SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A
                                (Amendment No. 2)

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

           (Mark One)
[X]        Annual report pursuant to section 13 or 15(d)
      of the Securities Exchange Act of 1934 [No Fee Required]

For the fiscal year ended December 31, 1998

[  ]       Transition report pursuant to sections 13 or 15(d)
          of the Securities Exchange Act of 1934 [Fee Required]

For the transition period from                             to

                        Commission file number 000-21430

                          RIVIERA HOLDINGS CORPORATION
             (Exact name of Registrant as specified in its charter)

            Nevada                                        88-0296885
(State of Incorporation)                    (I.R.S. Employer Identification No.)

2901 Las Vegas Boulevard South
Las Vegas, Nevada                                                     89109
(Address of principal executive offices)                           (Zip Code)

Registrant's telephone number, including area code:  (702) 734-5110


Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.001 par value
                                (Title of class)

           Indicate  by check  mark  whether  the  Registrant  (1) has filed all
reports  required to be filed by Section 13 or 15(d) of the Securities  Exchange
Act of 1934 during the preceding 12 months (or for such shorter  period that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.
YES   X    NO

           Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  Registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated by reference in Part III of this Form 10-K or amendment
to this Form 10-K. [ ]

           Based on the average bid price for the  Registrant's  Common Stock as
of February 26,  1999,  the  aggregate  market value of the voting stock held by
non-affiliates of the Registrant was approximately  $27,560,382.  As of February
26, 1999 the number of outstanding  shares of the Registrant's  Common Stock was
5,068,576.

Documents incorporated by reference:



                               Page 1 of 67 Pages
                    Exhibit Index Appears on Page 63 hereof.

<PAGE>
<TABLE>
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                   RIVIERA HOLDINGS CORPORATION AND SUBSIDIARY
                    ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
                          YEAR ENDED DECEMBER 31, 1998

                                TABLE OF CONTENTS

<S>                                                                                                             <C>
Item 1.   Business................................................................................................3
             General .............................................................................................3
             The Abandoned Merger.................................................................................3
             The Riviera Hotel & Casino...........................................................................3
             The Black Hawk Project...............................................................................8
             Geographical Markets.................................................................................8
             Management Activities................................................................................9
             Competition........................................................................................ 10
             Employees and Labor Relations.......................................................................11
             Regulation and Licensing............................................................................11
             Federal Registration................................................................................18

Item 2.   Properties.............................................................................................19

Item 3.   Legal Proceedings......................................................................................19

Item 4.   Submission of Matters to a Vote of Security Holders....................................................19

Item 5.   Market for the Registrant's Common Stock and Related Security Holder Matters...........................20

Item 6.   Selected Financial Data................................................................................20

Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations..................21
             Results of Operations...............................................................................21
             1998 Compared to 1997...............................................................................22
             1997 Compared to 1996...............................................................................23
             Liquidity and Capital Resources.....................................................................24
             Year 2000 ..........................................................................................25
             Forward Looking Statements..........................................................................26
             Recently Adopted Accounting Standards...............................................................26
             Recently Issued Accounting Standards................................................................26

Item 8.   Financial Statements and Supplementary Data............................................................27

Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................49

Item 10.  Directors and Executive Officers of the Registrant.....................................................50

Item 11.  Executive Compensation.................................................................................53

Item 12.  Principal Shareholders.................................................................................57

Item 13.  Certain Relationships and Related Transactions ........................................................59

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8K.........................................61

</TABLE>
<PAGE>
This Amendment is being filed to report the  information  contained in Part III.

                                                      PART I

Item 1.    Business

General

           Riviera Holdings  Corporation,  a Nevada corporation (the "Company"),
through its wholly-owned  subsidiary,  Riviera Operating  Corporation,  a Nevada
corporation  ("ROC"),  owns  and  operates  the  Riviera  Hotel  &  Casino  (the
"Riviera")  located on Las Vegas Boulevard (the "Las Vegas Strip") in Las Vegas,
Nevada. Opened in 1955, the Riviera has developed a long-standing reputation for
delivering high quality,  traditional Las Vegas-style gaming,  entertainment and
other amenities. The Company, through its wholly owned subsidiary Riviera Gaming
Management,  Inc. ("RGM"),  manages the Four Queens Hotel/Casino in downtown Las
Vegas.

           The Company, through its wholly-owned subsidiary,  Rivera Black Hawk,
Inc., is currently constructing a limited-stakes casino in Black Hawk, Colorado.
The successful  completion  and opening of the casino will be contingent  upon a
number of factors  including  regulatory  approval and the Company's  ability to
obtain  additional  financing.  The  Company  believes  the  casino  will  begin
operations in the first quarter of 2000.

The Abandoned Merger


           In  March  1998  the   Company  was  notified  by  Allen  E.  Paulson
("Paulson")  that he was terminating the merger  agreement dated as of September
of 1997 among the Company,  and R & E Gaming Corp. and Riviera  Acquisition Sub,
Inc.,  affiliates  of  Paulson.  Pursuant  to the  merger  agreement  a  company
controlled by Paulson was to have  acquired  100% of the Company's  common stock
for $15 per share, plus an interest factor.  Approximately $5.8 million is being
held in an escrow account for the holders of 1,770,000 Riviera  Contingent Value
Rights  ("CVR's").  The  escrow  account  was  established  by  Mr.  Paulson  in
connection  with the  original  terms of the  merger.  The CVR's  entitle  their
holders to share only in the proceeds of the funds currently in escrow. Excluded
from participating in the CVR's are Morgens Waterfall,  SunAmerica, Keyport Life
and Paulson, and their affiliates and associates, who own an aggregate 3,355,000
Riviera shares.

           The  Company,  three  major  stockholders  of the  Company  and other
defendants  involved in the  terminated  merger are in  litigation  with Paulson
relating to the merger  agreement and related issues.

The  Company  entered  into  an  Agreement  and  Plan  of  Merger  (the  "Merger
Agreement") with R&E Gaming Corp. ("R&E Gaming") and its wholly-owned subsidiary
RAS  Acquisition  Sub, Inc.  ("RAS"),  certain  entities  controlled by Allen E.
Paulson,  a California  businessman  ("Paulson"),  pursuant to which one of such
entities would be merged with and into the Company (the  "Merger").  On February
25, 1998, the Company  announced that it had been advised by Paulson,  President
of R&E Gaming,  that R&E Gaming was preserving its right not to proceed with its
acquisition  of  Elsinore  and that an Option and Voting  agreement  relating to
Elsinore between R&E Gaming and Morgens  Waterfall was void by reason of certain
alleged misrepresentations.

On March 20,  1998,  the  Company was  notified  (the  "Termination  Notice") by
Paulson  on behalf of R&E Gaming and its  wholly-owned  subsidiary  RAS that the
Merger Agreement,  dated as of September 15, 1997, among the Company, R&E Gaming
and RAS is void and unenforceable  against R&E Gaming and RAS, or alternatively,
of their intention to terminate the Merger  Agreement.  Riviera has disputed the
factual and legal assertions in the Termination Notice and intends to vigorously
pursue its rights against  Paulson,  including  collection of the  approximately
$5.8 million being held in escrow (the "Escrow  Funds") by State Street Bank and
Trust  Company of  California,  N.A. as escrow  agent under an Escrow  Agreement
dated as of  September  15, 1997.  The Escrow  Funds  consist of : (I) $3.00 per
share (20%) down payment for shares of the Company's common stock, which are not
owned by the  Morgans,  Waterfall,  Vintiadis  & Company,  Inc.  managed  funds,
SunAmerica Life Insurance Company, Keyport Life Insurance Company or Paulson and
his  affiliates,  and (ii)  interest  at the rate of 7% pre annum on the  $15.00
purchase  price for such  shares  from June 1, 1997 to February  14,  1998.  The
escrowed  funds include cash of $654,000 and a letter of credit in the amount of
$5.2 million which expires on June 10, 1998.

The Riviera  Board of Directors set the close of business on May 1, 1998, as the
record date for the Riviera minority  stockholders  entitled to receive anything
Riviera  collects  from the escrow.  Excluded  from  participating  were Morgens
Waterfall,  SunAmerica,  Keyport  Life and  Paulson,  and their  affiliates  and
associates,  who own an  aggregate  3,355,000  Riviera  shares.

The Company is paying the expenses of such  litigation but will not share in any
recovery of the escrow funds.


The Riviera Hotel & Casino

General

           The  Riviera  is  located  on the  corner of the Las Vegas  Strip and
Riviera  Boulevard,  across from Circus  Circus.  The Riviera  targets  slot and
mid-level  table game  customers with a focus on creating  repeat  customers and
increasing  walk-in  traffic.  Key elements of this strategy  include offering a
value-oriented experience by providing a variety of hotel rooms, restaurants and
entertainment,  with some of Las Vegas' most popular  shows,  all at  reasonable
prices.

Gaming

           The  Riviera  has 115,000  square  feet of casino  space.  The casino
currently has approximately 1,600 slot machines and 46 gaming tables,  including
blackjack,  craps,  roulette,  pai gow poker, Caribbean Stud(R) poker, baccarat,
Let It Ride(R) and poker.  The casino also includes a keno lounge and a 200-seat
race and sports book.

           Gaming  operations at the Riviera are continually  updated to respond
to both changing  market  conditions and customer demand in an effort to attract
new customers and encourage repeat customer business through player tracking and
database  management.  The Company maintains a slot players club,  through which
members receive  special  promotions and targeted  mailings.  New and innovative
slot and table games have been introduced based on customer feedback. Management
devotes substantial time and attention to the type, location and player activity
of all its slot machines.  The Company recently  completed an extensive  capital
investment program for the upgrade of its slot machines.

           The  current  management  team  redirected  its  business  away  from
high-stakes  wagerers in favor of the less volatile  mid-level gaming customers.
In order to  effectively  pursue  this  strategy,  management  has made  several
strategic changes including  reconfiguring the casino space, installing new slot
machines  and  bill  acceptors,   reducing  the  number  of  gaming  tables  and
de-emphasizing  baccarat.  In addition,  management  implemented stricter credit
policies and reduced baccarat table limits. As a result, the percentage of table
game dollar volume represented by credit play declined from approximately 24% in
1993  to13%  in 1998.  Also,  in 1998,  revenues  from  slots  and  tables  were
approximately  76%  and,  24%   respectively,   as  compared  to  55%  and  45%,
respectively, in 1992.


During  1998,  management  continued a number of  initiatives  at the Riviera to
increase  slot  play,  including  the  replacement  of old  slot  machines,  the
installation  of bill  acceptors and the addition of slot hosts.  Slot hosts are
employees of the Company who interact  with patrons as goodwill  ambassadors  to
generate  loyalty.  The Company's  strategy is to continue to increase slot play
through marketing programs and other  improvements,  including (i) the Company's
slot upgrade program, which was completed in December 1997, (ii) addition of new
signage,  (iii) promotion of the Riviera Player's Club, (iv) sponsorship of slot
tournaments,  (v)  creation  of  promotional  programs,  (vi)  marketing  of the
"World's  Loosest  Corner of Slots" and "$40 for $20(R)"  slot  promotions,  and
(vii) the opening of "Nickel Town(R)" at the end of 1997. The Company  developed
Nickel Town on the corner of the Las Vegas Strip and  Riviera  Boulevard  at the
crosswalk from Circus Circus and the local Strip bus stop for  approximately  $5
million.  The  10,000  square  foot  facility  contains  approximately  300 slot
machines, a bar, snack bar and souvenir shop. Food and beverage items are priced
very  attractively  and  promoted  extensively.  Dramatic  signage and  lighting
effects  compatible  with the  property's  existing  facade facing the Las Vegas
Strip  create a "must see"  effect for passers by on both sides of the Las Vegas
Strip. The Company  believes that the nickel player  represents the most rapidly
growing  portion of the Las Vegas gaming market and was frequently  neglected by
the  Company's  major  competitors  who  focus  their  slot  products  on higher
denominations.  Currently  78% of the  devices in Nickel  Town are  nickel  slot
machines.


           Casino segment revenues were $77,676,000, $71,624,000 and $80,384,000
in 1998, 1997 and 1996, respectively.

Hotel


The Riviera's hotel is comprised of five hotel towers with  approximately  2,100
guest  rooms,  including  169  suites.  Built  in 1955  as part of the  original
casino/hotel,  the nine-story  North Tower features 391 rooms and 11 suites.  In
1967, the 12-story  South Tower was built with 147 rooms and 31 suites.  Another
220 rooms and 72 suites,  including penthouse suites, were added to the property
through the construction of the 17-story Monte Carlo Tower in 1974. In 1977, the
six-story San Remo Tower added 243 rooms and six suites to the south side of the
resort.  The most recent phase of hotel expansion was completed in 1988 upon the
opening of the 930 room, 49 suite, 24-story Monaco Tower. By the end of 1997 the
Company completed  refurbishment of all of its  approximately  2,100 hotel rooms
except  for 65  one-bedroom  suites in the Monte  Carlo  Building.  Despite  the
significant  increase in rooms on the Las Vegas  Strip in the last three  years,
management  believes that the Riviera has attained room occupancy rates that are
among the  highest on the Las Vegas  Strip with 97.5% for 1994,  97.0% for 1995,
98.2% for 1996,  96.8% for 1997 and 95.2% for 1998 (based on  available  rooms).
The average occupancy rate citywide was 85.8% in 1998 according to the Las Vegas
Convention and Visitors Authority (the "LVCVA").  Management  believes that this
performance  can  be  attributed  to  its  targeted  and  coordinated  marketing
strategy, particularly its focus on conventioneers.


           Rooms segment revenues were  $36,626,000, $39,153,000 and $40,078,000
in 1998, 1997 and 1996, respectively.

Restaurants

           The  quality,  value and  variety of food  services  are  critical to
attracting Las Vegas visitors. The Riviera offers five bars and five restaurants
and serves an average of approximately  5,000 meals per day,  including banquets
and room service. The following table outlines, for each restaurant, the type of
service provided and total seating capacity:

                                                                        Seating
Name                               Type                                 Capacity
----                               ----                                 --------
Kady's                             Coffee Shop                               290
Kristofer's                        Steak and Seafood                         162
Rik' Shaw                          Chinese                                   124
Ristorante Italiano                Italian                                   126
World's Fare Buffet                All-you-can-eat                           432
                                                                          ------
                                                                           1,134

           In  addition,  the  Riviera  operates  a snack  bar  and  continental
breakfast  buffet as well as a fast food court  operated by a third  party.  The
food court has 200 seats and several fast-food restaurants.

           Food and Beverage segment revenues were $17,635,000,  $15,916,000 and
$16,262,000 in 1998, 1997 and 1996, respectively.

Convention Center

           The Riviera features  160,000 square feet of convention,  meeting and
banquet space.  The convention  center is one of the largest in Las Vegas and is
an important feature that attracts  customers.  The facility can be reconfigured
for multiple meetings of small groups or large gatherings of up to 5,000 people.
The Riviera hosts  approximately  175  conventions per year. The hotel currently
has over 1.15  million  convention  related  advance  bookings of rooms  totaled
approximately  620,000 definite  bookings and  approximately  530,000  tentative
bookings.  On  average,   approximately  25%  of  the  rooms  are  occupied  for
conventions.

           In March  1998 the  Company  commenced  construction  to  expand  its
convention  center  from  100,000  square  feet to  160,000.  The  new  expanded
facilities  include  new,  state-of-the-art  convention,   meeting  and  banquet
facilities,  teleconferencing and satellite uplink capability, and 66,000 square
feet  of  additional  parking.  The  new  facilities  connect  to  the  existing
convention  facility  and  the  main  hotel  buildings  to form  one  integrated
structure.  The new addition known as the Royale  Pavilion  opened  February 12,
1999, with a concert performed by the popular musical group, Air Supply.

Entertainment

           The Riviera has one of the most extensive  entertainment  programs in
Las  Vegas,  offering  four  different  regularly  scheduled  shows and  special
appearances  by  headline   entertainers  in  concert.   The  Company   believes
entertainment  provides an attractive marketing tool to attract customers to the
Riviera. The Riviera offers one of the most extensive  entertainment programs in
Las Vegas,  including such well received shows as Splash(R) (a variety show), An
Evening at La Cage(sm) (a female  impersonation show), Crazy Girls(sm) (an adult
revue) as well as featured  comedians at the Riviera  Comedy  Club.  The Company
updates its shows  continually in response to customer  surveys and to keep them
fresh.  Tickets for the shows are offered at  reasonable  prices in keeping with
the  Company's  emphasis on  mid-level  customers.  The readers of the Las Vegas
Review  Journal voted the Riviera  Comedy Club the number one comedy club in Las
Vegas and the Crazy  Girls  bronze  sculpture  in front of the Hotel as the best
visitor photo  opportunity  in Las Vegas in the most recently  released "Best of
Las Vegas" readers' survey.

           Other  entertainment  includes the  200-seat Le Bistro  entertainment
lounge located in the casino,  which offers live  performances  every night.  In
addition,  the Riviera  presents  major  concerts which since 1996 have included
performers such as the Beach Boys, the Pointer Sisters,  Drew Carey, Air Supply,
Frankie Avalon,  Bobby Vee, Dion, the Doobie  Brothers and Billy Ray Cyrus.  The
Company  believes  the  recently  completed  Royale  Pavilion  will enable it to
increase  attendance  at special  events since,  in the past,  the then existing
facilities could not accommodate the demand for tickets.

           Entertainment revenues including  complementaries have increased from
$16.5  million in 1993 to $21.5  million  in 1998,  a 30%  increase.  Management
believes that this increase is  attributable  to the  popularity of the in-house
productions   supplemented  by  focused  marketing  and  consistent  advertising
messages.


Entertainment  segment  revenues  (which  exclude  complimentary  revenues) were
$19,764,000, $19,855,000 and $20,714,000 in 1998, 1997 and 1996, respectively.


           "All  Other"  segment  revenues,  derived  primarily  from  telephone
revenue,  sales of retail  merchandise  and store  rentals  totaled  $8,254,000,
$7,244,000 and $6,960,000 in 1998, 1997 and 1996, respectively.

Future Expansions

           The Company is exploring the possible development of an approximately
60,000  square-foot  domed  shopping  center  and  entertainment  complex  to be
constructed directly over the casino which will contain stores and entertainment
that will appeal to the Riviera's  main target  audience,  adults aged 45 to 65.
The exit from the complex would be by an escalator which will deliver patrons to
the casino.  The Company would require partners to finance,  develop and operate
the  entertainment  attraction and retail stores.  To date no such partners have
been identified.

           The Company is exploring a number of options for the  development  of
its  existing  26 acre  site.  These  options  include a joint  venture  for the
development of a time-share  condominium  tower or an additional hotel tower and
parking  garage.  Under the terms of the Company's Bond  Indenture,  the Company
could  contribute  up to 6 acres  of land to such  projects  and if the  Company
decides to develop a time share  tower a third party  would  construct  and sell
time-share  units and arrange  financing.  Management  believes that  additional
rooms  adjacent  to the  Las  Vegas  Convention  Center  would  be  particularly
attractive to business customers and would provide a base for additional casinos
customers.  The  development  of a time-share  tower or parking  facility  would
require  additional  financing and, in the case of the time-share tower, a joint
venture partner, none of which the Company has in place at this time.

Marketing Strategies

           The Company has developed a marketing  program  intended to develop a
loyal following of repeat slot and mid-level  table game  customers.  Management
believes  it has been  able to  successfully  attract  these  patrons  using the
Riviera's restaurants, hotel accommodations and entertainment and by focusing on
customer service.  Management has adopted a selective  approach to the extension
of credit to these customers in order to reduce volatility of operating results.
The Company uses its research data to tailor  promotional offers to the specific
tastes of targeted customers.  All slot and table players are encouraged to join
the Riviera  Player's Club and to fill out surveys that provide the Riviera with
personal  information and preferences and tracks their level of play. Members of
the  Riviera  Player's  Club earn bonus  points  based upon their level of play,
redeemable for free gifts,  complimentary services or cash rebates.  Promotional
offers are made to qualifying customers through direct mail and telemarketing.

           The Riviera will continue to emphasize marketing programs that appeal
to slot and  mid-level  table game  customers  with a focus on  creating  repeat
customers and increasing walk-in traffic. In addition,  a key marketing focus is
maintaining  and  expanding  Riviera's  core  conventioneer  customer  base.  In
developing  its overall  marketing  programs,  the Company  conducts  extensive,
ongoing  research  of  its  target  customers'   preferences   through  surveys,
one-on-one interviews and focus groups.

           Create Repeat Customers

           Generating  customer loyalty is a critical  component of management's
business  strategy as retaining  customers is less expensive than attracting new
ones.  The Company has  developed a focused and  coordinated  marketing  program
intended to develop a loyal customer base which  emphasizes (i) providing a high
level of service to its customers to ensure an enjoyable experience while at the
Riviera,  (ii)  responding  to  customer  surveys and (iii)  focusing  marketing
efforts and promotional programs on customers with positive gaming profiles. The
Company  uses its  research  data to tailor  promotional  offers to the specific
tastes of targeted customers.  All slot and table players are encouraged to join
the Riviera  Player's  Club which  tracks  their level of play,  and to fill out
surveys that  provide the Riviera with  personal  information  and  preferences.
Members of the Riviera Player's Club earn bonus points based upon their level of
play,  redeemable  for  free  gifts,  complimentary  services  or cash  rebates.
Promotional  offers are made to  qualifying  customers  through  direct mail and
telemarketing.  The  Company  designs  promotional  offers  targeted  at certain
mid-level gaming patrons that are expected to provide significant revenues based
upon their  historical  gaming  patterns.  The Company  contacts these customers
through a combination of direct mail and telemarketing by an in-house  marketing
staff and independent  representatives located in major cities. The Riviera uses
a proprietary  database  which is linked to its player  tracking  system to help
identify customers'  requirements and preferences;  thereby allowing the Riviera
to customize promotions to attract repeat visitors. The Company offers customers
personalized   service,   credit   availability  and  access  to  a  variety  of
complimentary  or  reduced-rate  room,  dinner and  entertainment  reservations.
Management  uses  a  specialized  multi-tiered  marketing  approach  to  attract
customers  in each of its major  markets.  Slot and table game  tournaments  and
special  events  are  designed  for  specific  levels  of  play.  Utilizing  its
proprietary database the Company's marketing department then targets and invites
the customers most  appropriate  for the  customized  events.  In addition,  the
Company hosts an array of special events,  including slot and table tournaments,
designed to attract  customers for an extended  stay.  Management has found that
this  individualized  marketing approach has provided  significant  revenues and
profitable repeat business.

           Provide Extensive Entertainment Options

           The Company also focuses on attracting  its guests through a range of
entertainment  opportunities.   The  Riviera  has  one  of  the  most  extensive
entertainment  programs  in Las Vegas with four  different  regularly  scheduled
shows and special appearances by headline entertainers. In addition to providing
a positive impact on the Company's  profitability,  the shows attract additional
gaming revenue. Surveys indicate that approximately 80% of the show patrons come
from outside the hotel and approximately 66% of these individuals  gamble at the
Riviera before or after the shows.

           Attract Walk-In Traffic

           The Company  seeks to maximize the number of people who patronize the
Riviera  that are not guests in the hotel by  capitalizing  on  Riviera's  prime
Strip location,  convention  center proximity and the Riviera's  several popular
in-house  productions.  The Riviera is well situated on the Las Vegas Strip near
Circus Circus, Stardust Hotel & Casino, Westward Ho Casino & Hotel, Sahara Hotel
& Casino,  Las Vegas  Hilton  and the Las Vegas  Convention  Center.  Management
strives to attract customers from those facilities, as well as capitalize on the
visitors in Las Vegas in general, with the goal of increasing walk-in traffic by
(i) the  development  and promotion of Nickel Town,  (ii) providing a variety of
quality,  value-priced entertainment and dining options, and (iii) promoting the
"World's  Loosest  Corner  of  Slots,"  the  "Free  Pull" and "$40 for $20" slot
promotions, and placing them inside the casino.

           Focus on Convention Customers

           This market consists of two groups: (i) those trade organizations and
groups that hold their  events in the banquet  and meeting  space  provided by a
single hotel and (ii) those attending city-wide events,  usually held at the Las
Vegas  Convention  Center.  The Riviera targets  convention  business because it
typically  provides  patrons  willing to pay higher  room rates and it  provides
certain  advance  planning  benefits,  since  conventions are usually booked two
years in advance of the event date.  Management focuses its marketing efforts on
conventions  whose  participants  have the most active gaming profile and higher
room rate,  banquet and function spending habits. The Riviera also benefits from
its  proximity to the Las Vegas  Convention  Center which makes it attractive to
city-wide  conventioneers  looking to avoid the congestion  that occurs during a
major  convention,  particularly  at the south end of the Las Vegas  Strip.  The
Company  derives  approximately  25.5% of its hotel  occupancy  from  convention
customers  and  considers  them  a  critical  component  of its  customer  base.
Management  believes  that the recently  completed  expansion  of the  Riviera's
Convention  Center  from  100,000 to 160,000  square feet will  accommodate  the
growth in the size and number of groups that presently use the facility, attract
new  convention  groups  and  increase  the  percentage  of  rooms  occupied  by
conventioneers.

           Tour and Travel Operators

           Management  has found that many of its  customers use tour and travel
"package" options to reduce the cost of travel, lodging and entertainment. These
packages are produced by wholesale  operators  and travel  agents and  emphasize
mid-week stays.  Tour and travel patrons often book at off-peak periods enabling
the Company to maintain  occupancy  rates at the highest  levels  throughout the
year.  Management has developed  specialized  marketing  programs and cultivated
relationships  with  wholesale  operators,  travel agents and major domestic air
carriers to expand this  market.  The  Company's  four  largest  tour and travel
operators,  currently  account for approximately 500 of the available 2,100 room
bookings per night.  The Company makes an effort to convert many tour and travel
customers who meet the Company's target customer gaming profile into repeat slot
customers.

The Black Hawk Project


The  Company's  indirect  wholly-owned  subsidiary,  Riviera  Black  Hawk,  Inc.
("Riviera  Black Hawk") is constructing a casino in Black Hawk,  Colorado.  This
property  will be the  third  largest  casino  with  entertainment  and  parking
facilities in Black Hawk,  Colorado,  approximately 40 miles west of Denver.  It
will be one of the first three casinos encountered when traveling from Denver to
the Black Hawk/Central City market. The casino will feature  approximately 1,000
slot  machines  and 12 gaming  tables.  A  variety  of other  amenities  will be
offered,  which are designed to  differentiate  this casino,  including  on-site
parking for approximately 520 vehicles,  an approximately 265 seat casual dining
restaurant with two themed bars, and an entertainment center with seating for up
to 600 people.


           The casino is expected to be completed  and open in the first quarter
of 2000. The Company presently estimates that the total cost to develop and open
the casino,  excluding capitalized interest and financing related costs, will be
approximately $63.0 million,  which includes: (i) $15.1 million for the purchase
of the land on which the casino is being  developed,  (ii) $27.5 million  bonded
"Guaranteed Maximum Price" construction cost, (iii) $10.6 million for furniture,
fixtures and  equipment,  (iv) $7.7 million for project and  development  costs,
fees and permits and (v) $2.1 million for pre-opening  costs and initial working
capital.  As of December 31, 1998,  the Company had spent $25.0  million on this
project (excluding capitalized interest).

Geographical Markets

The Las Vegas Market

           Las Vegas is one of the  largest and  fastest  growing  entertainment
markets in the country. According to the LVCVA, the number of visitors traveling
to Las Vegas has increased at a steady and significant  rate for the last twelve
years from 15.2  million  in 1986 to 30.6  million  in 1998,  a compound  annual
growth  rate of 6.0%.  Clark  County  gaming  has  continued  to be a strong and
growing  business  with Clark County  gaming  revenues  increasing at a compound
annual growth rate of 8.4% from $2.4 billion in 1986 to $6.3 billion in 1998.

           Gaming  and  tourism  are  the  major   attractions   of  Las  Vegas,
complemented   by  warm  weather  and  the   availability   of  many  year-round
recreational  activities.  Although Las Vegas' principal markets are the western
region of the United States, most significantly Southern California and Arizona,
Las Vegas also serves as a  destination  resort for  visitors  from all over the
world.  A significant  percentage of visitors  originate  from Latin America and
Pacific Rim countries such as Japan, Taiwan, Hong Kong and Singapore.

           Historically, Las Vegas has had one of the strongest hotel markets in
the country.  The number of hotel and motel rooms in Las Vegas has  increased by
over 63% from  approximately  67,000 at the end of 1989 to 109,365 at the end of
1998,  giving Las Vegas the most hotel and motel rooms of any metropolitan  area
in the country.  Despite this  significant  increase in the supply of rooms, the
Las Vegas  hotel  occupancy  rate  exceeded  85% for each of the years from 1993
through 1998. Since January 1, 1998 approximately  4,500 new hotel rooms opened,
and as of December  31, 1998 there were 12,476  hotel rooms under  construction.
The LVCVA states that an additional  approximately 3,500 rooms will be completed
by the end of the year 2000.  The new rooms  under  construction  are  primarily
being  designed to attract the high-end  gaming and  convention  customers,  and
based on construction costs, will be priced at rates well above those which have
been or can be charged by the Riviera based on the investment in its facility.

