel, duly documented in the name of the Mortgagor under
the laws of the United States, together with all equipment, parts and
accessories integral to the operation of the Vessel as a vessel, including, but
not limited to, all of its boilers, engines, generators, air compressors,
machinery, masts, spars, sails, riggings, boats, anchors, cables, chains,
tackle, tools, pumps and pumping equipment, motors, apparel, furniture, computer
equipment, electronic equipment used in connection with the operation of the
Vessel and belonging to the Vessel, all machinery, equipment, engines,
appliances and fixtures for generating or distributing air, water, heat,
electricity, light, fuel or refrigeration, or for ventilating or sanitary
purposes, fittings and equipment, supplies, spare parts, fuel, and all other
appurtenances thereunto appertaining or belonging, whether now owned or
hereafter acquired, whether or not on board said Vessel, and all extensions,
additions, accessions, improvements, renewals, substitutions, and replacements
hereafter made in or to said Vessel or any part thereof, or in or to any said
appurtenances (the term "Vessel" as used herein being inclusive of all of the
foregoing; provided that the foregoing shall not include any property which is
           --------
not a "vessel" within the meaning of 46 U.S.C. (S) 31322(a); and provided
                                                                 --------
further, that if any determination is made at any time that for any reason this
Mortgage does include any property which is not a "vessel" within the meaning of
46 U.S.C. (S) 31322(c)(1), then such property may be separately discharged from
the Lien of this Mortgage (but not the Lien of any other security instruments)
by the payment by the Mortgagor to the Trustee of .01% of the total amount set
forth in Section 6.1 to be applied in the manner set forth in the Indenture;

     Notwithstanding the foregoing provisions of this Section 1.1, the amount of
the proceeds from any of the foregoing collateral other than the FF&E Collateral
(the "Pari Passu Collateral") from any enforcement or exercise of any right or
remedy with respect to the Vessel pursuant to Section 3.1 of this Mortgage or
pursuant to the corresponding provisions of any other collateral document that
may be applied to the Obligations pursuant to such provisions shall be limited
to an amount equal to the sum of $10,000,000 in principal amount of the New
Notes plus all related Obligations (the "Restricted Pari Passu Amount"); and the
amount of proceeds from the FF&E Collateral from any enforcement or exercise of
any right or remedy with respect to the Vessel pursuant to Section 3.1 of this
Mortgage or pursuant to the corresponding provisions of any other

                                       3
<PAGE>

collateral document that may be applied to the Obligations pursuant to such
provisions shall be limited to an amount equal to the sum of $29,000,000 in
principal amount of the New Notes plus all related Obligations (the "Restricted
FF&E Amount"). Nothing in the foregoing sentence shall be interpreted to mean
that this Mortgage applies to less than the whole of the Vessel, as required by
Chapters 301 and 313 of Title 46 of the United States Code, as amended, or that
Mortgagee has the right to foreclose on less than the whole of the Vessel.

     TO HAVE AND TO HOLD all and singular the above mortgaged and described
property unto the Mortgagee, its successors and assigns, forever upon the terms
herein set forth;

     PROVIDED, HOWEVER, and these presents are on the condition that if the
Obligations are paid and performed in accordance with the terms thereof and this
Mortgage, then these presents and the estates and rights hereunder shall cease,
terminate and be void, otherwise to be and remain in full force and effect.

     Section 1.2  Definitions.
                  -----------

          As used in this Mortgage, the terms "Mortgage", "Mortgagor",
                                               --------    ---------
"Mortgagee", "Trustee", "Indenture", "New Notes", and "Vessel" shall have the
----------    -------    ---------    ---------        ------
meanings assigned to them in the recitals hereto.  Any capitalized term used in
this Mortgage and not defined herein shall have the meaning assigned to such
term in the Indenture.  As used herein, the following terms shall have the
following meanings:

          "Event of Loss" shall have the meaning set forth in Section 2.4
           -------------
hereof.

          "Event of Default" shall have the meaning set forth in Section 3.1
           ----------------
hereof.

          "FF&E Collateral" shall have the meaning set forth in that certain
           ---------------
Security Agreement, dated as of June 15, 2001, by Mortgagor in favor of
Mortgagee.

          "Obligations" shall mean (i) the payment when due of indebtedness
           -----------
evidenced by the New Notes in the principal sum not to exceed at any time
outstanding of $39,000,000, interest (including post-petition interest) as set
forth in the Indenture and the New Notes, and premiums, penalties, and late
charges thereon; (ii) all other indebtedness and other sums (including, without
limitation, all expenses, attorneys' fees, other fees, indemnifications,
reimbursements, damages, other monetary liabilities, and other charges) and
obligations that may or shall become due hereunder or under the New Notes, any
Guarantees of the New Notes, the Indenture or the other Collateral Documents;
and (iii) any and all renewals, modifications, amendments, extensions for any
period, supplements and restatements of any of the foregoing.

                                       4
<PAGE>

                                  ARTICLE II.
                                  -----------
                   REPRESENTATIONS, WARRANTIES AND COVENANTS
                   -----------------------------------------

     In order to induce the Mortgagee to accept this Mortgage as collateral
security for the Obligations, the Mortgagor represents and warrants to the
Mortgagee and covenants and agrees with the Mortgagee that:

     Section 2.1  Legal Existence; Citizenship Authorization.
                  ------------------------------------------

          The Mortgagor is a general partnership duly organized and validly
existing under the laws of the State of Louisiana; and except as permitted by
the Indenture, shall maintain its partnership existence during the term of this
Mortgage; and the Mortgagor is and will continue to be a citizen of the United
States within the meaning of Title 46, Section 802, 803 of the United States
Code, as amended, and is duly qualified to engage in the trade in which the
Vessel operates.  The Mortgagor is duly authorized to mortgage the Vessel, and
all partnership action necessary and required by law for the execution and
delivery of this Mortgage has been duly and effectively taken by it, and this
Mortgage is the valid and enforceable obligation of the Mortgagor, except that
(a) the enforceability of any rights to indemnity and contribution hereunder may
be limited by federal or state securities laws or principles of public policy,
(b) enforceability hereof may be subject to applicable bankruptcy, insolvency,
fraudulent conveyance or transfer, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and (c) the enforceability
hereof may be subject to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).  All necessary
consents and approvals of any Governmental Authority or any other entity to the
entering into and performance of this Mortgage have been duly obtained or given
and the entering into and performance of this Mortgage does not and will not
contravene the terms of or constitute a default under (with or without giving of
notice or lapse of time or both) any material agreement, instrument or document
to which the Mortgagor is a party or by which it or its properties are bound or
affected after giving effect to the use of the proceeds of the New Notes.

