INCENTIVE COMPENSTION PLAN


1. Purpose.

          The purpose of this Plan is to attract and keep in the employ of the
company employees of experience and ability by providing additional incentive to
those who contribute significantly to the successful and profitable operation of
the business and affairs of the Company and its subsidiaries. To that end, the
Plan provides an opportunity for these employees to participate in the
successful results of such operations through special awards, granted on a merit
basis.

2. Definitions.

         Unless the context otherwise requires, the following words as used
herein shall have the following meanings:

(a) "Board" - The board of directors of the Company.

(b) "Bonus Pool" -- The incentive compensation reserve.

(c) "Company" - Riviera, Inc., a Nevada corporation.

(d) "Fiscal Period" - Each calendar year or portion thereof during the term of
the Plan.

(e) "Force Majeure" shall mean earthquakes, fire, floods and other acts of God,
strikes, lockouts, act of war, civil disorder not within the control of the
party concerned, and for these purposes an event shall not be deemed to be
within the control o the party concerned on the grounds that that party could
have prevented that event by acceding to an unreasonable demands of a
Governmental Authority or other authority, corpora-tion trade union, association
or other person; provided that for purposes of this Agreement, the obligations
of either party to this Agreement shall not be excused because of financial
in-ability.

(f) "Generally Accepted Accounting Principles" shall mean those generally
accepted accounting principles and practices which are recognized at such by the
American Institute of Certi-fied Public Accountants acting through its
Accounting Principles Board ("APB") or by the Financial Accounting Standards
Board ("FASB") or through other appropriate boards or committees thereof and
which are consistently applied for all periods after the date hereof to properly
reflect the financial condition and the results of operations and changes in
financial position of Company, except that any accounting principle or practice
required to be changed by the APB or FASB (or other appropriate board or
committee of the said Boards) in order to continue as a Generally Accepted
Accounting Principle or practice may so be changed. In the event of a change in
Generally Accepted Ac-counting Principles, Company and Executive will thereafter
negotiate in good faith to revise any provisions of this Agree-ment affected
thereby in order to make such provisions consistent with Generally Accepted
Accounting Principles then in effect.

(g) "Governmental Authority" shall mean any government (or any political
subdivision or jurisdiction thereof), court, bureau, agency or other similar
authority, foreign or domestic, having jurisdiction over the Company or
Participant, including Nevada Gaming Authorities.

(h) "Nevada Gaming Authorities" shall mean any state or local authority in the
State of Nevada having jurisdiction over gaming operations of Company and
Participant.

(i) "Operating Earnings" - with respect to any period for the Hotel, the sum of
the amounts for such period, determined in accordance with Generally Accepted
Accounting Principles, without duplication, of (1) the consolidated net income
of Company and its subsidiaries, plus (2) the consolidated depreciation and
amortization expense of Company and its subsidiaries, plus (3) the consolidated
interest expense of Company and its subsidiaries, plus (4) a provision for taxes
based on income, plus (5) to the extent not otherwise include, extraordinary
losses, plus (6) any provisions or payments made pursuant to the Plan, plus
(7)any provisions or payments made pursuant to the Incentive Compensation of the
Chairman and Chief Executive Officer as that term is defined in the Employment
Agreement dated ________, 1992, between Company and William L. Westerman, and
minus (7) any revenues that would be character-ized as an extraordinary gain
under Generally Accepted Account-ing Principles on a basis that is consistent
with past practices.

(j) "Operating Earnings Target" shall have that meaning assigned to such term in
Section 6(a).

(k) "Participant" shall have that meaning assigned to such term in Section 5.

(l) "Plan" - This Incentive Compensation Plan.

(m) "Profit Sharing and 401(k) Plan" shall mean the Howard Johnson & Company
Regional Defined Contribution Plan adopted by the Company by Adoption Agreement
dated , 1992, as modified thereafter from time to time.

3. Administration.

(a) The Plan shall be administered by the Chairman of the Board ("Chairman").

(b) The Chairman shall have power to interpret the Plan, and, subject to its
provisions set forth, to prescribe, amend and rescind rules and regulations and
make all other determina-tion necessary or desirable for the Plan's
administration.

