As filed with the Securities and Exchange Commission on September 26, 2002.

                           Registration No. 333-97907

          =====================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                           ---------------------------
                                Amendment No. 1 to
                                     Form S-4
                             REGISTRATION STATEMENT
                                      UNDER
                            THE SECURITIES ACT OF 1933
                           ---------------------------
                          RIVIERA HOLDINGS CORPORATION
                (Exact Name of Registrant as Specified in Its Charter)

      Nevada                       6719                         88-0296885

(State or other         (Primary Standard Industrial          (I.R.S. Employer
 jurisdiction of         Classification Code Number)         Identification No.)
incorporation or
 organization)
                          ---------------------------
                         2901 Las Vegas Boulevard South
                             Las Vegas, Nevada 89109
                                 (702) 734-5110
  (Address, Including Zip Code, and Telephone Number, Including Area Code, of
                  Registrant's Principal Executive Offices)
                          --------------------------
                    See Table of Additional Registrants below
                          --------------------------
                             WILLIAM L. WESTERMAN
                         2901 Las Vegas Boulevard South
                             Las Vegas, Nevada 89109
                                 (702) 734-5110
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
                               Agent For Service)
                         --------------------------
                                 With a copy to:
                             Richard L. Galin, Esq.
                              Gordon & Silver, Ltd.
                      3960 Howard Hughes Parkway, 9th Floor
                               Las Vegas, NV 89109
                                 (702) 796-5555
                         --------------------------
                  Approximate date of commencement of proposed
              sale to the public: October 25, 2002
                         --------------------------

                                                1


If any of the  securities  being  registered  on this Form are to be  offered in
connection  with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]

If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the  Securities  Act,  check the following box and list the
Securities  Act  registration   statement   number  of  the  earlier   effective
registration statement for the same offering. [ ]

If this form is a  post-effective  amendment filed pursuant to Rule 462(d) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registration  statement number of the earlier effective  registration  statement
for the same offering. [ ]

                        --------------------------
The Registrants  hereby amend this Registration  Statement on such date or dates
as may be necessary to delay its effective date until the Registrants shall file
a further amendment which specifically  states that this Registration  Statement
shall  thereafter  become  effective  in  accordance  with  Section  8(a) of the
Securities  Act of  1933  or  until  the  Registration  Statement  shall  become
effective on such date as the Commission,  acting pursuant to said Section 8(a),
may determine.




                          RIVIERA HOLDINGS CORPORATION

                         Table of Additional Registrants

                                                     Primary Standard
                                  State or Other        Industrial
                                  Jurisdiction of    Classification         IRS Employer
             Name                 Incorporation         Code No.          Identification No.
             ----                 --------------   ---------------------  ------------------

                                                                        
Riviera Operating Corporation     Nevada             7011, 7993, 7999       88-0296874

Riviera Gaming Management,        Nevada                   8741             88-0357130
Inc.

Riviera Black Hawk,  Inc.         Colorado                 7011             86-0886265

Riviera Gaming Management of      Colorado              7993, 7999          86-0874635
Colorado, Inc.



The address,  including zip code, and telephone number,  including area code, of
the  principal  offices  of  the  additional   registrants   listed   above  are
2901 Las Vegas Boulevard South, Las Vegas, Nevada 89109; (702) 734-5110.

                                                2


                                October 3, 2002

                                   PROSPECTUS

                                OFFER TO EXCHANGE
                        11% Senior Secured Notes due 2010
                               for all outstanding
                        11% Senior Secured Notes due 2010
                                       of
                          RIVIERA HOLDINGS CORPORATION
                   THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
           NEW YORK CITY TIME, ON NOVEMBER 25, 2002, UNLESS EXTENDED

Terms of the exchange offer:

-        We will exchange all existing  notes that are validly  tendered and not
         withdrawn prior to the expiration of the exchange offer.

-        You may withdraw tenders of existing notes at any time prior to the
         expiration of the exchange offer.

-        We believe  that the  exchange of existing  notes will not be a taxable
         event for U.S. federal income tax purposes,  but you should see "United
         States Federal Income Tax Considerations" for more information.

-        We will not receive any proceeds from the exchange offer.

-        The terms of the new notes are  substantially  the same as those of the
         existing  notes,  except  that the new notes are  registered  under the
         Securities Act of 1933 and the transfer  restrictions  and registration
         rights applicable to the existing notes do not apply to the new notes.

-        Each broker-dealer that receives new notes is required to deliver a
         prospectus in connection with any resale of such notes.

-        Each  broker-dealer  that acquired existing notes as a result of market
         making  or  other  trading  activities  may  use  this  exchange  offer
         prospectus, as supplemented or amended, for resales of new notes.

-        Broker-dealers that acquired the existing notes directly from us in the
         initial  offering  and not as a result  of  market  making  or  trading
         activities  cannot  use  this  Prospectus  for the  exchange  offer  in
         connection with resales of the new notes and, absent an exemption, must
         comply with the  registration and prospectus  delivery  requirements of
         the Securities Act in connection with secondary resale of the new notes
         and cannot  rely on the  position  of the staff of the  Securities  and

                                                3


         Exchange  Commission in Exxon Capital Holdings  Corporation  (April 13,
         1989).

See "Risk Factors"  beginning on page 16 for a discussion of risks that should
be considered by holders.

NEITHER THE NEVADA GAMING COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD, THE
COLORADO  LIMITED GAMING CONTROL  COMMISSION,  ANY OTHER GAMING  AUTHORITY,  ANY
STATE SECURITIES  COMMISSION NOR ANY OTHER REGULATORY AGENCY HAS PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS  PROSPECTUS OR THE INVESTMENT  MERITS OF THE NOTES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THESE  SECURITIES  HAVE NOT BEEN APPROVED OR  DISAPPROVED  BY THE SECURITIES AND
EXCHANGE  COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is October 3, 2002.

You should rely only on the information contained in this Prospectus or to which
we have  referred  you.  We have  not  authorized  anyone  to  provide  you with
information  that is  different.  This  Prospectus  may only be used where it is
legal to sell these  securities.  The information in this Prospectus may only be
accurate on the date of this document.

                           FORWARD-LOOKING STATEMENTS

         Throughout this Prospectus we make "forward-looking statements" as that
term is defined in Section 27A of the Securities  Act of 1933,  as amended  (the
"Securities  Act"),  and Section 21E of the Securities  Exchange Act of 1934, as
amended  (the  "Exchange  Act").  Forward-looking  statements  include the words
"may,"  "will,"  "would,"  "could,"  "likely,"   "estimate,"  "intend,"  "plan,"
"continue,"  "believe,"  "expect" or  "anticipate"  and other  similar words and
include all discussions  about our acquisition and development  plans. We do not
guarantee that the  transactions  and events  described in this  Prospectus will
happen as described or that any positive  trends noted in this  Prospectus  will


                                                4


continue.  The  forward-looking  statements  contained  in this  Prospectus  are
generally  located in the  material  set forth  under the  headings  "Prospectus
Summary,"  "Risk  Factors," "Use of Proceeds,"  "Capitalization,"  "Management's
Discussion and Analysis of Financial  Condition and Results of  Operations"  and
"Business," but may be found in other locations as well.  These  forward-looking
statements generally relate to our plans, objectives and expectations for future
operations  and are  based  upon  management's  reasonable  estimates  of future
results or trends.  Although we believe that our plans and objectives  reflected
in or suggested by such forward-looking statements are reasonable at the present
time, we may not achieve or we may modify such plans or  objectives.  You should
read this Prospectus  completely and with the  understanding  that actual future
results  may be  materially  different  from what we  expect.  We do not plan to
update forward-looking  statements even though our situation or plans may change
in the future.

         Specific  factors  that might cause  actual  results to differ from our
expectations,  might cause us to modify our plans or objectives,  may affect our
ability to pay timely amounts due under the notes or may affect the value of the
notes, include, but are not limited to:

         o        the availability and adequacy of our cash flow to meet our
                  requirements, including payment of amounts due under the
                  notes;

         o        economic, competitive, demographic, business and other
                  conditions in our local and regional markets;

         o        changes or developments in laws, regulations or taxes in the
                  gaming industry;

         o        actions  taken  or  omitted  to be  taken  by  third  parties,
                  including our customers, suppliers, competitors and members as
                  well  as   legislative,   regulatory,   judicial   and   other
                  governmental authorities;

         o        competition in the gaming industry, including the availability
                  and success of alternative gaming venues and other
                  entertainment attractions;

         o        a decline in the public acceptance of gaming;

         o        changes in personnel or compensation, including federal
                  minimum wage requirements;

         o        our failure to obtain,  delays in obtaining or the loss of any
                  licenses,  permits or approvals,  including  gaming and liquor
                  licenses,  or  the  limitation,  conditioning,  suspension  or
                  revocation of any such licenses,  permits or approvals, or our
                  failure  to  obtain  an  unconditional  renewal  of  any  such
                  licenses, permits or approvals on a timely basis;

         o        the loss of any of our casino facilities due to terrorist
                  acts, casualty, weather, mechanical failure or any
                  extended or extraordinary maintenance or inspection that may
                  be required;

         o        other adverse conditions, such as adverse economic conditions,
                  changes in general customer confidence or spending,  increased
                  transportation   costs,  travel  concerns  or  weather-related
                  factors,  that may  adversely  affect  the  economy in general
                  and/or the casino industry in particular;

         o        our substantial indebtedness, debt service requirements and
                  liquidity constraints;

         o        risks related to the notes and to high-yield securities and
                  gaming securities generally;

         o        changes in our business strategy, capital improvements or
                  development plans;


                                                5


         o        the availability of additional capital to support capital
                  improvements and development;

         o        factors relating to the current state of world affairs and any
                  further acts of terrorism or any other destabilizing events in
                  the United States or elsewhere; and

         o        other factors discussed under "Risk Factors" or elsewhere in
                  this Prospectus.

         All future written and oral forward-looking  statements attributable to
us or any person acting on our behalf are expressly  qualified in their entirety
by the cautionary  statements contained or referred to in this section. In light
of these and other risks,  uncertainties  and assumptions,  the  forward-looking
events  discussed  in this  Prospectus  might not occur.  You  should  read this
Prospectus  completely and with the understanding that actual future results may
be materially different from what we expect.

                               PROSPECTUS SUMMARY

         This summary highlights selected  information from this Prospectus.  It
does not contain all of the  information  that is important for your  investment
decision.  The  following  summary  is  qualified  in its  entirety  by the more
detailed  information and the financial  statements and notes thereto  appearing
elsewhere in this Prospectus.  You should carefully read this entire  Prospectus
and should  consider,  among  other  things,  the  matters set forth under "Risk
Factors" before making any investment  decisions  regarding the notes. The terms
"we," "us," "our" and other  references to our company refer to Riviera Holdings
Corporation and its subsidiaries.

The Exchange Offer

         On June 26, 2002, we sold $215.0 million aggregate  principal amount of
11% Senior Secured Notes due 2010 in a transaction  exempt from the registration
requirements of the Securities Act. In connection with that offering, we entered
into a registration  rights agreement with the initial purchaser of the existing
notes,  Jefferies  & Company,  Inc.,  in which we agreed to complete an exchange
offer for the existing notes. We are offering to exchange the existing notes for
$215.0 million  aggregate  principal  amount of our 11% Senior Secured Notes due
2010,  which have been registered  under the Securities Act. You are entitled to
exchange your existing notes for new notes with substantially the same terms. We
urge you to read the  discussions  under the headings "The  Exchange  Offer" and
"The New Notes" in this Summary for further  information  regarding the exchange
offer and the new notes.

The Company

         We own and operate the Riviera Hotel & Casino in Las Vegas, Nevada, and
the Riviera Black Hawk Casino in Black Hawk,  Colorado.  Our  properties  target
mid-level  gamers by,  among other  things,  emphasizing  slot  machine play and
value-oriented amenities. We believe our properties are located in strong gaming
markets and are well positioned to attract our target customers and benefit from
continued growth in these markets.

                                                6


Properties

         Riviera Las Vegas.  Opened in 1955, the Riviera Las Vegas has developed
a  long-standing  reputation  for  delivering  high  quality,   traditional  Las
Vegas-style gaming and entertainment. Riviera Las Vegas is located on the corner
of Las Vegas  Boulevard and Riviera  Boulevard at the northern end of the Strip.
The property  includes 110,000 square feet of casino space,  1,500 slot machines
and 34 gaming  tables,  including  blackjack,  craps,  roulette,  pai gow poker,
Caribbean  Stud(R)  poker,  Let It Ride(R)  and  mini-baccarat.  The casino also
includes a keno lounge and a 200-seat race and sports book.  Other  amenities on
the property  include five hotel  towers with  approximately  2,100 hotel rooms,
160,000 square feet of convention/meeting  space, four full-service restaurants,
five bars, a fast-food  court,  five  entertainment  centers for shows,  outdoor
swimming pools, tennis courts and a health club.

          Riviera Black Hawk. Opened on February 4, 2000, the Riviera Black Hawk
is located  approximately 40 miles west of Denver in the Black Hawk/Central City
market.  Our 32,000  square foot casino  features the fourth  largest  number of
gaming  devices  in the  market  with  approximately  986 slot  machines  and 12
blackjack tables.  Amenities include parking for 520 vehicles, a 252-seat casual
buffet-style  restaurant,  two  themed  bars and an  entertainment  center  with
seating for 440 people.  Our  marketing  emphasizes  quality  food and  beverage
amenities and  entertainment  programs  geared to meet the tastes of the market,
such as live music  provided by regional  and  national  groups,  comedians  and
boxing.

Successful Operating Strategies

         Focus On Slot Play.  We have focused our  businesses  on the  mid-level
gaming  customer,  who  overwhelmingly  favors  slot  play.  As a result of this
strategy,  slot revenue at the Riviera Las Vegas is 78% of total gaming revenue,
significantly  higher than the Strip  average of 48.2% for 2001. To further this
strategy, we opened Nickel Town(R) at the Riviera Las Vegas in 1997. Nickel Town
is comprised  primarily of nickel slot machines,  the fastest growing segment of
the Las Vegas slot market. In addition,  our slot focus was a critical factor in
choosing to operate in the Black  Hawk/Central  City  market,  where the maximum
single bet is $5 and limited stakes gaming diminishes the profitability of table
games.  We believe that our focus on slot players  reduces the volatility of our
operating results.

          Focus On  Non-Gaming  Revenues.  In addition  to  enjoying  one of the
highest hotel occupancy  rates on the Strip,  Riviera Las Vegas has an extensive
entertainment program, with five different regularly scheduled shows and special
appearances by headline entertainers.  Surveys have shown that our entertainment
draws gaming  customers,  as 30% of the show patrons come from outside the hotel
and 67% of these  individuals  gamble at Riviera  Las Vegas  before or after the
show.  In  addition,  a key growth  focus is  expanding  Riviera Las Vegas' core
conventioneer  customer  base. We believe that the  expansion of the  convention
facility  to 160,000  square  feet in February  1999 has  increased  Riviera Las
Vegas' convention  business and hotel room occupancy.  Conventioneers  accounted
for 30.4% of the Riviera Las Vegas hotel  bookings  in 2001.  In  addition,  the
hotel has over 740,000  convention-related  advance hotel room bookings over the
next four years, including  approximately 32% of all available hotel room nights
in 2002. Non-gaming revenues as a percent of total revenue was approximately 56%
in 2001 and generated 48% of our gross profits in 2001.

                                                7


Good Locations In Strong Markets

         Las  Vegas.  Riviera  Las Vegas is located  in one of the  largest  and
fastest  growing  entertainment  markets  and the largest  gaming  market in the
country.  According  to the Las Vegas  Convention  and Visitors  Authority,  the
number of visitors who traveled to Las Vegas during the 15-year period from 1986
through  2001  increased at a steady and  significant  rate from 15.2 million in
1986 to 35.0 million in 2001, a compound annual growth rate of 5.7%.  Convention
business  in Las  Vegas  continues  to grow  at a  rapid  pace  and  comprise  a
substantial  portion of visitation  (6.8% growth in convention  delegates  since
1986 with over four million delegates  visiting Las Vegas in 2001). Clark County
gaming  continues to be a strong and growing  business  with Clark County gaming
revenues  increasing at a compound  annual growth rate of 7.9% from $2.4 billion
in 1986 to just over $7.6  billion in 2001.  The events of  September  11,  2001
slowed growth in Las Vegas, as tourist visits and gaming revenue growth remained
flat versus the prior year.

         The Riviera Las Vegas facility is in the midst of extensive current and
potential  development  in the northern end of the Strip.  Currently,  Turnberry
Place,  a  luxurious   four-tower  Las  Vegas  condominium   complex,  is  under
construction  adjacent to the Riviera property.  In addition to Turnberry Place,
Hilton Hotels Corp. is building a $415 million, 1,500-unit time-share complex on
property across the street from the Riviera.  Further,  Steve Wynn has announced
the  development of a mega-resort  gaming property to be located on the Strip in
proximity to us and a monorail system connecting the north end of the Strip, the
south end of the Strip and downtown Las Vegas is under development.

          Black Hawk.  The Black  Hawk/Central  City  market  serves the rapidly
growing  Denver area, of which the  population in the  metropolitan  statistical
area grew 30.0% from 1990 to 2000.  During the 12 months  ended March 31,  2002,
the market  generated  $553.9  million of gaming  revenue and from  January 1998
through March 2002 grew at a compounded  annual growth rate of 10.2%. We believe
that the  market  has  potential  for  future  growth as well,  in part due to a
proposal to improve  access to Black Hawk.  The City of Black Hawk together with
the County of Gilpin and State of Colorado are currently  investigating plans to
improve  access to the Black Hawk gaming  community  via state highway 119. This
plan may ultimately result in the construction of a tunnel benefiting both Black
Hawk  and  Central  City  and  improving  access  to and from  I-70,  the  major
interstate  highway to  Denver.  We cannot  assure you that these  plans will be
accomplished.

         Riviera  Black Hawk  possesses a premier  location in the strong  Black
Hawk/Central City market. The facility is situated at the entrance of the market
and is one of the first casinos a visitor sees when traveling to Black Hawk from
Denver.  We also benefit from strong  "walk-in"  traffic due to the proximity of
our  casino  to two of the  most  successful  casinos  in the  market,  and  the
prominent location of Black Hawk versus Central City.

                                                8


Growth Opportunities

         Based on our  successful  development  of Riviera  Black  Hawk,  we are
pursuing the  development  of other  gaming  projects in other  emerging  gaming
markets.  We intend to finance the development of these gaming projects  through
unrestricted  subsidiaries,  which  we will  manage  for a fee,  funded  with an
investment from us and non-recourse debt financing.  This structure allows us to
grow  and  diversify  our  business  while  mitigating  the  risk  to  our  core
operations.

     Jefferson County,  Missouri.  We have received the endorsement of Jefferson
County  for a  casino/hotel  development  project,  and we  expect  to file  our
application  with the  Missouri  Gaming  Board in October  2002 or very  shortly
thereafter.  Current plans for the facility include,  among other things,  1,500
slot machines and a 200-room  hotel.  The estimated cost of this  development is
approximately  $150 million.  This property  would be located  approximately  22
miles  south of St.  Louis along the  Mississippi  River and would serve the St.
Louis market. The St. Louis market is the 17th most populated  metropolitan area
in the U.S. and has an average  household income equivalent to the U.S. average.
There are  approximately  2.8 million adults that reside within 100 miles of St.
Louis and 1.9 million adults reside within 50 miles.  Gaming revenues in the St.
Louis market have  increased to $760.4  million for the year ended  December 31,
2001,  an increase of 11.1% over the prior year and ranking tenth among all U.S.
gaming  markets.  There can be no  assurance  that we will  receive a license or
obtain the financing necessary to develop this property.

          Hobbs, New Mexico.  We are in the process of applying,  along with two
minority-owner  partners,  to the New Mexico Racing  Commission for a license to
develop and operate a horse racing facility. Once we receive the racing license,
we can then apply to the New Mexico  Gaming  Board to operate  slot  machines at
Saddlebrook  Park,  located  in  Hobbs,  New  Mexico,   just  west  of  the  New
Mexico/Texas  border.  Current plans for the facility include  approximately 600
slot machines,  a one-mile racetrack,  an entertainment center and retail shops.
The development of the facility is expected to cost  approximately  $30 million.
The facility  will enjoy a superior,  protected  location as it will be the only
casino within a 50-mile  radius.  There are currently only  approximately  2,700
gaming positions within a 200-mile radius of the site.  Approximately 6,700 cars
pass the proposed site daily along  Highway 18, over 2.4 million each year.  The
population base over 25 years old within 200 miles of the site is  approximately
1.2 million,  primarily located in western Texas. There can be no assurance that
we will  receive a license or obtain the  financing  necessary  to develop  this
property.

Strong Management Team

         Our current  senior  management has been with us since 1993. We benefit
from their many years of experience in all aspects of gaming operations, ranging
from slot management to database  marketing.  The success of our management team
is  demonstrated  by its  success in  maintaining  Riviera  Las Vegas  operating
performance despite an intensely competitive operating environment in Las Vegas,
and the successful development of Riviera Black Hawk.

         Our principal executive offices are located at 2901 Las Vegas Boulevard
South, Las Vegas, Nevada 89109, and our telephone number is (702) 734-5110.

                                                9


The Transactions

         The existing  notes were issued on June 26, 2002. The net proceeds from
the sale of the  existing  notes,  after  deduction  of the initial  purchaser's
discounts and expenses of the transaction,  were  approximately  $202.6 million.
The net proceeds of the offering,  along with cash on hand, were used to defease
our 10%  First  Mortgage  Notes  due 2004 and  Riviera  Black  Hawk's  13% First
Mortgage Notes due 2005 With Contingent Interest.

The Exchange Offer

Securities Offered.......   Up to $215,000,000 aggregate principal amount of 11%
                            Senior Secured Notes due 2010. The terms of the new
                            notes and existing notes are identical in all
                            material respects.

The Exchange
Offer....................   We are offering the new notes to you in exchange for
                            a like principal amount of existing notes.  Existing
                            notes may be exchanged only in integral multiples of
                            $1,000.

Expiration Date;
Withdrawal of Tender.....   The exchange offer will expire at 5:00 p.m.,
                            New York City time, on , November 25, 2002 unless we
                            extend it.


Procedures for Tendering
Existing Notes...........   If you  wish  to  accept  the  exchange offer and
                            tender your  existing  notes, you  must  complete,
                            sign and date the letter  of  transmittal  in
                            accordance with its terms,  and mail or  otherwise
                            deliver  the letter  of  transmittal, together with
                            your  existing  notes and any other  required
                            documentation,  to the  exchange  agent  at the
                            specified address.

Exchange Agent...........   The Bank of New York is serving as the exchange
                            agent in connection with the exchange offer.

Federal Income Tax
Consequences.............   The exchange of notes under the exchange offer
                            should not be a taxable event for federal income tax
                            purposes.

                         Consequences of Exchange Offer

         Based on interpretive letters issued by the staff of the Securities and
Exchange  Commission to third parties in unrelated  transactions,  we are of the
view that  holders of  existing  notes who  exchange  those  notes for new notes
pursuant to the exchange  offer  generally  may offer such new notes for resale,

                                                10


resell such new notes and otherwise  transfer such new notes without  compliance
with the registration and prospectus  delivery provisions of the Securities Act,
provided:

         o the new notes are acquired in the ordinary course of the holders'
business;

         o the holder has no arrangement with any person to participate in a
distribution of such new notes;

         o neither the holder nor any other person is engaging in or intends to
engage in a distribution of the new notes; and

         o the  holder is not our  "affiliate"  within  the  meaning of Rule 405
under the Securities Act.

         Each  broker-dealer  that  receives  new notes for its own  account  in
exchange for existing notes must  acknowledge  that it will deliver a prospectus
in connection  with any resale of such new notes.  In addition,  the  securities
laws of some  jurisdictions  may  prohibit  the  offer or sale of the new  notes
unless they have been  registered or qualified for sale in such  jurisdiction or
in compliance with an available exemption from registration or qualification. We
have  agreed,  pursuant to the  registration  rights  agreement,  to register or
qualify the new notes for offer or sale under the securities or blue sky laws of
such jurisdictions as any holder of the notes reasonably requests in writing. If
a holder of existing  notes does not exchange such existing  notes for new notes
pursuant to the exchange offer,  such existing notes will continue to be subject
to the restrictions on transfer  contained in the legend printed on the existing
notes.  In  general,  the  existing  notes  may not be  offered  or sold  unless
registered  under the Securities  Act,  except pursuant to an exemption from the
registration  requirements of the Securities Act and applicable state securities
laws.  Holders of existing notes do not have any appraisal or dissenters' rights
under Nevada law in connection with the exchange offer.

         The existing  notes are  currently  eligible for trading in the Private
Offerings,  Resales and Trading through Automated  Linkages  ("PORTAL")  market.
Prior to the consummation of the exchange offer, the existing notes may continue
to be traded in the PORTAL market.  Following  expiration of the exchange offer,
the existing notes will not be eligible for PORTAL trading.

The New Notes

         The terms of the new notes and the existing  notes are identical in all
material  respects,  except for transfer  restrictions and  registration  rights
relating to the existing notes.


Securities Offered.......  $215.0 million principal amount of 11% Senior Secured
                           Notes due 2010.

Maturity Date............  June 15, 2010.

Interest Rate............  We will pay interest on the notes at an annual rate
                           of 11%.
                                                11


Interest Payment Dates...  We  will  pay  interest  on  the  notes semiannually,
                           on  each  June  15  and December  15,  beginning
                           December  15, 2002.

Guarantees...............  The notes will be unconditionally guaranteed on a
                           senior secured basis by each of our existing and
                           future restricted subsidiaries. The guarantees will
                           rank equal in right of payment with all existing and
                           future senior indebtedness of these subsidiaries and
                           will rank senior in right of payment to all existing
                           and future subordinated indebtedness of these
                           subsidiaries.

Security  Interest........ The notes will be secured by a lien on substantially
                           all of our and the subsidiary guarantors' current and
                           future assets, other than  certain  furniture,
                           fixtures  and  equipment,  the  assets  of  our
                           unrestricted  subsidiaries  and certain of our
                           licenses.  After we sold the existing  notes, we
                           entered into a new $30 million  senior  secured,
                           revolving credit facility,  which is also guaranteed
                           by our  restricted subsidiaries.  The lien on the
                           collateral  securing the new credit facility and
                           credit  facility  guarantees  is senior to the lien
                           on the  collateral securing the notes and the note
                           guarantees.

Ranking..................  The notes will rank equal in right of payment with
                           all of our existing and future senior indebtedness
                           with the exception of the lien on the collateral
                           securing our new credit facility and the credit
                           facility guarantees, which is senior to the lien on
                           the collateral securing the notes and the note
                           guarantees.  If we default under the notes, we will
                           automatically be in default under the credit
                           facility.  The notes will rank senior in right of
                           payment to all of our existing and future
                           subordinated indebtedness.

Optional Redemption......  On or after June 15, 2006,  we may redeem notes from
                           time  to time at a price that will  decrease  over
                           time as set    forth    under    the    caption
                           "Description of Notes--Optional Redemption."

                           Prior to June 15,  2005,  we may redeem up  to  35%
                           of  the  notes   with  the proceeds of one or more
                           public equity offerings  at the price  set  forth in
                           this Prospectus.

Gaming Redemption........  The notes will be subject to mandatory disposition
                           and redemption requirements following certain
                           determinations by any gaming regulatory authority.

Change of Control Offer..  If we  experience  a change in control, the  holders
                           of the notes will have the right to require us to
                           repurchase their notes at a price equal to 101% of
                           the principal amount,  plus accrued and unpaid
                           interest and liquidated damages, if any.

                                                12


Asset Sale Offer.........  If we sell certain assets or experience certain
                           events of loss and do not apply the proceeds as
                           required, we will have to offer to repurchase notes
                           at a price equal to 100% of the principal amount,
                           plus accrued and unpaid interest and liquidated
                           damages, if any.

Certain Indenture
Provisions...............  We will issue the notes under an indenture. The
                           indenture contains covenants limiting our ability to,
                           among other things:

                            o incur more debt;

                            o pay dividends or make other distributions;

                            o redeem our equity interests;

                            o make certain investments;

                            o create liens;

                            o enter into transactions with affiliates;

                            o merge or consolidate; and

                            o transfer or sell assets, including the equity
                              interests of our subsidiaries.

                            These  covenants  will be  subject to a number of
                            important exceptions.

Exchange Offer Registration.In an effort to give you the opportunity to exchange
                            the existing notes for publicly  tradable notes with
                            substantially identical terms (which we refer to  as
                            "new  notes"),  we  have agreed,   pursuant  to  a
                            registration rights  agreement  between  us and  the
                            Initial Purchaser, to use our reasonable best
                            efforts to:

                            o cause a registration statement for the new notes
                            to be declared effective by the SEC within 120 days
                            from the date the existing notes were issued; and

                            o commence and consummate the enxhange offer within
                            150 days from the date the existing notes were
                            issued.

                            In addition, under certain circumstances, we have
                            agreed to file a shelf registration statement that
                            would allow some or all of the notes to be offered
                            to the public.  If we do not comply with the
                            foregoing obligations under the registration rights
                            agreement,  we will be  required to pay  liquidated
                            damages to the holders of the notes.  See
                            "Description of Notes--Registration  Rights;
                            Liquidated Damages."
                                                        13


Use Of Proceeds..........   We will not receive any proceeds from the new notes
                            in the exchange offer.


         Before making an investment  decision  regarding the notes,  you should
carefully consider the information  included in "Risk Factors" beginning on page
16, as well as all of the other information set forth in this Prospectus.

Summary Consolidated Financial Data

         You should  read the  following  information  in  conjunction  with the
sections of this Prospectus entitled "Selected  Consolidated Financial Data" and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  and the  historical  financial  statements  and the  notes  thereto
included in this Prospectus.  The summary consolidated financial data as of, and
for the years ended,  December 31, 1999, 2000 and 2001,  presented  below,  have
been  derived  from  the  audited  financial  statements  for  Riviera  Holdings
Corporation as of those dates and for those  periods.  Riviera Black Hawk was in
the  development  stage from its  inception in August 1997  through  February 4,
2000,  when it opened.  Accordingly,  the results of  operations  for all fiscal
periods  presented may not be comparable.  The summary financial data as of, and
for the six months ended, June 30, 2001 and June 30, 2002, presented below, have
been  derived  from the  unaudited  financial  statements  for Riviera  Holdings
Corporation as of those dates and for those periods. The unaudited  consolidated
financial  statements  have been prepared by us on a basis  consistent  with the
audited  financial  statements  and  include  all normal  recurring  adjustments
necessary for a fair presentation of the information set forth therein.  Results
for the six months  ended,  June 30, 2001 and June 30, 2002 are not  necessarily
indicative of results for the full year.

        The following tables also include data for the four quarters ended, June
30, 2002 and as adjusted data about us which have been included for the purposes
of  additional  analysis.  Certain of these data give effect to the offering and
reflect certain  non-recurring  data as set forth in the footnotes  below.  Such
information  is  presented  to  enhance  the   understanding  of  our  financial
performance; however such amounts are not measurements in accordance with GAAP.





                                                                                                Six Months Ended
                                                           Year Ended December 31,                   June 30,
                                                         --------------------------            -----------------
                                                       1999          2000         2001          2001          2002
                                                    ----------    ----------   ----------    ----------   --------
                                                                                (dollars in thousands)

Financial Statement Data:
                                                                                                 
Net operating revenues........................... $     157,268      $201,531     $202,031      $107,028     $96,352
Income from operations...........................        11,093        16,879       16,971        11,726       9,398
Cash flows from operations.......................         6,749        19,355       12,546         7,515       7,308
Cash flows from investing activities                    (57,995)       (4,161)     (10,177)       (6,204)     (5,213)
Cash flows from financing activities                     45,167        (5,824)      (7,937)       (3,955)    (26,727)
Other Data:
EBITDA(1)........................................        25,679        35,928       34,214        20,272      18,347



                                                14




                                                                                                   At June 30, 2002
                                                                                                Actual      As Adjusted(2)

Balance Sheet Data:
                                                                                                          
Cash and cash equivalents...............................................................         $21,974        $21,974
Total assets............................................................................         248,982(3)     248,982
Long-term debt..........................................................................         218,234        212,620
Stockholders' equity (deficiency).......................................................           5,143         (6,186)

(1)      EBITDA is calculated as follows:



                                                                                         Six Months Ended
                                                       Year Ended December 31,               June 30,
                                                     --------------------------           --------------
                                                    1999        2000         2001        2001        2002
                                                 ----------  ----------   ----------  ---------- --------
Income from operations.......................       $11,093     $16,879      $16,971    $11,726     $9,398
Preopening expenses--Riviera Black Hawk.......          595       1,222           --         --        --
Depreciation and amortization................        13,991      17,827       17,243      8,546      8,949

EBITDA.......................................       $25,679     $35,928      $34,214    $20,272    $18,347



         EBITDA   consists   of  earnings   before   interest,   income   taxes,
         depreciation, amortization, preopening expenses, and other, net. EBITDA
         is presented to enhance the understanding of our financial  performance
         and our  ability  to service  our  indebtedness,  including  the notes.
         Although EBITDA is not necessarily a measure of our ability to fund our
         cash needs, we understand  that it is used by certain  investors as one
         measure  of  cash  flow  and  to  compare  our  performance   with  the
         performance  of other  companies  that report  EBITDA.  EBITDA is not a
         measurement determined in accordance with GAAP, is unaudited and should
         not be considered  an  alternative  to, or more  meaningful  than,  net
         income or income from  operations,  as an  indicator  of our  operating
         performance,  or cash flows from operating activities,  as a measure of
         liquidity.  This  definition  of EBITDA  may not be the same as that of
         similarly named measures used by other companies or the definition used
         in  the  indenture  governing  the  notes  or any  of  our  other  debt
         agreements.

(2)      Gives effect to this offering as if it occurred on June 30, 2002.
         Stockholders' equity is adjusted to reflect the charges recorded upon
         the retirement of the 10% Notes and 13% Notes.

(3)      Total assets are net of $226.6 million of U.S. Treasury Bills held to
         retire $210 million of debt and related accured interest.

                                                15


                                  RISK FACTORS

         An investment in the notes  involves a high degree of risk.  You should
carefully  consider the  following  risk factors in addition to all of the other
information  provided to you in this  Prospectus  before  making any  investment
decision regarding the notes.

Risks Related to Our Substantial Debt

Our significant  indebtedness  could adversely  affect our financial  health and
prevent  us from  fulfilling  our  obligations  under  the  notes  and our other
outstanding indebtedness.

     We have a significant amount of debt outstanding,  including $218.2 million
of long-term debt represented by the notes and certain capital lease obligations
that we have committed,  under the indenture, to convert to leases that would be
classified  as  operating  leases  before  December  22,  2002,  subject  to our
obtaining  reasonable  terms for such  conversion.  In addition,  the  indenture
governing the notes permits us to incur additional debt in certain circumstances
including  to finance the  purchase of  furniture  and  equipment  and up to $30
million under our new senior secured, revolving credit facility. As adjusted for
the  issuance  of the  notes  and  the  recording  of a  charge  related  to the
redemption of the 10% Notes and 13% Notes,  and assuming [no]  borrowings  under
the new  credit  facility,  our  equity as of June 30,  2002  would  have been a
deficit of  approximately  $(6.2)  million.  Our earnings were not sufficient to
cover  fixed  charges  in any of our last four  years and as  adjusted  for this
offering for the 12 months ended June 30, 2002.

         Our high  level of debt could have  important  consequences  to you and
significant effects on our business. For example, it could, among other things:

         o        make it more difficult for us to satisfy our obligations with
                  respect to the notes and our other outstanding indebtedness;

         o        increase our vulnerability to adverse economic and industry
                  conditions or a downturn in our business;

         o        limit our ability to fund a required regulatory redemption or
                  a change of control offer;

         o        result in an event of  default  if we fail to comply  with the
                  financial  and other  restrictive  covenants  contained in the
                  indenture or our new credit  facility,  which event of default
                  could result in all of our indebtedness  becoming  immediately
                  due and payable and would permit some or all of our lenders to
                  foreclose on our assets securing such indebtedness;

         o        limit our ability to fund or obtain additional financing for
                  future working capital, capital expenditures and other general
                  financial requirements;

                                                16


         o        require us to dedicate a substantial  portion of our cash flow
                  from  operations  to  payments  on our  indebtedness,  thereby
                  reducing  the  availability  of our cash flow to fund  working
                  capital,    capital   expenditures,    development   projects,
                  acquisitions and other general corporate purposes;

         o        limit our flexibility in planning for, or reacting to, changes
                  in our business and industry; and

         o        place us at a competitive disadvantage compared to our
                  competitors that have less debt.

         The occurrence of any one of these events could have a material adverse
effect on our business,  financial condition,  results of operations,  prospects
and ability to satisfy our obligations  under the notes. For more information on
the  terms  of  the  notes,  see  the  discussion  under  the  section  entitled
"Description of Notes."

We may not be able to generate sufficient cash flow to service our debt.

         We may not be able to  generate  sufficient  cash flow to  service  our
debt, to repay the notes when due or to meet  unanticipated  capital needs.  Our
ability to generate  sufficient cash flow to satisfy our obligations will depend
on the future  performance  of our gaming  operations,  which is subject to many
economic, political,  competitive,  regulatory and other factors that we are not
able to control.  However,  if cash flows from  operations are not sufficient to
satisfy our obligations, we may need to seek additional financing in the debt or
equity  markets,  refinance the notes,  sell selected  assets or reduce or delay
planned activities and capital expenditures. Any such financing,  refinancing or
sale of assets might not be available on  economically  favorable  terms,  if at
all. In the event that we are left without sufficient liquidity to meet our debt
service  requirements,  an event of  default  would  occur  under our new credit
facility and the indenture.