           The Company believes that the growth in the Las Vegas market has been
enhanced as a result of (i) a dedicated program by the LVCVA and major Las Vegas
casino/hotels  to  promote  Las  Vegas  as a major  convention  site,  (ii)  the
increased  capacity of  McCarran  Airport  and (iii) the  introduction  of large
themed "must see" destination  resorts in Las Vegas. In 1988,  approximately 1.7
million delegates attended conventions in Las Vegas and generated  approximately
$1.3 billion of economic impact. In 1998, the number of convention delegates had
increased to 3.3 million with approximately $4.3 billion of economic impact.

           During  the past  five  years,  McCarran  Airport  has  expanded  its
facilities to accommodate the increased  number of airlines and passengers which
it services.  The number of passengers  traveling  through  McCarran Airport has
increased  from  approximately  22.5  million  in 1993 to 30.2  million in 1998.
Construction  has recently been completed on numerous  roadway  enhancements  to
improve access to the Airport.  An additional runway has also been completed and
is now  operational.  The  Airport  has  additional  long-term  expansion  plans
underway which will provide three new satellite concourses,  60 additional gates
and other facilities.

The Colorado Market

           In November 1990,  Colorado  voters  approved  limited-stakes  gaming
($5.00  or  less  per  wager)  in  three  historic  gold  mining  areas,   Black
Hawk/Central  City and Cripple  Creek.  Because of the $5.00  maximum  bet,  the
casinos in Colorado  emphasize  gaming machine play. Black Hawk and Central City
are  contiguous,  with  Black  Hawk  being  closer to  Denver,  and are  located
approximately  40 miles west of Denver and 10 miles north of Interstate  70, the
main highway connecting Denver to many of Colorado's major ski resorts.  Cripple
Creek is located  approximately 45 miles from Colorado Springs and 75 miles from
Pueblo.  Casinos located in the Black Hawk/Central City area serve primarily the
residents  of  Denver  and  Boulder,   Colorado  and  surrounding   communities.
Approximately  three million  people live within a 100-mile  radius of the Black
Hawk/Central City area.

           The proximity of the Black Hawk/Central City area to major population
centers has  contributed to consistent  growth in gaming  revenues in the market
since the  legalization  of gaming in 1990.  The Company also  believes that the
Black  Hawk/Central  City gaming market has benefitted from the entry of larger,
well-capitalized  gaming operators offering parking and superior amenities. As a
result, gaming revenues have grown from $127.6 million in 1992 to $366.0 million
in 1998, representing a 19% compound annual growth rate. As of December 31, 1998
there were 30 casinos and over 10,000 slot  machines in  operation in Black Hawk
and Central City.

Management Activities

           In order to capitalize on  management's  expertise and  reputation as
successful   operators  of  casino   properties,   the  Company  formed  RGM,  a
wholly-owned  subsidiary  of the Company,  for the primary  purpose of obtaining
casino  management  contracts  in Nevada and other  jurisdictions.  RGM provides
services  such as assisting  new venue  licensee  applicants  in  designing  and
planning  their  gaming  operations  and  managing  the  start-up  of new gaming
operations. These services include casino design, equipment selection,  employee
recruitment  and  training,  control  and  accounting  systems  development  and
marketing programs.  Management believes that management  contracts provide high
margin  income  with  limited  additional  overhead  and  little  or no  capital
expenditure requirements.  Management is continually evaluating opportunities to
manage other casinos/hotels. The Company's objective is to obtain the right to a
substantial  equity  position  in  projects  it  would  manage  as  part  of the
compensation for its services.

Four Queens Management Agreement

           Riviera  Gaming  Management-Elsinore,   Inc.  ("RGME"),  an  indirect
wholly-owned  subsidiary of the Company,  is operating the Four Queens Hotel and
Casino,  located adjacent to the Golden Nugget on Fremont Street in Downtown Las
Vegas, pursuant to a Management Agreement effective as of February 27, 1997. The
term of the agreement is approximately 40 months (subject to earlier termination
by either party on six months notice.  RGME is paid a minimum annual  management
fee of $1 million  and a  performance  fee,  which is payable  only if cash flow
increases  materially above current levels. RGME has warrants to purchase common
stock of Elsinore Corporation (the parent of the Four Queens Hotel/Casino) which
appears unlikely to have significant value.

Other Management Opportunities

           The Company is  continuously  reviewing  opportunities  to expand and
become a  multi-jurisdictional  casino company with greater capital resources to
enable it to compete more effectively.  The jurisdictions  include,  but are not
limited  to,  Mississippi,  Pennsylvania  and Iowa.  The Company may also become
involved in financially distressed casino properties where it believes it may be
able to effect a turn-around  (similar to that which current management achieved
at the Riviera) and can obtain a significant equity stake.

Competition

Las Vegas, Nevada

           Intense  competition  exists among companies in the gaming  industry,
many of which have significantly greater resources than the Company. The Riviera
faces  competition  from all other  casinos  and  hotels in the Las Vegas  area.
Management  believes  that the  Riviera's  most  direct  competition  comes from
certain large  casino/hotels  located on or near the Las Vegas Strip which offer
amenities and marketing programs similar to those offered by the Riviera.


At December 31, 1998, the Las Vegas Convention and Visitors  Authority  ("LVCA")
indicated  that there were 31  operational  casinos on the Las Vegas  Strip.  Of
these Las Vegas Strip casinos,  21 casinos had over 1,000 available hotel rooms.
The Riviera is ranked as the 17th  largest Las Vegas Strip  hotel/casino,  based
upon number of available hotel rooms.


           Las Vegas gaming square  footage and room capacity are  continuing to
grow and are  expected to continue  to  increase  significantly  during the next
several years.

           Since January 1, 1998 approximately 4,500 new hotel rooms opened, and
as of  December  31,  1998 there were  approximately  12,500  hotel  rooms under
construction.  The LVCVA states that an additional 3,537 rooms will be completed
by the end of the year 2000.  Existing  and  future  expansions,  additions  and
enhancements  to existing  properties and  construction of new properties by the
Company's  competitors  could  divert  additional  business  from the  Company's
facilities. There can be no assurance that the Company will compete successfully
in the Las Vegas market in the future.

           During 1998,  available room nights in the Las Vegas market increased
from 37.7  million to 39.0  million or 3.5%,  while total room  nights  occupied
increased  from 32.5 million to 33.4 million or 2.9%.  The ending room inventory
at December 31, 1998 was 109,365  compared to 105,347 at December  31, 1997,  an
increase  of 4,018  rooms  or 3.8 %.  This has had the  effect  of  intensifying
competition.  At the Riviera, room occupancy fell from 96.8% in 1997 to 95.2% in
1998  (still much higher than the Strip  average)  and room rates  decreased  by
$3.43 or 5.8%, from $58.25 in 1997 to $54.82 in 1998.

           The Company  also  competes,  to some  extent,  with casinos in other
states,   riverboat  and  Native  American  gaming   ventures,   state-sponsored
lotteries, on- and off-track wagering, card parlors and other forms of legalized
gaming  in the  United  States,  as well as with  gaming  on  cruise  ships  and
international  gaming  operations.  In addition,  certain  states have  recently
legalized or are considering  legalizing casino gaming in specific  geographical
areas within those states. Any future development of casinos, lotteries or other
forms of gaming in other  states,  particularly  areas close to Nevada,  such as
California,  could have a material  adverse  effect on the Company's  results of
operations.

           The current  business of the Company is entirely  dependent on gaming
in Las Vegas. The Riviera derives a substantial  percentage of its business from
tourists,  principally  from Southern  California  and the  southwestern  United
States.  Weakness  in the economy of Southern  California  has in the past,  and
could in the future,  adversely  affect the  financial  results of the  Company.
Until the Black Hawk casino opens,  the Company's  operations  will be primarily
dependent  upon the  results of  operations  achieved  by the Riviera on the Las
Vegas Strip. Any significant  disruption in operations at the Riviera would have
a material adverse effect on the Company.

Black Hawk, Colorado

           The Black Hawk/Central City gaming market is characterized by intense
competition.  The Company believes that the primary  competitive  factors in the
market are location,  availability  and  convenience of parking,  number of slot
machines and gaining  tables,  types and pricing of non-gaming  amenities,  name
recognition and overall  atmosphere.  The Company  believes its main competitors
will be the larger  gaming  facilities  in the City of Black Hawk,  particularly
those with considerable on-site or proximate parking and established reputations
in the local market.  Of the 30 gaming facilities  currently  operating in Black
Hawk/Central City, eight have over 400 gaming positions.  The largest casinos in
terms of the number of gaming  positions  are  respectively,  the Isle of Capri,
Black Hawk,  Harvey's  Wagon  Wheel  Casino  Hotel,  Colorado  Central  Station,
Bullwhackers Black Hawk, Canyon Casino, Fitzgeralds Casino Black Hawk, the Lodge
and Gilpin Hotel Casino. Construction has also begun on the "Mardi Gras" casino,
which is expected to feature over 600 slot  machines.  Other  projects have also
been announced,  proposed,  discussed or rumored for the Black Hawk/Central City
market,  although the Company is not aware of whether any of these  projects are
proceeding.

           The Company expects the gaming  facilities  near the  intersection of
Main and Mill Streets to provide significant competition, while at the same time
creating the greatest  concentration of parking in the Black  Hawk/Central  City
market, as well as attracting a critical mass of customers to the area. Colorado
Central Station,  one of the most successful  casinos in the market,  is located
across the street from the Company's Black Hawk casino and has approximately 700
slot machines, 20 gaming tables and approximately 700 valet-only parking spaces.
The Isle of Capri  Black  Hawk,  operated  by Casino  America,  which  opened in
December 1998, is located  directly  across the street from the Company's  Black
Hawk casino and features  approximately 1,100 slot machines, 14 table games, and
1,000 parking spaces.

           Currently,  limited  stakes  gaming in Colorado  is  constitutionally
authorized in Central City,  Black Hawk,  Cripple Creek and two Native  American
reservations  in southwest  Colorado.  However,  there can be no assurance  that
gaming will not be approved in other Colorado communities in the future.

           The Company will also compete with other forms of gaming in Colorado,
including  lottery  gaming,  and horse and dog racing as well as other  forms of
entertainment.

           Pursuant to a license agreement,  the Riviera will license the use at
the Black Hawk casino of all of the trademarks,  service marks and logos used by
the Riviera Hotel & Casino in Las Vegas. In addition, the license agreement will
provide  that  additional  trademarks,  service  marks  and  logos  acquired  or
developed by the Company and used at its other facilities will be subject to the
license agreement.

Employees and Labor Relations

           As of December 31, 1998 the Riviera had approximately 2,100 full time
equivalent  employees and had collective  bargaining  contracts with nine unions
covering  approximately  1,200 of such  employees  including  food and  beverage
employees,  rooms  department  employees,  carpenters,  engineers,  stage hands,
musicians,  electricians,  painters and teamsters. The Company's agreements with
the Southern Nevada Culinary and Bartenders  Union and Stage Hands Union,  which
cover the majority of the Company's  unionized  employees,  were renegotiated in
1998 and  expire in the year 2002.  Collective  Bargaining  Agreements  with the
Operating  Engineers,  Electricians and Musicians will expire in 1999, while the
Agreements with the Carpenters and Painters will expire in 2000. A new Agreement
was negotiated with the Teamsters and expires in 2003. Although unions have been
active  in  Las  Vegas,  management  considers  its  employee  relations  to  be
satisfactory.  There can be no assurance,  however,  that new agreements will be
reached without union action or will be on terms satisfactory to the Company.

Regulation and Licensing

Nevada

Nevada Gaming Authority

           The ownership and operation of casino gaming facilities in Nevada are
subject to: (i) The Nevada Gaming  Control Act and the  regulations  promulgated
thereunder (collectively the "Nevada Act") and (ii) various local ordinances and
regulations.  The Company's  gaming  operations are subject to the licensing and
regulatory control of the Nevada Commission,  the Nevada Board, the Clark County
Board and the City of Las Vegas.  The Nevada  Commission,  the Nevada Board, the
Clark County Board and the City of Las Vegas are collectively referred to as the
"Nevada Gaming Authorities."

           The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities  are based upon  declarations  of public  policy which are concerned
with, among other things:  (i) the prevention of unsavory or unsuitable  persons
from having a direct or indirect  involvement with gaming at any time and in any
capacity;  (ii) the  establishment  and  maintenance of  responsible  accounting
practices and procedures;  (iii) the maintenance of effective  controls over the
financial  practices  of  licensees,  including  the  establishment  of  minimum
procedures  for  internal  fiscal  affairs  and the  safeguarding  of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities;  (iv) the prevention of cheating and
fraudulent  practices;  and (v)  providing a source of state and local  revenues
through  taxation  and  licensing  fees.  Change in such laws,  regulations  and
procedures could have an adverse effect on the Company's gaming operations.

           ROC is required to be licensed by the Nevada Gaming Authorities.  The
gaming  license held by ROC requires the periodic  payment of fees and taxes and
is not  transferable.  ROC is also licensed as a manufacturer and distributor of
gaming devices.  Such licenses also require the periodic payment of fees and are
not  transferable.  The  Company is  registered  by the Nevada  Commission  as a
publicly  traded  corporation  (a "Registered  Corporation")  and has been found
suitable  to own  the  stock  of  ROC.  ROC is  also  registered  by the  Nevada
Commission  as an  intermediary  company and has been found  suitable to own the
stock  of  RGM  which  has  been  registered  by  the  Nevada  Commission  as an
Intermediary  company  and has  been  found  suitable  to own the  stock  of its
subsidiary  RGME.  RGME has been  licensed as the manager of the Four Queens and
such  license is not  transferable.  ROC and RGME are each a Corporate  Licensee
(collectively,  the "Corporate Licensees") under the terms of the Nevada Act. As
a  Registered  Corporation,  the  Company  is  required  periodically  to submit
detailed financial and operating reports to the Nevada Commission and to furnish
any other  information  which the Nevada  Commission may require.  No person may
become a  stockholder  of, or  receive  any  percentage  of  profits  from,  the
Corporate  Licensees  without first  obtaining  licenses and approvals  from the
Nevada Gaming Authorities. The Company, ROC, RGM and RGME have obtained from the
Nevada  Gaming  Authorities  the  various  registrations,   approvals,  permits,
findings  of  suitability  and  licenses  required  in order to engage in gaming
activities and manufacturing and distribution activities in Nevada.

           All gaming devices that are manufactured, sold or distributed for use
or play in Nevada, or for distribution  outside of Nevada,  must be manufactured
by licensed  manufacturers,  distributed  or sold by licensed  distributors  and
approved  by the Nevada  Commission.  The  approval  process  includes  rigorous
testing by the Nevada Board, a field trial and a determination as to whether the
gaming  device  meets  strict  technical  standards  that  are set  forth in the
regulations  of the Nevada  Gaming  Authorities.  Associated  equipment  must be
administratively  approved  by the  Chairman  of the Nevada  Board  before it is
distributed for use in Nevada.

           The Nevada Gaming  Authorities may investigate any individual who has
a material  relationship to, or material involvement with, the Company, ROC, RGM
or RGME in order to determine  whether such  individual is suitable or should be
licensed as a business associate of a gaming licensee.  Officers,  directors and
certain key  employees  of ROC and RGME must file  applications  with the Nevada
Gaming  Authorities  and may be required to be licensed or found suitable by the
Nevada Gaming Authorities.  Officers, directors and key employees of the Company
and RGM who are actively and directly  involved in the gaming  activities of ROC
or RGME may be required to be  licensed or found  suitable by the Nevada  Gaming
Authorities. The Nevada Gaming Authorities may deny an application for licensing
for any cause which they deem reasonable. A finding of suitability is comparable
to licensing,  and both require  submission  of detailed  personal and financial
information followed by a thorough investigation. The applicant for licensing or
a finding of suitability must pay all the costs of the investigation. Any change
in a  corporate  position  by a licensed  person  must be reported to the Nevada
Gaming  Authorities  and, in addition to their  authority to deny an application
for a finding of suitability or licensure,  the Nevada Gaming  Authorities  have
jurisdiction to disapprove a change in a corporate position.

           If the Nevada Gaming Authorities were to find an officer, director or
key  employee  unsuitable  for  licensing  or  unsuitable  to continue  having a
relationship  with the Company,  ROC, RGM or RGME the companies  involved  would
have to sever all  relationships  with such  person.  In  addition,  the  Nevada
Commission may require the Company, ROC, RGM or RGME to terminate the employment
of any person who refuses to file appropriate  applications.  Determinations  of
suitability or of questions  pertaining to licensing are not subject to judicial
review in Nevada.

           The Company,  ROC and RGME are required to submit detailed  financial
and  operating  reports to the Nevada  Commission.  Substantially  all  material
loans,  leases,  sales of securities and similar  financing  transactions by ROC
must be reported to or approved by the Nevada Commission.

           If it were  determined  that the  Nevada Act was  violated  by ROC or
RGME, the gaming licenses they hold could be limited, conditioned,  suspended or
revoked, subject to compliance with certain statutory and regulatory procedures.
In addition,  the Company,  ROC, RGM and RGME and the persons  involved could be
subject to  substantial  fines for each separate  violation of the Nevada Act at
the  discretion  of the  Nevada  Commission.  Further,  a  supervisor  could  be
appointed  by the Nevada  Commission  to operate the casino and,  under  certain
circumstances,  earnings generated during the supervisor's  appointment  (except
for  reasonable  rental value of the casino)  could be forfeited to the State of
Nevada. Limitation,  conditioning or suspension of the gaming licenses of ROC or
RGME or the  appointment  of a supervisor  could (and  revocation  of any gaming
license would) materially adversely affect the Company's gaming operations.

           Any beneficial holder of the Company's voting securities,  regardless
of the  number of shares  owned,  may be  required  to file an  application,  be
investigated,  and have his suitability as a beneficial  holder of the Company's
voting securities determined if the Nevada Commission has reason to believe that
such ownership would otherwise be inconsistent with the declared policies of the
State of Nevada.  The applicant must pay all costs of investigation  incurred by
the Nevada Gaming Authorities in conducting any such investigation.

           The Nevada Act  requires  any person who  acquires  more than 5% of a
Registered  Corporation's  voting  securities to report the  acquisition  to the
Nevada  Commission.  The Nevada Act requires that beneficial owners of more than
10%  of a  Registered  Corporation's  voting  securities  apply  to  the  Nevada
Commission for a finding of suitability within thirty days after the Chairman of
the Nevada Board mails the written notice  requiring such filing.  Under certain
circumstances,  an "institutional investor," as defined in the Nevada Act, which
acquires  more than 10%,  but not more than 15%, of a  Registered  Corporation's
voting  securities  may  apply to the  Nevada  Commission  for a waiver  of such
finding  of  suitability  if  such  institutional   investor  holds  the  voting
securities for investment purposes only. An institutional  investor shall not be
deemed to hold  voting  securities  for  investment  purposes  unless the voting
securities  were acquired and are held in the ordinary  course of business as an
institutional  investor  and  not  for  the  purpose  of  causing,  directly  or
indirectly,  the election of a majority of the members of the board of directors
of the  Registered  Corporation,  any change in the corporate  charter,  bylaws,
management,  policies or operations of the Registered Corporation, or any of its
gaming  affiliates,  or any other action which the Nevada Commission finds to be
inconsistent  with holding the Registered  Corporation's  voting  securities for
investment  purposes  only.  Activities  which are deemed to be consistent  with
holding voting  securities for investment  purposes only include:  (i) voting on
all matters voted on by stockholders;  (ii) making financial and other inquiries
of management of the type normally made by securities analysts for informational
purposes and not to cause a change in its  management,  policies or  operations;
and (iii) such other  activities  as the Nevada  Commission  may determine to be
consistent  with such  investment  intent.  If the  beneficial  holder of voting
securities who must be found suitable is a corporation, partnership or trust, it
must submit  detailed  business and  financial  information  including a list of
beneficial owners. The applicant is required to pay all costs of investigation.

           Any person who fails or refuses to apply for a finding of suitability
or a license  within  thirty  days  after  being  ordered to do so by the Nevada
Commission or the Chairman of the Nevada  Board,  may be found  unsuitable.  The
same  restrictions  apply to a record owner if the record owner,  after request,
fails to identify the beneficial owner. Any stockholder found unsuitable and who
holds,  directly or  indirectly,  any  beneficial  ownership of the common stock
beyond such period of time as may be prescribed by the Nevada  Commission may be
guilty of a criminal offense.  The Company is subject to disciplinary action if,
after it receives  notice that a person is unsuitable to be a stockholder  or to
have any other relationship with the Company,  ROC, RGM or RGME, the Company (i)
pays that person any dividend or interest upon voting securities of the Company,
(ii) allows that person to exercise,  directly or  indirectly,  any voting right
conferred through securities held by that person, (iii) pays remuneration in any
form to that person for services rendered or otherwise,  or (iv) fails to pursue
all lawful  efforts to require such  unsuitable  person to relinquish his voting
securities  including,  if  necessary,  the  immediate  purchase  of said voting
securities for cash at fair market value.  Additionally,  the Clark County Board
has the authority to approve all persons owning or controlling  the stock of any
corporation controlling a gaming licensee.

           The Nevada  Commission may, in its discretion,  require the holder of
any  debt  security  of  a  Registered  Corporation  to  file  applications,  be
investigated  and be found  suitable to own the debt  security  of a  Registered
Corporation,  if  it  has  reason  to  believe  that  such  ownership  would  be
inconsistent  with the declared  policies of the State of Nevada.  If the Nevada
Commission  determines  that a person is unsuitable to own such  security,  then
pursuant  to the Nevada  Act,  the  Registered  Corporation  can be  sanctioned,
including the loss of its approvals, if without the prior approval of the Nevada
Commission, it: (i) pays to the unsuitable person any dividend, interest, or any
distribution  whatsoever;  (ii)  recognizes any voting right by such  unsuitable
person in connection  with such  securities;  (iii) pays the  unsuitable  person
remuneration in any form; or (iv) makes any payment to the unsuitable  person by
way of principal,  redemption,  conversion,  exchange,  liquidation,  or similar
transaction.

           The Company is required to maintain a current  stock ledger in Nevada
which may be  examined  by the Nevada  Gaming  Authorities  at any time.  If any
securities are held in trust by an agent or by a nominee,  the record holder may
be required  to disclose  the  identity  of the  beneficial  owner to the Nevada
Gaming Authorities. A failure to make such disclosure may be grounds for finding
the record holder  unsuitable.  The Company is also  required to render  maximum
assistance  in  determining  the identity of the  beneficial  owner.  The Nevada
Commission has the power to require the Company's  stock  certificates to bear a
legend indicating that the securities are subject to the Nevada Act. However, to
date, the Nevada Commission has not imposed such a requirement on the Company.

           The Company may not make a public offering of its securities  without
the prior  approval  of the Nevada  Commission  if the  securities  or  proceeds
therefrom  are  intended  to be used to  construct,  acquire or  finance  gaming
facilities  in  Nevada,  or to retire or extend  obligations  incurred  for such
purposes.  In addition,  (i) a Corporate  Licensee may not  guarantee a security
issued by a Registered Corporation pursuant to a public offering, or hypothecate
its assets to secure the payment or performance of the obligations  evidenced by
such a security,  without the prior approval of the Nevada Commission,  (ii) the
pledge of the stock of a Corporate  Licensee  or  Intermediary  company  ("Stock
Pledge"),  such as ROC, RGM and RGME, is void without the prior  approval of the
Nevada  Commission,  and  (iii)  restrictions  upon the  transfer  of an  equity
security issued by a Corporate  Licensee or Intermediary  company and agreements
not  to  encumber  such  securities  (collectively,  "Stock  Restrictions")  are
ineffective without the prior approval of the Nevada Commission.

           Changes in  control of the  Company  through  merger,  consolidation,
stock or asset acquisitions,  management or consulting agreements, or any act or
conduct by a person whereby he obtains control,  may not occur without the prior
approval  of the Nevada  Commission.  Entities  seeking to acquire  control of a
Registered  Corporation must satisfy the Nevada Board and Nevada Commission in a
variety of  stringent  standards  prior to assuming  control of such  Registered
Corporation.  The Nevada Commission may also require  controlling  stockholders,
officers,  directors  and  other  persons  having  a  material  relationship  or
involvement with the entity proposing to acquire control, to be investigated and
licensed as part of the approval process relating to the transaction.

           The Nevada legislature has declared that some corporate  acquisitions
opposed by management,  repurchases of voting  securities and corporate  defense
tactics affecting Nevada corporate gaming Licensees and Registered  Corporations
that are  affiliated  with  those  operations,  may be  injurious  to stable and
productive  corporate gaming. The Nevada Commission has established  regulations
to ameliorate the potentially  adverse effects of these business  practices upon
Nevada's  gaming  industry  and to  further  Nevada's  policy to: (i) assure the
financial  stability of corporate  gaming Licensees and their  affiliates;  (ii)
preserve the beneficial  aspects of conducting  business in the corporate  form;
and (iii) promote a neutral  environment for the orderly governance of corporate
affairs.  Approvals  are,  in certain  circumstances,  required  from the Nevada
Commission before the Registered Corporation can make exceptional repurchases of
voting  securities above the current market price thereof and before a corporate
acquisition  opposed  by  management  can be  consummated.  The  Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Registered
Corporation's  Board of Directors in response to a tender offer made directly to
the Registered Corporation's  stockholders for the purposes of acquiring control
of the Registered Corporation.

           License  fees and taxes,  computed in various  ways  depending on the
type of gaming or activity  involved,  are payable to the State of Nevada and to
the County in which the ROC, RGM and RGME  operations are  conducted.  Depending
upon the particular fee or tax involved, these fees and taxes are payable either
monthly,  quarterly or annually and are based upon either:  (i) a percentage  of
the gross  revenues  received;  (ii) the number of gaming devices  operated;  or
(iii) the number of table games  operated.  A casino  entertainment  tax is also
paid by casino  operations  where  entertainment is furnished in connection with
the selling of food,  refreshments or merchandise.  Nevada Licensees that hold a
license to manufacture and distribute slot machines and gaming devices,  such as
ROC, also pay certain fees and taxes to the State of Nevada.

           Any person who is  licensed,  required  to be  licensed,  registered,
required  to be  registered,  or is  under  common  control  with  such  persons
(collectively,  "Licensees"),  and who  proposes to become  involved in a gaming
venture  outside of Nevada,  is required to deposit with the Nevada  Board,  and
thereafter  maintain,  a  revolving  fund in the  amount of  $10,000  to pay the
expenses of  investigation  by the Nevada Board of their  participation  in such
foreign  gaming.  The  revolving  fund is subject to increase or decrease in the
discretion  of the Nevada  Commission.  Thereafter,  Licensees  are  required to
comply with certain reporting  requirements imposed by the Nevada Act. Licensees
are also  subject  to  disciplinary  action  by the  Nevada  Commission  if they
knowingly violate any laws of the foreign jurisdiction pertaining to the foreign
gaming  operation,  fail to conduct the foreign  gaming  operation in accordance
with  the  standards  of  honesty  and  integrity   required  of  Nevada  gaming
operations,  engage in activities that are harmful to the State of Nevada or its
ability  to collect  gaming  taxes and fees,  or employ a person in the  foreign
operation who has been denied a license or finding of  suitability  in Nevada on
the ground of personal unsuitability.

Other Nevada Regulation

           The  sale  of  alcoholic  beverages  at the  Riviera  is  subject  to
licensing,  control and  regulation by the Clark County Board.  All licenses are
revocable  and are not  transferable.  The Clark  County Board has full power to
limit, condition,  suspend or revoke any such license, and any such disciplinary
action  could (and  revocation  would) have a material  adverse  affect upon the
operations of ROC.

Colorado

Colorado Gaming Regulation

           Pursuant to an amendment to the Colorado  Constitution (the "Colorado
Amendment"),  limited stakes gaming became lawful in the cities of Central City,
Black Hawk and Cripple Creek on October 1, 1991. The Colorado  Amendment defines
limited  stakes  gaming  as the  use of slot  machines  and the  card  games  of
blackjack and poker, with a maximum single bet of five dollars.

           Limited  stakes  gaming is confined to the  commercial  districts  of
these cities as defined by Central City on October 7, 1981, by Black Hawk on May
4, 1978,  and by Cripple  Creek on December 3, 1973.  In addition,  the Colorado
Amendment  restricts  limited  stakes gaming to  structures  that conform to the
architectural  styles and  designs  that were common to the areas prior to World
War 1, and which  conform to the  requirements  of  applicable  city  ordinances
regardless of the age of the structures. The Colorado Amendment provides that no
more than 35% of the square  footage of any building and no more than 50% of any
one floor of any building may be used for limited  stakes  gaming.  The Colorado
Amendment  prohibits  limited  stakes gaming  between the hours of 2:00 a.m. and
8:00 a.m., and allows limited stakes gaming to occur in establishments  licensed
to sell alcoholic beverages.

           Further,  the Colorado  Amendment  provides  that, in addition to any
other  applicable  license  fees,  up to a maximum  of 40% of the total  amounts
wagered  less  payouts to players  may be payable by a licensee  for  conducting
limited  stakes  gaming.  Such  percentage is to be  established by the Colorado
Limited Gaming Act of 1991 (the "Colorado Act").

