SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

                        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,
1999
     [ ] 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 28,  2000,  the  aggregate  market value of the voting stock held by
non-affiliates of the Registrant was approximately  $24,089,754.  As of February
28, 2000 the number of outstanding  shares of the Registrant's  Common Stock was
3,933,021.


Documents incorporated by reference:




                               Page 1 of 37 Pages

                    Exhibit Index Appears on Page 33 hereof.


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                                       1


<TABLE>
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                   RIVIERA HOLDINGS CORPORATION AND SUBSIDIARY


                    ANNUAL REPORT ON FORM 10-K FOR THE FISCAL


                          YEAR ENDED DECEMBER 31, 1999

                                TABLE OF CONTENTS

<S>  <C>                                                                                                         <C>
Item 1.   Business................................................................................................3
             General .............................................................................................3
             The Riviera Hotel & Casino...........................................................................3
             Riviera Black Hawk...................................................................................6
             Geographical Markets.................................................................................8
             Management Activities................................................................................9
             Competition........................................................................................ 10
             Employees and Labor Relations.......................................................................12
             Regulation and Licensing............................................................................12
             Federal Registration................................................................................20

Item 2.   Properties.............................................................................................20

Item 3.   Legal Proceedings......................................................................................21

Item 4.   Submission of Matters to a Vote of Security Holders....................................................21

Item 5.   Market for the Registrant's Common Stock and Related Security Holder Matters...........................22

Item 6.   Selected Financial Data................................................................................22

Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations..................23
             Results of Operations...............................................................................23
             1999 Compared to 1998...............................................................................24
             1998 Compared to 1997...............................................................................26
             Liquidity and Capital Resources.....................................................................27
Item 7a.  Quantitative and Qualitative Disclosure about Market Risk
             Year 2000 ..........................................................................................30
             Forward Looking Statements..........................................................................30

Item 8.   Financial Statements and Supplementary Data............................................................30

Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................30

Item 10.  Directors and Executive Officers of the Registrant.....................................................30

Item 11.  Executive Compensation.................................................................................30

Item 12.  Principal Shareholders.................................................................................31

Item 13.  Certain Relationships and Related Transactions ........................................................31

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8K.........................................31
</TABLE>


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                                       2







          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,  owns and operates the Riviera  Hotel & Casino  (Riviera Las Vegas)
located on Las Vegas Boulevard 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.

           Riviera Holdings  Corporation,  through its wholly-owned  subsidiary,
Rivera  Black  Hawk,  Inc.,  operates  a  limited-stakes  casino in Black  Hawk,
Colorado which opened on February 4, 2000.

The Riviera Hotel & Casino

General

           Riviera Las Vegas is located on the corner of Las Vegas Boulevard and
Riviera Boulevard, across from Circus Circus. Riviera Las Vegas 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


           Riviera Las Vegas has 110,000 square feet of casino space. The casino
currently has approximately 1,520 slot machines and 46 gaming tables,  including
blackjack,  craps,  roulette,  pai gow poker,  Caribbean  Stud(R)  poker,Let  It
Ride(R) and poker.  The casino also includes a keno lounge,  a 200-seat race and
sports book and a 160 seat bingo parlor.


           Gaming  operations  at Riviera Las Vegas 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. We maintain 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.  We recently completed an extensive capital investment
program for the upgrade of our slot machines.


           Our  current  management  team  redirected  our  business  away  from
high-stakes  wagerers in favor of the less volatile  mid-level gaming customers.
In order to effectively pursue this strategy,  we made several strategic changes
including  reconfiguring the casino space, installing new slot machines and bill
acceptors,  reducing the number of gaming tables and  eliminating  baccarat.  In
addition,  we implemented stricter credit policies.  As a result, the percentage
of  table  game  dollar  volume   represented   by  credit  play  declined  from
approximately  24% in 1993 to 9.1% in 1999.  Also, in 1999,  revenues from slots
and tables were approximately 70.5% and, 29.5% respectively,  as compared to 55%
and 45%, respectively, in 1992.

           During  1999,  we  continued a number of  initiatives  at Riviera Las
Vegas to increase slot play,  including the  replacement  of older slot machines
and the  employment of additional  slot hosts.  Slot hosts are our employees who
interact with patrons as goodwill  ambassadors to generate loyalty. Our strategy
is to  continue to  increase  slot play  through  marketing  programs  and other
improvements,  including (i) our ongoing slot upgrade program,  (ii) addition of
new  signage,  (iii)  promotion  of the Riviera Las Vegas  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)  "Nickel  Town(R)".  At the end of 1997, we opened Nickel
Town on the corner of Las Vegas Boulevard and Riviera Boulevard at the crosswalk
from Circus Circus and the local Las Vegas  Boulevard  bus stop.  Nickel Town is
comprised primarily of nickel slot machines,  the fastest growing segment of the
Las Vegas slot market.


           Casino   segment   revenues  were   $74,086,000,   $77,676,000,   and
$71,624,000 in 1999, 1998 and 1997, respectively.
<PAGE>
                                       3


Hotel


           Riviera  Las Vegas'  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 1999 we completed refurbishment of all of our approximately
2,100 hotel rooms except for 65  one-bedroom  suites in the Monte Carlo Building
which are in the process of being  remodeled and will be completed by the end of
the second quarter 2000.  Despite the  significant  increase in rooms on the Las
Vegas Strip in the last three years,  we believe  Riviera Las Vegas 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, 95.7% for 1997, 95.2% for 1998
and 97.5 % in 1999  (based on  available  rooms).  The  average  occupancy  rate
citywide was 88.0% in 1999  according to the Las Vegas  Convention  and Visitors
Authority.


           Rooms segment revenues were $35,947,000,  $35,513,000 and $38,190,000
in 1999, 1998 and 1997, respectively.

Restaurants

           The  quality,  value and  variety of food  services  are  critical to
attracting  Las Vegas  visitors.  Riviera  Las Vegas  offers  five bars and five
restaurants  and  serves  an  average  of  approximately  5,900  meals  per day,
including  banquets and room service.  The following  table  outlines,  for each
restaurant, the type of service provided and total seating capacity:
<TABLE>
<CAPTION>

                                                                Seating Capacity

Name                              Type


<S>                                <C>                               <C>
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
</TABLE>

           In addition,  Riviera Las Vegas 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 $18,081,000,  $16,818,000 and
$15,550,000 in 1999, 1998 and 1997, respectively.

Convention Center

           Riviera Las Vegas 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.  Riviera Las Vegas hosts  approximately  200 conventions per year.
The hotel  currently has over 650,000  convention  related  advance  bookings of
rooms through 2003 consisting of  approximately  458,000  definite  bookings and
approximately 192,000 tentative bookings. In 1999 approximately 23% of the rooms
were occupied for  conventions  and  management  estimates that 30% of its rooms
will be occupied for conventions in 2000.


           In  February  1999 we expanded  our  convention  center from  100,000
square feet to 160,000 with the addition of the Royal Pavilion. The new expanded
facilities  include  new,  state-of-the-art  convention,   meeting  and  banquet
facilities,  teleconferencing  and satellite uplink capability,  12 skyboxes 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.

<PAGE>
                                       4


Entertainment


           Riviera  Las  Vegas  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.   We  believe
entertainment  provides an attractive marketing tool to attract customers to the
Riviera.  Riviera Las Vegas'  entertainment  program includes such well received
shows as Splash(R) (a variety  show)which opened a new more spectacular  version
at the end of 1999,  An Evening at La  Cage(R)  (a female  impersonation  show),
Crazy  Girls(R)  (an adult  revue) as well as featured  comedians at the Riviera
Comedy Club. We update our shows continually in response to customer surveys and
to keep them fresh.  Tickets for the shows are offered at  reasonable  prices in
keeping with our 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,  Riviera  Las Vegas  presents  major  concerts  which  since 1997 have
included  performers such as The Beach Boys, Billy Ray Cyrus, Rich Little,  Drew
Carey, and Damon Wayans. We believe the recently  completed Royale Pavilion will
enable us to increase  attendance at special events since, in the past, the then
existing facilities could not accommodate the demand for tickets.

           We believe that our substantial entertainment revenue 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   $18,346,000,   $18,793,000  and  $17,873,000  in  1999,  1998  and  1997,
respectively. Complimentaries are rooms, food, beverage and other items that are
offered as an incentive to customers to patronize our casino.


           "All  Other"  segment  revenues,  derived  primarily  from  telephone
revenue,  sales of retail  merchandise  and store rentals  totaled  $11,713,000,
$11,155,000, and $10,556,000 in 1999, 1998 and 1997, respectively.

Future Expansions

           We are 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 Las Vegas'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.  We would  require  partners  to  finance,  develop and operate the
entertainment  attraction and retail stores.  To date no such partners have been
identified.

           We are  exploring  a number of  options  for the  development  of our
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 our $175 million Bond Indenture,  we could contribute
up to 6 acres of land to such  projects and if we decide to develop a time share
tower a third  party  would  construct  and sell  time-share  units and  arrange
financing. We believe 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 we have in place at
this time.

Marketing Strategies-Las Vegas

           We have  developed  a marketing  program  intended to develop a loyal
following of repeat slot and mid-level table game customers.  We believe we have
been able to  successfully  attract  these  patrons  using  Riviera  Las Vegas's
restaurants,  hotel accommodations and entertainment and by focusing on customer
service.  We have  adopted a selective  approach to the  extension  of credit to
these customers in order to reduce volatility of operating  results.  We use our
research data to tailor  promotional  offers to the specific  tastes of targeted
customers.  All slot and table  players are  encouraged  to join the Riviera Las
Vegas  Player's  Club and to fill out  surveys  that  provide  us with  personal
information  and  preferences  and tracks  their  level of play.  Members of the
Riviera  Las Vegas  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.
<PAGE>
                                       5


           Riviera Las Vegas 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  Las Vegas's  core  conventioneer
customer base. In developing an overall marketing program, we conduct extensive,
ongoing  research  of  our  target  customers'   preferences   through  surveys,
one-on-one interviews and focus groups.

           Create Repeat Customers

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

           Provide Extensive Entertainment Options

           We  also  focus  on  attracting   our  guests   through  a  range  of
entertainment  opportunities.  Riviera  Las Vegas 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 our  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 Riviera
Las Vegas before or after the shows.

           Attract Walk-In Traffic

           We seek to maximize  the number of people who  patronize  the Riviera
Las Vegas  that are not  guests  in the hotel by  capitalizing  on  Riviera  Las
Vegas's  prime Strip  location,  convention  center  proximity and the Riviera's
several popular in-house productions.  Riviera Las Vegas 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.  We  strive 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
the "$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.  Riviera Las Vegas targets convention  business because
it typically  provides  patrons willing to pay higher room rates and we are able
to provide  certain advance  planning  benefits,  since  conventions are usually

<PAGE>
                                       6


booked two years in advance of the event date. We focus our marketing efforts on
conventions  whose  participants  have the most active gaming profile and higher
room rate, banquet and function spending habits. Riviera Las Vegas also benefits
from our proximity to the Las Vegas Convention  Center which makes us 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. In 1999
we derived  approximately 22.7% of our hotel occupancy from convention customers
and consider them a critical component of our customer base. We believe that the
recently completed expansion of the Riviera Las Vegas's convention facility 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

           We have  found  that  many  of our  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
us to maintain  occupancy  rates at the highest  levels  throughout the year. We
have developed specialized marketing programs and cultivated  relationships with
wholesale  operators,  travel  agents and major  domestic air carriers to expand
this market.  Our four largest tour and travel operators  currently  account for
approximately  500 of the available  2,100 room  bookings per night.  We make an
effort to convert many tour and travel  customers  who meet our target  customer
gaming profile into repeat slot customers.

Riviera Black Hawk

Business

           Our wholly-owned  subsidiary,  Riviera Black Hawk, opened on February
4, 2000. Located in Black Hawk, Colorado, approximately 40 miles west of Denver,
our casino is one of the first three  encountered  when traveling from Denver to
the adjacent  gaming cities of Black Hawk and Central City. Our casino  features
the third  largest  number of gaming  devices in the market  with  approximately
1,000 slot machines and 12 blackjack tables. In Colorado,  each slot machine and
each table game is considered one gaming device.

           We also offer a variety of non-gaming  amenities  designed to further
differentiate our casino including:

o        parking for 520 vehicles, of which 92% are covered, with convenient and
         free self-park and valet options;

o        a 265-seat casual dining restaurant;

o        two themed bars; and

o        an entertainment center with seating for approximately 500 people.

           The initial  participants  in this market were small,  privately held
gaming  facilities whose inability to offer convenient  parking and a full range
of traditional casino amenities limited the growth of this market. Subsequently,
larger  casinos  offering  such  amenities  have  entered the market,  have been
gaining  market  share  and have  contributed  to the  consistent  growth in the
overall  market.  As of December  31,  1999,  there were 30 casinos in the Black
Hawk/Central City market,  with eight casinos each offering more than 400 gaming
devices.  Isle of  Capri,  located  across  the  street  from  our  casino  with
approximately  1,100 gaming machines and 1,000 covered parking spaces,  has been
the market leader in terms of win per gaming device.

Marketing strategy

           We plan to attract customers to our casino by implementing  marketing
strategies and promotions designed specifically for this market. In doing so, we
hope to create customer loyalty and benefit from repeat visits by our customers.
Specific  marketing  programs to support this strategy include the Riviera Black
Hawk Player's Club and "V.I.P." services offered to repeat gaming customers. The
Riviera  Black Hawk Player's  Club is a promotion  that rewards  casino play and
repeat visits to the casino with various  privileges  and amenities such as cash

<PAGE>
                                       7


bonuses, logo gift items and invitations to special events,  including free slot
tournaments and parties.  We have used the Player's Club promotion in our casino
in Las Vegas and,  in our  capacity as manager of the  Riviera  Black Hawk,  are
tailoring it for the Black  Hawk/Central City market to implement at our casino.
"V.I.P."  services  are  available  to the highest  level of players and include
special valet and self-parking  services,  complimentary  food and entertainment
offerings and special events specifically designed for this group of customers.

           We believe that we will benefit from strong "walk-in"  traffic due to
the  proximity  of our casino to the  Colorado  Central  Station and the Isle of
Capri  Casino.  We intend to develop  specific  marketing  programs  designed to
attract  these  "walk-in"  customers.  We  emphasize  quality  food and beverage
amenities with customer  friendly  service as a marketing tool. In addition,  we
will  provide  entertainment  programs  designed to meet the tastes of the Black
Hawk/Central  City market,  such as live music  performances by popular regional
and national groups.

           We will  utilize  proven  database  marketing  techniques  previously
implemented by our casino in Las Vegas. We plan to rely on database marketing in
order to best identify target customer  segments of the population and to tailor
the casino's  promotions  and amenities to our core group of customers.  We will
use the  current  database  maintained  by  Riviera  Las Vegas to  identify  and
stratify   slot  players   living  in  Colorado  for   appropriate   incentives.
Approximately  7,500 of these slot players have been  identified  as of December
31, 1999. In addition,  we will promote our casino by  advertising in newspapers
and on billboards in the local areas.

Geographical Markets

The Las Vegas Market


           Las Vegas is one of the  largest and  fastest  growing  entertainment
markets in the  country.  According  to the Las Vegas  Convention  and  Visitors
Authority,  the number of visitors  traveling  to Las Vegas has  increased  at a
steady and  significant  rate for the last  thirteen  years from 15.2 million in
1986 to an estimated 34 million in 1999, a compound annual growth rate of 12.4%.
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 8.8% from
$2.4 billion in 1986 to $7.2 billion in 1999.


           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 79% from  approximately  67,000 at the end of 1989 to 120,300 at the end of
1999,  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 1999. Since January 1, 1999 approximately 10,900 new hotel rooms opened,
and as of December 31, 1999 there were 4,300 hotel rooms under construction. The
new rooms are  primarily  being  designed  to attract  the  high-end  gaming and
convention customers, and based on construction costs, should be priced at rates
well above  those  which  have been or need to be  charged by Riviera  Las Vegas
based on the investment in our facility.

           We believe that the growth in the Las Vegas market has been  enhanced
as a result of (i) a dedicated  program by the Las Vegas Convention and Visitors
Authority  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 1999, the number of
convention  delegates  had increased to 3.8 million with in excess of $4 billion
of economic impact.