     Section 2.2  Ownership of Vessel; Warranty and Defense of Title.
                  --------------------------------------------------

     Except as set forth on Schedule 2.2 hereto, the Mortgagor is the sole owner
of the whole of the Vessel and is lawfully possessed of the whole of the Vessel,
free from any Lien whatsoever other than the Lien of this Mortgage and the Liens
permitted by Section 2.6 hereof, and the Mortgagor will warrant and defend the
title to and possession of the Vessel and every part thereof for the benefit of
the Mortgagee against the claims and demands of all other persons whomsoever,
subject to the Liens and other matters not prohibited by the Indenture or this
Mortgage.

          Section2.3  Compliance with Laws.
                      --------------------

                                       5
<PAGE>

               (a)  Documentation.  The Vessel is, and during the term of this
                    -------------
Mortgage shall continue to be, duly and lawfully registered under the laws and
flag of the United States, and the Mortgagor will comply with and satisfy all of
the provisions of the laws of the United States in order that the Vessel shall
continue to be documented pursuant to the laws of the United States as a vessel
of the United States under the United States flag with such endorsements as
shall qualify the Vessel for participation in the trades and services to which
it may be dedicated from time to time.

               (b)  Title 46.  The Mortgagor will, at its expense and at no cost
                    --------
to the Mortgagee, comply with and satisfy all the provisions of Chapters 301 and
313 of Title 46 of the United States Code, as amended, in order to establish,
record and maintain this Mortgage as a preferred ship mortgage thereunder upon
the Vessel. This Mortgage is in substantial compliance with the conditions and
requirements contained in Section 31321 of Title 46 of the United States Code.

               (c)  Laws, Treaties and Conventions.  The Vessel shall, and the
                    ------------------------------
Mortgagor covenants that it will in the operation of the Vessel, at all times
comply in all material respects with all applicable laws, treaties and
conventions and rules and regulations issued thereunder, including without
limitation the La. Rv. Boat Economic Dev & Gaming Control Act, La. R.S. 4:501 as
amended from time to time, La. R.S. 27:1-3, 11-26, 31 & 32, and shall have on
board as and when required thereby valid certificates showing compliance
therewith, except when (i) the use or title of the Vessel has been taken,
requisitioned or chartered by any Governmental Authority, (ii) there has been
actual or constructive total loss or an agreed or compromised total loss of the
Vessel, or damage to the Vessel to the extent, determined in the good faith
opinion of the Mortgagor, as would make repair thereof uneconomical, or (iii)
the Vessel has been laid up and removed from service and the Mortgagor has taken
adequate precautions for the preservation and maintenance of the Vessel.

     Section 2.4    Operation of Vessel.
                    -------------------

      The Mortgagor will not (except during any period when the use or title to
the Vessel has been taken, requisitioned or chartered by any Governmental
Authority) cause or permit the Vessel to be operated in any manner contrary to
applicable law or regulation, will not abandon the Vessel in any foreign port
(unless an Event of Loss (as hereinafter defined) has occurred as to the Vessel
or the safety or welfare of the Mortgagor's employees on the Vessel is
endangered), will not engage in any unlawful trade, violate any law or carry any
cargo that will expose the Vessel to penalty, forfeiture or capture and will not
do, or suffer or permit to be done, anything which can or may injuriously affect
the documentation of the Vessel under the existing laws and regulations of the
United States of America.  Mortgagor shall keep the operation of the Vessel
within the permitted navigational limits set forth in the trading warranties of
the policies of

                                       6
<PAGE>

insurance covering the Vessel and in any case will not operate the Vessel, or
permit the Vessel to be operated, in any area where such insurance would not be
fully applicable and enforceable with respect to the Vessel and its operation.

     "Event of Loss" shall mean any one of the following events: (i) actual
      -------------
total loss or destruction of the Vessel or any accident, occurrence or event
resulting in a constructive total loss or an agreed or compromised total loss of
the Vessel; or (ii) substantial damage to the Vessel, the repair of which is
uneconomical, including, but not limited to, any event pursuant to which
insurance proceeds are available which are not applied to repair the Vessel or
any other event resulting for any reason whatsoever in the Vessel being
permanently rendered unfit for normal use; or (iii) the condemnation,
confiscation, acquisition, seizure, detention, forfeiture, purchase or other
taking of title to or use of the Vessel (unless in the case of a requisition,
seizure, detention, or forfeiture, such action is revoked within ninety (90)
days) except the requisition of the use of the Vessel by any United States'
Governmental Authority on a basis not involving requisition of title to or
seizure or forfeiture of the Vessel.

     Section 2.5  Claims, Taxes, Fees, etc.
                  ------------------------

     The Mortgagor will pay and discharge or cause to be paid and discharged
prior to delinquency, all claims against, and fees, taxes, assessments,
governmental charges, fines and penalties imposed on, the Vessel, its cargoes or
any income therefrom; provided, that nothing in this Section 2.5 shall require
                      --------
the Mortgagor to pay any such claim, fee, tax, assessment, governmental charge,
fine or penalty so long as the validity thereof shall be contested by it in good
faith and by appropriate proceedings, and, provided, further, that such contest
                                           --------  -------
shall not subject the Vessel, or any part thereof, to forfeiture or loss.

     Section 2.6  Liens.
                  -----

     Neither the Mortgagor, any charterer, the master of the Vessel nor any
other person has or shall have any right, power or authority to create, incur or
permit to be placed or imposed or continued upon the Vessel, any Lien whatsoever
other than the Lien of this Mortgage, Permitted Liens and the following:

          (i)     Liens for wages of the crew (including wages of a master to
the extent provided by 46 U.S.C. App. (S)(S) 10301-10321, inclusive ("Master's
Wages")), general average and salvage (including contract salvage) which shall
not have been due and payable for forty-five (45) days after termination of a
voyage or which shall then be contested by the Mortgagor in good faith;

          (ii)    Liens for wages of the crew (including Master's Wages) and
salvage (including contract salvage) which are either unclaimed or covered by
insurance;

                                       7
<PAGE>

          (iii)   Liens incident to current operations (except for wages of the
crew including Master's Wages and salvage) or liens covered by insurance and any
deductible applicable thereto;

          (iv)    Liens for repairs; and

          (v)     Liens disclosed on Schedule 2.2 hereto; provided that the
Liens stated to be permitted by the foregoing subparagraphs (i) through (iv)
shall, unless they constitute a Lien for damage arising out of tort, for wages
of a stevedore when employed directly by the Mortgagor, master, ship's husband,
or agent, for wages of the crew (including Master's Wages) for general average,
or for salvage (including contract salvage), be permitted only to the extent
such Liens are either accrued (but not yet due) or are subordinate to the Lien
of this Mortgage. Nothing contained in this Section 2.6 constitutes a waiver by
the Mortgagee of the Mortgagee's preferred status pursuant to the provisions of
Chapters 301 and 313 of Title 46 of the United States Code. If any such Lien is
placed on the Vessel which is not subordinate to the Lien of this Mortgage,
Mortgagor will promptly after becoming aware of such Lien notify the Mortgagee.