Risks Related to the Notes

Your right to  receive  payments  on the notes is  effectively  subordinated  to
payments under our new credit facility and any equipment financing to the extent
of the  collateral  securing this other debt.  The proceeds from the  collateral
securing the notes may not be sufficient to pay all amounts owed under the notes
if an event of default  occurs,  even if the fair market value of the collateral
would otherwise be sufficient to pay the amounts owed under the notes.

         The notes and guarantees are effectively  subordinated to (1) up to $30
million  principal  amount of  indebtedness  that may be incurred  under our new
senior  secured,  revolving  credit  facility,  pursuant  to  the  intercreditor
agreement described below, and (2) future equipment financing and purchase money
debt, in each case to the extent of the assets securing that indebtedness.  As a
result,  upon  any  distribution  to  our  creditors  or  the  creditors  of any
subsidiary  guarantors in  bankruptcy,  liquidation,  reorganization  or similar
proceedings,  or  following  acceleration  of our  indebtedness  or an  event of
default under such indebtedness,  our lender under our new credit facility,  our

                                                17


equipment  financing and our purchase money  indebtedness will be entitled to be
repaid in full before any payment is made to you from the proceeds of the assets
securing  such  indebtedness,  or the  sale  of the  equipment  subject  to such
equipment  financing.  Consequently,  it is unlikely that the liquidation of the
collateral  securing  the notes  would  produce  sufficient  proceeds to pay the
principal of, or premium,  if any, and accrued interest and liquidated  damages,
if any,  on the notes after also  satisfying  our  obligations  to pay any other
senior secured creditors,  even if the fair market value of the collateral would
otherwise  be  sufficient  to pay the amounts  owed under the notes.  The market
value of the collateral will also impact our ability to make payments due on the
notes,  as described  above. We can not assure you that the fair market value of
the  collateral  securing the notes would be  sufficient  to pay the amounts due
under  the  notes,  even  absent  the new  credit  facility  and  any  equipment
financing. In addition,  under certain circumstances the indenture governing the
notes allows us to incur additional  indebtedness.  In such case, the collateral
securing the existing  notes or the new notes might also secure such  additional
indebtedness.  An event of default under, or  acceleration  of, our other senior
secured debt also may prohibit us and the subsidiary  guarantors from paying the
notes or the note guarantees.

         The trustee  under the  indenture  and the lender  under our new credit
facility have entered into an intercreditor agreement to govern the relationship
between them and their  obligations  and rights.  Financing by multiple  lenders
with security interests in common collateral may result in increased  complexity
and lack of flexibility in a debt  restructuring  or other work-out  relating to
us. Furthermore,  under the intercreditor  agreement,  the trustee's remedies in
the event of a default will be limited.  Under the intercreditor  agreement,  if
the notes become due and payable prior to the stated maturity or are not paid in
full at the stated maturity at a time when indebtedness is outstanding under our
credit  facility,  the  trustee  will not have the right to  foreclose  upon the
collateral  unless and until the lender under the credit  facility fails to take
steps to exercise  remedies with respect to or in connection with the collateral
within  180 days  following  notice  to such  lender  of the  default  under the
indenture.  Also, the  intercreditor  agreement will prevent the trustee and the
holders of the notes from pursuing remedies with respect to the collateral in an
insolvency  proceeding.  The  intercreditor  agreement  provides  that  the  net
proceeds from the sale of collateral will first be applied to repay indebtedness
outstanding  under the credit  facility  and  thereafter  to the  holders of the
notes.  See  "Description of New Credit Facility and  Intercreditor  Agreement -
Intercreditor  Agreement."  Also,  if  we  default  under  the  notes,  we  will
automatically be in default under the credit facility.

Failure to exchange your existing notes for new notes will  significantly  limit
your ability to sell the existing notes.

         If you do not exchange  your existing  notes for new notes  pursuant to
the exchange offer, you will not be able to resell, offer to resell or otherwise
transfer the existing notes unless they are registered  under the Securities Act
or unless an exemption from the registration  requirements of the Securities Act
is  available to you. We will no longer be under an  obligation  to register the
existing  notes under the  Securities  Act except in the  limited  circumstances
provided under the registration rights agreement. Also, upon consummation of the
exchange offer,  the existing notes will cease to be eligible for trading in the
PORTAL market.

                                                18


         Moreover,  to the  extent  that  existing  notes are not  tendered  for
exchange  and  accepted in the exchange  offer,  the trading  market for the new
notes could be adversely  affected because of an insufficient float of new notes
available for trading.

The notes will not be secured by a pledge of Riviera Operating Corporation stock
until receipt of approval of the applicable regulatory bodies.

     While the notes and  guarantees are secured by our assets and the assets of
our restricted subsidiaries,  we will not be able to pledge the stock of Riviera
Operating  Corporation,  which is one of our restricted Nevada subsidiaries,  to
secure the  existing  notes or the new notes  until we receive  the  appropriate
approvals from the applicable regulatory bodies. While we have agreed to use our
reasonable best efforts to obtain such approvals in order to allow the pledge of
that stock,  we cannot  assure you as to whether or when we will  receive  these
approvals.  In  addition,  since the  pledge  will not be  granted  until  after
incurrence of the  indebtedness,  under federal  bankruptcy law a court may find
that adequate consideration was not received for the pledge or that the granting
of the pledge was an avoidable  preferential transfer.  Therefore,  if we become
subject to the federal bankruptcy laws within 91 days after the effectiveness of
the pledge, the pledge may be voided.

Gaming laws, other  regulations and lessor consent issues may delay or otherwise
impede the trustee's ability to foreclose on the collateral.

         The  trustee's  ability to foreclose on a number of the assets in which
we  grant  security  interests  is  subject  to the  prior  approval  of  gaming
authorities,  the  senior  lender  under our new  credit  facility  and  certain
lessors. Approval of gaming regulatory authorities is required before any person
may  foreclose  on, take  possession  of, or dispose  of,  certain of the assets
securing the notes and the guarantees.  In the event we fail to pay the notes or
otherwise default under the indenture,  before the trustee or the holders of the
notes can foreclose or take  possession of the assets or exercise  certain other
rights,  they may need to become  licensed under the local state gaming laws and
the regulations promulgated thereunder.

         Nevada  law  requires  that all  persons  who  propose to own shares of
licensed   corporations   must  be  found  suitable  as   stockholders  of  such
corporations  by  the  Nevada  Gaming   Commission  and  other  relevant  gaming
authorities before acquiring ownership of such interests. Consequently, it would
be  necessary  for the  trustee to file an  application  with the Nevada  gaming
authorities  requesting approval to enforce the security interest in the pledged
shares  and obtain  such  approval  before it may take any steps to enforce  the
security  interest.  Additionally,  the trustee must file  applications with the
Nevada gaming authorities  requesting approval to enforce a security interest in
gaming  assets  before  it may take  steps to  enforce  the  security  interest.
Moreover,  it would be  necessary  for a  prospective  purchaser  of the pledged
shares or of the assets  comprising our gaming  businesses to file the necessary
applications,  be  investigated,  and be found  suitable  by the  Nevada  gaming
authorities before acquiring the gaming assets or the pledged shares through the
foreclosure  sale.  Under Nevada law, the applicant for such approvals must file
all  applications  required by the Nevada gaming  authorities,  be investigated,
provide all information  requested by the investigating agency, and pay all fees
and costs charged by the gaming  authorities for such  investigations.  Although
the regulations of the Nevada Gaming  Commission  provide that the Nevada Gaming
Commission  may, in its  discretion,  grant a temporary or  permanent  waiver of


                                                19


licensing  requirements with respect to foreclosure on pledged shares, no action
to enforce the security  interest in the pledged shares may be taken nor may the
ownership of the shares be transferred without the approval of the Nevada Gaming
Commission.  These  requirements  may  therefore  limit the number of  potential
bidders who would  participate in any foreclosure sale and may delay the sale of
the pledged shares or other gaming assets, either of which could have an adverse
effect on the proceeds received from such sales.

         Under  Colorado  gaming laws,  the trustee could be precluded  from, or
otherwise  limited or delayed  in,  exercising  certain  powers of  attorney  or
selling  collateral,  including slot machines,  at a foreclosure sale since only
persons  licensed by the Colorado  gaming  authorities may have slot machines in
their possession.  In addition,  the trustee may encounter difficulty in selling
collateral due to various legal  restrictions,  including  requirements that the
purchaser or the operator of a gaming facility be licensed by state  authorities
or that prior approval of a sale or  disposition  of collateral be obtained.  If
the  trustee  sought to  operate,  or retain an operator  for,  our casino,  the
trustee or its agents  would be required to be licensed  under  Colorado  gaming
laws in order to  conduct  gaming  operations  in the  casino.  Since  potential
purchasers  who wish to operate the casino must satisfy such  requirements,  the
number of potential purchasers in a sale of the casino could be less than in the
sale of other types of facilities.  Additionally,  these  requirements may delay
the sale of, and may adversely affect the price paid for, the collateral.

         In  addition,  the  trustee's  ability to  foreclose  upon and sell the
collateral  will be subject to the procedural  restrictions of state real estate
law and the Uniform  Commercial Code.  Furthermore,  the right of the trustee to
foreclose upon and sell the collateral is likely to be significantly impaired by
applicable  bankruptcy law if a bankruptcy proceeding were to be commenced by or
against us or any of our  subsidiaries  prior to, or possibly  even  after,  the
trustee has repossessed  and disposed of the  collateral.  See "Risks Related to
Our   Business--Extensive   government   regulation   continuously  impacts  our
operations."   Such  restrictions  and  limitations  may  adversely  affect  the
trustee's  ability to foreclose on such collateral if you or any other holder of
our notes is not a U.S. citizen.

A court could void our  subsidiaries'  guarantees of the notes under  fraudulent
transfer law.

         Our  restricted  subsidiaries  guarantee the notes,  and each guarantor
grants a security  interest  in  certain of its assets to secure its  guarantee.
Although the  guarantees  provide you with a direct claim  against the assets of
the  subsidiary   guarantors,   under  federal  bankruptcy  law  and  comparable
provisions of state  fraudulent  transfer laws,  under certain  circumstances  a
court  could  avoid  (i.e.,  cancel) a  guarantee  and  order the  return of any
payments  made  thereunder  to the guarantor or to a fund for the benefit of its
other creditors.

         A court might take these actions if it finds, among other things,  that
when the guarantor incurred the indebtedness evidenced by its guarantee,  (1) it
received less than reasonably  equivalent  value or fair  consideration  for the
incurrence of the  guarantee,  and (2) any one of the following  conditions  was
satisfied:

         o        the guarantor was insolvent or rendered insolvent by reason of
                  such incurrence;

                                                20


         o        the guarantor was engaged in a business or transaction for
                  which its remaining assets constituted unreasonably small
                  capital; or

         o        the guarantor  intended to incur,  or believed (or  reasonably
                  should have  believed)  that it would incur,  debts beyond its
                  ability to pay as those debts matured.

         In  applying  the  above  factors,  a court  would  likely  find that a
subsidiary guarantor did not receive fair consideration or reasonably equivalent
value for its  guarantee,  except to the extent  that it  benefited  directly or
indirectly from the notes' issuance.  The  determination of whether a subsidiary
was or was rendered  "insolvent"  when it entered into its  guarantee  will vary
depending on the law of the  jurisdiction  being applied.  Generally,  an entity
would be considered  insolvent if the sum of its debts (including  contingent or
unliquidated  debts) is greater than all of its property at a fair  valuation or
if the  present  fair  salable  value of its assets is less than the amount that
will be required to pay its probable  liability  on its  existing  debts as they
become absolute and matured.

         If a court avoided a subsidiary's guarantee, you would no longer have a
claim against that subsidiary. We cannot assure you that the assets of the other
subsidiary  guarantors  would be  sufficient  to pay amounts  then due under the
notes.

The  indenture  governing  the notes and our new credit  facility  both  contain
covenants that significantly restrict our operations.

         The  indenture  governing  the notes and our new credit  facility  both
contain,  and any other future debt agreement will contain,  numerous  covenants
imposing   financial  and  operating   restrictions   on  our  business.   These
restrictions  may affect our  ability to  operate  our  business,  may limit our
ability to take advantage of potential business  opportunities as they arise and
may adversely affect the conduct of our current  business.  These covenants will
restrict our ability and the ability of our subsidiaries to, among other things:

         o        incur more debt;

         o        pay dividends, redeem or repurchase our stock or make other
                  distributions;

         o        make acquisitions or investments;

         o        use assets as security in other transactions;

         o        enter into transactions with affiliates;

         o        merge or consolidate with others;

         o        dispose of assets or use asset sale proceeds;

         o        create liens on our assets; and

         o        extend credit.

                                                21


         Our new credit  facility also  requires  us  to  meet certain financial
ratios and tests.  See  "Description  of New Credit  Facility and  Intercreditor
Agreement  - New Senior  Secured  Credit  Facility."  Our  ability to meet these
ratios and tests and to comply with other provisions  governing our indebtedness
may be  adversely  affected  by our  operations  and by changes in  economic  or
business  conditions or other events  beyond our control.  Our failure to comply
with our debt-related  obligations could result in an event of default under the
notes.  A default  under the notes will also  constitute a default under our new
credit facility.

We may be unable to repurchase the notes upon a change of control.

         Upon the occurrence of specific  change of control  events,  we will be
required  to offer to  repurchase  your notes.  The lender  under our new credit
facility will have a similar right to be repaid upon a change of control. Any of
our future debt agreements also may contain a similar provision.  Our ability to
pay cash to the holders of the notes in connection  with such repurchase will be
limited by our then existing financial  resources.  Accordingly,  it is possible
that we will not have  sufficient  funds at the time of the change of control to
make the required repurchase of notes. The terms of our new credit facility also
limit our ability to  repurchase  your notes until all debt under the new credit
facility is paid in full. Any of our future debt  agreements may contain similar
restrictions.  Accordingly,  it is possible that  restrictions in our new credit
facility will not allow such  repurchases of notes. If we fail to repurchase any
notes  submitted in a change of control offer,  it would  constitute an event of
default under the indenture which would, in turn, constitute an event of default
under our new credit facility and could constitute an event of default under our
other  indebtedness,  even if the  change in  control  itself  would not cause a
default.

There is currently no public market for the notes,  and an active trading market
may not develop for them.

         The  existing  notes  are a  recent  issue  of  securities,  which  are
currently  eligible for trading in the PORTAL market.  Upon  consummation of the
exchange  offer,  however,  the  existing  notes will cease to be  eligible  for
trading in the PORTAL market.  An active market may not develop for the existing
notes or the new notes, and there can be no assurance as to the liquidity of any
market that may develop for either series of notes. If an active market does not
develop,  the market price and liquidity of the notes may be adversely affected.
If any of the notes are traded after their initial issuance, they may trade at a
discount from their initial  offering price.  Future trading prices of the notes
will  depend on many  factors,  including,  among other  things,  our ability to
effect the exchange offer,  prevailing interest rates, our operating results and
the market for similar securities.  Historically, the market for high-yield debt
has been subject to disruptions that have caused substantial fluctuations in the
prices  of  these  securities.  In  addition,  securities  of  gaming  companies
historically  have been more volatile than  securities of other  companies.  The
market  for the notes may be subject  to such  disruptions,  and there can be no
assurance that the notes will not be subject to such volatility, either of which
could have an adverse  effect on the price and  liquidity  of the notes.  At the
time we offered the  existing  notes,  the Initial  Purchaser  advised us of its
intent  to make a market  in the  notes  after  consummation  of that  offering.
However,  the  Initial  Purchaser  is  under  no  obligation  to do so  and  may
discontinue any  market-making  activities at any time without notice. We do not
intend to apply for listing of the new notes or existing notes on any securities


                                                22


exchange or for quotation of the notes in any automated dealer quotation system.
See "Description of Notes--Registration Rights" and "Plan of Distribution."

Risks Related to Our Business

We face significant competition in each market where we operate.

         We face intense  competition in each of the markets in which our gaming
facilities are located.  Many of our competitors have significantly greater name
recognition  and  financial,  marketing  and  other  resources  than we do.  Our
properties  compete   principally  with  other  gaming  properties  in  or  near
California, Nevada, and Colorado. In some of these jurisdictions, competition is
expected to intensify as new gaming  operations enter these markets and existing
competitors  consolidate with one another or expand or enhance their operations.
In  addition  to  regional  competitors,   we  compete  with  gaming  facilities
nationwide,   including  casinos  located  on  Indian   reservations  and  other
land-based  casinos in Nevada and Atlantic City, as well as elsewhere,  not only
for customers but also for employees and potential  future gaming sites. We also
compete, to some extent, with other forms of gaming on both a local and national
level, including state-sponsored  lotteries,  Internet gaming, on- and off-track
wagering  and  card  parlors.   The   expansion  of  legalized   gaming  to  new
jurisdictions  throughout the United States also has increased competition faced
by us and will  continue  to do so in the future.  Additionally,  if gaming were
legalized in  jurisdictions  near our properties  where gaming  currently is not
permitted, we would face additional competition.

         Increased  competition  may  require  us to  make  substantial  capital
expenditures  to  maintain  and  enhance  the   competitive   positions  of  our
properties,  including  updating slot machines to reflect  changing  technology,
refurbishing  rooms and public service areas  periodically,  replacing  obsolete
equipment  on an ongoing  basis and making  other  expenditures  to increase the
attractiveness  and add to the appeal of our  properties.  Because we are highly
leveraged,  after satisfying our obligations under our outstanding indebtedness,
there can be no assurance that we will have sufficient  funds to undertake these
expenditures or that we will be able to obtain sufficient financing to fund such
expenditures.  If we are  unable  to make  such  expenditures,  our  competitive
position and our results of operations could be materially adversely affected.

Extensive government regulation continuously impacts our operations.

         The  ownership,  management  and  operation  of gaming  facilities  are
subject to extensive laws,  regulations and ordinances which are administered by
various federal,  state and local government  entities and agencies.  The gaming
authorities  located  in the  jurisdictions  in  which  we  operate  have  broad
authority and  discretion to require us and our officers,  directors,  managers,
members,  employees and certain  security  holders to obtain  various  licenses,
registrations,  permits, findings of suitability and other approvals. To enforce
applicable  gaming  regulations,  gaming  authorities  may,  among other things,
limit,  suspend or revoke the licenses of any gaming entity or  individual,  and
may levy fines or forfeiture of assets against us or individuals  for violations
of gaming  laws or  regulations.  Any of these  actions  would  have a  material
adverse effect on us. See "Government Regulation and Licensing."


                                                23


         Government regulations require us to:

         o    pay gaming fees and taxes in each state where we operate a casino;

         o    obtain a gaming  license  in each  state  where we  operate  a
              casino,  which we must have renewed periodically and which may be
              suspended or revoked if we do not meet detailed  regulatory
              requirements;

         o    receive and maintain federal approvals to operate our casinos;

         o    receive and maintain federal and state environmental approvals;
              and

         o    receive and maintain local licenses to sell alcoholic beverages in
              our casinos.

         No  assurances  can be  given  that  any new  gaming  licenses,  liquor
licenses, registrations,  findings of suitability, permits and approvals, or any
proposed  expansion,  will be given or that  existing  ones will be renewed when
they  expire.  Any  failure to renew or  maintain  our  licenses  or receive new
licenses when necessary would have a material adverse effect on us.

         The  compliance  costs  associated  with these  laws,  regulations  and
licenses  are  significant.  A change  in the  laws,  regulations  and  licenses
applicable  to our  business  or a  violation  of any  current or future laws or
regulations   or  our  gaming   licenses  could  require  us  to  make  material
expenditures  or could  otherwise  materially  adversely  affect our business or
financial results.

         In some of the  jurisdictions  in which we  currently  operate  or from
which we  attract  customers,  or in which we may  expand,  gaming is subject to
local referendum. If the results of a referendum held in a jurisdiction in which
we operate  were to  restrict  gaming in whole or in part or if the results of a
referendum  in a nearby  non-gaming  jurisdiction  were to  permit  gaming,  our
results of operations could be negatively impacted.

         In Colorado,  the  legislation  establishing  the Colorado  Division of
Gaming is scheduled to expire effective July 1, 2003, unless continued by act of
the Colorado General Assembly.  This is a "sunset" provision common in assessing
the continuing  necessity for the existence of  administrative  agencies  within
Colorado.  If the repeal takes  effect,  Colorado  law provides a procedure  for
winding up the  affairs of the  Colorado  Division of Gaming,  public  hearings,
analysis and evaluation,  and for determining  claims by or against the Colorado
Division of Gaming.  The potential  effect of the possible  expiration  upon the
regulatory structure governing limited gaming in Colorado is unknown.

You may be required  to dispose of your  notes,  or we may be required to redeem
your notes, as a result of gaming regulatory matters.

         Gaming  authorities  have the power to investigate  any of our security
holders, including noteholders.  These authorities may require a person who is a
holder or beneficial  owner of our  securities,  including the notes, to provide


                                                24


information,  respond to questions or be licensed,  qualified, found suitable or
make filings or submissions within a required time period. If a gaming authority
determines that a holder is unsuitable to own any of our  securities,  including
the  notes,  such  holder  will  have no  further  right to  exercise  any right
conferred  by the  securities,  to receive  any  economic  benefit  or  payment,
including  payments of interest,  with respect to the  securities or to continue
its  ownership  or  economic  interest  in us.  For more  information,  refer to
"Government  Regulation  and  Licensing" and  "Description  of  Notes--Mandatory
Redemption Pursuant to Gaming Laws."

Loss  of  our  casino   properties  from  service  would  adversely  affect  our
operations.

         The  operations of our properties are subject to disruptions or reduced
patronage as a result of severe  weather  conditions.  Reduced  patronage of our
casino  properties  from  service  for any period of time due to severe  weather
could  adversely  affect  our  business,  financial  condition  and  results  of
operations.

We are subject to potential exposure to environmental liabilities.

     Generally,  we are  subject  to a  variety  of  federal,  state  and  local
governmental  laws and  regulations  relating  to the use,  storage,  discharge,
emission and disposal of hazardous  materials.  Failure to comply with such laws
could result in the imposition of severe penalties or restrictions on operations
by governmental  agencies or courts that could adversely affect  operations.  We
are not aware of any such  exposure at our  properties.  The Riviera  Black Hawk
property is located within a 400-square mile area that in 1983 was designated as
the Clear Creek  Central/City  National  Priorities List Site Study Area ("Study
Area") pursuant to the Comprehensive  Environmental  Response,  Compensation and
Liability Act of 1980, as amended. Although Riviera Black Hawk is not within any
of the specific areas of the Study Area currently  identified for  investigation
or remediation,  no assurance can be given that environmental  problems will not
subsequently be discovered, including in connection with any future construction
on  the  expansion  parcel  of  the  property.  Furthermore,  the  Environmental
Protection  Agency  or  other  governmental   authorities  could  broaden  their
investigations  and  identify  areas of  concern  within  the site,  we could be
identified  as a  "potentially  responsible  party"  and any  liability  related
thereto could have a material  adverse effect on us. We do not have insurance to
cover environmental liabilities, if any.

We are dependent on key personnel.

         Our  ability to operate  successfully  is  dependent,  in part,  on the
continued  services of certain of our  executive  personnel.  The loss of one or
more of such  executive  officers  or the  inability  to  attract  or retain key
employees in the future could have a material  adverse effect on our operations.
We  currently  have an  employment  agreement  with  William L.  Westerman,  our
Chairman of the Board,  President,  and Chief Executive Officer. Mr. Westerman's
employment  agreement  automatically  renews  each year on December 31 unless we
give three months notice or Mr.  Westerman gives six months notice to terminate.
Mr. Westerman's  contract is also subject to earlier termination upon occurrence
of certain events. Also, Robert A. Vannucci,  who serves as President of Riviera
Operating  Corporation,  has an  employment  contract  that is  effective  until
December 31, 2002. The contract is automatically renewed each year unless either
party gives 120 days prior written  notice of  nonrenewal.  Other than these two
executives,  none of our senior management is bound by any employment agreements
for any  specified  period of time.  There can be no  assurance  that a suitable
replacement for Mr.  Westerman or any of our other  executives could be found in
the event of a termination of employment. A shortage of skilled management-level


                                                25


employees  currently  exists in the gaming  industry which may make it difficult
and expensive to attract and retain qualified employees.

The casino  industry  generally is dependent in part on a number of factors that
are beyond our control.

         The economic  health of the casino  industry is affected by a number of
factors that are beyond our control,  including: (1) general economic conditions
and  economic  conditions  specific  to our  gaming  markets,  such  as  Denver,
Colorado;  (2) levels of  disposable  income of casino  patrons;  (3)  increased
transportation  costs  resulting  in  decreased  travel  by  patrons;  (4) local
conditions  in  key  gaming  markets,  including  seasonal  and  weather-related
factors; (5) increase in gaming taxes or fees; (6) competitive conditions in the
gaming industry and in particular  gaming markets,  including the effect of such
conditions  on the  pricing of our games and  products;  (7)  substantial  price
increases  in the cost of  energy in the  United  States;  and (8) the  relative
popularity of  entertainment  alternatives to casino gaming that compete for the
leisure dollar. Any of these factors could negatively impact the casino industry
generally, and as a result, our revenues and results of operations.

The terrorist attacks have negatively affected our revenues and could continue
to do so.

         On  September  11, 2001,  the World Trade Center  buildings in New York
City and the Pentagon in  Washington,  D.C. were  attacked by  terrorists  using
hijacked  airplanes.  The  effects of these  events  have  included a decline in
vacation  travel and  tourism  due to,  among  other  factors,  fears  regarding
additional  acts  of  terrorism,  and  reduced  operations  by  airlines  due to
decreased demands for air travel,  new security  directives and increased costs.
The  magnitude  and duration of these effects or any future acts of terrorism is
unknown and cannot be  predicted.  Any  decline in  vacation  travel and tourism
could adversely  affect our revenues,  particularly  with respect to Riviera Las
Vegas,  where the  majority  of our  customers  rely on air  travel to visit our
casino property.  Continued or even worsening negative market conditions related
to those terrorist  actions,  any future occurrences of other terrorist or other
destabilizing  events,  and other actions that perpetuate a climate of war could
cause  existing  and  potential  customers to further  delay and cancel  travel,
convention and vacation plans,  could decrease  wagering and increase costs, and
as a result could adversely affect our revenues and cash flow in the future.

                                 USE OF PROCEEDS

         We will not receive any proceeds from the exchange offer.

     The net proceeds from the offer and sale of the existing notes,  which were
issued on June 26, 2002,  were  approximately  $202.6 million after deduction of
the  initial  purchaser's  discounts  and  expenses  of the  offering.  The  net
proceeds,  along with cash on hand,  were used to defease our 10% First Mortgage
Notes due 2004 and Riviera Black Hawk's 13% First  Mortgage  Notes due 2005 With
Contingent  Interest.  The funds  required  to defease  these  obligations  were
deposited in accounts with the respective trustees. The Riviera Black Hawk Notes
were subsequently redeemed by the trustee on  July  26,  2002  at 106.5% of the
outstanding  principal amount.  Our First Mortgage Notes were redeemed by the
trustee on August 15, 2002 at 102.5% of the outstanding principal amount.

                                                26


                                 CAPITALIZATION

         The  following  table  sets  forth  our cash and cash  equivalents  and
capitalization  as of June 30, 2002,  on an actual basis and as adjusted to give
effect to the sale of the existing  notes,  including the application of the net
proceeds  of that  sale as if the  defeasance  and  redemption  of our 10% First
Mortgage  Notes due 2004 and Riviera Black Hawk's 13% First  Mortgage  Notes due
2005 With Contingent Interest had occurred on June 30, 2002. The following table
should be read in  conjunction  with  "Management's  Discussion  and Analysis of
Financial Condition and Results of Operations" and the financial  statements and
the notes thereto appearing elsewhere in this Prospectus.




                                                                       At June 30, 2002
                                                                    Actual        As Adjusted
                                                                    (dollars in thousands)

                                                                              
Cash and cash equivalents...................................... $   21,974       $21,974
                                                                    ======       =======


Current portion of long-term debt(1)........................... $    3,297       $ 2,066

Debt to be retired in third quarter of 2002
10% First Mortgage Notes due 2004 (4)..........................    174,270            --
13% First Mortgage Notes due 2005 With Contingent Interest (4).     34,941            --
Long-Term debt:
Credit facility (2)
11% Notes(3)...................................................    211,781       211,781
Capital lease obligations(1)...................................      4,553            --
Equipment financing and other(1)...............................      1,900           839

   Total long-term debt........................................    218,234       212,620

   Total stockholders' equity (deficiency)(5)..................      5,143        (6,186)

      Total capitalization.....................................   $223,377      $206,434



-----------

(1)  We have committed,  under the indenture, to convert $7.4 million of capital
     leases and other  equipment  financing on certain  equipment to leases that
     would be classified as operating  leases before December 22, 2002,  subject
     to our obtaining reasonable terms for such conversion.

(2)     We have entered into a new $30 million senior secured, revolving credit
        facility.

(3)     Reflects issuance of $215.0 million aggregate principal amount of notes
        on June 26, 2002 at the issue price of 98.5% of the principal amount
        thereof.

(4)     On June 26, 2002, we defeased these series of notes by depositing the
        required funds in accounts with the respective trustees.  On July 26,
        2002, the trustee under the 13% First Mortgage Notes redeemed those
        notes at 106.5% of the outstanding principal amount. On Ausgust 15 2002,
        the trustee under our 10% First Mortgage Notes redeemed  those notes at
        102.5% of the outstanding principal amount.

(5)     Stockholders' equity as adjusted reflects the extraordinary charges,
        including redemption premiums and unamortized deferred financing  costs
        with  respect to redemption of our 10% First Mortgage  Notes and Riviera
        Black Hawk's 13% First  Mortgage Notes.



                                                27


                      SELECTED CONSOLIDATED FINANCIAL DATA

         The selected historical consolidated financial data at, and for each of
the years ended,  December 31, 2000 and 2001 and for the year ended December 31,
1999 have been derived from our audited financial  statements included elsewhere
in this  Prospectus.  Riviera Black Hawk was in the  development  stage from its
inception in August 1997, through February 4, 2000, when it opened. Accordingly,
the  results  of  operations  for  all  fiscal  periods  presented  may  not  be
comparable.  The consolidated financial information at December 31, 1999, and as
of and for the years  ended  December  31, 1997 and 1998,  was derived  from our
audited  consolidated  financial  statements  that  are  not  included  in  this
Prospectus.  The selected historical consolidated financial data for each of the
six months  ended June 30,  2001 and June 30,  2002 have been  derived  from our
unaudited condensed consolidated  financial statements.  The unaudited condensed
consolidated financial statements have been prepared by us on a basis consistent
with the  audited  consolidated  financial  statements  and  include  all normal
recurring  adjustments  necessary for a fair presentation of the information set
forth  therein.  Results for each of the six months ended June 30, 2001 and June
30, 2002 are not necessarily indicative of results for the full year. You should
read "Management's Discussion and Analysis of Financial Condition and Results of
Operations"  and the  financial  statements  and  the  notes  thereto  appearing
elsewhere in this Prospectus.



                                                                                                                   Six Months
                                                            Year Ended December 31,                                Ended June 30,
                                         ------------------------------------------------------------------        --------------
                                            1997(1)       1998          1999         2000          2001          2001        2002
                                         -------------------------  ------------ ------------  ------------  --------------------
                                                                           (dollars in thousands)

Statement of Operations Data:
Operating revenues:
                                                                                                  
   Casino.............................       $71,624       $77,676      $73,181      $107,693   $114,039     $58,314   $54,926
   Rooms..............................        41,812        39,607       39,899        43,819     44,255      24,471    21,386
   Food and beverage..................        21,603        23,940       25,117        30,756     31,256      16,410    16,378
   Entertainment......................        20,895        21,543       20,994        24,526     20,692      11,763     8,580
   Other..............................        10,556        11,155       11,713        10,538      9,119       4,928     4,251

      Total...........................       166,490       173,921      170,904       217,332    219,361     115,886   105,521
Less: promotional allowances..........        12,697        13,966       13,636        15,801     17,330       8,858     9,169

   Net operating revenues.............       153,793       159,955      157,268       201,531    202,031     107,028    96,352
Operating costs and expenses:
   Casino.............................        40,620        45,293       42,306        57,450     62,845      32,111    29,186
   Rooms..............................        21,235        20,859       21,909        23,364     23,339      12,228    11,726
   Food and beverage..................        16,118        17,539       18,307        21,372     21,426      11,002    10,635
   Entertainment......................        17,235        16,861       16,271        18,959     14,900       8,386     5,674
   Other operating expenses...........         3,011         3,308        3,228         3,146      3,068       1,609     1,421
   Selling, general and administrative        26,211        27,028       29,568        41,312     42,239      21,420    19,363
   Depreciation and amortization......        10,485        12,137       13,991        17,827     17,243       8,546     8,949



                                                28




                                                                                                     
   Preopening expenses--Black Hawk.....           --            --          595         1,222         --          --        --
   Corporate expense--severance pay....           --           551           --            --         --          --        --

   Total..............................       134,915       143,576      146,175       184,652    185,060      95,302    86,954

Income from operations................        18,878        16,379       11,093        16,879     16,971      11,726     9,398
Other income (expense):
   Interest income....................         4,193         4,774        2,255         2,429      1,274         675       229
   Interest expense...................       (18,975)      (24,187)     (23,448)      (27,805)   (26,864)    (13,453)  (13,533) (7)
   Interest capitalized...............           771         2,679        4,733           616          --          --        --
   Other income (expense).............        (1,470)       (1,229)      (1,963)        1,171        (28)        (31)      (16)

Income (loss) before income tax
(benefit).............................         3,397        (1,584)      (7,330)       (6,710)    (8,647)     (1,083)   (3,922)
Income tax (benefit)..................         1,309          (533)      (4,461)       (2,495)    (2,240)       (355)        --

Income (loss) before extraordinary item        2,088        (1,051)      (2,869)       (4,215)    (6,407)       (728)   (3,922)

Extraordinary item (net of income tax
   of $1.6 million)(2)................            --        (3,006)          --            --         --          --        --

Net income (loss).....................        $2,088       $(4,057)     $(2,869)      $(4,215)   $(6,407)      $(728)  $(3,922)







                                                                      At December 31,                                At June 30,
                                          -----------------------------------------------------------------------       2002
                                                   1997           1998         1999          2000          2001         -----
                                                   ----           ----         ----          ----          ----
                                                                           (dollars in thousands)
Balance Sheet Data:
Cash and cash equivalents and short-term
                                                                                                      
   investments...........................           $65,151      $48,883       $48,062       $52,174      $46,606       $21,974
Total assets.............................           247,866 (3)  244,909       288,990       283,710      267,818       248,982 (6)
Long-term debt...........................           173,436 (3)  174,506       223,766       223,172      217,288       218,234 (6)
Total stockholders' equity...............            37,777       33,503        27,678        16,945        8,964         5,143





                                                                                                               Six Months Ended
                                                              Year Ended December 31,                              June 30,
                                           ------------------------------------------------------------------      --------
                                            1997(1)         1998         1999         2000            2001         2001         2002
                                            -------         ----         ----         ----            ----         ----         ----
                                                                           (dollars in thousands)

Other Data:
                                                                                                           
Ratio of earnings to fixed charges(4).         1.19          .93          .61          .76             .68         .92          .71
Deficiency Amount(5)..................                  $(1,584)     $(7,330)     $(6,710)        $(8,647)      $(1,083)    $(3,922)

-----------


                                                        29


(1)      Riviera Black Hawk, Inc. was formed in August 1997. Accordingly, its
         development stage results of operations included herein are for the
         period of August through December of 1997.

(2)      Relates to a loss on extinguishment of debt.

(3)      Total assets are net of $106,596,000 of U.S. Treasury Bills held to
         retire $100 million of debt. Long-term debt is net of the $100 million
         in debt to be retired by the aforementioned U.S. Treasury Bills.

(4)      Calculated  by  dividing  (a) the sum of net  income  (loss)  and fixed
         charges by (b) fixed charges.  "Fixed charges" is defined as the sum of
         (i)  interest  expensed  and  capitalized,   (ii)  amortized  premiums,
         discounts and capitalized expenses related to indebtedness and (iii) an
         estimate of the interest expense component of rental expense.

(5)      Earnings were not sufficient to cover fixed charges for all periods
         presented except 1997.

(6)      Total assets are net of $226,632 of U. S. Treasury Bills held to retire
         $210 million of debt and related accrued interest payable. Long-term
         debt is net of the $210 million in debt to be retired by the
         aforementioned U.S. Treasury Bills.

(7)      Includes interest expense on bonds held for retirement of $364,000.

              MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         The  following  discussion  should  be read  in  conjunction  with  the
"Summary Consolidated  Financial Data," and the "Selected Consolidated Financial
Data" and  historical  consolidated  financial  statements and the notes thereto
appearing  elsewhere  in  this  Prospectus.   Certain  statements  contained  in
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations  constitute  "forward-looking  statements"  within the meaning of the
Litigation  Reform Act, which statements  involve risks and  uncertainties.  See
"Forward-Looking Statements."