           During  the  past  six  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 an estimated 33.6 million
in  1999.   Construction   has  recently  been  completed  on  numerous  roadway
enhancements  to improve  access to the Airport.  An additional  runway has also
been completed.  The Airport has additional  long-term  expansion plans underway
which will provide three new satellite concourses, 60 additional gates and other
facilities.
<PAGE>
                                       8


The Black Hawk/Central City Market

           Gaming was first introduced to the Black  Hawk/Central City market in
October 1991 following a state-wide  referendum  where Colorado  voters approved
limited stakes gaming for three historic mining towns - Black Hawk, Central City
and Cripple  Creek.  Limited stakes gaming is defined as a maximum single bet of
$5. Black Hawk and Central City are contiguous  cities located  approximately 40
miles west of Denver and about ten miles  north of  Interstate  Highway  70, the
main  east-west  artery  from  Denver.  Historically,   these  two  gold  mining
communities were popular tourist towns.  However,  since the inception of casino
gaming in October 1991, many of the former tourist-related  businesses have been
displaced by gaming establishments.

           The first casino in the Black  Hawk/Central City market was opened in
October 1991 with 14 casinos open by the end of that year. The pace of expansion
increased further in 1992 with the number of casinos in the market peaking at 42
casinos.  However,  due to a  trend  of  consolidation  in the  market  and  the
displacement  of small  casinos  by the  entry  of  larger,  better  capitalized
operators, the number of casinos has declined to 30 as of December 31, 1999.

           The Black  Hawk/Central  City market  primarily  caters to "day-trip"
customers  from  Denver,  Boulder,  Fort Collins and Golden as well as Cheyenne,
Wyoming.  An estimated  adult  population  exceeding  2.3 million  people reside
within this 100-mile radius of Black Hawk. In addition,  residents  within a 100
mile radius of the City of Black Hawk had an estimated  average household income
in excess of $50,000 per annum in 1999..

           Since 1992,  the number of gaming  devices in the Black  Hawk/Central
City market has grown  approximately  33.9% from 7,252  devices in 1992 to 9,711
devices in 1999.  The total number of slot  machines has  increased  34.9% since
1992 to 9,555 in 1999  while the  total  number  of  tables  in the  market  has
decreased  with 156  tables  in the  market at the end of 1999.  Win per  gaming
device per day has  continued  to grow  despite  the  increase  in the number of
gaming devices.


           The City of Black Hawk has  experienced  more  significant  growth in
gaming  revenues than Central City since 1992.  The  popularity of Black Hawk in
comparison to Central City is due primarily to Black Hawk's  superior  access to
major highways,  as patrons must first pass through Black Hawk to access Central
City from Denver.  Due to this superior  location,  larger casino operators have
focused on  building in the City of Black  Hawk.  As a result,  casinos in Black
Hawk now generally  feature a larger average number of gaming  devices,  a wider
variety of amenities and convenient free parking for patrons. These factors have
contributed to growth in Black Hawk gaming revenues at a compound annual rate of
29.1% since 1992 compared to a more moderate  growth for Central City of 5% over
the same  period.  The number of slot  machines  and tables in the City of Black
Hawk have increased 119.5% and 41.0%,  respectively since 1992, while the number
of slot  machines  and tables in  Central  City have  declined  39.5% and 57.1%,
respectively over the same period.


           The City of Black Hawk experienced a 30.5% increase in gaming revenue
in 1999, the greatest of any gaming venue in the United States.

Management Activities

           In order to capitalize on our expertise and  reputation as successful
operators of casino properties,  we formed Riviera Gaming Management,  Inc., our
wholly-owned subsidiary,  for the primary purpose of obtaining casino management
contracts in Nevada and other jurisdictions.  Riviera Gaming Management 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.  We believe that management  contracts  provide high margin
income with limited  additional  overhead  and little or no capital  expenditure
requirements.  We are  continually  evaluating  opportunities  to  manage  other
casinos/hotels.  Our  objective is to obtain the right to a  substantial  equity
position  in  projects  we  would  manage  as part of the  compensation  for our
services.

Four Queens Management Agreement

           Riviera Gaming  Management-Elsinore,  Inc., our indirect wholly-owned
subsidiary,  operated 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.  This  agreement  terminated  on
December 30, 1999.
<PAGE>
                                       9


Other Management Opportunities


           We are  continuously  reviewing  opportunities to expand and become a
multi-jurisdictional  casino company with greater capital resources to enable us
to compete more effectively.  The jurisdictions include, but are not limited to,
Mississippi,  Pennsylvania  and Iowa. We may also become involved in financially
distressed  casino  properties  where  we  believe  we may be able to  effect  a
turn-around  (similar  to that which we  achieved  at Riviera Las Vegas) and can
obtain a  significant  equity  stake.  On  September  29, 1999,  Riviera  Gaming
Management  entered  into an  agreement  with  Peninsula  Gaming  LLC to provide
consulting services to Diamond Jo's Riverboat Casino in Dubuque, Iowa.


Competition

Las Vegas, Nevada

           Intense  competition  exists among companies in the gaming  industry,
many of which have  significantly  greater  resources than us. Riviera Las Vegas
faces  competition  from all other  casinos and hotels in the Las Vegas area. We
believe that our 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 Las Vegas.

           At December 31, 1999, the Las Vegas Convention and Visitors Authority
indicated  that there were 34  operational  casinos on the Las Vegas  Strip.  Of
these Las Vegas Strip casinos,  24 casinos had over 1,000 available hotel rooms.
Riviera Las Vegas is ranked as the 20th  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, 1999  approximately  10,900 new hotel rooms opened,
and as of  December  31, 1999 there were  approximately  4,300 hotel rooms under
construction.  Existing and future  expansions,  additions and  enhancements  to
existing  properties and construction of new properties by our competitors could
divert  additional  business from the our facilities.  There can be no assurance
that we will compete successfully in the Las Vegas market in the future.

           During 1999,  available room nights in the Las Vegas market increased
from 39.9  million to 43.9  million or 10%,  while  total room  nights  occupied
increased  from 33.4 million to an estimated  37.4  million,  or 12%. The ending
room inventory at December 31, 1999 was 120,294  compared to 109,365 at December
31,  1998,  an  increase  of 10,929  rooms or 9.9 %. This has had the  effect of
intensifying  competition.  At Riviera Las Vegas, room occupancy  increased from
95.2% in 1998 to 97.5% in 1999  (still  much  higher  than the Las  Vegas  Strip
average).  However room rates decreased by $1.04, or 1.9% from $54.82 in 1998 to
$53.78 in 1999.


           We  also  compete  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 our result of operations.


           The  number of  casinos  on  Indian  lands  has  increased  since the
enactment of the Indian Gaming  Regulatory  Act of 1988. The voters in the State
of California  addressed this issue on March 7, 2000 when they voted in favor of
Proposition 1A, an amendment to the California  State  constitution  that allows
Las  Vegas-style  gambling  on  Indian  lands in the  state.  While  new  gaming
jurisdictions  have  traditionally  not  materially   impacted  Las  Vegas,  the
potential expansion of gaming into California poses a more serious threat to the
continued growth of Las Vegas.


           Our  current  business  is highly  dependent  on gaming in Las Vegas.
Riviera  Las  Vegas  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 our financial results.
<PAGE>
                                       10


Black Hawk, Colorado


           The Black Hawk/Central City gaming market is characterized by intense
competition.  The  primary  competitive  factors  in the  market  are  location,
availability  and  convenience  of parking,  number of slot  machines and gaming
tables, types and pricing of non-gaming amenities,  name recognition and overall
atmosphere. Our main competitors are the larger gaming facilities,  particularly
those with considerable on-site or nearby parking and established reputations in
the local market. As of December 31, 1999 there were 19 gaming facilities in the
Black  Hawk  market  with  seven  casinos  each  offering  more than 400  gaming
positions. Construction has also begun on the "Mardi Gras" casino due to open in
March 2000, which is expected to feature over 600 slot machines,  and on a hotel
addition to the casino of one of our principal competitors.  Other projects have
also been announced,  proposed,  discussed or rumored for the Black Hawk/Central
City market.


           We expect that the gaming  facilities  near the  intersection of Main
and Mill Streets will provide  significant  competition to our casino.  Colorado
Central  Station,  which has been the most  successful  casino in  Colorado,  is
located  across  the  street  from our  casino  and has  approximately  700 slot
machines,  20 gaming tables and approximately 700 valet parking spaces. The Isle
of Capri Casino,  operated by Casino America,  which opened in December 1998, is
located  directly  across the street from our casino and features  approximately
1,100  slot  machines,  14 table  games and  1,100  parking  spaces,  and had an
extremely successful first year of operation.


           The number of hotel rooms  currently in the Black  Hawk/Central  City
market is  approximately  170, with only two gaming  facilities  providing hotel
accommodations to patrons.  These include Harvey's Wagon Wheel Casino Hotel with
approximately 120 rooms and the Lodge at Black Hawk with approximately 50 rooms.
In  addition,  the  Isle  of  Capri  Casino  began  construction  in  1999 of an
approximately 235 room hotel on top of its recently  completed  casino.  Casinos
offering  hotel  accommodations  for  overnight  stay  may  have  a  competitive
advantage  over our casino.  However,  we believe  that  self-parking  is a more
effective   utilization  of  our  available   space  and  that  providing  hotel
accommodations  will not be a significant factor, but instead will contribute to
growth in the overall market.


           Historically,  the city of Black Hawk has enjoyed an  advantage  over
Central City because customers have to drive through Black Hawk to reach Central
City.  Central City has proposed the  development of a road directly  connecting
Central City and Black Hawk with  Interstate  70 which would allow  customers to
reach  Central  City  without  driving by or through  Black Hawk.  There  remain
significant financial and legal obstacles to the development of this road and it
is uncertain whether it will be developed over the near to intermediate term, or
developed at all.

           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,  gaming could be approved in other
Colorado  communities in the future. The legalization of gaming closer to Denver
would likely have a material adverse effect on our future results of operations.
We also  compete  with  other  forms of gaming in  Colorado,  including  lottery
gaming, and horse and dog racing as well as other forms of entertainment.

           It is also  possible  that new forms of gaming could compete with our
casino.  Currently,  Colorado law does not authorize  video  lottery  terminals.
However,  Colorado law permits the  legislature,  with  executive  approval,  to
authorize new types of lottery gaming,  such as video lottery  terminals.  Video
lottery  terminals are games of chance,  similar to slot machines,  in which the
player  pushes a button that causes a random set of numbers or  characters to be
displayed on a video  screen.  The player may be awarded a ticket,  which can be
exchanged  for cash or credit play.  This form of gaming could compete with slot
machine gaming.

           Pursuant  to a license  agreement,  license the use at the Black Hawk
casino of all of the  trademarks,  service  marks and logos used by Riviera  Las
Vegas. In addition,  the license agreement provides that additional  trademarks,
service  marks  and  logos  acquired  or  developed  by us and used at our other
facilities will be subject to the license agreement.
<PAGE>
                                       11


Employees and Labor Relations

Riviera Las Vegas


           As of December  31, 1999  Riviera Las Vegas had  approximately  1,922
full time  equivalent  employees and had  collective  bargaining  contracts with
eight unions covering  approximately  1,092 of such employees including food and
beverage employees,  rooms department employees,  carpenters,  engineers,  stage
hands, musicians, electricians,  painters and teamsters. Our agreements with the
Southern Nevada Culinary and Bartenders Union and Stage Hands Union, which cover
the majority of our unionized employees, were renegotiated in 1998 and expire in
the year 2002. Collective Bargaining Agreements with the Operating Engineers and
Musicians  expired in 1999. The Agreements with the Carpenters and Painters will
expire in 2000. The Operating Engineers approved a new agreement that expires in
the year 2004. We are currently in  negotiations  with the Musicians  Union.  On
June 15,1999,  the hard count workers (employees who collect and count the coins
and tokens from slot  machines)  voted to join the Teamsters  Union.  This group
totaled seven at the time of the vote. We are currently  negotiating a Teamsters
Agreement  with  the  Hard  Count  workers  that  is  separate  to our  Teamster
Agreements.  A new agreement was negotiated with the Teamsters and  Electricians
and expire in 2003 and 2004  respectively.  Although  unions have been active in
Las Vegas, we consider our 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 us.


Riviera Black Hawk


           Riviera Black Hawk opened on February 4, 2000 with  approximately 450
employees and plans to maintain that employee level. The Black Hawk/Central City
labor market is very  competitive.  Riviera  Black Hawk believes that it will be
able to maintain its current employee level. There can be no assurance, however,
that new and existing  casinos will not affect  Riviera Black Hawk's  ability to
maintain its current employee level.

There are currently no collective bargaining agreements in Black Hawk casinos.


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.  Our gaming  operations are subject to the licensing and regulatory
control of the Nevada Commission,  the Nevada Board, the Clark County Board, and
during 1999, 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 our gaming operations.

           Riviera  Operating  Corporation  is  required  to be  licensed by the
Nevada  Gaming  Authorities.  The  gaming  license  held  by  Riviera  Operating
Corporation  requires  the  periodic  payment  of  fees  and  taxes  and  is not
transferable.  Riviera Operating  Corporation is also licensed as a manufacturer
and  distributor  of gaming  devices.  Such  licenses  also require the periodic
payment  of fees  and are not  transferable.  We are  registered  by the  Nevada
Commission as a publicly  traded  corporation (a "Registered  Corporation")  and
have been  found  suitable  to own the stock of Riviera  Operating  Corporation.
Riviera Operating  Corporation is also registered by the Nevada Commission as an
intermediary  company  and has been found  suitable  to own the stock of Riviera
Gaming  Management  which has been  registered  by the Nevada  Commission  as an
Intermediary  company  and has  been  found  suitable  to own the  stock  of its
subsidiary  Riviera  Gaming  Management  Elsinore.   Riviera  Gaming  Management

<PAGE>
                                       12


Elsinore  was  licensed as the  manager of the Four  Queens.  Riviera  Operating
Corporation is, and Riviera Gaming  Management  Elsinore was corporate  licensee
("Corporate  Licensee")  under  the terms of the  Nevada  Act.  As a  Registered
Corporation,  we are 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, a Corporate  Licensee  without first
obtaining  licenses and  approvals  from the Nevada Gaming  Authorities.  We and
Riviera Operating  Corporation have obtained,  and Riviera Gaming Management and
Riviera Gaming Management  Elsinore  previously  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.  The management  agreement
for Riviera  Gaming  Management  Elsinore  to manage the Four Queens  terminated
effective  December  30,  1999 and  therefore  the  registration  and license of
Riviera Gaming Management are no longer in effect after that date.

           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 us or Riviera Operating
Corporation 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  Riviera   Operating   Corporation   must  file
applications  with the  Nevada  Gaming  Authorities  and may be  required  to be
licensed  or found  suitable by the Nevada  Gaming  Authorities.  Our  officers,
directors and key employees who are actively and directly involved in the gaming
activities of Riviera  Operating  Corporation  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 us orRiviera  Operating  Corporation,  the companies  involved
would have to sever all relationships with such person. In addition,  the Nevada
Commission  may require us or Riviera  Operating  Corporation  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.

           We and Riviera Operating  Corporation 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 Riviera  Operating  Corporation must be reported to or approved by the Nevada
Commission.

           If it were  determined  that the Nevada Act was  violated  by Riviera
Operating Corporation the gaming license it holds could be limited, conditioned,
suspended  or  revoked,   subject  to  compliance  with  certain  statutory  and
regulatory procedures.  In addition, we or Riviera Operating Corporation 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  license  of  Riviera  Operating  Corporation  or  the  appointment  of a
supervisor  could  (and  revocation  of any  gaming  license  would)  materially
adversely affect our gaming operations.

           Any  beneficial  holder of our 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 our  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.
<PAGE>
                                       13


           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. We are subject to disciplinary action if, after we
receive  notice that a person is unsuitable  to be a stockholder  or to have any
other  relationship  with us or Riviera Operating  Corporation,  we (i) pay that
person any  dividend or interest  upon  voting our  securities,  (ii) allow that
person to exercise,  directly or indirectly,  any voting right conferred through
securities  held by that  person,  (iii)  pay  remuneration  in any form to that
person for  services  rendered or  otherwise,  or (iv) fail 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.

           We are  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.  We are also required to render maximum assistance in
determining the identity of the beneficial  owner. The Nevada Commission has the
power to require our 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 us.

           We may not make a public offering of our 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

<PAGE>
                                       14


of the stock of a Corporate Licensee ("Stock Pledge"), such as Riviera Operating
Corporation,  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 Riviera  Holdings  Corporation  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 Riviera Operating Corporation, Riviera Gaming Management
and Riviera Gaming Management Elsinore 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
Riviera Operating  Corporation,  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 or enter into associations that are harmful to
the State of Nevada or its ability to collect  gaming taxes and fees, or employ,
have contact with or associate  with 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 Riviera Las Vegas 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 Riviera Operating Corporation.
<PAGE>
                                       15


Colorado

Colorado Gaming and Liquor Regulation

Summary

         In general we, Riviera Black Hawk, our principal executive officers and
those of Riviera  Holdings,  and any of our  employees  who are  involved in our
gaming  operations,  are  required to be found  suitable  for  licensure  by the
Colorado Gaming Commission. Colorado also requires that significant stockholders
of 5% or more of our stock be certified as suitable for licensure. Riviera Black
Hawk's retail gaming license was approved by the Colorado  Gaming  Commission on
November 18, 1999.