     Section 2.7  Notice of Mortgage.
                  ------------------

     The Mortgagor will at all times carry on board the Vessel (with the ship's
papers) a certified copy of this Mortgage and any amendments and supplements
hereto and any assignments hereof, and will exhibit or cause to be exhibited the
same to any person having business with the Vessel which might give rise to a
Lien upon the Vessel or to the sale, conveyance, mortgage or lease thereof and,
on demand, to any representative of the Mortgagee.  The Mortgagor will also
place and keep prominently displayed on the Vessel a framed printed notice in
plain type of such size that the paragraph of reading matter shall cover a space
of not less than six inches wide by nine inches high (or such other dimensions
as may be required by law) reading as follows:

                              "NOTICE OF MORTGAGE

          This Vessel is owned by Hollywood Casino Shreveport and is subject to
          a Preferred Ship Mortgage dated as of June 15, 2001, in favor of
          Street Bank and Trust Company, as Trustee and Mortgagee, a First
          Preferred Ship Mortgage dated as of August 4, 2000, in favor of State
          Street Bank and Trust Company, as Trustee and Mortgagee, an FF&E
          Intercreditor Agreement dated as of June 15, 2001, among State Street
          Bank and Trust Company, as trustee, Hollywood Casino Shreveport and
          State Street Bank and Trust Company, as trustee for the benefit of the
          holders of the New

                                       8
<PAGE>

          Notes, and a Pari Passu Intercreditor Agreement dated as of June 15,
          2001, among State Street Bank and Trust Company, as trustee, Hollywood
          Casino Shreveport and State Street Bank and Trust Company, as trustee
          for the benefit of the holders of the New Notes, under the authority
          of Chapter 301 and Chapter 313 of Title 46 of the United States Code,
          as amended, certified copies of which Mortgages are kept with this
          Vessel's papers. Under the terms of said Mortgages neither the owner,
          any charterer, the master of this Vessel nor any other person has any
          right, power or authority to create, incur or permit to be placed or
          imposed upon this Vessel any lien whatsoever other than the lien of
          said Mortgages, liens for wages, general average or salvage, and
          certain other liens permitted by the provisions of said Mortgages."

     Section 2.8  Libel or Attachment.
                  -------------------

      If a libel is filed against the Vessel or if the Vessel shall be attached,
levied upon or taken into custody by virtue of any proceeding in any court or
tribunal, the Mortgagor will promptly notify the Mortgagee thereof by telegram,
cable or facsimile, confirmed by letter addressed to the Mortgagee, and within
fifteen (15) days after any such libel, levy, attachment or taking into custody,
Mortgagor will use its best efforts to cause the Vessel to be released and will
promptly notify the Mortgagee of such release in the manner aforesaid.  In the
event that the Vessel shall not be released within such fifteen (15) day period,
the Mortgagor does hereby authorize and empower the Mortgagee, in the name of
the Mortgagor, or its successor or assigns, to apply for and receive possession
of and to take possession of the Vessel with all the rights and powers that the
Mortgagor, or its successors or assigns, might have, possess or exercise in any
such event; and this power of attorney shall be irrevocable and may be exercised
not only by the Mortgagee hereinabove named but also by any one such appointee
or the appointees of the Mortgagee, with full power of substitution, to the same
extent as if the said appointee or appointees had been named as one of the
attorneys above named by express designation.

     Section 2.9  Maintenance of Vessel; Change of Hailing Port.
                  ---------------------------------------------

          (a)     Except as to such period as (i) the use or title of the Vessel
has been taken, requisitioned or chartered by a Governmental Authority, (ii)
there has been actual or constructive total loss or an agreed or compromised
total loss of the Vessel, or damage to the Vessel to the extent determined in
the good faith opinion of the Mortgagor, as would make repair thereof
uneconomic, or (iii) the Vessel has been laid up and removed from service and
the Mortgagor has taken adequate precautions for the preservation and
maintenance of the Vessel, the Mortgagor will, at all times and without cost or
expense to the Mortgagee, maintain and preserve, or cause to be maintained and
preserved, the Vessel in good running order and repair, so that the Vessel

                                       9
<PAGE>

shall be tight, staunch, strong and well and sufficiently tackled, appareled,
furnished, equipped and in every respect seaworthy, in compliance with all
applicable United States Coast Guard Regulations, and in as good order and
operating condition for Mortgagor's gaming operations as when made subject to
the Lien of this Mortgage, ordinary wear and tear excepted; provided, however,
                                                            --------  -------
that nothing in this Section shall prevent Mortgagor from discontinuing any
operation or maintenance of any portion of the Vessel, or disposing thereof, if
such discontinuance or disposal is (A) in the judgment of the Board of Directors
of the Managing General Partner of the Mortgagor, desirable in the conduct of
the business of the Mortgagor, and (B) not disadvantageous in any material
respect to the Holders, subject in both instances to the terms of the Indenture.

          (b)  Except as to the Vessel during a period set out in clauses (i) or
(ii) of Subsection 2.9(a) above, the Mortgagor will (i) keep the Vessel in such
condition and will comply with all Marine Insurance Underwriters requirements
for vessels of its type and size, and (ii) will cause the Vessel to be
overhauled when necessary, and as often as required by the Marine Insurance
Underwriters.

          (c)  Except as to the Vessel during a period set out in clause (i) or
(ii) of Subsection 2.9(a) above, during each calendar year (or part thereof) in
which this Mortgage is in effect, the Mortgagor shall promptly furnish to the
Mortgagee copies of all Certified Marine Survey Reports in connection with
annual, and other periodic and damage surveys with respect to damage greater
than $250,000 with respect to the Vessel.