                                                30


Introduction

         Our  operations  are  comprised  of the  Riviera  Hotel & Casino in Las
Vegas, Nevada and the Riviera Black Hawk Casino in Black Hawk, Colorado with our
corporate  office located at the Riviera Las Vegas.  Income from  operations for
2001 was $17.0 million. Income from operations for the six months ended June 30,
2002 was $9.4 million, a decrease of $2.3 million from the six months ended June
30, 2001.  We believe  this  decrease was the result of the effects of September
11th.  Riviera  Las Vegas was opened in 1955,  underwent a major  renovation  in
1992,  and over the past several years we have again  refurbished  the rooms and
updated the casino.  By maintaining the freshness of our facilities and focusing
on our niche markets, we have historically been able to maintain a stable EBITDA
at Riviera Las Vegas with an average  EBITDA of $28.4 million per year from 1996
to 2000. However, in 2001, EBITDA at Riviera Las Vegas declined to $21.5 million
largely due to, we believe,  the  terrorist  attacks of September 11, 2001 which
curtailed  travel to  destinations  markets  such as Las  Vegas.  We opened  the
Riviera Black Hawk in February 2000.  In Riviera Black Hawk's first full year of
operations, 2001, it generated  EBITDA of $12.7 million, and the results for the
six months of 2002 show  continued  growth.  We believe that Riviera  Black Hawk
was  less  affected  by the events of September 11th due to its focus on serving
the local Denver market.

         The impact of the events of September 11th forced us to re-evaluate our
operations.  As a result we implemented a business  improvement plan under which
we permanently  eliminated  approximately 200 full-time  equivalent employees at
Riviera Las Vegas and corporate  offices,  or approximately 10% of our workforce
in these areas, and converted the LeBistro Lounge from a company-run cost center
to a  revenue-producing  rental location.  We believe this business  improvement
plan addressed operating inefficiencies and aligned costs with our ongoing needs
as opposed to temporarily  reducing variable costs associated with revenues.  We
also conducted a special post September 11th marketing campaign.

     Given the effect that these events had on our Las Vegas operations in 2001,
we believe  Riviera Las Vegas'  historical  results from 1996 through 2000 which
averaged  $28.4 million  EBITDA  annually,  together with the results at Riviera
Black  Hawk  (which we believe  were less  affected  by the events of  September
11th),  for  the 12  months  ended  June  30,  2002  which  produced  EBITDA  of
approximately $14.1 million,  should also be considered in evaluating our EBITDA
coverage ratio (EBITDA divided by cash interest expense),  EBITDA leverage ratio
(net  long-term debt divided by EBITDA).  Based upon an assumed,  combined $42.5
million of EBITDA described above, our interest  coverage ratio would be 1.73 to
1.0 and our  leverage  ratio  would be 4.61 to 1.0.  These  amounts  and ratios,
however,  are not amounts  prepared or computed in  accordance  with  accounting
principals  generally  accepted in the U.S.  Further,  there can be no assurance
that we can or will  achieve  these  results in the future.  The  aforementioned
ratios were calculated using the following assumptions: Cash interest expense is
estimated at  $24,575,000  which  includes  cash interest on the notes and other
debt aggregating  $218,234,000 at June 30, 2002. Net long-term debt for purposes
of our leverage  ratio is calculated as long-term  debt of $218.2  million minus
cash and cash equivalents of approximately $22 million at June 30, 2002.

                                                31


Historical Results of Operations

      Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001

The following table sets forth certain of our historical  operating  results for
the periods indicated.



                                                    Six Months
                                                  Ended June 30,
                                                                               $ Change          % Change
                                                 2001          2002           Inc/(Decr)        Inc/(Decr)
                                                 ----          ----           ----------        ----------
                                                                (dollars in thousands)

Net Operating Revenues
                                                                                       
Riviera Las Vegas.............................      $84,068     $71,936        $(12,132)           (14.4)%
Riviera Black Hawk............................       22,960      24,416           1,456              6.3 %
Riviera Gaming Management.....................           --          --               --

   Total......................................     $107,028     $96,352        $(10,676)           (10.0)%



Income (Loss) from Operations
Riviera Las Vegas.............................       $8,770      $5,789         $(2,981)           (34.0)%
Riviera Black Hawk............................        2,956       3,609             653             22.1 %
Riviera Gaming Management.....................           --          --               --

   Total......................................      $11,726      $9,398         $(2,328)           (19.9)%



EBITDA(1):
Rivera Las Vegas..............................      $14,910     $11,652         $(3,258)           (21.9)%
Riviera Black Hawk............................        5,362       6,695           1,333             24.9 %
Riviera Gaming Management.....................           --          --               --

   Total EBITDA...............................      $20,272     $18,347         $(1,925)            (9.5)%

EBITDA Margin:
Riviera Las Vegas.............................        17.7%       16.2%
Riviera Black Hawk............................        23.4%       27.4%
Riviera Gaming Management.....................           --          --

   Total EBITDA Margin........................        18.9%       19.0%



-----------

(1)      EBITDA   consists   of  earnings   before   interest,   income   taxes,
         depreciation,   amortization,  preopening  expenses,  and  other,  net.
         Although EBITDA is not necessarily a measure of our ability to fund our
         cash needs, we understand  that it is used by certain  investors as one
         measure  of  cash  flow  and  to  compare  our  performance   with  the
         performance  of other  companies  that report  EBITDA.  EBITDA is not a
         measurement determined in accordance with GAAP, is unaudited and should
         not be considered  an  alternative  to, or more  meaningful  than,  net
         income or income from  operations,  as an  indicator  of our  operating
         performance,  or cash flows from operating activities,  as a measure of
         liquidity.  This  definition  of EBITDA  may not be the same as that of
         similarly named measures used by other companies or the definition used
         in  the  indenture  governing  the  notes  or any  of  our  other  debt
         agreements.

                                                32


Riviera Las Vegas

         Revenues.  Net revenues  decreased by approximately  $12.1 million,  or
14.4%,  from $84.1  million in 2001 to $72.0  million in 2002 due  primarily  to
decreased casino, rooms and entertainment revenues. Casino revenues decreased by
approximately  $4.5 million,  or 12.3%,  from $36.4 million during 2001 to $31.9
million  during 2002 due to a decrease in slot  machine  revenue.  Room  revenue
decreased $3.1 million, or 12.6%, from $24.5 million in 2001 to $21.4 million in
2002  due to the  continued  effects  of a  slower  economy  and the  events  of
September  11, 2001.  Hotel  occupancy  fell 5.6% from 97.4% in 2001 to 91.8% in
2002 and  average  daily room rate fell  $5.65 from  $65.02 in 2001 to $59.37 in
2002. We have been able to bring occupancy back to normal levels,  however,  the
average  daily  rate  remained  8.6%  below  historical  levels  in  June  2002.
Entertainment  revenues decreased by approximately $3.3 million,  or 27.9%, from
$11.7  million  during  2001 to $8.4  million  during  2002 due  primarily  to a
decrease in Splash and Crazy Girls  revenues as result of  competition  from the
openings  of new  shows  on the Las  Vegas  Strip  and a slower  economy.  Other
revenues decreased by approximately $775,000, or 16.5%, from $4.7 million during
2001 to $3.9  million  during  2002 due  primarily  to  decreased  gift shop and
telephone revenues.  Promotional allowances decreased by approximately $229,000,
or 3.3%, from $7.0 million during 2001 to $6.8 million during 2002 primarily due
to decreases in comps related to lower casino activity.

          Income from  Operations.  Income from operations in Las Vegas declined
$3.0 million, or 34.0%, from $8.8 million in 2001 to $5.8 million in 2002 due to
the  14.4%  decrease  in net  revenues  which  was  partially  offset by a 12.2%
decrease  in  expenses.   Fixed  costs  in  the  rooms  department  and  general
administrative costs were not reduced in sufficient proportion to compensate for
the decline in  revenue.  Room  revenues  fell 12.6% while costs were down 4.1%.
Total net revenues were down 14.4% while general and  administrative  costs were
down 12.2%.

          EBITDA.   Riviera  Las  Vegas   EBITDA,   as  defined,   decreased  by
approximately  $3.3  million,  or 21.9%,  from  $14.9  million  in 2001 to $11.7
million in 2002 for reasons  described  above.  During the same periods,  EBITDA
margin  decreased  from  17.7% to 16.2% of net  revenues.  Margins  in Las Vegas
continue  to be  pressured  by the  economy  and  competitor  actions,  but have
improved each month. The Las Vegas operation is spending more marketing  dollars
to  increase  demand  and will  continue  to focus and grow  incentive  programs
through the rest of the year and into 2003.

Riviera Black Hawk

         Revenues.  Net revenues  increased by  approximately  $1.5 million,  or
6.3%,  from $22.9  million in 2001 to $24.4  million  in 2002.  Casino  revenues
increased $1.1 million,  or 4.9%, from $21.9 million in 2001 to $23.0 million in
2002.  Gaming  revenues in the Black Hawk market grew by a healthy  12.5% in the

                                                33


second  quarter  of 2002  compared  to the  second  quarter  of 2001,  more than
offsetting  the 12% increase in gaming devices as a result of the opening of the
Hyatt Casino in December 2001.  This continues a historical  trend of growth for
the Black Hawk market as new casinos  offering a variety of new  amenities  have
expanded the market's appeal to a broader base of customers.

         Food and beverage revenues were  approximately $3.3 million in 2002, of
which $2.4 million was complimentary (promotional allowance). Riviera Black Hawk
continues to refine its marketing  efforts by  constantly  measuring the success
rates of its  programs,  while  monitoring  the  offerings of  competitors.  The
operation is attempting to strike a balance  between player  incentives,  gaming
product, food offerings and entertainment as its primary marketing programs.

         Income from Operations.  Income from operations in Black Hawk increased
$653,000,  or 22.1%,  from $3.0  million in 2001 to $3.6  million in 2002 due to
increased  revenues as a result of refining our direct marketing and promotional
programs for the casino in the first six months of 2002.

         EBITDA. Riviera Black Hawk EBITDA, as defined,  increased $1.3 million,
or 24.9%,  from $5.4 million in 2001 to $6.7 million in 2002.  EBITDA margin for
the first six months  increased  to 27.4% from  23.4% for the same  period  last
year.

Consolidated Operations

         Other Income  (Expense).  Interest  expense of $8.8 million on the $175
million 10% First Mortgage Notes issued by us, plus related amortization of loan
fees and equipment and other financing costs totaled approximately $10.0 million
in 2001 and 2002. Interest expense on the remaining $35 million of the 13% First
Mortgage  Notes With  Contingent  Interest  issued by Riviera Black Hawk in June
1999 combined with its interest from capital  leases totaled $3.3 million in the
first six months of 2002  compared  to $3.5  million for the first six months of
2001.  Additionally,  our new offering of $215 million 11% Senior  Secured Notes
resulted in interest expense of $353,000 for the first six months of 2002.

         Net Income  (Loss).  Our results of operations  decreased  $3.2 million
from a net loss of  $728,000  in 2001 to a net loss of $3.9  million in 2002 due
primarily  to the  continuing  effects  of a slower  economy  and the  events of
September 11, 2001.

         EBITDA.  Consolidated  EBITDA,  as defined,  decreased by approximately
$1.9  million,  or 9.5%,  from $20.3  million in 2001 to $18.3  million in 2002.
During the same periods,  our EBITDA margin increased from 18.9% to 19.0% of net
revenues for the reasons described above.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

         Special Factors Affecting Comparability of Results of Operations

         Riviera  Black  Hawk was in the  development  stage  during  the  first
quarter of 2000 until  February 4, 2000 when it opened the casino.  Accordingly,
the results of operations for the fiscal 2001 and fiscal 2000 results may not be
comparable.

                                                34


         The  following  table sets forth,  for the periods  indicated,  certain
operating  data for  Riviera  Las Vegas and Riviera  Black  Hawk.  Net  revenues
displayed in this table and  discussed  in this  section are net of  promotional
allowances.  Operating  income  from  properties  is  presented  as shown on the
Consolidated Statement of Operations. EBITDA from properties for the purposes of
this table excludes  corporate  expense,  pre-opening  expense and inter-company
management fees.



                                                    Year Ended December 31,
                              --------------------------------------------------------------------
                                            2001                              2000       $ Change          % Change
                                            ----                              ----       Inc/(Decr)        Inc/(Decr)
                                                     (dollars in thousands)

Net Revenues:
                                                                                                    
Riviera Las Vegas..........              $152,985                          $166,038        $(13,053)            (7.9)%
Riviera Black Hawk.........                49,046                            35,261           13,785             39.1%
Riviera Gaming Management..                    --                               232            (232)          (100.0)%

   Total Net Revenues......              $202,031                          $201,531             $500              0.2%



Income (loss) from
   Operations:
Riviera Las Vegas..........                $9,350                           $14,910         $(5,560)           (37.2)%
Riviera Black Hawk.........                 7,622                             1,881            5,741            305.2%
Riviera Gaming Management..                   (1)                                88             (89)          (101.1)%

   Total Operating Income..               $16,971                           $16,879              $92              0.5%



EBITDA(1):
Riviera Las Vegas..........               $21,493                           $29,243         $(7,750)           (26.5)%
Riviera Black Hawk.........                12,722                             6,597            6,125             92.8%
Riviera Gaming Management..                   (1)                                88             (89)          (101.1)%

   Total EBITDA............               $34,214                           $35,928         $(1,714)            (4.8)%



EBITDA Margin:
Riviera Las Vegas..........                 14.0%                             17.6%
Riviera Black Hawk.........                 25.9%                             18.7%
Riviera Gaming Management..                                                   37.9%

   Total EBITDA Margin.....                 16.9%                             17.8%


                                                35




-----------

(1)      EBITDA   consists   of  earnings   before   interest,   income   taxes,
         depreciation,   amortization,  preopening  expenses,  and  other,  net.
         Although EBITDA is not necessarily a measure of our ability to fund our
         cash needs, we understand  that it is used by certain  investors as one
         measure  of  cash  flow  and  to  compare  our  performance   with  the
         performance  of other  companies  that report  EBITDA.  EBITDA is not a
         measurement determined in accordance with GAAP, is unaudited and should
         not be considered  an  alternative  to, or more  meaningful  than,  net
         income or income from  operations,  as an  indicator  of our  operating
         performance,  or cash flows from operating activities,  as a measure of
         liquidity.  This  definition  of EBITDA  may not be the same as that of
         similarly named measures used by other companies or the definition used
         in  the  indenture  governing  the  notes  or any  of  our  other  debt
         agreements.

Riviera Las Vegas

         Revenues.  Riviera Las Vegas net revenues  decreased  by  approximately
$13.1  million,  or 7.9%,  from $166.0 million in 2000 to $153.0 million in 2001
primarily due to the effects of the recession and the September  11th  terrorist
attacks. Casino revenues decreased approximately $6.7 million or 9.0%,from $74.1
million  during 2000 to $67.4 million  during 2001.  Slot revenues were down 7%,
while table games revenues were down 13.6%. The hold percentages were comparable
for both table games and slot  machines  in 2001 and 2000.  Room  revenues  were
comparable  to the prior year,  as the average room rate  increased  $3.50 or 6%
from $59.00 to $62.50 and hotel  occupancy  decreased  from 96.6% to 91.6%.  The
decrease  in air  travel,  especially  long-haul  flights  from the east  coast,
affected  Riviera  Las Vegas more than many of its  competitors.  Our  marketing
efforts  had  been   concentrated  on  airline  customers  who  traveled  longer
distances, paid more for their tickets and had a larger gaming and entertainment
budget.  While this strategy was  successful in prior years,  the effects of the
September  11th  terrorist  attacks  were  devastating  to this market  segment.
Subsequent to September 11th,  gaming marketing  expenditures  were increased to
protect and promote the slot customer base.  Increased  room  marketing  efforts
focus on customers in the western  United States and these efforts  appear to be
successful,  based  on the  pace of  advance  bookings.  Call  volumes,  booking
patterns  and  occupancy  began  to  normalize  in  mid-January  2002.  Although
occupancy  is  recovering  on the  weekends,  the midweek  occupancy  rates vary
significantly   from  day  to  day  primarily  due  to  competitive   pressures.
Entertainment  revenues decreased by approximately $4.1 million,  or 16.7%, from
$24.5 million during 2000 to $20.4 million  during 2001 as attendance  decreased
approximately  27%,  which was  partially  offset by a 13.6%  increase in ticket
price.  Competition  for Riviera show  customers,  while  significant  all year,
intensified  after  September  11th.  Tour  and  travel  room  sales  were  down
approximately 50% in the fourth quarter of 2001, which is an important  producer
of  show  ticket  sales  and  slot  revenues.   Other   revenues   decreased  by
approximately  $1.7 million,  or 16.7%,  from $10.2 million  during 2000 to $8.5
million during 2001 due primarily to lower telephone revenues.

         Income from Operations.  Income from operations  decreased $5.6 million
or 37.2% from $14.9 million in 2000 to $9.3 million in 2001 due to the decreased
revenues,  which were partially offset by lower entertainment  contract expenses
and a 9.4% or $1.4 million  reduction  in  depreciation  expense.  Entertainment
costs  are  tied  to  revenues  and  as  a  result  of  this  relationship,  the
departmental results were similar to the prior year.  Depreciation decreased, as
$20 million of equipment  purchased in 1993 became fully depreciated in 2000. In
addition,  the September 11th terrorist  attacks caused management to accelerate
the timing and  magnitude  of staffing  reductions.  In excess of 300  full-time

                                                36


equivalent  employees  were laid off,  based on the reduction in volumes.  These
events have caused the industry to reevaluate  their cost  structures and adjust
payrolls accordingly.

         EBITDA.   Riviera  Las  Vegas   EBITDA,   as  defined,   decreased   by
approximately  $7.8  million,  or 26.5%,  from  $29.2  million  in 2000 to $21.5
million in 2001. During the same periods,  EBITDA margin decreased from 17.6% to
14.0% of net revenues.

Riviera Black Hawk

         Special Factors Affecting Comparability of Results of Operations

         Riviera Black Hawk was in the  development  stage during 1999 and until
February 4, 2000 when the casino opened.  Accordingly,  the consolidated results
of operations for fiscal 2001 and 2000 may not be comparable.

         Revenues.  Riviera Black Hawk net revenues  increased by  approximately
$13.8  million,  or 39.1%,  from $35.3 million in the 11 months of 2000 to $49.0
million in the 12 months ended December 31, 2001 as the operation  gained market
share and was, for the most part,  unaffected  by the events of September  11th.
Casino  revenues,  primarily slot  machines,  increased by  approximately  $13.0
million,  or 38.7%, from $33.6 million in the 11 months of 2000 to $46.7 million
in the 12 months  ended  December  31,  2001.  Average slot machine win per unit
increased from $114 per day in 2000 to $148 in 2001. Food and beverage  revenues
increased by approximately  $1.6 million,  or 40.0%, from $4.0 million in the 11
months of 2000 to $5.6  million in the 12 months ended  December  31, 2001.  The
remodeled buffet and related  marketing  efforts resulted in a 45.6% increase in
covers (customers) and a 26.4% increase in average check (price).

         Income from Operations.  Income from operations  increased $5.7 million
or 305% from $1.9  million  in the 11 months of 2000 to $7.6  million  in the 12
months  ended  December  31, 2001 due to the  increase  in  revenues  and better
margins as  marketing  costs were  stabilized.  Staffing  was also  optimized as
full-time  equivalent employees were reduced from 450 at the opening in February
2000  to 350 at the end of  2001.  Although  general  and  administrative  costs
increased $1.7 million, they were 23.5% of revenues in the current year compared
with 27.7% in 2000.  Depreciation  increased  $809,000 or 27.5% in 2001 compared
with the 11 months of operations in 2000.

         EBITDA.   Riviera   Black  Hawk  EBITDA,   as  defined,   increased  by
approximately $6.1 million, or 92.8%, from $6.6 million in the 11 months of 2000
to $12.7  million in the 12 months  ended  December  31,  2001.  During the same
periods, EBITDA margin increased from 18.7% to 25.9% of net revenues.

Consolidated Operations

         Other Income (Expense). Interest expense on our $175  million 10% First
Mortgage  Notes plus related  amortization  of loan fees and equipment and other

                                                37


financing costs totaled  approximately  $20.1 million in 2001 and 2000. Interest
expense on the $45 million 13% First Mortgage Notes issued by Riviera Black Hawk
in June 1999 combined with its interest from capital leases totaled $6.7 million
in 2001 compared with $7.7 million in 2000.  Capitalized interest of $616,000 in
2000 was primarily from the Black Hawk, Colorado project.

         Other  expenses,  net  include an  insurance  reimbursement  of Paulson
litigation costs of $1.2 million in 2000.

         Net  Loss.  The  consolidated  net loss  increased  approximately  $2.2
million from $4.2 million in 2000 to $6.4 million in 2001. The effective  income
tax  benefit  rates  decreased  from  37.2% in 2000 to 25.9% in 2001  because of
permanent  timing  differences  for certain travel and  entertainment  expenses,
along with adjustments for tax credits which were considered deductions in prior
years.

         EBITDA.  Consolidated EBITDA, as defined,  decreased approximately $1.7
million,  or 4.8%,  from $35.9 million in 2000 to $34.2 million in 2001.  During
the same periods, EBITDA margin decreased from 17.8% to 16.9% of net revenues.

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

         Special Factors Affecting Comparability of Results of Operations

         Riviera Black Hawk was in the  development  stage during 1999 and until
February 4, 2000 when the casino opened.  Accordingly,  the consolidated results
of operations for fiscal 2000 and 1999 may not be comparable.

         The  following  table sets forth,  for the periods  indicated,  certain
operating  data for  Riviera  Las Vegas and  Riviera  Black  Hawk.  EBITDA  from
properties for the purposes of this table excludes corporate expense, preopening
expense and intercompany  management  fees.  Operating income from properties is
presented as shown on the Consolidated Statement of Operations.




                                                    Year Ended December 31,
                              --------------------------------------------------------------------
                                               2000                              1999         $ Change          % Change
                                               ----                              ----       Inc/(Decr)        Inc/(Decr)
                                                          (dollars in thousands)

Net Revenues:
                                                                                                        
Riviera Las Vegas..........                $166,038                          $156,204           $9,834              6.2%
Riviera Black Hawk.........                  35,261                                 0           35,261
Riviera Gaming Management..                     232                             1,064            (832)           (78.2)%

   Total Net Revenues......                $201,531                          $157,268          $44,263             28.0%


                                                38






Income (loss) from
   Operations:
                                                                                                       
Riviera Las Vegas..........                 $14,910                           $10,641           $4,269             40.1%
Riviera Black Hawk.........                   1,881                             (595)            2,476
Riviera Gaming Management..                      88                             1,047            (959)           (91.6)%

   Total Operating Income..                 $16,879                           $11,093           $5,786           (52.1)%



EBITDA(1):
Riviera Las Vegas..........                 $29,243                           $24,631           $4,612             18.7%
Riviera Black Hawk.........                   6,597                                 1            6,596
Riviera Gaming Management..                      88                             1,047            (959)           (91.6)%

   Total EBITDA............                 $35,928                           $25,679          $10,249             39.9%



EBITDA Margin:
Riviera Las Vegas..........                   17.6%                             15.9%
Riviera Black Hawk.........                   18.7%
Riviera Gaming Management..                   37.9%                             98.4%

   Total EBITDA Margin.....                   17.8%                             16.3%





-----------

(1)      EBITDA   consists   of  earnings   before   interest,   income   taxes,
         depreciation,   amortization,  preopening  expenses,  and  other,  net.
         Although EBITDA is not necessarily a measure of our ability to fund our
         cash needs, we understand  that it is used by certain  investors as one
         measure  of  cash  flow  and  to  compare  our  performance   with  the
         performance  of other  companies  that report  EBITDA.  EBITDA is not a
         measurement determined in accordance with GAAP, is unaudited and should
         not be considered  an  alternative  to, or more  meaningful  than,  net
         income or income from  operations,  as an  indicator  of our  operating
         performance,  or cash flows from operating activities,  as a measure of
         liquidity.  This  definition  of EBITDA  may not be the same as that of
         similarly named measures used by other companies or the definition used
         in  the  indenture  governing  the  notes  or any  of  our  other  debt
         agreements.

Riviera Las Vegas

         Revenues.  Net revenues  increased by  approximately  $9.8 million,  or
6.2%,  from $156.2  million in 1999 to $166.0  million in 2000 due  primarily to
increased room and  entertainment  revenues as described below.  Casino revenues
increased by approximately $0.8 million, or 1.1%, from $73.2 million during 1999
to $74.0 million  during 2000 due to an increase in slot machine  revenue.  Room
revenues  increased by  approximately  $3.9 million,  or 9.8% from $39.9 million
during 1999 to $43.8  million  during 2000 as a result of an increase in average

                                                39


room  rate of $5.16,  or 10%,  which was  offset by a slight  decrease  in hotel
occupancy   from  97.5%  to  96.6%.   Food  and  beverage   revenues   increased
approximately  $1.7 million,  or 6.4%,  from $25.1 million  during 1999 to $26.8
million  during 2000 due to higher cover counts and modestly  increased  prices.
Entertainment  revenues increased by approximately $3.5 million,  or 16.7%, from
$21.0  million  during 1999 to $24.5  million  during 2000 due  primarily to the
increase in Splash  revenues as a result of the showroom  renovation and the new
show which opened in late 1999. Other revenues  decreased by approximately  $0.7
million, or 6.7%, from $10.6 million during 1999 to $9.9 million during 2000 due
primarily to decreased management fees from Riviera Gaming  Management-Elsinore,
Inc.'s  contract  which  expired  December  30,  1999.   Promotional  allowances
decreased by approximately $0.6 million, or 4.4%, from $13.6 million during 1999
to $13.0  million  during 2000  primarily  due to decreases in comps  related to
lower table games activity.

         Income from Operations.  Income from operations increased $4.2 million,
or  40.1%,  from  $10.6  million  in 1999 to  $14.9  million  in 2000 due to the
increased revenues.

         EBITDA.   Riviera  Las  Vegas   EBITDA,   as  defined,   increased   by
approximately  $4.6  million,  or 18.7%,  from  $24.6  million  in 1999 to $29.2
million in 2000. During the same periods,  EBITDA margin increased from 15.8% to
17.6% of net revenues.

Riviera Black Hawk

         Revenues.  Riviera Black Hawk opened on February 4, 2000. It had net
revenues of approximately $35.3 million for the approximate eleven-month period
in 2000. Casino revenues were $33.6 million, including $31.9 million in slot
revenue and $1.7 million in table games revenue.

         Food and beverage revenues were  approximately  $4.0 million,  of which
$2.8 million were  complimentary  (promotional  allowance).  Other revenues were
approximately $0.4 million primarily from ATM transaction fees.

         EBITDA.  Riviera Black Hawk EBITDA, as defined, was $6.6 million, or
18.7%, of net revenues.

Consolidated Operations

         Other Income  (Expense).  Interest expense of $17.5 million on the $175
million 10% First Mortgage Notes issued by us, plus related amortization of loan
fees and equipment and other financing costs totaled approximately $20.1 million
in 2000 and 1999.  Interest  expense on the $45 million 13% First Mortgage Notes
issued by  Riviera  Black  Hawk in June 1999  combined  with its  interest  from
capital leases totaled $7.7 million in 2000.  Capitalized  interest was $616,000
in 2000, which was primarily from the Black Hawk,  Colorado  project,  decreased
approximately $2.4 million from 1999.

         In 2000, other expenses,  net,  included an insurance  reimbursement of
Paulson litigation costs of $1.2 million which were incurred in 1999.

                                                40


         Net  Loss.  The  consolidated  net loss  increased  approximately  $1.3
million  from $2.9  million  in 1999 to $4.2  million in 2000 due  primarily  to
higher total  interest  expense  offset by lower  capitalized  interest in 2000.
Federal income tax benefits as a percent of losses were lower in 2000 because we
reflected the results of an audit by the Internal  Revenue  Service in 1999. The
audit  resulted in the release of reserves of $1.9 million for taxes on employee
meals and other items, which were settled favorably to us.

         EBITDA.  Consolidated  EBITDA,  as defined,  increased by approximately
$10.2  million,  or 39.9%,  from $25.7 million in 1999 to $35.9 million in 2000.
During the same  periods,  EBITDA  margin  increased  from 16.3% to 17.8% of net
revenues.

Critical Accounting Policies

         The preparation of our consolidated  financial  statements requires our
management to adopt  accounting  policies and to make estimates and  assumptions
that affect the reported amounts of assets,  liabilities,  revenue and expenses.
Management  periodically  evaluates  its  policies,  estimates  and  assumptions
related to these policies.  We operate in a highly regulated industry.  For both
our Las Vegas,  Nevada and Black  Hawk,  Colorado  operations  we are subject to
regulations   that  describe  and  regulate   operating  and  internal   control
procedures.  The majority of our casino revenue is in the form of cash, personal
checks or gaming chips and tokens,  which by their nature do not require complex
estimates.  We estimate certain liabilities with payment periods that extend for
longer than several months. Such estimates include customer loyalty liabilities,
self-insured  medical and workers  compensation  costs and litigation  costs. We
believe these  estimates are reasonable  based on our past  experience  with the
business  and based on our  assumptions  related  to  possible  outcomes  in the
future. Future actual results will likely differ from these estimates.

         We have determined that the following  accounting  policies and related
estimates  are  critical  to  the  preparation  of  our  consolidated  financial
statements:

Long-lived Assets:

         We have a significant  investment in long-lived property and equipment.
We estimate that the undiscounted  future cash flows expected to result from the
use of these assets  exceeds the current  carrying  value of these  assets.  Any
adverse  change in the  estimate of these  undiscounted  future cash flows could
necessitate an impairment charge that would adversely affect operating  results.
We  estimate  useful  lives  for our  assets  based  on  historical  experience,
estimates of assets'  commercial  lives,  and the  likelihood  of  technological
obsolescence. Should the actual useful life of a class of assets differ from the
estimated  useful life, we would record an impairment  charge.  We review useful
lives  and  obsolescence  and we assess  commercial  viability  of these  assets
periodically.

         We utilize  estimates  related to cash flow projections  related to the
application of Statement of Financial  Accounting Standards ("SFAS") No. 109 for
the  realization  of deferred tax assets.  Our  estimates  are based upon recent
operating results and budgets for future operating results.  These estimates are
made using assumptions about the economic, social and regulatory environments in
which we  operate.  These  estimates  could be  negatively  impacted by numerous
unforeseen events including changes to regulations  affecting how we operate our
business,  changes in the labor market or economic  downturns in the areas where
we operate.

                                                41


Provision for Credit Losses

         We maintain a provision for estimated credit losses based on historical
experience and specific  customer  collection  issues.  Any unforeseen change in
customer   liquidity  or  financial   condition  could   adversely   affect  the
collectibility of that account and our operating results.

Liquidity and Capital Resources

         In June 2002,  we issued the  existing  notes.  The proceeds along with
cash on hand were used to  defease  our 10% First  Mortgage  Notes due 2004 and
Riviera Black Hawk's remaining 13% First Mortgage Notes due 2005 With Contingent
Interest.

         Effective July 26, 2002, we entered into a $30 million, five-year
revolving credit facility with a financial institution.  Terms of the facility
include interest at Wells Fargo's prime rate plus 0.75% or a LIBOR-derived rate.
See Description of New Credit Facility and Intercreditor Agreement.

         At June 30, 2002, we had cash and cash  equivalents of $22 million. The
cash  and  cash  equivalents decreased $24.6 million for the first six months of
2002, resulting  from  $7.3  million  of  cash  provided  by  operations,  $5.2
million of cash flow for  investing  activities  and  $26.7  million outflow for
financing activities in that six-month period.

         For 2001,  net cash provided by operating  activities was $12.5 million
compared to $19.4 million in 2000. Cash flows used in investing  activities were
$10.2  million  in 2001  compared  to $4.2  million  in 2000.  Net cash  used in
financing  was $7.9 million in 2001 and $5.8 million in 2000,  primarily  due to
the repurchase of treasury stock and Black Hawk First Mortgage Notes. EBITDA, as
defined, for 2001 and 2000 was $34.2 million and $35.9 million, respectively.

         Cash  balances  include  amounts  that  may be  required  to  fund  the
Chairman's pension  obligation in a rabbi trust with 5 days notice.  (See Note 7
to the financial statements, Other Long-Term Liabilities).  Although there is no
current   intention  to  require  this  funding,   we  might  need  to  disburse
approximately $7 million for this purpose in a short period.

         Our Las Vegas  operations are  self-insured  for workers'  compensation
claims.  The State of Nevada  requires that we maintain a $2.5 million  tangible
net worth,  as defined in the statute.  If tangible net worth were to fall below
$2.5 million, we would have to fund a $2.5 million bond with the State or obtain
workers' compensation  insurance at a significantly higher cost than our current
cost  structure.  The State has  notified us that we qualify for  self-insurance
through April 2003.

         We  believe  that  cash  flow from  operations,  combined  with the $22
million  cash and  cash  equivalents  and the new $30  million  senior  secured,
revolving  credit  facility  will be  sufficient  to cover our debt  service,
enable  investment in budgeted  capital  expenditures  for 2002 for both the Las
Vegas  and  Black  Hawk  properties and  provide our initial investments  in the
potential Missouri and New Mexico projects.

                                                42


         Our cash flow from  operations may not be sufficient to pay 100% of the
principal of the $215 million  notes at maturity on June 15, 2010.  Accordingly,
our  ability  to repay the notes at  maturity  may  depend  on our  ability  to
refinance  those  notes.  We cannot give any  assurance  that we will be able to
obtain such refinancing.

         In  certain  circumstances  we must  offer  to  repurchase  the  notes,
including if we undergo a change of control. If we become obligated to redeem or
repurchase  the notes prior to  maturity,  we would be unable to do so without a
refinancing.

         The notes  contain  certain  covenants  which limit our ability to: (a)
incur  additional  indebtedness;  (b)  pay  dividends  or  other  distributions,
repurchase capital stock or other equity interests or subordinated indebtedness;
(c) enter into certain  transactions  with our  affiliates;  (d) create  certain
liens  or  sell  certain  assets;   and  (e)  enter  into  certain  mergers  and
consolidations.  As a  result  of  these  restrictions,  our  ability  to  incur
additional  indebtedness to fund  operations or to make capital  expenditures is
limited.  If our cash  flow  from  operations  is  insufficient  to  cover  cash
requirements,  we  would  be  required  to  curtail  or  defer  certain  capital
expenditure programs, which could have an adverse effect on our operations.

         As of June 30,  2002,  we believe  that we are in  compliance  with the
covenants of our notes.

Contractual Obligations

         The  following  table   summarizes  our  contractual   obligations  and
commitments as of June 30, 2002.



                                                                                    Payments Due by Period
                                                             ----------------------------------------------------------------------
                                                                 Total        Remaining        2003        2004        2005 and
                                                                 -----        six months       ----        ----       Thereafter
                                                                               of 2002                                ----------
                                                                               --------
Contractual obligations
                                                                                                            
   Long-term debt.........................................        $224,750         $1,596     $3,474      $3,360        $216,320
   Bonds to be retired....................................         216,587        216,587
   Operating leases.......................................              39             39
   Other long-term obligations............................             191            112        $22         $19            $38

Total contractual cash obligations........................        $441,567       $218,334     $3,496      $3,379       $216,358


     Market risks  relating to our operations  result  primarily from changes in
interest  rates.  We  invest  our cash and cash  equivalents  primarily  in U.S.
Treasury Bills with maturities of 90 days or less. Our equipment  loans,  leases
and Special Improvement District debt are not subject to significant  valuations
adjustment due to interest rate changes.

                                                43





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

                                    Remaining
                                    six months                                                                         Fair Value
                                     of 2002         2003       2004       2005       2006     Thereafter    Total     At 6/30/02
                                 ---------------     ----       ----       ----       ----     ----------    -----     ----------
                                                                      (Amounts in Thousands)
Long Term Debt Including
   Current Portion
Equipment loans and capital
                                                                                                      
   leases--Las Vegas...           $     601      $    1,326   $    988   $     11                          $   2,926    $   2,926
Average interest rate.                  8.0%           7.8%        7.8%       8.4%

11% Senior Secured Notes                                                                        $211,781     211,781      211,781
                                                                                                               3,219
Average interest rate.                                                                            11.6%

Capital leases, Black Hawk,
   Colorado...........           $      946       $   2,045   $  2,263   $    658                          $   5,912    $  5,912
Average interest rate.                10.8%           10.8%       10.8%      10.8%

Special Improvement District
   Bonds--Black Hawk, Colorado
   casino project.....           $       49        $    103     $  109   $    116     $  124     $   411   $     912    $    912
Average interest rate.                 5.5%             5.5%       5.5%       5.5%       5.5%        5.5%
-----------------------------------------------------------------------------------------------------------------------------------
Bonds held for retirement
13% First Mortgage Note, Black
   Hawk, Colorado casino project   $ 34,941                                                                  $  34,941   $  34,941
Average interest rate.                14.0%

10% First Mortgage Note           $ 175,000                                                                    $175,000    $175,000
Average interest rate.                10.6%


Recently Adopted Accounting Standards

         The Financial  Accounting Standards Board ("FASB") issued SFAS No. 133,
Accounting for Derivatives,  which is effective for fiscal years beginning after
June 15,  2000.  SFAS No.  133  defines  derivatives  and  requires  qualitative
disclosure of certain  financial and descriptive  information  about a company's
derivatives.  We adopted SFAS No. 133 in the quarter  ending March 31, 2001. The
adoption  of SFAS No.  133 had no  impact  on us or our  consolidated  financial
statements.