           The Colorado  legislature  promulgated  the Colorado Act to implement
the provisions of the Colorado  Amendment.  The Colorado Act became effective on
June 4, 1991 and has been amended subsequently.

           The Colorado Act declares  public policy on limited  stakes gaming to
be that:  (i) the  success of limited  stakes  gaming is  dependent  upon public
confidence and trust that licensed  limited stakes gaming is conducted  honestly
and  competitively;  the rights of the  creditors  of licensees  are  protected;
gaming is free from criminal and corruptive elements; (ii) public confidence and
trust can be maintained  only by strict  regulation  of all persons,  locations,
practices,  associations  and  activities  related to the  operation of licenses
gaming  establishments and the manufacture or distribution of gaming devices and
equipment; (iii) all establishments where limited stakes gaming is conducted and
where gambling  devices and equipment must be licensed,  controlled and assisted
to protect the  inhabitants  of the state to foster the stability and success of
limited  stakes  gaming and to  preserve  the economy  and free  competition  in
Colorado; and (iv) no applicant for a license of other approval has any right to
a license or to the granting of the approval sought.

           The Colorado Act subjects the  ownership  and operation of limitation
stakes  gaming  facilities  in Colorado to extensive  regulation by the Colorado
Limited Gaming Control  Commission  (the  "Colorado  Commission")  and prohibits
persons under the age of 21 from  participating  in limited  stakes  gaming.  No
limited stakes gaming may be conducted in Colorado unless all appropriate gaming
licenses are approved by and obtained from the Colorado Commission. The Colorado
Commission has full and exclusive authority to promulgate,  and has promulgated,
rules and  regulations  governing  the  licensing,  conducting  and operating of
limited  stakes gaming (the  "Colorado  Regulations").  Such  authority does not
require any approval by or delegation of authority from the Colorado  Department
of Revenue (the "Colorado  Revenue  Department").  The Colorado Act also created
the  Division  of Gaming  within the  Colorado  Revenue  Department  to license,
implement,  regulate  and  supervise  the  conduct of limited  stakes  gaming in
Colorado,  supervised and administered by the Director of the Division of Gaming
(the "Division Director").

           The Colorado Commission may issue: (i) slot machine or distributor,
(ii)  operator,  (iii) retail gaming,  (iv) support and (v) key employee  gaming
licenses.  The first  three  licenses  require  annual  renewal by the  Colorado
Commission.  Support and key  employee  licenses are issued for two year periods
and are renewable by the Division  Director.  The Colorado  Commission has broad
discretion to condition, suspend for up to six months, revoke, limit or restrict
a license at any time and also has the authority to impose fines.

           An  applicant  for  a  gaming  license  must  complete  comprehensive
application forms, pay required fees and provide all information required by the
Colorado Commission and the Division of Gaming.  Prior to licensure,  applicants
must satisfy the  Colorado  Commission  that they are  suitable  for  licensing.
Applicants have the burden of proving their qualifications and must pay the full
cost of any background investigations.
There is no limit on the cost of such background investigations.

           Gaming employees must hold either a support or key employee  license.
Every retail gaming  licensee must have a key employee  license in charge of all
limited stakes gaming  activities when limited stakes gaming is being conducted.
The Colorado  Commission may determine that a gaming  employee is a key employee
and, require that such person apply for a key employee license.

           A retail  gaming  license  is  required  for all  persons  conducting
limited stakes gaming on their  premises.  In addition,  an operator  license is
required  for all  persons who engage in the  business of placing and  operating
slot machines on the premises of a retailer. However, a retailer is not required
to hold an operator  license.  No person may have an ownership  interest in more
than three retail licenses.  A slot machine  manufacturer or distributor license
is required for all persons who manufacture,  import or distribute slot machines
in Colorado.

           The  Colorado  Act  requires  that  every  officer,   director,   and
stockholder of private  corporations or equivalent  office or ownership  holders
for non-corporate applicants, and every officer, director or stockholder holding
either a 5% or greater  interest or  controlling  interest of a publicly  traded
corporation  or owners of an  applicant  or  licensee  shall be a person of good
moral character and submit to a full background  investigation  conducted by the
Division of Gaming and the  Colorado  Commission.  The Colorado  Commission  may
require any person having an interest in a license to undergo a full  background
investigation  and pay the  cost  of  investigation  in the  same  manner  as an
applicant.

           Persons found  unsuitable by the Colorado  Commission may be required
immediately  to  terminate  any  interest,  association,  or  agreement  with or
relationship  to a  licensee.  A finding of  unsuitability  with  respect to any
officer, director, employee, associate, lender or beneficial owner of a licensee
or applicant  also may  jeopardize  the  licensee's  license or the  applicant's
application.  A license  approval may be conditioned upon the termination of any
relationship with unsuitable persons.

           An  applicant  or licensee  must report to the  Division of Gaming or
Colorado  Commission  all leases not later than 30 days after the effective date
of the lease. Also, an applicant or a license,  upon the request of the Colorado
Commission or the Division  Director,  must submit copies of all written  gaming
contracts and  summaries of all oral gaming  contracts to which it is or intends
to become a party. The Division Director or the Colorado  Commission may require
changes in the lease or gaming  contract  before an  applicant  is  approved  or
participation  in such  agreement is allowed or may require  termination  of the
lease or gaming contract.

           The Colorado Act and the Colorado  Regulations  require  licensees to
maintain  detailed records that account for all business  transactions.  Records
must be furnished upon demand to the Colorado Commission, the Division of Gaming
and other law enforcement  authorities.  The Colorado Regulations also establish
extensive  playing  procedures  and rules of play for poker,  blackjack and slot
machines.  Retail gaming  licenses  must adopt  comprehensive  internal  control
procedures.  Such  procedures  must be  approved  in advance by the  Division of
Gaming and  include the areas of  accounting,  surveillance,  security,  cashier
operations,  key control and fill and drop procedures,  among others.  No gaming
devices  may be used in  limited  stakes  gaming  without  the  approval  of the
Division Director or the Colorado Commission.

           Licensees  have  a  continuing  duty  to  immediately  report  to the
Division  of Gaming the name,  date of birth and social  security  number of all
persons who obtain an ownership, financial or equity interest in the licensee of
five (5) percent or greater, or who have the ability to control the licensee, or
who have the ability to exercise significant influence over the licensee, or who
loan any money or other thing of value to the licensee. Licensees must report to
the Division of Gaming all  licenses,  and all  applications  for  licenses,  in
foreign jurisdictions.

           With limited  exceptions  applicable  to licensees  that are publicly
traded  entities,  no person may sell,  lease,  purchase,  convey or acquire any
interest in a retail  gaming or operator  license or business  without the prior
approval of the Colorado Commission.

           All agreement, contracts, leases, or arrangements in violation of the
Colorado Act or the Colorado Regulations are void and unenforceable.

           The  Colorado  Amendment  requires an annual tax of as much as 40% on
the total amount  wagered less all payouts to players.  With respect to games of
poker, the tax is calculated based on the sums wagered which are retained by the
licensee  as  compensation.  Effective  October  1 of each  year,  the  Colorado
Commission  establishes  the gaming tax for the following 12 months.  Currently,
the gaming tax is: 2% on the first $2  million of these  amounts;  4% on amounts
from $2 million to $4 million; 14% on amounts from $4 million to $5 million; 18%
on amounts from $5 million to $10 million; and 20% on amounts over $10 million.

           The  Colorado  Commission  requires  all gaming  licensees  to pay an
annual device fee for each slot machine, blackjack table and poker table of $75.
The municipality of Black Hawk assesses an annual device fee of $750 per device.
There is no statutory limit on state or city device fees, which may be increased
at the  discretion  of the  Colorado  Commission  or the city.  In  addition,  a
business  improvement  fee of as much as $102 per  device  and a  transportation
authority  device  fee of $77 per  device  also  may  apply  depending  upon the
location of the licensed  premises in Black Hawk.  The current  annual  business
improvement fee is $89.04.

           Black  Hawk  also  imposes  taxes  and fees on other  aspects  of the
businesses of gaming licensees, such as parking, alcoholic beverage licenses and
other municipal taxes and fees.  Significant  increases in these fees and taxes,
or the imposition of new taxes and fees, may occur.

           Violation of the Colorado Act constitutes a class 1 misdemeanor which
may  subject the  violator to fines or  incarceration  or both.  A licensee  who
violates the Colorado Act or Colorado  Regulations  is subject to  suspension of
the  license  for a period of up to six  months,  fines or both,  or to  license
revocation.

           The  Colorado   Commission   has  enacted  rule  4.5,  which  imposes
requirements on publicly traded corporations holding gaming licenses in Colorado
and on gaming  licenses  owned  directly  or  indirectly  by a  publicly  traded
corporation,  whether  through a subsidiary or  intermediary  company.  The term
"publicly traded corporation"  includes  corporations,  firms, limited liability
companies,  trusts,  partnerships and other forms of business organizations even
if  created  under  the  laws of a  foreign  country.  Such  requirements  shall
automatically  apply  to  any  ownership  interest  held  by a  publicly  traded
corporation,  holding  company  or  intermediary  company  thereof,  where  such
ownership  interest  directly or indirectly  is, or will be upon approval of the
Colorado  Commission,  5% or more of the entire  licensee.  In any event, if the
Colorado  Commission  determines  that  a  publicly  traded  corporation,  or  a
subsidiary,  intermediary  company or holding  company has the actual ability to
exercise  influence  over a licensee,  regardless of the percentage of ownership
possessed by said entity,  the  Colorado  Commission  may require that entity to
comply with the disclosure regulations contained in Rule 4.5.

           Under  Rule  4.5,   gaming   licensees,   affiliated   companies  and
controlling  persons  commencing  a public  offering of voting  securities  must
notify  the  Colorado  Commission  within  10 days of the  initial  filing  of a
registration  statement with the Securities  and Exchange  Commission.  Licensed
publicly traded  corporations  are also required to send proxy statements to the
Division of Gaming within 5 days after distribution of such statement. Licensees
to whom Rule 4.5  applies  must  include in their  articles of  organization  or
similar charter documents  provisions that: restrict the rights of the licensees
to issue voting  interests or securities  except in accordance with the Colorado
Act and the Colorado Regulations; limit the rights of persons to transfer voting
interests or securities of licensees  except in accordance with the Colorado Act
and the Colorado  Regulations;  and provide that holders of voting  interests or
securities of licensees found unsuitable by the Colorado  commission may, within
60 days of such finding of unsuitability, be required to sell their interests or
securities  back to the  issuer  at the  lesser  of the cash  equivalent  of the
holders'  investment  or the  market  price  as of the  date of the  finding  of
unsuitability.  Alternatively, the holders may, within 60 days after the finding
of  unsuitability,  transfer the voting  interests or  securities  to a suitable
person (as determined by the Colorado Commission). Until the voting interests or
securities  are held by suitable  persons,  the issuer may not pay  dividends or
interest,  the  securities  may not be voted,  they may not be  included  in the
voting or securities of the issuer,  and the issuer may not pay any remuneration
in any form to the holders of the securities.

           Pursuant  to  Rule  4.5,  persons  who  acquire  direct  or  indirect
beneficial  ownership of (i) 5% or more of any class of voting  securities  of a
publicly traded corporation  required to include in its articles of organization
the Rule 4.5 charter language  provisions,  or (ii) 5% or more of the beneficial
interest in a gaming licensee directly or indirectly through any class of voting
securities  of any holding  company or  intermediary  company of a licensee (all
such persons hereinafter referred to as "qualifying persons"),  shall notify the
Division of Gaming  within 10 days of such  acquisition,  are required to submit
all  requested  information  and are  subject  to a finding  of  suitability  as
required by the Division of Gaming or the Colorado  Commission.  Licensees  also
must notify any qualifying  persons of these  requirements.  A qualifying person
whose  interest  equals 10% or more must apply to the Colorado  Commission for a
finding of suitability within 45 days after acquiring such securities. Licensees
must also notify any qualifying  persons of these  requirements.  Whether or not
notified,   qualifying   persons  are   responsible  for  complying  with  these
requirements.

           A qualifying  person who is an institutional  investor under Rule 4.5
and who  individually  or in  association  with  others,  acquires,  directly or
indirectly,  the  beneficial  ownership  of 15% or more of any  class of  voting
securities  must apply to the Colorado  Commission  for a finding of suitability
within 45 days after acquiring such interests.

           The Regulation also provides for exemption from the  requirements for
a finding of suitability  when the Colorado  Commission  finds such action to be
consistent with the purposes of the Act.

           Pursuant  to Rule  4.5,  persons  found  unsuitable  by the  Colorado
Commission  must be  removed  from any  position  as an  officer,  director,  or
employee  of a  licensee,  or  from a  holding  or  intermediary  company.  Such
unsuitable  persons also are  prohibited  from any  beneficial  ownership of the
voting  securities of any such entities.  Licensees,  or affiliated  entities of
licensees,  are subject to sanctions for paying  dividends or  distributions  to
persons found unsuitable by the Colorado  Commission,  or for recognizing voting
rights of, or paying a salary or any  remuneration  for services to,  unsuitable
persons.  Licensees or their  affiliated  entities  also may be  sanctioned  for
failing to pursue  efforts to require  unsuitable  persons to  relinquish  their
interest.  The Colorado  Commission  may  determine  that anyone with a material
relationship  to, or material  involvement  with,  a licensee  or an  affiliated
company must apply for a finding of suitability or must apply for a key employee
licensee.

           The sale of alcoholic  beverages in gaming  establishments is subject
to strict  licensing,  control and regulation by state and local authorities and
requires  a liquor  license.  Alcoholic  beverage  licenses  are  revocable  and
nontransferable. State and local licensing authorities have full power to limit,
condition,  suspend  for as long as six  months  or  revoke  any such  licenses.
Violation of state  alcoholic  beverage laws may  constitute a criminal  offense
resulting in incarceration or fines or both.

           There  are  various  classes  of  retail  liquor  licenses  under the
Colorado  Liquor Code. A gaming  licensee  may sell malt,  vinous or  spirituous
liquors only by the  individual  drink for  consumption  on the  premises.  Even
though a retail gaming  licensee may be issued various  classes of retail liquor
licenses,  such gaming licensee may only hold liquor licenses of the same class.
An application for an alcoholic  beverage  license in Colorado  requires notice,
posting and a public hearing before the local liquor  licensing  authority prior
to approval of the same. The Colorado Department of Revenue's Liquor Enforcement
Division must also approve the application.

           Currently, no gaming or liquor licenses in Colorado have been granted
in  connection  with the Black Hawk Project.  Applications  have been made for a
retail  gaming  license  and  for  a  hotel  and  restaurant   liquor   license.
Applications  for key employee  gaming  licenses have also been made.  Associate
Person license  applications  have been submitted for some related  companies as
required  by the  Division  Director.  Additional  gaming  and  support  license
applications  will  have to be made and  approved  prior to the  opening  of the
casino.  Certain  stockholders  of the Company owning more than 5% of the common
stock are submitting  information  relevant to the  requirement for a finding of
suitability, or exemption from such finding.

Federal Registration

           ROC is  required to annually  file with the  Attorney  General of the
United States in connection with the sales, distribution,  or operations of slot
machines. All requisite filings for the present year have been made.

Item 2.    Properties

           The  Riviera  complex  is located  on the Las Vegas  Strip,  occupies
approximately  26 acres and  comprises  approximately  one-million  square feet,
including  115,000 square feet of casino space,  160,000 square foot convention,
meeting  and  banquet  facility,  approximately  2,100  hotel  rooms  (including
approximately  169 luxury suites) in five towers,  four  restaurants,  a buffet,
four showrooms,  a lounge and  approximately  2,300 parking spaces. In addition,
executive and other offices for the Riviera are located on the property.

           There are 41 food and retail  concessions  operated under  individual
leases with third parties. The leases are for periods from one year to ten years
and expire over the next five years.

           The entire Riviera complex is encumbered by a first deed of trust
securing  the Notes.  See,  "Management's  Discussion  And Analysis of Financial
Condition And Results of Operations."

           The Company also owns the Black Hawk Land,  which is a 71,000  square
foot parcel of real property in Black Hawk, Colorado.

Item 3.    Legal Proceedings

           The Company is a party to several routine  lawsuits both as plaintiff
and as defendant arising from the normal operations of a hotel.  Management does
not believe that the outcome of such litigation,  in the aggregate,  will have a
material  adverse  effect on the financial  position or results of operations of
the Company.


           In  March  1998  the   Company  was  notified  by  Allen  E.  Paulson
("Paulson")  that he was terminating the merger  agreement dated as of September
of 1997 among the Company,  and R & E Gaming Corp. and Riviera  Acquisition Sub,
Inc.,  affiliates  of  Paulson.  Pursuant  to the  merger  agreement  a  company
controlled by Paulson was to have  acquired  100% of the Company's  common stock
for $15 per share, plus an interest factor.  Approximately $5.8 million is being
held in an escrow account for the holders of 1,770,000 Riviera  Contingent Value
Rights  ("CVR's").  The  escrow  account  was  established  by  Mr.  Paulson  in
connection  with the  original  terms of the  merger.  The CVR's  entitle  their
holders to share only in the proceeds of the funds currently in escrow. Excluded
from participating in the CVR's are Morgens Waterfall,  SunAmerica, Keyport Life
and Paulson, and their affiliates and associates, who own an aggregate 3,355,000
Riviera shares.

           The  Company,  three  major  stockholders  of the  Company  and other
defendants  involved in the  terminated  merger are in  litigation  with Paulson
relating to the merger  agreement and related issues.

The  Company  entered  into  an  Agreement  and  Plan  of  Merger  (the  "Merger
Agreement") with R&E Gaming Corp. ("R&E Gaming") and its wholly-owned subsidiary
RAS  Acquisition  Sub, Inc.  ("RAS"),  certain  entities  controlled by Allen E.
Paulson,  a California  businessman  ("Paulson"),  pursuant to which one of such
entities would be merged with and into the Company (the  "Merger").  On February
25, 1998, the Company  announced that it had been advised by Paulson,  President
of R&E Gaming,  that R&E Gaming was preserving its right not to proceed with its
acquisition  of  Elsinore  and that an Option and Voting  agreement  relating to
Elsinore between R&E Gaming and Morgens  Waterfall was void by reason of certain
alleged misrepresentations.

On March 20,  1998,  the  Company was  notified  (the  "Termination  Notice") by
Paulson  on behalf of R&E Gaming and its  wholly-owned  subsidiary  RAS that the
Merger Agreement,  dated as of September 15, 1997, among the Company, R&E Gaming
and RAS is void and unenforceable  against R&E Gaming and RAS, or alternatively,
of their intention to terminate the Merger  Agreement.  Riviera has disputed the
factual and legal assertions in the Termination Notice and intends to vigorously
pursue its rights against  Paulson,  including  collection of the  approximately
$5.8 million being held in escrow (the "Escrow  Funds") by State Street Bank and
Trust  Company of  California,  N.A. as escrow  agent under an Escrow  Agreement
dated as of  September  15, 1997.  The Escrow  Funds  consist of : (I) $3.00 per
share (20%) down payment for shares of the Company's common stock, which are not
owned by the  Morgans,  Waterfall,  Vintiadis  & Company,  Inc.  managed  funds,
SunAmerica Life Insurance Company, Keyport Life Insurance Company or Paulson and
his  affiliates,  and (ii)  interest  at the rate of 7% pre annum on the  $15.00
purchase  price for such  shares  from June 1, 1997 to February  14,  1998.  The
escrowed  funds include cash of $654,000 and a letter of credit in the amount of
$5.2 million which expires on June 10, 1998.

The Riviera  Board of Directors set the close of business on May 1, 1998, as the
record date for the Riviera minority  stockholders  entitled to receive anything
Riviera  collects  from the escrow.  Excluded  from  participating  were Morgens
Waterfall,  SunAmerica,  Keyport  Life and  Paulson,  and their  affiliates  and
associates,  who own an  aggregate  3,355,000  Riviera  shares.


Item 4.    Submission of Matters to a Vote of Security Holders

           Not applicable.

<PAGE>
                                                      PART II

Item 5.    Market for the Registrant's Common Stock
           and Related Security Holder Matters

           The  Company's  Common  Stock  began  trading on the  American  Stock
Exchange on May 13, 1996 and was reported on the NASDAQ  Bulletin Board prior to
that date. As of February 26, 1999, based upon information  available to it, the
Company believes that there were  approximately  1,000 beneficial holders of the
Company's Common Stock.

           The Company has never paid any dividends on its Common Stock and does
not  currently  expect to pay any  dividends  (cash or  otherwise) on its Common
Stock for the  foreseeable  future.  The  Company's  ability to pay dividends is
primarily  dependent  upon receipt of dividends and  distributions  from ROC. In
addition,  the indenture for the First  Mortgage  Notes  restricts the Company's
ability to pay dividends on its Common Stock.

           The table  below sets  forth the bid and ask sales  prices by quarter
for the years ended  December  31,  1998,  1997 and 1996,  based on  information
provided by certain brokers who have had  transactions  in the Company's  Common
Stock during the year:
<TABLE>
<CAPTION>


                                         First                 Second                  Third                 Fourth
                                       Quarter                Quarter                Quarter                Quarter
                                       -------                -------                -------                -------
         1998
<S>                                      <C>                    <C>                    <C>                    <C>
        LOW BID                         $10.75                  $6.00                  $5.75                  $3.88
       HIGH ASK                          15.06                  10.81                   8.13                   5.81

         1997
        LOW BID                        $ 12.88                $ 12.25                $ 12.13                $ 12.75
       HIGH ASK                          14.50                  14.13                  15.50                  14.94

         1996
        LOW BID                         $ 7.50                 $11.00                 $14.00                 $12.94
       HIGH ASK                           9.75                  17.75                  17.13                  15.63

</TABLE>

           On February  26, 1999,  (the most recent trade date of the  Company's
common stock), 4,300 shares were traded closing at $5.4375 per share.

Item 6.    Selected Financial Data

           The following  table sets forth a summary of selected  financial data
for the Company  for the years ended  December  31 in  thousands  (in  thousands
except Net Income (Loss) Per Common Share):
<TABLE>
<CAPTION>


                                                       1998            1997           1996            1995            1994
                                                       ----            ----           ----            ----            ----
<S>                                                <C>             <C>            <C>             <C>             <C>
Total Operating  Revenue                           $159,955        $153,793       $164,409        $151,146        $153,921
Net Income (Loss)                                   (4,057)           2,088          8,440           6,344           4,790
Net Income (Loss) Per Diluted
Common Share                                        ($0.81)           $0.40          $1.63           $1.26           $1.00
Total Assets                                        244,909         347,866        167,665         157,931         151,925
Long-Term Debt                                      179,439         177,512        109,088         110,571         113,155
</TABLE>

<PAGE>
Item 7.    Management's Discussion and Analysis of Financial Condition and
           Results of Operations

Results of Operations

           The following table sets forth the Company's income statement data as
a percentage of net revenues  (unless  otherwise  noted) for the Company for the
periods indicated:
<TABLE>
<CAPTION>

                                                                          1998              1997               1996
                                                                          ----              ----               ----
Revenues:
<S>                                                                     <C>               <C>                <C>
  Casino                                                                 48.6%             46.6%              48.9%
  Rooms                                                                  24.8%             27.2%              25.7%
  Food and Beverage                                                      15.0%             14.0%              13.8%
  Entertainment                                                          13.5%             13.6%              13.2%
  Other                                                                   7.0%              6.9%               6.1%
  Less promotional  allowances                                          (8.7%)            (8.3%)             (7.7%)
                                                                       -------           -------            -------
     Net revenues                                                       100.0%            100.0%             100.0%

Costs and Expenses:
  Casino1                                                                58.3%             56.7%              56.9%
  Rooms1                                                                 52.7%             50.8%              52.9%
  Food and Beverage1                                                     73.3%             74.6%              71.7%
  Entertainment1                                                         78.3%             82.5%              82.4%
  Other1                                                                 29.7%             28.5%              29.2%
  General and administrative                                             16.9%             17.0%              16.9%
  Corporate expenses, severance pay                                       0.3%              0.0%               0.0%
  Depreciation and amortization                                           7.6%              6.8%               5.0%
     Total Costs and Expenses                                            89.8%             87.7%              85.8%

Income from operations                                                   10.2%             12.3%              14.2%
Interest expense on 11%, $100 million notes                              -2.9%             -7.2%              -6.7%
Interest income on Treasury Bills to retire 11%, $100 million notes       1.5%              1.5%               0.0%
Interest expense, other                                                 -12.2%             -4.6%              -0.6%
Interest income, other                                                    1.5%              1.3%               0.7%
Interest, capitalized                                                     1.7%              0.5%               0.0%
Other (income) expense, net                                              -0.8%             -1.0%              -0.3%
                                                                       -------           -------            -------
Income before provision for income taxes                                 -1.0%              2.2%               7.8%
(Benefit) provision for income  taxes                                    -0.3%              0.9%              -2.7%
                                                                       -------            ------            -------
     Net Income before extraordinary item                                -0.7%              1.4%               5.1%
Extraordinary item, net of income taxes of $1.6 million                  -1.9%              0.0%               0.0%
                                                                       -------           -------            -------
     Net Income (Loss)                                                   -2.5%              1.4%               5.1%
                                                                       =======           =======            =======

 EBITDA2  margin                                                         18.2%             19.1%              19.2%
</TABLE>
-----------------------
1 Shown as a percentage of corresponding departmental revenue.


2   EBITDA consists of earnings before interest,  income taxes, depreciation and
    amortization   (excluding   corporate   financing,   severance  and  Paulson
    Merger/litigation  costs.)  While  EBITDA  should  not  be  construed  as  a
    substitute for operating income or a better indicator of liquidity than cash
    flow from  operating  activities,  which are  determined in accordance  with
    generally accepted accounting  principles ("GAAP"), it is included herein to
    provide additional information with respect to the ability of the Company to
    meet its future  debt  service,  capital  expenditure  and  working  capital
    requirements.  Although EBITDA is not necessarily a measure of the Company's
    ability to fund its cash needs,  management  believes that certain investors
    find EBITDA to be a useful tool for  measuring the ability of the Company to
    service its debt.  The Company's computation of EBITDA may not be comparable
    to other similarly titled measures of other companies.


<PAGE>
1998 Compared to 1997

Revenues


Net revenues  increased by  approximately  $6.2  million,  or 4.0%,  from $153.8
million  in 1997 to  $159.9  million  in  1998.  Casino  revenues  increased  by
approximately  $6.0 million,  or 8.4%,  from $71.7 million  during 1997 to $77.7
million during 1998 due primarily to a $5.5 million, or 11.9%,  increase in slot
revenues as a result of the opening of Nickel Town in late 1997.  Nickel Town is
designed to offer value oriented slot  customers an attractive  location to play
and is attracting  additional walk-in customers from the Las Vegas Strip because
it competes with Circus Circus, Slots-of Fun and Westward Ho with value oriented
food, beverage and merchandise. Table games revenue increased approximately $0.9
million as the result of significant play from selected regular customers.  Room
revenues  decreased by approximately  $2.2 million,  or 5.3%. from $41.8 million
1997 to $39.6  million  during  1998 as a result of a slight  decrease  in hotel
occupancy  from 96.8% to 95.2% and a decrease in average room rate of $3.43,  or
5.8%,  from  $58.25  in 1997 to  $54.82  in  1998.  Food and  beverage  revenues
increased approximately $2.3 million, or 10.8%, from $21.6 million 1997 to $23.9
million  during  1998 due to  additional  covers  in the  bars and  restaurants.
Entertainment revenues increased by approximately  $650,000, or 3.1%, from $20.9
million during 1997 to $21.5 million during 1998 due to 27,000  increased covers
from  737,000  in  1997  to  764,000  in  1998.  Other  revenues   increased  by
approximately $600,000, or 5.7%, from $10.6 million during 1997 to $11.2 million
during 1998 due  primarily  to the Nickel Town gift shop  revenues.  Promotional
allowances increased by approximately $1.3 million, or 10.0%, from $12.7 million
during 1997 to $14.0 million during 1998 due to competition  for gaming revenues
on the Las Vegas Strip.


Direct Costs and Expenses of Operating Departments

           Total direct costs and expenses of operating departments increased by
approximately  $5.6  million,  or 5.7%,  from  $98.2  million  in 1997 to $103.8
million in 1998.  Casino expense  increased by  approximately  $4.7 million,  or
11.5%,  from $40.6 million  during 1997 to $45.3 million  during 1998 and casino
expenses as a percent of casino revenue  increased  from 56.7% to 58.3%,  due to
increased  marketing  costs.  Room costs  decreased  $400,000 or 1.8% from $21.2
million in 1997 to $20.8 million in 1998, however, room costs as a percentage of
room  revenues  increased  from 50.8%  during 1997 to 52.7%  during 1998 as room
revenue  decreased.  Food and beverage  costs  increased by  approximately  $1.4
million,  or 8.8%,  from $16.1 million  during 1997 to $17.5 million  during the
1998  period  resulting  from a  corresponding  increase in  revenues.  Food and
beverage  costs as a percentage  of food and beverage  revenues  decreased  from
74.6%  during  1997 to 73.3%  during  1998  because  food and  beverage  revenue
increased   while  payroll  and  other  costs  remained   relatively   constant.
Entertainment  costs decreased by  approximately  $400,000,  or 2.2%, from $17.2
million during 1997 to $16.8 million during 1998 and entertainment  expense as a
percentage of entertainment  revenues  decreased from 82.5% during 1997 to 78.3%
in 1998 due to the increase in revenues in all Mardi Gras shows,  special events
and  the  box  office  operation.  Other  expenses  increased  by  approximately
$300,000,  or 9.9%,  from $3.0 million to $3.3 million due to the  corresponding
increase in Nickel Town gift shop sales.