          (d)  The Mortgagor will not make, or permit to be made, any material
change in the structure or type of the Vessel or in its rig if such change is
disadvantageous in any material respect to the Holders, subject to the terms of
the Indenture.  The Mortgagor will not change the location where the Vessel is
moored or the hailing port of the Vessel, if such change is disadvantageous in
any material respect to the Holders, subject to the terms of the Indenture;
Mortgagor shall pay for all expenses of registration or re-registration of this
Mortgage incurred in connection with any such change of location or hailing
port.

     Section 2.10  Inspection.
                   ----------

     Weather permitting, the Mortgagor will at all reasonable times, upon
reasonable notice and at no cost or risk to the Mortgagor, afford the Mortgagee
or its authorized representatives full and complete access to the Vessel for the
purpose of inspecting or surveying the same and its papers.

                                       10
<PAGE>

     Section 2.11  Sale or Other Disposition of Vessel.
                   ------------------------------------

     Except as allowed in the Indenture, the Mortgagor will not sell, mortgage,
bareboat charter, transfer or in any other way dispose of all or any part of the
Vessel without the prior written consent of the Mortgagee.

     Section 2.12  Notice of Loss, Requisition or Damage.
                   -------------------------------------

     In the event of actual loss of the Vessel or any casualty, accident or
damage to the Vessel involving or estimated in good faith to involve an amount
in excess of $250,000, the Mortgagor will forthwith give written notice thereof
(containing full particulars) to the Mortgagee.

     Section 2.13  Insurance.
                   ----------

          (a)  All Risk.  The Mortgagor shall, at its own expense, keep the
               --------
Vessel insured against all such risks that are insured against by prudent owners
of vessels and equipment similar to the Vessel, such insurance to include,
without limitation, insurance against the risks indicated below:

               (i)   marine (including without limitation, marine and port risk)
          hull insurance under the latest (at the time of issue of the policies
          in question) forms of American Institute of Marine Underwriters'
          policies, or under such other forms of policies as are customary for
          similar vessels with such a use, insuring the Vessel against the usual
          risks covered by such forms; and

               (ii)  while the Vessel is laid up, at the option of the Mortgagor
          and in lieu of the insurance specified by subparagraph (i) above with
          respect to such Vessel, port risk insurance under the latest (at the
          time of issue of the policies in question) forms of American Institute
          of Marine Underwriters' policies, or under such other forms of
          policies as are customary for similar vessels with such a use,
          insuring such Vessel against the usual risks covered by such forms.

          (b)  Liability; Workers' Compensation.  The Mortgagor shall maintain
               --------------------------------
at all times, to the extent required by applicable law, such worker's
compensation, employer's liability, and longshoreman and harbor worker's
insurance including a Maritime Coverage Endorsement and pollution insurance. The
Mortgagor shall also, at its own expense, keep the Vessel insured against such
marine protection and indemnity risks and liabilities (including, without
limitation, public liabilities, marine liabilities and employer's liability),
together with umbrella liability coverage as insured against by prudent owners
of vessels and equipment similar to the Vessel. Such policies shall provide that
any loss under such insurance may be paid directly to the entity

                                       11
<PAGE>

to whom any liability covered by such policies has been incurred.

          (c)  Payment Provisions.  All payments made under policies of
               ------------------
insurance maintained under this Section shall be applied as set forth in Section
4.11 of the Indenture.

          (d)  Constructive Total Loss.  In the case of an Event of Loss which
               -----------------------
is a constructive total loss of the Vessel, the Mortgagee shall have the right
(but only with prior written consent of the Mortgagor unless an Event of Default
has occurred and is continuing) to claim for a constructive total loss of the
Vessel, and if both (i) such claim is accepted by all underwriters under all
policies then in force as to the Vessel and (ii) payment in full is made in cash
under such policies, then the Mortgagee shall have the right to abandon the
Vessel to the underwriters under such policies, free from the Lien of this
Mortgage.

          (e)  Agreed Total Loss.  The Mortgagee shall not have the right to
               -----------------
enter into an agreement or compromise providing for an agreed or compromised
total loss of the Vessel without the prior consent of the Mortgagor unless an
Event of Default has occurred and is continuing. If the Mortgagor shall have
given its prior consent thereto, or an Event of Default has occurred and is
continuing, the Mortgagee shall have the right in its discretion to enter into
an agreement or compromise providing for an agreed or compromised total loss of
the Vessel, provided the same is agreed to by underwriters under all applicable
policies.

          (f)  Insurers.  All insurance required under this Section 2.13 shall
               --------
be placed and kept with the United States Government, or such insurance
companies, underwriters' associations, clubs or underwriting funds as are
reputable and generally recognized within the industry.

          (g)  Taking by United States.  During the continuance of a taking,
               -----------------------
requisition or charter of the use of the Vessel by any governmental body of the
United States of America (including, without limitation, the state of
Louisiana), the provisions of this Section 2.13 shall be deemed to have been
complied with in all respects as to the Vessel if the United States Government
or any governmental body (including, without limitation, the state of Louisiana)
shall have agreed (i) to reimburse the Mortgagee and the Mortgagor for loss or
damage resulting from the risks indicated in paragraphs (a) and (b) of this
Section 2.13, or (ii) that the Mortgagee and the Mortgagor shall be entitled to
just compensation therefor. In addition, the provisions of this Section 2.13
shall be deemed to have been complied with in all respects during any period
after title to the Vessel shall have been taken or requisitioned by the United
States Government or governmental body (including, without limitation, the state
of Louisiana) or there shall have been an actual or constructive total loss or
an agreed or compromised total loss of the Vessel. In the event of any taking,
requisition, charter or loss of the Vessel contemplated by this paragraph (g),
the Mortgagor shall promptly furnish to the Mortgagee a sworn certificate of an
officer of the Mortgagor stating that such taking, requisition, charter or loss
has occurred and, if there shall

                                       12
<PAGE>

have been a taking, requisition or charter of the use of the Vessel, that the
United States Government or governmental body (including, without limitation,
the state of Louisiana) has agreed (i) to reimburse the Mortgagor for loss or
damage resulting from the risks indicated in the above-mentioned paragraphs (a)
and (b) or (ii) that the Mortgagor or the Mortgagee, as the case may be, is
entitled to just compensation therefor.