         The Emerging  Issues Task Force of the American  Institute of Certified
Public Accountants  ("EITF") issued EITF No. 00-22,  Accounting for "Points" and
Certain Other Timed-Based  Sales Incentive Offers,  and Offers for Free Products
or Services to Be Delivered in the Future,  on January 18, 2001.  EITF No. 00-22
concluded  that  when a  company  or vendor  offers  to a  customer  (a) free or
discounted  products or services that will be delivered (either by the vendor or
by  another  unrelated  entity)  at a future  date  (1) as a result  of a single
revenue  transaction  with the customer or (2) only if the customer  completes a


                                                44


specified  cumulative level of revenue transactions with the vendor or remains a
customer of the vendor for a specified time period and (b) a rebate or refund of
a determinable cash amount only if the customer completes a specified cumulative
level of revenue  transactions  with the  vendor or  remains a  customer  of the
vendor for a  specified  time  period,  such  rebates  should be  reported  as a
reduction of revenues. We were required to adopt EITF No. 00-22 during the first
quarter of 2001. As a result of adopting it, we reclassified  approximately $3.4
million and  $905,000 of such sales  incentive  "Points"  from Casino  operating
expense to net against Casino revenues for the twelve months ending December 31,
2000 and 1999, respectively.

         The  EITF  issued  EITF  No.  00-14,   Accounting   for  Certain  Sales
Incentives,  on  April  18,  2001.  We  offer  such  sales  incentives  as "Cash
Vouchers."  EITF No. 00-14  concluded  that when a company or vendor  offers its
customers sales  incentives  including  discounts,  coupons,  rebates,  and free
products or services, such sales incentives should be reported as a reduction of
revenues.  We chose to adopt EITF No. 00-14 in the first quarter of 2001,  which
was earlier than the first quarter of 2002 requirement.  As a result of adopting
EITF No. 00-14, we reclassified  approximately $1.9 million and $0 of such sales
incentive  "Cash Vouchers" from Casino  operating  expense to net against Casino
revenues for the twelve months ending December 31, 2000 and 1999, respectively.

         In June 2001, the FASB issued SFAS No. 141, Business Combinations. SFAS
No. 141 requires the purchase  method of  accounting  for business  combinations
initiated  after June 30, 2001 and eliminates the  pooling-of-interests  method.
The adoption of SFAS No. 141 did not have a significant  impact on our operating
results or financial statements.

         In June  2001,  the  FASB  issued  SFAS No.  142,  Goodwill  and  Other
Intangible  Assets,  which  became  effective  January  1,  2002.  SFAS No.  142
requires,  among other things, the discontinuance of goodwill  amortization.  In
addition,  SFAS No. 142 includes provisions for the  reclassification of certain
existing recognized intangibles as goodwill, reassessment of the useful lives of
existing recognized intangibles,  reclassification of certain intangibles out of
previously  reported  goodwill and the  identification  of  reporting  units for
purposes of assessing  potential  future  impairments of goodwill.  SFAS No. 142
also required us to complete a transitional  goodwill impairment test six months
from the date of  adoption.  The  adoption  of SFAS No. 142 had no impact on our
financial position and results of operations.

         In June  2001,  the FASB  issued  SFAS No.  143,  Accounting  for Asset
Retirement  Obligations.   SFAS  No.  143  addresses  financial  accounting  and
reporting for obligations  associated with the retirement of tangible long-lived
assets and the associated  asset retirement  costs.  SFAS No. 143 applies to all
entities.  It applies to legal  obligations  associated  with the  retirement of
long-lived  assets that result from the acquisition,  construction,  development
and  (or) the  normal  operation  of a  long-lived  asset,  except  for  certain
obligations  of lessees.  SFAS No. 143 is  effective  for  financial  statements
issued  for  fiscal  years  beginning  after  June 15,  2002.  The adoption of
SFAS No. 143 had no impact on our financial position or results of operations.

         In August  2001,  the FASB  issued  SFAS No.  144,  Accounting  for the
Impairment or Disposal of Long-Lived  Assets.  SFAS No. 144 addresses  financial
accounting and reporting for the impairment or disposal of long-lived assets and
supersedes  FASB Statement No. 121,  Accounting for the Impairment of Long-Lived
Assets and for  Long-Lived  Assets to Be  Disposed  Of, and the  accounting  and
reporting  provisions of Accounting  Principles Bulletin ("APB") Opinion No. 30,
Reporting  the  Results of  Operations-Reporting  the  Effects of  Disposal of a
Segment of a Business,  and  Extraordinary,  Unusual and Infrequently  Occurring
Events  and  Transactions,  for the  disposal  of a segment  of a  business  (as
previously  defined  in that  Opinion).  SFAS  No.  144 also  amends  Accounting
Research Bulletin No. 51, Consolidated  Financial  Statements,  to eliminate the
exception to  consolidation  for a subsidiary  for which control is likely to be
temporary. The provisions of SFAS No. 144 are effective for financial statements
issued for fiscal years  beginning  after December 15, 2001, and interim periods
within  those  fiscal  years.  The adoption SFAS No. 144 had no impact on our
financial position or results of operations.

                                                45


Recently Issued Accounting Standards

         In  April  2002,  the FASB  issued  SFAS No.  145,  Rescission  of FASB
Statement Nos. 4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical
Corrections.  SFAS No. 145 requires that gains and losses from extinguishment of
debt be classified as extraordinary  items only if they meet the criteria in APB
Opinion No. 30.  Applying the provisions of APB Opinion No. 30 will  distinguish
transactions that are part of an entity's  recurring  operations from those that
are  unusual  and  infrequent  that  meet  criteria  for  classification  as  an
extraordinary  item. SFAS No. 145 is effective for us beginning January 1, 2003,
but we may adopt it prior to this date. The effect on our consolidated financial
position and results of  operations of the adoption of SFAS No. 145 will be that
we recognize and report bond retirement costs as an operating expense.

         In June  2002,  the FASB  issued  SFAS No.  146,  Accounting  for Costs
Associated with Exit or Disposal  Activities.  SFAS No. 146 addresses  financial
accounting and reporting for costs  associated with exit or disposal  activities
and  nullifies  EITF  No.  94-3,  Liability  Recognition  for  Certain  Employee
Termination  Benefits  and Other  Costs to Exit an Activity  (including  Certain
Costs Incurred in a Restructuring). SFAS No. 146 requires that a liability for a
cost  associated  with an exit or  disposal  activity  be  recognized  when  the
liability  is incurred.  A  fundamental  conclusion  reached by the FASB in this
statement is that an entity's commitment to a plan, by itself, does not create a
present obligation to others that meets the definition of a liability.  SFAS No.
146 also establishes that fair value is the objective for initial measurement of
the  liability.  The  provisions  of this  statement  are  effective for exit or
disposal  activities  that are  initiated  after  December 31, 2002,  with early
application encouraged. We are currently assessing, but have not yet determined,
the impact of SFAS No. 146 on our financial position and results of operations.

                               THE EXCHANGE OFFER

Purpose and Effect of the Exchange Offer

         We issued and sold the existing notes to the Initial  Purchaser on June
26,  2002.  The  Initial  Purchaser  subsequently  sold  the  existing  notes to
qualified  institutional  buyers in reliance  on Rule 144A under the  Securities
Act, to institutional  accredited investors in reliance on other exemptions from
registration  under the  Securities  Act,  and to  certain  other  investors  in
reliance on Regulation S under the  Securities  Act.  Because the existing notes
are subject to transfer  restrictions,  we entered  into a  registration  rights
agreement with the Initial Purchaser,  dated June 26, 2002, pursuant to which we
agreed to do, among other things, the following:

                                                46


         o       within 120 days after June 26, 2002, to use our reasonable best
                 best efforts to cause the registration statement, of which this
                 Prospectus is a part,  to become effective under the Securities
                 Act;

         o       upon the effectiveness of the registration statement, to offer
                 the new notes in exchange for surrender of the existing notes;

         o       to keep the exchange  offer open for not less than 20 business
                 days, or longer if required by applicable  law, after the date
                 notice of the  exchange  offer is mailed to the holders of the
                 existing notes; and

         o       to use our best efforts to commence and consummate the exchange
                 offer within 150 days after June 26, 2002.

         The  registration   statement  is  intended  to  satisfy  in  part  our
obligations  with respect to the existing  notes under the  registration  rights
agreement.

         Under   existing   interpretations   of  the  Securities  and  Exchange
Commission,  the new notes will be freely transferable by holders other than our
affiliates  after the exchange  offer  without  further  registration  under the
Securities Act if the holder of the new notes represents that:

         o        it is acquiring the new notes in the ordinary course of its
                  business;

         o        it has no arrangement or understanding with any person to
                  participate in the distribution of the new notes;

         o        it is not our affiliate, as such term is interpreted by the
                  Securities and Exchange Commission; and

         o        if such holder is not a broker-dealer, then such holder is not
                  engaged in and does not intend to engage in, a distribution of
                  the new notes.

         However,  participating  broker-dealers  receiving  new  notes  in  the
exchange  offer will have a  prospectus  delivery  requirement  with  respect to
resales of such new notes. The Securities and Exchange  Commission has taken the
position that participating broker-dealers may fulfill their prospectus delivery
requirements  with  respect  to new  notes,  other  than a resale  of an  unsold
allotment from the original sale of the existing  notes,  with this  Prospectus.
Under the registration rights agreement,  we are required to allow participating
broker-dealers  and other  persons,  if any,  with similar  prospectus  delivery
requirements  to use this  Prospectus in connection  with the resale of such new
notes.  Each  broker-dealer  that  receives  new  notes for its own  account  in
exchange for existing  notes,  where such  existing  notes were acquired by such
broker-dealer  as  a  result  of  market-making   activities  or  other  trading
activities,  must  acknowledge  that it will deliver a prospectus  in connection
with any resale of such new notes.

                                                47


Terms of the Exchange Offer; Period for Tendering Existing Notes

         On the terms and subject to the conditions set forth in this Prospectus
and in the  accompanying  letter of transmittal,  which together  constitute the
exchange  offer,  we will accept for exchange  existing notes which are properly
tendered  on or prior to the  expiration  date and not  withdrawn  as  permitted
below.   The   expiration   date  is  5:00  p.m.,   New  York  City   time,   on
November 25,  2002. However, if we, in our sole discretion,  extend the period
of time for which the exchange offer is open, the expiration date will be the
latest time and date to which the exchange offer is extended.

         As of the date of this Prospectus,  $215.0 million aggregate  principal
amount of the existing notes is outstanding.

         We reserve the right,  at any time or from time to time,  to extend the
period of time  during  which the  exchange  offer is open,  and  thereby  delay
acceptance  for any exchange of any  existing  notes,  by giving  notice of such
extension to the holders of existing notes as described  below.  During any such
extension,  all existing  notes  previously  tendered will remain subject to the
exchange  offer and may be accepted for  exchange by us. Any existing  notes not
accepted  for exchange  for any reason will be returned  without  expense to the
tendering holder as promptly as practicable  after the expiration or termination
of the exchange offer.

         We reserve the right to amend or terminate the exchange offer,  and not
to accept for exchange any existing notes not previously  accepted for exchange,
upon the  occurrence of any of the  conditions of the exchange  offer  specified
below.  We will  give  notice of any  extension,  amendment,  non-acceptance  or
termination  to the holders of the  existing  notes as promptly as  practicable,
such notice in the case of any  extension to be issued not later than 9:00 a.m.,
New York City time,  on the next  business  day after the  previously  scheduled
expiration date.

         Holders of  existing  notes do not have any  appraisal  or  dissenters'
rights under Nevada law in connection with the exchange offer.

Procedures for Tendering Existing Notes

         The tender to us of existing notes by a holder of existing notes as set
forth below and the  acceptance  of such tender by us will  constitute a binding
agreement  between the  tendering  holder and us on the terms and subject to the
conditions  set  forth in this  Prospectus  and in the  accompanying  letter  of
transmittal.  Except as set forth below, a holder who wishes to tender  existing
notes for  exchange  pursuant  to the  exchange  offer must  transmit a properly
completed and duly executed  letter of  transmittal to the exchange  agent,  The
Bank of New York, on or prior to the expiration date. In addition,  the exchange
agent must receive:

         o        certificates for such existing notes along with the letter of
                  transmittal, or

         o        prior  to the  expiration  date,  a timely  confirmation  of a
                  book-entry  transfer of such existing  notes into the exchange
                  agent's  account  at  The  Depository  Trust  Company  ("DTC")
                  pursuant to the procedure for  book-entry  transfer  described
                  below, or

         o        the holder must comply with the guaranteed delivery procedure
                  described below.

         The method of delivery of existing  notes,  letters of transmittal  and
all other  required  documents is at your election and risk. If such delivery is
by mail, we recommend  that you use  registered  mail,  properly  insured,  with
return receipt  requested.  In all cases,  you should allow  sufficient  time to
assure timely  delivery.  You should not send letters of transmittal or existing
notes to us.

                                                48


         Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be,  must be  guaranteed  unless the  existing  notes  surrendered  for
exchange are tendered:

         o        by a registered holder of the existing notes who has not
                  completed the box entitled "Special Issuance Instruction" or
                  "Special Delivery Instruction" on the letter of transmittal;
                  or

         o        for the account of an eligible institution.

         If signatures on a letter of transmittal or a notice of withdrawal,  as
the case may be, are required to be guaranteed,  such  guarantees  must be by an
eligible institution.  Eligible institutions are any firm which is a member of a
registered national securities exchange or a member of the National  Association
of Securities  Dealers,  Inc. or a commercial  bank or trust  company  having an
office or correspondent  in the United States.  If existing notes are registered
in the name of a person  other than a signer of the letter of  transmittal,  the
existing notes  surrendered  for exchange must be endorsed by, or be accompanied
by, a written instrument or instruments of transfer or exchange. This must be in
satisfactory  form as determined by us in our sole discretion,  duly executed by
the registered holder with the signature on such existing notes guaranteed by an
eligible institution.

         Any beneficial owner whose existing notes are registered in the name of
a broker,  dealer,  commercial  bank,  trust company or other  nominee,  and who
wishes to tender,  should  contact the registered  holder  promptly and instruct
such  registered  holder to tender on such beneficial  owner's  behalf.  If such
beneficial  owner wishes to tender on such owner's own behalf,  such owner must,
prior to completing and executing the letter of transmittal  and delivering such
owner's  existing  notes,  either  make  appropriate  arrangements  to  register
ownership  of the  existing  notes in such  owner's  name or  obtain a  properly
completed  bond power from the  registered  holder.  The transfer of  registered
ownership may take considerable time.

         All questions as to the validity,  form,  eligibility,  time of receipt
and  acceptance of existing notes tendered for exchange will be determined by us
in our sole  discretion.  This  determination  shall be final  and  binding.  We
reserve  the  absolute  right to reject any and all  tenders  of any  particular
existing notes not properly  tendered or to not accept any  particular  existing
notes which  acceptance  might,  in our judgment or our counsel's  judgment,  be
unlawful.   We  also  reserve  the  absolute  right  to  waive  any  defects  or
irregularities or conditions of the exchange offer as to any particular existing
notes either before or after the  expiration  date  including the right to waive
the  ineligibility  of any  holder  who  seeks to tender  existing  notes in the
exchange offer. The  interpretation  of the terms and conditions of the exchange
offer as to any particular  existing notes either before or after the expiration
date, including the letter of transmittal and the instructions to such letter of
transmittal, by us shall be final and binding on all parties. Unless waived, any
defects or  irregularities  in  connection  with  tenders of existing  notes for
exchange  must be cured within such  reasonable  period of time as we determine.


                                                49


Neither we, the  exchange  agent nor any other person shall be under any duty to
give  notification of any defect or  irregularity  with respect to any tender of
existing  notes for  exchange,  nor shall any of them  incur any  liability  for
failure to give such notification.

         If the  letter  of  transmittal  or any  existing  notes or  powers  of
attorney  are  signed  by  trustees,   executors,   administrators,   guardians,
attorneys-in-fact,  officers of  corporations or others acting in a fiduciary or
representative  capacity,  such persons  should so indicate when  signing,  and,
unless waived by us, proper evidence satisfactory to us of their authority to so
act must be submitted.

         By  tendering,  each holder of existing  notes will  represent to us in
writing that, among other things:

         o        the new notes acquired pursuant to the exchange offer are
                  being obtained in the ordinary course of business of the
                  holder and any beneficial holder;

         o        neither the holder nor any such beneficial holder has an
                  arrangement or understanding with any person to participate in
                  the distribution of such new notes; and

         o        neither   the  holder  nor  any  such  other   person  is  our
                  "affiliate,"  as defined under Rule 405 of the Securities Act.
                  If  the  holder  is  not  a  broker-dealer,  the  holder  must
                  represent  that it is not  engaged  in nor does it  intend  to
                  engage in a distribution of the new notes.

         If any holder or any such other person is our  "affiliate,"  as defined
in Rule 405 of the Securities Act, or is engaged in, or intends to engage in, or
has an  arrangement  or  understanding  with any  person  to  participate  in, a
distribution  of such new notes to be acquired  pursuant to the exchange  offer,
such  holder  or  any  such  other  person  may  not  rely  on  the   applicable
interpretations of the staff of the Securities and Exchange  Commission and must
comply  with  the  registration  and  prospectus  delivery  requirements  of the
Securities Act in connection with any resale transaction.

         If the holder is a  broker-dealer,  the holder must  represent  that it
will receive new notes for its own account in exchange  for existing  notes that
were  acquired  as  a  result  of  market-making  activities  or  other  trading
activities.  Each  broker-dealer  that receives new notes for its own account in
exchange for existing  notes,  where such  existing  notes were acquired by such
broker-dealer  as  a  result  of  market-making   activities  or  other  trading
activities,  must  acknowledge  that it will deliver a prospectus  in connection
with any resale of such new notes.


                                                50


Acceptance of Existing Notes for Exchange; Delivery of New Notes

         Upon  satisfaction  or waiver of all of the  conditions to the exchange
offer,  we will accept,  promptly after the expiration  date, all existing notes
properly tendered, and will issue the new notes promptly after acceptance of the
existing  notes.  For purposes of the exchange offer, we shall be deemed to have
accepted  properly tendered existing notes for exchange when, as, and if we have
given oral and written notice to the exchange agent.

         The new notes will bear  interest  from the most  recent  date to which
interest has been paid on the existing notes, or if no interest has been paid on
the existing notes, from June 26, 2002.  Accordingly,  registered holders of new
notes on the relevant record date for the first interest  payment date following
the consummation of the exchange offer will receive  interest  accruing from the
most recent  date to which  interest  has been paid or, if no interest  has been
paid,  from June 26, 2002.  Existing  notes  accepted for exchange will cease to
accrue  interest from and after the date of  consummation of the exchange offer.
Holders of existing  notes that are accepted  for exchange  will not receive any
payment in respect of accrued interest on such existing notes otherwise  payable
on any  interest  payment  date the  record  date for  which  occurs on or after
consummation  of the  exchange  offer,  and such  holders will be deemed to have
waived their rights to receive such accrued interest on the existing notes.

         In all  cases,  issuance  of new  notes  for  existing  notes  that are
accepted  pursuant to the exchange  offer will be made only after timely receipt
by the exchange  agent of the  following  (along with any other  documents  that
might be required):

         o        a timely book-entry confirmation of such existing notes in the
                  exchange  agent's  account  at DTC,  along  with  an  "agent's
                  message"  from DTC, as  described in  "--Book-Entry  Transfer"
                  below; or

         o        certificates for such existing notes, accompanied by a
                  properly completed and duly executed letter of transmittal.

         If any  tendered  existing  notes are not  accepted  for any reason set
forth in the terms and conditions of the exchange offer or if existing notes are
submitted for a greater  principal  amount than the holder  desires to exchange,
such unaccepted or non-exchanged existing notes will be returned without expense
to the tendering  holder.  In the case of existing  notes tendered by book-entry
transfer  into the exchange  agent's  account at DTC pursuant to the  book-entry
transfer procedures  described below, such non-exchanged  existing notes will be
credited to an account  maintained  with DTC as promptly  as  practicable  after
expiration of the exchange offer.

Book-Entry Transfer

         Any financial  institution  that is a participant  in DTC's systems may
make  book-entry  delivery  of existing  notes by causing  DTC to transfer  such
existing notes into the exchange agent's account at DTC in accordance with DTC's
procedures for transfer.


                                                51


         We understand  that the exchange  agent has confirmed with DTC that any
financial  institution  that is a participant  in DTC's system may utilize DTC's
Automated  Tender Offer Program  ("ATOP") to tender  existing  notes. We further
understand that the exchange agent will request,  within two business days after
the date the  exchange  offer  commences,  that DTC  establish  an account  with
respect to the  existing  notes for the  purpose of  facilitating  the  exchange
offer.  Also, any participant may make book-entry  delivery of existing notes by
causing DTC to transfer such existing notes into the exchange agent's account in
accordance with DTC's ATOP procedures for transfer. However, the exchange of the
existing notes so tendered will only be made after timely  confirmation  of such
book-entry  transfer  and  timely  receipt by the  exchange  agent of an agent's
message and any other  documents  required.  An "agent's  message" is a message,
transmitted  by DTC and  received  by the  exchange  agent and  forming  part of
book-entry  confirmation,   which  states  that  DTC  has  received  an  express
acknowledgment from a participant tendering existing notes which are the subject
of such  book-entry  confirmation  and that such  participant  has  received and
agrees to be bound by the terms of the  letter  of  transmittal  and that we may
enforce such agreement against such participant.

Guaranteed Delivery Procedures

         If a  registered  holder of the existing  notes  desires to tender such
existing notes and the existing  notes are not  immediately  available,  or time
will not permit such  holder's  existing  notes or other  required  documents to
reach the exchange agent by the expiration date, or the procedure for book-entry
transfer  cannot be completed on a timely basis,  a tender may still be effected
if:

         o        the tender is made through an eligible institution;

         o        prior to the expiration date, the exchange agent received from
                  such eligible institution a properly completed and duly
                  executed Letter of Transmittal and Notice of Guaranteed
                  Delivery, substantially in the form provided by us, by
                  facsimile transmission, mail or hand delivery, setting forth
                  the name and address of the holder of existing notes and the
                  amount of existing notes tendered, stating that the tender is
                  being made thereby and guaranteeing that within five New York
                  Stock Exchange ("NYSE") trading days after the date of
                  execution of the Notice of Guaranteed Delivery, the
                  certificates for all physically tendered existing notes, in
                  proper form for  transfer, or a book-entry confirmation, as
                  the case may be, and any other documents required by the
                  letter of transmittal will be deposited by the eligible
                  institution with the exchange agent; and

         o        the certificates for all physically  tendered  existing notes,
                  in proper form for transfer, or a book-entry confirmation,  as
                  the case  may be,  and all  other  documents  required  by the
                  Letter of  Transmittal  are  received  by the  exchange  agent
                  within five NYSE  trading  days after the date of execution of
                  the Notice of Guaranteed Delivery.

Withdrawal Rights

         Tenders of  existing  notes may be  withdrawn  at any time prior to the
expiration  date.  For a  withdrawal  to  be  effective,  a  written  notice  of
withdrawal must be received by the exchange agent. Any such notice of withdrawal
must:

         o        specify the name of the person having tendered the existing
                  notes to be withdrawn;

                                                52


         o        identify the existing notes to be withdrawn and the principal
                  amount of such existing notes; and

         o        where  certificates  for existing notes have been  transmitted
                  specify the name in which such existing notes are  registered,
                  if different from that of the withdrawing holder.

         If  certificates  for existing  notes have been  delivered or otherwise
identified  to  the  exchange  agent,   then,  prior  to  the  release  of  such
certificates,  the withdrawing holder must also submit the serial numbers of the
particular  certificates  to be withdrawn and a signed notice of withdrawal with
signatures  guaranteed  by an  eligible  institution  unless  such  holder is an
eligible institution.

         If existing  notes have been  tendered  pursuant to the  procedure  for
book-entry  transfer  described above, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn existing
notes and otherwise  comply with the procedures of such facility.  All questions
as to the validity,  form and  eligibility,  including time of receipt,  of such
notices  will be  determined  by us,  and our  determination  shall be final and
binding on all parties.  Any existing  notes so withdrawn  will be deemed not to
have been validly  tendered for exchange for purposes of the exchange offer. Any
existing notes which have been tendered for exchange but which are not exchanged
for any reason  will be  returned  to the holder  thereof  without  cost to such
holder,  or in the case of existing notes  tendered by book-entry  transfer into
the  exchange  agent's  account  at  DTC  pursuant  to the  book-entry  transfer
procedures  described above,  such existing notes will be credited to an account
maintained  with such  book-entry  transfer  facility for the existing notes, as
soon as practicable after withdrawal,  rejection of tender or termination of the
exchange  offer.  Properly  withdrawn  existing  notes  may  be  re-tendered  by
following one of the procedures  described  above at any time on or prior to the
expiration date.

Conditions to the Exchange Offer

         Notwithstanding  any other  provision of the exchange offer, we are not
required  to accept for  exchange,  or to issue new notes in exchange  for,  any
existing  notes. We may terminate or amend the exchange offer if any time before
the  acceptance of such existing notes for exchange or the exchange of new notes
for such existing notes, we determine that:

         o        the exchange offer does not comply with any applicable law or
                  any applicable interpretation of the staff of the Securities
                  and Exchange Commission;

         o        we have not received all applicable governmental approvals; or

         o        any actions or proceedings of any governmental agency or court
                  exist which could materially  impair our ability to consummate
                  the exchange offer.

                                                53


         The foregoing  conditions  are for our sole benefit and may be asserted
by us regardless of the  circumstances  giving rise to any such condition or may
be  waived  by us in whole  or in part at any time and from  time to time in its
reasonable discretion.  Our failure at any time to exercise any of the foregoing
rights  shall not be deemed a waiver of such right and each such right  shall be
deemed an ongoing right which may be asserted at any time and from time to time.

         In  addition,  we will not  accept  for  exchange  any  existing  notes
tendered,  and no new notes  will be issued in  exchange  for any such  existing
notes, if at such time any stop order is threatened or in effect with respect to
the  registration  statement of which this Prospectus  constitutes a part or the
qualification  of the  indenture  under  the  Trust  Indenture  Act of 1939,  as
amended.  In any such event we are  required to use every  reasonable  effort to
obtain the withdrawal of any stop order at the earliest possible time.

Exchange Agent

         The Bank of New York is the exchange agent for the exchange offer.  All
executed letters of transmittal  should be directed to the exchange agent at one
of the  addresses  set forth  below.  Questions  and  requests  for  assistance,
requests  for  additional  copies  of  this  Prospectus  or  of  the  letter  of
transmittal  and requests for Notices of Guaranteed  Delivery should be directed
to the exchange agent addressed as follows:

    By Registered or Certified Mail or
    Overnight Courier:                      By Hand:

    The Bank of New York                    The Bank of New York
    101 Barclay Street,                     101 Barclay Street,
    Ground Level                            Ground Level
    New York, NY  10286                     Corporate Trust Services Window
    Attn.:   Santino Ginocchietti,          New York, NY  10286
             Reorganization    Unit-7E      Attn.:   Santino Ginocchietti,
    Reference:  Riviera                              Reorganization
    Holdings Corporation                             Unit-7E
                                            Reference:  Riviera
                                            Holdings Corporation

    By Facsimile (for Eligible
    Institutions only):
    (212) 298-1915

    Confirm by Telephone:
    (212) 815-6331

         Delivery  other  than as set forth  above will not  constitute  a valid
delivery.

                                                54


Fees and Expenses

         We will not make any payments to brokers,  dealers or others soliciting
acceptances of the exchange offer.  The principal  solicitation is being made by
mail. However, additional solicitations may be made in person or by telephone by
our officers and employees.

         Expenses incurred in connection with the exchange offer will be paid by
us. Such expenses  include fees and expenses of the exchange agent and indenture
trustee, accounting and legal fees and printing costs, among others.

Accounting Treatment

         The new  notes  will be  recorded  at the same  carrying  amount as the
existing  notes,  which is the principal  amount as reflected in our  accounting
records on the date of the exchange  and,  accordingly,  no gain or loss will be
recognized.  The debt  issuance  costs  will be  capitalized  and  amortized  to
interest expense over the term of the new notes.

Transfer Taxes

         Holders  who  tender  their  existing  notes for  exchange  will not be
obligated to pay transfer taxes, except that holders who instruct us to register
new notes in the name of, or request  that  existing  notes not  tendered or not
accepted  in the  exchange  offer  be  returned  to,  a  person  other  than the
registered  tendering  holder  will  be  responsible  for  the  payment  of  any
applicable transfer tax thereon.

Consequences of Failure to Exchange; Resales of New Notes

         Holders of existing  notes who do not exchange their existing notes for
new notes in the exchange offer will continue to be subject to the  restrictions
on  transfer  of such  existing  notes as set forth in the  legend  thereon as a
consequence  of the issuance of the existing  notes  pursuant to the  exemptions
from, or in transactions not subject to, the  registration  requirements of, the
Securities  Act  and  applicable  state  securities  laws.  Existing  notes  not
exchanged  in the  exchange  offer will  continue to accrue  interest at 11% per
annum  on  the  principal  amount  and  will  otherwise  remain  outstanding  in
accordance with their terms. Holders of existing notes do not have any appraisal
or dissenters' rights under Nevada law in connection with the exchange offer. In
general,  the existing notes may not be offered or sold unless  registered under
the Securities  Act,  except  pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable  state  securities laws. We do
not  currently  anticipate  that we will  register the existing  notes under the
Securities Act.  However,  if the Initial  Purchaser so requests with respect to
existing  notes not eligible to be exchanged for new notes in the exchange offer
and held by it following  consummation of the exchange offer or if any holder of
existing notes other than an exchanging dealer is not eligible to participate in
the exchange offer or, in the case of any holder of existing notes other than an
exchanging  dealer that participates in the exchange offer, does not receive new
notes in exchange for existing notes that may be sold without  restriction under
state and federal  securities  laws, other than due solely to the status of such

                                                55


holder as our "affiliate" (as defined in Rule 405 under the Securities  Act), we
are obligated to file a shelf  registration  statement  under the Securities Act
relating to the existing notes held by such persons.

         Based on interpretive letters issued by the staff of the Securities and
Exchange  Commission to third parties in unrelated  transactions,  we are of the
view that new notes  issued  pursuant to the  exchange  offer may be offered for
resale, resold or otherwise transferred by holders thereof,  other than any such
holder which is our  "affiliate"  under the Securities Act or any  broker-dealer
that  purchases  notes  from us to  resell  pursuant  to Rule  144A or any other
available  exemption,  without  compliance with the  registration and prospectus
delivery  provisions of the Securities  Act. This is the case provided that such
new notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement or  understanding  with any person to participate in
the  distribution  of such new  notes.  If any  holder  has any  arrangement  or
understanding  with respect to the  distribution of the new notes to be acquired
pursuant to the exchange offer, such holder:

         o        could not rely on the applicable interpretations of the staff
                  of the Securities and Exchange Commission; and

         o        must  comply with the  registration  and  prospectus  delivery
                  requirements  of  the  Securities  Act  in  connection  with a
                  secondary resale transaction.

         A broker-dealer who holds existing notes that were acquired for its own
account as a result of market-making  or other trading  activities may be deemed
an  "underwriter"  under  the  Securities  Act and  must,  therefore,  deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of new notes. Each such broker-dealer that receives new notes for its own
account in exchange for existing notes,  where such existing notes were acquired
by such  broker-dealer as a result of market-making  activities or other trading
activities, must acknowledge in the letter of transmittal that it will deliver a
prospectus  in  connection  with  any  resale  of such  new  notes.  We have not
requested the staff of the  Securities  and Exchange  Commission to consider the
exchange  offer in the  context  of a  no-action  letter,  and  there  can be no
assurance  that the staff  would take  positions  similar to those  taken in the
interpretive letters referred to above if we were to make such a request.

         In addition, the new notes may not be offered or sold in a jurisdiction
unless they have been registered or qualified for sale in such  jurisdictions or
there has been  compliance  with an available  exemption  from  registration  or
qualification.  We have agreed,  under the  registration  rights  agreement  and
subject to the  specified  limitations  therein,  to register or qualify the new
notes  for  offer  or  sale  under  the  securities  or  blue  sky  laws of such
jurisdictions in the U.S. as any selling holder of the notes reasonably requests
in writing.

                 UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

         The following  discussion  summarizes  certain U.S.  federal income tax
consequences  of the  exchange  offer to a holder of  existing  notes that is an
individual citizen or resident of the U.S. or a U.S.  corporation that purchased
the existing notes pursuant to their original issue. It also summarizes  certain
U.S. income tax consequences resulting from the ownership and disposition of the
new notes.  This  discussion  is based on the Internal  Revenue Code of 1986, as
amended to the date  hereof,  existing and proposed  Treasury  regulations,  and
judicial and administrative  determinations,  all of which are subject to change
at any time,  possibly on a retroactive basis. The following relates only to the


                                                56


existing  notes,  and the new notes received in exchange for the existing notes,
that are held as "capital  assets"  under  Section 1221 of the Internal  Revenue
Code by holders.  It does not discuss state,  local or foreign tax consequences,
nor does it discuss tax consequences to subsequent purchasers,  or to categories
of  holders  that  are  subject  to  special  rules,  such as  foreign  persons,
tax-exempt  organizations,  insurance  companies,  banks,  dealers in stocks and
securities  and persons  holding the notes as part of a "straddle,"  "hedge," or
"conversion  transaction." For this purpose,  subsequent  purchasers are persons
who did not purchase the existing notes pursuant to their  original  issue.  Tax
consequences may vary depending on the particular status of an investor.

         No  rulings  will be  sought  from  the  IRS  with  respect  to the tax
consequences  of the exchange  offer or the  ownership  and  disposition  of the
exchange  notes.  There can be no assurance that the IRS will not take positions
contrary to the federal income tax consequences  discussed below. In particular,
we intend to treat the notes as  indebtedness  for federal  income tax purposes.
However,  this treatment is not binding on the IRS or any court and there can be
no assurance that the IRS will not successfully  argue, or that a court will not
hold,  that the notes  should  be  treated  as equity  for  federal  income  tax
purposes.  If any  portion  of the  notes  is  treated  as  equity  rather  than
indebtedness, we would not be able to deduct the interest on that portion of the
notes.  This could have a material adverse effect on our after-tax cash flow. In
addition,  the  interest  payments  made on the portion of the notes  treated as
equity  will be  taxable  to the  recipient  as  dividends  to the extent of our
current and accumulated  earnings and profits.  This could adversely  affect the
timing, character and amounts includible in the income of a holder of notes.

         This  section  does not  purport  to deal with all  aspects  of federal
income  taxation  that may be  relevant  to an  investor's  decision to exchange
existing  notes for new notes.  Each  investor  should  consult with its own tax
advisor  concerning the application of the federal income tax laws and other tax
laws to its particular situation before determining whether to exchange existing
notes for new notes.

The Exchange Offer

         The exchange of existing notes pursuant to the exchange offer should be
treated as an exchange of  securities  where no gain or loss will be  recognized
and will also be a continuation of the corresponding  existing notes because the
terms of the new  notes  are not  materially  different  from  the  terms of the
existing notes. Accordingly,  the exchange should not constitute a taxable event
to holders, and therefore:

         o        no gain or loss should be realized by holders upon receipt of
                  a new note;

         o        the holding period of a new note should include the holding
                  period of the existing note for which the new note was
                  exchanged; and

                                                57


         o        the  adjusted  tax basis of the new note should be the same as
                  the adjusted tax basis of the existing  note for which the new
                  note was exchanged immediately before the exchange.

Recognition of Interest Income

         Because the stated  redemption  price at maturity of the notes will not
exceed their issue price by more than 1/4 of 1% of their stated redemption price
at maturity  multiplied  by the number of full years until  maturity,  the notes
will not be considered  issued with original  issue  discount for federal income
tax  purposes.  A holder of notes will be required to report as ordinary  income
for federal  income tax purposes  stated  interest  earned on the notes as it is
received or accrued,  in accordance  with the holder's  method of accounting for
tax purposes.

Sale, Retirement or Other Taxable Disposition

         A holder of a note will  generally  recognize gain or loss on the sale,
redemption,  retirement,  or other taxable  disposition of the note in an amount
equal to the difference  between the amount of cash and the fair market value of
property received in exchange therefor, except to the extent attributable to the
payment of accrued interest or original issue discount,  which generally will be
taxable to the holder as ordinary  income,  reduced by any  negative  adjustment
carryforward  and the  holder's  adjusted  tax  basis in the  note.  A  holder's
adjusted tax basis in a note  generally  will be equal to the price paid for the
note,  determined  without  adjustments,  and  decreased  by the  amount  of any
payments  previously made on the note. The resulting gain or loss will generally
be capital gain or loss and will be  long-term  capital gain or loss if the note
has been held for more than one year.

Liquidated Damages

         We intend to take the  position  that any  liquidated  damages  will be
taxable to the holder as ordinary  income in accordance with the holder's method
of  accounting  for federal  income tax  purposes.  The IRS may take a different
position, however, which could affect the timing of both the holder's income and
our deduction with respect to any liquidated damages.