Other Operating Expenses

           General  and  administrative   expenses  increased  by  approximately
$800,000,  or 3.1%,  from  $26.2  million  for 1997 to  $27.0  million  1998 due
primarily to increased  incentive and employee  retention plan costs required to
retain personnel in the competitive gaming environment. As a percentage of total
net revenues,  general and  administrative  expenses decreased from 17.0% during
the 1997  period  to  16.9%  during  the 1998  period.  Corporate  expenses  for
severance  settlements  caused by  changes  in the  composition  of the Board of
Directors and executive staff totaled  $550,000 in 1998.  Included were payments
for the  spread  on  options,  consulting  agreements  and  other  compensation.
Depreciation and amortization increased by approximately $1.7 million, or 15.8%,
from $10.5  million  during  the 1997  period to $12.1  million  during the 1998
period due to a significant  increase in depreciable  capital  expenditures  for
operating  assets  in  the  twelve  months  ended  December  31,  1998  totaling
approximately $20,000,000.

Other Income (Expense)

           Interest  expense,  other  increased  by $12.4  million  because  the
Company  issued  10% First  Mortgage  Notes in the  amount of $175.0  million on
August 13,  1997,  in addition to carrying the now  defeased  11%,  $100 million
notes until June 1, 1998,  when the 11%, $100 million notes were  redeemed.  The
Company  used part of the proceeds of the 10% First  Mortgage  Notes to purchase
United States  Government  securities,  which were deposited into an irrevocable
trust held to retire  the 11%,  $100  million  notes.  Interest  income on these
securities was $2.3 million in 1998. Interest income, other,  increased $500,000
because of the increased cash balances from the remaining proceeds of the $175.0
million notes.  Capitalized  interest  increased  $1.9 million  primarily on the
Black Hawk, Colorado, and Riviera Convention Center Expansion projects.

           During 1997 the Company  withdrew a secondary  offering due to market
conditions and, as a result,  charged costs totaling  $850,000 to other expense.
Also,  during  1997,  approximately  $400,000  in merger and  acquisition  costs
related  to the R&E  Gaming  Corporation  Plan of Merger  was  charged  to other
expense.  In 1998, $1.2 million in costs related to the abandoned Paulson Merger
were charged to other expense.

Extraordinary Item

           The 11%, $100 million  notes,  for which  retirement  monies were put
into trust in August  1997,  were  retired on June 1, 1998.  The call premium of
$4.3 million and unamortized  deferred  financing  costs totaling  $300,000 were
recorded  net of the 35%  income  tax  effect of $1.6  million  resulting  in an
extraordinary loss of $3.0 million.

Net Income

           As  a  result   of  the   additional   depreciation,   interest   and
extraordinary  item, net income  decreased by approximately  $6.1 million,  from
$2.0 million in 1997 to a loss of $4.1 million in 1998.

EBITDA

           EBITDA,  as defined,  decreased by approximately  $300,000,  or 1.0%,
from $29.4  million in 1997 to $29.1  million in 1998.  During the same periods,
EBITDA margin decreased from 19.1% to 18.2% of net revenues.

1997 Compared to 1996

Revenues

           Net revenues decreased by approximately  $10.6 million, or 6.5%, from
$164.4 million in 1996 to $153.8 million in 1997.  Casino revenues  decreased by
approximately  $8.8  million,  or 10.9%,  from  $80.4  million  in 1996 to $71.6
million in 1997 due to a general  softness  in the  gaming  market in Las Vegas.
Room revenues decreased by approximately $400,000, or 1.0% from $42.2 million in
1996 to $41.8 million in 1997 as a result of a decrease in hotel  occupancy from
98.2% to 96.8%. The decrease in occupancy was partially offset by an increase in
ADR from $57.07 in 1996 to $58.25 in 1997. Food and beverage revenues  decreased
approximately $1.0 million, or 4.8%, from $22.6 million in 1996 to $21.6 million
during  1997 due to fewer  covers  in the  bars and  restaurants.  Entertainment
revenues decreased by approximately $900,000, or 4.1%, from $21.8 million during
1996 to $20.9 million  during 1997, due to the reduction in number of covers for
the Splash variety show. Other revenues increased by approximately  $600,000, or
5.7%,  from $10.0 million during 1996 to $10.6 million during 1997 due primarily
to management fees of  approximately  $1.0 million for operating the Four Queens
Hotel/Casino  in downtown  Las Vegas.  In 1996 the Company  received a refund of
$576,000  from a union  health  and  welfare  trust fund for  reduced  premiums.
Promotional  allowances  remained  relatively  unchanged at approximately  $12.6
million during 1996 and $12.7 million in 1997.

Direct Costs and Expenses of Operating Departments

           Total direct costs and expenses of operating departments decreased by
approximately  $6.9  million,  or 6.5%,  from  $105.3  million  in 1996 to $98.2
million in 1997.  Casino expenses  decreased by approximately  $5.0 million,  or
11.1%,  from $45.7 million in 1996 to $40.7 million in 1997, and casino expenses
as a percent of casino  revenue  decreased  slightly  from 56.9% to 56.7%.  Room
costs decreased  approximately $1.0 million, or 5.0%, from $22.3 million in 1996
to $21.3  million  in 1997,  and room  costs as a  percentage  of room  revenues
decreased from 52.9% during 1996 to $50.8% during 1997.  Payroll and linen costs
were reduced due to the lower  occupancy.  Food and beverage  cost  decreased by
approximately  $100,000, or 0.5%, from $16.2 million in 1996 to $16.1 million in
1997  resulting from a  corresponding  decrease in revenues.  However,  food and
beverage  costs as a percentage  of food and beverage  revenues  increased  from
71.7% during 1996 to 74.6% during l997 because of reduced  beverage  promotional
revenue from the casino bars.  Entertainment  costs  decreased by  approximately
$700,  000, or 4.0% from $17.9 million  during 1996 to $17.2 million during 1997
due  to  the  reduced   expenses   associated   with  lower  covers  in  Splash.
Entertainment  expense as a percentage of entertainment  revenues increased from
82.4% in 1996 to 82.5% in 1997 due to a decrease  in  revenues.  Other  expenses
increased by approximately  $100,000,  or 3.3% from $2.9 million to $3.0 million
due to the corresponding increase in other revenues.

Other Operating Expenses

           General and  administrative  expenses decreased by approximately $1.6
million,  or 5.6%,  from $27.8  million in 1996 to $26.2  million in 1997 due to
decreased  incentive plan costs associated with lower earnings.  As a percentage
of total net revenues,  general and administrative expenses increased from 16.9%
in 1996  to17.0% in l997 as a result of  spreading of fixed costs over a smaller
revenue  base in the 1997 period.  Depreciation  and  amortization  increased by
approximately $2.3 million, or 27.7%, from $8.2 million in 1996 to $10.5 million
in 1997 due to capital expenditures of $21.0 million during the 1997 period.

Other Income (Expense)

           Interest  expense,  other,  increased  by $6.1  million  because  the
Company issued 10% First Mortgage Notes of $175.0 million on August13,  1997, in
addition to carrying the 11%, $100 million  notes until June 1, 1998,  when they
were  redeemed.  The Company used part of the proceeds of the 10% First Mortgage
Notes to  purchase  United  States  Government  securities  at a cost of  $104.3
million which were deposited  into an irrevocable  trust held to retire the 11%,
$100 million  notes.  Interest  income on these  securities  was $2.3 million in
1997. Interest income, other, increased  approximately  $759,000, or 65.0%, from
$1.2 million to $1.9 million  because of the  increased  cash  balances from the
remaining proceeds of the $175.0 million notes.

           During the first quarter of 1997, the Company  withdrew its secondary
offering  due to market  conditions  and, as a result,  charged  costs  totaling
$850,000 to other expenses.  Also, during 1997 approximately  $400,000 in merger
and  acquisition  costs  related to the  Paulson  Merger  were  charged to other
expense.

Net Income

           As a result of the factors  discussed  above and a decrease in income
taxes of  approximately  $3.1  million  at a 34.5%  effective  rate,  net income
decreased by approximately $6.4 million, or 75.3%, from $8.4 million during 1996
to $2.1 million during 1997.

EBITDA

           EBITDA , as defined,  decreased by  approximately  $2.1  million,  or
6.8%,  from  $31.5  million in 1996 to $29.4  million  in 1997.  During the same
periods, EBITDA margins were 19.2% and 19.1% respectively.

Liquidity and Capital Resources

           The  Company  had cash  and cash  equivalents  of  $48.9  million  at
December 31, 1998,  which was $16.3  million less than  balances at December 31,
1997, due primarily to capital expenditures of $34.1 million.

           The Company's net cash from operating  activities was approximately $
8.1  million  for 1998  compared  to $18.6  million in 1997.  Cash flows used in
investing  activities were $28.8 million in 1998 and $42.8 million in 1997. Cash
flows from financing  activities  were $4.0 million in 1998 and $63.9 million in
1997. EBITDA, as defined, for 1998 and 1997 was $29.1 million and $29.4 million,
respectively.  Management believes that cash flow from operations, combined with
the $48.9 million cash on hand,  will be sufficient to cover the Company's  debt
service and enable  investment  in budgeted  capital  expenditures  for the next
twelve months,  assuming that $40 million in project and equipment  financing is
available for the Black Hawk casino development.  Should the Company not be able
to finance all of the $40 million required for Black Hawk, capital  expenditures
in Las Vegas will be reduced or financed, if necessary.

           Scheduled  interest  payments  on the 11%,  $100  million  notes were
provided  by the use of the U. S.  Treasury  Bills held to retire the 11%,  $100
million notes and the related  interest income. A portion of the proceeds of the
10% Notes was used to acquire U.S. Treasury Bills sufficient to pay the interest
on the 11%, $100 million notes in December 1997 and the interest,  principal and
premium due June 1, 1998, when the retirement of the 11%, $100 million notes was
accomplished.  Substantially all of the covenants on the 11%, $100 million notes
were released as a result of the "contractual defeasance" in August of 1997. The
debt was redeemed on June 1, 1998, resulting in an extraordinary  charge, net of
tax, of $3 million.

           On August 13, 1997,  the Company raised $175 million in 10% Notes due
August 15, 2004.  Cash flow from  operations  is not expected to pay 100% of the
principal at maturity.  Repayment will be dependent upon refinancing,  and there
can be no assurance  that the Company will be able to  refinance  the  principal
amount of the 10% Notes at  maturity.  The 10% Notes are not  redeemable  at the
option of the Company until August 15, 2001,  and  thereafter  are redeemable at
premiums beginning at 105.0% and declining each subsequent year to par in 2003.

           The 10% Note  Indenture  provides that in certain  circumstances  the
Company must offer to repurchase  the 10% Notes upon the  occurrence of a change
of control or certain other events. In the event of such mandatory redemption or
repurchase  prior to maturity,  the Company would be unable to pay the principal
amount of the 10% Notes without a refinancing.  The proposed  Paulson Merger was
specifically  excluded from the defined transactions which would be considered a
change in control.

           The 10% Note Indenture  contains certain  covenants,  which limit the
ability  of the  Company  and its  restricted  subsidiaries,  subject to certain
exceptions,  to: (i) incur additional indebtedness;  (ii) pay dividends or other
distributions,   repurchase   capital   stock  or  other  equity   interests  or
subordinated   indebtedness;   (iii)  enter  into  certain   transactions   with
affiliates;  (iv) create certain liens; (v) sell certain assets;  and (vi) enter
into certain mergers and consolidations.  As a result of these restrictions, the
ability  of the  Company  and  ROC to  incur  additional  indebtedness  to  fund
operations or to make capital  expenditures  is limited.  In the event that cash
flow from operations is insufficient to cover cash requirements, the Company and
ROC would be required to curtail or defer certain of their  capital  expenditure
programs  under these  circumstances,  which could have an adverse effect on the
Company's  operations.  Management  believes  that as of December 31, 1998,  the
Company was in compliance with the covenants.

           Management  considers it important to the competitive position of the
Riviera that expenditures be made to upgrade the property.  Capital expenditures
in Las Vegas totaled  approximately  $8.9 million in 1994, $7.8 million in 1995,
$14.9  million in 1996,  $19.8  million in 1997 and $23.6  million in 1998 which
excludes the Black Hawk project expenditures of $27.1 million for 1997 and 1998.
Management has budgeted  approximately $17.3 million for capital expenditures in
Las Vegas for 1999 including the completion of the convention  center expansion.
The Company  expects to finance the majority of such capital  expenditures  from
cash flow and equipment financing.

           In  August  1997,  the  Company,  through  its  indirect  100%  owned
subsidiary, Riviera Black Hawk, Inc., purchased approximately 71,000 square feet
of land in Black Hawk, Colorado, which is entirely zoned for gaming. The Company
is  constructing  a casino  containing  1,000 slot  machines,  14 table games, a
520-space covered parking garage,  and entertainment and food service amenities.
Management  intends to finance the project with a portion of the unused proceeds
from the new First Mortgage Notes, equipment leases and project (first mortgage)
financing.  The casino is  scheduled  to open in early 2000.  As of December 31,
1998,  the  company  had  invested  $27.1  million in the Black  Hawk,  Colorado
project.

Year 2000

           In the past, many computer  software  programs were written using two
digits  rather  than  four  to  define  the   applicable   year.  As  a  result,
date-sensitive  software may recognize a date using "00" as the year 1900 rather
than the year 2000.  This  situation is generally  referred to as the "Year 2000
Problem." If such situation  occurs,  the potential  exists for computer  system
failures  or  miscalculations   by  computer   programs,   which  could  disrupt
operations.

           The Company  has  conducted a  comprehensive  review of its  computer
systems and other systems for the purpose of assessing  its potential  Year 2000
Problem, and is in the process of modifying or replacing those systems which are
not Year 2000  compliant.  Based  upon this  review,  management  believes  such
systems will be compliant by mid-calendar  1999.  However,  if modifications are
not made or not completed timely, the Year 2000 Problem could have a significant
impact on the Company's operations.

           All costs  related to the Year 2000 Problem are expensed as incurred,
while the cost of new hardware and software is  capitalized  and amortized  over
its expected  useful life. The costs  associated  with Year 2000 compliance have
not been and are not  anticipated  to be  material  to the  Company's  financial
position or results of  operations.  As of December  31,  1998,  the Company has
incurred costs of approximately  $75,000  (primarily for internal labor) related
to the system  applications and anticipates  spending an additional  $200,000 to
become Year 2000  compliant.  The estimated  completion date and remaining costs
are based upon management's best estimates,  as well as third party modification
plans and other factors.  However, there can be no guarantee that such estimates
will occur and actual results could differ.


In addition,  the Company has communicated  with its major vendors and suppliers
to determine their state of readiness  relative to the Year 2000 Problem and the
Company's  possible  exposure  to Year 2000  issues of such third  parties.  The
Company,  through  correspondence  from major vendors or statements  obtained at
Year 2000 disclosure sites of major vendors, has been advised that such vendors'
software  or  products  are either  Year 2000  compliant  or should be Year 2000
compliant before December 31, 1999. However,  there can be no guarantee that the
systems of other companies,  which the Company's  systems may rely upon, will be
timely  converted or  representations  made to the Company by these  parties are
accurate.  As a result the failure of a major  vendor or supplier to  adequately
address their Year 2000 Problem could have a significant  adverse  impact on the
Company's operations.

       As a  result of  various  external  risk  factors,  the  Company could be
adversely impacted and the effect could be material  regardless of the readiness
of our own systems.  The most reasonable worst case scenario - if one or more of
our utility providers (of electric,  natural gas, water, sewer) experiences Year
2000  problems  that  impact  their  ability  to  provide  their  services,  our
operations could be adversely impacted. Furthermore,  disruption of services for
any of the  markets  for our  customers  could  result in an  adverse  change in
customer visits from the affected market.  Automobile and airline traffic to and
from the Las Vegas market could be disrupted by Year 2000 problems,  which would
limit the ability of  potential  customers to visit our  property.  The possible
long-term  disruption  of  banking  services  due to Year  2000  problems  could
ultimately  impair our daily  financial  transactions,  including the deposit of
monies and  processing  of  checks.  Furthermore,  credit  card  processing  and
customers' access to cash via automated teller machines could also be disrupted.

The most likely worst case scenario is a failure of utility companies to deliver
services.  Under that scenario,  the entire Las Vegas hotel and casino  industry
would be closed until the utilities were restored.  The  contingency  plan is to
provide minimal services to the guests until the utilities can be restored.


           Planning for the Year 2000 Problem,  including  contingency planning,
is significantly complete and will be revised, if necessary.

Forward Looking Statements

           The Private Securities Litigation Reform Act of 1998 provides a "safe
harbor" for certain  forward-looking  statements.  Certain matters  discussed in
this  filing  could  be  characterized  as  forward-looking  statements.   These
forward-looking   statements   generally  relate  to  the  Company's  plans  and
objectives  for future  operations  and are based upon  management's  reasonable
estimates of future results or trends. The factors that may affect the Company's
expectations of its operations,  markets and services include, among others, the
following:  local and  regional  economic and  business  conditions;  changes or
developments in laws, regulations or taxes; actions taken or omitted to be taken
by third parties, including the Company's customers, suppliers,  competitors and
stockholders,   as  well  as   legislative,   regulatory,   judicial  and  other
governmental  authorities;  competition;  the loss of any licenses or permits or
the  Company's  failure to renew  gaming or liquor  licenses on a timely  basis;
delays in completing the construction of the casino in Black Hawk,  Colorado due
to casualty, weather or mechanical failure, or labor disputes or work stoppages;
changes  in  business  strategy,  capital  improvements  or  development  plans;
availability  of  additional   capital  to  support  capital   improvements  and
development;  and other  factors  discussed  under the  captions  "Business"  or
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations,"or elsewhere in this Form 10-K.

Recently Adopted Accounting Standards

           The Financial Accounting Standards Board ("FASB") issued Statement of
Financial  Accounting  Standards  ("SFAS")  No.  130,  "Reporting  Comprehensive
Income," which is effective for fiscal years  beginning after December 15, 1997.
This  statement  required  businesses to disclose  comprehensive  income and its
components  in  their  financial  statements.   The  Company  has  no  items  of
comprehensive income.

           The FASB issued SFAS No. 131, "Segment Reporting," which is effective
for fiscal years  ending  after  December  31,  1997.  This  statement  requires
companies to identify and disclose certain information  regarding segments based
upon the operating decisions of certain of the Company's management. The Company
believes that it has complied with the requirements of the FASB.

Recently Issued Accounting Standards

           The FASB issued SFAS No. 133,  "Accounting for Derivatives," which is
effective for fiscal years beginning after June 15, 1999. This statement defines
derivatives  and  requires  qualitative  disclosure  of  certain  financial  and
descriptive  information about a company's  derivatives.  The Company will adopt
SFAS No. 133 in the year ending December 31, 2000.  Management has not finalized
its analysis of this SFAS or the impact on the Company.

           The American Institute of Financial Accountants' Accounting Standards
Executive  Committee  issued  Statement of Position No. 98-5,  "Reporting on the
Costs of Start-Up  Activities." This standard provides guidance on the financial
reporting  costs  for  start-up  costs and  organization  costs.  This  standard
requires cost of start-up and organization costs to be expensed as incurred, and
is  effective  for fiscal years  beginning  after  December  15, 1998,  although
earlier application is encouraged. Management is evaluating the impact that this
standard could have on the Company's consolidated financial statements.


Item 7a

Quantitative and Qualitative Disclosure About Market Risk

Market  risks  relating  to our  operations  result  primarily  from  changes in
interest rates. We invest our cash and cash  equivalents in U.S.  Treasury Bills
with maturaties of 30 days or less.

As of December 31, 1998, we had $174.5  million in  borrowings.  The  borrowings
include  $175  million in bonds  maturing in 2004.  Interest  under the bonds is
based on a fixed rate of 10%.  The  borrowings  also  include  $.7  million in a
special  improvement  district bond  offering  with the City of Black Hawk.  The
Company's  share of the debt on the SID bonds of $1,470,000  when the project is
complete,  is payable  over ten years  beginning  in January  2000.  The special
improvement  district  bonds bear  interest at 5%.  Other  borrowings  relate to
leases.

<PAGE>


Interest rate Sensitivity
Principal (Notational Amount by Expected Maturity)
Average Interest Rate

                                                                           Fair
(Amounts in                                                            Value at
 thousands)         1999   2000   2001  2002  2003  Thereafter  Total  12/31/98
----------------    ----   ----   ----  ----  ----  ----------  -----  --------
Long term
debt including
current portion
________________
Equipment
loans and
capital leases     $363   $307   $110   $108   $82              $970     $970
                   ------------------------------------------------------------
Average interest
rate               7.5%   7.5%   5.6%   5.6%   5.6%
________________
Special
Improvement
District Bonds           $112    $120   $127  $132     $979   $1,470   $1,470
                   ------------------------------------------------------------
Average interest
rates                    5.0%    5.0%   5.0%  5.0%     5.0%
________________
10% First
Mortgage Notes                                     $173,271 $173,271 $156,334
                   ------------------------------------------------------------
Average interest
rate                                                  10.0%    10.0%
________________

                   ------------------------------------------------------------

<PAGE>
Item 8.    Financial Statements and Supplementary Data


Financial Statements for the Years Ended
December 31, 1998, 1997 and 1996 and
Independent Auditors' Report




RIVIERA HOLDINGS CORPORATION

TABLE OF CONTENTS




                                                                            Page

INDEPENDENT AUDITORS' REPORT                                                 28


CONSOLIDATED FINANCIAL STATEMENTS:

     Balance Sheets as of December 31, 1998 and 1997                         29

     Statements of Operations for the Years
      Ended December 31, 1998, 1997 and 1996                                 30

     Statements of Stockholders' Equity for Years
      Ended December 31, 1998, 1997 and 1996                                 32

     Consolidated Statements of Cash Flows for Years
      Ended December 31, 1998, 1997 and 1996                                 33

     Notes to Consolidated Financial Statements                              35

<PAGE>

INDEPENDENT AUDITORS' REPORT


Riviera Holdings Corporation
Las Vegas, Nevada

We have audited the accompanying consolidated balance sheets of Riviera Holdings
Corporation and  subsidiaries  (the "Company") as of December 31, 1998 and 1997,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period  ended  December  31, 1998.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects, the financial position of the Company as of December 31, 1998
and 1997,  and the results of its  operations and its cash flows for each of the
three years in the period ended December 31, 1998, in conformity  with generally
accepted accounting principles.



/s/ Deloitte & Touche, LLP


Las Vegas, Nevada
February 19, 1999

<PAGE>
<TABLE>
<CAPTION>




RIVIERA HOLDINGS CORPORATION

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(In thousands, except share amounts)
-----------------------------------------------------------------------------------------------------------------------


ASSETS                                                                                              1998           1997

CURRENT ASSETS:
<S>                                                                                             <C>             <C>
  Cash and cash equivalents                                                                $     48,883    $     65,151
  Accounts receivable, net                                                                        5,389           4,938
  Inventories                                                                                     2,727           3,509
  Prepaid expenses and other assets                                                               4,028           4,554
                                                                                           -------------   -------------

           Total current assets                                                                  61,027          78,152

U.S. TREASURY BILLS HELD TO RETIRE $100 MILLION NOTES                                                           106,596

PROPERTY AND EQUIPMENT, Net                                                                     175,622         153,611

OTHER ASSETS, Net                                                                                 8,260           9,507
                                                                                           -------------   -------------

TOTAL                                                                                      $    244,909     $   347,866
                                                                                           =============   =============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current portion of long-term debt                                                        $        363  $          364
  Accounts payable                                                                               11,865          10,890
  Accrued interest, other                                                                         6,563           6,570
  Accrued expenses                                                                               10,053           8,795
                                                                                           -------------   -------------

           Total current liabilities                                                             28,844          26,619
                                                                                           -------------   -------------

DEFERRED INCOME TAX LIABILITY, Net                                                                3,123           5,958
                                                                                           -------------   -------------

$100 MILLION NOTES TO BE RETIRED BY THE U.S. TREASURY BILLS                                                     100,000
                                                                                           -------------   -------------

OTHER LONG-TERM LIABILITIES                                                                       4,933           4,076
                                                                                           -------------   -------------

LONG-TERM DEBT, Net of current portion                                                          174,506         173,436
                                                                                           -------------   -------------

COMMITMENTS AND CONTINGENCIES (Note 12)

STOCKHOLDERS" EQUITY:
  Common stock ($.001 par value;  20,000,000  shares  authorized;  5,073,376 and
    4,903,680 shares at December 31, 1998 and 1997, respectively,
    issued and outstanding                                                                            5               5
  Additional paid-in capital                                                                     13,457          13,711
  Treasury stock (34,300 shares at December 31, 1998)                                              (167)
  Notes receivable from employee stockholders                                                        (3)           (207)
  Retained earnings                                                                              20,211          24,268
                                                                                           -------------   -------------

           Total stockholders"  equity                                                           33,503          37,777
                                                                                           -------------   -------------

TOTAL                                                                                      $    244,909     $   347,866
                                                                                           =============   =============
</TABLE>

See notes to consolidated financial statements.