          (h)  Mortgage Provisions.  All insurance required under this Section
               -------------------
2.13 shall be taken out in the name of the Mortgagor.  The Mortgagee shall be
named as an additional insured under all liability policies (other than workers'
compensation and similar insurance) and the Mortgagor and the Mortgagee (or its
assignee) shall be named as the sole loss payees under all physical damage
policies in accordance with paragraph (c) of this Section 2.13.  All policies
for such insurance shall also provide that (i) there shall be no recourse
against the Mortgagee (or its assignee) for the payment of premiums or
commissions, (ii) if such policies provide for the payment of club calls,
assessments or advances, there shall be no recourse against the Mortgagee (or
its assignee) for the payment thereof, and (iii) at least ten (10) days' or such
greater period as may be provided in any such policy prior written notice of any
cancellation, reduction in amount or material change in coverage of such
insurance shall be given to the Mortgagee (or its assignee) by the insurance
underwriters.  All policies for physical damage shall also contain a breach of
warranty clause in favor of the Mortgagee, to the extent applicable.

          (i)  Compliance.  The Mortgagor shall not do any act, nor voluntarily
               ----------
suffer nor permit any act to be done, whereby any insurance required by this
Section 2.13 shall or may be suspended, impaired or defeated, or suffer or
permit the Vessel to engage in any voyage, to engage in any activity or to carry
any cargo not permitted under the policies of insurance then in effect without
first procuring reasonably comparable insurance for such voyage, activity or the
carriage of such cargo.

          (j)  Assignment of Insurance to Surety.  In the event that any claim
               ---------------------------------
or Lien is asserted against the Vessel for loss, damage or expense which is
covered by insurance hereunder and it is necessary for the Mortgagor to obtain a
bond or supply other security to prevent arrest of the Vessel or to obtain the
release of the Vessel from arrest on account of said claim or Lien, so long as
no Event of Default has occurred and is continuing, the Mortgagee, upon the
written request of the Mortgagor, shall assign all or any part of its right,
title and interest in and to said insurance covering such loss, damage or
expense, to any entity executing a surety or guaranty bond or other agreement to
save or release the Vessel from such arrest as collateral security to indemnify
against liability under said bond or other agreement.

          (k)  Policies.  The Mortgagor, upon execution of this Mortgage, shall
               --------
deliver to the Mortgagee true copies of the original policies, certified to the
satisfaction of the Mortgagee, evidencing the insurance maintained under this
Section 2.13. If the Mortgagor executes any new or renewal policies of insurance
under this Section 2.13, the Mortgagor, upon the request of

                                       13
<PAGE>

Mortgagee, will promptly deliver to the Mortgagee true copies of such policies.

          (l) Opinion and Certificates.  At such times as the Mortgagee may
              ------------------------
reasonably request, the Mortgagor shall furnish or cause to be furnished to the
Mortgagee a detailed certificate or opinion (signed by a reputable insurance
broker) as to the insurance maintained by the Mortgagor pursuant to this Section
2.13, specifying the respective policies of insurance covering the same and
attaching certificates of confirmation evidencing the same and stating with
regard to the insurance maintained by the Mortgagor pursuant to this Section
2.13 the amounts, deductibles, and the risks against which such insurance is
issued.

          (m) Oil Pollution.  The Mortgagor shall on behalf and for the benefit
              -------------
of itself and the Mortgagee (i) when required by law, maintain a Certificate of
Financial Responsibility (Oil Pollution) issued by the United States Coast Guard
pursuant to the Oil Pollution Act of 1990, as amended, and (ii) maintain such
additional coverage for the Vessel in respect of oil pollution liability as may
be customary among prudent owners of similar vessels from time to time.

          (n) Obligation to Collect.  Mortgagor shall, at no cost or expense to
              ---------------------
the Mortgagee, have the duty and responsibility to make all proofs of loss and
take any and all other steps necessary to effect collections from underwriters
for any loss under any insurance on or in respect of the Vessel or the operation
thereof; provided, that Mortgagor shall have such duty only to the extent that
         --------
such conduct would be taken by a prudent owner.

                                  ARTICLE III.
                                  ------------
                       REMEDIES; APPLICATION OF PROCEEDS
                       ---------------------------------

     Section 3.1  Sale, Etc.
                  ---------

     If an Event of Default shall have occurred and be continuing which has
resulted in the Mortgagee accelerating the maturity of the Obligations, the
Mortgagee may, to the fullest extent permitted by and in accordance with
applicable law:

          (a) exercise all the rights and remedies in foreclosure and otherwise
given to mortgagees by the provisions of Chapter 313 of Title 46 of the United
States Code, as amended, or by the applicable laws of any other applicable
jurisdiction;

          (b) bring suit at law, in equity or in admiralty or initiate and
prosecute such other judicial, extrajudicial, or administrative proceedings as
it may consider appropriate to recover any and all sums due, or declared due, in
respect of the Obligations, with the right to enforce payment of said sums
against any assets of the Mortgagor, whether they are covered by this Mortgage
or otherwise;

                                       14
<PAGE>

          (c) take possession of the Vessel, with or without legal proceedings,
at any place where it may be found, and the Mortgagor or any person in
possession of the Vessel, forthwith upon request by the Mortgagee, as mortgage
creditor, shall deliver possession to the Mortgagee on demand of the Mortgagee,
and the Mortgagee shall have the right, subject to applicable law, without being
responsible for loss or damage to lay up, hold, charter, lease, operate or
otherwise use the Vessel for such period and under such conditions as it may
deem most expedient for its interest, accounting only for net profits, if any,
arising from such use and charging against all receipts from such use or from
the sale of the Vessel by court proceedings or pursuant to subsection (d) below,
all costs, expenses, charges, damages or losses by reason of such use; and if at
any time the Mortgagee shall avail itself of the right herein given to it to
take the Vessel and shall take it, the Mortgagee shall have the right to dock
the Vessel at any dock, pier or other premises owned or leased by the Mortgagor
without charge, or at any other place at the cost and expense of the Mortgagor;

          (d) sell the Vessel at public or private sale, by sealed bids or
otherwise, on such terms and conditions as the Mortgagee deems best, free of any
claim, commitment or encumbrance, regardless of the nature thereof, in favor of
the Mortgagor and, except as provided by law, any other person, upon advance
notice or at least three different days, the first of which shall be published
at least ten (10) days and the last at least three (3) days prior to the date
fixed for such sale published in any newspaper authorized to publish legal
notices of that kind in the port of registry and the place of sale of the Vessel
and by sending notice of such sale at least fourteen (14) days prior to the date
fixed for such sale, by telegraph, cable or telex, confirmed by mail, to the
Mortgagor.  In the event that the Vessel shall be offered for sale by private
sale, no newspaper publication of notice shall be required, nor notice of
adjournment of sale. Sale may be held at such place and at such time as the
Mortgagee by notice may have specified, or may be adjourned by the Mortgagee
from time to time by announcement at the time and place appointed for such sale
or for such adjourned sale, and without further notice or publication the
Mortgagee may make any such sale at the time and place to which the same shall
be so adjourned; and any sale may be conducted without bringing the Vessel to
the place designated for such sale and in such manner as the Mortgagee may deem
to be for its best advantage, and the Mortgagee may become the purchaser at any
public sale, and shall have the right to credit on the purchase price any and
all sums of money due hereunder.