Backup Withholding

         A holder of notes may be subject to backup  withholding  at the rate of
30%  (subject to change in future tax years) with  respect to interest  paid on,
and gross  proceeds  from a sale or other  disposition  of, the notes unless the
holder is a  corporation  or comes  within  other exempt  categories  and,  when
required,  demonstrates this fact or provides a correct taxpayer  identification
number,  certifies  as to no loss  of  exemption  from  backup  withholding  and
otherwise complies with applicable requirements of the backup withholding rules.
A holder  of notes  who does not  provide  us with his or her  correct  taxpayer
identification number may be subject to penalties imposed by the IRS.

         We will  report to the  holders  of the notes and the IRS the amount of
any "reportable  payments," including any original issue discount accrued on the
notes and any amount  withheld  with  respect to the notes  during the  calendar
year.

                                                58


                                    BUSINESS

General

                  We own and operate  the  Riviera  Hotel & Casino in Las Vegas,
Nevada,  and the  Riviera  Black  Hawk  Casino  in  Black  Hawk,  Colorado.  Our
properties  target  mid-level  gamers by, among other things,  emphasizing  slot
machine play and value-oriented amenities. We believe our properties are located
in strong gaming markets and are well positioned to attract our target customers
and benefit from continued growth in these markets.

Riviera Las Vegas

         General

                  Riviera  Las  Vegas is  located  on the  corner  of Las  Vegas
Boulevard  and Riviera  Boulevard in Clark  County,  Nevada,  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  1,500 slot machines and 34 gaming  tables,
including blackjack,  craps,  roulette,  pai gow poker, Caribbean Stud(R) poker,
Let It Ride(R) and  mini-baccarat.  The casino also includes a keno lounge and a
200-seat race and sports book.

                  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  maintain a 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  the baccarat
room. 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 6% in 2001. Also, in 2001,  revenues from slots and
tables were approximately 78% and 22% of total gaming revenue,  respectively, as
compared to 60% and 34%, respectively, in 1993.

                                                59


                  During 2001, we continued a number of  initiatives  at Riviera
Las Vegas to  increase  slot  play,  including  the  replacement  of older  slot
machines and maintaining our slot host program. 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 (1) our ongoing slot upgrade  program,  (2) addition of
new  signage,  (3)  promotion  of the  Riviera  Las  Vegas  Player's  Club,  (4)
sponsorship  of slot  tournaments,  (5) creation of  promotional  programs,  (6)
marketing  of the "Slot  Frenzy" and "$40 for $20(R)" slot  promotions,  and (7)
"Nickel Town(R)". At the end of 1997, we opened Nickel Town(R) 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(R) is  comprised
primarily  of  nickel  slot  machines,  the  fastest  growing segment of the Las
Vegas slot market.

         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  2001,  we  completed   refurbishment  of  all  of  our
approximately 2,100 hotel rooms and suites.  Despite the significant increase in
rooms on the Las Vegas  Strip  since  1997,  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,  97.5% for 1999,  96.6%  for 2000 and 91.5% for 2001  (based on  available
rooms).  The average  occupancy rate citywide was 88.9% in 2001 according to the
Las Vegas Convention and Visitors Authority.

         Restaurants

                  The quality,  value and variety of food  services are critical
to attracting  Las Vegas  visitors.  Riviera Las Vegas offers five bars and four
restaurants  and  serves  an  average  of  approximately  5,312  meals  per day,
including banquets and room service.  Riviera Las Vegas completely remodeled its
buffet in 2001 upgrading the ambiance and food quality,  featuring  cuisine from
various  countries as well as a carving  station.  The following table outlines,
for each restaurant, the type of service provided and total seating capacity:




Name                                       Type                Seating Capacity
----                                    ---------------------------------------
                                                                 
Kady's.................................... Coffee Shop                 290
Kristofer's............................... Steak and Seafood           162
Ristorante Italiano....................... Italian                     126
World's Fare Buffet....................... All-you-can-eat             366
                                                                       ---
                                                                       944

                                                60



                  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, including
Burger King(R), Pizza Hut(R), Panda Express(R), Quiznos(R) and La Salsa(R).

         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 hosted  approximately  382 conventions in 2001.
The hotel  currently has over 740,000  convention  related  advance  bookings of
rooms through 2005 consisting of  approximately  490,700  definite  bookings and
approximately  249,360 tentative bookings.  In 2001,  approximately 30.4% of the
rooms were occupied for conventions,  and, based on current  bookings,  32.5% of
its rooms will be occupied for conventions in 2002.

                  The Royal  Pavilion  portion of the convention  center,  which
opened in February 1999, and represents  approximately 60,000 square feet of our
convention facility, features state-of-the-art  convention,  meeting and banquet
facilities, teleconferencing and satellite uplink capability and 12 skyboxes.

         Entertainment

                  Riviera Las Vegas has one of the most extensive  entertainment
programs in Las Vegas,  offering five 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),  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 Riviera Mardi Gras shows of "La Cage" and the "Comedy Club" have
previously received awards for "Best Las Vegas Shows" from What's On Magazine.

                  The following table outlines,  for each entertainment  center,
the type of service provided and total seating capacity:




Name                                         Type              Seating Capacity
                                                                
Splash..................................   Variety                    875
La Cage.................................   Female impersonation       575
Crazy Girls.............................   Adult Revue                375
Comedy Club.............................   Comedy                     350
Le Bistro...............................   Variety                    190
                                                                      ----
                                                                    2,365

                                                61


                  In addition,  Riviera Las Vegas  presents major concerts which
since 1998 have  included  performers  such as The Beach Boys,  Billy Ray Cyrus,
Rich Little, Drew Carey, Damon Wayans, Titus, Brett Butler and D.L. Hughley. The
addition of the Royal Pavilion has enabled 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.

         Marketing Strategies

                  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'
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.

                  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  expanding  Riviera Las Vegas' 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 (1) providing
a high level of service to our customers to ensure an enjoyable experience while
at Riviera  Las Vegas,  (2)  responding  to customer  surveys  and (3)  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. In addition to our Riviera Las Vegas Players' Club
marketing  efforts,  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


                                                62


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  five
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
30% of the show  patrons come from  outside the hotel and  approximately  67% 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 who are not guests in the hotel by  capitalizing
on Riviera Las Vegas' 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 (1) the development and promotion of Nickel Town,
(R) (2)providing a variety of  quality,  value-priced  entertainment  and dining
options,  and (3)  promoting  "Slot  Frenzy,"  the "Free  Pull" and the "$40 for
$20"(R) slot promotions, and placing them inside the casino.

         Focus on Convention Customers.  This market consists of two groups: (1)
those trade  organizations  and groups that hold their events in the banquet and
meeting  space  provided  by a single  hotel and (2) 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 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 2001 we derived  approximately 30.4% of
our hotel  occupancy  from  convention  customers  and consider  them a critical
component of our customer  base. We believe that the completed  expansion of the
Riviera Las Vegas' convention facility in February 1999, from 100,000 to 160,000
square  feet,  has  accommodated  the growth in size and  number of groups  that
presently use the facility,  attracted new  convention  groups and increased the
percentage of rooms occupied by conventioneers.

                                                63


         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 26% 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

                  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 fourth  largest
number of gaming devices in the market with  approximately 986 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 newly remodeled 252-seat casual buffet-styled
restaurant;

                  o        a Pizza Hut(R);

                  o        two themed bars; and

                  o        an entertainment center with seating for
approximately 440 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, 2001, there were 25 casinos in the Black
Hawk/Central  City market,  with 11 casinos each  offering  more than 400 gaming
devices.  Isle of  Capri,  located  across  the  street  from  our  casino  with
approximately  1,145 gaming machines and 1,000 covered parking spaces,  has been
the market leader in terms of win per gaming device. The Hyatt Casino with 1,332
gaming machines and 22 table games opened on December 20, 2001.

                                                64


         Marketing Strategy

                  We attract  customers to our casino by implementing  marketing
strategies and promotions designed specifically for this market. In so doing, 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
bonuses,  logo gift items and invitations to special events, such as parties and
concerts.  We have used the Player's  Club  promotion in our casino in Las Vegas
and are tailoring it for the Black  Hawk/Central City market  "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 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
have and continue 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  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, comedians and boxing.

                  We 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 use the  current  database  to
identify and stratify slot players living  primarily in Colorado for appropriate
incentives.  Approximately 150,000 of these slot players have been identified as
of December  31,  2001.  In addition,  we promote our casino by  advertising  in
newspapers, on billboards and on the radio in the local areas.

Markets

         Riviera Las Vegas

                  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 who traveled to Las Vegas during the
15-year period from 1986 through 2001 increased at a steady and significant rate
from 15.2 million in 1986 to 35.0 million in 2001, a compound annual growth rate
of 5.7%.  Convention business in Las Vegas continues to grow at a rapid pace and
comprises a  substantial  portion  of  visitation  (6.8%  growth  in  convention
delegates  since 1986 with over four  million  delegates  visiting  Las Vegas in
2001).  Clark County gaming  continued to be a strong and growing  business with
Clark County gaming revenues increasing at a compound annual growth rate of 7.9%
from $2.4  billion  in 1986 to just under  $7.6  billion in 2001.  The events of
September  11, 2001  slowed  growth in Las Vegas,  as tourist  visits and gaming
revenue growth remained flat versus the prior year.

                                                65


                  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 locations such as Japan, Taiwan, Hong Kong and Singapore. The events
of September 11, 2001 have had, and may continue to have,  an adverse  impact on
the number of Latin American and Pacific Rim visitors coming to Las Vegas. Japan
Air Lines ceased its daily  non-stop  service  between Tokyo and Las Vegas after
September  11th but  resumed  non-stop  service  three days per week in April of
2002.

                  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 85% from approximately 67,000 at the end of 1989 to 126,610 at
the end of  2001,  giving  Las  Vegas  the most  hotel  and  motel  rooms of any
metropolitan area in the world.  Despite this significant increase in the supply
of rooms,  the Las Vegas hotel occupancy rate exceeded 84% for each of the years
from 1993 through 2001. During 2001, approximately 2,340 hotel rooms opened as a
result of the opening of the Palms and Green Valley Ranch casinos, which are off
the Strip.

                  We believe  that the  growth in the Las Vegas  market has been
enhanced as a result of (1) 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, (2) the increased  capacity of McCarran Airport and (3)
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.  Even  though the
terrorist attacks negatively impacted major city-wide conventions, the number of
convention delegates had increased to 4.0 million in 2001 with in excess of $4.8
billion of economic impact.

                  During the past eight 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 35.2 million
in  2001.   Construction   has  recently  been  completed  on  numerous  roadway
enhancements to improve access to the airport.  McCarran Airport is ranked among
the ten busiest airports in the world based on passenger activity.

         Riviera Black Hawk

                  Gaming was first  introduced  to the Black  Hawk/Central  City
market  in  October  1991  following  an  initiated  state-wide   Constitutional
amendment  where  Colorado  voters  approved  limited  stakes  gaming  for three
historic  mining  towns,  namely  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 10 miles  north of I-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,  gaming
establishments have displaced many of the former tourist-related businesses.

                                                66


                  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 declined to 25 as of December 31, 2001.

                  The  Black   Hawk/Central  City  market  primarily  caters  to
"day-trip"  customers from Denver,  Boulder,  Fort Collins and Golden as well as
Cheyenne,  Wyoming.  We believe an  estimated  adult  population  exceeding  2.4
million people  resides within this 100-mile  radius of Black Hawk. In addition,
we believe that 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 2001.

                  Since  1992,  the  number  of  gaming  devices  in  the  Black
Hawk/Central City market has grown  approximately 78% from 7,252 devices in 1992
to 12,907  devices in 2001.  Win per gaming device per day has continued to grow
despite the  increase in the number of gaming  devices.  Gaming  revenues in the
market grew by 8.2% in 2001 over 2000. The City of Black Hawk itself experienced
a 10.3% increase in gaming revenue in 2001.

                  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 of 783% since 1992 compared
to a negative growth for Central City of 16% over the same period. The number of
gaming  devices in the City of Black Hawk has increased  242% since 1992,  while
the  number of gaming  devices in Central  City has  declined  43% over the same
period.

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, directly or through its own subsidiaries,  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.

                                                67


                  Through  a  subsidiary  we  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.
The agreement terminated on December 30, 1999.

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,  California,  Mississippi,  Pennsylvania,  Missouri,  New Mexico 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 Riverboat
Casino in Dubuque, Iowa. This agreement terminated on September 30, 2000.

Growth Opportunities

                  Based on our successful  development of Riviera Black Hawk, we
are pursuing the  development of other gaming  projects in other emerging gaming
markets.  We intend to finance the development of these gaming projects  through
unrestricted  subsidiaries,  which  we will  manage  for a fee,  funded  with an
investment from us and non-recourse debt financing.  This structure allows us to
grow  and  diversify  our  business  while  mitigating  the  risk  to  our  core
operations.

     Jefferson County,  Missouri.  We have received the endorsement of Jefferson
County  for a  casino/hotel  development  project,  and we  expect  to file  our
application  with the  Missouri  Gaming  Board in October  2002 or very  shortly
thereafter.  Current plans for the facility include,  among other things,  1,500
slot machines and a 200-room  hotel.  The estimated cost of this  development is
approximately  $150 million.  This property  would be located  approximately  22
miles  south of St.  Louis along the  Mississippi  River and would serve the St.
Louis market. The St. Louis market is the 18th most populated  metropolitan area
in the U.S. and has an average  household income equivalent to the U.S. average.
There are  approximately  3.7 million adults that reside within 100 miles of St.
Louis and 1.8 million adults reside within 50 miles.  Gaming revenues in the St.
Louis market have  increased to $760.4  million for the year ended  December 31,
2001,  an increase of 11.2% over the prior year and ranking ninth among all U.S.
gaming  markets.  There can be no  assurance  that we will  receive a license or
obtain the financing necessary to develop this property.

         Hobbs,  New Mexico.  We are in the process of applying,  along with two
minority-owner  partners,  to the New  Mexico  Racing  Commission  for a  gaming
license to develop and operate a horse  racing  facility.  Should we receive the
racing license, we can then apply to the New Mexico Gaming Board to operate slot
machines at Saddlebrook Park, located in Hobbs, New Mexico, just west of the New
Mexico/Texas  border.  Current plans for the facility include  approximately 600
slot machines,  a one-mile racetrack,  an entertainment center and retail shops.
The development of the facility is expected to cost  approximately  $30 million.
The facility  will enjoy a superior,  protected  location as it will be the only
casino within a 50-mile  radius.  There are currently only  approximately  2,700
gaming positions within a 200-mile radius of the site.  Approximately 6,700 cars
pass the proposed site daily along  Highway 18, over 2.4 million each year.  The
population base over 25 years old within 200 miles of the site is  approximately
1.2 million,  primarily located in western Texas. There can be no assurance that
we will  receive a license or obtain the  financing  necessary  to develop  this
property.

                                                68


Competition

         Las Vegas, Nevada

                  Intense  competition  exists  among  companies  in the  gaming
industry, many of which have significantly greater resources than we do. 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
casinos/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, 2001,  the Las Vegas  Convention  and Visitors
Authority  indicated that there were 24 casinos on the Las Vegas Strip which 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  during the next
several years.  During calendar year 2001,  approximately  2,340 new hotel rooms
opened,  and  as  of  December  31,  2001,  there  were  no  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 our facilities.  There can be no assurance that
we will compete successfully in the Las Vegas market in the future.

                  During  2001,  available  room nights in the Las Vegas  market
increased  from 44.7  million to 45.6  million or 2.1%,  while total room nights
occupied decreased from 39.8 million to an estimated 38.6 million,  or 2.9%. The
ending room  inventory at December  31, 2001 was 126,610  compared to 124,270 at
December 31, 2000,  an increase of 2,340 rooms or 1.9%.  This has had the effect
of intensifying competition. At Riviera Las Vegas, room occupancy decreased from
96.7% in 2000 to 91.6% in 2001 (still higher than the Las Vegas Strip  average).
However, room rates increased by $3.52, or 6.0% from $58.86 in 2000 to $62.46 in
2001,  due primarily to an increase in convention  rooms sold and a reduction in
tour and travel rooms sold as a result of the September 11th terrorist attacks.

                  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
U.S.,  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 results of operations.

                                                69


                  The number of casinos on Indian lands has increased  since the
enactment of the Indian Gaming  Regulatory Act of 1988. The voters in 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
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.  Recent  power
shortages,  and  possible  utility  rate  increases  in  California  could  also
adversely  affect our financial  results.  The events of September 11, 2001 have
had the most serious effect, and could continue to have an adverse effect on our
financial results.

         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,  promotional  incentives,  hotel rooms,  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,
2001,  there were 25 gaming  facilities in the Black Hawk market with 11 casinos
each offering more than 400 gaming positions.  The Hyatt Casino,  which features
1,335 slot machines,  opened on December 20, 2001. Other projects have also been
announced, proposed, discussed or rumored for the market.

                  The gaming  facilities near the  intersection of Main and Mill
Streets provide significant competition to our casino. Colorado Central Station,
which has been one of the most successful casinos 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, the
most  successful  casino in Colorado,  which opened in December 1998, is located
directly across the street from our casino and features approximately 1,145 slot
machines, 14 table games, 1,000 parking spaces, and 235 hotel rooms.

                  The number of hotel rooms currently in the Black  Hawk/Central
City market is approximately  450, with only three gaming  facilities  providing
hotel accommodations to patrons. These include Harvey's Wagon Wheel Casino Hotel
with  approximately  120 rooms,  the Lodge at Black Hawk with  approximately  50
rooms  and the Isle of Capri  Casino  with 235  rooms.  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.

                                                70


                  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 received  approval for 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 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.  Any expansion of gaming to
additional Colorado communities would be subject to an amendment to the Colorado
State Constitution.  In addition, a referendum  permitting gaming within any new
community  would be subject to a local vote accepting or rejecting the activity.
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 conducted
at tracks within  Colorado and simulcast  presentations  with wagers accepted on
pari-mutuel   events  held  outside  the  state,  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,  Riviera Las Vegas  licenses
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.

Employees and Labor Relations

         Riviera Las Vegas

                  As of December  31, 2001  Riviera Las Vegas had  approximately
1,411 full-time  equivalent  employees and had collective  bargaining  contracts
with  eight  unions  covering  approximately  813 of such  employees,  including
certain food and beverage employees, rooms department employees, slot department
employees,   carpenters,   engineers,  stage  hands,  musicians,   electricians,
painters, receiving and warehousemen, and valet parking attendants. The Southern
Nevada  Culinary and  Bartenders  Union has ratified  (but not yet signed) a new
agreement with us running until May 31, 2007. We are currently negotiating a new
agreement  with the Stage Hands Union.  The current  agreement has been extended
indefinitely  for the  purpose of further  negotiations.  Agreements  with those
unions  cover the  majority of our  unionized  employees.  We are  currently  in
negotiations  with the  Musicians  Union,  with whom our  collective  bargaining
agreement  expired in 1999.  Our agreement  with the Teamsters  Union expires in
2003.  Our collective  bargaining  agreements  with the Operating  Engineers and

                                                71


Electricians  Unions  expire  in  2004.   In  July  2002,  a  group  of  six
administrative employees voted to join the Teamsters Union. 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

                  As of December 31, 2001,  Riviera Black Hawk had approximately
371 employees.  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.

Legal Proceedings

                  We are a party to several  routine  lawsuits both as plaintiff
and as defendant arising from our normal operations.  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.

                                   MANAGEMENT

Directors and Executive Officers

             The following table sets forth certain  information as of September
3, 2002 regarding  our  directors  and  executive officers and the directors and
executive officers of Riviera Operating Corporation ("ROC"):





Name                                      Age                        Position(s)
                                                    --------------------------------------------
                                                          
William L. Westerman................       71           Chairman of the Board and Chief Executive Officer of us and
                                                        ROC, and President of us

Robert R. Barengo...................       61           Director of us and ROC and Director of Government and Public
                                                        Affairs of ROC

Jeffrey A. Silver...................       56           Director of us and ROC

Paul A. Harvey......................       65           Director of us and ROC

Vincent L. Divito...................       42           Director of us and ROC

Duane R. Krohn......................       56           Treasurer and Chief Financial Officer of us and ROC, and
                                                        Executive Vice President of Finance of ROC

Tullio J. Marchionne................       47           Secretary and General Counsel of us and ROC, and Vice
                                                        President of ROC

Robert A. Vannucci..................       55           President and Chief Operating Officer of ROC

Ronald P. Johnson...................       54           Executive Vice President of Gaming Operations of ROC

Jerome P. Grippe....................       60           Executive Vice President of Operations of ROC


                                              72


     William L. Westerman has been our Chairman of the Board and Chief Executive
Officer since  February 1993.  Mr.  Westerman was a consultant to Riviera,  Inc.
(our predecessor) from July 1, 1991 until he was appointed Chairman of the Board
and Chief  Executive  Officer of Riviera,  Inc. on January 1, 1992. From 1973 to
June 30, 1991,  Mr.  Westerman  was  President  and Chief  Executive  Officer of
Cellu-Craft  Inc.,  a  manufacturer  of flexible  packaging  primarily  for food
products,  and then later had several positions with Alusuisse, a multi-national
aluminum and chemical company, following its acquisition of Cellu-Craft in 1989.
Mr.  Westerman was on the Board of Managers of Peninsula  Gaming  Partners,  LLC
from June 1999 to December 2000.

         Robert  R.  Barengo  has  been  one of our and  ROC's  Directors  since
February 1993.  Mr. Barengo was a consultant to Riviera,  Inc. from January 1993
until June 30,  1993.  Since 1972,  Mr.  Barengo has been engaged in the private
practice of law in Reno,  Nevada. Mr. Barengo was elected to the Nevada Assembly
in 1972 and served until 1982. In 1979 he was elected Speaker Pro Tempore and in
1981 he was elected  Speaker of the Assembly.  Since 1993,  Mr. Barengo has been
the President and sole  stockholder  of Silver State  Disseminators  Company,  a
company licensed by Nevada gaming  authorities to disseminate racing information
in the State of Nevada. In October 1992 the Governor  appointed Mr. Barengo as a
member of the State of Nevada  Dairy  Commission  and in July 1993 the  Governor
appointed him as Chairman of the State of Nevada Dairy Commission, a position he
still holds.  Mr. Barengo  currently is the Chairman of the Board and a Director
of Western  Thrift and Loan,  a thrift  company  licensed  and  regulated by the
Commissioner  of Financial  Institutions,  Department  of Business and Industry,
State of Nevada. Mr. Barengo accepted the position of Director of Government and
Public Affairs with ROC effective  January 1, 2001, in addition to his duties as
a Director of us and ROC.

         Jeffrey  A.  Silver  has  been  one of our and  ROC's  Directors  since
February 26, 2001.  Mr. Silver is currently a shareholder  with Gordon & Silver,
Ltd., a law firm in Las Vegas,  Nevada.  Mr.  Silver  served as the Chief Deputy
District Attorney, Clark County, Nevada from 1972 to 1975 and was a Board Member
with the Nevada Gaming  Control  Board from 1975 to 1978 before  engaging in the
private  practice of law from 1979 to 1981 and 1984 to the present.  Mr.  Silver
was the Chief  Operating  Officer and General  Counsel of the  Landmark  Hotel &
Casino  from 1981 to 1983,  Chief  Executive  Officer of the  Riviera  Hotel and
Casino from 1983 to 1984 and Senior Vice  President  at Caesars  Palace in 1984.
Mr.  Silver  served  on the  Board of the Las  Vegas  Convention  and  Visitor's
Authority  from  1989 to 1992 as  Secretary/Treasurer  where he also  served  as
trustee.  He was a member of the Board of  Directors  of the  Greater  Las Vegas
Chamber of Commerce from 1988 to 1995 and in 1988 was its  Chairman.  Mr. Silver
served  for four  years as a member of the  United  States  Travel  and  Tourism
Advisory  Board.  He was President of the  International  Association  of Gaming
Attorneys  form 1992 to 1994 and  Chairman of the ABA Section of Gaming Law from
1994 to 1996.

                                                73


         Major General Paul A. Harvey,  USAF (RET) has been one of our and ROC's
Directors  since May 18,  2001.  Mr.  Harvey is  currently a  consultant  to the
gaming,  hotel and resort  industry  and serves as  Chairman of the Board of the
National Center for Responsible Gaming. Mr. Harvey spent 32 years on active duty
in the  United  States  Air  Force  where  he held  numerous  command  positions
throughout  the United States,  Europe,  Africa and the Middle East. He flew 160
combat  missions in Vietnam and  Southeast  Asia before  retiring at the rank of
Major General in 1991. Mr. Harvey was the Executive  Director of the Mississippi
Gaming  Commission  from 1993 through 1998 before  becoming  President and Chief
Executive  Officer of Signature  Works,  Inc.,  which is the largest employer of
blind and visually  impaired  people in the world.  The company merged with LCI,
Inc. and he is currently on the Board of Directors of LC Industries.

     Vincent L. DiVito was appointed as one of our and ROC's directors effective
June 14, 2002. Mr. DiVito is currently Vice President,  Chief Financial  Officer
and  Treasurer  of  Lonza,   Inc.,  a  global   specialties   chemical  business
headquartered  in Fair Lawn,  New Jersey.  Lonza,  Inc. is part of Lonza  Group,
which is traded on the Swiss Stock Exchange. Prior to September 2000, Mr. DiVito
was the Vice President and Chief Financial  Officer of Algroup  Wheaton,a global
pharmaceutical  and  cosmetics  packaging  company  after  having  served as the
Director of Business Development. From 1984 to 1990 Mr.DiVito was Vice President
of Miracle  Adhesives  Corp.  (a division  of Pratt & Lambert an American  Stock
Exchange-listed  manufacturer of paints, coatings and adhesives). Prior to 1984,
Mr. DiVito spent two years on the audit team at Ernst & Whinney (Ernst & Young).
Mr. DiVito is a certified public accountant and certified management accountant.

         Duane R. Krohn, CPA, assumed the position of Treasurer of us and ROC on
June 30,  1993 and was  elected  Vice  President  of Finance of ROC on April 26,
1994,  and Executive Vice President of Finance of ROC on July 1, 1998 and served
as Secretary  from June 8, 1999 to February 17,  2000.  Mr. Krohn was  initially
employed by Riviera,  Inc. in April 1990,  as Director of Corporate  Finance and
served as Vice  President-Finance  from  March 1992 to June 30,  1993.  Prior to
1990, Mr. Krohn was Chief Financial Officer of the Imperial Palace, the Mint and
the Dunes in Las Vegas,  Nevada,  and Bally's Park Place in Atlantic  City,  New
Jersey.

         Tullio J.  Marchionne  assumed the  position  of our and ROC's  General
Counsel on January 10, 2000,  was appointed our and ROC's  Secretary on February
17, 2000 and elected Vice President of ROC on February 26, 2001. Mr.  Marchionne
was initially  employed by Riviera,  Inc., in June 1986 as a Casino Games Dealer
and served in various  capacities  including  Pit Manager,  General  Counsel and
Director  of  Gaming  Administration  until  September  1996,  when  we and  ROC
transferred  Mr.  Marchionne  to the Four Queens Hotel and Casino as Director of
Casino  Operations  pursuant to the  management  agreement  we had with the Four
Queens at that time  through  our  wholly-owned  subsidiary  and  served in that
position until May 1997.  Mr.  Marchionne  served as the General  Manager of the
Regency Casino  Thessaloniki,  located in Thessaloniki,  Greece,  from June 1997
until December 1997. Mr.  Marchionne served as a Casino Supervisor with Bally's,
Las Vegas, from February 1998 until June 1998,  Director of Casino Operations at
the Maxim Hotel and Casino in Las Vegas from June 1998 until  November  1998 and
Director of  Table  Games at the Resort At Summerlin (a  Las Vegas casino/hotel)
from November 1998 until December 1999.

                                                74


     Robert  A.   Vannucci   was  elected  Vice   President  of  Marketing   and
Entertainment  of ROC on April 26, 1994,  Executive  Vice President of Marketing
and  Entertainment  on July 1, 1998 and President of ROC on October 1, 2000. Mr.
Vannucci had been Director of Marketing of ROC since July 19, 1993. Mr. Vannucci
was Senior Vice  President of Marketing and Operations at the Sands Casino Hotel
in Las Vegas from April 1991 to February 1993.  Mr.  Vannucci was Vice President
and General Manager of Riviera Las Vegas from 1988 to January 1991.

     Ronald P.  Johnson  became Vice  President of Gaming  Operations  of ROC in
September 1994,  Executive Vice President of Gaming Operations of ROC on July 1,
1998,  and on February  10,  1999,  President  of Riviera  Black Hawk,  Inc.,  a
position  he  holds  concurrently  with  his  Executive  Vice  President  of ROC
position.  Mr. Johnson became Director of Slots on June 30, 1993 and was elected
Vice  President of Slot  Operations and Marketing on April 26, 1994. Mr. Johnson
was Vice  President-Slot  Operations  and Marketing of Riviera,  Inc. from April
1991 until June 30, 1993.  Mr.  Johnson was Vice  President-Slot  Operations for
Sands Hotel and Casino Inc. from September 1989 until he joined Riviera, Inc.

     Jerome P. Grippe was elected Vice  President of  Operations of ROC on April
26,  1994,  Senior  Vice  President  of  Operations  of ROC on July 1,  1998 and
Executive  Vice  President  of ROC on September 1, 2000.  Mr.  Grippe  served as
General  Manager  of the  Four  Queens  Hotel  and  Casino  from  June,  1998 to
September, 1999 pursuant to the management agreement we had with the Four Queens
through our  wholly-owned  subsidiary,  and as General Manager of the Diamond Jo
Riverboat Casino in Dubuque,  Iowa from September 1999 to July 2000, pursuant to
a management agreement we had with Peninsula Gaming Company, LLC, which owns and
operates the Diamond Jo Riverboat  Casino,  and Riviera Gaming  Management,  our
wholly-owned subsidiary. Mr. Grippe performed in the capacity as general manager
at these  properties  concurrently  with his duties for us.  Mr.  Grippe  became
Director of Operations of ROC on June 30, 1993.  Mr. Grippe was Assistant to the
Chairman of the Board of Riviera, Inc. from July 1990 until May 1993. Mr. Grippe
served in the United States Army from 1964 until his  retirement as a Colonel in
July 1990.

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

Summary Compensation Table

                  The following  table sets forth a summary of the  compensation
paid by us in the years ended December 31, 1999, 2000 and 2001, to our and ROC's
Chief Executive Officer, and to our four other most highly compensated executive
officers who received over $100,000 in compensation  during 2001  (collectively,
the "Named Executive Officers").

                                                75




                                                                                    Other Annual       All Other
Name and Principal Positions                 Year       Salary         Bonus       Compensation(1)  Compensation(2)
----------------------------                 ----       ------         -----       ---------------  ---------------

William L. Westerman....................
                                                                                         
   Chairman of the Board and               2001       $  600,000   $400,000(3)     $ 293,211(4)     $     2,566
   Chief Executive Officer of us           2000          600,000    900,000(3)       841,403(4)           2,566
   and ROC                                 1999          600,000    900,000          255,990(4)           2,566

Robert A. Vannucci......................   2001       $  300,000   $ 69,491(5)     $ 157,425(6)     $     2,566
   President and Chief Operating           2000          250,000     236,166             7,425            1,438
   Officer of ROC                          1999          209,336     158,333             7,300            1,156

Duane R. Krohn..........................
   Treasurer of us and Executive           2001       $  250,000   $  69,491(7)    $     7,425      $     1,438
   Vice President of Finance and           2000          237,500     236,166             7,425            1,438
   Treasurer of ROC                        1999          211,149     158,333             7,300            1,156

Ronald P. Johnson.......................   2001       $  250,000   $  69,491(8)    $     7,425      $     1,438
   Executive Vice President of             2000          237,500     236,166             7,425            1,438
   Gaming Operations of ROC                1999          209,759     158,333             7,300            1,156

Jerome P. Grippe........................   2001       $  250,000   $ 69,491(9)     $     7,425      $     1,438
   Executive Vice President of             2000          183,333     211,166             7,425            1,062
   Operations of ROC                       1999          159,576     133,333             7,300              730


         (1) Includes  amounts  contributed  by us under our Profit  Sharing and
401(k) Plans. We contributed  for the account of each executive  $7,425 in 2001,
$7,425 in 2000 and $7,300 in 1999.

         (2)      Includes premiums paid by us for excess life insurance.

         (3)      See "-Employment Agreements" for a summary of certain of the
provisions of Mr. Westerman's employment agreement.

         (4) Includes  contributions to Mr. Westerman's retirement account of $0
in 2001,  $600,000 in 2000 and $133,000 in 1999. Also includes interest computed
at our average  borrowing  rate less the rate pursuant to Internal  Revenue Code
1274D of $285,786  in 2001,  $233,978  in 2000 and  $115,690  in 1999.  Does not
include interest earned on retirement  account of $493,024 in 2001,  $413,440 in
2000 and $372,039 in 1999. (See "Employment Agreements.")

         (5)  Includes  $50,000  current  year  incentive  and  $19,491  special
incentive bonus, of which 20% and 100%, respectively,  were deferred pursuant to
our Deferred Compensation Plan.

         (6)  Includes $150,000 award of restricted stock pursuant to Mr.
Vannucci's employment agreement as follows: $25,000 per quarter and an award
equal to Mr. Vannucci's $50,000 incentive bonus. See "Restricted Stock Plan" for
a summary of our Restricted Stock Plan.

         (7)  Includes  $50,000  current  year  incentive  and  $19,491  special
incentive bonus, of which 50% was deferred pursuant to our Deferred Compensation
Plan.

                                                76


         (8)  Includes $50,000 current year incentive, of which 25% was deferred
pursuant to our Deferred Compensation Plan, and $19,491 special incentive bonus.

         (9)  Includes $50,000  current  year  incentive  and  $19,491  special
incentive bonus.  Mr. Grippe deferred 100% of the Special Bonus pursuant to our
Deferred Compensation Plan.

Option Surrenders

                  On November 26, 1996, 410,000 stock options were granted to 18
of our executives at an option price of $13.625 per share, 320,000 of which were
granted to Mr.  Westerman.  Two of these  executives'  options  totaling  11,000
shares were cancelled due to those executives leaving us, resulting in a balance
of  399,000  options  at $13.625  per share  held by 16 of our  executives.  The
options of these 16 executives were vested in their entirety.

                  On January 16, 2001, we approved a Stock Option Surrender Plan
where each  executive  could  surrender  all or any  portion of his/her  $13.625
options.  Further,  we could, but were not obligated to, grant new options in an
amount no less than the shares  surrendered.  The new options would be issued no
sooner than six months and a day after the surrender of the $13.625 options. Any
new  options  granted  would be at the price of our common  stock on the date of
grant and subject to the vesting requirements of our Employee Stock Option Plan.

                  All 16 of our  executives  surrendered  the entire  balance of
399,000 of the $13.625 options effective January 31,
2001.

                  In August 2001,  107,500  stock  options were granted to 15 of
our 16 executives who surrendered options on January 31, 2001. The August option
grant was not premised on the January 31 option  surrender  but made pursuant to
the Board's customary annual grant of stock options.

Option Grants

                  The number of shares of our stock available for purchase under
our 1993 Employee  Stock Option Plan, as amended (the "Stock Option  Plan"),  is
1,000,000.  Excluding  the  options  surrendered  pursuant  to the Stock  Option
Surrender Plan discussed above,  options for an aggregate of 771,500 shares have
been granted  under our Stock Option Plan as of December 31, 2001.  During 2001,
170,500 options were granted under our Stock Option Plan.

         The number of shares  available for purchase by non-employee  directors
under our 1996 Non-Qualified Stock Option Plan (the "Directors' Option Plan") is
50,000.  During 2001, we granted 8,000 options under the Directors'  Option Plan
and as of December 31, 2001,  options for an aggregate of 24,000  shares were
outstanding  under  this  plan.  See   "-Compensation  of  Directors"  for  more
information about our Directors' Option Plan.

         The number of options  available  under each of our stock option plans,
as specified above, is subject to antidilution adjustments.

Option Exercises, Year-End Options Values and Option Grants in 2001

                                                77


                  The following table presents at December 31, 2001 the value of
unexercised  in-the-money  options held by the Named Executive  Officers.  There
were no options exercised in 2001.


                                                        Number of                       Value of Unexercised
                                                   Unexercised Options                  In-The-Money Options
                                                ---------------------------     --------------------------------------
Name                                            Vested       Not Vested         Vested              Not Vested
----                                            ------       ----------         ------              ----------
                                                                                            
William L. Westerman......................      12,500       37,500             $  0                $    0
Robert A. Vannucci........................      27,500       22,500                0                     0
Duane R. Krohn............................      25,000       15,000                0                     0
Ronald P. Johnson.........................      25,000       15,000                0                     0
Jerome P. Grippe..........................      18,250       12,750                0                     0





                  The following table presents options granted during 2001.


                                                                                                  Potential Realizable
                                                                                                 Value at Assumed Annual
                                                                                                  Rates of Stock Price
                                                                                                    Appreciation for
                                                     Individual Grants                                 Option Term
                            --------------------------------------------------------------------       ------------
                                                  Percent of Total
                                Number of         Options Granted     Exercise or
                                Underlying        to Employees in     Base Price     Expiration
Name                          Options Granted          2001           per Share        Date          5%            10%
----                          ---------------          ----           ---------        ----          ---          ----

                                                                                                  
William L. Westerman.......      50,000                 29.3%         $6.00          8/7/11        $488,668      $778,123
Robert A. Vannucci.........      20,000                 11.7%          6.00          8/7/11         195,467       311,249
Duane R. Krohn.............      10,000                  5.9%          6.00          8/7/11          97,734       155,625
Ronald P. Johnson..........      10,000                  5.9%          6.00          8/7/11          97,734       155,625
Jerome P. Grippe...........      10,000                  5.9%          6.00          8/7/11          97,734       155,625



Compensation of Directors

                  Messrs.  Silver,  Harvey  and  DiVito  (effective  as  of  his
appointment  in June 2002) are each paid an annual fee of $50,000 for serving as
a Director of us and ROC. Each Director is also reimbursed for expenses incurred
in connection with attendance at meetings of the Board of Directors.