<PAGE>

<TABLE>
<CAPTION>

RIVIERA HOLDINGS CORPORATION

CONSOLIDATED  STATEMENTS OF OPERATIONS  YEARS ENDED DECEMBER 31, 1998,  1997 AND
1996 (In thousands, except per share and share amounts)
---------------------------------------------------------------------------------------------------------------------------


                                                                                         1998         1997          1996

REVENUES:
<S>                                                                                   <C>           <C>           <C>
  Casino                                                                         $      77,676  $     71,624  $     80,384
  Rooms                                                                                 39,607        41,812        42,246
  Food and beverage                                                                     23,940        21,603        22,641
  Entertainment                                                                         21,543        20,895        21,778
  Other                                                                                 11,155        10,556         9,987
                                                                                 -------------- ------------- -------------

          Total                                                                        173,921       166,490       177,036
  Less promotional allowances                                                           13,966        12,697        12,627
                                                                                 -------------- ------------- -------------

          Net revenues                                                                 159,955       153,793       164,409
                                                                                 -------------- ------------- -------------

COSTS AND EXPENSES:
  Direct costs and expenses of operating departments:
    Casino                                                                              45,293        40,620        45,699
    Rooms                                                                               20,859        21,235        22,344
    Food and beverage                                                                   17,539        16,118        16,223
    Entertainment                                                                       16,861        17,235        17,956
    Other                                                                                3,308         3,011         2,916
  Other operating expenses:
    General and administrative                                                          27,028        26,211        27,778
    Corporate expenses, severance pay                                                      551
    Depreciation and amortization                                                       12,137        10,485         8,212
                                                                                 -------------- ------------- -------------

         Total costs and expenses                                                      143,576       134,915       141,128
                                                                                 -------------- ------------- -------------

INCOME FROM OPERATIONS                                                                  16,379        18,878        23,281
                                                                                 -------------- ------------- -------------

OTHER INCOME (EXPENSE):
  Interest expense on $100 million notes                                                (4,642)      (11,067)      (11,063)
  Interest income on Treasury Bills held to retire $100 million notes                    2,334         2,267
  Interest expense, other                                                              (19,545)       (7,908)       (1,022)
  Interest income, other                                                                 2,440         1,926         1,167
  Interest capitalized                                                                   2,679           771
  Other, net                                                                            (1,229)       (1,470)          505
                                                                                 -------------- ------------- -------------

          Total other expense                                                          (17,963)      (15,481)      (10,413)
                                                                                 -------------- ------------- -------------

INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR TAXES AND
  EXTRAORDINARY ITEM                                                                    (1,584)        3,397        12,868

PROVISION (BENEFIT) FOR INCOME TAXES                                                      (533)        1,309         4,428
                                                                                 -------------- ------------- -------------

 INCOME (LOSS) BEFORE EXTRAORDINARY ITEM                                                (1,051)        2,088         8,440

EXTRAORDINARY ITEM (net of income tax of $1.6 million)                                  (3,006)
                                                                                 -------------- ------------- -------------

NET INCOME (LOSS)                                                                $      (4,057) $      2,088  $      8,440
                                                                                 ============== ============= =============

</TABLE>

See notes to consolidated financial statements (Continued)

<PAGE>

<TABLE>
<CAPTION>

RIVIERA HOLDINGS CORPORATION

CONSOLIDATED  STATEMENTS OF OPERATIONS  YEARS ENDED DECEMBER 31, 1998,  1997 AND
1996 (In thousands, except per share and share amounts)
--------------------------------------------------------------------------------------------------------------------------


                                                                                      1998          1997            1996

EARNINGS PER SHARE DATA:
  Earnings (loss) per share before extraordinary item:
<S>                                                                                 <C>            <C>             <C>
    Basic                                                                    $      (0.21)  $       0.42   $         1.73
                                                                             ============== =============  ==============

    Diluted                                                                  $      (0.21)  $       0.40   $         1.63
                                                                             ============== =============  ==============

  Earnings (loss) per share for extraordinary item:
    Basic                                                                    $      (0.60)    $        -     $          -
                                                                             ============== =============  ==============

    Diluted                                                                  $      (0.60)    $        -     $          -
                                                                             ============== =============  ==============

  Earnings (loss) per share:
    Basic                                                                    $      (0.81)  $       0.42   $         1.73
                                                                             ============== =============  ==============

    Diluted                                                                  $      (0.81)  $       0.40   $         1.63
                                                                             ============== =============  ==============

  Weighted-average common shares outstanding                                        5,037          4,913            4,880
                                                                             ============== =============  ==============

  Weighted-average common and common equivalent shares                              5,037          5,214            5,169
                                                                             ============== =============  ==============
</TABLE>


See notes to consolidated financial statements.
                                                                    (Concluded)

<PAGE>

<TABLE>
<CAPTION>



RIVIERA HOLDINGS CORPORATION

CONSOLIDATED  STATEMENTS OF STOCKHOLDERS'  EQUITY YEARS ENDED DECEMBER 31, 1998,
1997 AND 1996 (In thousands, except share amounts)
-----------------------------------------------------------------------------------------------------------------------


                                                                                                Notes
                                                                                             Receivable
                                                         Additional                             from
                                Shares        Common      Paid-In     Retained   Treasury     Employee
                              Outstanding      Stock      Capital     Earnings    Stock     Shareholders          Total

BALANCES,
<S>                               <C>               <C>    <C>         <C>          <C>       <C>              <C>
  JANUARY 1, 1996                 4,800,000    $    5  $   12,537  $   13,740                               $   26,282

  Stock issued under employee
    stock purchase plan             137,000                 1,543                          $  (1,383)              160
  Collections of stockholders"
    receivables                                                                                  332               332
  Refunds on employee
    stock purchases                 (17,600)                 (198)                               198
  Director compensation plan          3,103                    37                                                   37
  Net income                                                            8,440                                    8,440
                                  ----------   ------  ----------- -----------             ----------       -----------


BALANCES,
  DECEMBER 31, 1996               4,922,503         5      13,919      22,180                   (853)           35,251

  Stock issued under employee
    stock purchase plan               6,200                    71                                (71)
  Collections of stockholders'
    receivables                                                                                  425               425
  Refunds on employee
    stock purchases                 (25,900)                 (292)                               292
  Director compensation plan            877                    13                                                   13
  Net income                                                            2,088                                    2,088
                                  ----------   ------  ----------- -----------             ----------       -----------
BALANCES,
  DECEMBER 31, 1997               4,903,680         5      13,711      24,268                  (207)            37,777

  Stock issued under executive
    option plan                     269,096                   480                                                  480
  Collections and refunds of
    stockholders' receivables, net                                                             (530)              (530)
  Purchase of treasury stock        (34,300)                                    $   (167)                         (167)
  Refunds on employee stock
    purchases                       (65,100)                 (734)                              734
  Net loss                                                             (4,057)                                  (4,057)
                                  ----------   ------  ----------- -----------  ---------  ----------       -----------

BALANCES,
  DECEMBER 31, 1998               5,073,376    $    5  $   13,457  $   20,211   $   (167)  $     (3)        $   33,503
                                  ==========   ======  =========== ===========  =========  ==========       ===========
</TABLE>

See notes to consolidated financial statements

<PAGE>
<TABLE>
<CAPTION>




RIVIERA HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (In thousands)
-----------------------------------------------------------------------------------------------------------------------


                                                                                 1998              1997            1996

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                            <C>             <C>              <C>
   Net income (Loss)                                                     $      (4,057)  $        2,088    $      8,440
  Adjustments to reconcile net income (loss) to net cash provided by
    operating activities:
    Depreciation and amortization                                               12,137           10,485           8,212
    Provision for bad debts                                                        782              (16)            524
    Provision for gaming discounts                                                 (76)             (84)            232
    Gain on disposition of long-term debt, net                                                                     (505)
    Extraordinary item, call premium to retire $100 million notes                4,624
    Interest income on U.S. Treasury Bills to retire $100 million notes         (2,334)
    Interest expense, $100 million notes                                         4,642           11,067          12,085
    Interest paid on $100 million notes                                         (4,614)         (11,420)        (12,072)
    Interest expense, other                                                     19,545            7,874
    Interest paid, other                                                       (17,688)
    Interest capitalized on construction projects                               (2,679)            (771)
    Changes in operating assets and liabilities:
      Increase in U.S. Treasury Bills purchased to retire $100 million notes                     (2,267)
      (Increase) decrease in accounts receivable, net                           (1,157)             276          (1,535)
      Decrease (increase) in inventories                                           782             (470)           (853)
      Decrease (increase) in prepaid expenses and other assets                     526           (1,862)            (90)
      (Decrease) increase in accounts payable                                     (774)           2,167             166
      Increase (decrease) in accrued expenses                                    1,258             (726)            104
      Increase (decrease) in current income taxes payable                                          (413)            362
      (Decrease) increase in deferred income taxes payable                      (2,835)           1,332           1,603
      Decrease in slot annuities payable                                          (153)             253             578
      Increase in non-qualified pension plan obligation to CEO upon retire         600              755           1,039
                                                                          -------------  ---------------   -------------

           Net cash provided by operating activities                            8,529            18,268          18,290

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures for property and equipment, other                      (21,432)          (19,752)        (14,923)
  Capital expenditures - Black Hawk, Colorado                                  (9,842)          (17,353)
  Interest capitalized on construction projects                                 2,679               771
  Increase in other assets - Black Hawk, Colorado                                 (27)             (100)
  (Increase) decrease in other assets                                            (208)           (6,346)          1,906
                                                                          ------------  ----------------   -------------

           Net cash used in investing activities                              (28,830)          (42,780)        (13,017)
                                                                          ------------  ----------------   -------------
</TABLE>

See notes to consolidated financial statements.
                                                                     (Continued)

<PAGE>
<TABLE>
<CAPTION>




RIVIERA HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (In thousands)
-----------------------------------------------------------------------------------------------------------------------


                                                                                      1998           1997          1996

CASH FLOWS FROM FINANCING ACTIVITIES:
<S>                                                                               <C>            <C>            <C>
  Proceeds from long-term borrowings                                                         $    172,848    $      209
  U.S. Treasury Bills sold (purchased) to retire $100 million notes           $    108,930       (104,329)
  Payments to retire $100 million notes with call premium                         (104,313)
  Payments on long-term borrowings                                                    (364)        (5,041)       (2,226)
  Purchase of treasury stock                                                          (167)
  Proceeds from issuance of stock to employees and directors                                           13           197
  Net collections, cancellations employee stock purchase plan and exercise of employee
    stock options                                                                      (50)           425           332
                                                                              -------------  -------------   -----------

           Net cash provided by (used in) financing activities                       4,036         63,916        (1,488)
                                                                              -------------  -------------   -----------

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                   (16,268)        39,404         3,785

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                        65,151         25,747        21,962
                                                                              -------------  -------------   -----------

CASH AND CASH EQUIVALENTS, END  OF YEAR                                       $     48,883    $    65,151    $   25,747
                                                                              =============  =============   ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
  Income taxes paid                                                           $          -    $     1,860    $    2,463
                                                                              =============  =============   ===========

SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
  Stock issued to employees for notes receivable                              $          -    $         7    $    1,383
                                                                              =============  =============   ===========

  Noncash reductions of long-term debt                                        $          -                   $      845
                                                                              =============                  ===========

Property acquired with debt and accounts payable                              $      2,874
                                                                              =============


</TABLE>

See notes to consolidated financial statements.
                                                                    (Concluded)

<PAGE>



RIVIERA HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of  Presentation  - Riviera  Holdings  Corporation  and its  wholly  owned
subsidiary,  Riviera Operating Corporation ("ROC"),  (together,  the "Company"),
were  incorporated  on January  27,  1993,  in order to  acquire  all assets and
liabilities of Riviera, Inc. Casino-Hotel Division on June 30, 1993, pursuant to
a plan of reorganization.

In July 1994, management established a new division,  Riviera Gaming Management,
Inc.  ("RGM") for the purpose of  obtaining  management  contracts in Nevada and
other jurisdictions.  In August 1995, RGM incorporated in the state of Nevada as
a wholly owned subsidiary of ROC.

All significant  subsidiaries are  consolidated  and inter company  transactions
eliminated in this presentation.

Nature of  Operations  - The  primary  line of  business  of the  Company is the
operation of the Riviera  Hotel and Casino (the  "Riviera")  on the Strip in Las
Vegas,  Nevada.  The Company,  through its gaming  management  subsidiary,  also
manages the Four Queens  Hotel and Casino  (owned by  Elsinore  Corporation)  in
downtown Las Vegas (see Note 13). Currently,  the Company is developing a casino
in Black Hawk,  Colorado,  through  Riviera Black Hawk,  Inc.,  ("RBH") a wholly
owned subsidiary of ROC. Riviera Gaming Management of Colorado, Inc. is a wholly
owned subsidiary of RGM, and will manage the casino when completed.

Casino operations are subject to extensive  regulation in the State of Nevada by
the Gaming Control Board and various other state and local regulatory  agencies.
Management  believes  that  the  Company's  procedures  for  supervising  casino
operations,  recording casino and other revenues, and granting credit comply, in
all material respects, with the applicable regulations.

Principles of Consolidation - The consolidated  financial statements include the
accounts of the Company,  its wholly owned subsidiaries,  ROC and RGM, and their
related subsidiary entities. All material intercompany accounts and transactions
have been eliminated.

Cash and Cash  Equivalents - All highly  liquid  investments  securities  with a
maturity  of three  months  or less  when  acquired  are  considered  to be cash
equivalents.  The Company accounts for investment  securities in accordance with
Statement of Financial  Accounting  Standards ("SFAS") No. 115,  "Accounting for
Certain Investments in Debt and Equity Securities."

The  Company's  investment   securities,   along  with  certain  cash  and  cash
equivalents  that are not deemed  securities  under SFAS No. 115, are carried on
the consolidated balance sheets in the cash and cash equivalents category.  SFAS
No. 115  addresses  the  accounting  and  reporting  for  investments  in equity
securities that have readily determinable fair values and for all investments in
debt securities, and requires such securities to be classified as either held to
maturity, trading, or available for sale.

Management   determines  the  appropriate   classification   of  its  investment
securities at the time of purchase and reevaluates  such  determination  at each
balance sheet date.  Held-to-maturity  securities  are required to be carried at
amortized cost. At December 31, 1998 and 1997,  securities classified as held to
maturity  comprised debt securities  issued by the U.S.  Treasury and other U.S.
government  corporations  and  agencies,  and  repurchase  agreements,  with  an
amortized cost of $35,781,000 and $50,534,000,  respectively,  maturing in three
months or less.

Inventories - Inventories  consist primarily of food,  beverage,  gift shop, and
promotional  inventories;  and are stated at the lower of cost  (determined on a
first-in, first-out basis) or market.

Property  and  Equipment  -  Property  and  equipment  are  stated at cost,  and
capitalized lease assets are stated at the present value of future minimum lease
payments at the date of lease inception. Interest incurred during construction

<PAGE>



of new facilities or major  additions to facilities is capitalized and amortized
over the life of the asset. Depreciation is computed by the straight-line method
over the shorter of the estimated useful lives or lease terms, if applicable, of
the related assets,  which range from 5 for certain gaming equipment to 40 years
for  buildings.  The costs of normal  maintenance  and  repairs  are  charged to
expense as incurred. Gains or losses on disposals are recognized as incurred.

The Company  periodically  assesses the  recoverability  of property,  plant and
equipment  and  evaluates  such  assets  for  impairment   whenever   events  or
circumstances  indicate that carrying amount of an asset may not be recoverable.
Asset  impairment  is  determined  to  exist if  estimated  future  cash  flows,
undiscounted and without interest charges, are less than the carrying amount.

Other Assets - Other assets include bond offering costs and  commissions,  which
are amortized over the life of the debt, and are included in interest expense.

Restricted  Cash for Periodic Slot Payments - At December 31, 1998 and 1997, the
Company had  interest-bearing  deposits with a commercial  bank in the amount of
$55,000  and  $208,000,  respectively,  which are  restricted  as to use.  These
amounts represent  deposits required by the State of Nevada Gaming Control Board
to fund  periodic  slot  payments  due  customers  through the year 2000 and are
included in other noncurrent assets.

Stock-Based  Compensation - The effect of stock options in the income  statement
is reported in accordance  with  Accounting  Principles  Board Statement No. 25,
"Accounting  for  Stock  Issued to  Employees."  The  Company  has  adopted  the
disclosures-only   provision  of  SFAS  No.  123,  "Accounting  for  Stock-Based
Compensation."  Accordingly,  no  compensation  cost  has  been  recognized  for
unissued stock options in the stock option plan (see Note 15).

Fair Value Disclosure as of December 31, 1998 and 1997:

    Cash and Cash Equivalents, Accounts Receivable, Restricted Cash for Periodic
    Slot  Payments,  Accounts  Payable,  and Accrued  Liabilities - The carrying
    value of these items is a reasonable estimate of their fair value.

    Long-Term Debt - The fair value of the Company's  long-term debt  (including
    the  $100  million  Notes  to be  retired  by the U.S.  Treasury  Bills)  is
    estimated  based on the quoted market prices for the same or similar  issues
    or on the  current  rates  offered  to the  Company  for  debt  of the  same
    remaining  maturities.  Based on the borrowing rates currently  available to
    the  Company  for debt  with  similar  terms  and  average  maturities,  the
    estimated fair value of long-term  debt is  approximately  $158,774,000  and
    $276,638,000 in 1998 and 1997, respectively.


Revenue Recognition

    Casino  Revenue - The Company  recognizes,  as gross  revenue,  the net  win
    from gaming activities,  which is the  difference  between  gaming  wins and
    losses.

    Room Revenue,  Food and Beverage  Revenue,  Entertainment  Revenue and Other
    Revenue - The Company recognizes room, food and beverage, entertainment  and
    other revenue at the time that goods or services are provided.


Promotional   Allowances  -   Promotional   allowances   consist   primarily  of
accommodations,  entertainment, and food and beverage services furnished without
charge to  customers.  The retail  value of such  services  is  included  in the
respective  revenue   classifications   and  is  then  deducted  as  promotional
allowances.

The estimated costs of providing promotional  allowances are classified as costs
of the casino operating department through interdepartmental  allocations. These
allocations for the years ended December 31, 1998, 1997 and 1996, are as follows
(amounts in thousands):


                                           1998            1997            1996

    Food and beverage                  $  6,271      $    5,759      $    6,364
    Rooms                                 1,698           1,442           1,209
    Entertainment                         1,518             903             922
                                       ---------     -----------     -----------

    Total costs allocated to casino    $  9,487      $    8,104      $    8,495
                                       =========     ===========     ===========

Federal  Income  Taxes - The Company and its  subsidiaries  file a  consolidated
federal tax return.  The Company  accounts for income taxes in  accordance  with
SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 requires
<PAGE>



recognition of deferred tax assets and  liabilities  for the expected future tax
consequences  of events that have been included in the  financial  statements or
tax returns.  Deferred income taxes reflect the net tax effects of (i) temporary
differences between the carrying amounts of assets and liabilities for financial
reporting  purposes  and the  amounts  used for  income tax  purposes;  and (ii)
operating loss and tax credit carryforwards.

Estimates  and  Assumptions  -  The  preparation  of  financial   statements  in
conformity with generally accepted accounting  principles requires management to
make estimates and  assumptions  that affect the reported  amounts of assets and
liabilities,  disclosure of contingent assets and liabilities at the date of the
financial  statements,  and the reported amounts of revenues and expenses during
the  reporting  period.  Significant  estimates  used  by  the  Company  include
estimated useful lives for depreciable and amortizable  assets,  certain accrued
liabilities,  and the estimated  allowance for  receivables.  Actual results may
differ from estimates.

Reclassifications  -  Certain  reclassifications  have been made to the 1997 and
1996  financial  statements to conform to the current year  presentation.  These
reclassifications had no effect on the Company's net income.

Recently Adopted Accounting Standards - The Financial Accounting Standards Board
("FASB")  issued  SFAS  No.  130,  "Reporting  Comprehensive  Income,"  which is
effective for fiscal years  beginning  after  December 15, 1997.  This statement
required businesses to disclose comprehensive income and its components in their
financial statements.
The Company has no items of comprehensive income.

The FASB issued SFAS No. 131, "Segment Reporting," which is effective for fiscal
years ending  after  December 31, 1997.  This  statement  requires  companies to
identify and disclose  certain  information  regarding  segments  based upon the
operating decisions of certain of the Company's management. The Company believes
that it has complied with the requirements of this SFAS.

Recently Issued Accounting Standards - The FASB issued SFAS No. 133, "Accounting
for  Derivatives,"  which is effective for fiscal years beginning after June 15,
1999. This statement defines derivatives and requires qualitative  disclosure of
certain financial and descriptive information about a company's derivatives. The
Company will adopt SFAS No. 133 in the year ending December 31, 2000. Management
has not finalized its analysis of this SFAS or the impact on the Company.

The American  Institute of Certified Public  Accountants'  Accounting  Standards
Executive  Committee  issued  Statement of Position No. 98-5,  "Reporting on the
Costs of Start-Up  Activities." This standard provides guidance on the financial
reporting for start-up  costs and  organization  costs.  This standard  requires
costs of start-up  activities and organization costs to be expensed as incurred,
and is effective for fiscal years  beginning  after December 15, 1998,  although
earlier application is encouraged.

Management  is  evaluating  the  impact  that this  standard  could  have on the
Company's future consolidated financial statements.

2.  ACCOUNTS RECEIVABLE

Accounts receivable consist of the following at December 31 (in thousands):


                                                        1998               1997

Casino                                              $  3,492           $  2,211
Hotel                                                  3,211              3,115
Other                                                                       158
                                                    ---------          ---------

Total                                                  6,703              5,484
Allowance for bad debts and discounts                 (1,314)              (546)


Ending balance                                      $  5,389           $  4,938
                                                    =========          =========

<PAGE>



Changes in the casino and hotel  allowance  for bad debts and  discounts for the
years ended  December  31, 1998,  1997 and 1996,  consist of the  following  (in
thousands):


                                        1998           1997           1996

Beginning balance                 $     546         $     646      $     741
Write-offs                             (391)             (438)          (912)
Recoveries                               81                49             61
Provision for bad debts               1,154               372            524
Provision for gaming discounts          (76)              (83)           232
                                  ----------        ----------     ----------

Ending balance                    $   1,314         $     546      $     646
                                  ==========        ==========     ==========

3.       PREPAID EXPENSES AND OTHER ASSETS

Prepaid  expenses and other assets  consist of the  following at December 31 (in
thousands):


                                                            1998           1997

Prepaid gaming taxes                                   $  1,209        $  1,286
Prepaid federal income taxes                              1,092           1,190
Prepaid insurance                                           431             263
Other prepaid expenses                                    1,296           1,815
                                                       ---------       ---------

Total                                                  $  4,028        $  4,554
                                                       =========       =========

4.    PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31 (in thousands):


                                                         1998              1997

Land and improvements                             $    37,638       $    36,751
Buildings and improvements                             80,381            80,322
Equipment, furniture, and fixtures                     71,238            67,793
Construction in progress                               32,083             2,326
                                                  ------------      ------------

Total property and equipment                          221,340           187,192
Accumulated depreciation                              (45,718)          (33,581)
                                                  ------------      ------------

Net property and equipment                        $   175,622       $   153,611
                                                  ============      ============


In 1998 and  1997,  approximately  $2,679,000  and  $771,000,  respectively,  in
interest costs were capitalized on construction  projects.  Substantially all of
the  Company's  property and  equipment is pledged as  collateral to secure debt
(see Note 8). Repairs and maintenance that do not significantly improve the life
of fixed  assets are expensed as incurred.  Costs for  significant  improvements
that extend the expected life of fixed assets more than one year are capitalized
and depreciated over the remaining extended life using a straight line method of
depreciation.




<PAGE>



5.       OTHER ASSETS

Other assets consist of the following at December 31 (in thousands):


                                                  1998           1997

Deposits                                     $     163          $     725
Bond offering costs and commissions, net         6,366              7,327
Other                                            1,676              1,247
Restricted cash for periodic slot payments          55                208
                                             ----------         ----------

Total                                        $   8,260          $   9,507
                                             ==========         ==========

6.       ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable consist of the following at December 31 (in thousands):


                                                 1998             1997

Outstanding chip and token liability       $      495         $       681
Casino account deposits                         1,055                 203
Miscellaneous gaming                              589                 716


Total liabilities related to gaming activities  2,139               1,600
Accounts payable to vendors                     6,516               7,944
Hotel deposits                                  1,119                 969
Construction payables                           1,749
Other                                             342                 377
                                           -----------        ------------

Total                                      $   11,865         $    10,890
                                           ===========        ============


Accrued expenses consist of the following at December 31 (in thousands):

                                                            1998           1997

Payroll, related payroll taxes, and employee benefits  $    5,919      $  5,593
Incentive, retention, and profit sharing plans              2,797         1,982
Other                                                       1,337         1,220
                                                       -----------     ---------

Total                                                  $   10,053      $  8,795
                                                       ===========     =========

7.       OTHER LONG-TERM LIABILITIES

Other  long-term  liabilities  consist  of  the  following  at  December  31 (in
thousands):
<TABLE>
<CAPTION>


                                                                                       1998           1997

Periodic slot payments due to customers through 2000, pre-funded by
<S>                                                                                  <C>               <C>
  restricted cash (see Note 1)                                                  $       55         $     208
Nonqualified pension plan obligation to the CEO of the Company, payable
  in 20 quarterly installments upon expiration of his employment contract,
  plus accrued interest                                                              4,878             3,868
                                                                                -----------       -----------

Total other long-term liabilities                                               $    4,933        $    4,076
                                                                                ===========       ===========

</TABLE>

<PAGE>



8.       LONG-TERM DEBT

Long-term debt consists of the following at December 31 (in thousands):

<TABLE>
<CAPTION>

                                                                                            1998              1997

10% First Mortgage Notes maturing on August 15, 2004,  bearing  interest payable
  semi-annually on February 15 and August 15 of each year,  redeemable beginning
  August 1, 2001,  at 105%;  2002 at 102.5%;  and 2003 and  thereafter  at 100%.
  These notes are collateralized by the land and physical structures  comprising
  the
<S>                                                                                       <C>              <C>
  Riviera Hotel and Casino                                                            $  173,271        $  172,963

5%Special  Improvement  District Bonds - issued by the City of Black Hawk, Black
  Hawk,  Colorado,  in the amount of $2,940,000 in July 1998. Bond proceeds will
  be used to finance certain road improvements and other infrastructure projects
  that will benefit the Riviera  Black Hawk  property and the Isle of Capri,  an
  adjacent casino.  As of December 31, 1998,  approximately  $1,370,000 had been
  expended. Riviera Black Hawk is responsible to repay 50%
  of the obligation                                                                          687

Capitalized lease obligations (see Note 11)                                                  473               741

5.6% note payable to computer  manufacturer  in monthly  installments of $8,835,
  including interest through August 2003, for a computer
  system and related peripherals                                                             438

8.5% unsecured, promissory notes in the original principal amount of
  $441,262, payable monthly and maturing December 31, 1998                                                      96
                                                                                      -----------       -----------

Total long-term debt                                                                     174,869           173,800
Current maturities by terms of debt                                                         (363)             (364)
                                                                                      -----------       -----------

Total                                                                                 $  174,506        $  173,436
                                                                                      ===========       ===========
</TABLE>

Maturities  of  long-term  debt for the year  ending  December  31,  1998 are as
follows (in thousands):


1999                                                              $         363
2000                                                                        419
2001                                                                        230
2002                                                                        235
2003                                                                        214
2004                                                                    173,271
Thereafter                                                                  137
                                                                 ---------------

Total                                                                $  174,869
                                                                 ===============


During the fourth quarter of 1996 the Company  restructured  and retired certain
of its  long-term  debt  resulting  in  recognition  of other  income,  net,  of
$505,000.

Other income (expense) for the year ended December 31, 1997,  includes  $850,000
of costs for a canceled secondary offering.

In February 1997, the Company entered into a $15.0 million,  five-year  reducing
revolving  line of credit (the "Credit  Facility").  The Credit  Facility  bears
interest at prime plus 0.5% or LIBOR plus 2.9%.  The  Company  has not  utilized
this line of credit.  The Credit  Facility  was  modified as a result of the 10%
First  Mortgage  Notes and the  proposed  Paulson  Merger  (see  Note  12).  The
modifications  included an increase in the allowable funded debt-to-EBITDA ratio
to 4.75 to one.  The Company is not  currently  meeting  this  requirement  and,
therefore,  cannot  draw down on the Credit  Facility  at this time.  The Credit
Facility is callable upon a change in control other than the Merger.

On August  13,  1997,  the  Company  issued 10% First  Mortgage  Notes (the "10%
Notes")  with a principal  amount of $175  million  dollars.  The 10% Notes were
issued at a  discount  in the  amount of $2.2  million.  The  discount  is being
accreted  over  the  life of the  note on a  straight-line  basis.  The 10% Note
Indenture  contains certain  covenants that limit the ability of the Company and
its  restricted  subsidiaries,  subject  to  certain  exceptions,  to: (i) incur
additional indebtedness;  (ii) pay dividends or other distributions,  repurchase
capital  stock or other equity  interests or  subordinated  indebtedness;  (iii)
enter into certain transactions with affiliates; (iv) create certain liens; sell
certain assets; and (v) enter into certain mergers and consolidations. A portion
of the proceeds  from the 10% Notes  totaling $4.5 million was paid to a bank to
retire certain long-term debt. As described in Note 9, a portion of the proceeds
was  invested in U.S.  Treasury  Notes to pay the 11% $100  Million  Notes.  The
Company has registered under the Securities Act of 1933, as amended,  securities
identical  to the 10%  Notes.  On  January 8, 1998,  the  Company  completed  an
exchange  offer  for such  registered  securities  for the 10%  Notes  effective
January 1, 1998.

The  10%  Notes  are  unconditionally  guaranteed  by all  existing  and  future
restricted subsidiaries of the Company, which will not initially include Riviera
Black Hawk, Inc. ("RBH").  RBH will become collateral for the 10% First Mortgage
Notes if certain consolidated operating ratios are met. As of December 31, 1998,
RBH  had  no  operations.   At  December  31,  1998,  RBH  only  had  assets  of
approximately $27.1 million, which represents the cost of the land for the Black
Hawk Casino project and construction in progress. Therefore, the Company has not
included  separate  financial  information for the guarantors as of December 31,
1998. The Company intends to disclose such additional  information in the future
as the subsidiary develops.

The  Company has credit  facilities  totaling  $1,100,000  for letters of credit
issued periodically to foreign vendors for purchases of merchandise. The letters
require payment upon presentation of a valid voucher.

9.       $100 MILLION NOTES RETIRED BY THE U.S. TREASURY BILLS

On August 13, 1997,  the Company used part of the proceeds from the 10% Notes to
purchase United States  Government  Securities (the  "Securities")  at a cost of
$109.8 million, which was deposited into an irrevocable trust. These Securities,
together with interest  that was earned by the  Securities,  was used to pay the
principal,  interest  from August 13, 1997 to June 1, 1998,  and call premium of
$4,313,000  due on the 11% $100  Million  Notes on June 1,  1998,  which was the
earliest date the 11% $100 Million Notes could be redeemed. Interest earned from
the  Securities is included in Interest  income on Treasury Bills held to retire
$100 million  notes.  The interest  expenses from the 10% Notes and from the 11%
$100 Million  Notes are reported  separately on the  consolidated  statements of
income.   As  a  part  of  the  funding  for  the  retirement  of  these  notes,
substantially  all the covenants  (other than payment of principal and interest)
were  released.  The call  premium  of $4.3  million  and  unamortized  deferred
financing costs totaling $300,000 were recorded net of the 35% income tax effect
of $1.6 million, resulting in an extraordinary loss of $3.0 million.

10.      FEDERAL INCOME TAXES

SFAS No. 109  requires the Company to compute  deferred  income taxes based upon
the  difference  between  the  financial  statement  and tax basis of assets and
liabilities  using  enacted  tax  rates in  effect  in the  years  in which  the
differences are expected to reverse.