Background

           Pursuant to an amendment to the Colorado Constitution, limited stakes
gaming became lawful in the cities of Central City, Black Hawk and Cripple Creek
on October 1, 1991.  Limited  stakes  gaming means a maximum  single bet of five
dollars on slot machines and in the card games of blackjack and poker.

           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 I, and which  conform to the  requirements  of  applicable  city  ordinances
regardless of the age of the structures.  Under the Colorado Amendment,  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.  Persons under the
age of 21 cannot  participate in limited stakes gaming.  The Colorado  Amendment
also  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 the  privilege
of conducting limited stakes gaming. Such percentage is to be established by the
Colorado Commission on July 1 annually.

           The Colorado Act declares  public policy on limited  stakes gaming to
be that:  (1) the  success of limited  sakes  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 (2) public  confidence and
trust can be maintained  only by strict  regulation  of all persons,  locations,
practices,  associations  and  activities  related to the  operation of licensed
gaming  establishments and the manufacture or distribution of gaming devices and
equipment;  (3) all  establishments  where limited gaming is conducted and where
gambling devices are operated,  and all manufacturers,  sellers and distributors
of certain gambling devices and equipment must therefore be licensed, controlled
and assisted to protect the public  health,  safety,  good order and the general
welfare of the  inhabitants  of the state to foster the stability and success of
limited stakes gaming and to preserve the economy, policies and free competition
in Colorado;  and (4) no applicant for a license or other approval has any right
to a license or to the granting of the approval  sought.  Any license  issued or
other commission  approval granted pursuant to the provisions of this Article is
a revocable privilege, and no holder acquires any vested rights therein.

Regulatory Structure

           The  Colorado Act subjects  the  ownership  and  operation of limited
stakes gaming  facilities in Colorado to extensive  licensing and  regulation by
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
Act also created the  Colorado  Division of Gaming  within the Colorado  Revenue
Department  to license,  regulate and  supervise  the conduct of limited  stakes
gaming in Colorado.  The division is supervised and administered by the Director
of the Division of Gaming.
<PAGE>
                                       16


Gaming licenses

The Colorado Commission may issue:

o        slot machine manufacturer or distributor,

o        operator,

o        retail gaming,

o        support and

o        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  licensee 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 gaming  licenses.  A slot machine  manufacturer or distributor
license is required for all persons who manufacture,  import and distribute slot
machines in Colorado.

           The Colorado  Regulations require 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.  A person may be found unsuitable because
of prior acts,  associations or financial conditions.  Acts that would lead to a
finding of  unsuitability  are those that would  violate the Colorado Act or the
Colorado  Regulations or that contravene the legislative purpose of the Colorado
Act.

Duties of licensees

           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 licensee, 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

<PAGE>
                                       17


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 Amendment 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
5% or  greater,  who have the  ability to  control  the  licensee,  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  gaming  licenses,  and all  applications  for  gaming
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 agreements,  contracts,  leases,  or arrangements in violation of
the Colorado  Amendment,  the Colorado Act or the Colorado  Regulations are void
and unenforceable.

Taxes, fees and fines

           The  Colorado  Amendment  requires  an annual tax of up to 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 July 1 of each year, the Colorado Commission
establishes  the gaming tax for the following 12 months.  Currently,  the gaming
tax is:

o        .25% on the first $2 million of these amounts;

o        2% on amounts from $2 million to $4 million;

o        4% on amounts from $4 million to $5 million;

o        11% on amounts from $5 million to $10 million;

o        16% on amounts from $10 million to $15 million; and

o        20% on amounts over $15 million.

           The Colorado  Commission  has  eliminated  the annual  device fee for
gaming device machines, blackjack tables and poker tables.

           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  $77.04  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.
<PAGE>
                                       18


           Violation  of the  Colorado  Gaming Act or the  Colorado  Regulations
constitutes  a class 1  misdemeanor  which may subject the  violator to fines or
incarceration  or both.  A licensee  who  violates  the  Colorado  Gaming 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.

Requirements for publicly traded corporations

           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.  Such
requirements  automatically  apply to any ownership  interest held by a publicly
traded corporation,  holding company or intermediary company thereof,  where the
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 the 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 no later than ten business days after 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 their  distribution.  Licensees to
whom Rule 4.5 applies must include in their charter  documents  provisions that:
restrict the rights of the  licensees to issue  voting  interests or  securities
except in accordance with the Colorado Gaming Act and the Colorado  Regulations;
limit the  rights of persons to  transfer  voting  interests  or  securities  of
licensees  except in  accordance  with the Colorado  Gaming 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

     o 5% or more  of any  class  of  voting  securities  of a  publicly  traded
corporation that is required to include in its articles of organization the Rule
4.5 charter language provisions or

     o 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,  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
other than an  institutional  investor  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.
<PAGE>
                                       19


           The  Colorado   Regulations  also  provide  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 Colorado 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
license.

Alcoholic Beverage Licenses

           The sale of alcoholic  beverages in gaming  establishments is subject
to strict  licensing,  control and  regulation  by state and local  authorities.
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  which may be
issued 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.  Riviera Black
Hawk's  hotel  and  restaurant  license  has been  approved  by both  the  local
licensing authority and the State Division of Liquor Enforcement.

Federal Registration

           Riviera  Operating  Corporation 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

           Riviera Hotel and Casino


           The  Riviera  Las Vegas  complex is  located on the Las Vegas  Strip,
occupies approximately 26 acres and comprises  approximately  one-million square
feet,  including  110,000  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 Riviera Las Vegas 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 Las Vegas 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."

           Riviera Black Hawk

           Riviera  Black Hawk owns the Black  Hawk land,  which is located on a
71,000 square foot parcel of real property in Black Hawk, Colorado and comprises
of   approximately   32,000   square  feet  of  gaming  space  and  parking  for
approximately 520 vehicles  (substantially all of which are covered), a 265 seat
casual dining restaurant,  two bars and an entertainment center with seating for
approximately 500 people.
<PAGE>
                                       20


Item 3.    Legal Proceedings

           Paulson, et al. v. Jefferies,  Riviera Holdings Corporation,  et al.,
United States  District  Court for the Central  District of  California,  No. CV
98-2644 (ABC) (the  "California  Action").  We and the plaintiffs to this action
entered into a Settlement  Agreement  dated as of July 2, 1999.  The  Settlement
Agreement was conditioned  upon the United States District court for the Central
District of California  (the "Court")  entering a Settlement Bar Order and Final
Judgment and provided that upon the entering of such an Order:  (i) we would pay
plaintiff  Allen E.  Paulson  ("Paulson")  $3,477,412  ($7.50 per share) for the
463,655 shares of Riviera  Holdings  Corporation  common stock owned by Paulson,
(ii) Paulson  would receive  $1,1522,587.50  from the funds being held in escrow
for the benefit of holders of Riviera  Holdings  Corporation's  Contingent Value
Rights ("CVRs"),  (iii) the remainder of the escrow of approximately  $4,340,000
would be  distributed to the holders of the CVRs, and (iv) Paulson would file an
amended complaint which eliminated allegations of wrongdoing against us.

           On October  7, 1999,  the Court  entered a  Settlement  Bar Order and
Final  Judgment  which  dismissed  the  California  Action  as  against  us with
prejudice,  and  barred  the  other  defendants  to  the  lawsuit  from  seeking
indemnification  against us for claims arising under the federal securities laws
or  for  state  law  claims  arising  out  of the  transactions  underlying  the
plaintiffs' federal security law claims.

           Shortly  after the entry of the  Settlement  Bar Order,  we  acquired
Paulson's  stock,  and funds were  disbursed from escrow as per the terms of the
Settlement Agreement.

     Morgens,  Waterfall,   Vintiadis  &  Company,  Inc.,  v.  Riviera  Holdings
Corporation,      William     L.      Westerman,      Robert     R.     Barengo,
Richard L.  Barovick and James N. Land,  Jr., as  Directors of Riviera  Holdings
Corporation,       United      States      District      court      for      the
District of Nevada  (CV-S-99-1383-JBR(RLH)) (the "Nevada Action"). The plaintiff
in this action  ("Morgens,  Waterfall")  is a  shareholder  of Riviera  Holdings
Corporation  and a defendant to the  California  Action.  On September 30, 1999,
Morgens,  Waterfall commenced this action in Nevada state court, where it sought
an order  enjoining us from  obtaining a Settlement  Bar Order in the California
Action.  We and the other  defendants to the Nevada Action removed the action to
the United States  District Court for the district of Nevada on October 1, 1999.
This  removal to federal  court  divested  the state  court of  jurisdiction  to
consider Morgens,  Waterfall's motion for injunctive relief. Morgens,  Waterfall
filed a complaint  with the court,  but it did not serve the complaint on any of
the defendants.

           On November 1, 1999, Morgens,  Waterfall served a notice of motion to
remand the Nevada  Action  from the Nevada  federal  court back to Nevada  state
court.  We and the  other  defendants  opposed  the  motion,  and the  motion is
presently pending before the federal court.


     On January  31,  2000,  Morgens,  Waterfall  purported  to serve an Amended
Summons and a First Amended Verified  Complaint on Riviera Holdings  Corporation
with subsequent service on directors.  The Amended Complaint asserts four claims
for relief. In the first claim for relief, Morgens, Waterfall asserts that there
is a dispute as to the meaning of the amended  complaint filed by Paulson in the
California Action pursuant to the Settlement Agreement. Morgens, Waterfall seeks
an  affirmation  injunction  requiring  Riviera  Holdings  Corporation  to  seek
clarification from Paulson as to the meaning of this amended  complaint.  In its
second claim for relief,  Morgens,  Waterfall seeks indemnification from Riviera
Holdings Corporation for all damages and costs incurred in the California Action
by  reason  of any  misconduct  alleged  by  Paulson  against  Riviera  Holdings
Corporation.  In its third  claim for  relief,  Morgens,  Waterfall  claims that
Riviera Holdings  corporation and the director defendants breached its fiduciary
duties to Morgens,  Waterfall when it consummated  the Settlement  Agreement and
secured the settlement Bar Order because it left Morgens,  Waterfall unprotected
from claims based on Riviera Holdings  Corporation's  alleged misconduct and, in
addition,  harmed  Morgens,   Waterfall  because  Riviera  Holdings  Corporation
allegedly  paid too much for  Paulson's  stock.  Morgens,  Waterfall  styles its
fourth claim for relief as a  "derivative  claim" and assets it only against the
director  defendants.  Morgens,  Waterfall  claims that the director  defendants
violated their  fiduciary  duties by entering into the Settlement  Agreement and
securing the Settlement Bar Order. We believe all these claims are without merit
and intend to vigorously defend against them.


           We are also a party to several routine lawsuits both as plaintiff and
as defendant  arising from the normal  operations of a hotel.  We do not believe
that the  outcome of such  litigation,  in the  aggregate,  will have a material
adverse effect on the financial position or results of our operations.

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

           Not applicable.
<PAGE>
                                       21


                                                                     .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 28, 2000, based upon information  available to it, the
Company  believes that there were  approximately  600 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 Riviera
Operating  Corporation.  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,  1999,  1998 and 1997,  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
       1999        Quarter             Quarter                Quarter                Quarter

<S>                 <C>                    <C>                    <C>                    <C>
       HIGH      $7.25                  $6.38                  $6.13                  $6.63
       LOW       $4.00                  $3.94                  $4.00                  $3.94


       1998

       HIGH      $ 15.06                $ 10.81                 $ 8.13                 $ 5.81
       LOW         10.75                   6.00                   5.75                   3.88


       1997

       HIGH      $ 14.50                $ 14.13                $ 15.50                $ 14.94
       LOW         12.88                  12.25                  12.13                  12.75


</TABLE>


           On February  28, 2000,  (the most recent trade date of the  Company's
common stock), 34,500 shares were traded closing at $6.125 per share.


Item 6.    Selected Financial Data

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


                                          1999        1998       1997        1996       1995       1994
                                          ----        ----       ----        ----       ----       ----

<S>                                        <C>         <C>        <C>         <C>        <C>        <C>
Net Operating  Revenue                  $158,173    $159,955   $153,793    $164,409   $151,146   $153,921
Net Income (Loss)                        (2,869)     (4,057)      2,088       8,440      6,344      4,790
Net Income (Loss) Per Diluted Common     ($0.58)     ($0.81)      $0.40       $1.63      $1.26      $1.00
Share
Total Assets                             288,990     244,909    347,866     167,665    157,931    151,925
Long-Term Debt                           229,052     179,439    177,512     109,088    110,571    113,155

</TABLE>



<PAGE>
                                       22





     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>


                                                                               1999           1998            1997
     Revenues:
 <S>                                                                           <C>            <C>             <C>
      Casino                                                                  46.8%          48.6%           46.6%
      Rooms                                                                   25.2%          24.8%           27.2%
      Food and Beverage                                                   15.9%          15.0%           14.0%
      Entertainment                                                           13.3%          13.5%           13.6%
      Other                                                                    7.4%           7.0%            6.9%
      Less promotional  allowances                                            (8.6%)         (8.7%)          (8.3%)
                                                                             ------         ------          ------
        Net revenues                                                         100.0%         100.0%          100.0%
     Costs and Expenses:
      Casino(1)                                                               58.3%          58.3%           56.7%
      Rooms(1)                                                                54.9%          52.7%           50.8%
      Food and Beverage(1).                                                   72.9%          73.3%           74.6%
      Entertainment(1)                                                        77.5%          78.3%           82.5%
      Other(1)                                                                27.6%          29.7%           28.5%
      General and administrative                                              18.7%          16.9%           17.0%
      Corporate expenses,  Severance Pay                                       0.0%           0.3%            0.3%
                                                                               ---            ----            ----

      Depreciation and amortization                                            8.8%           7.6%            6.8%
     Total Costs and Expenses                                                 93.0%          89.8%           87.7%
                                                                              -----          -----           -----
     Income from operations                                                    7.0%          10.2%           12.3%
     Interest expense on $100 million notes                                    0.0%          (2.9%)          (7.2%)
     Interest income on Treasury Bills to retire $100 million notes            0.0%           1.5%            1.5%
     Interest expense, other                                                 (14.8%)        (12.2%)          (4.6%)
     Interest income, other                                                    1.4%           1.5%            1.3%
     Interest, capitalized                                                     3.0%           1.7%            0.5%
     Other (income) expense, net                                              (1.2%)         (0.8%)          (1.0%)
                                                                             ------         ------          ------
     Income before provision (benefit) for income taxes                       (4.6%)         (1.0%)           2.2%
     (Benefit) provision for income  taxes                                    (2.8%)         (0.3%)           0.9%

      Net Income (loss) before extraordinary item                             (1.8%)         (0.7%)            1.4%

     Extraordinary item, net of income taxes of $1.6 million                   0.0%          (1.9%)            0.0%

     Net Income (Loss)                                                        (1.8%)         (2.5%)            1.4%
                                                                             ======         ======            ====

     EBITDA (2) margin                                                        16.2%          18.2%            19.1%
</TABLE>



(1)      Shown as a percentage of corresponding departmental revenue.


(2)            EBITDA  consists  of  earnings  before  interest,  income  taxes,
               depreciation  and  amortization  (excluding  corporate  expenses,
               preopening expense,  severance pay and Paulson  Merger/litigation
               costs  included  in  Other,  net.)  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

<PAGE>
                                       23


               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.


1999 Compared to 1998

Revenues

         Net revenues  decreased by  approximately  $1.8 million,  or 1.1%, from
$159.9 million in 1998 to $158.2 million in 1999.  Casino revenues  decreased by
approximately  $3.6 million,  or 4.6%,  from $77.7 million  during 1998 to $74.1
million during 1999 due primarily to a 2.4% fall in table games hold  percentage
from 1998 which decreased win by  approximately  $2.1 million.  Table games drop
was $6.6  million  down from 1998  resulting in a loss of $1.2 million in tables
games revenue.  Slot coin-in,  however,  increased $10.6 million from 1998 which
contributed an additional  $700,000 in slot revenue.  Room revenues increased by
approximately $300,000, or 0.7%. from $39.6 million 1998 to $39.9 million during
1999 as a result of an increase in hotel occupancy from 95.2% to 97.5% (based on
available  rooms) offset by a slight  decrease in average room rate of $1.04, or
1.9%. Food and beverage revenues increased  approximately $1.2 million, or 4.9%,
from $23.9  million in 1998 to $25.1  million  during 1999 due primarily to the
expansion of the  convention  center  banquet  facilities in February  1999.
Entertainment revenues decreased by approximately  $550,000, or 2.6%, from $21.5
million during 1998 to $21.0 million during 1999 due primarily to the closing of
Splash in early  November  1999 until  December 25, 1999 for  renovation.  Other
revenues increased by approximately $550,000, or 5.0%, from $11.2 million during
1998 to $11.7 million during 1999 due primarily to increased  telephone and gift
shop revenues.  Promotional  allowances decreased by approximately  $300,000, or
2.4%,  from $14.0 million  during 1998 to $13.7 million  during 1999  consistent
with the decrease in table games play.