                  On March 5, 1996 we adopted the Directors'  Option Plan, which
was approved by our  stockholders on May 10, 1996.  Under the Directors'  Option
Plan,  each  individual  elected,  re-elected or  continuing  as a  non-employee
director will automatically receive a nonqualified stock option for 2,000 shares
of our Common  Stock,  with an exercise  price equal to the fair market value of
our Common  Stock on the date of grant.  50,000  shares have been  reserved  for
issuance under the Directors'  Option Plan.  Options to purchase 2,000 shares at
$13.50  per share  were  granted  to Mr.  Barengo  on May 12,  1997,  options to
purchase  2,000  shares at $9.00 per share were  granted to him on May 11, 1998,
options to purchase  2,000 shares at $4.88 per share were  granted to him on May
10, 1999 and options to purchase 2,000 shares at $7.75 per share were granted to
him on May 10, 2000. No options were granted to Mr. Barengo under the Directors'
Option Plan in 2001 due to his becoming an employee  effective  January 1, 2001.
Mr.  Barengo was granted  options to purchase 7,500 shares at $6.00 per share on
August 7, 2001 under our Stock Option Plan. Mr.  Barengo's  compensation in 2001
was $125,000.

                                                78


                  Upon  becoming one of our  Directors,  Mr.  Silver was granted
options under the  Directors'  Option Plan to purchase 2,000 shares at $7.05 per
share on February 26,  2001.  Mr.  Silver was  subsequently  granted  options to
purchase 2,000 shares at $6.55 per share on May 10, 2001.

                  Upon  becoming one of our  Directors,  Mr.  Harvey was granted
options under the  Directors'  Option Plan to purchase 2,000 shares at $6.60 per
share on May 18, 2001.

                  Directors who are also our or ROC's officers or employees do
not receive additional compensation for services as a Director.  Currently,
Messrs. Westerman and Barengo are such Directors.

                  Under  our  Stock   Compensation  Plan,  the  members  of  our
Compensation  Committee  have the right to receive  all or part of their  annual
fees in the form of our Common  Stock  having a fair  market  value equal to the
amount of their fees. Of the 50,000 shares  available under this plan, we issued
3,103 shares to Mr. Barengo for a portion of his director's fees in 1996 and 877
shares to him for a portion of his fees in 1997.

Employment Agreements

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

                  Mr. Westerman's existing employment agreement, which was last
amended on December 6, 2000, automatically renews each year on December 31st
subject to termination by us upon three months notice or by Mr. Westerman upon
six months notice. Mr. Westerman's base compensation is $600,000.

                  Under his employment  agreement,  Mr. Westerman is entitled to
participate in our Senior  Management  Compensation Plan or such other executive
bonus plan as shall be established by our Board of Directors  (collectively  the
"Plan").  If at least 80% of net targeted operating  results,  as defined by the
Plan,  is met,  Mr.  Westerman  is  entitled  to receive a bonus  under the Plan
expressed as a percentage of his $600,000  base salary.  Mr.  Westerman's  bonus
depends on the percentage of targeted results of operations  realized by us in a
particular  year,  with a maximum bonus of $900,000.  According to a December 6,
2000 amendment, to the extent Mr. Westerman's bonus exceeds $400,000 in 2001 and
each  succeeding  year,  the excess  amount will be deducted  from the principal
balance of his retirement  account at the time the bonus is paid. Mr.  Westerman
received an incentive bonus of $900,000 for 2001, $500,000 of which was deducted
from the principal balance of his retirement account resulting in a net bonus of
$400,000.

                                                79


                  The  employment  agreement  provides that we fund a retirement
account for Mr. Westerman.  Pursuant to the employment  agreement,  an aggregate
net amount of $6,812,123  had been credited to the  retirement  account from its
inception through December 31, 2001. Under the employment  agreement,  each year
that Mr. Westerman continues to be employed,  an amount equal to Mr. Westerman's
base salary for that year was credited to the account on January 1 of that year.
According  to a  December  6,  2000  amendment  to  Mr.  Westerman's  employment
agreement, the January 1, 2001 contribution was the final principal contribution
to the retirement account. As of December 31, 2001, no portion of this account
had been funded.

                  We retain  beneficial  ownership  of the  retirement  account,
which is earmarked to pay Mr. Westerman's retirement benefits. However, upon (1)
the vote of a majority of the  outstanding  shares of Common  Stock  approving a
"Change of Control" (as discussed in the next paragraph),  (2) the occurrence of
a Change of Control without Mr. Westerman's  consent,  (3) a breach  by  us of a
material  term of  the  employment  agreement or (4) the  expiration  or earlier
termination of the term of  the employment  agreement for any  reason other than
cause, Mr. Westerman has  the right to require us to  establish a "Rabbi  Trust"
for his  benefit.  He  also  has the right to require us to fund such trust with
an  amount of cash equal to the amount then credited to the retirement  account,
including  any amount  to be credited to the retirement account upon a Change of
Control.

                  On  February  5, 1998,  our  stockholders  by a majority  vote
approved  the  Agreement  and the Plan of Merger with R&E Gaming  Corp.  and its
wholly-owned  subsidiary Riviera Acquisition Sub, Inc. Such stockholder approval
constituted a Change of Control. On March 5, 1998,  subsequent to this Change of
Control, Mr. Westerman exercised his right to require us to establish and fund a
Rabbi Trust for his benefit.  On March 20, 1998, Mr.  Westerman  entered into an
agreement  with us whereby  Mr.  Westerman  waived his right to have us fund the
Rabbi  Trust in exchange  for us  agreeing to fund such Rabbi Trust  within five
business days after notice from Mr. Westerman.

                  In the event that Mr.  Westerman  is no longer  employed by us
(except for termination for cause, in which case Mr. Westerman would forfeit all
rights to monies in the retirement  account),  Mr. Westerman will be entitled to
receive the amount in the retirement account (principal and current interest) in
20 equal  quarterly  installments as of the date he ceases to be employed by us.
In the event  that Mr.  Westerman's  Rabbi  Trust has not yet been  funded,  the
balance of  principal  and  interest  of the  retirement  account  shall be paid
directly to Mr. Westerman upon his retirement, termination (except for cause) or
upon a change in control.

                  Pursuant to the employment  agreement,  the retirement account
was  credited  quarterly  with  interest  and will be credited  with  additional
amounts  on the  first  day of each  succeeding  calendar  quarter  equal to the
product of:

                                                80


                  o    our average borrowing cost for the immediately preceding
fiscal year, as determined by our chief financial officer and

                  o    the average outstanding balance in the retirement account
during the preceding calendar quarter.

     This  interest  continues  to  accrue  pursuant  to the  December  6,  2000
amendment.  Interest  computed  at our  average  borrowing  rate  less  the rate
pursuant to Internal  Revenue Code Section 1274D was $285,786 in 2001,  $233,978
in 2000 and $115,690 in 1999. Interest computed at the rate pursuant to Internal
Revenue Code Section  1274D was $493,024 in 2001,  $413,440 in 2000 and $372,039
in 1999.  In the event the Rabbi  Trust has been  funded,  upon Mr.  Westerman's
death,  an amount equal to the  applicable  federal estate tax on the retirement
account will be pre-paid prior to the date or dates such taxes are due.

                  Mr. Westerman's employment agreement provides (a) that the sum
of Mr. Westerman's base salary,  bonus, and credits to his Retirement Account in
any one year must not  exceed  that  which  would  have been  payable  under his
previous employment agreement with us, and (b) that Mr. Westerman shall instruct
us of any  reductions  in base  salary,  bonus,  and  credits to his  retirement
account  necessary to comply with this  limitation.  We determined  that for the
year 1999,  a  reduction  of  $467,000  would be  necessary  to comply with this
provision.  Prior to December 31, 1999,  and  December 31, 1998,  Mr.  Westerman
instructed  us that this be applied to reduce the amount to be  credited  to his
retirement account from $600,000 to $133,000.

                  In  addition to Mr.  Westerman,  one other  executive,  Robert
Vannucci, has an employment agreement with us.

     Mr. Vannucci was appointed  President of ROC effective October 1, 2000. Mr.
Vannucci's  employment  agreement  was  amended  at that  time to  reflect  this
appointment.  Mr.  Vannucci's  base  compensation  is $300,000.  Mr.  Vannucci's
employment  agreement  contains a  Termination  Fee  Agreement  and a Stay Bonus
Agreement.  See "-Termination  Fee Agreements" and "-Stay Bonus  Agreements." It
also  provides  for  a  "Normal  Incentive  Bonus"  entitling  Mr.  Vannucci  to
participate in our Incentive Compensation Plan whereby he may share a portion of
such  plan's  pool which  provides  for a target of $25  million  EBITDA  before
deductions of incentives,  as defined, for the years 2000 and 2001. Such amounts
will be credited to the  Incentive  Compensation  Plan's pool up to a maximum of
$1.2 million.  Mr. Vannucci's incentive bonus for the year 2001 was $50,000. Mr.
Vannucci's  employment  agreement also provides for a "Special  Incentive Bonus"
which amounted to $19,491 in 2001.

                  Mr.  Vannucci  also  receives  compensation  in  the  form  of
restricted stock pursuant to our Restricted Stock Plan. (See "-Restricted  Stock
Plan") Mr.  Vannucci's  agreement  provides that he is to receive $25,000 in our
restricted  common  stock at market from  treasury on the first  business day of
each quarter,  plus our restricted common stock at market value from treasury in
the same amount he receives  pursuant to our Incentive  Compensation  Plan.  Mr.
Vannucci received  restricted stock valued at $150,000 in 2001.  Pursuant to the
Restricted Stock Plan, Mr. Vannucci is presently entitled to all rights of stock
ownership with respect to the restricted shares, including the right to vote and
receive dividends.  Mr. Vannucci may not, however sell, assign, pledge, encumber
or otherwise  transfer any of the restricted shares so long as he is employed by
us, without our consent.  The restricted  shares fully vest to Mr. Vannucci upon
his separation of employment from us,  so  long  as  such  separation  is  not a
termination for cause. Mr. Vannucci's  agreement is effective until December 31,
2002, and automatically renews annually subject to 120 days prior written notice
by either party.

                                                81


Employee Stock Ownership Plan

     We have an Employee  Stock  Ownership Plan ("ESOP"), which became effective
as of January 1, 2000 and replaced the profit sharing contribution component of
our  Profit  Sharing  and  401(k) Plans. The other components of the 401(k) Plan
remain unchanged.  All employees of Riviera Las Vegas and Riviera Black Hawk who
completed  a  minimum  of  1000  hours  of service in a plan year, were employed
through December 31 of that year, were at least 21 years of  age  and  were  not
covered by a collective bargaining  agreement are eligible to participate in the
ESOP. The ESOP provides that we will make a contribution for the participants at
the Las Vegas and Black Hawk  properties  relative to the economic  performance
of each  property.  For Riviera  Las Vegas,  we will make a  contribution  equal
to 1% of each  eligible employee's  annual  compensation  if a prescribed annual
operating results target is attained  and  an  additional 1% thereof for each $2
million by which  operating results  are  exceeded,  up to a maximum of 5%.  For
Riviera  Black Hawk,  we will make a  contribution  equal to 1% of each eligible
employee's annual  compensation if a prescribed annual operating earnings target
is attained and an additional 1% thereof for each $1 million by which  operating
results are exceeded,  up to a maximum of 5%.  Under the ESOP,  our contribution
will be made in cash  which  will be used to buy primarily our common stock.

Incentive Compensation Programs

     Approximately 70 executives and other  significant employees at Riviera Las
Vegas  and 20 at  Riviera  Black  Hawk  participate  in  incentive  compensation
programs.  Participants in each of the two programs  receive an annual incentive
bonus based on  predetermined  financial  targets at each location being met. An
aggregate of $1,301,000 and $136,000,  respectively, was awarded to participants
at  Riviera  Las Vegas and Black  Hawk under  these  programs  in the year ended
December 31, 2001.

Deferred Compensation Plan

     On October 2, 2000, we adopted a Deferred Compensation Plan. The purpose of
this plan is to give eligible  employees an  opportunity to defer the receipt of
cash  compensation.  Participation in this plan is limited to highly compensated
employees who receive annual  compensation  of at least  $100,000.  The deferred
funds are  maintained  on our books as  liabilities.  All elections to defer the
receipt of compensation must be made not later than
December  1  preceding  each  plan year to which the  election  relates  and are
irrevocable  for the duration of such year.  Six of our executives are currently
participating in this plan.

                                                82


Restricted Stock Plan

                  On  October 2, 2000,  we  adopted a  Restricted  Stock Plan to
provide  incentives  which will attract and retain highly  competent  persons as
officers and key employees by providing them opportunities to receive restricted
shares of our Common Stock.  Participants  will consist of such officers and key
employees  as  our  Compensation   Committee   determines  to  be  significantly
responsible  for our  success  and future  growth and  profitability.  Awards of
restricted  stock are subject to such terms and conditions as we determine to be
appropriate  at the time of the  grant,  including  restrictions  on the sale or
other  disposition  of such shares and the provisions for the forfeiture of such
shares for partial or no  consideration  upon  termination of the  participant's
employment  within specified periods or under certain  conditions.  Mr. Vannucci
and Mr. Grippe,  President and Executive Vice  President,  respectively,  of our
wholly-owned  subsidiary,  ROC,  are  currently  the  only  participants  in the
Restricted Stock Plan.

Stay Bonus Agreements

                  Approximately 85 executive officers and significant  employees
(excluding Mr. Westerman) of ROC were party to stay bonus agreements pursuant to
which  each such  employee  was  entitled  to  receive a "stay  bonus"  (varying
amounts) if the employee was  discharged  without  cause (as defined in the stay
bonus agreements), or continued to be employed by us on each of January 1, 2000,
January 1, 2001 and June 30, 2001.  The total amount that was payable  under all
such agreements was approximately $2.2 million, of which approximately  $610,000
was paid in January, 2000, $1,068,000 was paid in January, 2001 and $462,500 was
paid in June 2001.

Termination Fee Agreements

     Approximately 85 executive  officers and significant  employees  (excluding
Mr. Westerman) of ROC have termination fee agreements effective through December
31,  2003,  pursuant  to which they will be  entitled  to receive (1) either six
months' or one year's base  salary if their  employment  with us is  terminated,
without  cause,  within 12 or 24 months of a change of control of us or ROC; and
(2) group health insurance for either one or two years. The base salary payments
are payable in bi-weekly installments subject to the employee's duty to mitigate
by using his or her best  efforts to find  employment.  As of December 31, 2001,
the total amount that would be payable under all such  agreements if all payment
obligations were to be triggered was approximately $5.5 million,  including $1.3
million in benefits.

Compensation Committee Report on Executive Compensation

         The  Compensation  Committee  endeavors to ensure that the compensation
program for  executive  officers of the Company is effective in  attracting  and
retaining  key  executives  responsible  for the  success of the  Company and is
tailored to promote the long-term interests of the Company and its stockholders.
The  Company's  executive  officer  compensation  program in its last  completed
fiscal year was  principally  comprised of base salary,  an executive  incentive
plan, a 401(k) plan, a profit-sharing plan (revised to provide  contributions to
ESOP)  and  long-term  incentive  compensation  in the form of  incentive  stock
options or  non-qualified  stock  options,  a Deferred  Compensation  Plan and a
Restricted Stock Plan.

                                                83


         The Compensation  Committee takes into account various  qualitative and
quantitative  indicators of corporate and individual  performance in determining
the level and  composition of  compensation  for the Company's  Chief  Executive
Officer and his  recommendations  regarding  the other  executive  officers.  In
particular,  the Compensation  Committee considers several financial performance
measures,  including  revenue growth and net income.  However,  the Compensation
Committee   does  not  apply  any  specific   quantitative   formula  in  making
compensation  decisions.  The Committee also considers  achievements that, while
difficult to quantify,  are important to the Company's  long-term  success.  The
Compensation  Committee  seeks to create a  mutuality  of  interest  between the
executive  officers and the Company's  stockholders  by increasing the executive
officers' ownership of the Company's Common Stock through the Stock Option Plan,
ESOP, Deferred Compensation Plan and Restricted Stock Plan.

         Salary levels for the Company's  executive  officers are  significantly
influenced  by the need to attract  and retain  management  employees  with high
levels of  expertise.  In each case,  consideration  is given  both to  personal
factors,  such  as  the  individual's  experience,   responsibilities  and  work
performance,  and to  external  factors,  such as  salaries  paid by  comparable
companies in the gaming industry.  With regard to the latter, it is important to
recognize  that because of the opening of new  properties on the Las Vegas Strip
in 1998, 1999 and 2000 and the growth of riverboat and dockside  gaming,  Native
American  gaming  operations and the  proliferation  of  jurisdictions  in which
gaming is permitted,  the Company  competes with numerous other  companies for a
limited pool of experienced  and skilled  personnel.  Therefore,  it is critical
that the  Company  provide  base  salaries  that are  competitive  in the casino
industry. With respect to the personal factors, the Compensation Committee makes
salary decisions in an annual review based on the  recommendations  of the Chief
Executive   Officer.   This  annual   review   considers   the   decision-making
responsibilities of each position as well as the experience and work performance
of each  executive.  The Chief Executive  Officer views work  performance as the
single  most  important   measurement   factor.  As  a  baseline  measure,   the
Compensation  Committee  engaged the services of an independent CPA firm,  other
than Deloitte & Touche, LLP, which conducted a compensation survey of comparable
Las  Vegas  resorts.  The  CPA  firm  concluded  that  compensation  of  Company
executives was consistent with other members of the industry.

         The  compensation  of Mr.  Westerman for the Company's  last  completed
fiscal  year was set  pursuant  to the  employment  agreement  described  in the
"Compensation of Executive Officers" section.



                                                               
         Date:   February 25, 2002        Jeffrey A. Silver           Chairman
                                          Robert R. Barengo           Member
                                          James N. Land, Jr. (1)      Member

         (1)  Mr. Land resigned as of May 31, 2002


                                                84


Compensation Committee Interlocks And Insider Participation

Mr. Silver is a shareholder in the law firm of Gordon & Silver, Ltd., which we
have engaged for various legal matters.  Mr. Barengo has been  an  employee of
Riviera Operating Corporation since January 1, 2001.

Performance Graph

         The following graph compares the annual change in the cumulative  total
return,  assuming reinvestment of dividends, on our Common Stock with the annual
change in the cumulative total returns of the NASDAQ Broad Market,  the American
Stock Exchange Index (the "AMEX  Index"),  the New York Stock Exchange  ("NYSE")
and the NASDAQ  Amusement and  Recreation  Services  Index (the "NASDAQ  79xx"),
which we consider to be our peer industry group. The graph assumes an investment
of $100 on December 31, 1996, in each of our Common Stock, the stocks comprising
the NASDAQ Broad  Market,  the stocks  comprising  the AMEX Index and the stocks
comprising the NASDAQ 79xx.

         The graph is a Comparison  of  Cumulative  Total Return Among us, NYSE/
AMEX/Nasdaq Stock Market (U.S.  Companies) and Nasdaq stocks (SIC 7900 - 7999 US
Companies amusement and recreation services) (1).


                                                85

             Comparison of Five-Year Cumulative Total Returns
                       Performance Graph for
                    Riviera Holdings Corporation

            Produced on 03/04/2002 including data to 12/31/2001




                                                12/1996  12/1997 12/1998 12/1999 12/2000 12/2001
                                                                        
Rivera Holdings Corporation                      100.0    90.4     30.7   44.7    50.0    29.8
NYSE/AMEX/Nasdaq Stock Market (US Companies)     100.0   130.9    161.5  202.4   179.4   160.3
NYSE/AMEX/Nasdaq Stocks(SIC 7900-7999 US Comp)   100.0   119.2    103.2  132.6   112.0   130.6
Amusement and recreation services



(1)    Comprised  of  companies  whose  stock is traded on the  Nasdaq  National
       Market and whose standard industrial  classification is within 7900-7999.
       We do not necessarily  believe that this is an indication of the value of
       our stock.




                                                86





                            OWNERSHIP OF THE COMPANY

Security Ownership of Certain Beneficial Owners and Management

     Our Common Stock is traded on the American  Stock  Exchange.  The following
table sets forth  certain  information  as of  September 3, 2002  regarding  the
beneficial  ownership  of our  Common  Stock,  by (1) each  person  who,  to our
knowledge, beneficially owns more than 5% of our outstanding Common Stock (based
on  reports  filed  with  the  Securities  and  Exchange  Commission  under  the
Securities  Exchange Act of 1934 or upon  information  furnished to us), (2) our
directors  and certain of our officers and (3) all of our directors and officers
as well as those of ROC as a group.  The  percentage  of shares of Common  Stock
held or beneficially  owned by any stockholder or group of stockholders is based
on the total  number of shares of Common  Stock  outstanding  as of September 3,
2002.  Except  as  indicated,  each  person  listed  below has sole  voting  and
investment  power with respect to the shares set forth  opposite  such  person's
name.



                                                                                      Shares Beneficially Owned
Name                                                                                        Number       Percentage

                                                                                                  
William L. Westerman(1)(2)........................................................         673,628         18.7%
Robert R. Barengo(1)(3)...........................................................         125,806          3.5
Jeffrey A. Silver(1)(4)...........................................................           5,800            *
Paul A. Harvey(1)(5)..............................................................             400            *
Vincent L. Divito.................................................................         -               -
Robert A. Vannucci(1)(6)..........................................................         128,128          3.5
Ronald P. Johnson(1)(7)...........................................................         130,366          3.6
Duane R. Krohn(1)(8)..............................................................         136,128          3.8
Jerome P. Grippe(1)(9)............................................................          71,274          2.0
Tullio J. Marchionne(1)(10).......................................................           6,600            *
Donald J. Trump(11)...............................................................         350,000          9.8
Sun America Life Insurance Company(12)............................................         500,000         14.0
Diversified Equity Ventures, LLC(13)..............................................         320,000          9.0
Employee Stock Ownership Plan (ESOP) other than officers and directors(14)........         336,260          9.4
All executive officers and directors as a group
   (10 persons)(2)(3)(4)(5)(6)(7)(8)(9)(10).......................................       1,278,130         34.0

-----------

* Less than 1%.


         (1) The address for each of our and ROC's directors and officers is c/o
Riviera Holdings Corporation,  2901 Las Vegas Boulevard South, Las Vegas, Nevada
89109.

         (2) Includes  25,000  shares  which  may  be acquired within 60 days of
September 3, 2002, upon the exercise of outstanding options.

                                                87


         (3) Includes 13,450 shares which may be acquired within 60 days of
September 3, 2002, upon the exercise of outstanding options.

         (4) Includes 800 shares which may be acquired within 60 days of
September 3, 2002, upon the exercise of outstanding options.

         (5) Consists of 400 shares which may be acquired within 60 days of
September 3, 2002, upon the exercise of outstanding options.

         (6) Includes 42,500 shares which may be acquired within 60 days of
September 3, 2002,  upon the exercise of  outstanding  options,  46,395  shares
under our Restricted Stock Plan and 19,404 shares under our Deferred
Compensation Plan.

         (7) Includes 35,000 shares which may be acquired within 60 days of
September 3, 2002,  upon the exercise of outstanding  options and 27,766 shares
under our Deferred Compensation Plan.

         (8) Includes 35,000 shares which may be acquired within 60 days of
September 3, 2002,  upon the exercise of outstanding  options and 48,029 shares
under our Deferred Compensation Plan.

         (9) Includes 26,750 shares which may be acquired within 60 days of
September 3,  2002,  upon the  exercise of  outstanding  options,  8,217 shares
under our Restricted Stock Plan and 20,048 shares under our Deferred
Compensation Plan.

         (10) Includes 6,000 shares which may be acquired within 60 days of
September 3, 2002, upon the exercise of outstanding options.

         (11) The address for Donald J. Trump is 725 Fifth Avenue, New York,
New York 10022.  Trump Hotels & Casino Resorts Holdings, L.P. ("THCR Holdings")
has an option to purchase the shares of our Common Stock held by Mr. Trump.
Trump Hotels and Casino Resorts, Inc. ("THCR") is the sole general partner of
THCR Holdings.  Both of THCR Holdings and THCR, therefore, may also be deemed
the beneficial owner of those shares.  The address for THCR Holdings and THCR is
1000 Boardwalk, Atlantic City, New Jersey 08401.

         (12) The address for SunAmerica Life Insurance Company is One
SunAmerica Center, Los Angeles, California 90067.

         (13) The address for Diversified Equity Ventures, LLC, and its manager,
Jeffrey P. Jacobs, is 1231 Main Avenue, Cleveland, OH 44113.

         (14) The Trustee of the ESOP and its address are U.S. Trust Company,
National Association, 515 South Flower Street, Suite 2800, Los Angeles,
California 90071.


                                                88



                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Jeffrey A. Silver is one of our directors and is a shareholder in the
law firm of Gordon & Silver, Ltd. ("Gordon & Silver"). Gordon & Silver has been
engaged by us for various legal matters.


         DESCRIPTION OF NEW CREDIT FACILITY AND INTERCREDITOR AGREEMENT

New Senior Credit Facility

         New Senior Credit Facility

         On July  26,  2002 we  entered  into a $30  million,  five-year  senior
secured credit  facility.  The credit facility is secured by  substantially  the
same  collateral that secures the existing  notes,  the new notes,  and the note
guarantees. The lien on the collateral securing the credit facility is senior to
the lien on the  collateral  securing  the  notes and the note  guarantees.  The
credit  facility  contains   customary   conditions  to  borrowing  and  certain
representations and warranties customary in gaming-related financing. The credit
facility also contains  financial  covenants and  restrictions  on us regarding,
among other  things,  indebtedness,  investments,  distributions  and changes in
control.  Under the credit facility,  we can obtain  extensions of credit in the
forms of cash advances and letters of credit. We are required to pay interest on
all outstanding  cash advances at the rate of interest  announced by Wells Fargo
at its principal  office in San Francisco as its prime rate plus 0.75% or at the
rate at which  major  international  banks  in  London  charge  each  other  for
borrowings in U.S.  dollars plus 3.00%.  However,  the minimum  interest rate we
will be charged on outstanding  cash advances is 4.50%. We are required to pay a
fee on all  outstanding  letters of credit  equal to their  face value  times an
annual percentage rate of 2.5%.  Additionally,  if we are in default, the credit
facility  lender may increase  the interest  rate and letter of credit fee by an
additional 2.00% per year during the period of the default.

         Affirmative Covenants

         Until all of our  obligations  under the credit facility have been paid
in full, we have agreed to do, among other things, the following:

         *        maintain our accounting and inventory reporting system in
                  accordance with generally accepted accounting practices;

         *        provide financial statements and operational reports to the
                  credit facility lender;

         *        maintain our properties in a condition necessary to conduct
                  our business;

         *        pay all taxes, assessments, rents, leases, brokerage
                  commissions and finders fees when due;

         *        maintain various forms of insurance;

         *        keep all inventory and equipment at the locations specified in
                  the credit facility;

                                                89


         *        comply with all applicable laws and governmental regulations;

         *        maintain our corporate charters in good standing;

         *        comply with environmental laws;

         *        update all disclosures and correct any errors or omissions
                  discovered in the credit facility within five days of their
                  discovery;

         *        inform the lender of any notice received from any governmental
                  authority having jurisdiction over our gaming activities;

         *        maintain our licenses and permits in full force and effect;
                  and

         *        cause any new restricted subsidiary to become a borrower or
                  guarantor under the credit facility.

         Negative Covenants

         Until all of our  obligations  under the credit facility have been paid
in full, we are prohibited from doing, among other things, any of the following:

         *        becoming   liable   for  any   indebtedness   other  than  (a)
                  indebtedness   outstanding  as  of  the  date  of  the  credit
                  facility,  (b)  indebtedness  incurred to acquire fixed assets
                  exceeding  $7.5  million  outstanding  at any  one  time,  (c)
                  indebtedness incurred to refinance or restructure indebtedness
                  otherwise   permitted   under   the   credit   facility,   (d)
                  indebtedness  under the existing notes,  the new notes and the
                  note guarantees,  (e) subordinated intercompany  indebtedness,
                  and (f) certain unsecured indebtedness arising in the ordinary
                  course of business or permitted under the indenture;

         *        permitting any lien on any of our assets, except liens
                  securing the notes, the credit facility and certain other
                  permitted liens;

         *        merging, consolidating, reorganizing, recapitalizing or
                  reclassifying our stock;

         *        liquidating, winding up, or dissolving any part of our
                  business;

         *        selling any substantial part of our assets;

         *        transferring or disposing of any of our assets except in the
                  ordinary course of business or in certain other circumstances
                  permitted under the credit facility;

         *        licensing our intellectual property rights except for
                  nonexclusive licenses given in the ordinary course of
                  business;

         *        selling tangible personal property in excess of $500,000 per
                  year;


                                                90


         *        entering  into any  material  lease  except  leases for retail
                  space, entertainment or other non-hotel,  non-gaming purposes,
                  or licenses to use hotel rooms,  including  licenses  given in
                  connection with a possible timeshare conversion;

         *        guaranteeing or otherwise becoming liable for obligations of
                  any third person except for the obligations created by the
                  credit facility;

         *        changing the nature of our business;

         *        prepaying,  redeeming,  defeasing,  purchasing,  or  otherwise
                  acquiring any of our indebtedness  other than (a) indebtedness
                  under the credit  facility,  (b) prepayment in connection with
                  certain refinancing, and (c) prepayment of indebtedness (other
                  than the notes) which does not exceed $10 million,  so long as
                  no event of default  has  occurred  or is  continuing  and the
                  prepayment  does not reduce the sum of our  unrestricted  cash
                  and availability under the credit facility below $20 million;

         *        prepaying,  redeeming,  defeasing,  purchasing,  or  otherwise
                  acquiring  any  indebtedness  under the existing  notes or new
                  notes, except for a redemption necessary to comply with gaming
                  laws or in connection with a modification of the notes;

         *        changing any terms or conditions of our obligations under the
                  notes or certain other agreements covering indebtedness;

         *        causing or permitting any person or group to become the
                  beneficial owner of 35% or more of our stock;

         *        causing or permitting a change in a majority of the members of
                  our board of directors;

         *        ceasing to directly own and control 100% of the outstanding
                  stock of our restricted  subsidiaries;

         *        making any  distribution,  declaring  or paying any  dividends
                  other than stock dividends, or acquiring our outstanding stock
                  unless certain financial tests are satisfied;

         *        changing our method of accounting except as may be required by
                  generally accepted accounting practices;

         *        making or acquiring any  investment or incurring any liability
                  in connection with a transaction  which would be considered an
                  investment  under generally  accepted  accounting  principles,
                  other than permitted investments not exceeding $15 million;

         *        entering into any transaction with a related party except for
                  arms-length transactions in the ordinary course of business;

                                                91


         *        suspending or discontinuing a substantial portion of our
                  business;

         *        using the proceeds from the credit facility for any purpose
                  other than what is contemplated by the credit facility;

         *        failing  to  maintain  earnings  before  interest,  taxes  and
                  depreciation  of  at least  $28.5  million  for  the  12-month
                  periods ending September 30, 2002 and December 31, 2002 and at
                  least  $30  million  for  each  12-month period ending at each
                  quarter-end thereafter until June 30, 2007; or

         *        making a  capital  expenditure  in excess  of $4  million  per
                  quarter or $8 million  annually through December 31, 2003, and
                  subject to limits to be established by good faith negotiations
                  thereafter,  except (a) expenditures  made for the acquisition
                  of gaming devices,  and (b) expenditures in calendar year 2005
                  in connection with a monorail project.

         Events of Default

         Each of the following,  among other things, will be an event of default
under the credit facility:

         *        failing to make any payment due under the credit facility;

         *        failing to pay taxes, rents, leases and brokerage commissions
                  if such failure continues for five business days;

         *        failing to maintain our inventory and equipment at the
                  locations specified in the credit facility;

         *        failing to maintain our accounting system or the condition of
                  our properties if such failure continues for 15 days;

         *        the attachment, seizure, subjection to a writ or distress
                  warrant or levy of a material portion of our assets;

         *        the subjection of our assets to the control of a third person;

         *        the commencement of a voluntary insolvency proceeding or of an
                  involuntary  insolvency  proceeding  if  we  consent  to  such
                  proceeding, if the petition is not timely controverted, if the
                  proceeding  is not  dismissed  within 60 days,  if an  interim
                  trustee is  appointed to take  possession  of our assets or to
                  operate our business or if an order for relief is entered;

         *        if a court order prohibiting the conduct of all or a material
                  portion of our business remains in effect in excess of five
                  business days;

         *        the filing of a notice of lien, levy or assessment against our
                  assets by the United States or any federal agency;

                                                92


         *        the filing of a notice of lien,  levy, or  assessment  against
                  our assets by any state,  municipality  or other  governmental
                  agency if it is not released or  discharged  within 30 days of
                  the date filed or within  five days of the date our assets are
                  subject to forfeiture;

         *        if  judgments  involving  an  aggregate  of $2 million or more
                  become a lien or encumbrance  upon any material portion of our
                  assets  and  such  lien  or   encumbrance   is  not  released,
                  discharged  or bonded  against  before the  earlier of 30 days
                  after  the date  filed  or  within  five  days of the date our
                  assets are subject to forfeiture;

         *        a default under the notes or the note guarantees;

         *        a default in any material agreements involving indebtedness in
                  an  aggregate  amount  exceeding  $5 million  which  occurs at
                  maturity or upon the occurrence of an event which entitles the
                  lender to accelerate the maturity of such indebtedness;

         *        making any payment on any indebtedness that is subordinated to
                  the credit facility, except as permitted by the subordination
                  agreement;

         *        any material misstatement or misrepresentation by us of any of
                  our warranties, representations or other statements made in
                  the credit facility;

         *        if any lien created by the credit facility ceases to be valid,
                  fails to be perfected against,  or fails to continue to create
                  a security  interest  in the  collateral  securing  the credit
                  facility;

         *        our contesting of the enforceability of any material provision
                  of the credit facility documents;

         *        the limitation or termination of our credit facility
                  obligations by operation of law; or

         *        our failure to keep our licenses and permits in full force and
                  effect.

Intercreditor Agreement

                  In connection with our new credit facility,  the trustee under
the indenture governing the notes entered into an intercreditor agreement, which
is  substantially  in the form of the  intercreditor  agreement  attached  as an
exhibit to the note  indenture,  with the lender under our new credit  facility.
The effects of that agreement  include,  among other things,  a subordination of
the liens  securing  the notes and note  guarantees  to the liens  securing  the
indebtedness and the guarantees under the new credit facility.  See "Description
of Notes--Intercreditor Agreement."

                  The intercreditor  agreement,  among other things,  will limit
the  trustee's  rights  in an  event of  default  under  the  notes.  Under  the
intercreditor agreement, if the notes become due and payable prior to the stated
maturity  or are  not  paid  in  full  at the  stated  maturity  at a time  when
indebtedness is outstanding under our new credit facility,  the trustee will not
have the right to foreclose on the collateral  unless and until the lender under


                                                93


the credit facility fails to take steps to exercise remedies with respect to, or
in connection  with,  the collateral  within 180 days  following  notice to that
lender of the default under the  indenture.  Also, the  intercreditor  agreement
will  prevent the trustee  and the holders of the notes from  pursuing  remedies
with respect to the collateral in an insolvency  proceeding.  The  intercreditor
agreement  provides that the net proceeds from the sale of collateral will first
be applied to repay  indebtedness  outstanding  under the  credit  facility  and
thereafter to the holders of the notes.

                              DESCRIPTION OF NOTES

                  You can find the  definitions  of  certain  terms used in this
description under the subheading "Certain Definitions." In this description, the
phrase "the Company" refers only to Riviera Holdings  Corporation and not to any
of its subsidiaries.

                  The Company  issued the existing  notes and will issue the new
notes under an indenture among itself,  the Guarantors and The Bank of New York,
as trustee.  The terms of the indenture  apply to the existing notes and the new
notes.  The terms of the notes  include  those stated in the indenture and those
made part of the  indenture by reference to the Trust  Indenture Act of 1939, as
amended.  The  Collateral  Documents  referred to under the  caption  "Security"
define the terms of the agreements and collateral that will secure the notes and
the guarantees.

                  The  following  description  is  a  summary  of  the  material
provisions  of  the  indenture,   the  registration  rights  agreement  and  the
Collateral Documents. It does not restate those agreements in their entirety. We
urge  you to read the  indenture,  the  registration  rights  agreement  and the
Collateral Documents because they, and not this description,  define your rights
as holders of the notes. Copies of the indenture,  registration rights agreement
and  Collateral  Documents  are  available  as set forth below under  "Available
Information."  Certain  defined terms used in this  description  but not defined
below under the caption  "--Certain  Definitions"  have the meanings assigned to
them in the indenture.

                  The  registered  Holder of a note will be treated as the owner
of it for all  purposes.  Only  registered  Holders  will have rights  under the
indenture.