(c) The decision of the Chairman on any questions concern-ing or involved in the
interpretation or administration of the Plan shall be final and conclusive, and
nothing in this Plan shall be deemed to give any officer or employee, or his or
her legal representatives or assigns, any right to participate in the Plan or
the Bonus Pool except to such extent, if any, as the Chairman may have
determined or approved pursuant to the provi-sions of this Plan.

4. Eligible Employees.

(a) Employees eligible to participate in this Plan shall be those full-time
salaried employees of the Company who, in the opinion of the Chairman, 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.

(b) WILLIAM L. WESTERMAN, Chairman of the Board and Chief Executive Officer,
hereby waives any rights he may have to participate in the Plan, and hence will
not be eligible for such participation.

5. Participants.

         From the employees eligible to participate in this Plan, the Chairman
shall annually choose those who shall actually participate for that year (the
employees being referred to in this Plan as "Participants") and shall determine
the amount of the participation (the amount being referred to in this Plan as
the "incentive award" of the Participant) of each Participant in the Bonus Pool.
In choosing the Participants and in determining the amount of the incentive
award of each, the Chairman shall consider the positions and responsibilities of
the eligible employees, their accomplishments during the year, the value of such
accomplishments to the Company and such other factors as the Chairman deems
pertinent.

6. Computation of Bonus Pool.

(a) In the event that Operating Earnings for any Fiscal Period meet the
Operating Earnings Targets for such Fiscal Period (as set forth below), the
Chairman shall cause the fol-lowing amounts to be credited to the Bonus Pool:


<PAGE>

<TABLE>
<CAPTION>

                                Operating
      Fiscal                    Earnings                  Bonus
      Period                    Target                     Pool
      ------                  --------------------       --------------

<S>    <C>                    <C>                        <C>
       1992                   $ 22,000,000               $ 350,000
       1993                     23,000,000                 375,000
       1994                     23,000,000                 375,000
       1995                     24,000,000                 400,000
</TABLE>


(b) In the event that for any Fiscal Period, the Operating Earnings exceed the
Operating Target, in addition to the amount set forth in Subsection (a) above,
the Chairman shall cause to be credited to the Bonus Pool an amount equal to ten
percent (10%) of the sum by which the Operating Earnings exceed the Operating
Earnings Target.

(c) In the event that Operating Earnings for any Fiscal Period is at least equal
to ninety-five percent (95%) of the Operating Earnings Target but less than the
Operating Earnings Target, the Chairman shall cause to be credited to the Bonus
Pool an amount equal to 75% of the Bonus Pool had the Operating Earn-ings Target
for such Fiscal Period been met.

(d) As soon as practicable after the end of each Fiscal Period, Company's
independent public accountants shall determine and report to the Chairman the
amount creditable to the Bonus Pool for that Fiscal Period under the provisions
of the Plan. In making such determinations and reports, the independent public
accountants shall make all adjustments directed by the Chairman pursuant to the
provisions of the Plan.

(e) The Chairman shall be under no compulsion to award the total amount
creditable to the Bonus Pool for any particular Fis-cal Period. At the
discretion of the Chairman and with Board approval, a portion of the Bonus Pool
may be allocated to fund contributions to the Profit Sharing and 401(k) Plan in
addition to those amounts stated in the Term Sheet for the Profit Sharing and
401(k) Plan. Any amount of the Bonus Pool for any Fiscal Period which the
Chairman shall not have awarded within 60 days after receipt of the
determination and report of the independent public accountants shall no longer
be available for awards under the Plan. THIS PARAGRAPH 6(e) DELETED AS OF AUGUST
3, 1995.

7. Incentive Award.

(a) The Chairman shall make an incentive awards to Participants in the form of
cash. The incentive award payable to each Participant shall not exceed
twenty-five percent (25%) of such participant's Base Salary. Notwithstanding the
foregoing to the contrary, in the event that Operating Earnings for any Fiscal
Period exceed the Operating Earnings Target, the incentive award to a
Participant may increase by an additional ten percent(10%
(b)

<PAGE>


         up to a maximum of sixty percent (60%) of a Participant's Base Salary
for each One Million Dollars $1,000,000.00 by which Operating Earnings for such
Fiscal Period exceeds the Operating Earnings Target. Furthermore, the maximum
incentive payable to a Participant may be further increased at the
recommendation of the Chairman, with Board approval.