     As used in this Mortgage, "Event of Default" shall mean the occurrence of
                                ----------------
any Event of Default under the Indenture.

          Section 3.2  Finality of Sale.
                       ----------------

          A sale of the Vessel made in pursuance of this Mortgage, whether under
the power of sale hereby granted or any judicial proceedings, shall operate to
divest all right, title and

                                       15
<PAGE>

interest of any nature whatsoever of the Mortgagor therein and thereto, and
shall bar the Mortgagor, its successors and assigns, and all persons claiming
by, through or under them. No purchaser shall be bound to inquire whether notice
has been given or whether any default has occurred, or as to the propriety of
the sale, or as to application of the proceeds thereof.

     Section 3.3  Powers and Rights of Mortgagee Upon Notice of Default.
                  -----------------------------------------------------

     During the occurrence and continuance of an Event of Default and after the
acceleration of the New Notes, Mortgagee shall have the following powers and
rights:

          (a) Sale.  The Mortgagor does hereby irrevocably appoint the Mortgagee
              ----
and its successors and assigns the true and lawful attorney of the Mortgagor, in
its name and stead, for the purpose of Sections 3.1 and 3.2, to make all
necessary transfers of the Vessel, and for that purpose the Mortgagee shall
execute all necessary instruments of assignment and transfer (including bills of
sale), the Mortgagor hereby ratifying and confirming all that its said attorney
shall lawfully do by virtue hereof.  Nevertheless, the Mortgagor shall, if so
requested by the Mortgagee, ratify and confirm any sale of the Vessel by
executing and delivering to the purchaser thereof such proper bills of sale,
conveyances, instruments of transfer and releases as may be designated in such
request.

          (b) Revenues and Proceeds of Vessel; Prior Liens.
              --------------------------------------------

              (i)  The Mortgagee is hereby irrevocably appointed attorney-in-
fact of the Mortgagor, with the power, among other things in the name of the
Mortgagor to demand, collect, receive, compromise and sue for, so far as may be
permitted by law, all freights, hire, earnings, issues, revenues, income and
profits of the Vessel, and all amounts due from underwriters under any insurance
thereon as payment of losses or as return premiums or otherwise, salvage awards
and recoveries, recoveries in general average or otherwise, and all other sums
due or to become due in respect of the Vessel or in respect of any insurance
thereon from any person whomsoever, and to make, give and execute in the name of
the Mortgagor acquittances, receipts, releases or other discharges for the same,
whether under seal or otherwise, and to endorse and accept in the name of the
Mortgagor all checks, notes, drafts, warrants, agreements and all other
instruments in writing with respect to the foregoing, the Mortgagor hereby
confirming and ratifying the same.

              (ii) The Mortgagee is hereby irrevocably authorized to pay or
furnish indemnity in the proper amounts against any Liens which have or may (in
the opinion of the Mortgagee) have priority over the Lien of this Mortgage and
which are not permitted under this Mortgage.

          (c) Additional Rights.  The Mortgagor covenants and agrees that in
              -----------------
addition to

                                       16
<PAGE>

any and all other rights, powers and remedies elsewhere in this Mortgage granted
to and conferred upon the Mortgagee, the Mortgagee in any suit to enforce any of
its rights, powers or remedies shall be entitled as a matter of right and not as
a matter of discretion (i) to seek the appointment of a receiver or receivers of
the Vessel and any receiver or receivers so appointed shall have full right and
power to use and operate the Vessel as shall be ordered by the federal court,
and (ii) to a decree ordering and directing the sale and disposal of the Vessel,
and the Mortgagee may become the purchaser at such sale and shall have the right
to credit against the purchase price any and all sums of money due hereunder.

     Section 3.4  Restoration of Position.
                  -----------------------

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

     Section 3.5  Application of Proceeds.
                  -----------------------

     The proceeds of any sale and net earnings derived from the operation, use,
charter, or any other employment of the Vessel by the Mortgagee, as mortgage
creditor, and within any of the powers and authority above given, as well as the
proceeds of any judgment which the Mortgagee may obtain by reason of the breach
of failure to perform any of the terms of this Mortgage, as well as the proceeds
of any claim for damage received by the Mortgagee while exercising the powers
and the authorities above given shall be applied as follows:

          (i)    to the payment of all charges and expenses, including the costs
of any public or private sale or sales, the cost of replevying or taking
possession of the Vessel which may be incurred or paid out by the Mortgagee, as
mortgage creditor, and the expenses and reasonable administrator and attorneys'
fees incurred on foreclosure or in the protection of the rights and interests of
the Mortgagee founded upon this Mortgage;

          (ii)   to pay or to furnish indemnity in the proper amounts against
any Liens which have or may (in the opinion of the Mortgagee) have priority over
the Lien of this Mortgage and which are not Liens permitted under this Mortgage;

          (iii)  to reduce or pay in full the Obligations; and

                                       17
<PAGE>

          (iv)   to the payment of any surplus thereafter remaining to the
Mortgagor or to whomsoever shall be entitled thereto.

     Section 3.6 No Transfer in Violation of Shipping Act.
                 ----------------------------------------

     Notwithstanding any other provision herein to the contrary, no sale,
charter, transfer or other disposition of the Vessel or any interest therein may
be made to any entity not a citizen of the United States within the meaning of
Section 2 of the Shipping Act of 1916, as amended, without the approval of the
Secretary of Transportation of the United States. Furthermore, the Vessel shall
not be operated by the Trustee without the approval of the Secretary of
Transportation.

     Section 3.7 Gaming Authority.  Each of the provisions of this Mortgage is
                 ----------------
subject to, and shall be enforced in compliance with, the requirements of any
applicable Gaming Authority.