Brief Description of the Notes and the Guarantees

The Notes

                  The existing notes and the new notes:

                  o        are general obligations of the Company;

                  o        are secured by substantially all of the assets of the
                           Company; however, the lien on the Collateral securing
                           the new senior secured credit facility will be senior
                           to the lien on the Collateral securing the notes;


                                                94


                  o        are pari passu in right of payment with all existing
                           and future senior Indebtedness of the Company;

                  o        are senior in right of payment to all existing and
                           any future subordinated Indebtedness of the Company;
                           and

                  o        are unconditionally guaranteed by the Guarantors.

                  All of our  Subsidiaries  except Riviera Gaming  Management of
New  Mexico,   Inc.,   Riviera   Gaming   Management   of  Missouri,   Inc.  and
Riviera-Reston-Newton,    LLC   are   "Restricted   Subsidiaries."   Under   the
circumstances     described     below    under    the     caption     "--Certain
Covenants--Designation  of Restricted  and  Unrestricted  Subsidiaries,"  we are
permitted   to  designate   certain  of  our   Subsidiaries   as   "Unrestricted
Subsidiaries." Our Unrestricted  Subsidiaries will not be subject to many of the
restrictive covenants in the indenture.  Our Unrestricted  Subsidiaries will not
guarantee the notes.

The Guarantees

                  The notes are  guaranteed by all of the Company's  current and
future Restricted Subsidiaries.

                  Each guarantee of the notes:

                  o        is a general obligation of the Guarantor;

                  o        is secured by substantially all of the assets of that
                           Guarantor;   however,  the  lien  on  the  Collateral
                           securing the  Guarantor's  obligations  under the new
                           senior secured credit  facility will be senior to the
                           lien  on  the  Collateral  securing  the  Guarantor's
                           guarantee of the notes;

                  o        is pari passu in right of payment with all existing
                           and future senior Indebtedness of that Guarantor; and

                  o        is senior in right of payment to all existing and
                           future subordinated indebtedness of that Guarantor.

                  The  operations  of the  Company  are  conducted  through  its
Subsidiaries  and,  therefore,  the  Company  depends  on the  cash  flow of its
Subsidiaries to meet its obligations, including its obligations under the notes.

Principal, Maturity and Interest

                  The Company issued notes in an aggregate  principal  amount of
$215  million  under  an  indenture  with  The Bank of New  York.  We may  issue
additional  notes from time to time after this exchange  offer.  Any offering of
additional  notes is subject to the covenant  described  below under the caption
"--Certain  Covenants--Incurrence  of  Indebtedness  and  Issuance of  Preferred


                                                95


Stock."  The  existing  notes and new notes that the  Company  issues  under the
indenture  in this  exchange  offer will be  treated  as a single  class for all
purposes  under  the  indenture,   including,   without   limitation,   waivers,
amendments,  redemptions  and offers to  purchase.  The  Company  will issue new
notes, in exchange for existing notes, in  denominations  of $1,000 and integral
multiples of $1,000. The notes will mature on June 15, 2010.

                  Interest on the notes accrues at the rate of 11% per annum and
will be payable  semi-annually in arrears on June 15 and December 15, commencing
on December 15, 2002. The Company will make each interest payment to the Holders
of record on the immediately preceding June 1 and December 1.

                  Interest  on the  notes  accrues  from  the  date of  original
issuance  or, if  interest  has  already  been  paid,  from the date it was most
recently  paid.  Interest  will be  computed  on the  basis  of a  360-day  year
comprised of twelve 30-day months.

Methods of Receiving Payments on the Notes

                  If a  Holder  has  given  wire  transfer  instructions  to the
Company, the Company will pay all principal, interest and premium and Liquidated
Damages,  if any, on that Holder's notes in accordance with those  instructions.
All other  payments  on notes will be made at the office or agency of the paying
agent and  registrar  within the City and State of New York  unless the  Company
elects to make interest payments by check mailed to the Holders at their address
set forth in the register of Holders.

Paying Agent and Registrar for the Notes

                  The trustee  acts as paying agent and  registrar.  The Company
may change the paying agent or registrar  without prior notice to the Holders of
the notes, and the Company or any of its Subsidiaries may act as paying agent or
registrar.

Transfer Taxes

                  The Company will pay any and all transfer taxes  applicable to
the  exchange of existing  notes for new notes in  connection  with the exchange
offer,  except in the case of Holders who  instruct us to register  new notes in
the name of, or request that existing  notes not tendered or not accepted in the
exchange  offer be returned  to, a person other than the  registered,  tendering
Holder.  In such case, the Holder will be responsible for the transfer taxes, if
any.

Subsidiary Guarantees

                  The notes will be guaranteed by each of the Company's  current
and future Restricted  Subsidiaries.  These Subsidiary  Guarantees are joint and
several  obligations of the Guarantors.  The obligations of each Guarantor under
its Subsidiary Guarantee will be limited as necessary to prevent that Subsidiary
Guarantee from  constituting a fraudulent  conveyance  under applicable law. See
"Risk  Factors--A  court could void our  subsidiaries'  guarantees  of the notes
under fraudulent transfer law."

                                                96


                  The Subsidiary Guarantee of a Guarantor will be released:

                  (1)      in connection  with any sale or other  disposition of
                           all  or  substantially  all  of the  assets  of  that
                           Guarantor    (including   by   way   of   merger   or
                           consolidation) to a Person that is not (either before
                           or  after  giving  effect  to  such   transaction)  a
                           Restricted  Subsidiary of the Company, if the sale or
                           other  disposition  complies  with the  "Asset  Sale"
                           provisions of the indenture;

                  (2)      in  connection  with any  sale of all of the  Capital
                           Stock of a Guarantor  to a Person that is not (either
                           before or after giving effect to such  transaction) a
                           Restricted  Subsidiary  of the  Company,  if the sale
                           complies  with the  "Asset  Sale"  provisions  of the
                           indenture; or

                  (3)      if the Company  designates any Restricted  Subsidiary
                           that is a Guarantor as an Unrestricted  Subsidiary in
                           accordance  with  the  applicable  provisions  of the
                           indenture.

         See "--Repurchase at the Option of Holders--Asset Sales."

Security

                  The  notes  and  the  Guarantees  are  secured  by a  security
interest in  substantially  all of the Company's and the Subsidiary  Guarantors'
assets, whether now owned or hereafter acquired,  including, without limitation,
and subject to the liens  permitted by the Collateral  Documents  other than any
Gaming License or other license that may not be assigned  pursuant to applicable
law,  certain  furniture,  fixtures and  equipment  and the assets of our future
unrestricted subsidiaries.

                  The  trustee  under the note  indenture  has  entered  into an
intercreditor  agreement,  pursuant to which the trustee's  security interest in
the  Collateral  is  subordinated  to a  lien  securing  up to  $30  million  of
Indebtedness under the new senior secured credit facility.  See "--Intercreditor
Agreement."

                  If an Event of Default occurs, the trustee may, in addition to
any rights and remedies  available to it under the indenture and the  Collateral
Documents and subject to the intercreditor agreement and applicable Gaming Laws,
take such action as it deems  advisable to protect and enforce its rights in the
Collateral, including the commencement of sale or foreclosure proceedings.

                  Under   certain   circumstances,   if  the   inclusion  of  an
Unrestricted  Subsidiary  that owns a Gaming Project would result in an increase
in the Fixed Charge Coverage Ratio of the Company,  the Unrestricted  Subsidiary
will:

                  (1)      automatically become and remain a Restricted
                           Subsidiary; and

                                                97


                  (2)      will   execute  a  Subsidiary   Guarantee   and  such
                           Collateral  Documents as are  necessary to create and
                           convey a perfected Lien on the Collateral (subject to
                           Permitted  Liens) held by such  Subsidiary;  provided
                           that no such  Subsidiary  Guarantee  will be executed
                           and no such Lien will be  created  or  conveyed  with
                           respect  to any real or  personal  property  owned or
                           leased by such Subsidiary if the execution,  creation
                           or conveyance  thereof would violate or conflict with
                           any law or the  provisions of any financing  incurred
                           to acquire,  develop or construct the Gaming  Project
                           outstanding at the time of such conversion;

provided  that no  Default  or Event  of  Default  shall  have  occurred  and be
continuing  and provided that a Default or Event of Default would not be created
thereby.

                  Notwithstanding the foregoing,  if the execution,  creation or
conveyance  thereof would satisfy the  conditions in the preceding  sentence but
for any filing  with or  approval of any Gaming  Authority  or other  regulatory
entity, the Company shall use, and shall cause the applicable Subsidiary to use,
its best efforts to make all such required  filings and obtain all such required
approvals  in order to permit  such  execution,  creation  and  conveyance.  See
"Certain Covenants--Additional Subsidiary Guarantees."

                  So long as no Event of Default has occurred and is continuing,
subject to certain terms and  conditions  in the  indenture  and the  Collateral
Documents and subject to applicable  Gaming Laws, the Company and its Restricted
Subsidiaries  will be entitled  to receive  the  benefit of all cash  dividends,
interest and other payments made upon or with respect to the Collateral  pledged
by them and to exercise any voting and other consensual rights pertaining to the
pledged Collateral.  Upon the occurrence and during the continuance of a Default
or Event of Default:

                  (1)      all  rights  of  the  Company   and  its   Restricted
                           Subsidiaries to receive all cash dividends,  interest
                           and other  payments  made upon or with respect to the
                           Collateral   will   cease   and,   subject   to   the
                           Intercreditor   Agreement,   such   cash   dividends,
                           interest  and  other  payments  will  be  paid to the
                           trustee;

                  (2)      all  rights  of  the  Company   and  its   Restricted
                           Subsidiaries   to  exercise   such  voting  or  other
                           consensual  rights shall cease,  and,  subject to the
                           Intercreditor Agreement, all such rights shall become
                           vested in the trustee which, to the extent  permitted
                           by law,  will have the sole  right to  exercise  such
                           rights; and

                  (3)      subject to the Intercreditor  Agreement,  the trustee
                           may  sell  the  Collateral  or any  part  thereof  in
                           accordance   with  the   terms   of  the   Collateral
                           Documents.

                  Under the terms of the indenture, the Collateral Documents and
the  Intercreditor  Agreement,  the trustee will determine the circumstances and
manner in which the Collateral shall be disposed of, including,  but not limited
to, the determination of whether to release all or any portion of the Collateral


                                                98


from the Liens created by the  Collateral  Documents and whether to foreclose on
the Collateral following a Default or Event of Default.  Moreover, upon the full
and final payment and  performance  of  all  Obligations  of the Company and the
Subsidiary  Guarantors  under  the  indenture  and  the  notes,  the  Collateral
Documents  will  terminate  and the  Collateral  will be released  from the lien
securing the notes and the Guarantees.

Certain Gaming Law Limitations

                  The trustee's  ability to foreclose on the Collateral  will be
limited by relevant gaming laws, which generally require that persons who own or
operate  a casino  or own  equity  securities  of a gaming  licensee  (including
capital stock) or purchase, possess or sell gaming equipment hold a valid gaming
license. No person can hold a license in Nevada or Colorado unless the person is
found qualified or suitable by the relevant Gaming Authorities. In order for the
trustee  or a  purchaser  at or  after  foreclosure  to be  found  qualified  or
suitable,  such Gaming Authorities would have discretionary authority to require
the  trustee,  any or all of the Holders of the notes or any such  purchaser  to
file  applications,  be  investigated  and be found  qualified or suitable as an
owner or operator of gaming establishments.  The applicant for qualification,  a
finding of  suitability  or licensing must pay a filing fee and all cost of such
investigation.  If the  trustee is unable or chooses  not to  qualify,  be found
suitable,  or licensed  to own,  operate or sell such  assets,  it would have to
retain  or sell to an  entity  licensed  to  operate  or sell  such  assets.  In
addition, in any foreclosure sale or subsequent resale by the trustee, licensing
requirements  under the  relevant  gaming laws may limit the number of potential
bidders  and may delay any sale,  either of which  events  would have an adverse
effect on the sale price of the Collateral.  Moreover, the gaming industry could
become  subject to different or additional  regulations  during the terms of the
notes, which could further adversely affect the practical rights and remedies of
the trustee.  Therefore, the practical value of realizing on the Collateral may,
without the appropriate approvals, be limited.

Certain Bankruptcy Limitations

                  The right of the  trustee  to  repossess  and  dispose  of the
Collateral  upon  the  occurrence  of  an  Event  of  Default  is  likely  to be
significantly  impaired by applicable  bankruptcy law if a bankruptcy proceeding
were to be commenced by or against the Company or a Restricted  Subsidiary prior
to  the  trustee  having  repossessed  and  disposed  of the  Collateral.  Under
bankruptcy  law,  a secured  creditor  such as the  trustee is  prohibited  from
repossessing  its security from a debtor in a bankruptcy case, or from disposing
of security  repossessed  from such debtor,  without  bankruptcy court approval.
Moreover,  bankruptcy  law  permits  the debtor to continue to retain and to use
collateral  (and the  proceeds,  products,  offspring,  rents or profits of such
collateral)  even  though  the debtor is in default  under the  applicable  debt
instruments,  provided that the secured creditor is given "adequate protection."
The  meaning  of  the  term   "adequate   protection"   may  vary  according  to
circumstances, but it is intended in general to protect the value of the secured
creditor's interest in the collateral and may include, if approved by the court,
cash payments or the granting of additional  security for any  diminution in the
value  of  the  collateral  as a  result  of the  stay  of  repossession  or the
disposition  or any use of the  collateral  by the debtor during the pendency of
the  bankruptcy  case.  The court has  broad  discretionary  powers in all these
matters,  including  the  valuation  of  collateral.  In  addition,  because the


                                                99


enforcement  of the Lien of the  trustee  in  cash,  deposit  accounts  and cash
equivalents may be limited in a bankruptcy proceeding,  the Holders of the notes
may not have any consent  rights  with  respect to the use of those funds by the
Company  or  any of its  Restricted  Subsidiaries  during  the  pendency  of the
proceeding.  In view of these  considerations,  it is  impossible to predict how
long  payments  under the notes  could be delayed  following  commencement  of a
bankruptcy  case,  whether or when the trustee could repossess or dispose of the
Collateral  or  whether  or to  what  extent  Holders  of  the  notes  would  be
compensated for any delay in payment or loss of value of the Collateral.

Intercreditor Agreement

                  The trustee and the lender under the new senior secured credit
facility  have  entered  into an  intercreditor  agreement  (the  "Intercreditor
Agreement").  The  Intercreditor  Agreement  provides  that  the  Liens  on  the
Collateral  securing the notes and the Guarantees are  subordinated to the Liens
securing  up to $30  million of  Indebtedness  outstanding  under the new credit
facility and related interest, fees, costs and expenses. Under the Intercreditor
Agreement,  if the notes become due and payable before their stated maturity for
any reason or are not paid in full at their  stated  maturity  at a time  during
which Indebtedness is outstanding under the new credit facility,  the Collateral
that  also  secures  the  obligations  under  the  credit  facility  can  not be
foreclosed  upon unless and until the lender under that  facility  fails to take
steps to exercise  remedies with respect to or in connection with the Collateral
within 180 days  following  notice to such lender of the Event of Default  under
the  Indenture;  provided  that the  Intercreditor  Agreement  will  prevent the
Collateral  Agent and the Holders  from  pursuing  remedies  with respect to the
Collateral in an insolvency  proceeding.  The Intercreditor  Agreement  provides
that the net proceeds from the sale of Collateral will first be applied to repay
Indebtedness  outstanding  under the new credit  facility and  thereafter to the
Holders of the notes.

Optional Redemption

                  At any time prior to June 15, 2005, the Company may on any one
or more occasions  redeem up to 35% of the aggregate  principal  amount of notes
issued  under  the  indenture  at a  redemption  price of 111% of the  principal
amount,  plus accrued and unpaid interest and Liquidated Damages, if any, to the
redemption  date,  with  the net  cash  proceeds  of one or more  Public  Equity
Offerings; provided that:

                  (1) at least 65% of the  aggregate  principal  amount of notes
issued under the indenture remains outstanding  immediately after the occurrence
of such redemption  (excluding notes held by the Company and its  Subsidiaries);
and

                  (2)      the redemption occurs within 45 days of the date of
the closing of such Public Equity Offering.

                  Except pursuant to the preceding paragraph, the notes will not
be redeemable at the Company's option prior to June 15, 2006.

                                                100


                  On or after June 15,  2006,  the  Company  may redeem all or a
part of the notes  upon not less than 30 nor more than 60 days'  notice,  at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid  interest and Liquidated  Damages,  if any, on the notes
redeemed, to the applicable redemption date, if redeemed during the twelve-month
period beginning on June 15 of the years indicated below:



                  Year                                       Percentage
                  ----                                     ------------
                                                       
                  2006...............................        105.500%
                  2007...............................        103.667%
                  2008...............................        101.833%
                  2009 and thereafter................        100.000%


Mandatory Redemption Pursuant to Gaming Laws

                  If any Gaming  Authority  requires that a Holder or Beneficial
Owner of notes be licensed,  qualified or found  suitable  under any  applicable
Gaming Law and such Holder or Beneficial Owner:

                  (1)      fails  to apply  for a  license,  qualification  or a
                           finding  of  suitability  within  30  days  (or  such
                           shorter  period as may be required by the  applicable
                           Gaming  Authority)  after being requested to do so by
                           the Gaming Authority; or

                  (2)      is denied such license or qualification or not found
                           suitable;

then the Company shall have the right:

                  (1)      to require  any such  Holder or  Beneficial  Owner to
                           dispose of its notes  within 30 days (or such earlier
                           date  as may be  required  by the  applicable  Gaming
                           Authority) of the  occurrence of the event  described
                           in clause (1) or (2) above, or

                  (2)      to redeem the notes of such Holder or Beneficial
                           Owner at a redemption price equal to the least of:

                           (a)      the principal amount thereof,  together with
                                    accrued and unpaid  interest and  Liquidated
                                    Damages,  if any, to the earlier of the date
                                    of  redemption  or the date of the denial of
                                    license or  qualification  or of the finding
                                    of unsuitability by such Gaming Authority;

                           (b)      the price at which such Holder or Beneficial
                                    Owner  acquired  the  notes,  together  with
                                    accrued and unpaid  interest and  Liquidated
                                    Damages,  if any, to the earlier of the date
                                    of  redemption  or the date of the denial of
                                    license or  qualification  or of the finding
                                    of unsuitability  by such Gaming  Authority;
                                    and


                                                101


                           (c)      such other lesser amount as may be required
                                    by any Gaming Authority.

                  Immediately  upon a determination by a Gaming Authority that a
Holder or Beneficial Owner of the notes will not be licensed, qualified or found
suitable,  the  Holder or  Beneficial  Owner  will,  to the extent  required  by
applicable law, have no further right:

                  (1)      to exercise, directly or indirectly, through any
                           trustee or nominee or any other person or entity, any
                           right conferred by the notes; or

                  (2)      to receive any interest, dividend, economic interests
                           or any other  distributions  or payments with respect
                           to the  notes or any  remuneration  in any form  with
                           respect to the notes from the Company, the Restricted
                           Subsidiaries or the trustee.

                  The  Company  will  notify the  trustee in writing of any such
redemption  as soon as  practicable.  The  Holder or  Beneficial  Owner  that is
required to apply for a license,  qualification or a finding of suitability must
pay all fees and costs of applying for and obtaining the license,  qualification
or finding of suitability  and of any  investigation  by the  applicable  Gaming
Authorities.

Mandatory Redemption

                  The Company is not required to make  mandatory  redemption  or
sinking fund payments with respect to the notes.

Repurchase at the Option of Holders

Change of Control

                  If a Change of Control occurs,  each Holder of notes will have
the right to require the Company to repurchase  all or any part (equal to $1,000
or an integral  multiple of $1,000) of that Holder's  notes pursuant to a Change
of  Control  Offer on the  terms set forth in the  indenture.  In the  Change of
Control Offer,  the Company will offer a Change of Control Payment in cash equal
to 101% of the aggregate  principal amount of notes repurchased plus accrued and
unpaid interest and Liquidated Damages, if any, on the notes repurchased, to the
date of purchase.  Within 30 days  following any Change of Control,  the Company
will mail a notice to each Holder  describing the  transaction  or  transactions
that  constitute  the Change of Control and offering to repurchase  notes on the
Change of Control  Payment Date  specified in the notice,  which date will be no
earlier  than 30 days and no later  than 60 days  from the date  such  notice is
mailed,  pursuant to the  procedures  required by the indenture and described in
such notice.  The Company will comply with the  requirements of Rule 14e-1 under
the Exchange Act and any other  securities  laws and  regulations  to the extent
they are  applicable in connection  with the repurchase of the notes as a result
of a Change of Control. To the extent that the provisions of any securities laws
or regulations  conflict with the Change of Control provisions of the indenture,
the Company will comply with the applicable  securities laws and regulations and
will not be deemed to have breached its obligations  under the Change of Control


                                                102


provisions of the indenture by virtue of such conflict.

                  On the Change of Control  Payment  Date,  the Company will, to
the extent lawful:

                  (1)      accept for payment all notes or portions of notes
                           properly tendered pursuant to the Change of Control
                           Offer;

                  (2)      deposit with the paying agent an amount equal to the
                           Change of Control Payment in respect of all notes or
                           portions of notes properly tendered; and

                  (3)      deliver or cause to be  delivered  to the trustee the
                           notes  properly  accepted  together with an officer's
                           certificate stating the aggregate principal amount of
                           notes being purchased by the Company.

                  The paying  agent will  promptly  mail to each Holder of notes
properly  tendered the Change of Control Payment for such notes, and the trustee
will promptly  authenticate  and mail (or cause to be transferred by book entry)
to each Holder a new note equal in principal  amount to any unpurchased  portion
of the  notes  surrendered,  if any;  provided  that  each new note will be in a
principal amount of $1,000 or an integral multiple of $1,000.

                  The Company will  publicly  announce the results of the Change
of  Control  Offer on or as soon as  practicable  after the  Change  of  Control
Payment Date.

                  The  provisions  described  above that  require the Company to
make a Change of Control Offer  following a Change of Control will be applicable
whether or not any other  provisions of the indenture are applicable.  Except as
described  above with  respect to a Change of Control,  the  indenture  does not
contain  provisions  that permit the Holders of the notes to require the Company
to repurchase  or redeem the notes in the event of a takeover,  recapitalization
or similar transaction.

                  The  Company  will not be required to make a Change of Control
Offer  upon a Change of  Control  if a third  party  makes the Change of Control
Offer  in the  manner,  at the  times  and  otherwise  in  compliance  with  the
requirements  in the  indenture  applicable to a Change of Control Offer made by
the Company and purchases all notes  properly  tendered and not withdrawn  under
the Change of Control Offer.

                  The definition of Change of Control includes a phrase relating
to the direct or indirect sale, lease, transfer, conveyance or other disposition
of "all or substantially all" of the properties or assets of the Company and its
Restricted  Subsidiaries  taken as a whole.  Although there is a limited body of
case law  interpreting  the phrase  "substantially  all,"  there is no  precise,
established  definition of the phrase under  applicable  law.  Accordingly,  the
ability of a Holder of notes to require the Company to repurchase the notes as a
result of a sale, lease, transfer,  conveyance or other disposition of less than
all of the assets of the  Company  and its  Restricted  Subsidiaries  taken as a
whole to another Person or group may be uncertain.


                                                103


Asset Sales

                  The  Company  will  not,  and  will  not  permit  any  of  its
Restricted Subsidiaries to, consummate an Asset Sale unless:

                  (1)      the Company  (or the  Restricted  Subsidiary,  as the
                           case may be)  receives  consideration  at the time of
                           the  Asset  Sale at least  equal  to the fair  market
                           value of the  assets  or Equity  Interests  issued or
                           sold or otherwise disposed of;

                  (2)      the fair market value is  determined by the Company's
                           Board of Directors  and  evidenced by a resolution of
                           the  Board of  Directors  set  forth in an  officer's
                           certificate delivered to the trustee; and

                  (3)      at least  80% of the  consideration  received  in the
                           Asset  Sale  by  the   Company  or  such   Restricted
                           Subsidiary  is in the form of cash.  For  purposes of
                           this provision,  each of the following will be deemed
                           cash:

                           (a)      any  liabilities,  as shown on the Company's
                                    most recent  consolidated  balance sheet, of
                                    the  Company  or any  Restricted  Subsidiary
                                    (other  than   contingent   liabilities  and
                                    liabilities   that   are  by   their   terms
                                    subordinated  to the notes or any Subsidiary
                                    Guarantee)   that   are   assumed   by   the
                                    transferee of any such assets  pursuant to a
                                    customary  novation  agreement that releases
                                    the  Company or such  Restricted  Subsidiary
                                    from further liability; and

                           (b)      any securities,  notes or other  obligations
                                    received   by  the   Company   or  any  such
                                    Restricted  Subsidiary  from such transferee
                                    that are,  within 30 days,  converted by the
                                    Company or such  Restricted  Subsidiary into
                                    cash,  to the extent of the cash received in
                                    that conversion.

         Within 360 days after the  receipt  of any Net  Proceeds  from an Asset
Sale,  the Company or the applicable  Restricted  Subsidiary may apply those Net
Proceeds:

                  (1)      to repay Indebtedness and other Obligations under a
                           Revolving Credit Facility and to correspondingly
                           reduce commitments with respect thereto;

                  (2)      to acquire all or substantially all of the assets of,
                           or a majority of the Voting Stock of, another
                           Permitted Business;

                  (3)      to make a capital expenditure; or

                  (4)      to acquire other long-term assets that are used or
                           useful in a Permitted Business;


                                                104


provided,  however,  that  with  respect  to any  assets  that are  acquired  or
constructed or Voting Stock that is acquired with such Net Proceeds, the Company
or the applicable Restricted Subsidiary,  as the case may be, promptly grants to
the  trustee,  on behalf of the  Holders of notes,  a first  priority  perfected
security  interest on any such assets or Voting  Stock on the terms set forth in
the indenture and the Collateral Documents.

         Pending the final  application of any Net Proceeds,  the Company or the
applicable  Restricted  Subsidiary may temporarily reduce Indebtedness under the
Revolving Credit Facility or invest such Net Proceeds in Cash Equivalents  which
will  be  held  in an  account  in  which  the  trustee  shall,  subject  to the
Intercreditor  Agreement,  have a first priority  perfected  security  interest,
subject to  Permitted  Liens,  for the  benefit  of the  Holders of the notes in
accordance with the indenture and the Collateral Documents.

         Any Net  Proceeds  from Asset Sales that are not applied or invested as
provided in the preceding  paragraph will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $5.0 million,  the Company will make
an  Asset  Sale  Offer  to all  Holders  of  notes  and  all  holders  of  other
Indebtedness that is pari passu with the notes containing  provisions similar to
those set forth in the  indenture  with  respect to offers to purchase or redeem
with the proceeds of sales of assets to purchase the maximum principal amount of
notes and such other pari passu  Indebtedness  that may be purchased  out of the
Excess  Proceeds.  The offer price in any Asset Sale Offer will be equal to 100%
of principal amount plus accrued and unpaid interest and Liquidated  Damages, if
any,  to the date of  purchase,  and will be  payable  in  cash.  If any  Excess
Proceeds remain after  consummation of an Asset Sale Offer,  the Company may use
those Excess Proceeds for any purpose not otherwise prohibited by the indenture.
If the  aggregate  principal  amount of notes and other pari passu  Indebtedness
tendered into such Asset Sale Offer exceeds the amount of Excess  Proceeds,  the
trustee  will  select the notes and such other  pari  passu  Indebtedness  to be
purchased on a pro rata basis.  Upon  completion  of each Asset Sale Offer,  the
amount of Excess Proceeds will be reset at zero.

         The Company will comply with the  requirements  of Rule 14e-1 under the
Exchange Act and any other  securities  laws and  regulations  thereunder to the
extent  those  laws and  regulations  are  applicable  in  connection  with each
repurchase  of notes  pursuant  to an Asset Sale  Offer.  To the extent that the
provisions of any securities  laws or  regulations  conflict with the Asset Sale
provisions  of the  indenture,  the  Company  will  comply  with the  applicable
securities  laws and  regulations  and will not be deemed to have  breached  its
obligations  under the Asset Sale  provisions of the indenture by virtue of such
conflict.

         The Company's new senior secured credit facility contains  prohibitions
of certain  events that would  constitute a Change of Control or Asset Sale.  In
addition,  the  exercise  by the  Holders of notes of their right to require the
Company to  repurchase  the notes could cause a default  under such other senior
indebtedness,  even if the Change of Control or Asset Sale itself does not,  due
to the  financial  effect  of such  repurchases  on the  Company.  Finally,  the
Company's  ability to pay cash to the Holders of notes upon a repurchase  may be
limited by the Company's then existing financial resources.


                                                105


Selection and Notice

         If less  than all of the  notes are to be  redeemed  at any  time,  the
trustee will select notes for redemption as follows:

                  (1)      if the notes are listed on any national securities
                           exchange, in compliance with the requirements of the
                           principal national securities exchange on which the
                           notes are listed; or

                  (2)      if  the  notes  are  not   listed  on  any   national
                           securities  exchange,  on a pro rata basis, by lot or
                           by  such  method  as  the  trustee   deems  fair  and
                           appropriate.

         No notes  of  $1,000  or less  can be  redeemed  in  part.  Notices  of
redemption  will be mailed by first  class mail at least 30 but not more than 60
days  before the  redemption  date to each Holder of notes to be redeemed at its
registered  address,  except that redemption  notices may be mailed more than 60
days prior to a  redemption  date if the notice is issued in  connection  with a
defeasance  of the  notes or a  satisfaction  and  discharge  of the  indenture.
Notices of redemption may not be conditional.

         If any note is to be  redeemed in part only,  the notice of  redemption
that relates to that note will state the portion of the principal amount of that
note  that is to be  redeemed.  A new  note in  principal  amount  equal  to the
unredeemed portion of the original note will be issued in the name of the Holder
of notes upon  cancellation  of the original  note.  Notes called for redemption
become due on the date fixed for redemption.  On and after the redemption  date,
interest ceases to accrue on notes or portions of them called for redemption.

Certain Covenants

         Restricted Payments

         The  Company  will  not,  and will  not  permit  any of its  Restricted
Subsidiaries to, directly or indirectly:

                  (1)      declare or pay any dividend or make any other payment
                           or distribution on account of the Company's or any of
                           its   Restricted   Subsidiaries'   Equity   Interests
                           (including,   without  limitation,   any  payment  in
                           connection with any merger or consolidation involving
                           the Company or any of its Restricted Subsidiaries) or
                           to the direct or indirect holders of the Company's or
                           any of its Restricted  Subsidiaries' Equity Interests
                           in their  capacity as such (other than  dividends  or
                           distributions payable in Equity Interests (other than
                           Disqualified  Stock) of the Company or to the Company
                           or a Restricted Subsidiary of the Company);

                  (2)      purchase,  redeem or otherwise  acquire or retire for
                           value (including,  without limitation,  in connection
                           with  any  merger  or  consolidation   involving  the
                           Company)  any Equity  Interests of the Company or any
                           Restricted  Subsidiary  or  any  direct  or  indirect



                                                106


                           parent of the Company or any Restricted Subsidiary;

                  (3)      make any payment on or with  respect to, or purchase,
                           redeem,  defease or  otherwise  acquire or retire for
                           value any  Indebtedness  that is  subordinated to the
                           notes or the Subsidiary Guarantees,  except a payment
                           of  interest  or  principal  at the  Stated  Maturity
                           thereof;

                  (4)      make any Restricted Investment (all such payments and
                           other actions set forth in these clauses (1) through
                           (4) above being collectively referred to as
                           "Restricted Payments"),

unless, at the time of and after giving effect to such Restricted Payment:

                  (1)      no Default or Event of Default has occurred and is
                           continuing or would occur as a consequence of such
                           Restricted Payment; and

                  (2)      the  Company  would,  at the time of such  Restricted
                           Payment and after giving pro forma effect  thereto as
                           if  such  Restricted  Payment  had  been  made at the
                           beginning of the applicable four-quarter period, have
                           been  permitted to incur at least $1.00 of additional
                           Indebtedness  pursuant to the Fixed  Charge  Coverage
                           Ratio  test set forth in the first  paragraph  of the
                           covenant    described   below   under   the   caption
                           "--Incurrence   of   Indebtedness   and  Issuance  of
                           Preferred Stock;" and

                  (3)      such Restricted Payment,  together with the aggregate
                           amount of all other  Restricted  Payments made by the
                           Company  and its  Restricted  Subsidiaries  after the
                           date of the indenture (excluding  Restricted Payments
                           permitted   by  clauses  (2)  and  (3)  of  the  next
                           succeeding paragraph),  is less than the sum, without
                           duplication, of:

                           (a)      50% of the  Consolidated  Net  Income of the
                                    Company   for  the  period   (taken  as  one
                                    accounting period) from the beginning of the
                                    first fiscal  quarter  commencing  after the
                                    date  of the  indenture  to  the  end of the
                                    Company's most recently ended fiscal quarter
                                    for which internal financial  statements are
                                    available  at the  time of  such  Restricted
                                    Payment (or, if such Consolidated Net Income
                                    for such  period is a deficit,  less 100% of
                                    such deficit), plus

                           (b)      100%  of the  aggregate  net  cash  proceeds
                                    received  by the  Company  since the date of
                                    the  indenture  as  a  contribution  to  its
                                    common  equity  capital or from the issue or
                                    sale  of  Equity  Interests  of the  Company
                                    (other than Disqualified  Stock) or from the
                                    issue or sale of convertible or exchangeable
                                    Disqualified   Stock   or   convertible   or
                                    exchangeable  debt securities of the Company
                                    that have been  converted  into or exchanged
                                    for such Equity Interests (other than Equity


                                                107


                                    Interests  (or  Disqualified  Stock  or debt
                                    securities)  sold  to a  Subsidiary  of  the
                                    Company), plus

                           (c)      to the extent that any Restricted Investment
                                    that  was  made   after   the  date  of  the
                                    indenture  is sold  for  cash  or  otherwise
                                    liquidated or repaid for cash, the lesser of
                                    (i) the cash return of capital  with respect
                                    to such Restricted Investment (less the cost
                                    of disposition, if any) and (ii) the initial
                                    amount of such Restricted Investment, plus

                           (d)      50% of any dividends received by the Company
                                    or a Wholly Owned Restricted Subsidiary that
                                    is  a  Guarantor   after  the  date  of  the
                                    indenture from an Unrestricted Subsidiary of
                                    the   Company,   to  the  extent  that  such
                                    dividends  were not  otherwise  included  in
                                    Consolidated  Net Income of the  Company for
                                    such period.

         So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions will not prohibit:

                  (1)      the payment of any dividend  within 60 days after the
                           date of declaration  of the dividend,  if at the date
                           of  declaration  the  dividend   payment  would  have
                           complied with the provisions of the indenture;

                  (2)      the redemption, repurchase, retirement, defeasance or
                           other acquisition of any subordinated Indebtedness of
                           the  Company  or  any  Guarantor  or  of  any  Equity
                           Interests  of the Company in exchange  for, or out of
                           the net cash proceeds of the substantially concurrent
                           sale (other than to a Subsidiary  of the Company) of,
                           Equity   Interests   of  the   Company   (other  than
                           Disqualified Stock);  provided that the amount of any
                           such net cash proceeds that are utilized for any such
                           redemption,  repurchase,  retirement,  defeasance  or
                           other  acquisition  will be excluded  from clause (3)
                           (b) of the preceding paragraph;

                  (3)      the  defeasance,   redemption,  repurchase  or  other
                           acquisition  of  subordinated   Indebtedness  of  the
                           Company or any  Guarantor  with the net cash proceeds
                           from   an   incurrence   of   Permitted   Refinancing
                           Indebtedness;

                  (4)      any  redemption  or  purchase  by the  Company or any
                           Restricted   Subsidiary   of  Equity   Interests   or
                           subordinated Indebtedness of either of the Company or
                           a   Restricted   Subsidiary   required  by  a  Gaming
                           Authority  in order to  preserve  a  material  Gaming
                           License;  provided,  that so long as such  efforts do
                           not  jeopardize  any  material  Gaming  License,  the
                           Company  or such  Restricted  Subsidiary  shall  have
                           diligently tried to find a third-party  purchaser for
                           such Equity  Interests or  subordinated  Indebtedness
                           and  no  third-party   purchaser  acceptable  to  the
                           applicable  Gaming  Authority was willing to purchase
                           such Equity  Interests or  subordinated  Indebtedness
                           within  a  time  period  acceptable  to  such  Gaming
                           Authority;


                                                108


                  (5)      the  repurchase,  redemption or other  acquisition or
                           retirement  for value of any Equity  Interests of the
                           Company or any  Restricted  Subsidiary of the Company
                           held by any  member of the  Company's  (or any of its
                           Restricted  Subsidiaries') management pursuant to any
                           management  equity  subscription   agreement,   stock
                           option agreement or similar agreement;  provided that
                           the  aggregate  price paid for all such  repurchased,
                           redeemed,  acquired or retired  Equity  Interests may
                           not  exceed  $1.0  million  in  any  calendar   year;
                           provided  that any portion of such $1.0 million limit
                           not used in any year may be carried  forward  for use
                           in subsequent years; and

                  (6)      Restricted Payments in an aggregate amount, taken
                           together since the date of the indenture, of not more
                           than $10.0 million.