8. Settlement of Incentive Awards.

          (a) The Chairman shall order the incentive award for any Fiscal Period
to be paid promptly after the amount of the bonus Pool is determined.

(b) Incentive awards shall be paid as ordered by the Chair- man pursuant to
Subsection 7(a) above, excep6t that in the event any Participant is discharged
for just cause, all incentive awards to the Participant shall be forfeited to
the extent not actually paid at the time of such discharge.

(c) There shall be deducted from all payments of incentive awards and paid over
for the account of the recipient, any taxes required to be withheld by the
federal or any state or local government.

9. Death of Participant.

         In case of death of a Participant before or after termination of
employment, any unpaid installments of cash shall be paid to the Participant's
legal representatives.

10. Powers of Board of Directors.

         The Board, with the approval of the Chairman, may suspend, terminate or
amend the Plan, in whole or in part, within the first ten (10) days of each
Fiscal Period with prompt written notice to each of the members of the Company's
executive commit-tee. THIS PARAGRAPH 10 DELETED AS OF AUGUST 3, 1995.

11. Effective Date and Expiration of Time for Awards.

         Subject to approval of the Plan by the holders of a majority of the
shares of the Company entitled to vote, the Plan will become initially effective
for the year ending December 31, 1992, and incentive awards under the Plan may
be made in respect of each fiscal year of the Company beginning with the Fiscal
Period 1992 and ending not later than December 31, 1995.








                          RIVIERA HOLDINGS CORPORATION
                          RIVIERA OPERATING CORPORATION
                             COMPENSATION COMMITTEE


A meeting of the Compensation Committee was held at 4:30PM on August 3, 1995.
Present were Committee members Robert Barengo (Chairman) and William Friedman.
Also present by invitation were Philip Hannifin, Fred Klink and William
Westerman (who acted as Secretary).

Prior to the meeting, Mr. Westerman had distributed his recommendations for
changes in the Company's Executive Incentive Plan, Profit Sharing Plan and
Termination Fee agreements, attached hereto as Exhibit A.

After extensive discussion, especially with respect to Riviera Gaming
management's affect on the Company's profits and incentive calculation, the
Committee unanimously approved the following resolutions:

1.                         The Termination Fee agreements for current
                           participants will be amended to extend the expiration
                           date to December 31, 1996.

2.                         The Operating Earnings Target for 1996 will be $26
                           million And the Incentive Bonus Pool will be
                           $450,000.

3.                         Operating earnings will include net income or net
                           loss derived from Riviera Gaming Management (RGM)
                           activities, provided that if Riviera invests capital
                           (debt or equity) in an RGM "client," the Board of
                           Directors of ROC will make a determination with
                           respect to the expected rate of return on the
                           investment and basis for including earnings from the
                           "client" in the operating earnings calculation.

4.                         Deletion of Paragraph 6e of the existing incentive
                           agreement.

5.                         Deletion of Paragraph 10 of the existing incentive
                           agreement and replacement as follows: Beginning in
                           1995, no later than September 30 of each year, the
                           Board of Directors of the Company will establish the
                           Operating Earnings Target and Bonus Pool amounts for
                           the next fiscal year, and the Chairman of the Board
                           will notify each member of the Executive Committee in
                           writing of the amounts so determined.

6.                         Amendment of the Company's profit sharing plan
                           effective January 1, 1996 as follows: The Company
                           will contribute an amount equal to (i) 1% of each
                           eligible employee's compensation I the operating
                           earnings target is met and (ii) 1/10th of 1% thereof
                           for each $200,000 by which operating earnings is
                           exceeded up to a maximum of 3% thereof. For example,
                           assuming a target of $26 million and actual operating
                           earnings of $32 million or more, 3% of each eligible
                           employee's compensation would be contributed.

The meeting was adjourned by Mr. Barengo at 7:00PM.


----------------------
Robert Barengo

----------------------
         William Friedman