Direct Costs and Expenses of Operating Departments

         Total direct costs and expenses of operating  departments  decreased by
approximately  $1.0  million,  or 0.9%,  from  $103.8  million in 1998 to $102.9
million in 1999.  Casino expense  decreased by  approximately  $2.1 million,  or
4.6%,  from $45.3 million  during 1998 to $43.2  million  during 1999 and casino
expenses as a percent of casino revenue  remained  constant at 58.3% in 1998 and
1999,  due to  decreased  casino  marketing  costs.  Room costs  increased  $1.1
million,  or 5.0% from $20.8 million in 1998 to $21.9 million in 1999, and, room
costs as a percentage of room revenues increased from 52.7% during 1998 to 54.9%
during 1999 due to  additions to hotel  operations  staff in an effort to better
accommodate  our guests.  Food and beverage  costs  increased  by  approximately
$800,000,  or 4.4%,  from $17.5 million  during 1998 to $18.3 million during the
1999  period  resulting  from a  corresponding  increase in  revenues.  Food and
beverage  costs as a percentage  of food and beverage  revenues  decreased  from
73.3%  during  1998 to 72.9%  during  1999  because  food and  beverage  revenue
increased   while  payroll  and  other  costs  remained   relatively   constant.
Entertainment  costs decreased by  approximately  $600,000,  or 3.5%, from $16.9
million during 1998 to $16.3 million during 1999 and entertainment  expense as a
percentage of entertainment  revenues  decreased from 78.3% during 1998 to 77.5%
in 1999 due to the  increase in  revenues  in special  events and the box office
operation.  Other expenses  decreased by approximately  $100,000,  or 2.4%, from
$3.3 million to $3.2  million due to reduced  costs of long  distance  telephone
service.
<PAGE>
                                       24


Other Operating Expenses

         General and  administrative  expenses  increased by approximately  $2.5
million,  or  9.4%,  from  $27.0  million  for 1998 to  $29.5  million  1999 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 increased from 16.9% during
the 1998 period to 18.7% during the 1999  period.  Additionally,  utility  costs
have increased  approximately $600,000 from 1998 to 1999 due to the expansion of
the convention center.  Depreciation and amortization increased by approximately
$1.9  million,  or 15.3%,  from $12.1  million  during the 1998  period to $14.0
million  during the 1999 period due to a  significant  increase  in  depreciable
capital expenditures for depreciable operating assets in the twelve months
ended December 31, 1999 totaling approximately $31.1 million.

Other Income (Expense)

         Interest  expense on $100 million notes of $4.6 million,  less interest
income on U.S.  Treasury  Bills of $2.3  million was  recorded in 1998 until the
notes were redeemed on June 1, 1998.  Interest expense,  other increased by $3.9
million due to the 13% First Mortgage Notes issued by Riviera Black Hawk in June
1999.  Interest  income,  other  decreased  $200,000  because of the decrease in
investment  balances for the period as the  proceeds of the $175  million  notes
were utilized in the Convention  Center  Pavilion in early 1999 and the proceeds
of the $45 million  notes were utilized in the Black Hawk,  Colorado  project in
the second half of 1999.  Capitalized  interest increased $2.1 million primarily
on the Black Hawk, Colorado,  project but also on the Convention Center Pavilion
and Pavilion Sky Box projects.

         Other expenses,  net include Paulson litigation and settlement costs of
$1.9 million in 1999. Of this amount $1.2 million  represents  the spread on the
repurchase  of Mr.  Paulson's  shares in connection  with the  settlement of the
litigation.  Riviera  agreed to pay $7.50 per share in July 1999 when the market
price was $5.00 per share.

Extraordinary Item, Net of Taxes in 1998

                The $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 (Loss)


                Net loss  decreased  approximately  $1.2  million from a loss of
$4.1  million  in 1998 to a loss of $2.9  million in 1999 due  primarily  to the
extraordinary  item in 1998.  Federal  income tax benefits  exceed the normal 35
percent  because the Company  settled an Internal  Revenue Service audit through
1996. The audit resulted in the release of reserves of $2.2 million for taxes on
employee meals and other items, which were settled favorably to the Company.


EBITDA

                EBITDA, as defined,  decreased by approximately $3.4 million, or
11.7%,  from  $29.1  million in 1998 to $25.7  million in 1999.  During the same
periods, EBITDA margin decreased from 18.2% to 16.2% of net revenues.
<PAGE>
                                       25


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 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.
<PAGE>
                                       26


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

Liquidity and Capital Resources


         The Company  had cash and short term  investments  of $48.1  million at
December  31,  1999,  which was a decrease  of  $800,000  from the  balances  at
December 31, 1998.

         For 1999,  the Company's net cash provided by operating  activities was
$6.7  million  compared to $8.5  million in 1998.  Cash flows used in  investing
activities  were  $57.9  million  in 1999 and $28.8  million  in 1998.  Net cash
provided  by  financing  was $45.1  million  in 1999 and $4.0  million  in 1998.
EBITDA,  as  defined,  for 1999 and 1998 was $25.7  million  and $29.1  million,
respectively.  Management believes that cash flow from operations, combined with
the $48.1 million cash and short term  investments,  will be sufficient to cover
the  Company's   debt  service  and  enable   investment  in  budgeted   capital
expenditures for the next twelve months  including  completion of the Black Hawk
casino development.

         Cash flow from  operations is not expected to be sufficient to pay 100%
of the  principal  of the $175  million 10% Notes at maturity on August 15, 2004
and the $45  million  13% Notes at  maturity  on May 1, 2005.  Accordingly,  the
ability of the Company and its subsidiary to repay the Notes at maturity will be
dependent upon its ability to refinance  those notes.  There can be no assurance
that the Company and its  subsidiary  will be able to  refinance  the  principal
amount of the 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.  Although

<PAGE>
                                       27


Riviera Black Hawk, Inc. can, at any time prior to May 1, 2001, redeem up to 35%
of the aggregate  principal amount of the 13% notes at 113% with the proceeds of
a qualified public offering, the subsidiary may not redeem 100% of the 13% Notes
until May 1, 2002, at premiums beginning at 106.5% and declining each subsequent
year to par in 2004.


         The 10% and 13% Note Indentures provide that, in certain circumstances,
the  Company  and its  subsidiary  must offer to  repurchase  the 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 and its
subsidiary  would be unable to pay the  principal  amount of the Notes without a
refinancing.

         The 10% Note  Indenture  contains  certain  covenants,  which limit the
ability of the Company and its  restricted  subsidiaries  (and its  unrestricted
subsidiary  Riviera Black Hawk, Inc. under the 13% Notes Indenture),  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.  As a result of these  restrictions,  the
ability of the Company and its subsidiaries 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 its  subsidiaries  would be required to curtail or defer  certain of
their capital expenditure programs under these  circumstances,  which could have
an adverse effect on operations. At December 31, 1999, the Company believes that
it is in compliance with the covenants.


         In  August  1997,   the  Company,   through  its  indirect  100%  owned
subsidiary, Riviera Black Hawk, Inc., purchased approximately 70,000 square feet
of land in Black Hawk, Colorado, which is entirely zoned for gaming. On February
4, 2000, the Company  opened its casino  containing  1,000 slot  machines,  12
table games, a 520-space  covered parking  garage,  and  entertainment  and food
service  amenities.  As of December  31, 1999,  the company had  invested  $20.0
million in cash (exclusive of capitalized  interest) in the Black Hawk, Colorado
project and the total project costs at December 31, 1999  including  capitalized
interest were $56.7 million.

     Recently Adopted Accounting Standards - 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.
The Company  adopted this standard in 1999 and  recognized  preopening  costs of
$595,000  that would  have  otherwise  been  deferred  until the  opening of the
Riviera Black Hawk Casino in fiscal 2000.

     Recently Issued Accounting  Standards -The Financial  Accounting  Standards
Board issued SFAS No. 133,  "Accounting for Derivatives," which is effective for
fiscal years beginning after June 15, 2000. 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, 2001.  Management has not finalized its analysis
of this SFAS or the impact of this SFAS on the Company or the  Company's  future
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 maturities of 60 days or less.

         As of December  31,  1999,  we had $225.0  million in  borrowings.  The
borrowings  include $175 million in notes  maturing in 2004,  $45 million  notes
maturing in 2006 and capital  leases  maturing at various  dates  through  2005.
Interest under the $175 million notes is based on a fixed rate of 10%.  Interest
on the $45 million notes is 13% with  contingent  interest if certain  operating
results are achieved.  The capital  leases have interest rates ranging from 5.2%
to 13.5%.  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  $1,120,000  when the project is  complete,  is payable
over ten years  beginning in 2000. The special  improvement  district bonds bear
interest at 5.5%. Other borrowings relate to leases.


<PAGE>
                                       28




<TABLE>
<CAPTION>

Interest Rate Sensitivity

Principal (Notational Amount by Expected Maturity)
Average Interest Rate

(Amounts in Thousands)                                                                                   Fair Value
<S>                              <C>       <C>      <C>       <C>       <C>
                                 2000      2001     2002      2003      2004     Thereafter     Total    At
                                                                                                         12/31/99

     Assets

Short term investments        $40,036                                                           $40,036    $40,036

Average interest rate            4.75%

Long Term Debt
Including Current Portion

Equipment loans and

 capital leases                 $1,204   $1,072    $1,171   $1,254         $949                   $5,650    $5,650

Average interest rate             7.7%     8.0%      7.8%     7.8%         7.8%


 10% First Mortgage Note                                                $173,579                $173,579  $154,000

Average interest rate                                                     10.0%

Equipment loans and
capital leases-Black Hawk,

Colorado casino casino             $9        $10    $8                                           $27        $27

Average interest rate             11.2%      11.2%   11.2%

Special Improvement
District Bonds-Black Hawk,

 Colorado casino project           $60        $64      $68      $71         $76       $445        $784       $784

Average interest rate              5.5%     5.5%      5.5%     5.5%        5.5%       5.5%


 13% First Mortgage Note
Black Hawk, Colorado casino

project                                                                              $45,000     $45,000    $48,600

Average interest rate                                                                  13.0%
</TABLE>


<PAGE>
                                       29





Year 2000

         The Company  conducted a comprehensive  review of its computer  systems
and other systems for the purpose of assessing its potential  Year 2000 Problem,
and modified or replaced those systems which were not Year 2000 compliant. Based
upon  this  review,  systems  were  compliant  by  December  1999.  However,  if
modifications had not been made or completed on schedule,  the Year 2000 Problem
could have had a significant impact on the Company's operations.

         All costs  related to the Year 2000 Problem were  expensed as incurred,
while the cost of new hardware and software was  capitalized  and amortized over
its expected  useful life. The costs  associated  with Year 2000 compliance were
not material to the Company's financial position or results of operations. As of
December 31,  1999,  the Company has incurred  costs of  approximately  $200,000
(primarily for internal labor) related to the system applications.


         In  addition,  the  Company  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,  was advised that such
vendors' software or products were Year 2000 compliant.  The Company experienced
no failure of a major vendor or supplier which impacted operations.

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  such as
statements  relating  to plans for future  expansion,  as well as other  capital
spending,  financing  sources and effects of regulation  and  competition.  Such
forward-looking  statements involve important risks and uncertainties that could
cause  actual  results  to  differ  materially  from  those  expressed  in  such
forward-looking statements.


Item 8.    Financial Statements and Supplementary Data

           See financial Statements included in Item 14(a).

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

           None.




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


                           PART III

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





Item 10.   Directors and Executive Officers of the Registrant.

           Information  regarding this item is  incorporated by reference to the
Company's Proxy  Statement dated March 17, 2000,  relating to the Annual Meeting
of Stockholders to be held on April 25, 2000 and is made a part hereof.

Item 11.   Executive Compensation

           Information  regarding this item is  incorporated by reference to the
Company's Proxy  Statement dated March 17, 2000,  relating to the Annual Meeting
of Stockholders to be held on April 25, 2000 and is made a part hereof.
<PAGE>
                                       30


Item 12.   Principal Shareholders

           Information  regarding this item is  incorporated by reference to the
Company's Proxy  Statement dated March 17, 2000,  relating to the Annual Meeting
of Stockholders to be held on April 25, 2000 and is made a part hereof.

Item 13.   Certain Relationships and Related Transactions

           Information  regarding this item is  incorporated by reference to the
Company's Proxy  Statement dated March 17, 2000,  relating to the Annual Meeting
of Stockholders to be held on April 25, 2000 and is made a part hereof.

                                         PART IV

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

           (a)(1)   List of Financial Statements

           The  following  Independent  Auditor's  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 Febraury 14, 2000.
-        Consolidated Balance Sheets as of December 31, 1998 and 1999.
-        Consolidated  Statements of Operations for the Years Ended December 31,
         1999, 1998, and 1997.
-        Consolidated  Statements of Stockholders' Equity for the Years
         Ended December 31, 1999, 1998 and 1997.
-        Consolidated  Statements  of Cash Flows for the Years Ended  December
         31, 1999, 1998 and 1997

-        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

         The  Company  filed a current  report on Form 8-K dated  October  18,
         1999,  to  announce  the  court  approval  of  the  settlement  of  the
         Paulson litigation.


<PAGE>
                                       31



                                       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)

                                           March 14, 2000


           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      March 14, 2000
------------------------
William L. Westerman            Executive Officer and President


/s/ DUANE R. KROHN              Treasurer (Principal Financial    March 14, 2000
-------------------------
Duane R. Krohn                  and Accounting Officer)


/s/ ROBERT R. BARENGO           Director                          March 14, 2000
-------------------------
 Robert R. Barengo

/s/ RICHARD L. BAROVICK         Director                          March 14, 2000
-------------------------
Richard. L. Barovick


/s/ JAMES N. LAND, JR.          Director                          March 14, 2000
-------------------------
James N. Land, Jr.



<PAGE>
                                       32



                            EXHIBIT INDEX Description

Exhibit

Number


     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>
                                       33


     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)
<PAGE>
                                       34


     10.9*  Operating  Agreement,  dated June 30, 1993,  between the Company and
Riviera 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)
<PAGE>
                                       35


     10.21* Amendment dated September 30, 1994, to Employment  Agreement between
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)
<PAGE>
                                       36


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

     10.38  Consulting  Agreement  between Riviera Gaming  Management,  Inc. and
Peninsula Gaming Partners, LLC, dated January 1, 2000.

     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

o          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.
<PAGE>
                                       37


EXHIBIT 10.38
AMENDED AND RESTATED CONSULTING AGREEMENT

Amended and Restated Consulting Agreement ("Agreement"),  dated as of January 1,
2000, by and between  Riviera Gaming  Management,  Inc.  ("RGM"),  and Peninsula
Gaming Partners, LLC, a Delaware limited liability company ("Peninsula").

                  Pursuant to a consulting  agreement (the "Original  Consulting
Agreement"),  dated  September  27,  1999,  by and  between  RGM and  Peninsula,
Peninsula  has engaged  RGM, and RGM has agreed to be engaged by  Peninsula,  to
provide  consulting and other advisory services in connection with the operation
of the Diamond Jo riverboat casino (the "Facility") located in Dubuque, Iowa.

                  Peninsula  and RGM each hereby  agree to amend and restate the
terms  of  the  Original  Consulting  Agreement  on  the  terms  and  conditions
hereinafter set forth.

                  In  consideration  of the mutual  agreements  hereinafter  set
forth,  the parties  hereto agree as follows:  1. This  Agreement  shall have an
initial term of six months from the date hereof (the  "Initial  Term") and shall
automatically  renew for successive  six-month  terms (the Initial Term, and any
successive  term,  hereinafter  the "Term")  unless this Agreement is terminated
earlier as provided  herein.  Either party may terminate  this  Agreement at any
time after the Initial Term for any reason upon 60 days prior written  notice to
the other party.

2. During the Term of this Agreement, RGM shall render consulting and other
advisory  services  hereunder  at the sole  direction  of Mr. M. Brent  Stevens;
provided, however, that RGM will have no responsibility for the operation of the
Facility or the management of the business or affairs of Peninsula.