<PAGE>
The effective income tax rates on income  attributable to continuing  operations
differ from the statutory  federal  income tax rates for the year ended December
31, 1998, 1997, and 1996, as follows (in thousands):
<TABLE>
<CAPTION>


                                                 1998                    1997                      1996
                                                 Amount    Rate         Amount        Rate        Amount         Rate

Taxes (benefit) at federal
<S>                                            <C>        <C>            <C>         <C>             <C>        <C>
  statutory rate                           $   (2,164)    (35.0)%   $    1,189       35.0 %     $    4,504      35.0 %
Other                                              21       0.3 %          120        3.5 %            (76)     (1.0)%
                                           -----------    -------   -----------     --------    -----------     ------

Provision (benefit) for
  income taxes                             $   (2,143)    (34.7)%   $    1,309       38.5 %     $    4,428      34.0 %
                                           ===========    =======   ===========     ========    ===========     ======
</TABLE>
<TABLE>
<CAPTION>


Comparative analysis of the provision (benefit) for income taxes is as follows:

                                                  1998                     1997                       1996
                                                  ----                     ----                       ----
<S>                                            <C>                       <C>                         <C>
Current                                           691                      (23)                      5,831
Deferred                                       (2,835)                   1,332                      (1,603)
                                               -------                   ------                     -------
Total                                         $(2,143)                  $1,309                      $4,428
                                              ========                  =======                     =======
</TABLE>


The tax effects of the items comprising the Company's net deferred tax liability
consist of the following at December 31 (in thousands):

                                                               1998        1997

Deferred tax liabilities:
  Basis in long-term debt obligations                                  $    150
  Reserve differential for hospitality and gaming activities $  1,208     1,214
  Difference between book and tax depreciable property          6,299     6,955
  Other                                                           928       867
                                                             --------- ---------

Total                                                           8,435     9,186
                                                             --------- ---------

Deferred tax assets:
  Reserves not currently deductible                             2,899     1,845
  Bad debt reserves                                               460       191
  AMT and other credits                                         1,953     1,192
                                                             --------- ---------

Total                                                           5,312     3,228
                                                             --------- ---------

Net deferred tax liability                                   $  3,123  $  5,958
                                                             ========= =========

The Company has $1,953,000 of alternative minimum tax credit available to offset
future income tax liabilities. The credit has no expiration date.

<PAGE>
11.      LEASING ACTIVITIES

The Company leases certain equipment under capital leases. These agreements have
been  capitalized  at the present value of the future  minimum lease payments at
lease  inception  and are  included  with  property  and  equipment.  Management
estimates  the fair market value of the property and  equipment,  subject to the
leases,  approximates  the net present value of the leases.  The leased property
and equipment consist primarily of signs and air conditioning equipment.

The  following  is a schedule by year of the minimum  rental  payments due under
capital leases, as of December 31, 1998 (in thousands).


  1999                                                                $     462
  2000                                                                      232
                                                                      ----------

Total minimum lease payments                                                694
Taxes, maintenance, and insurance                                          (177)
Interest portion of payments                                                (44)
                                                                      ----------

Present value of net minimum lease payments                           $     473
                                                                      ==========

Rental  expense  for the years  ended  December  31,  1998,  1997 and 1996,  was
approximately $287,000, $275,000 and $334,000, respectively.

In addition, the Company leases retail space (primarily to retail shops and fast
food  vendors) to third parties under terms of  noncancelable  operating  leases
that expire in various years through 2003.  Rental income,  which is included in
other  income,  for the years ended  December  31,  1998,  1997,  and 1996,  was
approximately $1,615,000, $1,555,000, and $1,573,000, respectively.

At December 31, 1998,  the Company had future  minimum  annual rental income due
under noncancelable operating leases as follows (in thousands):


  1999                                                               $    1,183
  2000                                                                      647
  2001                                                                      428
  2002                                                                      276
  2003                                                                      150
                                                                     -----------

Total                                                                $    2,684
                                                                     ===========

12.      COMMITMENTS AND CONTINGENCIES

The  Company  is  party to  several  routine  lawsuits,  both as  plaintiff  and
defendant,  arising  from  normal  operations  of a hotel.  Management  does not
believe  that the  outcome  of such  litigation  in the  aggregate,  will have a
material  adverse effect on the financial  position,  results of operations,  or
cash flows of the Company.

Allen  Paulson  Merger/Litigation  - In March 1998,  the Company was notified by
Allen E.  Paulson  ("Paulson")  that he was  terminating  the  Merger  Agreement
entered into in September of 1997, whereby a company controlled by Paulson would
acquire 100% of the Company's stock for $15 per share,  plus an interest factor.
Approximately  $5.8 million is being held in escrow for the holders of 1,770,000
Riviera  Contingent  Value Rights  ("CVRs").  The CVRs entitle  their holders to
share only in the  proceeds  of the funds  currently  in escrow.  Excluded  from
participating in the CVRs are Morgens Waterfall,  SunAmerica,  Keyport Life, and
Paulson,  and their  affiliates and associates,  who own an aggregate  3,355,000
Riviera shares.

The Company (and three major  stockholders  of the Company and other  defendants
involved  in the  terminated  merger) is  involved in  litigation  with  Paulson
relating to the Merger  Agreement and related issues.  The Company is paying the
expenses of such  litigation,  but will not share in any  recovery of the escrow
funds.  There can be no assurance  that Riviera will be successful in collecting
all or any part of the funds currently held in the escrow account.


Other income  (expense) for the year ended December 31, 1998 and 1997,  includes
$1,231,000  and $400,000,  respectively,  in costs relating to the Allen Paulson
merger/litigation.   These   specific  legal  expenses  were  incurred  for  the
collection of funds due to shareholders in connection with the terminated merger
agreement  (Contingent  Value Rights) and as such have been excluded from income
from operations.


Black  Hawk  Project - The  Company  is  constructing  a casino  in Black  Hawk,
Colorado,  on a site that was  purchased for $15.1 million in August 1997. As of
December 31, 1998, the Company had expended  approximately  $27.1 million on the
project.  The Company entered into a contract for a gross maximum price of $27.5
million for the  construction of the casino.  The Company  estimated the cost of
the  project at $65  million.  The Company  believes  that it has, or can raise,
sufficient funds to complete the project.

Employees  and  Labor  Relations  - As of  December  31,  1998 the  Riviera  had
approximately 2,100 full-time equivalent employees and had collective bargaining
contracts  with  nine  unions  covering  approximately  1,200 of such  employees
including food and beverage employees,  rooms department employees,  carpenters,
engineers,  stage hands, musicians,  electricians,  painters and teamsters.  The
Company's  agreements with the Southern Nevada Culinary and Bartenders Union and
Stage  Hands  Union,  which  cover  the  majority  of  the  Company's  unionized
employees,  were  renegotiated  in 1998 and expire in the year 2002.  Collective
Bargaining  Agreements with the Operating Engineers,  Electricians and Musicians
will expire in 1999,  while the Agreements with the Carpenters and Painters will
expire in 2000. A new Agreement was negotiated with the Teamsters and expires in
2003.  Although unions have been active in Las Vegas,  management  considers its
employee relations to be satisfactory.  There can be no assurance, however, that
new  agreements  will be  reached  without  union  action  or  will be on  terms
satisfactory to the Company.

13.      MANAGEMENT AGREEMENTS

From August  1996 until  February  1997,  RGM was  operating  the Four Queens in
downtown Las Vegas under an interim  management  agreement  for a fee of $83,333
per month. A long-term  management  agreement (the "Management  Agreement") with
Elsinore  Corporation  ("Elsinore"),  the  owner of the Four  Queens,  went into
effect on  February  28,  1997,  the  effective  date of the  Chapter 11 plan of
reorganization  of  Elsinore.  The  Company  believes  that  the  terms  of  the
Management  Agreement  are no less  favorable to the Company than if the Company
had negotiated with an independent party.

The term of the  Management  Agreement is  approximately  40 months,  subject to
earlier  termination  or extension.  Either party may terminate the Agreement if
cumulative  earnings before  interest,  taxes,  depreciation,  and  amortization
("EBITDA") for the first two fiscal years are less than $12.8 million.  The Four
Queens EBITDA for the 24 months ending February 28, 1999 will approximate  $10.7
million.  Management  and the Board of  Directors  of  Elsinore  have  agreed to
continue the agreement for its original term provided, however, that it could be
terminated by either party on six month's  notice.  RGM is paid a minimum annual
management  fee of $1.0  million,  payable  in equal  monthly  installments.  In
addition, RGM is entitled to a fee of 25% of the amount by which the Four Queens
EBITDA exceeds $8 million in any fiscal year. Based upon current  historical and
projected  EBITDA, it is unlikely that the $8 million threshold will be met. RGM
has received warrants to purchase  1,125,000 shares of common stock of Elsinore,
exercisable  during the term or extended term of the Management  Agreement at an
exercise price of $1 per share. In consideration of Four Queens' failure to meet
the $12.8 million  EBITDA  threshold  for the first two years of the  agreement,
RGME and Elsinore are negotiating a revised termination bonus.

Either party can terminate the Management Agreement if (i) substantially all the
Four  Queens'  assets  are  sold;  (ii) the Four  Queens is  merged;  or (iii) a
majority  of  the  Four  Queens'  or  Elsinore's  shares  are  sold.  Upon  such
termination RGM will receive a $2.0 million  termination  bonus minus any amount
realized or realizable upon exercise of the warrants.

RGM has entered into a management  agreement,  in principle  with Riviera  Black
Hawk, Inc. wherein RGM will receive  management fees for operating Riviera Black
Hawk, Inc. for a percentage of revenues and EBITDA.

14.      EMPLOYMENT AGREEMENTS AND EMPLOYEE BENEFIT PLANS

The Company has an  employment  agreement  with Mr.  Westerman,  Chairman of the
Board and Chief  Executive  Officer of the Company.  This agreement  includes an
annual  base  salary,  an  incentive  bonus  based upon the  extent of  adjusted
operating  earnings,   contributions  to  a  Non-Qualified   Pension  Plan,  and
contributions  to a Profit  Sharing  and  401(k)  Plan.  While  employed  by the
company,  contributions  to  the  pension  plan  are  in  amounts  equal  to Mr.
Westerman's salary each year plus interest on accrued amounts of a rate equal to
the current effective interest rate of the Company (10.6% at December 31, 1998).
In  addition,  the  Company  has  termination  fee  agreements  with each of the
Directors,  Executive Officers, and Significant Employees pursuant to which each
of such  employees  will be  entitled  to receive  one year's  salary and health
insurance benefits if their employment with the Company is terminated within one
year of a change of control of the Company and without cause, or the involuntary
termination of Mr. Westerman.

On March 20,  1998,  Mr.  Westerman  exercised  a clause in the  Agreement  that
requires the Company to establish a trust for the money in his  retirement  fund
as permitted in his employment  agreement  following  shareholder  approval of a
"change in control." The approval by the  shareholders of the merger on February
5, 1998,  constituted a change of control (see Note 12). The Company has entered
into an agreement  with Mr.  Westerman to permit funding the trust amount at his
option.

The  Company has an  incentive  compensation  plan,  covering  employees  of the
Company  who, in the opinion of the  Chairman of the Board,  either serve in key
executive,  administrative,  professional,  or  technical  capacities  with  the
Company or other employees who also have made a significant  contribution to the
successful and profitable  operation of the Company.  The amount of the bonus is
based on operating earnings before depreciation, amortization, interest expense,
provision for income taxes,  extraordinary  losses and gains,  any provisions or
payments made pursuant to the Plan, and any provisions or payments made pursuant
to the  incentive  compensation  of the  Chairman and Chief  Executive  Officer.
During the years ended December 31, 1998,  1997 and 1996,  the Company  recorded
accrued bonuses of $1,593,475, $920,000 and $2,588,000, respectively, based upon
the  above  incentive  compensation  plan and the  incentive  compensation  plan
established for the Chairman of the Board under his employment agreement.

The Company  contributes  to  multi-employer  pension  plans under various union
agreements to which the Company is a party.  Contributions,  based on wages paid
to covered employees, were approximately  $1,657,605,  $1,604,199 and $1,650,000
for the years ended December 31, 1998, 1997, and 1996. These  contributions were
for approximately 1,400 employees,  including food and beverage employees,  room
department  employees,   carpenters,   engineers,   stage  hands,  electricians,
painters,  and teamsters.  The Company's share of any unfunded liability related
to multi-employer plans, if any, is not determinable.

The  Company   sponsors  a  Profit   Sharing  and  401(k)  Plan  that   incurred
administrative  expenses of approximately  $36,000,  $44,000 and $34,000 for the
years ended 1998, 1997, and 1996, respectively.

The profit sharing component of the Profit Sharing and 401(k) Plan provides that
the  Company  will make a  contribution  equal to one  percent of each  eligible
employee's annual  compensation if a prescribed annual operating earnings target
is attained and an additional 1/10th of one percent thereof for each $200,000 by
which operating earnings is exceeded,  up to a maximum of three percent thereof.
The Company may elect not to contribute to the Profit Sharing and 401(k) Plan if
it notifies its employees by the first day of January of the Profit  Sharing and
401(k) Plan year. An employee will become vested in the Company's  contributions
based on the  employee's  years of service.  An employee  will receive a year of
vesting  service for each plan year in which the employee  completed 1,000 hours
of service.  Vesting credit will be allocated in 20% increments for each year of
service commencing with the attainment of two years of service. An employee will
be fully vested following the completion of six years of service.

The 401(k)  component of the Profit  Sharing and 401(k) Plan  provides that each
eligible   employee  may  contribute  up  to  15%  of  such  employee's   annual
compensation,  and that the Company will contribute 1% of each employee's annual
compensation  for each 4% of compensation  contributed by the employee,  up to a
maximum  of  2%.  All  non-union  employees  of  the  Company  are  eligible  to
participate in the Profit Sharing and 401(k) Plan after 12 consecutive months of
service with the Company.

As a result of the scheduled  opening of several new Las Vegas Strip  properties
in 1998,  1999,  and 2000,  an estimated  38,000 jobs must be filled,  including
5,000  supervisory   positions.   Because  of  the  Riviera's   performance  and
reputation,  its employees are prime candidates to fill these positions.  In the
third quarter of 1998,  management  instituted an employee  retention  plan (the
"Plan"),  which covers  approximately 90 executive,  supervisory,  and technical
support positions, and includes a combination of employment contracts,  stay put
agreements, bonus arrangements, and salary adjustments.

The  period  costs  associated  with the Plan are being  accrued  as  additional
payroll costs and included approximately $287,000 in 1998. The total cost of the
Plan is estimated to be approximately $2.0 million over the period July 1, 1998,
through June 30, 2001.

15.      STOCK OPTION PLANS

At a meeting held on July 27, 1993, the Company's  Board of Directors  adopted a
stock option plan providing for the issuance of both  nonqualified and incentive
stock options (as defined in the Internal Revenue Code).  This stock option plan
was  ratified  by the  Company's  stockholders  at the  April 26,  1994,  annual
meeting. The number of shares available for purchase under the Stock Option Plan
as adopted was 120,000 (as adjusted  pursuant to antidilution  provisions).  The
stockholders  approved a  four-for-one  stock  split,  increasing  the number of
shares of Common Stock  available  for  purchase  under the Stock Option Plan to
480,000.  Options were granted for 228,000  shares for 1993;  132,000 shares for
1994; none for 1995; and 110,000 for 1996. No options were exercised in 1996, or
1997. On November 21, 1996, the Company amended the Stock Option Plan, which was
approved at the annual  meeting  held on May 8, 1997,  to increase the number of
shares  available  under the Stock Option Plan from 480,000  shares to 1,000,000
shares  and  granted  options  to  purchase  300,000  additional  shares  to Mr.
Westerman.  During  1998,  95,000  options  were  issued for 1997 to  executives
excluding Mr.  Westerman.  Also during 1998,  284,000  options were exercised by
executives.  In  connection  with  the  resignation  of a  board  member  and an
employee,  the Company paid  approximately  $258,000  (included in non-recurring
corporate  expenses) on 54,000 options for the  difference  between the weighted
average option price of $2.22 compared to the weighted average,  market price of
$7.00 on the dates of exercise.  On January 21, 1999, 95,000 options were issued
for 1998 to executives excluding Mr. Westerman.  Options vest 25% on the date of
grant and 25% each  subsequent  year.  The term of an option  can in no event be
exercisable  more than 10 years (five years in the case of an  incentive  option
granted to a  shareholder  owning  more than 10% of the Common  Stock),  or such
shorter period,  if any, as may be necessary to comply with the  requirements of
state securities laws, from the date such option is granted.

On March 5, 1996, the Board of Directors adopted an employee stock purchase plan
(the "Stock Purchase  Plan"),  which was approved by the stockholders on May 10,
1996.  A total of 300,000  shares of common  stock  (subject to  adjustment  for
capital  changes) in the aggregate may be granted under the stock purchase plan.
The Stock  Purchase Plan is  administered  by the  compensation  committee.  The
purchase  price per share of stock shall be 85% of per share market value of the
common  stock on the  purchase  date.  Employees  may  require  the  Company  to
repurchase the stock prior to fulfillment upon termination or the request of the
employee.  Refunds  represent the return of payroll  deductions to employees for
persons exiting the Plan. On May 31, 1996, approximately 560 union and non-union
employees participated in the 1996 employee stock purchase plan. Under the plan,
137,000  shares were issued to  employees  at $11.26 (85% of market price at May
10, 1996),  for $160,000 cash and the balance in notes receivable of $1,383,000,
which are payable  over two years via payroll  deduction.  During  1997,  25,900
shares were returned through the plan as the result of refunds to the employees.
During 1997, 6,200 shares were issued at $11.47 for notes receivable of $71,145.
During 1998,  65,100  shares of stock were  returned to the Plan due to employee
refunds.

On May 10, 1996, the stockholders  approved a Nonqualified Stock Option Plan for
Non-Employee  Directors  (the  "Nonqualified  Stock  Option  Plan")  and a Stock
Compensation  Plan for  Directors  serving on the  Compensation  Committee  (the
"Stock  Compensation  Plan").  The total number of shares available for purchase
under each plan is 50,000.  Pursuant  to the  Nonqualified  Stock  Option  Plan,
directors were granted  options to purchase  10,000 shares at exercise prices of
$13.25 and $13.50,  which  represented fair market value in 1996. As of December
31, 1997,  3,980 shares were issued pursuant to the Stock  Compensation  Plan at
$12.08 per share.  In May and August of 1998, an  additional  2,000 options were
issued at the market price on the  respective  dates of  issuance,  of $9.00 and
$7.50 per share. As a result of the departure of board members, 6,000 non-vested
options were extinguished.

The activity of the two stock option plans (1994 Incentive Stock Option Plan and
1996 Non-Employee Director Stock Compensation Plan) is as follows:

<TABLE>
<CAPTION>


                                                                            Per Share
                                                                            Exercise Price
1994 Incentive Stock Option Plan
<S>                                                         <C>             <C>
Outstanding at January 1, 1996                               360,000        $2.08 to $2.50
 Grants                                                      410,000        $13.63
 Exercised
 Canceled
                                                        -------------
Outstanding at December 31, 1996                             770,000        $2.08 to $13.63
 Grants
 Exercised
 Canceled
                                                        -------------
Outstanding at December 31, 1997                             770,000        $2.08 to $13.63
 Grants                                                       95,000        $7.00
 Exercised                                                  (284,000)       $7.00
 Purchased from option holder by Company                     (54,000)       $7.00
 Canceled                                                     (7,000)       $7.00
                                                        -------------
Outstanding at December 31, 1998                             520,000

1996 Non-Employee Director Stock Compensation Plan
Outstanding at January 1, 1996
 Grants                                                        4,000        $13.25
 Exercised
 Canceled
                                                        -------------
Outstanding at December 31, 1996                               4,000        $13.25
 Grants                                                        6,000        $13.50
 Exercised
 Canceled
                                                        -------------
Outstanding at December 31, 1997                              10,000        $13.25 to $13.50
 Automatic grant to directors                                  8,000        $7.50 to $9.00
 Exercised
 Canceled                                                    (10,000)       $9.00 to $13.50
                                                        -------------
Outstanding at December 31, 1998                               8,000        $9.00 to $13.50


</TABLE>

No compensation  cost has been recognized for unexercised  options  remaining in
the stock option plan. Had compensation cost for the Company's stock option plan
been  determined  based on the  fair  value  at the  date of  grant  for  awards
consistent with the provisions of SFAS No. 123, the Company's net income and pro
forma net  income  common  share and  common  share  equivalent  would have been
decreased to the pro forma amounts indicated below at December 31 (in thousands,
except per share amounts).

<TABLE>

                                                                                 1998              1997               1996

<S>                                                                            <C>                <C>                <C>
Net income (loss) - as reported                                        $       (4,057)     $      2,088      $       8,440
Net income (loss) - pro forma                                          $       (4,548)     $      2,058      $       8,380
Basic income (loss) per common share - as reported                     $           (1)     $          0      $           2
Basic earnings (loss) per common share - pro forma                     $           (1)     $          0      $           2
Diluted earnings (loss) per common and common
  share equivalent - as reported                                       $           (1)     $          0      $           2
Diluted earnings (loss) per common and common share
  equivalent - pro forma                                               $           (1)     $          0      $           2
</TABLE>

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option   pricing  model  with  the  following   weighted-average
assumptions used for grants in 1998, 1997 and 1996, respectively: dividend yield
of 0% for all years; expected volatility of 62%, 72% and 77%; risk-free interest
rates of 5.46%, 6.50% and 5.70%; and expected lives of five years for all years.
The  weighted  fair value of options  granted in 1998,  1997 and 1996 was $7.21,
$6.81 and $3.08, respectively.

Due to the fact that the  Company's  stock option  programs vest over many years
and  additional  awards are made each year,  the above pro forma numbers are not
indicative of the financial impact had the disclosure provisions of SFAS No. 123
been applicable to all years of previous option grants. The above numbers do not
include the effect of options granted prior to 1995.

16.      EARNINGS PER SHARE

For the year  ended  December  31,  1997,  the  Company  adopted  SFAS No.  128,
"Earnings  per Share." This  statement  established  standards for computing and
presenting  earnings per share  ("EPS") and required  restatement  of all prior-
period EPS data  presented.  Basic EPS is computed by dividing net income by the
weighted-average number of common shares outstanding for the period. Diluted EPS
is computed by dividing net income by the  weighted  number of common and common
equivalent shares outstanding for the period.  Options to purchase common stock,
whose  exercise  price was greater than the average market price for the period,
have been  excluded  from the  computation  of diluted  EPS.  Such  antidilutive
options  outstanding  for the 12 months ended December 31, 1998,  1997 and 1996,
were 531,000, 410,000 and 414,000, respectively.

<PAGE>

A  reconciliation  of income and shares for basic and  diluted EPS is as follows
(amounts in thousands, except per share amounts):


<TABLE>
<CAPTION>



                                                                               Year Ended 1998
                                                                -----------------------------------------------
                                                                        Income      Shares          Per-Share
                                                                   (Numerator)    (Denominator)      Amount

Basic EPS -
<S>                                                               <C>                    <C>        <C>
  Loss available to common stockholders                           $  (4,057)             5,037      $    (0.81)
                                                                                                   ============
Effect of dilutive securities -
  Options                                                         ----------            -------

Diluted EPS -
  Loss available to common stockholders plus
    assumed conversions                                           $  (4,057)             5,037      $    (0.81)
                                                                =============     =============     ===========

                                                                               Year Ended 1997
                                                                -----------------------------------------------
                                                                        Income      Shares          Per-Share
                                                                   (Numerator)    (Denominator)      Amount

Basic EPS -
  Income available to common stockholders                         $   2,088              4,913      $     0.42
                                                                                                    ===========
Effect of dilutive securities -
  Options                                                                                  301
                                                                  ----------            -------
Diluted EPS -
  Income available to common stockholders plus
    assumed conversions                                           $   2,088              5,214      $     0.40
                                                                ==============    =============     ===========


                                                                               Year Ended 1996
                                                                -----------------------------------------------
                                                                        Income      Shares          Per-Share
                                                                   (Numerator)    (Denominator)      Amount

Basic EPS -
  Income available to common stockholders                         $   8,440              4,880      $     1.73
                                                                                                    ===========
Effect of dilutive securities -
  Options                                                                                  289
                                                                  ----------           --------
Diluted EPS -
  Income available to common stockholders plus
    assumed conversions                                           $   8,440              5,169      $     1.63
                                                                ==============    =============     ===========
</TABLE>

On November 16, 1995, the  stockholders of the Company  approved an amendment to
the Company's  Amended and Restated  Articles of  Incorporation  to increase the
authorized   shares  of  common  stock  from   5,000,000  to  20,000,000  and  a
four-for-one stock split. Accordingly, per share information,  average number of
shares  outstanding,  and  number  of  shares  outstanding  in the  accompanying
consolidated  financial  statements have been adjusted for the stock split as of
the earliest date presented (January 1, 1996).

17.      SEGMENT DISCLOSURES

The Company provides Las Vegas-style  gaming,  amenities and entertainment.  The
Company's four reportable  segments are based upon the type of service provided:
Casino, rooms, food and beverage, and entertainment. The casino segment provides
customers  with  gaming  activities  through  traditional  table  games and slot
machines.  The rooms  segment  provides  hotel  services.  The food and beverage
segment  provides  restaurant  and drink  services  through a variety  of themed
restaurants  and bars.  The  entertainment  segment  provides  customers  with a
variety of live Las Vegas-style shows, reviews, and concerts.  All other segment
activity  consists of rent income,  retail store  income,  telephone,  and other
activity.  The Company  evaluates  each segment's  performance  based on segment
operating profit. The accounting policies of the operating segments are the same
as those described in the summary of significant accounting policies.


<TABLE>
<CAPTION>
                                                                   Food and
                1998                    Casino         Rooms       Beverage     Entertainment         All Other     Total

<S>                                         <C>           <C>           <C>           <C>                <C>       <C>
Revenues from external customers     $      77,676 $      36,626 $      17,635  $     19,764     $       8,254  $  159,955
Intersegment revenues                                      2,981         6,305         1,779             2,901      13,966
Segment profit                              32,382        15,767            96         2,903             4,946      56,094


                1997

Revenues from external customers            71,624        39,153        15,916        19,855             7,244     153,792
Intersegment revenues                                      2,659         5,687         1,040             3,312      12,698
Segment profit                              31,004        17,918          (202)        2,620             4,233      55,573


                1996

Revenues from external customers            80,384        40,078        16,262        20,714             6,970     164,408
Intersegment revenues                                      2,168         6,379         1,064             3,017      12,628
Segment profit                              34,685        17,734            39         2,758             4,054      59,270
</TABLE>

Reconciliation  of segment  profit to  consolidated  net income before taxes and
extraordinary items:
<TABLE>
<CAPTION>


                                                                                   1998             1997            1996

<S>                                                                              <C>              <C>             <C>
                                                         Segment profit       $  56,094        $  55,573       $  59,270
                                               Other operating expenses          39,715           36,695          35,989
                                                          Other expense          17,963           15,481          10,413
                                                                              ----------       ----------      ----------


                           Net income (loss) before provision (benefit)
                                      for taxes and extraordinary items       $  (1,584)       $   3,397       $  12,868
                                                                              ==========       ==========      ==========
</TABLE>

The  Company  does not  market to  residents  of Las  Vegas.  Significantly  all
revenues are derived  from patrons  visiting the Company from other parts of the
United States and other countries. Revenues from a foreign country or region may
exceed  10% of all  reported  segment  revenues;  however,  the  Company  cannot
identify such information based upon the nature of gaming operations.

18.  SUBSEQUENT EVENTS (Unaudited)

On June 3, 1999, the registrant's  wholly-owned subsidiary,  Riviera Black Hawk,
Inc.,  closed a private  placement of $45 million 13% First  Mortgage  Notes due
2005. The proceeds will be used for Riviera Black Hawk's casino project.


The Company entered into a Settlement  Agreement,  dated as of July 1, 1999 (the
"Settlement Agreement"),  by and among Allen E. Paulson ("Paulson"),  R&E Gaming
Corp.  ("Gaming"),  Riviera Acquisition Sub, Inc. ("RAS"),  Elsinore Acquisition
Sub,  Inc.  ("EAS"),  and Carlo  Corporation  ("Carlo,"  and  collectively  with
Paulson,  Gaming,  EAS and  RAS,  the  "Paulson  Plaintiffs"),  and the  Company
("RHC").

On Friday,  October 8, 1999, the Federal District Court for the Central District
of  California  approved  a bar  order as part of a  settlement  of the  lawsuit
brought by Allen  Paulson  against  the  Company.  Pursuant  to the terms of the
Settlement Agreement,  the Company purchased 463,655 shares from Mr. Paulson for
$7.50 per share.  By a letter dated  October 13, 1999,  the  Company's  Chairman
advised  holders of Contingent  Value Rights  ("CVR's")  that they would receive
from an  escrow  established  by Mr.  Paulson  in  connection  with the  aborted
Paulson-Riviera  merger  $2.46 for each CVR. On Friday,  October 8, 1999,  there
were 1,770,000 CVR's outstanding.

On October  18,  1999,  the  Company  purchased  81,000 of its  shares  from Sun
America,  Inc.  at $7.50 per  share.  This  transaction  reduced  Sun  America's
ownership  of the  Company  below  15% of the  Company's  outstanding  stock  to
facilitate  the  licensing by the Colorado  Gaming  Commission  of the Company's
subsidiary,  Riviera  Black  Hawk,  Inc.  After  giving  effect  to  such  share
repurchases, the Company had 4,523,021 shares of common stock outstanding.