                                  ARTICLE IV.
                                  -----------
                          GENERAL POWERS OF MORTGAGEE
                          ---------------------------

     Section 4.1 General Powers of Mortgagee.
                 ---------------------------

             (a) Arrest or Detention of Vessel.  In the event that the Vessel
                 -----------------------------
shall be arrested or detained by a marshal or other officer of any court of law,
equity or admiralty jurisdiction in any country or nation of the world or by any
government or other entity and shall not be released from arrest or detention
within thirty (30) days from the date of arrest or detention, the Mortgagor does
hereby authorize and empower the Mortgagee, in the name of the Mortgagor, or its
successors or assigns, to apply for and receive possession of and to take
possession of the Vessel with all the rights and powers that the Mortgagor, or
its successors or assigns, might have, possess or exercise in any such event;
and this power of attorney shall be irrevocable and may be exercised not only by
the Mortgagee but also by its appointee or appointees, with full power of
substitution, to the same extent as if the said appointee or appointees had been
named as the attorney above named by express designation.

             (b) Suits.  The Mortgagor also authorizes and empowers the
                 -----
Mortgagee or its appointees or any of them to appear in the name of the
Mortgagor, its successors or assigns, in any court of any country or nation of
the world where a suit is pending against the Vessel because of or on account of
any alleged Lien against the Vessel from which the Vessel has not been released
in accordance with the terms of this Mortgage and to take such proceedings as to
it may seem proper towards the defense of such suit and the discharge of such
Lien.

             (c) Reimbursement of Expenses.  If Mortgagor fails to perform any
                 -------------------------
obligation or covenant under this Mortgage, Mortgagee shall have the right, but
not the obligation, to

                                       18
<PAGE>

perform or take such actions to comply with the terms of this Mortgage, and all
amounts reasonably expended in connection with such conduct shall be a demand
obligation of Mortgagor owing to Mortgagee at the post-default rate of interest
specified in the New Notes and shall be secured by the Lien of this Mortgage and
the other Collateral Documents.

                                   ARTICLE V
                                   ---------
                               SUNDRY PROVISIONS
                               -----------------

     Section 5.1  Defeasance.
                  ----------

     If the Obligations shall have been satisfied and discharged then this
Mortgage and the estate and rights hereunder shall cease, determine, and become
null and void; and the Mortgagee, on the request of the Mortgagor and at the
Mortgagor's cost and expense, shall forthwith cause satisfaction and discharge
of this Mortgage to be entered upon its and other appropriate records and shall
execute and deliver to the Mortgagor such instruments as may be necessary in the
Mortgagor's reasonable opinion to duly acknowledge the satisfaction and
discharge of this Mortgage.

     Section 5.2  Right of Peaceful Enjoyment.
                  ---------------------------

     During the term of this Mortgage and so long as no Event of Default shall
have occurred and be continuing, the Mortgagor shall have full and peaceful
enjoyment, use, right to possession and control of the Vessel.

     Section 5.3  Cumulative Remedies; No Waiver.
                  ------------------------------

     Each and every power and remedy herein given to the Mortgagee shall be
cumulative and shall be in addition to every other power and remedy herein or
now or hereafter existing at law, in equity, in admiralty, or by statute, and
each and every power and remedy whether herein given or otherwise existing may
be exercised from time to time and as often and in such order as may be deemed
expedient by the Mortgagee, and the exercise or the beginning of the exercise of
any power or remedy shall not be construed to be a waiver of the right to
exercise at the same time or thereafter any other power or remedy.  No course of
dealing on the part of the Mortgagee, its officers, employees, consultants or
agents, nor any delay or omission by the Mortgagee in the exercise of any right
or power or in the pursuance of any remedy shall operate as a waiver of any such
right, power or remedy.

     Section 5.4  Further Assurances.
                  ------------------

     In the event that this Mortgage, or any provisions hereof, shall be deemed
invalid in whole or in part by reason of any present or future law or any
decision of any court having

                                       19
<PAGE>

jurisdiction, or if the documents at any time held by the Mortgagee shall be
deemed by the Mortgagee for any reason insufficient to carry out the rights and
powers granted to the Mortgagee herein, then, from time to time, the Mortgagor
will do, execute, acknowledge and deliver, or cause to be done, executed,
acknowledged and delivered such other and further assurances and documents as in
the opinion of the Mortgagee may reasonably be required in order to more
effectively subject the Vessel to the lien of this Mortgage or more effectively
subject the Vessel to the performance of the terms and provisions of this
Mortgage, or to enable this Mortgage to continuously enjoy the status of a
preferred ship mortgage.

     Section 5.5  Survival of Agreements.
                  ----------------------

     All representations, warranties, covenants and agreements herein contained
or made in writing in connection with this Mortgage shall survive the execution
of this Mortgage and shall continue in full force and effect until all sums
secured hereby shall have been paid in full, and the same shall bind and inure
to the benefit of the respective successors and assigns of the Mortgagor and the
Mortgagee.

     Section 5.6  Notices.
                  -------

     All notices, requests and demands to or upon the respective parties hereto
to be effective shall be in writing (including by telex or facsimile
transmission), and, unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when actually delivered or, in the case of telex
notice, when sent, answerback received, or in the case of facsimile
transmission, when received and telephonically confirmed, addressed as follows
or to such other address as may be hereafter notified by the respective parties
hereto or any assignee thereof or successor thereto:

     Mortgagor:  Hollywood Casino Shreveport
                 c/o HCS I, Inc.
                 Two Galleria Tower, Suite 2200
                 13455 Noel Road, LB 48
                 Dallas, Texas 75240
                 Telecopier No. (972) 386-7411

     Mortgagee:  State Street Bank and Trust Company
                 Corporate Trust Administration
                 2 Avenue de Lafayette
                 Boston, Massachusetts 02111-1724
                 Telecopier No. (617) 662-1460

     Section 5.7 Counterparts.
                 ------------

                                       20
<PAGE>

     This instrument may be executed in any number of counterparts, and each of
such counterparts shall for all purposes be deemed to be an original.

     Section 5.8  Section Headings.
                  ----------------

     The section headings used in this Mortgage are for convenience of reference
only and are not to affect the construction of or be taken into consideration in
interpreting this Mortgage.

     Section 5.9  GOVERNING LAW.
                  -------------

     THIS MORTGAGE, AND ALL OF THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER, AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, SHALL BE GOVERNED BY
TITLE 46, UNITED STATES CODE, CHAPTERS 301 AND 313 AND THE FEDERAL MARITIME LAWS
OF THE UNITED STATES OF AMERICA AND, ONLY TO THE EXTENT NOT ADDRESSED THEREBY,
BY THE LAWS OF THE STATE OF NEW YORK.