3. In  consideration  for the  services to be rendered  hereunder,  RGM shall be
entitled  to  compensation  of $30,000  for each of the  months of  January  and
February  2000 and $22,500  per month  thereafter  (the  "Monthly  Fee"),  which
Monthly  Fee  shall be paid by  Peninsula  in  advance  on the first day of each
month,  commencing March 1, 2000 (it being understood that the Monthly Fee shall
be in addition to and  exclusive of the $7,500  monthly  payment  required to be
made under the Employee Sharing Agreement, a copy of which is attached hereto as
Exhibit A). During the Term of this Agreement,  RGM shall be entitled to monthly
compensation in excess of the Monthly Fee to the extent such excess compensation
(hereinafter,  "Additional  Compensation")  is approved in writing in advance by
Peninsula  and is  documented  in  writing  by RGM on an hourly  basis in a form
reasonably  acceptable to Peninsula (it being  understood  that hourly rates for
services  rendered under this Agreement  shall not exceed the rates set forth on
Schedule A attached hereto). RGM hereby acknowledges and agrees that all amounts
due and  owing RGM under (i) the  Original  Consulting  Agreement  and (ii) this
Agreement  in respect of services  rendered or to be rendered  during the period

<PAGE>
                                       38


prior to March 1, 2000, in each case,  have been paid in full by  Peninsula.  In
addition to the Monthly Fee (and Additional Compensation,  if any), RGM shall be
entitled to reimbursement of reasonable  out-of-pocket  expenses incurred by RGM
in  connection  with  its  performance  under  this  Agreement,  which  payments
(including  Monthly  Fees  and  Additional  Compensation,  if any)  shall be (i)
invoiced by RGM on a monthly  basis (which  invoice  shall be  accompanied  by a
written  receipt  or other  documentation  reasonably  acceptable  to  Peninsula
evidencing  such expenses) and (ii) paid by Peninsula  within 10 days of receipt
thereof.  Consulting and advisory services to be rendered by RGM hereunder shall
be provided by employees of RGM as needed from time to time at the  direction of
Mr.  William L.  Westerman  and Mr.  Stevens.  In addition to the services to be
provided by RGM under this Agreement,  RGM  acknowledges and agrees to the terms
and conditions set forth in that certain  Employee Sharing  Agreement,  attached
hereto as Exhibit A, pursuant to which Peninsula Gaming Company,  LLC has agreed
to employ Mr. Jerome Grippe,  an employee of RGM, to provide certain  additional
managerial  services described therein. 4. Peninsula hereby agrees that prior to
any  consulting  services  being  rendered by RGM,  Peninsula  will  obtain,  at
Peninsula's expense, an opinion of Peninsula's Iowa gaming counsel to the effect
that rendition of such  consulting  services by RGM does not require that RGM be
licensed by the Iowa gaming authorities,  provided however that if counsel shall
advise that any such license must be obtained,  RGM reserves the right to either
terminate this  Agreement or to require  Peninsula to pay all costs and expenses
incurred in connection with obtaining any necessary gaming licenses.  RGM hereby
agrees that as a condition to providing services hereunder it shall enter into a
confidentiality  agreement,  in form  and  substance  reasonably  acceptable  to
Peninsula,  in order to protect the proprietary and confidential  information of
Peninsula  made  available  or  disclosed  to RGM during the course of providing
services under this Agreement.

5.  RGM,  its  affiliates  and  each of  their  respective  officers,  partners,
directors,  employees  and agents  shall not be liable to the  Peninsula  or any
person who has  acquired an  interest in either or both of them,  for any losses
sustained or liabilities  incurred,  including monetary damages,  as a result of
any act or omission of RGM, its affiliates or any of their respective  officers,
partners,  directors,  employees or agents,  if the conduct of RGM or such other
person did not constitute  actual fraud,  gross  negligence or willful or wanton
misconduct  ("Consultant  Conduct  Standard").  The negative  disposition of any
action, suit or proceeding by judgment, order, settlement,  conviction or upon a
plea of nolo  contendere,  or its  equivalent,  shall not,  of itself,  create a
presumption  that  RGM,  its  affiliate  or any of  their  respective  officers,
partners,  directors,  employees  or agents  acted in a manner  contrary  to the
Consultant Conduct Standard.

     6. a. Subject to the  provisions  of Section 6(b) hereof,  Peninsula  shall
indemnify  and hold  harmless RGM, its  affiliates  and any of their  respective
officers,  partners,  directors,  employees  and agents (each  individually,  an
"Indemnitee"), from and against anyand all losses, claims, damages, liabilities,
expenses  (including  reasonable  legal fees and  expenses),  judgments,  fines,
settlements and other amounts arising from any and all claims, demands, actions,

<PAGE>
                                       39


suits or proceedings, civil, criminal,  administrative or investigative, in
which an Indemnitee may be involved, or threatened to be involved, as a party or
otherwise, which relates to, or arises out of, the performance of any duties and
services for or on behalf of the Peninsula  pursuant to the terms and within the
scope  of this  Agreement.  The  negative  disposition  of any  action,  suit or
proceeding  by judgment,  order,  settlement,  conviction or upon a plea of nolo
contendere,  or its equivalent,  shall not, of itself, create a presumption that
an Indemnitee acted in a manner contrary to the Consultant Conduct Standard.

b. An Indemnitee shall not be entitled to  indemnification  under this Section 6
 with  respect  to any  claim,  issue or  matter  in  which it has been  finally
 adjudged  in a  nonappealable  order  that such  Indemnitee  has  breached  the
 Consultant Conduct Standard unless

  and only to the extent  that the court in which such  action was  brought,  or
  another court of competent  jurisdiction,  determines upon  application  that,
  despite the adjudication of liability,  in view of all of the circumstances of
  the case, the Indemnitee is fairly

        and reasonably  entitled to  indemnification  for such  liabilities  and
  expenses as the court may deem proper. In addition,  notwithstanding  anything
  to the  contrary  contained  in this  Section  6, an  Indemnitee  shall not be
  entitled to  indemnification  under this Section 6 against losses sustained or
  liabilities incurred if such losses or liabilities are finally determined by a
  court of competent jurisdiction to have been the direct result of breach of
  the Consultant Conduct Standard by such Indemnitee.

     c. In the event that any legal proceedings shall be instituted or any claim
or demand  shall be  asserted  by any person in respect of which  payment may be
sought by an Indemnitee  under the  provisions of this Section 6, the Indemnitee
shall promptly  cause written notice of the assertion of any such  proceeding or
claim of which it has  actual  knowledge  to be  forwarded  to  Peninsula.  Upon
receipt  of such  notice,  Peninsula  shall  have the  right,  at its option and
expense,  to be  represented  by counsel of its choice,  and to defend  against,
negotiate,  settle or otherwise deal with any proceeding,  claim or demand which
relates  to any  loss,  liability,  damage  or  deficiency  indemnified  against
hereunder;  provided,  however,  that no settlement  shall be made without prior
written  consent of the  Indemnitee,  which  consent  shall not be  unreasonably
withheld;  and provided further, that the Indemnitee may participate in any such
proceeding  with counsel of its choice and at its expense.  The  Indemnitee  and
Peninsula  agree to  cooperate  fully  with each  other in  connection  with the
defense,  negotiation  or  settlement  of any such  legal  proceeding,  claim or
demand.

     7. This Agreement  shall be governed by and  interpreted in accordance with
the laws of the State of Nevada without giving effect to conflict of laws.

8. Peninsula and RGM hereby agree that any dispute arising under or with respect
to this  Agreement  shall be  determined  by  arbitration  in Las Vegas,  Nevada
pursuant to the rules of the American Arbitration Association ("AAA") by a panel
of three  arbitrators with experience in the gaming business,  one of whom shall
be appointed  by RGM, one of whom shall be appointed by Peninsula  and the third
of whom  shall be  appointed  by the  first  two  arbitrators  and  shall act as
Chairman, provided that if a party shall fail to appoint an arbitrator within 20
days  after  commencement  of the  arbitration  or  the  Chairman  shall  not be
appointed within 40 days of the commencement of the arbitration,  the same shall
be appointed by the AAA. Such  arbitrators  may award legal fees and expenses to
the party prevailing in such arbitration. The decision of such arbitrators shall
be binding upon the parties  hereto.  9. This  Agreement  represents  the entire
understanding  of the  parties  with  respect to its  subject  matter and may be
amended or  modified  only by a written  instrument  duly  signed by the parties
hereto.
<PAGE>
                                       40


10.Any notice required or permitted to be given hereunder shall be given as
follows:

                           a. Peninsula:
                           -- ----------
                           M. Brent Stevens
                           c/o Jefferies & Company, Inc.
                           11100 Santa Monica Boulevard, Tenth Floor
                           Los Angeles, CA  90025

                           b. RGM:
                           -- ----
                           William L. Westerman
                           Riviera Hotel & Casino
                           2901 Las Vegas Boulevard South
                           Las Vegas, NV  89109

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
 written above.
                                                RIVIERA GAMING MANAGEMENT, INC.


                                           By:_________________________________
                                                          Name:
                                                          Title:


                         PENINSULA GAMING PARTNERS, LLC

                             By:__________________________________
                             Name: M. Brent Stevens
                             Title:  President and CEO

<PAGE>
                                       41





                           EMPLOYEE SHARING AGREEMENT

     Employee Sharing Agreement ("Agreement"), dated as of February 15, 2000, by
and between Riviera Gaming  Management,  Inc. ("RGM"),  Jerome Grippe ("Grippe")
and  Peninsula  Gaming  Company,  LLC,  a  Delaware  limited  liability  company
("Peninsula").  WHEREAS,  Peninsula desires to engage the services of Grippe, an
employee  of RGM,  and RGM and Grippe  agree to such  employment,  in each case,
pursuant  to the terms and  conditions  set forth  herein;  NOW,  THEREFORE,  in
consideration  of the mutual  agreements  hereinafter  set  forth,  for good and
valuable   consideration,   the   adequacy  and  receipt  of  which  are  hereby
acknowledged, the parties hereby agree as follows:

1. This  Agreement  shall have an initial  term  commencing  on the date  hereof
through June 30, 2000 (the  "Initial  Term") and shall  automatically  renew for
successive   six-month  terms  (the  Initial  Term,  and  any  successive  term,
hereinafter, the "Term") unless this Agreement is terminated earlier as provided
herein.  Any party may  terminate  this  Agreement at any time after the Initial
Term for any  reason  upon 60 days  prior  written  notice to the  other  party;
provided, however, that Peninsula may terminate Grippe's employment hereunder at
any time for just cause.  For purposes of this Section 1, "just cause" means (i)
a material  breach of this  Agreement by Grippe  (after notice and a 10-day cure
period);  (ii) a breach of Grippe's  duty of loyalty to  Peninsula or any act of
dishonesty  with respect to Peninsula  or its members,  customers or  suppliers;
(iii)  Grippe's  continued  failure or refusal to perform any  material  duty to
Peninsula which is normally  attached to his position (after notice and a 10-day
cure period); (iv) Grippe's gross negligence or willful misconduct in performing
those duties which are normally attached to his position;  (v) the commission by
Grippe  of  an  act  of  fraud,  conversion,   misappropriation  (including  the
unauthorized  use or disclosure of  confidential  or proprietary  information of
Peninsula) or embezzlement or crime of moral turpitude;  (vi) a conviction of or
guilty plea or confession by Grippe to any fraud, conversion,  misappropriation,
embezzlement  or  felony;  (vii)  the  exposure  of  Peninsula  to any  criminal
liability or regulatory sanction or adverse action  substantially  caused by the
conduct of Grippe which results in a material  adverse  effect upon  Peninsula's
business,  operations,  financial  condition  or  results of  operations  or the
exposure  of  Peninsula  to any  civil  liability  caused by  Grippe's  unlawful
harassment in employment; or (viii) the repeated taking of any action prohibited
(x) by the board of managers  or any of the  executive  officers  of  Peninsula,
provided that Grippe has received at least one written notice of having taken an
action so  prohibited,  or (y) by this  Agreement;  or (ix) Grippe's  failure to
obtain and/or maintain an appropriate license to serve as General Manager of the
Diamond Jo riverboat casino located in Dubuque, Iowa (the "Facility").

2. During the Term of this Agreement,  Peninsula hereby agrees to employ Grippe,
Grippe agrees to be employed by Peninsula,  and RGM agrees to offer the services
of Grippe to  Peninsula,  in each  case,  as set forth  herein to carry out such
duties  and  responsibilities  as  directed  by the Chief  Executive  Officer of

<PAGE>
                                       42


Peninsula,  which duties and responsibilities shall include, but are not limited
to, (i) managing the day-to-day operations of the Facility,  (ii) functioning as
the  General  Manager of the  Facility  with all  authority  and  responsibility
inherent therein;  and (iii) assisting Peninsula in the selection of a permanent
General Manager and Chief Financial  Officer and coordinating the integration of
such individuals with Peninsula's business operations,  all of which are subject
to the further  delineation at the direction of M. Brent Stevens,  President and
CEO of  Peninsula.  Grippe  shall  report  directly  and solely to Mr.  Stevens,
Peninsula's Chief Executive Officer, and shall perform his services hereunder at
the Facility three (3) days every two weeks and be available by telephone, email
or fax at all other times.  RGM shall have no supervisory  or directive  control
over Grippe while he is functioning as an employee of Peninsula  under the terms
of this  Agreement.  During the Term of this  Agreement,  Grippe shall remain an
employee of RGM,  and  Grippe's  employment  by  Peninsula  hereunder  shall not
otherwise  limit or affect  in any  manner  whatsoever  the  benefits  otherwise
accorded  Grippe as an  employee  of RGM;  provided,  however,  that,  except as
expressly  provided  in this  Agreement,  Grippe  shall not be  entitled  to any
compensation or benefits of any kind as an employee of Peninsula.

3.  During  the Term of this  Agreement,  Peninsula  shall pay to RGM the sum of
seven thousand five hundred dollars  ($7,500) per month,  or a pro-rata  portion
thereof  in  respect  of any  partial  month  during  which  Grippe is  employed
hereunder (the "Monthly Fee"), for services performed  hereunder,  which Monthly
Fee shall be paid in advance on the first day of each month, commencing March 1,
2000. In addition to the Monthly Fee,  Grippe and RGM, if advanced by RGM, shall
be entitled to reimbursement of reasonable  out-of-pocket  expenses  incurred by
him or it in  connection  with  his  performance  under  this  Agreement,  which
payments  shall be (i) submitted by Grippe or RGM on a monthly  basis  (together
with written  documentation  reasonably  acceptable to Peninsula evidencing such
expenses) and (ii) paid by Peninsula within 10 days of receipt thereof.

4. Peninsula hereby agrees that RGM will have no responsibility for managing the
gaming  operations of the Diamond Jo riverboat  casino or the  management of the
business  or affairs  of  Peninsula.  5.  Grippe  and RGM  acknowledge  that the
information, observations and data obtained by or available to Grippe during the
course of  employment  with  Peninsula  concerning  the  business and affairs of
Peninsula are and will be the property of Peninsula.  Therefore,  Grippe and RGM
agree,  during the Term of this  Agreement  and  following  the  termination  of
Grippe'semployment  for any  reason  whatsoever,  not to  disclose  or induce or
assist in the use or disclosure, to any person or entity, or use for the account
of any person or entity other than Peninsula, any such information, observations
or  data  including,  without  limitation,  any  business  secrets  or  methods,
processes,   formulas,  designs,  inventories,   techniques,   marketing  plans,
strategies, forecasts, new products, blueprints,  specifications, maps, computer
software programs,  promotional ideas, unpublished financial statements,  budget
projections,   licenses,  prices,  costs,  policies,  manuals  or  instructions,
reports, lists of names and/or addresses of customers,  prospective customers or
suppliers,  other customer or prospective  customer information or requirements,

<PAGE>
                                       43


personnel  information,  the  terms  of any  Company  contract,  lease  or other
arrangement  with  any  customer  or  leasing  information   (including  without
limitation,  expiration dates, renewal dates,  pricing  information,  other data
used  by  Peninsula  in   connection   with  its  gaming   operations,   special
requirements,  referral lists or other data setting forth names and addresses of
customers) or any other of its confidential or proprietary information, records,
observations  or  data  (whether  or  not  patented,  copyrighted  or  otherwise
protected under applicable law) or information created,  discovered,  developed,
or made known to Peninsula (including, without limitation,  information created,
discovered, developed, or made known by Grippe to Peninsula during his period of
employment  by  Peninsula)  along  with  any  reports,  analyses,  compilations,
memoranda,  notes and other  writings  or  recordings  prepared by Grippe or any
other employee, agent or representative of Peninsula,  which contain, reflect or
are  based  upon  such   information,   observations   or  data   (collectively,
"Confidential  Information")  without Peninsula's prior written consent,  unless
and to the extent that the aforementioned  matters become generally known to and
available for use by the public other than as a result of RGM's or Grippe's acts
or  omissions  to act,  and except as required by law or legal  process.  In the
event  Grippe's   employment   with  Peninsula  is  terminated  for  any  reason
whatsoever,  Grippe and RGM will promptly  return and surrender to Peninsula any
and all  Confidential  Information  made  available  to either  Grippe or RGM by
Peninsula  or  otherwise  in the  possession  of Grippe or RGM in the  course of
Grippe's employment with Peninsula.