In a letter dated September 1, 1999, Elsinore  Corporation and Four Queens, Inc.
(the "Companies")  terminated a Management  Agreement,  dated as of February 28,
1996, by and among the Companies and Riviera  Gaming  Management  Corp.-Elsinore
("Manager"),  effective  120 days  from the date of such  letter  (December  30,
1999).  In a letter,  dated September 3, 1999,  William L. Westerman,  acting on
behalf of the Manager (1) accepted the termination but pointed out that it would
have no effect on the rights of the  Manager and its  affiliates  to continue to
receive the  management  fee and to receive  other monies from the Companies for
services  performed or goods  supplied prior to December 30, 1999 by the Manager
and its  affiliates,  (2) noted that Mr. Dual Cooper had been appointed  General
Manager of the Companies and requested  that the Companies  confirm  (which they
did by  executing  such  September  3rd  letter)  that the  Manager is no longer
responsible  for  management of the Four Queens and that its role until December
30, 1999 will be limited to (i) providing such  consulting  services on the same
basis as at present and (iii) using its best  efforts to separate  the  computer
systems in an orderly fashion but that the Manager will assume no responsibility
for the  effectiveness  thereof and (3)  indicated  that the  Companies  were to
exculpate and indemnify the Manager from any responsibility for operation of the
Four Queens from and after  September 3, 1999 (which they did by executing  such
September 3rd letter).

The Financial  Accounting Standards Board recently issued FAS No. 137, 'Deferral
of FAS 133 Accounting for Derivatives'  which delays the  implementation of that
pronouncement to September 15, 2000. The Company has not determined what effect,
if any, that FAS 133 may have on its results of operations.


Item 9.        Changes in and Disagreements with Accountants on Accounting and
               Financial Disclosure

        None.

<PAGE>



                                                       PART III

Item 10.       Directors and Executive Officers of the Registrant.

                                                       Directors

        The following  table sets forth certain  information as of April 5, 1999
regarding the directors of the Company:



Name                        Age    Position


William L. Westerman        67     Chairman of the Board and Chief Executive
                                   Officer of the Company and Riviera Operating
                                   Corporation ("ROC"), a wholly-owned
                                   subsidiary of the Company,
                                   and President of the Company
Robert R. Barengo           57     Director of the Company and ROC
Richard. L. Barovick        69     Director of the Company and ROC
James N. Land, Jr.          69     Director of the Company and ROC


        William L. Westerman has been Chairman of the Board and Chief  Executive
Officer of the Company since February  1993.  Mr.  Westerman was a consultant to
Riviera, Inc. from July 1, 1991 until he was appointed Chairman of the Board and
Chief Executive Officer of Riviera, Inc. (the Company's  predecessor) on January
1, 1992.  From 1973 to June 30, 1991,  Mr.  Westerman  was  President  and Chief
Executive  Officer of  Cellu-Craft  Inc., a manufacturer  of flexible  packaging
primarily  for  food  products,  and  then  later  had  several  positions  with
Alusuisse,  a  multi-national  aluminum  and  chemical  company,  following  its
acquisition of Cellu-Craft in 1989.

        Robert R. Barengo has been a Director of the Company and ROC since
February 1993.  Mr. Barengo was a consultant to Riviera,  Inc. from January 1993
until June 30,  1993.  Since 1972,  Mr.  Barengo has been engaged in the private
practice of law in Reno, Nevada.  From 1978 to 1993, Mr. Barengo was Speaker Pro
Tempore and Speaker of the Nevada  Assembly.  From October 1992 to May 1996, Mr.
Barengo was a director and 10% shareholder of Leroy's Horse & Sports Place, Inc.
("Leroy's").  In May 1996,  Leroy's became a wholly owned subsidiary of American
Wagering,  Inc. ("AWI"), a publicly held corporation listed on NASDAQ. Since May
1996,  Mr.  Barengo  has been a  director  of AWI and  currently  owns 7% of the
outstanding stock of AWI. Since 1993, Mr. Barengo has been the President and the
sole stockholder of Silver State  Disseminators  Company,  a company licensed by
Nevada gaming  authorities  to  disseminate  racing  information in the State of
Nevada and Chairman of the Nevada Dairy Commission.

        Richard L.  Barovick is  currently a private  investor and a founder and
member of the  board of the Bank of  Westport,  in  Westport,  Connecticut.  Mr.
Barovick  was elected a director  of the Company and ROC on August 4, 1998.  Mr.
Barovick was Chief Executive  Officer of Grundy Worldwide from 1994 until it was
acquired  by Pearson  plc in May,  1995.  From 1991 to 1994,  Mr.  Barovick  was
Managing  Director and a member of the Board of Grundy.  Mr. Barovick  graduated
from the Harvard Law School and shortly  thereafter  joined the legal department
of  MCA/Universal,  where he was involved in the  financial  and  administrative
aspects  of  television  packaging.  Thereafter,  Mr.  Barovick  was in  private
practice and served,  at various times,  as General Counsel to the New York Jets
and  Association  of  Tennis   Professionals,   special  counsel  to  IBM,  Time
Incorporated,  The William Morris Agency,  Reader's Digest  Entertainment,  MCA,
Inc., and HBO, among others.

        James N. Land, Jr. is currently a corporate consultant.  Mr. Land was
elected a director of the Company  and ROC on January  21,  1999.  Mr. Land is a
director of Raytheon Company and E. W. Blanch  Holdings,  Inc. During the period
1956 to 1976,  Mr. Land was employed by The First Boston  Corporation in various
capacities,  including  Director,  Senior Vice  President,  Co-Head of Corporate
Finance, and Head of International Operations. From 1971 through 1989, he served
as a director of various  companies,  including Kaiser  Industries  Corporation,
Marathon Oil Company, Castle & Cooke, Inc., Manville Corporation,  NWA, Inc. and
Northwest Airlines, Inc. Since 1976, Mr. Land has been a financial consultant to
such companies as Castle & Cooke, Inc., Kaiser Cement Corporation,  Kaiser Steel
Corporation, Scripps League Newspapers, Inc., Xerox Corporation, PPG Industries,
Inc., Mellon Bank,  McLeod Young & Weir,  Shilling & Co., Pollio Dairy Products,
Air Products and Chemicals, Inc. and Cellu-Craft, Inc.

<PAGE>

                                                  Executive Officers

        The following table sets forth certain  information as of March 31, 1999
regarding the executive officers of the Company and ROC:



Name                      Age       Position


William L. Westerman      67        Chairman of the Board and Chief Executive
                                    Officer of the Company and ROC, and
                                    President of the Company
Duane R. Krohn            53        Treasurer of the Company, and Executive Vice
                                    President of Finance and Treasurer of ROC
John A. Wishon, Esq.      54        Vice President and General Counsel of ROC,
                                    Secretary of the Company and ROC
Ronald P. Johnson         50        Executive Vice President of Gaming
                                    Operations of ROC
Robert A. Vannucci        51        Executive Vice President of Marketing and
                                    Entertainment of ROC
Jerome P. Grippe          56        Senior Vice President of Operations of ROC
Robert E. Nickels, Sr.    69        Senior Vice President of Administration
                                    of ROC
Michael L. Falba          56        Vice President of Casino Operations of ROC


        For a description of the business experience of William L. Westerman,
        see "Directors."

        Duane R. Krohn, CPA, assumed the position of Treasurer of the Company
and ROC on June 30, 1993 and was  elected  Vice  President  of Finance of ROC on
April 26, 1994,  and Executive Vice President of Finance of ROC on July 1, 1998.
Mr. Krohn was initially employed by Riviera,  Inc. in April 1990, as Director of
Corporate Finance and served as Vice  President-Finance  from March 1992 to June
30, 1993. Mr. Krohn served as Chief Financial  Officer of Imperial Palace,  Inc.
(a casino/hotel  operator in Las Vegas) from February 1987 to March 1990.  Prior
to 1987, Mr. Krohn was Chief Financial  Officer of the Mint and the Dunes in Las
Vegas, Nevada, and Bally's Park Place in Atlantic City, New Jersey.

        John A. Wishon, Esq. was elected Secretary of the Company and ROC, and
General  Counsel of ROC in September 1994, and was elected Vice President of ROC
in  November  1996.  Mr.  Wishon was  initially  employed  by ROC as a Marketing
Analyst in February  1994.  From January 1992 to February 1994, Mr. Wishon was a
legal and  management  consultant  to Gold  River  Gambling  Hall & Resort,  the
Bicycle  Club  Casino,  and Tierra del Sol Casino  Resort.  From October 1990 to
January 1992, Mr. Wishon served as Vice President of Hotel  Operations and later
as Vice President of Administration  and Legal Affairs at the Sands Hotel Casino
in Las Vegas.  Prior to December 1988,  Mr. Wishon served as General  Manager of
the Airtel Plaza and Westwood Plaza Hotels in Los Angeles, California. From 1976
until 1988,  Mr.  Wishon was Senior  Vice  President  of the Hotel del  Coronado
Corporation and held the positions of Resident Manager and General Counsel.  Mr.
Wishon is a member of the Nevada and  California  Bars,  has  practiced law with
emphasis  on  real  estate  and  contract  law  and  has  been  employed  in law
enforcement.

        Ronald P. Johnson became Vice President of Gaming Operations of ROC in
September 1994, and Executive Vice President of Gaming Operations of ROC on July
1, 1998. Mr.  Johnson  became  Director of Slots of ROC on June 30, 1993 and was
elected Vice  President of Slot  Operations and Marketing on April 26, 1994. Mr.
Johnson was Vice President-Slot  Operations and Marketing of Riviera,  Inc. from
April 1991 until June 30, 1993. Mr. Johnson was Vice  President-Slot  Operations
for Sands Hotel and Casino Inc.  from  September  1989 until he joined  Riviera,
Inc. From  September 1986 until  September  1989, Mr. Johnson was Assistant Slot
Manager at Bally's Grand Las Vegas.

        Robert A. Vannucci was elected Vice President of Marketing and
Entertainment  of ROC on  April  26,  1994,  and  Executive  Vice  President  of
Marketing and  Entertainment  on July 1, 1998. Mr. Vannucci had been Director of
Marketing of ROC since July 19, 1993. Mr.  Vannucci was Senior Vice President of
Marketing and  Operations at the Sands Casino Hotel in Las Vegas from April 1991
to February  1993.  Mr.  Vannucci  was Vice  President  and  General  Manager of
Fitzgerald's Las Vegas (a casino/hotel operator) from 1988 to January 1991.

<PAGE>
        Jerome P. Grippe was elected Vice President of Operations of ROC on
April 26, 1994,  and Senior Vice President of Operations of ROC on July 1, 1998.
Mr. Grippe became Director of Operations of ROC on June 30, 1993. Mr. Grippe was
Assistant to the Chairman of the Board of Riviera, Inc. from July 1990 until May
1993.  Mr.  Grippe  had  served in the  United  States  Army from 1964 until his
retirement as a Colonel in July 1990.

        Robert E. Nickels, Sr. was elected Vice President of Administration of
ROC on June 30, 1993, and Senior Vice President of Administration of ROC on July
1, 1998.  From March 1992 until June 30, 1993, Mr. Nickels was Vice President of
Administration of Riviera, Inc. From November 1991 to February 1992, Mr. Nickels
was a  self-employed  business  consultant.  From March 1979 to April 1986,  Mr.
Nickels was Director of Internal Audit for MGM-Reno. From April 1986 to November
1991, Mr. Nickels served as Vice President of Administration at Bally's Reno and
Las Vegas.

        Michael L. Falba was elected Vice President of Casino Operations of ROC
on April 26, 1994. Mr. Falba became Director of Casino Operations of ROC on June
30, 1993. Mr. Falba was employed by Riviera, Inc. from March 1989 until November
1991 as Assistant  Casino  Manager,  and from  November 1991 to June 30, 1993 as
Vice President of Casino Operations.

        Officers of each of the Company and ROC serve at the discretion of their
respective   Boards  of  Directors   and  are  also  subject  to  the  licensing
requirements of the Nevada Gaming Commission.

          Section 16(a) Beneficial Ownership Reporting Compliance

        Section 16(a) of the Exchange Act requires the  Company's  directors and
executive  officers  and any  persons  who own  more  than  ten  percent  of the
Company's  Common  Stock to file with the  Securities  and  Exchange  Commission
various reports as to ownership of such Common Stock.  Such persons are required
by  Securities  and Exchange  Commission  regulation to furnish the Company with
copies of all Section 16(a) forms they file. To the Company's  knowledge,  based
solely on its review of the copies of such reports  furnished to the Company and
written representations to the Company, during the last fiscal year (i) the Form
5 filed by Mr.  Barengo  for the fiscal year  ending  December  31, 1998 was not
timely  filed,  (ii) a Form 4 filed by Richard  Barovick to report  purchases of
Common  Stock in August  1998 was 18 days late;  (iii) a Form 4 filed by Michael
Falba to report dispositions of Common Stock in March 1998 was 13 days late; and
(iv) other than these specific  exceptions,  the aforesaid  Section 16(a) filing
requirements  of these and all other officers and directors were met on a timely
basis during 1998.

<PAGE>



Item 11.       Executive Compensation

                                          Compensation of Executive Officers

        The following table sets forth a summary of the compensation paid by the
Company  in the Years  ended  December  31,  1996,  1997 and 1998,  to the Chief
Executive  Officer of the Company and ROC, and to the Company's four most highly
compensated executive officers who received over $100,000 in compensation during
1997 from the Company (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>


                                                 Summary Compensation Table

Name and                                                                             Other Annual            All Other
Principal Position                    Year        Salary            Bonus            Compensation(1)      Compensation(2)
<S>                                   <C>            <C>              <C>                  <C>                       <C>
William L. Westerman                  1998          $600,000(5)        $900,000(5)        $413,300 (4)(5)           $2,402
Chairman of the Board and             1997           600,000              -----            782,175(4)                1,809
Chief Executive Officer of the        1996           400,000          1,213,969(3)         441,375(4)                1,566
Company and ROC

Ronald P. Johnson                     1998           188,757             84,000              7,300                     818
Executive Vice President of           1997           180,996             82,000              7,175                     763
Gaming Operations of ROC              1996           170,961            100,000              6,875                     791

Robert Vannucci                       1998           183,710             84,000              7,300                     818
Executive Vice President of           1997           167,055             82,000              7,175                     681
Marketing and Entertainment           1996           145,961            100,000              6,875                     536
of ROC

Duane R. Krohn                        1998           160,040             84,000              7,300                     563
Treasurer of the Company and          1997           123,351             82,000              7,175                     394
Executive Vice President of           1996           117,715            100,000              6,875                     408
Finance and Treasurer of ROC

Jerome P. Grippe                      1998           134,196             84,000              7,300                     469
Senior Vice President of              1997           122,580             82,000              7,175                     394
Operations of ROC                     1996           118,653            100,000              6,837                     408
</TABLE>

(1)     Includes amounts contributed by the Company under the Company's Profit
        Sharing and 401(k) Plans.  The Company contributed for the account of
        each executive, $2,500 in 1998 and $2,375in each of 1997 and 1996.

(2)     Includes premiums paid by the Company for excess life insurance.
(3)     Includes  $614,000 of Mr.  Westerman's  1996  Incentive  Bonus which was
        credited to his retirement account pursuant to his employment agreement.
(4)     Includes contributions to Mr. Westerman's retirement account of $406,000
        in 1998, $775,000 in 1997, and
        $425,000 in 1996.  Does not include interest earned on retirement
        account of $410,159 in 1998 and $343,914 in 1997. (See "Employment
        Agreements")
(5)     See  "Employment  Agreements" for a summary of certain of the provisions
        of Mr. Westerman's employment agreement.

<PAGE>



                                                    Option Grants

        The number of shares  available for purchase  under the  Company's  1993
Employee  Stock Option Plan,  as amended (the "Stock  Option Plan") is 1,000,000
(as adjusted pursuant to antidilution  provisions).  Options for an aggregate of
770,000  shares have been granted under the Stock Option Plan as of December 31,
1998.  During the Company's 1998 fiscal year,  95,000 options were granted under
the Stock Option Plan.

       Option Exercises, Year-End Options Values and Option Grants in 1998

        The  following  table  presents  at  December  31,  1998  the  value  of
unexercised in-the-money options held by the Named Executive Officers.
<TABLE>
<CAPTION>


                                                       Number of                                      Value of Unexercised,
                                                  Unexercised Options                                 In-The-Money Options
Name                                                 Vested       Not Vested                          Vested      Not Vested
----                                                 ------       ----------                          ------     -----------
<S>                                                 <C>               <C>                                  <C>               <C>
William L. Westerman                                240,000           80,000                              $0                $0
Ronald P. Johnson                                     7,750            9,250                               0                 0
Duane R. Krohn                                        7,750            9,250                               0                 0
Robert Vannucci                                       7,750            9,250                               0                 0
Jerome P. Grippe                                      7,000            7,000                               0                 0
</TABLE>

        The following table presents options granted during 1998.


<TABLE>
<CAPTION>




                                                Individual Grants
                                                                                      Potential Realizable Value at
                            ---------------------------------------------------------     Assumed Annual Rates of
                                            Percent of                                  Stock Price Appreciation for
                             Number of     Total Options   Exercise of                      Option Term
                             Underlying     Granted to    Exercise Price                  ------------------
                              Options      Employees in    Base Price     Expiration
Name                          Granted         1998         Per Share         Date          5%             10%
-----                       ------------   ------------   ------------   ------------    --------      --------
<S>                            <C>            <C>            <C>           <C>            <C>           <C>
Ronald P. Johnson              10,000         10.5%          7.000         6/11/08       $114,023      $181,562
Duane R. Krohn                 10,000         10.5%          7.000         6/11/08        114,023       181,562
Robert Vannucci                10,000         10.5%          7.000         6/11/08        114,023       181,562
Jerome P. Grippe                7,000          7.4%          7.000         6/11/08         79,816       127,093
</TABLE>

The following table presents  aggregated  option exercises during 1998 and their
values as of December 31, 1998.
<TABLE>
<CAPTION>

                                                                                               Value of Unexercised
                                                       Number of Securities Underlying        In-The-Money Options at
                                 Options Exercised     Unexercised Options at 12/31/98             12/31/98
                                  Shares      Value
Name                            Acquired    Realized(1)    Exercisable     Unexercisable     Exercisable   Unexercisable
----                            --------     --------      -----------     -------------     -----------   -------------
<S>                              <C>         <C>               <C>             <C>              <C>            <C>
William L. Westerman             180,000     $1,400,000        240,000         80,000          $0.00          $0.00
Ronald P. Johnson                 18,000        147,875          7,750          9,250           0.00           0.00
Duane R. Krohn                    18,000        140,000          7,750          9,250           0.00           0.00
Robert Vannucci                   14,168        116,461          7,750          9,250           0.00           0.00
Jerome P. Grippe                  14,168        116,461          7,750          9,250           0.00           0.00
</TABLE>

----------------------
(1)      Market  value of the  underlying  securities  at the  exercise  date or
         year-end, as the case may be, less the exercise price of "in-the-money"
         options.  Messrs.  Westerman,  Johnson  and  Krohn  paid cash for their
         option  shares,  while  Messrs.  Vannucci and Grippe  elected  cashless
         exercise and received 14,168 shares.

                                                 Employment Agreements

        William L.  Westerman  serves as  Chairman of the Board,  President  and
Chief Executive  Officer of the Company,  and as Chairman of the Board and Chief
Executive Officer of ROC.

        Under Mr. Westerman's existing employment agreement with the Company,
which was last amended on June 24, 1998, Mr.  Westerman shall be employed by the
Company for an indefinite period subject to termination by either the Company or
Mr.  Westerman on not less than 120 days prior written notice.  Mr.  Westerman's
base compensation is $600,000.

        Under the employment agreement, Mr. Westerman is entitled to participate
in the Company's  Senior  Management  Compensation  Plan or such other executive
bonus  plan  as  shall  be  established  by the  Company's  Board  of  Directors
(collectively the "Plan"). If at least 80% of targeted net income, as defined by
the Plan, is met, Mr.  Westerman  shall be entitled to receive a bonus under the
Plan  expressed as a percentage  of his  $600,000  base salary  depending on the
percentage of targeted net income realized by the Company in a particular  year,
with a maximum bonus of $900,000.  Mr. Westerman  received an incentive bonus of
$900,000 for 1998.

        The  employment  agreement  provides  that the Company fund a retirement
account for Mr. Westerman. Pursuant to the employment agreement, an aggregate of
$4,877,968  had been  credited  to the  retirement  account  from its  inception
through  January 1, 1999.  Under the  employment  agreement,  each year that Mr.
Westerman  continues to be employed,  an amount  equal to Mr.  Westerman's  base
salary for that year will be  credited  to the account on January 1 of that year
and in the event that Mr. Westerman is no longer employed by the Company (except
for termination for cause, in which case Mr.  Westerman would forfeit all rights
to monies in the retirement account),  Mr. Westerman will be entitled to receive
the amount in the retirement  account as of the date he ceases to be employed by
the Company in 20 quarterly installments.  Pursuant to the employment agreement,
the  retirement  account  was  credited  quarterly  with  interest  and shall be
credited with additional  amounts on the first day of each  succeeding  calendar
quarter equal to the product of (i) the Company's average borrowing cost for the
immediately  preceding  fiscal  year,  as  determined  by  the  Company's  chief
financial  officer and (ii) the average  outstanding  balance in the  retirement
account during the preceding  calendar  quarter.  Total interest earned for 1998
and  1997  was  $410,159  and  $343,914,  respectively.  In  the  event  of  Mr.
Westerman's  death,  an amount equal to the  applicable  federal estate tax (now
60%) on the retirement  account will be pre-paid prior to the date or dates such
taxes are due.

        The Company retains beneficial ownership of all monies in the retirement
account,  which monies are earmarked to pay Mr. Westerman's retirement benefits.
However,  upon (i) the vote of a majority  of the  outstanding  shares of Common
Stock approving a "Change of Control" (as defined below), (ii) the occurrence of
a Change of  Control  without  Mr.  Westerman's  consent,  (iii) a breach by the
Company of a material term of the employment agreement or (iv) the expiration or
earlier termination of the term of the employment agreement for any reason other
than cause,  Mr.  Westerman may require the Company to establish a "Rabbi Trust"
for the benefit of Mr.  Westerman  and to fund such trust with an amount of cash
equal to the amount  then  credited to the  retirement  account,  including  any
amount  to be  credited  to the  retirement  account  upon a Change  of  Control
discussed below.

        On February 5, 1998, the  shareholders of the Company by a majority vote
approved the Agreement and the Plan of Merger (the "Riviera  Merger  Agreement")
with R&E Gaming Corp. and its wholly-owned  subsidiary Riviera  Acquisition Sub,
Inc. (See,"Security Ownership of Certain Beneficial Owners and Management" for a
description  of the Riviera  Merger  Agreement  and events that have taken place
since the February 5, 1998  shareholder  approval.)  Such  shareholder  approval
constituted a Change of Control. On March 5, 1998,  subsequent to this Change of
Control,  Mr. Westerman  exercised his right to require the Company to establish
and fund a Rabbi Trust for his benefit. On March 20, 1998, Mr. Westerman and the
Company entered into an agreement whereby Mr. Westerman waived his right to have
the Company  fund the Rabbi Trust in exchange  for the Company  agreeing to fund
such Rabbi Trust within five business days after notice from Mr. Westerman.

        Mr.  Westerman's employment agreement provides (a) that the sum of  Mr.
Westerman's base salary, bonus, and credits to his Retirement Account in any one
year shall not exceed  that which  would have been  payable  under his  previous
employment agreement with the Company, and (b) that Mr. Westerman shall instruct
the  Company  of any  reductions  in base  salary,  bonus,  and  credits  to his
Retirement  Account  necessary to comply with this  limitation.  The Company has
determined that for the year 1998, a reduction of $194,000 would be necessary to
comply with this provision. Prior to December 31, 1998, Mr. Westerman instructed
the  Company  that this be applied to reduce  the amount to be  credited  to his
retirement account from $600,000 to $406,000.

        In addition to Mr. Westerman,  four executives have employment contracts
with  the  Company  for  fixed  terms  of  either  2 or 3  years.  Each of these
employment  contracts  contains a  Termination  Fee  Agreement  and a Stay Bonus
Agreement.  See "Termination Fee Agreements" and "Stay Bonus  Agreements." These
employment  agreements also provide for a "Normal Incentive Bonus" entitling the
executive to participate in the Company's Senior  Management  Compensation  Plan
(the  "Plan")  whereby the employee may share a portion of the Plan's pool which
provides  for a target of $25  million  EBITDA  for the years 1999 and 2000 with
amounts being credited to the Plan's pool up to a maximum of $1.2 million. Three
of these employment  agreements also provide for a "Special  Incentive Bonus" in
an amount equal to one-third of any excess of $1.2 million.

                                           Employee Stock Purchase Plan

        On March 5,  1996,  the Board of  Directors  adopted an  employee  stock
purchase  plan  (the  "Stock  Purchase   Plan"),   which  was  approved  by  the
stockholders on May 10, 1996. A total of 300,000 shares of Common Stock (subject
to  adjustment  for capital  changes) in the  aggregate may be granted under the
Stock Purchase Plan. The Stock Purchase Plan is administered by the Compensation
Committee.  The  purchase  price  per  share of stock  shall be 85% of per share
market  value  of the  Common  Stock  on the  purchase  date.  On May 31,  1996,
approximately  560  union  and  non-union  employees  participated  in the Stock
Purchase  Plan.  Under the Stock  Purchase  Plan,  137,000 shares were issued to
employees at $11.26 (85% of market price at May 10, 1996), for $160,000 cash and
the balance in notes  receivable of $1,383,000 which were payable over two years
via payroll  deduction.  During 1997,  6,200 shares were  reissued at $11.47 for
notes receivable of $71,145.  During 1996, 1997 and 1998  respectively,  17,600,
25,900 and 65,100 shares were returned to the Stock  Purchase  Plan, and 265,400
shares remained eligible to be issued under the plan at December 31, 1998.

        The Company has registered the issuance of all the shares issuable under
the Stock Purchase Plan on Form S-8 under the Securities Act of 1933, as amended
(the "Securities Act").

                                              Key Employee Retention Plan

        As a result of the  scheduled  openings  of several  new Las Vegas Strip
properties  in 1998,  1999 and 2000,  an  estimated  38,000 jobs must be filled,
including 5,000 supervisory positions.  Because of the Riviera's performance and
reputation,  its employees are prime candidates to fill these positions.  In the
third quarter of 1998,  management  instituted an employee  retention plan which
covers  approximately 85 executive,  supervisory and technical support positions
and includes a combination of employment contracts,  stay put agreements,  bonus
arrangements and salary adjustments.

                                              Termination Fee Agreements

        Approximately 85 executive officers and significant employees (excluding
Mr. Westerman) of ROC have termination fee agreements  effective through January
2000,  pursuant to which each of such  employees will be entitled to receive (1)
either six  months'  or one  year's  base  salary if their  employment  with the
Company  is  terminated,  without  cause,  within 12 or 24 months of a change of
control of the Company or ROC;  and (2) group  health  insurance  for periods of
either one or two years.  The base  salary  payments  are  payable in  bi-weekly
installments subject to the employee's duty to mitigate by using his or her best
efforts to find  employment.  The  estimated  total amount that would be payable
under all such  agreements  is  approximately  $5 million in  salaries  and $1.5
million in benefits as of December 31, 1998.

                                          Stay Bonus Agreements

        Approximately 85 executive officers and significant employees (excluding
Mr.  Westerman)  or ROC are  party to  agreements  pursuant  to which  each such
employee is entitled to receive a "stay bonus" (varying amounts) if the employee
is  discharged  without  cause (as  defined  in the stay bonus  agreements),  or
continues to be employed by the

Company  on each of January 1,  2000,  January  1, 2001 and June 30,  2001.  The
estimated  total  amount  that would be  payable  under all such  agreements  is
approximately $2.3 million.

                                               Compensation of Directors

        Each of  Messrs.  Barengo,  Barovick  and Land is paid an annual  fee of
$50,000 for services as a director of the Company and ROC. Each director is also
reimbursed for expenses  incurred in connection  with  attendance at meetings of
the  Board of  Directors.  On March 5,  1996 the  Board of  Directors  adopted a
Nonqualified  Stock  Option Plan for  Non-Employee  Directors  (the  "Directors'
Option Plan"), which was approved by the stockholders on May 10, 1996. Under the
Directors' Option Plan, each individual  elected,  re-elected or continuing as a
non-employee  director will automatically  receive a non-qualified  stock option
for 2,000 shares of Common  Stock,  with an option  exercise  price equal to the
fair market value of the Common Stock on the date of grant.  50,000  shares have
been  reserved  for  issuance  under  the  Directors'  Option  Plan.  Under  the
Directors'  Option Plans,  options to purchase 2,000 shares at an exercise price
of $13.25 were granted to Mr. Barengo on May 10, 1996, options to purchase 2,000
shares at an  exercise  price of $13.50 were  granted to Mr.  Barengo on May 12,
1997,  and options to purchase  2,000 shares at an exercise  price of $9.00 were
granted to Mr. Barengo on May 11, 1998. Upon becoming  Directors of the Company,
under the Directors'  Option Plan Mr.  Barovick was granted  options to purchase
2,000 shares at an exercise  price of $7.50 on August 4, 1998,  and Mr. Land was
granted  options  to  purchase  2,000  shares at an  exercise  price of $5.50 on
January 21,1999.  Options to purchase 2,000 shares at an exercise price of $9.00
were granted to Phillip P. Hannifin on May 11, 1998.  Options to purchase  2,000
shares at an exercise price of $9.00 were granted to William Friedman on May 11,
1998. Messrs. Hannifin and Friedman resigned from the Board of Directors on June
24, 1998 and July 27, 1998,  respectively.  Directors  who are also  officers or
employees of the Company or ROC do not receive any additional  compensation  for
services as a director.  Currently, Mr. Westerman is the only such director. The
Board of Directors  has granted the members of the  Compensation  Committee  the
right to elect to receive  all or part of their  annual  fees in the form of the
Company's Common Stock in a number of shares having a fair market value equal to
the  cash  compensation  subject  to such  election  pursuant  to the  Company's
Compensation  Plan for Directors serving on the Compensation  Committee.  Of the
50,000 shares reserved for issuance under this plan, 3,103 shares were issued to
Mr.  Barengo  for a portion of his  director's  fees in 1996 and 877 shares were
issued to Mr. Barengo for a portion of his director's fees in 1997.