     Section 5.10  Amendments and Waivers.
                   ----------------------

     None of the terms or provisions of this Mortgage may be waived, amended,
supplemented or otherwise modified except if made or given in compliance with
the terms and provisions of the Indenture.

     Section 5.11  Termination.
                   -----------

     The grant of the Liens hereunder and all of Mortgagee's rights, powers and
remedies in connection therewith, shall unless otherwise provided in the
Indenture or this Mortgage, remain in full force and effect until payment in
full of (A) the New Notes under the terms of the Indenture and (B) all
Obligations then due and owing under the Indenture, the New Notes and the
Collateral Documents; provided, however, that after receipt from the Mortgagor
                      --------  -------
by the Trustee of a request for a release of the Vessel permitted under the
Indenture upon the sale, transfer, assignment, exchange or other disposition of
the Vessel not prohibited by the Indenture or otherwise (and upon receipt by the
Trustee of all proceeds of such sale, transfer, assignment, exchange or other
disposition to the extent required to be remitted to the Trustee under the
Indenture), the Vessel shall be released from the Lien and security interest
created hereunder in accordance with the provisions of the Indenture and no
longer be subject to the Liens granted herein. Upon the payment in full of (A)
the New Notes under the terms of the Indenture and (B) all Obligations then due
and owing under the Indenture and the Collateral Documents, the Mortgagor shall
be entitled to the return, upon its request and at its expense, of the Vessel.

                                       21
<PAGE>

     Upon any termination of this Mortgage or release of the Vessel as permitted
by the Indenture, the Mortgagee will, at the expense of the Mortgagor, execute
and deliver to the Mortgagor such documents and take such other actions as the
Mortgagor shall reasonably request to evidence the termination of this Mortgage
or the release of the Vessel, as the case may be.  Any such action taken by the
Mortgagee shall be without warranty by or recourse to the Trustee, except as to
the absence of any prior assignments by the Mortgagee of its interests in the
Vessel, and shall be at the expense of the Mortgagor.  The Mortgagee may
conclusively rely on any certificate delivered to it by the Mortgagor stating
that the execution of such documents and release of the Vessel is in accordance
with and permitted by the terms of the Indenture and this Mortgage.

     Section 5.12  Indenture.
                   ---------

     This Mortgage is issued pursuant to the terms, conditions and provisions of
the Indenture.

     Section 5.13  Rights of Holders.
                   -----------------

     No Holder shall have any independent rights hereunder other than those
rights granted to individual Holders pursuant to Section 6.07 of the Indenture;
provided that nothing in this Section 5.13 shall limit any rights granted to the
Trustee under the New Notes, the Indenture or the Collateral Documents.

     Section 5.14  Intercreditor Agreement.
                   -----------------------

     Notwithstanding anything to the contrary contained herein, Trustee
acknowledges solely with respect to the Pari Passu Collateral (a) its status as
a Pari Passu Party (as defined in the Pari Passu Intercreditor Agreement) and
(b) that this Mortgage is subject to the terms of the Pari Passu Intercreditor
Agreement.

     Section 5.15  No Personal Liability of Directors, Officers, Employees and
                   -----------------------------------------------------------
Stockholders.
------------

     No past, present or future director, officer, employee, incorporator or
stockholder of the Mortgagor as such, or the Holder of any of the New Notes, or
any successor Person, as such, shall have any liability for any obligations of
the Mortgagor under this Mortgage or for any claim based on, in respect of, or
by reason of, such obligations or their creation.

                                   ARTICLE VI
                                   ----------
                        AMOUNT OF MORTGAGE; RECORDATION
                        -------------------------------

     Section 6.1  Recordation.  For the purpose of this Mortgage and the
                  -----------
recordation of this Mortgage on the documents of the Vessel as required by
Chapter 313 of Title 46 of the United

                                       22
<PAGE>

States Code, as amended, the total amount of this Mortgage is $39,000,000.00
plus interest and performance of mortgage covenants. The Vessel subject to this
Mortgage is identified on Schedule 6.1 hereto. The Mortgagor holds an interest
of 100% in the Vessel and 100% of such interest is subject to this Mortgage. The
addresses of the parties are:

     Mortgagor:  Hollywood Casino Shreveport
                 Two Galleria Tower, Suite 2200
                 13455 Noel Road, LB48
                 Dallas, Texas 75240

     Mortgagee:  State Street Bank and Trust Company
                 Corporate Trust Administration
                 2 Avenue de Lafayette
                 Boston, Massachusetts  02111-1724
                 Telecopier No. (617) 662-1460

     Although it is not intended that this Mortgage include any property other
than the whole of the Vessel named on Schedule 6.1 hereto, including earned
freights, if any determination is made at any time that for any reason this
Mortgage does include any property other than a "vessel" within the meaning of
46 U.S.C. (S) 31322(c)(1), then such property may be separately discharged from
the lien of this Mortgage (but not the lien of any other security instruments)
by the payment of .01% of the said total amount.

                            [SIGNATURE PAGE FOLLOWS]

                                       23
<PAGE>

     IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to be duly
executed as of the day and year first above written.

                              HOLLYWOOD CASINO SHREVEPORT

                              BY:   HCS I, INC., a Louisiana Corporation
                                    Its Managing General Partner

                                    By:  _____________________________
                                         Name:  Edward T. Pratt III
                                         Title: President

                                       24
<PAGE>

STATE OF _________________
COUNTY OF _______________

     THIS INSTRUMENT was acknowledged before me on behalf of Hollywood Casino
Shreveport by ________________, __________ of HCS I, Inc., the managing and
general partner of Hollywood Casino Shreveport, and after having first been duly
authorized by said corporation to do so.

                                         _______________________________

                                         Printed Name of Notary:

                                         ________________________________

                                         My Commission Expires:

                                         ________________________________

                                       25
<PAGE>

                                  SCHEDULE 2.2
                                  ------------

                                  Other Liens
                                  -----------

1.   First Preferred Ship Mortgage in favor of State Street Bank and Trust
     Company, as Trustee and Mortgagee, dated as of August 4, 2000.

                                       26
<PAGE>

                                  SCHEDULE 6.1
                                  ------------

                             Description of Vessel
                             ---------------------

               Vessel Name                        Official Number
               -----------                        ---------------

               Hollywood Dreams                   1099497

                                       27

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