6. Grippe and RGM each further agree that, for a period of six months  following
any termination of Grippe's employment for any reason whatsoever, neither Grippe
nor RGM will,  directly or  indirectly,  either for  themselves or for any other
person,  firm,  company or  corporation,  in any capacity,  induce or attempt to
induce  or call  upon or  solicit  any of  Peninsula's  employees,  consultants,
customers,   prospective  customers,  suppliers,  landlords  or  other  business
relations of Peninsula to leave or cease doing business with Peninsula or in any
way interfere with the relationship  between Peninsula and any of its employees,
customers,   prospective  customers,  suppliers,  landlords  or  other  business
relations  thereof or hire or solicit for  employment any employee of Peninsula.
If,  at the  time of  enforcement  of this  Section  6, a court  holds  that the
restrictions  stated herein are unreasonable under  circumstances then existing,
the parties hereto agree that the maximum duration,  scope and geographical area
reasonable under such circumstances  shall be substituted for the stated period,
scope and area and that the court  shall be allowed  to reduce the  restrictions
contained herein to cover the maximum duration, scope and area permitted by law.
Grippe and RGM each  acknowledge  that a  violation  of the  provisions  of this
Agreement will cause irreparable harm to Peninsula's business,  the exact amount
of which will be  difficult to  ascertain,  and that the remedies at law for any
such breach will be inadequate.  Accordingly,  Grippe and RGM agree that, in the
event of such  violation or  threatened  violation by either of them,  Peninsula
shall be entitled, in addition to any other remedy which may be available at law
or in equity,  to specific  performance and injunctive  relief,  without posting
bond or other  security.  Grippe and RGM further agree that, in the event of the
voluntary or involuntary  termination of Grippe's  employment with Peninsula for

<PAGE>
                                       44


any reason  whatsoever,  Grippe and RGM shall promptly  deliver to Peninsula all
documents,  photocopies, notes, drawings, data and other materials of any nature
pertaining to Grippe's  employment  with  Peninsula,  and neither Grippe nor RGM
shall take with them, or allow any third party to take,  any of the foregoing or
any reproduction of any of the foregoing.

7. This agreement  shall be governed by and  interpreted in accordance  with the
laws of the State of Iowa without  giving effect to conflicts of law  provisions
thereof.

8. Peninsula, RGM and Grippe hereby agree that any dispute arising under or with
respect to this  Agreement  shall be  determined  by  arbitration  in Las Vegas,
Nevada pursuant to the rules of the American Arbitration  Association ("AAA") by
a panel of three arbitrators with experience in the gaming business, one of whom
shall be appointed  by RGM, one of whom shall be appointed by Peninsula  and the
third of whom shall be appointed by the first two  arbitrators  and shall act as
Chairman, provided that if a party shall fail to appoint an arbitrator within 20
days  after  commencement  of the  arbitration  or  the  Chairman  shall  not be
appointed within 40 days of the commencement of the arbitration,  the same shall
be appointed by the AAA. Such  arbitrators  may award legal fees and expenses to
the party prevailing in such arbitration. The decision of such arbitrators shall
be binding upon the parties  hereto.  9. This  Agreement  represents  the entire
understanding  of the  parties  with  respect to its  subject  matter and may be
amended or  modified  only by a written  instrument  duly  signed by the parties
hereto.

10.Any notice required or permitted to be given hereunder shall be given as
follows:

                           a. Peninsula:
                           -- ---------
                           M. Brent Stevens
                           c/o Jefferies & Company, Inc.
                           11100 Santa Monica Boulevard, Tenth Floor
                           Los Angeles, CA  90025

                           b. RGM:
                           -- ----
                           William L. Westerman
                           Riviera Hotel & Casino
                           2901 Las Vegas Boulevard South
                           Las Vegas, NV  89109

                           c. Grippe:
                           -- -------
                           Jerome Grippe
                           Riviera Hotel & Casino
                           2901 Las Vegas Boulevard South
                           Las Vegas, NV 89109
<PAGE>
                                       45


11. Notwithstanding anything to the contrary set forth herein, this Agreement is
subject to, and shall become effective upon, the approval of the Iowa Racing and
Gaming  Commission and  appropriate  licensure by RGM and Grippe pursuant to the
rules and regulations of the Iowa Racing and Gaming Commission.

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date written above.
                                               RIVIERA GAMING MANAGEMENT, INC.



                                           By:_________________________________
                                           Name:
                                           Title:



                                           ------------------------------------
                                           JEROME GRIPPE



                          PENINSULA GAMING COMPANY, LLC

                            By:__________________________________
                            Name: M. Brent Stevens
                            Title:  President and CEO


<PAGE>
                                       46




F-20


                                   SCHEDULE A
                                 CONSULTING FEES

         Employee                   Hourly Rate

         W. Westerman                       $200
         J. Grippe                          $150
         R. Johnson                         $150
         D. Krohn                   $150
         R. Vannucci                        $150
         Associates and others              $125


























<PAGE>
                                       47



ITEM 14a(.)FINANCIAL STATEMENTS
RIVIERA HOLDINGS CORPORATION

TABLE OF CONTENTS

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

<TABLE>
<CAPTION>

                                                                                                                  Page

<S>                                                                                                                <C>
INDEPENDENT AUDITORS' REPORT                                                                                       F-1


CONSOLIDATED FINANCIAL STATEMENTS:


   Balance Sheets as of December 31, 1999 and 1998                                                                 F-2

   Statements of Operations for the Years Ended December 31, 1999, 1998, and 1997                                  F-3

   Statements of Stockholders' Equity for the Years Ended December 31, 1999, 1998, and 1997                        F-5

   Statements of Cash Flows for the Years Ended December 31, 1999, 1998, and 1997                                  F-6

   Notes to Consolidated Financial Statements                                                                      F-8
</TABLE>



<PAGE>
                                       48







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, 1999
and 1998, and the related consolidated  statements of operations,  stockholders'
equity,  and cash flows for each of the three years in the period ended December
31, 1999.  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,
1999 and 1998,  and the results of its operations and its cash flows for each of
the three years in the period  ended  December  31,  1999,  in  conformity  with
generally accepted accounting principles.

DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 14, 2000


<PAGE>
                                       F-1


<TABLE>
<CAPTION>

RIVIERA HOLDINGS CORPORATION

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998 (In Thousands, Except Share Amounts)
--------------------------------------------------------------------------------


<S>                                                         <C>            <C>
ASSETS                                                     1999           1998

CURRENT ASSETS:
  Cash and cash equivalents                             $ 42,804       $ 48,883
  Cash and cash equivalents, restricted                    7,173
  Short-term investments                                   5,258
  Short-term investments, restricted                       7,887
  Accounts receivable, net                                 5,042          5,389
  Inventories                                              3,432          2,727
  Prepaid expenses and other assets                        3,989          4,028

           Total current assets                           75,585         61,027

PROPERTY AND EQUIPMENT, Net                              202,659        175,622

OTHER ASSETS, Net                                         10,391          8,260

DEFERRED INCOME TAXES                                        355

TOTAL                                                  $ 288,990      $ 244,909

LIABILITIES AND STOCKHOLDERS EQUITY

CURRENT LIABILITIES:
  Current portion of long-term debt                      $ 1,274          $ 363
  Accounts payable                                        11,498         11,865
  Accrued interest                                         7,539          6,563
  Accrued expenses                                        11,949         10,053

           Total current liabilities                      32,260         28,844

DEFERRED INCOME TAX LIABILITY, Net                                        3,123

OTHER LONG-TERM LIABILITIES                                5,286          4,933

LONG-TERM DEBT, Net of current portion                   223,766        174,506

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS EQUITY:
  Common stock issued and outstanding ($.001 par value
    ; 20,000,000 shares authorized; 4,523,021 and
    5,073,376 shares at December 31, 1999 and 1998,
    respectively)                                              5              5
  Additional paid-in capital                              13,446         13,457
  Treasury stock (583,755 and 34,300 shares at
  December 31, 1999 and 1998,respectively)                (3,115)          (167)
  Notes receivable from employee stockholders                                (3)
  Retained earnings                                       17,342         20,211

           Total stockholders equity                      27,678         33,503

TOTAL                                                  $ 288,990      $ 244,909
See notes to consolidated financial statements.


</TABLE>


<PAGE>
                                       F-2






RIVIERA HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997 (In Thousands)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>


                                                              1999          1998          1997

REVENUES:
<S>                                                            <C>           <C>           <C>
  Casino                                                     74,086        77,676        71,624
  Rooms                                                      39,899        39,607        41,812
  Food and beverage                                          25,117        23,940        21,603
  Entertainment                                              20,994        21,543        20,895
  Other                                                      11,713        11,155        10,556

          Total revenues                                    171,809       173,921       166,490
  Less promotional allowances                                13,636        13,966        12,697

          Net revenues                                      158,173       159,955       153,793

COSTS AND EXPENSES:
  Direct costs and expenses of operating departments:
    Casino                                                   43,211        45,293        40,620
    Rooms                                                    21,909        20,859        21,235
    Food and beverage                                        18,307        17,539        16,118
    Entertainment                                            16,271        16,861        17,235
    Other                                                     3,228         3,308         3,011
  Other operating expenses:
    General and administrative                               29,568        27,028        26,211
    Preopening expenses - Black Hawk, Colorado project          595
    Corporate expenses - severance pay                                        551
    Depreciation and amortization                            13,991        12,137        10,485

         Total costs and expenses                           147,080       143,576       134,915

INCOME FROM OPERATIONS                                       11,093        16,379        18,878

OTHER (EXPENSE) INCOME:
  Interest expense on $100 million notes                                   (4,642)      (11,067)
  Interest income on U.S. Treasury bills held to
   retire $100 million notes                                                2,334         2,267
  Interest expense - other                                  (23,448)      (19,545)       (7,908)
  Interest income - other                                     2,255         2,440         1,926
  Interest capitalized                                        4,733         2,679           771
  Other, net                                                 (1,963)       (1,229)       (1,470)

          Total other expense                               (18,423)      (17,963)      (15,481)

(LOSS) INCOME BEFORE (BENEFIT) PROVISION
  FOR TAXES AND EXTRAORDINARY ITEM                           (7,330)       (1,584)        3,397

(BENEFIT) PROVISION FOR INCOME TAXES                         (4,461)         (533)        1,309

(LOSS) INCOME BEFORE EXTRAORDINARY ITEM                      (2,869)       (1,051)        2,088

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

NET (LOSS) INCOME                                          $ (2,869)     $ (4,057)      $ 2,088

See notes to consolidated financial statements.

</TABLE>

<PAGE>
                                     F-3



RIVIERA HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(In Thousands, Except Share Amounts)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>


                                                             1999           1998           1997

EARNINGS PER SHARE DATA:
  (Loss) earnings per share before extraordinary item:
<S>                                                           <C>            <C>            <C>
    Basic                                                  $ (0.58)       $ (0.21)       $ 0.42

    Diluted                                                $ (0.58)       $ (0.21)       $ 0.40

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

    Diluted                                                   $ -         $ (0.60)          $ -

  (Loss) earnings per share:
    Basic                                                  $ (0.58)       $ (0.81)       $ 0.42

    Diluted                                                $ (0.58)       $ (0.81)       $ 0.40

  Weighted-average common shares outstanding                 4,978          5,037          4,913

  Weighted-average common and common
    equivalent shares                                        4,978          5,037          5,214


See notes to consolidated financial statements.

</TABLE>




<PAGE>
                                      F-4


<TABLE>
<CAPTION>
RIVIERA HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997 (In Thousands, Except Share Amounts)
--------------------------------------------------------------------------------------------------------------------------------


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

<S>              <C>                             <C>            <C>    <C>         <C>            <C>         <C>       <C>
BALANCE, JANUARY 1, 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

BALANCE, 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)

BALANCE, DECEMBER 31, 1998                         5,073,376      5      13,457      20,211      (167)         (3)     33,503

  Refunds on employee stock purchases                   (900)               (11)                                3          (8)

  Purchase of treasury stock                        (549,455)                                   (2,948)                (2,948)

  Net loss                                                                           (2,869)                           (2,869)

BALANCE, DECEMBER 31, 1999                          4,523,021   $ 5     $ 13,446    $ 17,342    $(3,115)      $ -     $ 27,678

See notes to consolidated financial statements.
</TABLE>



<PAGE>
                                      F-5


<TABLE>
<CAPTION>
RIVIERA HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997 (In Thousands)
-------------------------------------------------------------------------------------------------------------------------


                                                                                           1999       1998       1997
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                        <C>        <C>        <C>
   Net (loss) income                                                                       $(2,869)   $(4,057)   $ 2,088
  Adjustments to reconcile net (loss) income to net cash provided by operating
    activities:
    Gain on sale of equipment                                                                  (55)
    Depreciation and amortization                                                           13,991     12,137     10,485
    Provision for bad debts                                                                    297        782        (16)
    Provision for gaming discounts                                                                        (76)       (84)
    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
    Interest paid on $100 million notes                                                                (4,614)   (11,420)
    Interest expense - other                                                                23,448     19,545      7,874
    Interest paid - other                                                                  (20,132)   (17,688)
    Interest capitalized on construction projects                                           (4,733)    (2,679)      (771)
    Changes in operating assets and liabilities:
      Increase in U.S. Treasury bills purchased to retire $100 million notes                                      (2,267)
      Decrease (increase) in accounts receivable, net                                           50     (1,157)       276
      (Increase) decrease in inventories                                                      (705)       782       (470)
      Decrease (increase) in prepaid expenses and other assets                                  39        526     (1,862)
      (Decrease) increase in accounts payable                                                 (884)      (774)     2,167
      Increase (decrease) in accrued expenses                                                1,896      1,258       (726)
      Decrease in current income taxes payable                                                                      (413)
      (Decrease) increase in deferred income taxes payable                                  (3,478)    (2,835)     1,332
      (Decrease) increase in slot annuities payable                                            (55)      (153)       253
      (Decrease) increase in non-qualified pension plan obligation to CEO upon retirement      (61)       600        755

           Net cash provided by operating activities                                         6,749      8,529     18,268

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures for property and equipment - Las Vegas, Nevada                      (10,892)   (21,432)   (19,752)
  Capital expenditures - Black Hawk, Colorado                                              (28,134)    (9,842)   (17,353)
  Interest capitalized on construction projects                                              4,733      2,679        771
  Increase in short-term investments                                                        (5,258)
  Increase in Black Hawk, Colorado, restricted funds                                       (15,060)       (27)      (100)
  Sale of equipment                                                                            174
  Increase in other assets                                                                  (3,558)      (208)    (6,346)

           Net cash used in investing activities                                           (57,995)   (28,830)   (42,780)

See notes to consolidated financial statements.

</TABLE>





<PAGE>
                                      F-6


<TABLE>
<CAPTION>


RIVIERA HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997 (In Thousands)
--------------------------------------------------------------------------------------------------------------------


                                                                                      1999       1998        1997
CASH FLOWS FROM FINANCING ACTIVITIES:
<S>                                                                                <C>             <C>        <C>
  Proceeds from long-term borrowings                                               $ 48,764               $ 172,848
  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                                                     (641)       (364)     (5,041)
  Purchase of treasury stock                                                         (2,948)       (167)
  Proceeds from issuance of stock to employees and directors                                                     13
  Net collections, cancellations of employee stock purchase plan, and exercise of
    employee stock options                                                               (8)        (53)        425
                                                                                         --         ---         ---

           Net cash provided by financing activities                                 45,167       4,033      63,916
                                                                                     ------       -----      ------

( DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                    (6,079)    (16,268)     39,404

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                         48,883      65,151      25,747
                                                                                     ------      ------      ------

CASH AND CASH EQUIVALENTS, END OF YEAR                                             $ 42,804    $ 48,883    $ 65,151
                                                                                   ========    ========    ========


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

SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
  Stock issued to employees for notes receivable                                                              $ 77

  Property acquired with accounts payable, Las Vegas, Nevada                                     $ 984

  Property acquired with accounts payable, Black Hawk, Colorado                    $ 2,566     $ 1,203

  Property acquired with debt, Las Vegas, Nevada                                   $ 1,614

  Property acquired with debt, Black Hawk, Colorado                                  $ 126      $ 687


See notes to consolidated financial statements.