Item 12.       Principal Shareholders

               Security Ownership of Certain Beneficial Owners and Management

        The Common Stock is traded on the American Stock Exchange. The following
table sets forth certain information  regarding the beneficial  ownership of the
Common  Stock as of April 7, 1999,  by (i) each person who, to the  knowledge of
the Company,  beneficially owns more than 5% of the outstanding  Common Stock of
the Company (based on reports filed with the Securities and Exchange  Commission
under the Securities Exchange Act of 1934, or upon information  furnished to the
Company),  (ii) the directors and certain  officers of the Company and (iii) all
directors  and officers of the Company and ROC as a group.  The  percentages  of
shares of Common Stock held or beneficially owned by any Stockholder or group of
Stockholders  are  based  upon the  total  number  of  shares  of  Common  Stock
outstanding as of April 7, 1999.  Except as indicated,  each person listed below
has sole  voting  and  investment  power  with  respect  to the shares set forth
opposite such person's name.
<TABLE>
<CAPTION>

                                                                                Shares Beneficially Owned
Name                                                                                Number          Percentage**
----                                                                                ------          ----------
<S>                                                                              <C>                   <C>
William L. Westerman(1)(2)                                                         504,200               9.9%
Robert R. Barengo(1)(2)                                                              5,180                *
Richard L. Barovick(1)(2)                                                           10,000                *
James N. Land, Jr.                                                                   1,500                *
Ronald P. Johnson(1)(2)                                                             39,250                *
Duane R. Krohn(1)(2)                                                                36,050                *
Robert Vannucci(1)(2)                                                               24,418                *
Jerome P. Grippe(1)(2)                                                              22,918                *
Keyport Life Insurance Co.(3)                                                      857,160              16.9
SunAmerica Life Insurance Company(4)                                               761,920              15.0
Morgens Entities:(5)
  Betje Partners                                                                    29,360               0.6
  Morgens Waterfall Income Partners                                                 43,920               0.9
  MWV Employee Retirement Plan Group Trust                                           7,760               0.2
  Phoenix Partners, L.P.                                                            79,440               1.6
  Restart Partners, L.P.                                                           282,000               5.8
  Restart Partners II, L.P.                                                        440,600               8.7
  Restart Partners III, L.P.                                                       298,600               5.9
  The Common Fund                                                                   90,880               1.8
                                                                               -----------              ----
      Total Morgens Entities                                                     1,264,800              25.0
James D. Bennett(6)                                                                497,065               9.8
Allen E. Paulson(7)                                                                463,655               9.1
All executive officers and directors as a group                                    697,413              12.9
(11 persons).(1)(2)
</TABLE>

--------------------------------
*     Less than 1%.
** Based on 5,068,376 shares of Common Stock outstanding on April 7, 1999.

(1)  The address for each director and officer of the Company or ROC is c/o
     Riviera Holdings Corporation, 2901 Las Vegas Boulevard South, Las Vegas,
     Nevada 89109.
(2)  Includes  vested  portion  of options to  purchase  shares of Common  Stock
     granted  pursuant to the Stock Option Plan and  Non-qualified  Stock Option
     Plan for Non-Employee Directors.
(3)  The address for Keyport  Life  Insurance  Company  ("Keyport")  is 125 High
     Street,  Boston Massachusetts 02110. Stein Roe & Farnham  Incorporated,  an
     affiliate of Keyport, is Keyport's  investment  advisor,  and, as such, has
     the power and authority to direct the  disposition of the  securities,  and
     accordingly,  could be deemed to be a "beneficial" owner within the meaning
     of Rule 13d-3 of the  Securities  Exchange  Act of 1934,  as  amended  (the
     "Exchange  Act").  Stein Roe &  Farnham  Incorporated,  however,  disclaims
     actual beneficial ownership of such securities.
(4)  The address for SunAmerica  Life Insurance  Company  ("SunAmerica")  is One
     SunAmerica Center, Los Angeles, California 90067.
(5)  The address for Morgens,  Waterfall,  Vintiadis & Company, Inc. ("Morgens")
     is 10 East 50th Street, New York, New York 10022. Morgens or its principals
     are either investment  advisors to, or trustees or general partners of, the
     eight entities listed in the above table ("Morgens  Entities") that are the
     owners of the Common Stock of the Company.  Morgens or its principals  have
     the power and authority to direct the disposition of these  securities and,
     accordingly,  could be deemed to be "beneficial"  owners within the meaning
     of Rule l3d-3 of the Exchange Act. Each of Morgens,  its principals and the
     Morgens Entities,  however,  disclaims beneficial ownership with respect to
     any securities not actually beneficially owned by it.
(6)  The address for Mr.  Bennett is 2 Stamford  Plaza,  Suite 1501, 281 Tresser
     Boulevard,  Stamford,  Connecticut  06901.  Includes 303,003 shares held by
     Restructuring  Capital  Associates,   L.P.  ("Restructuring  Capital")  and
     Bennett Restructuring Fund, L.P.
(7)  The address for Mr. Paulson is Del Mar Country Club, 6001 Clubhouse Drive,
     Rancho Santa Fe, California 92067.


           The Company is a party to a registration rights agreement with, among
others,  Morgens,  Keyport,  SunAmerica and affiliates of Restructuring Capital,
each of which  owns more than 5% of the  Common  Stock.  Pursuant  to the Equity
Registration  Rights  Agreement  dated June 30, 1993,  among the Company and the
Holders of Registerable  Shares  referred to therein,  each of the three largest
holders of Common Stock is entitled to cause the Company to file a  registration
statement  and holders of 51% or more of the shares of Common Stock then subject
to the Equity Registration Rights Agreement are entitled to cause the Company to
file two  registration  statements,  registering  under the Securities  Act, the
offer and sale of Common  Stock  owned by such  persons.  All other  Holders  of
Registerable  Shares will be  entitled  to have shares of Common  Stock owned by
them included in any such  registrations  in addition,  the agreement  grants to
each  party the right to have  included,  subject to  certain  limitations,  all
shares of Common Stock owned by such party in any  registration  statement filed
by the Company under the Securities Act,  including those filed on behalf of the
Company  or  security  holders  not  party  to the  Equity  Registration  Rights
Agreement.  Pursuant  to the  agreement,  the  Company  will pay all  costs  and
expenses, other than underwriting discounts and commissions,  in connection with
the registration and sale of Common Stock under the agreement.

Item 13.   Certain Relationships and Related Transactions

           Robert R.  Barengo was  formerly a director  and 10%  stockholder  of
Leroy's.  In May  1996,  Leroy's  became a  wholly-owned  subsidiary  of AWI,  a
publicly hold corporation  listed on NASDAQ. Mr. Barengo is currently a director
of AWI and owns 7% of the outstanding  stock of AWI, which leases  approximately
12,000  square feet of the Riviera  Hotel & Casino's  casino  floor.  AWI is the
operator of the Riviera Hotel & Casino's sports book operations.  This lease was
assumed by the Company  from  Riviera,  Inc.  and is still in effect.  The lease
provides for rental payments based upon the monthly and annual revenues  derived
by AWI from the location.  From January 1, 1998 through  December 31, 1998,  AWI
paid aggregate rent to ROC of  approximately  $212,000 The Company believes that
the terms of the lease with AWI are at least as favorable to the Company and ROC
as could have been obtained from unaffiliated  third parties and are at least as
favorable as terms  obtained by other casino hotels in Las Vegas.  AWI also owns
Howard Johnson Hotel & Casino located at the  intersection  of Tropicana  Avenue
and  Interstate  15 in Las Vegas,  Nevada.  The  hotel's  operations  include an
International House of Pancakes restaurant, on-site food and beverage sales, 150
guest  rooms (no  suites)  and  approximately  53 gaming  machines.  The Company
believes  that  this  casino/hotel's  operations  are not  competitive  with the
Riviera Hotel & Casino.

           As of April 1, 1998,  the Company  entered  into a letter  agreement,
with Mr. Barengo, a member of the Bar of the State of Nevada,  pursuant to which
Mr. Barengo has been assisting the Company and its outside  counsel in enforcing
the  Company's  rights  under the  Riviera  Merger  Agreement  and with  related
matters. Under such letter agreement,  Mr. Barengo receives a fee of $10,000 per
month for his consulting  services,  which services  commenced on April 1, 1998.
Either party may terminate the letter agreement on no less than seven days prior
written notice.

           From   August   1996   until    February    1997,    Riviera   Gaming
Management-Elsinore,  Inc. ("RGME"), an indirect wholly-owned  subsidiary of the
Company,  operated  the Four Queens  located  adjacent  to the Golden  Nugget on
Fremont Street in downtown Las Vegas under an interim management agreement for a
fee of $83,333 per month,  A long-term  management  agreement  (the  "Management
Agreement") with Elsinore Corporation  ("Elsinore"),  which owns the Four Queens
through its  wholly-owned  subsidiary  Four  Queens,  Inc.,  went into effect on
February 28, 1997, the effective  date of the Chapter 11 plan of  reorganization
of Elsinore. The Morgens Entities, beneficial owners of approximately 25% of the
common stock of the Company,  own over 94% of the voting stock of Elsinore.  The
Company  believes  that  the  terms  of the  Management  Agreement  are no  less
favorable to the Company than if the Company had negotiated  with an independent
third party.  The term of the Management  Agreement is  approximately 40 months,
subject to earlier  termination  or  extension.  Either party can  terminate the
Management  Agreement if (i) substantially all the Four Queens' assets are sold;
(ii) the Four  Queens is  merged;  or (iii) a  majority  of the Four  Queens' or
Elsinore's  shares  are sold.  Upon such  termination  RGME will  receive a $2.0
million  termination bonus minus any amount realized or realizable upon exercise
of the warrants. Either party may terminate the Agreement if cumulative earnings
before interest, taxes, depreciation,  and amortization ("EBITDA") for the first
two fiscal years are less than $12.8 million.  The Four Queens EBITDA for the 24
months ending March 31, 1999 was approximately $10.2 million. Management and the
Board of Directors of Elsinore  have agreed to continue  the  agreement  for its
original term  provided,  however,  that it can be terminated by either party on
six  month's  notice.  RGME  is paid a  minimum  annual  management  fee of $1.0
million, payable in equal monthly installments. In addition, RGME is entitled to
a fee of 25% of the amount by which the Four Queens EBITDA exceeds $8 million in
any fiscal year.  Based upon current  historical  and  projected  EBITDA,  it is
unlikely that the $8 million  threshold will be met. RGME has received  warrants
to purchase 1,125,000 shares of common stock of Elsinore, exercisable during the
term or extended term of the Management Agreement at an exercise price of $1 per
share. In consideration of Four Queens' failure to meet the $12.8 million EBITDA
threshold  for the first  two  years of the  agreement,  RGME and  Elsinore  are
negotiating a revised termination bonus.

           Since  March 5, 1997,  Mr.  Westerman  has been the  President  and a
director of Four Queens,  Inc. Mr. Westerman has also been a director of Darling
International  Inc.,  a publicly  held  company,  since June 23,  1997.  Morgens
Entities  own  46.13%  of the  stock of  Darling  International,  Inc.  which is
primarily in the business of processing animal and bakery waste by-products.

<PAGE>

                                                PART IV

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K

           (a)(1)     List of Financial Statements.

           The  following  Independent  Auditors'  Report  and the  Consolidated
Financial Statements of the Company are incorporated by reference into this Item
14 of Form 10-K by Item 8 hereof:

-          Independent Auditors' Report dated February 19, 1999.
-          Consolidated Balance Sheets as of December 31, 1998 and 1997.
-          Consolidated Statements of Income for the Years Ended December
           31, 1998, 1997 and 1996
-          Consolidated Statements of Stockholders' Equity for the Years Ended
           December 31, 1998, 1997 and 1996.
-          Consolidated Statements of Cash Flows for the Years Ended December
           31, 1998, 1997 and 1996.
-          Notes to Consolidated Financial Statements.

           (a)(2)     List of Financial Statement Schedules.

           No financial  statement schedules have been filed herewith since they
are either not required,  are not  applicable,  or the required  information  is
shown in the consolidated financial statements or related notes.

           (a)(3)     List of Exhibits.

           Exhibits  required  by Item 601 of  Regulation  S-K are listed in the
Exhibit Index herein, which information is incorporated by reference.

           (b)        Reports on Form 8-K

           No  reports on Form 8-K were  filed  with the  Commission  during the
fourth quarter ended December 31, 1998.

<PAGE>

                                                      SIGNATURES


           Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                         RIVIERA HOLDINGS CORPORATION


                                         By:/s/   WILLIAM L. WESTERMAN
                                         William L. Westerman
                                         Chief Executive Officer and President
                                         (Principal Executive Officer)

                                         April 30, 1999


           Pursuant to the requirements of the Securities  Exchange Act of 1934,
this  Amendment has been signed below by the following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Signature                           Title                             Date


/s/ WILLIAM L. WESTERMAN    Chairman of the Board, Chief         April 30, 1999
William L. Westerman        Executive Officer and President


/s/ DUANE R. KROHN          Treasurer (Principal Financial       April 30, 1999
Duane R. Krohn              and Accounting Officer)


/s/ ROBERT R. BARENGO       Director                             April 30, 1999
Robert R. Barengo


/s/ RICHARD L. BAROVICK     Director                             April 30, 1999
Richard. L. Barovick


/s/ JAMES N. LAND, JR.      Director                             April 30, 1999
James N. Land, Jr.

<PAGE>

                                                    EXHIBIT  INDEX
Exhibit
Number                                 Description
2.1*                                   Agreement  and  Plan  of  Merger,   dated
                                       September  15,  1997,  by and  among  R&E
                                       Gaming Corp.,  Riviera  Acquisitions Sub,
                                       Inc.,  and Riviera  Holdings  Corporation
                                       (see  Exhibit  10.1 to Current  Report on
                                       Form 8-K  filed  with the  Commission  on
                                       September 29, 1997,  Commission  File No.
                                       0-21430)

3.1*                                   Second Restated Articles of Incorporation
                                       of the Company (see Exhibit 3.1 to
                                       Registration Statement on Form S-4 filed
                                       with the Commission on September
                                       10, 1997, Commission File No. 0-21430)

3.2*                                   Bylaws of the Company (see Exhibit 3.2 to
                                       Registration Statement on Form S-4
                                       filed with the Commission on September
                                       10, 1997, Commission File No. 0-21430)

3.3*                                   Articles of Incorporation of Riviera
                                       Operating Corporation (see Exhibit 3.3 to
                                       Registration Statement on Form S-4 filed
                                       with the Commission on September
                                       10, 1997, Commission File No. 0-21430)

3.4*                                   Bylaws of Riviera  Operating  Corporation
                                       (see   Exhibit   3.4   to    Registration
                                       Statement  on Form  S-4  filed  with  the
                                       Commission   on   September   10,   1997,
                                       Commission File No. 0-21430)

3.5*                                   Articles of Incorporation of Riviera
                                       Gaming Management, Inc. (see Exhibit 3.5
                                       to Registration Statement on Form S-4
                                       filed with the Commission on September
                                       10, 1997, Commission File No. 0-21430)

3.6*                                   Bylaws of Riviera Gaming Management, Inc.
                                       (see Exhibit 3.6 to Registration
                                       Statement on Form S-4 filed with the
                                       Commission on September 10, 1997,
                                       Commission File No. 0-21430)

3.7*                                   Articles of Incorporation of Riviera
                                       Gaming Management - Elsinore, Inc. (see
                                       Exhibit 3.7 to Registration Statement on
                                       Form S-4 filed with the Commission on
                                       September 10, 1997, Commission File No.
                                       0-21430)

3.8*                                   Bylaws of Riviera Gaming Management -
                                       Elsinore, Inc. (see Exhibit 3.8 to
                                       Registration Statement on Form S-4 filed
                                       with the Commission on September
                                       10, 1997, Commission File No. 0-21430)

3.9*                                   Articles of Incorporation of Riviera
                                       Gaming Management of Colorado, Inc. (see
                                       Exhibit 3.9 to Amendment No. 1 to
                                       Registration Statement on Form S-4 filed
                                       with the Commission on December 9, 1997,
                                       Commission File No. 0-21430)

3.10*                                  Bylaws of Riviera Gaming Management of
                                       Colorado, Inc. (see Exhibit 3.10 to
                                       Amendment No. 1 to Registration Statement
                                       on Form S-4 filed with the
                                      Commission on December 9, 1997, Commission
                                      File No. 0-21430)


<PAGE>
4.1*                                   Indenture  dated as of  August  13,  1997
                                       between  the  Company  and  Norwest  Bank
                                       Minnesota,    N.A.,   as   trustee,   the
                                       Guarantors  party  thereto,  Jefferies  &
                                       Company,  Inc. and  Ladenburg  Thalmann &
                                       Co.  Inc.  (see  Exhibit  4.2 to  Current
                                       Report  on  Form  8-K   filed   with  the
                                       Commission on August 18, 1997, Commission
                                       File No.
                                       0-21430)

4.2*                                   Form of the Company's 10% Senior Notes
                                       due 2004 (included in Exhibit 4.1)

5.1*                                   Opinion  of  Dechert  Price & Rhoads  re:
                                       legality  (see  Exhibit 5.1 to  Amendment
                                       No. 1 to  Registration  Statement on Form
                                       S-4 filed with the Commission on December
                                       9, 1997, Commission File No. 0-21430)

10.1*                                  Registration Rights Agreement dated as of
                                       August 13, 1997 by and among the
                                       Company, the Guarantors party thereto,
                                       Jefferies & Company, Inc. and
                                      Ladenburg Thalmann & Co. Inc. (see Exhibit
                                      4.1 to Current Report on Form 8-K
                                       filed with the Commission on August 18,
                                       1997, Commission File No. 0-21430)

10.2*                                  Purchase  Agreement  dated August 8, 1997
                                       among the Company,  the Guarantors  party
                                       thereto,  Jefferies & Company,  Inc.  and
                                       Ladenburg   Thalmann  &  Co.,  Inc.  (see
                                       Exhibit 1.1 to Current Report on Form 8-K
                                       filed with the  Commission  on August 18,
                                       1997, Commission File No. 0-21430)

10.3*                                  Lease Agreement between Riviera, Inc. and
                                       Mardi Gras Food Court, Inc. dated
                                       April 1, 1990 (see Exhibit 10.1 to Form
                                       10, Commission File No. 0-21430)

10.4*                                  Amendment to Lease Agreement between
                                       Riviera, Inc. and Mardi Gras Food
                                       Court, Inc. dated April 1, 1990 (see
                                     Exhibit 10.2 to Registration Statement Form
                                       S-1 filed with the Commission on August
                                       11, 1993, File No. 33-67206)

10.5*                                  Lease Agreement between Riviera, Inc. and
                                       Leroy's Horse and Sports Place (see
                                       Exhibit 10.3 to Form 10, Commission File
                                       No. 0-21430)

10.6*                                  Indemnity Agreement, dated June 30, 1993,
                                       from Riviera, Inc. and Meshulam Riklis in
                                       favor   of  the   Company   and   Riviera
                                       Operating  Corporation  (see Exhibit 10.7
                                       to Registration  Statement Form S-1 filed
                                       with the  Commission  on August 11, 1993,
                                       File No. 33-67206)

10.7*                                  Indemnity Agreement, dated June 30, 1993,
                                       from the Company in favor of IBJ Schroder
                                       Bank & Trust Company (see Exhibit 10.8 to
                                       Registration  Statement  Form  S-1  filed
                                       with the  Commission  on August 11, 1993,
                                       File No. 33-67206)

10.8*                                  Equity Registration Rights Agreement,
                                       dated June 30, 1993, among the
                                       Company and the Holders of Registerable
                                       Shares (see Exhibit 10.9 to
                                      Registration Statement Form S-1 filed with
                                       the Commission on August 11, 1993,
                                       File No. 33-67206)

10.9*                                  Operating Agreement, dated June 30, 1993,
                                       between the Company and Riviera

<PAGE>



                                       Operating  Corporation (see Exhibit 10.15
                                       to Registration  Statement Form S-1 filed
                                       with the  Commission  on August 11, 1993,
                                       File No. 33-67206).

10.10*                                 Adoption   Agreement   regarding   Profit
                                       Sharing  and 401(k)  Plans of the Company
                                       (see   Exhibit   10.16  to   Registration
                                       Statement   Form  S-1   filed   with  the
                                       Commission  on August 11, 1993,  File No.
                                       33-67206)

10.11*                                 Howard Johnson & Company Regional Defined
                                       Contribution  Plan,  dated March 16, 1990
                                       (adopted by the  Company  pursuant to the
                                       Adoption Agreement filed as Exhibit 10.17
                                       to Registration  Statement Form S-1 filed
                                       with the  Commission  on August 11, 1993,
                                       File No. 33-67206)

10.12*                                Employment Agreement between Riviera, Inc.
                                      and William L. Westerman, dated
                                      January 6, 1993 (see Exhibit 10.18 to Form
                                      10, Commission File No. 0-21430)

10.13*                                 Form of Agreement between the Company and
                                       Directors (see Exhibit 10.19 to
                                       Form 10, Commission File No. 0-21430)

10.14*                                 Form of Termination Fee Agreement (see
                                       Exhibit 10.20 to Form 10,
                                       Commission File No. 0-21430)

10.15*                                 Restricted Account Agreement,  dated June
                                       30,   1993,   among   Riviera   Operating
                                       Corporation,  IBJ  Schroder  Bank & Trust
                                       Company  and Bank of America  Nevada (see
                                       Exhibit 10.22 to  Registration  Statement
                                       Form S-1  filed  with the  Commission  on
                                       August 11, 1993, File No. 33-67206)

10.16*                                 Disbursement Agreement, dated June 30,
                                       1993, between the Company and IBJ
                                      Schroder Bank & Trust Company (see Exhibit
                                       10.23 to Registration Statement
                                       Form S-1 filed with the Commission on
                                       August 11, 1993, File No. 33-67206)

10.17*                                 Tax Sharing Agreement between the Company
                                       and Riviera Operating Corporation dated
                                       June 30, 1993 (see Exhibit 10.24 to
                                       Amendment No. 1 to
                                       Registration Statement Form S-1 filed
                                       with the Commission on August 19, 1993,
                                       File No. 33-67206)

10.18*                                 The Registrant's 1993 Stock Option Plan
                                       (see Exhibit 10.25 to Amendment No.
                                       1 to Registration Statement Form S-1
                                       filed with the Commission on August 19,
                                       1993, File No. 33-67206)

10.19*                                 Form of Stay Bonus Agreement (see Exhibit
                                       10.27  to  Form  10-Q   filed   with  the
                                       Commission    on    November   9,   1994,
                                       Commission File No. 0-21430)

10.20*                                 Amendment dated February 19, 1995, to
                                       Lease Agreement between Riviera, Inc.
                                       and Mardi Gras Food Court, Inc. (filed
                                       with Exhibits 10.3 and 10.4)

10.21*                                 Amendment dated September 30, 1994, to
                                       Employment Agreement between

<PAGE>



                                       Riviera, Inc. and William L. Westerman
                                       (filed with Exhibit 10.12)

10.22*                                 Management Agreement by and between
                                       Elsinore Corporation, Four Queens,
                                       Inc. and Riviera Gaming Management Corp.
                                       - Elsinore (see Exhibit 10.30 to
                                       Form 10-K for the fiscal year ended
                                       December 31, 1996, Commission File No.
                                       000-21430)

10.23*                                 Employment Agreement dated as of November
                                       21,  1996  by and  between  the  Company,
                                       Riviera Operating Corporation and William
                                       L.  Westerman  (see Exhibit 10.31 to Form
                                       10-K for the fiscal  year ended  December
                                       31, 1996, Commission File No. 000-21430)

10.24*                                 Revolving  Line of Credit Loan  Agreement
                                       dated  February  28,  1997 by and between
                                       the    Company,     Riviera     Operating
                                       Corporation  and U.S. Bank of Nevada (see
                                       Exhibit 10.32 to Form 10-K for the fiscal
                                       year ended December 31, 1996,  Commission
                                       File No. 000-21430)

10.25*                                 Letter of Intent dated March 4, 1997
                                       between the Company and Eagle Gaming,
                                       L.P. (see Exhibit 10.33 to Form 10-K for
                                       the fiscal year ended December 31,
                                       1996, Commission File No. 000-21430)

10.26*                                 Deed  of  Trust,   Assignment  of  Rents,
                                       Leases,   Fixture   Filing  and  Security
                                       Agreement,   dated   August   13,   1997,
                                       executed by Riviera Holdings  Corporation
                                       for   the   benefit   of   Norwest   Bank
                                       Minnesota,   National   Association  (see
                                       Exhibit 10.1 to Form 8-K filed August 18,
                                       1997, Commission File No. 000-21430)

10.27*                                 Security  Agreement,   dated  August  13,
                                       1997,  by  and  among  Riviera   Holdings
                                       Corporation,       Riviera      Operating
                                       Corporation,  Riviera Gaming  Management,
                                       Inc.,   Riviera   Gaming   Management  of
                                       Colorado, Inc., Riviera Gaming Management
                                       -  Elsinore,   Inc.   and  Norwest   Bank
                                       Minnesota,   National   Association  (see
                                       Exhibit 10.2 to Form 8-K filed August 18,
                                       1997, Commission File No. 000-21430)

10.28*                                 Stock Pledge and Security Agreement,
                                       dated August 13, 1997, executed by
                                       Riviera Holdings Corporation (see Exhibit
                                       10.3 to Form 8-K filed August 18,
                                       1997, Commission File No. 000-21430)

10.29*                                 Stock Pledge and Security Agreement,
                                       dated August 13, 1997, executed by
                                       Riviera Operating Corporation (see
                                       Exhibit 10.4 to Form 8-K filed August 18,
                                       1997, Commission File No. 000-21430)

10.30*                                 Stock Pledge and Security Agreement,
                                       dated August 13, 1997, executed by
                                       Riviera Gaming Management, Inc. (see
                                       Exhibit 10.5 to Form 8-K filed August
                                       18, 1997, Commission File No. 000-21430)

10.31*                                 Restricted   Account   Agreement,   dated
                                       August  13,  1997,  by and among  Riviera
                                       Holdings   Corporation,    Norwest   Bank
                                       Minnesota,  National Association and U.S.
                                       Bank of Nevada (see  Exhibit 10.6 to Form
                                       8-K filed  August  18,  1997,  Commission
                                       File No. 000-21430)

10.32*                                 First Amendment to Revolving Line of
                                       Credit Loan Agreement, dated August

<PAGE>


                                       12,  1997,   between   Riviera   Holdings
                                       Corporation,       Riviera      Operating
                                       Corporation  and U.S.  Bank (see  Exhibit
                                       10.7 to Form 8-K filed  August 18,  1997,
                                       Commission File No. 000-21430)

10.33*                                 Escrow  Agreement,  dated  September  15,
                                       1997,  by and  among  R&E  Gaming  Corp.,
                                       Riviera Holdings  Corporation,  and State
                                       Street   Bank  and   Trust   Company   of
                                       California  (see Exhibit 10.2 to Form 8-K
                                       filed September 29, 1997, Commission File
                                       No. 000-21430)

10.34*                                 Employment  agreement between the Company
                                       and Ronald P. Johnson  effective  July 1,
                                       1998  (see,  Exhibit  10.34  of Form  10Q
                                       filed November 6, 1998.)

10.35*                                 Employment agreement between the Company
                                       and Duane R. Krohn effective
                                       July 1, 1998 (see, Exhibit 10.35 of Form
                                       10Q filed November 6, 1998.)

10.36*                                 Employment  agreement between the Company
                                       and Robert A. Vannucci  effective July 1,
                                       1998  (see,  Exhibit  10.36  of Form  10Q
                                       filed November 6, 1998.)

10.37*                                 Employment  agreement between the Company
                                       and Jerome P.  Grippe  effective  July 1,
                                       1998  (see,  Exhibit  10.37  of Form  10Q
                                       filed November 6, 1998.)

21.1*                                  Subsidiaries of the Company (see Exhibit
                                       21.1 to Registration Statement on
                                       Form S-4 filed with the Commission on
                                       September 10, 1997, Commission File
                                       No. 0-21430)

99.1*                                  Letter, dated March 20, 1998, from R&E
                                       Gaming Corp. to the Company regarding
                                      the Company's Agreement and Plan of Merger

*   The  exhibits  thus  designated  are  incorporated  herein by  reference  as
    exhibits  hereto.  Following the description of such exhibits is a reference
    to the copy of the exhibit  heretofore  filed with the Commission,  to which
    there have been no amendments or changes.