</TABLE>



<PAGE>
                                       F-7




RIVIERA HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


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 August 1995, Riviera Gaming Management, Inc. ("RGM") incorporated in the
State of Nevada as a wholly owned subsidiary of ROC for the purpose of obtaining
management contracts in Nevada and other jurisdictions.

     Nature of  Operations  - The primary line of business of the Company is the
operation  of the  Riviera  Hotel & Casino (the  "Riviera")  on the Strip in Las
Vegas,  Nevada.  The Company,  through its gaming  management  subsidiary,  also
managed the Four Queens  Hotel and Casino  (owned by  Elsinore  Corporation)  in
downtown  Las Vegas (see Note 14). RGM is also  providing  services to Peninsula
Gaming  Partners  LLC with  respect to that  company's  riverboat,  Diamond  Jo,
operating in Dubuque,  Iowa. In February of 2000,  the Company opened its casino
in Black  Hawk,  Colorado,  which is owned  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 manages the casino.

     Casino  operations  are subject to  extensive  regulation  in the states of
Nevada and Colorado by the  respective  Gaming  Control Boards 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 investment  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.
<PAGE>
                                      F-8


     Management  determines  the  appropriate  classification  of its investment
securities at the time of purchase, including the determination as to restricted
versus nonrestricted assets, and re-evaluates such determination at each balance
sheet date.  Held-to-maturity securities are required to be carried at amortized
cost. At December 31, 1999 and 1998,  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
$26,891,000 and $35,781,000, 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
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 years 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  the  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. Such amortized costs are included
in interest expense.

     Restricted Cash and Short-term Investments - Amounts related to the Riviera
Black Hawk Casino project in Black Hawk, Colorado, are restricted in use to that
project or for the related 13% First Mortgage Notes interest payments.

     Restricted Cash for Periodic Slot Payments - At December 31, 1999 and 1998,
the Company had  interest-bearing  deposits with a commercial bank in the amount
of $3,000 and  $55,000,  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 current 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 16).

<PAGE>
                                      F-9




Fair Value Disclosure as of December 31, 1999 and 1998:

     Cash and Cash Equivalents,  Short-term Investments (including  restricted),
Accounts Receivable, Accounts Payable, and Accrued Expenses - The carrying value
of these items is a reasonable estimate of their fair value.

     Long-TermDebt - The fair value of the Company's long-term debt 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 $209,061,000 and $158,774,000 in 1999 and 1998, 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 revenue,
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, 1999,  1998, and 1997 are as
follows (amounts in thousands):
<TABLE>
<CAPTION>
                                                1999          1998         1997

<S>                                             <C>          <C>          <C>
Food and beverage                               $6,266       $6,271       $5,759
Rooms                                            1,676        1,698        1,442
Entertainment                                    1,312        1,518          903

Total costs allocated to casino                 $9,254       $9,487       $8,104

</TABLE>


     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  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.

<PAGE>
                                       F-10




     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.

     Recently Adopted Accounting Standards - 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.
The Company  adopted this standard in 1999 and  recognized  preopening  costs of
$595,000  that would  have  otherwise  been  deferred  until the  opening of the
Riviera Black Hawk Casino in fiscal 2000.

     Recently Issued Accounting  Standards - The Financial  Accounting Standards
Board issued SFAS No. 133,  "Accounting for Derivatives," which is effective for
fiscal years beginning after June 15, 2000. 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, 2001.  Management has not finalized its analysis
of this SFAS or the impact of this SFAS on the Company or the  Company's  future
consolidated financial statements.
2.    ACCOUNTS RECEIVABLE

Accounts receivable consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
                                                             1999          1998

<S>                                                       <C>           <C>
Casino                                                    $ 2,405       $ 3,492
Hotel                                                       4,248         3,211

Total                                                       6,653         6,703
Allowance for bad debts and discounts                      (1,611)       (1,314)

Ending balance                                            $ 5,042       $ 5,389

</TABLE>

     Changes in the casino and hotel  allowance  for bad debts and discounts for
the years ended  December 31, 1999,  1998, and 1997 consist of the following (in
thousands):
<TABLE>
<CAPTION>

                                                 1999          1998        1997

<S>                                             <C>           <C>         <C>
Beginning balance                               $1,314        $ 546       $ 646
Write-offs                                        (872)        (391)       (438)
Recoveries                                         107           81          49
Provision for bad debts                          1,062        1,154         372
Provision for gaming discounts                                  (76)        (83)

Ending balance                                  $1,611       $1,314       $ 546
</TABLE>
<PAGE>
                                       F-11



3.    PREPAID EXPENSES AND OTHER ASSETS

Prepaid expenses and other assets consist of the following at December 31
(in thousands):
<TABLE>
<CAPTION>
                                                        1999         1998

<S>                                                    <C>         <C>
Prepaid gaming taxes                                   $ 800       $1,209
Prepaid insurance                                        560          431
Other prepaid expenses                                 2,629        2,388

Total                                                 $3,989       $4,028
</TABLE>


4.    PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
                                                                   1999            1998

<S>                                                              <C>             <C>
Land and improvements                                            $ 37,701        $ 37,638
Buildings and improvements                                         98,363          80,381
Equipment, furniture, and fixtures                                 85,027          71,238
Construction in progress, primarily in Black Hawk, Colorado        40,931          32,083

Total property and equipment                                      262,022         221,340
Accumulated depreciation                                          (59,363)        (45,718)

Net property and equipment                                       $202,659        $175,622
</TABLE>


     In 1999 and 1998, approximately $4,733,000 and $2,679,000, 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.

5.    OTHER ASSETS

Other assets consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
                                                            1999          1998

<S>                                                          <C>          <C>
Deposits                                                     $ 292        $ 163
Bond offering costs and commissions, net                     8,716        6,366
Other                                                        1,383        1,731

Total                                                      $10,391       $8,260
</TABLE>




<PAGE>
                                       F-12



6.    ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
                                                                    1999           1998

<S>                                                                <C>            <C>
Outstanding chip and token liability                               $ 665          $ 495
Casino account deposits                                              108            310
Miscellaneous gaming                                                 875            745

Total liabilities related to gaming activities                     1,648          1,550

Accounts payable to vendors                                        5,394          6,725
Hotel deposits                                                     1,637          1,340
Construction payables                                              2,566          2,187
Other                                                                253             63

Total                                                            $11,498        $11,865
</TABLE>


Accrued expenses consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
                                                                    1999          1998

<S>                                                               <C>           <C>
Payroll, related payroll taxes, and employee benefits             $ 6,253       $ 5,981
Incentive, retention, and profit-sharing plans                      3,687         2,736
Other                                                               2,009         1,336

Total                                                             $11,949       $10,053
</TABLE>


7.    OTHER LONG-TERM LIABILITIES

Other long-term liabilities consist of the following at December 31
(in thousands):
<TABLE>
<CAPTION>
                                                                    1999         1998

<S>                                                                  <C>          <C>
Periodic slot payments due to customers through 2000,
pre-funded by restricted cash (see Notes 1 and 5)                    $ -         $ 55
Nonqualified pension plan obligation to the CEO of the
 Company, payable in 20 quarterly installments upon
 expiration of his employment contract, plus accrued interest       5,286        4,878

Total other long-term liabilities                                  $5,286       $4,933
</TABLE>




<PAGE>
                                       F-13




8.    LONG-TERM DEBT

Long-term debt consists of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
<S>                                                                         <C>             <C>
                                                                            1999            1998
10% First Mortgage Notes maturing on August 15, 2004, bearing
  interest, payable semiannually 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
  Riviera Hotel and Casino                                                $173,579        $173,271

13% First Mortgage Notes maturing on June 3, 2005, bearing
   interest, payable semiannually on November 3 and June 3
  of each year; redeemable beginning May 1, 2002 at 106.5%;
  2003 at 103.25%; and after 2004 at 100%.  These notes are                 45,000
  collateralized by the land and physical structures comprising the
  Riviera Black Hawk Casino

5.6% to 9% Notes collateralized by equipment and vehicles, payable
  monthly, including interest, maturing through October 2004                 3,962             438

Capitalized lease obligations (see Note 10)                                  1,715             473

5.5% Special Improvement District Bonds - issued by the City of
  Black Hawk, Black Hawk, Colorado, interest and principal
  payable monthly over 10 years beginning in 2000                              784             687


Total long-term debt                                                       225,040         174,869
Current maturities by terms of debt                                         (1,274)           (363)

Total                                                                     $223,766        $174,506

</TABLE>

Maturities of long-term debt for the years ending December 31 are as follows
(in thousands):
<TABLE>
<CAPTION>
<S>                                                                    <C>
2000                                                                   $ 1,274
2001                                                                     1,146
2002                                                                     1,248
2003                                                                     1,324
2004                                                                   174,603
Thereafter                                                              45,445
                                                                        ------

Total                                                                 $225,040
</TABLE>


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


<PAGE>
                                       F-14




     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 percent or the London  Interbank  Offered Rate
("LIBOR")  plus 2.9 percent.  The Company has not utilized  this line of credit.
The Credit  Facility  was modified as a result of the 10% First  Mortgage  Notes
(the "10% Notes").  The  modifications  included an increase in the ratio of the
allowable  funded debt to earnings before  interest,  taxes,  depreciation,  and
amortization  ("EBITDA")  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.

     On August 13, 1997, the Company issued 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 notes on a
straight-line  basis,  which approximates the effective interest method. 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  and
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.  At  December  31,  1999,  the  Company  believes  that it is in
compliance  with such  covenants.  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 11, a portion of the  proceeds  was invested in U.S.  Treasury
notes to pay the 11% $100 million notes.  The Company has registered  securities
identical to the 10% Notes,  under the  Securities  Act of 1933, as amended.  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 RBH.
RBH will become collateral for the 10% Notes if certain  consolidated  operating
ratios are met. As of December 31, 1999, RBH had no operations as defined in the
notes to consolidated financial statements.  At December 31, 1999, RBH had total
assets of  approximately  $72.8  million,  which  represent  primarily  cash and
restricted  cash and  investments,  other  assets,  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, 1999. The Company intends to disclose such  additional  information
in the future as the subsidiary develops.

     On June 3, 1999, RBH completed a $45 million private placement of 13% First
Mortgage  Notes.  The net  proceeds  of the  placement  were  used  to fund  the
completion of RBH's casino  project in Black Hawk,  Colorado.  Riviera  Holdings
Corporation  has not guaranteed  the $45 million RBH notes,  but has agreed to a
"Capital Completion Commitment" of up to $10 million and a "Keep Well Agreement"
of $5 million per year (or an  aggregate  limited to $10  million) for the first
three years of RBH operations to cover if (i) the $5.85 million interest on such
notes is not paid by RBH and (ii) the amount by which RBH cash flow is less than
$9.0 million per year. RBH has registered  securities identical to the 13% Notes
under the Securities Act of 1933, as amended.  On January 4, 2000, RBH completed
an exchange  offer for such  registered  securities.

     The notes were issued at a cost in the amount of $3.5 million. The deferred
financing cost is being amortized over the life of the notes on a straight-lines
basis, which approximates the effective interest method.

<PAGE>
                                       F-15




     The  13%  First   Mortgage  Note   Indenture   provides  that,  in  certain
circumstances, RBH must offer to repurchase the 13% 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,  RBH  would be unable to pay the
principal amount of the 13% Notes without a refinancing.

     The 13% First Mortgage Note Indenture  contains  certain  covenants,  which
limit the  ability of RBH and its  restricted  subsidiaries,  subject to certain
exceptions,  to: (i) incur additional indebtedness;  (ii) pay dividends or other
distributions  and  repurchase  capital  stock  or  other  equity  interests  or
subordinated   indebtedness;   (iii)  enter  into  certain   transactions   with
affiliates;  (iv) create  certain liens and sell certain  assets;  and (v) enter
into certain mergers and consolidations.  As a result of these restrictions, the
ability of the Company 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 would be
required to curtail or defer certain of their capital expenditure programs under
these circumstances,  which could have an adverse effect on RBH's operations. At
December 31, 1999, RBH believes that it is in compliance with the covenants.

     The Company has credit facilities totaling $1,600,000 for letters of credit
issued periodically to foreign vendors for purchases of merchandise. The letters
require payment upon presentation of a valid voucher.

     The 5.5%  Special  Improvement  District  Bonds were  issued by the City of
Black Hawk,  Colorado,  in July 1998 for $2,940,000.  The proceeds were used for
road improvements and other infrastructure projects benefiting the Riviera Black
Hawk Casino and another nearby casino. The projects are expected to be completed
in 2000 at an estimated cost of $2,240,000, including interest and reserves. The
excess proceeds have been returned to the bondholders by the City of Black Hawk,
Colorado.  RBH is  responsible  for 50 percent of the debt payable over 10 years
beginning in 2000.

10.   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 following is a schedule by year of the minimum rental payments due under
capital leases, as of December 31, 1999 (in thousands).
<TABLE>
<CAPTION>
<S>                                                                        <C>
2000                                                                      $ 698
2001                                                                        595
2002                                                                        595
2003                                                                        595
2004                                                                        439

Total minimum lease payments                                              2,922
Taxes, maintenance, and insurance                                          (240)
Interest portion of payments                                               (967)

Present value of net minimum lease payments                              $1,715
</TABLE>
<PAGE>
                                       F-16



     Rental  expense  under  operating  leases for the years ended  December 31,
1999,  1998,  and 1997  was  approximately  $329,117,  $287,000,  and  $275,000,
respectively. Such leases were year to year in nature.

     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  2004.  Rental  income,  which is
included in other income, for the years ended December 31, 1999, 1998, and 1997,
was approximately $1,803,000, $1,615,000, and $1,555,000, respectively.

     At December 31, 1999,  the Company had future  minimum annual rental income
due under noncancelable operating leases as follows (in thousands):
<TABLE>
<CAPTION>

<S>                                                           <C>
2000                                                          $ 989
2001                                                            849
2002                                                            671
2003                                                            535
2004                                                            383

Total                                                        $3,427
                                                             ======
</TABLE>


11.   $100 MILLION NOTES RETIRED BY U.S. TREASURY BILLS

     On August 13,  1997,  the Company  used part of the  proceeds  from the 10%
Notes to purchase U.S.  government  securities (the  "Securities")  at a cost of
$109.8  million,   which  were  deposited  into  an  irrevocable   trust.  These
Securities,  together with interest that was earned by the Securities, were 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 U.S. 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 percent
income tax effect of $1.6 million,  resulting in an  extraordinary  loss of $3.0
million.

12.   FEDERAL INCOME TAXES

     The  Company  computes  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>
                                      F-17




     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, 1999, 1998, and 1997 as follows (in thousands):
<TABLE>
<CAPTION>


                                     1999                    1998                    1997

                                    Amount       Rate       Amount        Rate      Amount       Rate

(Provision) benefit for
 income taxes at federal
<S>                                  <C>           <C>        <C>           <C>       <C>         <C>
  statutory rate                     $ (2,565)     (35.0)%    $ (2,164)     (35.0)%   $ 1,189     35.0 %
Benefit from outcome of
  IRS examination                      (1,874)     (25.6)%
Other                                     (22)      (0.2)%         21       0.3 %        120       3.5 %

(Benefit) provision for
  income taxes                       $ (4,461)     (60.8)%    $ (2,143)     (34.7)%  $ 1,309      38.5 %

</TABLE>


Comparative analysis of the (benefit) provision for income taxes is as follows:
<TABLE>
<CAPTION>
                                              1999          1998        1997

<S>                                         <C>            <C>         <C>
Current                                     $ (984)        $ 692       $ (23)
Deferred                                    (3,477)       (2,835)      1,332

Total                                      $(4,461)      $(2,143)     $1,309
</TABLE>


     The tax effects of the items  composing  the  Company's  net  deferred  tax
(asset) liability consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>

                                                             1999          1998

Deferred tax liabilities:
<S>                                                          <C>         <C>
  Reserve differential for hospitality and gaming activities $ 968       $1,208
  Difference between book and tax-depreciable property       6,174        6,299
  Other                                                        430          928

Total                                                       $7,572       $8,435
                                                            ------       ------

Deferred tax assets:
  Net operating loss carryforward                           $3,064
  Reserves not currently deductible                          1,162       $2,899
  Bad debt reserves                                            564          460
  AMT and other credits                                      3,137        1,953

Total                                                        7,927        5,312

Net deferred tax (asset) liability                          $ (355)      $3,123
</TABLE>


     The Company has  $2,739,000 of  alternative  minimum tax ("AMT") credit and
$398,000  of general  business  credit  available  to offset  future  income tax
liabilities.  The AMT credit has no expiration date. The general business credit
will not begin to expire until 2009.
<PAGE>
                                       F-18


13.   COMMITMENTS AND CONTINGENCIES

     The Company is party to several  routine  lawsuits,  both as plaintiff  and
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,  results of operations,  or
cash flows of the Company.

     Allen Paulson  Merger/Litigation  - In September  1997, the Company entered
into an agreement (the "Merger  Agreement")  with Allen E. Paulson  ("Paulson"),
whereby a company  controlled  by  Paulson  would  acquire  100  percent  of the
Company's stock for $15 per share, plus an interest factor.  The stockholders of
the Company approved the Merger Agreement on February 8, 1998. As a condition of
the Merger  Agreement,  approximately  $5.8 million was placed in escrow for the
holders of 1,770,000 Riviera Contingent Value Rights ("CVRs"). The CVRs entitled
their  holders to share only in the  proceeds  of the funds in escrow.  Excluded
from  participating  in  the  CVRs  were  Morgens  Waterfall,  SunAmerica,  Inc.
("SunAmerica"),  Keyport Life, and Paulson, and their affiliates and associates,
who owned an aggregate 3,355,000 Riviera shares.

     In March 1998, the Company was notified by Paulson that he was  terminating
the Merger Agreement and filed a lawsuit against the Company.

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

     On 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  Paulson  against  the  Company.  Pursuant  to the  terms  of the  Settlement
Agreement,  the Company  purchased  463,655  shares  from  Paulson for $7.50 per
share. The purchased shares are included in treasury stock at December 31, 1999.
Holders of the 1,770,000 CVRs received $2.46 for each CVR, and all related suits
between the Paulson Plaintiffs and the Company were dropped.

     Other (expense) income for the year ended December 31, 1999, 1998, and 1997
includes $1,964,000, $1,231,000 and $400,000, respectively, in costs relating to
the Paulson merger/litigation. The 1999 amount of $1,964,000 includes $1,159,000
or $2.00 per share in the purchase of the 463,655 shares from Paulson, which was
the difference  between the $7.50 and the market price of the Company's stock on
July 1, 1999.

     Morgens, Waterfall,  Vintiadis Litigation - Morgens, Waterfall, Vintiadis &
Company,  Inc.  ("Morgens  Waterfall"),  a stockholder  of the Company,  filed a
complaint against the Company and its directors seeking indemnification from the
Company for costs related to the Paulson litigation.  It also seeks other relief
and makes other  claims  stemming  from the  Settlement  Agreement.  The Company
believes  that the claims are  without  merit and intends to  vigorously  defend
against them.

     Employees  and Labor  Relations - As of December 31, 1999,  the Riviera had
approximately 1,900 full-time equivalent employees and had collective bargaining
contracts  with nine  unions  covering  approximately  1,100 of such  employees,
including food and beverage employees,  rooms department employees,  carpenters,
engineers,  stage hands, musicians,  electricians,  painters, and teamsters. The

<PAGE>
                                       F-19


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
expired in 1999,  whereas the  agreements  with the carpenters and painters will
expire in 2000. The Company completed  contract  negotiations with the operating
engineers,  which extends the contract to 2004.  The Company is in  negotiations
with the  Musicians  Union and expects to complete  negotiations  in 2000. A new
agreement was negotiated with the Teamsters,  which expires in 2003. The Company
is also  negotiating  with the Teamsters  Union for a hard count  agreement with
seven  employees.  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.

     Black Hawk Project - The Company  completed the  construction of its casino
in Black  Hawk,  Colorado,  on a site that was  purchased  for $15.1  million in
August 1997.  As of December 31,  1999,  the Company had expended  approximately
$56.7  million  on the  project.  The  Company  estimated  the total cost of the
project at $78 million. The casino was opened on February 4, 2000.

     Deposit Account - Pursuant to a deposit account agreement, dated as of June
3, 1999, among Bank of America as deposit bank, Riviera Holdings Corporation and
First  American  Title  Insurance  Company,  Riviera  Holdings  Corporation  has
deposited  $5.0 million to insure First American  against  mechanics lien claims
against the Black Hawk property.  If no mechanics  liens are outstanding 30 days
after the casino  opens,  such $5.0 million  deposit will be returned to Riviera
Holdings  Corporation.  These amounts are included in cash and cash equivalents,
restricted.

     Keep-Well  Agreement  - RBH and  Riviera  Holdings  Corporation  entered  a
Keep-Well  Agreement  wherein,  if (1) RBH does not have the necessary  funds to
make a payment of fixed  interest  on the notes  during its first three years of
operations or (2) consolidated cash flow is less than $9.0 million in any of the
first three years of operations,  Riviera Holdings Corporation will be obligated
to  contribute  cash to RBH to make up those  amounts  (up to a maximum  of $5.0
million for any one operating year and $10.0 million in the aggregate).

14.   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 "Four  Queens  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 Four Queens Management  Agreement were no less favorable to the Company than
if the  Company  had  negotiated  with an  independent  party.  RGM was paid the
minimum annual  management fee of $1.0 million.  In a letter dated  September 1,
1999,  Elsinore  and Four Queens,  Inc.  terminated  the Four Queens  Management
Agreement  December 30, 1999. The Company  completed its requirements  under the
agreement,  and the Four Queens Management Agreement was terminated December 30,
1999.

     RBH  has  entered  into a  management  agreement  in  principle  (the  "RBH
Management  Agreement") with Riviera Gaming  Management of Colorado,  Inc., (the
"Manager") a wholly owned subsidiary of Riviera Holdings Corporation,  which, in
exchange  for a fee,  will  manage RBH.  The  management  fee will  consist of a
revenue fee and a performance fee. The revenue fee will be based on 1 percent of
net revenues (gross revenues less  complimentaries)  and is payable quarterly in
arrears.  The  performance  fee will be based on the  following  percentages  of
EBITDA, whose components are based on generally accepted accounting principles):
(1) 10 percent  of EBITDA  from $5  million  to $10  million,  (2) 15 percent of

<PAGE>
                                      F-20


EBITDA from $10 million to $15  million,  and (3) 20 percent of EBITDA in excess
of $15 million.  The  performance  fee will be based on the preceding  quarterly
installments  subject  to  year-end  adjustment.  The  management  fee  began on
February 4, 2000,  the date of the opening of the Riviera Black Hawk Casino.  If
there is any default under the RBH Management Agreement, the Manager will not be
entitled to receive  management fees but will still be entitled to inter-company
service fees.

15.   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 percent at December
31, 1999).

     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  stockholder approval of a
"change in control." The approval by the  stockholders of the merger on February
5, 1998  constituted  a change of control (see Note 13). The Company has entered
into an agreement  with Mr.  Westerman to permit funding the trust amount at his
option.

In addition to Mr. Westerman, four executives have employment contracts with the
Company  for fixed  terms of  either  two or three  years.  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, 1999,  1998,  and
                1997,  the  Company  recorded  accrued  bonuses  of  $1,871,632,
                $1,593,475,  and  $920,000,  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 $1,637,000,  $1,658,000, and $1,604,000
for the years ended  December  31, 1999,  1998,  and 1997,  respectively.  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 $21,851,  $36,000, and $44,000 for the
years ended 1999, 1998, and 1997, 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

<PAGE>
                                       F-21


employee's annual compensation, if a prescribed annual operating earnings target
is  attained,  and an  additional  one-tenth  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 percent
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 percent of such employee's annual
compensation,  and that the Company will contribute 1 percent of each employee's
annual  compensation  for each 4  percent  of  compensation  contributed  by the
employee,  up to a maximum of 2 percent.  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  $1,000,000  and  $287,000  in  fiscal  1999  and  1998,
respectively.  The total cost of the Plan is estimated to be approximately  $2.0
million over the period July 1, 1998 through June 30, 2001.

16.   STOCK OPTION PLANS

     At a  meeting  held on July 27,  1993,  the  Company's  Board of  Directors
adopted a stock option plan (the "Stock Option Plan") providing for the issuance
of both  non-qualified  and incentive  stock options (as defined in the Internal
Revenue Code). The Stock Option Plan was ratified by the Company's  stockholders
at the April 26, 1994  annual  meeting.  Options  vest 25 percent on the date of
grant and 25 percent each subsequent year. The term of an option can in no event
be  exercisable  more than 10 years (5 years in the case of an incentive  option
granted to a stockholder  owning more than 10 percent 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.  Options are
granted at market value on the date of the grant. The number of shares initially
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.  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.

     In connection with the  resignation of a board member and an employee,  the
Company  paid  approximately  $258,000  (included  in  non-recurring   corporate
expenses  in fiscal  1998) 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.
<PAGE>
                                      F-22


     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 percent 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  under certain  conditions.  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 Stock  Purchase Plan.  Under the plan,  137,000 shares
were issued to  employees at $11.26 (85 percent 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  deductions.  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
1999, 1998, and 1997, 900,  65,100,  and 25,900 shares,  respectively,  of stock
were returned to the plan due to employee refunds.

     On May 10, 1996, the  stockholders  approved a  Non-qualified  Stock Option
Plan for Non-employee  Directors (the  "Non-qualified  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.  Options are  granted at market  value on the date of
the  grant.  The  options  vest over five years.  As a  result of the departure
of board members,  6,000 non-vested  options were extinguished  during 1998.

<PAGE>
                                       F-23





The activity of the Stock Option Plan and the Non-Qualified Stock Option Plan is
 as follows:
<TABLE>
<CAPTION>
                                                                Per Share
                                                                 Exercise
Stock Option Plan                                                  Price

<S>                                                <C>               <C>
Outstanding at January 1, 1997                    $ 470,000   $2.08 to $13.63
Grants                                              300,000       $13.63
Exercised
Canceled

Outstanding at December 31, 1997                    770,000   $2.08 to $13.63
Grants                                               95,000        $7.00
Exercised                                          (284,000)  $2.08 to $2.50
Purchased from option holder by Company             (54,000)  $2.08 to $2.50
Canceled                                             (7,000)      $13.63

Outstanding at December 31, 1998                    520,000   $2.08 to $13.63
Grants                                               99,000   $4.50 to $5.25
Exercised
Canceled

Outstanding at December 31, 1999                    619,000   $2.08 to $13.63

Non-Qualified Stock Option Plan

Outstanding at January 1, 1997                        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   $7.50 to $13.50
Automatic grant to directors                          6,000   $4.88 to $7.50

Exercised

Outstanding at December 31, 1999                    14,000    $4.88 to $13.50
</TABLE>




<PAGE>
                                       F-24




     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>
<CAPTION>

                                                                  1999           1998          1997

<S>                                                            <C>           <C>            <C>
Net (loss) income - as reported                                $ (2,869)     $ (4,057)      $ 2,088
Net (loss) income - pro forma                                  $ (3,226)     $ (4,548)      $ 2,058
Basic (loss) income per common share - as reported             $ (0.58)       $ (0.81)      $ 0.42
Basic (loss) earnings per common share - pro forma             $ (0.65)       $ (0.90)      $ 0.42
Diluted (loss) earnings per common and common
  share equivalent - as reported                               $ (0.58)       $ (0.81)      $ 0.40
Diluted (loss) earnings per common and common share
  equivalent - pro forma                                       $ (0.65)       $ (0.90)      $ 0.39

</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 1999,  1998,  and 1997,  respectively:  dividend
yield of 0 percent for all years; expected volatility of 60 percent, 62 percent,
and 72 percent; risk-free interest rates of 5.00 percent, 5.46 percent, and 6.50
percent; and expected lives of five years for all years. The weighted fair value
of  options  granted  in 1999,  1998,  and 1997 was  $4.57,  $7.21,  and  $6.81,
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.

17.   EARNINGS PER SHARE

     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, 1999,  1998,  and 1997,  were
633,000, 531,000, and 410,000, respectively.


<PAGE>
                                      F-25




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 1999

                                                       Income          Shares        Per Share
                                                     (Numerator)     (Denominator)     Amount

Basic EPS -

<S>                                                       <C>               <C>           <C>
  Loss available to common stockholders                   $(2,869)          4,978         $(0.58)
Effect of dilutive securities -
  Options

Diluted EPS -
  Loss available to common stockholders plus
    assumed conversions                                   $(2,869)         4,978          $(0.58)

                                                           Year Ended 1998

                                                       Income          Shares        Per Share
                                                     (Numerator)     (Denominator)     Amount

Basic EPS -

  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)

</TABLE>

<TABLE>
<CAPTION>


                                                             Year Ended 1997

                                                          Income          Shares        Per Share
                                                       (Numerator)     (Denominator)    Amount

Basic EPS -
<S>                                                          <C>              <C>           <C>
  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

</TABLE>


     In January 1999,  the Company  purchased  4,800 shares of treasury stock on
the open market for approximately  $22,000. In addition to the purchase of stock
from Paulson as described in Note 13, the Company purchased 81,000 of its shares
from SunAmerica at $7.50 per share on October 18, 1999. This transaction reduced
SunAmerica's  ownership of the Company to under 15 percent.  After giving effect
to such share  repurchases,  the Company had  4,523,021  shares of common  stock
outstanding. The purchases were recorded in treasury stock.


<PAGE>
                                       F-26





18.   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  primarily 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>

        (amounts in thousands)                        Food and
1999                            Casino       Rooms     Beverage   Entertainment  All Other      Total

<S>                              <C>         <C>         <C>         <C>         <C>          <C>
Revenues from external
 customers                       $ 74,086    $ 35,947    $ 18,081    $ 18,346    $ 11,713     $ 158,173
Intersegment revenues                           3,952       7,036       2,648                    13,636
Segment profit (loss)              30,875      14,038        (225)      2,075       8,485        55,247

1998

Revenues from external
 customers                       $ 77,676    $ 35,513    $ 16,818    $ 18,793    $ 11,155     $ 159,955
Intersegment revenues                           4,094       7,122       2,750                    13,966
Segment profit (loss)              32,383      14,654        (721)      1,932       7,847        56,095

1997

Revenues from external
 customers                       $ 71,624    $ 38,190    $ 15,550    $ 17,873    $ 10,556     $ 153,793
Intersegment revenues                           3,622       6,053       3,022                    12,697
Segment profit (loss)              31,004      16,955        (568)        638       7,545        55,574

</TABLE>

Reconciliation of segment profit to consolidated net income before taxes and
extraordinary item:
<TABLE>
<CAPTION>
                                                   1999           1998          1997


<S>                                                <C>            <C>           <C>
Segment profit                                   $55,247        $56,095       $55,574
Other operating expenses                          44,154         39,716        36,696
Other expense                                     18,423         17,963        15,481

Net (loss) income before (benefit)
 provision for taxes and extraordinary item      $(7,330)       $(1,584)     $ 3,397

</TABLE>

     The Company's primary marketing is not aimed toward 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  percent  of all  reported  segment  revenues;
however, the Company cannot identify such information,  based upon the nature of
gaming operations.


<PAGE>
                                       F-27


19.      RELATED PARTY TRANSACTIONS

     Robert R. Barengo, a member of the Board of Directors of the Company,  is a
director  of  American  Wagering,  Inc.  ("AWI")  and  owns  7  percent  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 sport book  operations.  The lease provides for rental payments based
upon the monthly and annual revenues derived by AWI from the location.  AWI paid
aggregate rent to ROC of approximately $250,000,  $212,000, and $234,000 in each
of the three years ended  December 31, 1999,  1998 and 1997,  respectively.  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 lease as favorable as terms  obtained by other casino  hotels
in Las Vegas.

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
litigation related to the Paulson merger,  the Morgens Waterfall  litigation and
with related matters. Under such letter agreement, Mr. Barengo receives a fee of
$10,000 per month for his  counseling  services.  Fees paid under this agreement
were  $120,000  and  $90,000  for the years  ended  December  31, 1999 and 1998,
respectively.  Either party may terminate  the letter  agreement on no less than
seven days prior written notice.

     Peninsula  Gaming Partners LLC engaged RGM to assist,  on an interim basis,
with  transitional  matters  relating to the operations of the Diamond Jo gaming
riverboat in Dubuque,  Iowa. Such services include assisting in the selection of
a new chief operating  officer to oversee  riverboat casino operations and other
matters.  RGM has earned fees and expenses in the amount of $64,000 for the year
ended  December  31,  1999.  Mr.  Westerman  serves as a manager on the board of
managers of Peninsula Gaming  Partners,  LLC. The Company believes that the fees
are no less favorable than would have been paid in an arms-length transaction.

20.   SUBSEQUENT EVENTS

     On  February  8,  2000,  the  Company  completed  a  tender  offer  wherein
approximately  590,000 shares of stock were  purchased for $7.50 per share.  The
Company used its cash and cash equivalents to purchase the tendered shares.
<PAGE>
                                       F-28


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