         The amount of all  Restricted  Payments  (other  than cash) will be the
fair  market  value on the date of the  Restricted  Payment of the  asset(s)  or
securities  proposed  to be  transferred  or  issued  by  the  Company  or  such
Restricted  Subsidiary,  as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be valued
by this covenant will be determined by the Board of Directors  whose  resolution
with respect  thereto will be delivered to the trustee.  The Board of Directors'
determination  must  be  based  upon  an  opinion  or  appraisal  issued  by  an
accounting,  appraisal or  investment  banking firm of national  standing if the
fair market value  exceeds $5.0  million.  Not later than the date of making any
Restricted  Payment,  the  Company  will  deliver to the  trustee  an  officer's
certificate  stating that such Restricted Payment is permitted and setting forth
the basis upon which the  calculations  required by this  "Restricted  Payments"
covenant  were  computed,  together  with a  copy  of any  fairness  opinion  or
appraisal required by the indenture.

         Incurrence of Indebtedness and Issuance of Preferred Stock

         The  Company  will  not,  and will  not  permit  any of its  Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise  become directly or indirectly  liable,  contingently or otherwise,
with respect to  (collectively,  "incur") any Indebtedness  (including  Acquired
Debt), and the Company will not issue any Disqualified Stock and will not permit
any of its  Restricted  Subsidiaries  to issue any  shares of  preferred  stock;
provided,  however, that the Company may incur Indebtedness  (including Acquired
Debt) or issue Disqualified Stock, and the Company's Restricted Subsidiaries may
incur Indebtedness or issue preferred stock, if:

         (1)      the  Fixed  Charge  Coverage  Ratio  for  the  Company's  most
                  recently  ended four full fiscal  quarters for which  internal
                  financial statements are available  immediately  preceding the
                  date on which such additional Indebtedness is incurred or such
                  Disqualified  Stock or  preferred  stock is issued  would have
                  been  at  least  2.0 to 1,  determined  on a pro  forma  basis
                  (including  a  pro  forma  application  of  the  net  proceeds
                  therefrom),   as  if  the  additional  Indebtedness  had  been
                  incurred or the preferred stock or Disqualified Stock had been
                  issued,  as  the  case  may  be,  at  the  beginning  of  such
                  four-quarter period; and


                                                109


         (2)      the Weighted Average Life to Maturity of the Indebtedness is
                  greater than the remaining Weighted Average Life to Maturity
                  of the notes.

         The first  paragraph of this covenant does not prohibit the  incurrence
of any of the following items of Indebtedness (collectively, "Permitted Debt"):

         (1)      the incurrence by the Company and any Restricted  Subsidiaries
                  of additional  revolving  credit  Indebtedness  and letters of
                  credit  under a  Revolving  Credit  Facility  in an  aggregate
                  principal amount at any one time outstanding under this clause
                  (1)(with  letters of credit  being  deemed to have a principal
                  amount equal to the maximum potential liability of the Company
                  and its  Subsidiaries  thereunder) not to exceed $30.0 million
                  less the  aggregate  amount of all Net Proceeds of Asset Sales
                  applied by the Company or any of its  Restricted  Subsidiaries
                  to repay  Indebtedness under the Revolving Credit Facility and
                  effect  a  corresponding   commitment   reduction   thereunder
                  pursuant  to the  covenant  described  above under the caption
                  "--Repurchase at the Option of Holders--Asset Sales;" provided
                  that with respect to any Revolving  Credit Facility secured by
                  a Lien or the  Collateral,  the lenders  under such  Revolving
                  Credit Facility have entered into an Intercreditor Agreement;

         (2)      the  incurrence  by the  Company  and  the  Guarantors  of (a)
                  Indebtedness   represented   by  the  notes  and  the  related
                  Subsidiary  Guarantees issued on the date of the indenture and
                  the Exchange Notes and the related Subsidiary Guarantees to be
                  issued pursuant to the  registration  rights agreement and (b)
                  their  respective  obligations  arising  under the  Collateral
                  Documents  to the  extent  such  obligations  would  represent
                  Indebtedness;

         (3)      the  incurrence  by the  Company  or  any  of  its  Restricted
                  Subsidiaries  of  Indebtedness  represented  by Capital  Lease
                  Obligations,    mortgage    financings   or   purchase   money
                  obligations,  in  each  case,  incurred  for  the  purpose  of
                  financing  all or any  part of the  purchase  price or cost of
                  construction  or improvement  of property,  plant or equipment
                  used  in  the  business  of the  Company  or  such  Restricted
                  Subsidiary,  in an aggregate  principal amount,  including all
                  Permitted   Refinancing   Indebtedness   incurred  to  refund,
                  refinance  or replace any  Indebtedness  incurred  pursuant to
                  this  clause  (3),  not to  exceed  $7.5  million  at any time
                  outstanding;

         (4)      the incurrence by the Company and its Restricted Subsidiaries
                  of Indebtedness outstanding under the FF&E Agreements on the
                  date of the indenture, until such amounts are repaid;

         (5)      the  incurrence  by the  Company  or  any  of  its  Restricted
                  Subsidiaries of Permitted Refinancing Indebtedness in exchange
                  for,  or the  net  proceeds  of  which  are  used  to  refund,
                  refinance  or replace  Indebtedness  (other than  intercompany
                  Indebtedness)  that  was  permitted  by  the  indenture  to be
                  incurred under the first paragraph of this covenant or clauses
                  (2), (3), (5), or (13) of this paragraph;


                                                110


         (6)      the  incurrence  by the  Company  or  any  of  its  Restricted
                  Subsidiaries of intercompany Indebtedness between or among the
                  Company and any of its Wholly Owned  Restricted  Subsidiaries;
                  provided, however, that:

                  (a)      if the  Company or any  Guarantor  is the  obligor on
                           such   Indebtedness,   such   Indebtedness   must  be
                           expressly  subordinated  to the prior payment in full
                           in cash of all Obligations with respect to the notes,
                           in  the  case  of  the  Company,  or  the  Subsidiary
                           Guarantee, in the case of a Guarantor; and

                  (b)      (i) any  subsequent  issuance  or  transfer of Equity
                           Interests that results in any such Indebtedness being
                           held by a Person  other than the  Company or a Wholly
                           Owned  Restricted  Subsidiary of the Company and (ii)
                           any sale or other  transfer of any such  Indebtedness
                           to a  Person  that is not  either  the  Company  or a
                           Wholly Owned  Restricted  Subsidiary  of the Company;
                           will  be  deemed,  in each  case,  to  constitute  an
                           incurrence  of such  Indebtedness  by the  Company or
                           such Restricted Subsidiary,  as the case may be, that
                           was not permitted by this clause (6);

         (7)      the  incurrence  by the  Company  or  any  of  its  Restricted
                  Subsidiaries of Hedging  Obligations that are incurred for the
                  purpose of fixing or hedging  interest  rate risk with respect
                  to any  floating  rate  Indebtedness  that is permitted by the
                  terms of the indenture to be outstanding;

         (8)      the guarantee by the Company or any of the Guarantors of
                  Indebtedness of the Company or a Restricted Subsidiary of the
                  Company that was permitted to be incurred by another provision
                  of this covenant;

         (9)      the accrual of  interest,  the  accretion or  amortization  of
                  original  issue  discount,  the  payment  of  interest  on any
                  Indebtedness in the form of additional  Indebtedness  with the
                  same terms, and the payment of dividends on Disqualified Stock
                  in the  form  of  additional  shares  of  the  same  class  of
                  Disqualified  Stock will not be deemed to be an  incurrence of
                  Indebtedness or an issuance of Disqualified Stock for purposes
                  of this covenant; provided, in each such case, that the amount
                  thereof  is  included  in  Fixed  Charges  of the  Company  as
                  accrued;

         (10)     reimbursement  obligations  with  respect to letters of credit
                  issued in the ordinary  course of business,  indemnifications,
                  adjustments  of purchase  prices,  performance  bonds,  appeal
                  bonds,  surety bonds,  workers'  compensation  obligations  or
                  insurance  obligations  incurred  in the  ordinary  course  of
                  business;

         (11)     indebtedness  arising  from  the  honoring  by a bank or other
                  financial  institution of a check, draft or similar instrument
                  inadvertently drawn against insufficient funds in the ordinary
                  course of business;

         (12)     a bond or surety  obligation  posted in order to  prevent  the
                  loss  or  material  impairment  of  a  Gaming  License  or  as


                                                111


                  otherwise  required  by an order of any Gaming  Authority,  in
                  each  case  to the  extent  required  by  applicable  law  and
                  consistent  in character  and amount with  customary  industry
                  practice; and

         (13)     the  incurrence  by the  Company or any of the  Guarantors  of
                  additional  Indebtedness in an aggregate  principal amount (or
                  accreted  value,  as  applicable)  at  any  time  outstanding,
                  including all Permitted  Refinancing  Indebtedness incurred to
                  refund,   refinance  or  replace  any  Indebtedness   incurred
                  pursuant to this clause (13), not to exceed $10.0 million.

         The Company will not incur any Indebtedness  (including Permitted Debt)
that is contractually subordinated in right of payment to any other Indebtedness
of the Company unless such  Indebtedness is also  contractually  subordinated in
right of  payment  to the  notes on  substantially  identical  terms;  provided,
however,  that no  Indebtedness  of the  Company  will be  deemed  contractually
subordinated in right of payment to any other Indebtedness of the Company solely
by virtue of being unsecured.

         For  purposes  of  determining  compliance  with  this  "Incurrence  of
Indebtedness and Issuance of Preferred  Stock" covenant,  if an item of proposed
Indebtedness  meets the criteria of more than one of the categories of Permitted
Debt described in clauses (1) through (13) above,  or is entitled to be incurred
pursuant to the first paragraph of this covenant,  the Company will be permitted
to classify such item of Indebtedness  on the date of its  incurrence,  or later
reclassify  all or a portion of such item of  Indebtedness,  in any manner  that
complies with this covenant.  Indebtedness  under  Revolving  Credit  Facilities
outstanding on the date on which notes were first issued and authenticated under
the  indenture  will be deemed to have been incurred on such date in reliance on
the exception provided by clause (1) of the definition of Permitted Debt.

         Liens

         The Company will not, and will not permit any of its  Subsidiaries  to,
directly or indirectly, create, incur, assume or suffer to exist any Lien of any
kind on any asset now owned or hereafter acquired, except Permitted Liens.

         Dividend and Other Payment Restrictions Affecting Subsidiaries

         The  Company  will  not,  and will  not  permit  any of its  Restricted
Subsidiaries  to,  directly or  indirectly,  create or permit to exist or become
effective  any  consensual  encumbrance  or  restriction  on the  ability of any
Restricted Subsidiary to:

         (1)      pay dividends or make any other  distributions  on its Capital
                  Stock to the Company or any of its Restricted Subsidiaries, or
                  with  respect to any other  interest or  participation  in, or
                  measured by, its profits,  or pay any indebtedness owed to the
                  Company or any of its Restricted Subsidiaries;

         (2)      make loans or advances to the Company or any of its Restricted
                  Subsidiaries; or

                                                112


         (3)      transfer any of its properties or assets to the Company or any
                  of its Restricted Subsidiaries.

         However,  the preceding  restrictions will not apply to encumbrances or
restrictions existing under or by reason of:

         (1)      the indenture, the notes, the Subsidiary Guarantees and the
                  Collateral Documents;

         (2)      applicable law;

         (3)      any instrument  governing  Indebtedness  or Capital Stock of a
                  Person  acquired  by the  Company  or  any  of its  Restricted
                  Subsidiaries  as in  effect  at the  time of such  acquisition
                  (except to the extent such  Indebtedness  or Capital Stock was
                  incurred  in  connection  with  or in  contemplation  of  such
                  acquisition),   which   encumbrance   or  restriction  is  not
                  applicable to any Person,  or the  properties or assets of any
                  Person,  other than the Person,  or the  property or assets of
                  the  Person,  so  acquired,  provided  that,  in the  case  of
                  Indebtedness,  such Indebtedness was permitted by the terms of
                  the indenture to be incurred;

         (4)      customary non-assignment or subletting provisions in leases
                  entered into in the ordinary course of business and consistent
                  with past practices;

         (5)      purchase  money  obligations  for  property  acquired  in  the
                  ordinary  course of business that impose  restrictions on that
                  property  of  the  nature  described  in  clause  (3)  of  the
                  preceding paragraph;

         (6)      any  agreement  for  the  sale  or  other   disposition  of  a
                  Restricted  Subsidiary  that restricts  distributions  by that
                  Restricted Subsidiary pending its sale or other disposition;

         (7)      Permitted   Refinancing   Indebtedness,   provided   that  the
                  restrictions   contained  in  the  agreements  governing  such
                  Permitted  Refinancing  Indebtedness are no more  restrictive,
                  taken as a  whole,  than  those  contained  in the  agreements
                  governing the Indebtedness being refinanced;

         (8)      Liens securing Indebtedness otherwise permitted to be incurred
                  under the provisions of the covenant described above under the
                  caption  "--Liens"  that  limit  the  right of the  debtor  to
                  dispose of the assets subject to such Liens;

         (9)      provisions  with respect to the disposition or distribution of
                  assets or property in joint  venture  agreements,  assets sale
                  agreements, stock sale agreements and other similar agreements
                  entered into in the ordinary course of business; and

         (10)     upon  the  conversion  of  an  Unrestricted  Subsidiary  to  a
                  Restricted  Subsidiary  pursuant to the  provisions  described
                  above  under the  caption  "--Security,"  provided,  that such
                  Indebtedness  was  not  incurred  in  connection  with,  or in


                                                113


                  contemplation  of, such  conversion,  and such  encumbrance or
                  restriction is not applicable to any Person or the property or
                  assets of any Person other than the new Restricted Subsidiary.

         Merger, Consolidation or Sale of Assets

         Neither the Company nor any Guarantor may, directly or indirectly:  (1)
consolidate or merge with or into another Person  (whether or not the Company or
the  Guarantor is the surviving  corporation);  or (2) sell,  assign,  transfer,
convey or otherwise  dispose of all or  substantially  all of the  properties or
assets of the  Company  and its  Subsidiaries  taken as a whole,  in one or more
related transactions, to another Person; unless:

         (1)      either:  (a) the Company or the Guarantor,  as applicable,  is
                  the  surviving  corporation;  or (b) the  Person  formed by or
                  surviving any such  consolidation or merger (if other than the
                  Company or the  Guarantor) or to which such sale,  assignment,
                  transfer,  conveyance or other  disposition has been made is a
                  corporation organized or existing under the laws of the United
                  States,  any state of the  United  States or the  District  of
                  Columbia;

         (2)      the Person  formed by or surviving any such  consolidation  or
                  merger (if other than the  Company  or the  Guarantor)  or the
                  Person to which such sale, assignment, transfer, conveyance or
                  other disposition has been made assumes all the obligations of
                  the Company or the Guarantor, as applicable,  under the notes,
                  the  indenture,  the  registration  rights  agreement  and the
                  Collateral   Documents   pursuant  to  agreements   reasonably
                  satisfactory to the trustee;

         (3)      immediately after such transaction, no Default or Event of
                  Default exists;

         (4)      such  transaction  would not require any Holder or  Beneficial
                  Owner of notes to obtain a Gaming  License or be  qualified or
                  found  suitable  under  the  law  of  any  applicable   gaming
                  jurisdiction;  provided,  that such Holder or Beneficial Owner
                  would not have been required to obtain a Gaming  License or be
                  qualified or found  suitable  under the laws of any applicable
                  gaming jurisdiction in the absence of such transaction;

         (5)      such transaction would not result in the loss or suspension or
                  material  impairment  of any of  the  Company's  or any of its
                  Restricted Subsidiaries' Gaming Licenses,  unless a comparable
                  replacement   Gaming   License  is   effective   prior  to  or
                  simultaneously   with  such  loss,   suspension   or  material
                  impairment; and

         (6)      in the case of a consolidation  or merger of the Company,  the
                  Company  or  the  Person  formed  by  or  surviving  any  such
                  consolidation  or merger  (if other than the  Company),  or to
                  which such sale,  assignment,  transfer,  conveyance  or other
                  disposition   has  been  made  will,  or  in  the  case  of  a
                  consolidation   or  merger  of  a   Guarantor   or  the  sale,
                  assignment,  transfer,  conveyance or other disposition of the
                  property or assets of a Guarantor, the Company will:

                                                114


                  (a)      have  Consolidated  Net Worth  immediately  after the
                           transaction equal to or greater than the Consolidated
                           Net Worth of the Company  immediately  preceding  the
                           transaction; and

                  (b)      on the  date of such  transaction  after  giving  pro
                           forma  effect  thereto  and  any  related   financing
                           transactions  as if  the  same  had  occurred  at the
                           beginning of the applicable  four-quarter  period, be
                           permitted  to  incur at  least  $1.00  of  additional
                           Indebtedness  pursuant to the Fixed  Charge  Coverage
                           Ratio  test set forth in the first  paragraph  of the
                           covenant    described   above   under   the   caption
                           "--Incurrence   of   Indebtedness   and  Issuance  of
                           Preferred Stock."

         In addition,  neither the Company nor any  Guarantor  may,  directly or
indirectly,  lease all or substantially  all of its properties or assets, in one
or more related transactions,  to any other Person. This "Merger,  Consolidation
or Sale of  Assets"  covenant  will not apply to a sale,  assignment,  transfer,
conveyance or other  disposition  of assets between or among the Company and any
of the Guarantors.

         Transactions with Affiliates

         The  Company  will  not,  and will  not  permit  any of its  Restricted
Subsidiaries  to,  make any payment to, or sell,  lease,  transfer or  otherwise
dispose of any of its  properties  or assets to, or  purchase  any  property  or
assets  from,  or  enter  into or  make  or  amend  any  transaction,  contract,
agreement,  understanding,  loan,  advance or guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless:

         (1)      the  Affiliate  Transaction  is on  terms  that  are  no  less
                  favorable to the Company or the relevant Restricted Subsidiary
                  than  those  that would  have been  obtained  in a  comparable
                  transaction by the Company or such Restricted  Subsidiary with
                  an unrelated Person; and

         (2)      the Company delivers to the trustee:

                  (a)      with respect to any Affiliate  Transaction  or series
                           of related Affiliate Transactions involving aggregate
                           consideration in excess of $1.0 million, a resolution
                           of the  Company's  Board of Directors set forth in an
                           officer's certificate  certifying that such Affiliate
                           Transaction complies with this covenant and that such
                           Affiliate Transaction has been approved by a majority
                           of the  disinterested  members of the Company's Board
                           of Directors; and

                  (b)      with respect to any Affiliate  Transaction  or series
                           of related Affiliate Transactions involving aggregate
                           consideration  in excess of $5.0 million,  an opinion
                           as to the  fairness to the Company of such  Affiliate
                           Transaction  from a financial point of view issued by
                           an accounting,  appraisal or investment  banking firm
                           of national standing.

                                                115


         The  following  items will not be deemed  Affiliate  Transactions  and,
therefore, will not be subject to the provisions of the prior paragraph:

                  (1)      any employment  agreement entered into by the Company
                           or any of its Restricted Subsidiaries in the ordinary
                           course  of  business  and  consistent  with  the past
                           practice   of  the   Company   or   such   Restricted
                           Subsidiary;

                  (2)      transactions between or among the Company and/or its
                           Restricted Subsidiaries;

                  (3)      transactions with a Person that is an Affiliate of
                           the Company solely because the Company owns an Equity
                           Interest in, or controls, such Person;

                  (4)      payment of reasonable fees and  compensation  paid or
                           issued  to  and  indemnity  provided  on  behalf  of,
                           officers, directors,  employees or consultants of the
                           Company or any Restricted  Subsidiary in the ordinary
                           course of business;

                  (5)      sales of Equity Interests (other than Disqualified
                           Stock) of the Company to Affiliates of the Company;
                           and

                  (6)      Restricted   Payments   that  are  permitted  by  the
                           provisions of the indenture described above under the
                           caption "--Restricted Payments."

         Additional Subsidiary Guarantees

         If  the  Company  or any of its  Restricted  Subsidiaries  acquires  or
creates  another  Subsidiary  after the date of the  indenture,  then that newly
acquired  or  created  Subsidiary  will  become  a  Guarantor,  other  than  all
Subsidiaries that have properly been designated as Unrestricted  Subsidiaries in
accordance  with  the  indenture  for so  long as they  continue  to  constitute
Unrestricted  Subsidiaries,  and execute a supplemental indenture and Collateral
Documents securing the Guarantee and deliver an opinion of counsel  satisfactory
to the trustee  within ten Business Days of the date on which it was acquired or
created. Upon any conversion of a Subsidiary from an Unrestricted  Subsidiary to
a Restricted  Subsidiary  pursuant to the provisions  described  above under the
caption  "--Security,"  or pursuant  to the  definition  below of  "Unrestricted
Subsidiary," the newly-created Restricted Subsidiary will also be subject to the
requirements of the preceding sentence.

         Designation of Restricted and Unrestricted Subsidiaries

         The  Company's   Board  of  Directors  may  designate  any   Restricted
Subsidiary as an Unrestricted  Subsidiary if that designation  would not cause a
Default;  provided that in no event will the  businesses  currently  operated by
ROC, RGM, RGMC and RBH be transferred to or held by an Unrestricted  Subsidiary,
and  provided,   further  that  following  any  conversion  of  an  Unrestricted
Subsidiary that owns a Gaming Project to a Restricted Subsidiary pursuant to the
provisions  described  above under the caption  "--Security,"  in no event shall
such  Subsidiary or the Gaming Project  operated by such Subsidiary be converted


                                                116


into,  transferred  to or held by an  Unrestricted  Subsidiary.  If a Restricted
Subsidiary is  designated  as an  Unrestricted  Subsidiary,  the aggregate  fair
market  value  of all  outstanding  Investments  owned  by the  Company  and its
Restricted  Subsidiaries in the Subsidiary properly designated will be deemed to
be an  Investment  made as of the time of the  designation  and will  reduce the
amount  available  for  Restricted  Payments  under the first  paragraph  of the
covenant described above under the caption "--Restricted  Payments" or Permitted
Investments,  as  determined  by the  Company.  That  designation  will  only be
permitted  if  the  Investment  would  be  permitted  at  that  time  and if the
Restricted   Subsidiary  otherwise  meets  the  definition  of  an  Unrestricted
Subsidiary.  The Board of Directors may redesignate any Unrestricted  Subsidiary
as a Restricted Subsidiary if the redesignation would not cause a Default.

         Maintenance of Insurance

         Until the notes have been paid in full,  the Company and the Guarantors
will have and maintain in effect  insurance with  responsible  carriers  against
such risks and in such amounts as is customarily  carried by similar  businesses
with  such  deductibles,   retentions,  self  insured  amounts  and  coinsurance
provisions  as are  customarily  carried by similar  businesses of similar size,
including, without limitation, property and casualty.

         Business Activities

         The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Restricted  Subsidiaries taken as a
whole.

         Payments for Consent

         The  Company  will  not,  and will  not  permit  any of its  Restricted
Subsidiaries  to,  directly  or  indirectly,   pay  or  cause  to  be  paid  any
consideration  to or  for  the  benefit  of any  Holder  of  notes  for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of  the  indenture,   the  notes  or  the  Collateral   Documents   unless  such
consideration is offered to be paid and is paid to all Holders of the notes that
consent, waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.

         Pledge of Equity Interests in ROC

         The Company will use its best efforts to obtain all required  approvals
necessary for the trustee to be granted a first  priority  security  interest in
the  outstanding  Equity  Interests  of ROC or any  other  entity  that owns the
Riviera Las Vegas Hotel. Upon receipt of such approvals,  the Company will grant
to the trustee such interest for the benefit of the Holders of the notes.

         Additional Collateral; Acquisition of Assets or Property

         Concurrently  with the  acquisition  by the  Company or any  Restricted
Subsidiary of any assets or property with a fair market value (as  determined by
the Board of Directors of the Company) in excess of $2.0 million individually or


                                                117


$10.0  million  in the  aggregate,  to  the  extent  not  prohibited  by  Gaming
Authorities or applicable  Gaming Laws,  the Company  shall,  or shall cause the
applicable Restricted Subsidiary to:

                  (1)      in the case of personal property, execute and deliver
                           to the trustee such Uniform Commercial Code financing
                           statements  or take such  other  actions  as shall be
                           necessary   or  (in  the  opinion  of  the   trustee)
                           desirable  to  perfect  and  protect  the   trustee's
                           security interest in such assets or property;

                  (2)      in the case of real property, execute and deliver to
                           the trustee:

                           (a)      a deed  of  trust  or a  leasehold  deed  of
                                    trust,    as    appropriate    (with    such
                                    modifications  as are  necessary  to  comply
                                    with   applicable  law)  (under  which  such
                                    Restricted Subsidiary shall grant a security
                                    interest   to  the   trustee  in  such  real
                                    property and any related fixtures); and

                           (b)      title and extended coverage insurance
                                    covering such real property in an amount at
                                    least equal to the purchase price of such
                                    real property; and

                  (3)      promptly  deliver to the  trustee  such  opinions  of
                           counsel,  if  any,  as  the  trustee  may  reasonably
                           require  with  respect  to the  foregoing  (including
                           opinions  as  to  enforceability  and  perfection  of
                           security interests).

         Further Assurances

         The Company will,  and will cause each of its  Restricted  Subsidiaries
to, execute and deliver such additional instruments,  certificates or documents,
and take all such  actions as may be  reasonably  required  from time to time in
order to:

                  (1)      carry out more effectively the purposes of the
                           Collateral Documents;

                  (2)      create, grant, perfect and maintain the validity,
                           effectiveness and priority of any of the Collateral
                           Documents and the Liens created, or intended to be
                           created, by the Collateral Documents; and

                  (3)      ensure the protection  and  enforcement of any of the
                           rights  granted  or  intended  to be  granted  to the
                           trustee  under  any  other  instrument   executed  in
                           connection therewith.

         Upon the  exercise  by the  trustee or any Holder of any power,  right,
privilege or remedy under the indenture or any of the Collateral Documents which
requires any consent, approval, recording, qualification or authorization of any
governmental  authority (including any Gaming Authority),  the Company will, and
will cause each of its  Restricted  Subsidiaries  to,  execute  and  deliver all
applications,  certifications,  instruments  and other documents and papers that


                                                118


may be required from the Company or any of its Restricted  Subsidiaries for such
governmental consent, approval, recording, qualification or authorization.

         Conversion of Capital Leases

         The  Company  will use its  reasonable  efforts to convert  the Capital
Lease Obligations under the FF&E Agreements into leases that would be classified
as operating  leases in accordance  with GAAP within 180 days of the date of the
indenture.

Reports

         Whether or not  required  by the  Commission,  so long as any notes are
outstanding,  the Company will furnish to the Holders of notes,  within the time
periods specified in the Commission's rules and regulations:

         (1) all  quarterly  and  annual  financial  information  that  would be
required to be contained in a filing with the  Commission on Forms 10-Q and 10-K
if the  Company  were  required to file such  Forms,  including a  "Management's
Discussion and Analysis of Financial  Condition and Results of Operations"  and,
with respect to the annual  information  only, a report on the annual  financial
statements by the Company's certified independent accountants; and

         (2) all current reports that would be required to be filed with the
             Commission on Form 8-K if the Company were required to file such
             reports.

         If the Company has designated any of its  Subsidiaries  as Unrestricted
Subsidiaries,  then the quarterly and annual financial  information  required by
the preceding paragraph will include a reasonably detailed presentation,  either
on the face of the  financial  statements or in the  footnotes  thereto,  and in
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations,  of the financial condition and results of operations of the Company
and its  Restricted  Subsidiaries  separate  from the  financial  condition  and
results of operations of the Unrestricted Subsidiaries of the Company.

         In addition, following the consummation of this exchange offer, whether
or not  required by the  Commission,  the Company will file a copy of all of the
information  and  reports  referred  to in  clauses  (1) and (2) above  with the
Commission  for public  availability  within the time  periods  specified in the
Commission's rules and regulations (unless the Commission will not accept such a
filing)  and  make  such  information   available  to  securities  analysts  and
prospective investors upon request. In addition,  the Company and the Subsidiary
Guarantors have agreed that, for so long as any notes remain  outstanding,  they
will  furnish  to  the  Holders  and  to  securities  analysts  and  prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.


                                                119


Events of Default and Remedies

         Each of the following is an Event of Default:

                  (1)      default for 30 days in the payment when due of
                           interest on, or Liquidated Damages with respect to,
                           the notes;

                  (2)      default in payment when due of the principal of, or
                           premium, if any, on the notes;

                  (3)      failure by the Company or any of its  Subsidiaries to
                           comply  with  the  provisions   described  under  the
                           captions    "--Repurchase    at   the    Option    of
                           Holders--Change  of  Control,"  "--Repurchase  at the
                           Option   of   Holders--Asset    Sales,"    "--Certain
                           Covenants--Restricted    Payments,"    "    --Certain
                           Covenants--Incurrence of Indebtedness and Issuance of
                           Preferred  Stock"  or  "--Certain  Covenants--Merger,
                           Consolidation or Sale of Assets;"

                  (4)      failure by the Company or any of its Restricted
                           Subsidiaries for 60 days after notice to comply with
                           any of the other agreements in the indenture or the
                           Collateral Documents;

                  (5)      default under any  mortgage,  indenture or instrument
                           under which there may be issued or by which there may
                           be secured or evidenced  any  Indebtedness  for money
                           borrowed  by the  Company  or  any of its  Restricted
                           Subsidiaries  (or the payment of which is  guaranteed
                           by the Company or any of its Restricted Subsidiaries)
                           whether such  Indebtedness or guarantee  exists on or
                           after the date of the indenture, if that default:

                           (a)      is caused by a failure to pay  principal of,
                                    or  interest  or  premium,  if any,  on such
                                    Indebtedness  prior to the expiration of the
                                    grace period  provided in such  Indebtedness
                                    on the  date of  such  default  (a  "Payment
                                    Default"); or

                           (b)      results in the acceleration of such
                                    Indebtedness prior to its express maturity,

                           and, in each case,  the principal  amount of any such
                           Indebtedness,  together with the principal  amount of
                           any other such  Indebtedness  under  which  there has
                           been a Payment  Default or the  maturity of which has
                           been so accelerated, aggregates $5.0 million or more;

                  (6)      failure by the Company or any of its Subsidiaries to
                           pay final judgments aggregating in excess of $5.0
                           million, which judgments are not paid, discharged or
                           stayed for a period of 60 days; and

                                                120


                  (7)      any representation or warranty made by the Company or
                           any of its Restricted  Subsidiaries in any Collateral
                           Document  or that is  contained  in any  certificate,
                           document or financial or other statement furnished by
                           any of them at any time under or in  connection  with
                           any such Collateral Document shall prove to have been
                           inaccurate  in any  material  respect on or as of the
                           date made or deemed made;

                  (8)      any of the Collateral  Documents shall cease, for any
                           reason (other than pursuant to the terms thereof), to
                           be in full force and  effect,  or any party  shall so
                           assert, or any security interest created or purported
                           to be  created,  by any of the  Collateral  Documents
                           shall cease to be enforceable  and of the same effect
                           and priority purported to be created thereby;

                  (9)      except as permitted by the indenture,  any Subsidiary
                           Guarantee shall be held in any judicial proceeding to
                           be  unenforceable  or invalid or shall  cease for any
                           reason  to  be  in  full  force  and  effect  or  any
                           Guarantor,  or any  Person  acting  on  behalf of any
                           Guarantor,  shall deny or disaffirm  its  obligations
                           under its Subsidiary Guarantee;

                  (10)     certain events of bankruptcy or insolvency described
                           in the indenture with respect to the Company or any
                           of its Restricted Subsidiaries; and

                  (11)     the revocation or suspension of any Gaming License of
                           the  Company or any of its  Restricted  Subsidiaries,
                           resulting in the cessation of operation of any of the
                           Company's  or  any of  its  Restricted  Subsidiaries'
                           casino business for 90 days.

         In the case of an Event of  Default  arising  from  certain  events  of
bankruptcy or insolvency with respect to the Company, any Restricted  Subsidiary
that is a Significant  Subsidiary or any group of Restricted  Subsidiaries that,
taken together, would constitute a Significant Subsidiary, all outstanding notes
will  become  due and  payable  immediately  without  further  action or notice.
Subject  to the terms of the  Intercreditor  Agreement,  if any  other  Event of
Default occurs and is continuing,  the trustee or the Holders of at least 25% in
principal amount of the then  outstanding  notes may declare all the notes to be
due and payable immediately.

         Holders of the notes may not enforce the  indenture or the notes except
as  provided  in the  indenture.  Subject to certain  limitations,  Holders of a
majority  in  principal  amount of the then  outstanding  notes may  direct  the
trustee in its  exercise of any trust or power.  The trustee may  withhold  from
Holders of the notes notice of any continuing  Default or Event of Default if it
determines that  withholding  notice is in their  interest,  except a Default or
Event of Default  relating to the payment of principal or interest or Liquidated
Damages.

         The Holders of a majority in  aggregate  principal  amount of the notes
then outstanding by notice to the trustee may on behalf of the Holders of all of
the notes waive any  existing  Default or Event of Default and its  consequences
under the  indenture  except a  continuing  Default  or Event of  Default in the
payment of interest or Liquidated Damages on, or the principal of, the notes.

                                                121


         In the case of any Event of Default  occurring by reason of any willful
action or inaction  taken or not taken by or on behalf of the  Company  with the
intention of avoiding  payment of the premium that the Company would have had to
pay if the Company then had elected to redeem the notes pursuant to the optional
redemption  provisions of the indenture,  an equivalent premium will also become
and be  immediately  due and  payable  to the extent  permitted  by law upon the
acceleration of the notes. If an Event of Default occurs prior to June 15, 2006,
by reason of any  willful  action  (or  inaction)  taken (or not taken) by or on
behalf  of the  Company  with the  intention  of  avoiding  the  prohibition  on
redemption  of the notes prior to June 15, 2006,  then the premium  specified in
the  indenture  will also  become  immediately  due and  payable  to the  extent
permitted by law upon the acceleration of the notes.

         The Company is required to deliver to the trustee  annually a statement
regarding  compliance with the indenture.  Upon becoming aware of any Default or
Event of Default,  the Company is required to deliver to the trustee a statement
specifying such Default or Event of Default.

No Personal Liability of Directors, Officers, Employees and Stockholders

         No director,  officer,  employee,  incorporator  or  stockholder of the
Company or any Guarantor,  as such,  will have any liability for any obligations
of the Company or the Guarantors under the notes, the indenture,  the Subsidiary
Guarantees,  the Collateral  Documents or for any claim based on, in respect of,
or by reason of, such  obligations  or their  creation.  Each Holder of notes by
accepting a note waives and releases all such liability.  The waiver and release
are part of the  consideration  for issuance of the notes. The waiver may not be
effective to waive liabilities under the federal securities laws.

Legal Defeasance and Covenant Defeasance

         The Company  may,  at its option and at any time,  elect to have all of
its  obligations  discharged  with  respect  to the  outstanding  notes  and all
obligations  of the  Guarantors  discharged  with  respect  to their  Subsidiary
Guarantees ("Legal Defeasance") except for:

                  (1)      the rights of Holders of outstanding notes to receive
                           payments in respect of the  principal of, or interest
                           or premium and  Liquidated  Damages,  if any, on such
                           notes  when  such  payments  are due from  the  trust
                           referred to below;

                  (2)      the Company's  obligations  with respect to the notes
                           concerning  issuing temporary notes,  registration of
                           notes, mutilated, destroyed, lost or stolen notes and
                           the  maintenance  of an office or agency for  payment
                           and money for security payments held in trust;

                  (3)      the rights, powers, trusts, duties and immunities of
                           the trustee, and the Company's and the Guarantor's
                           obligations in connection therewith; and

                  (4)      the Legal Defeasance provisions of the indenture.


                                                122


         In addition,  the Company may, at its option and at any time,  elect to
have the obligations of the Company and the Guarantors  released with respect to
certain  covenants that are described in the indenture  ("Covenant  Defeasance")
and thereafter any omission to comply with those covenants will not constitute a
Default or Event of Default  with  respect to the notes.  In the event  Covenant
Defeasance  occurs,  certain  events  (not  including  non-payment,  bankruptcy,
receivership,  rehabilitation and insolvency events) described under the caption
"--Events of Default and Remedies" will no longer constitute an Event of Default
with respect to the notes.  In addition,  the Liens securing the Collateral will
be released upon Legal Defeasance or Covenant Defeasance.

         In order to exercise either Legal Defeasance or Covenant Defeasance:

                  (1)      the  Company  must   irrevocably   deposit  with  the
                           trustee,  in trust, for the benefit of the Holders of
                           the  notes,  cash  in  U.S.   dollars,   non-callable
                           Government  Securities,  or a combination  of cash in
                           U.S. dollars and non-callable  Government Securities,
                           in amounts as will be sufficient, in the opinion of a
                           nationally  recognized  firm  of  independent  public
                           accountants, to pay the principal of, or interest and
                           premium  and  Liquidated  Damages,  if  any,  on  the
                           outstanding  notes on the stated  maturity  or on the
                           applicable  redemption  date, as the case may be, and
                           the Company must specify  whether the notes are being
                           defeased to maturity  or to a  particular  redemption
                           date;

                  (2)      in the  case of Legal  Defeasance,  the  Company  has
                           delivered  to  the  trustee  an  opinion  of  counsel
                           reasonably  acceptable to the trustee confirming that
                           (a) the Company has received  from, or there has been
                           published by, the Internal  Revenue  Service a ruling
                           or (b)  since  the date of the  indenture,  there has
                           been a change in the  applicable  federal  income tax
                           law,  in either  case to the effect  that,  and based
                           thereon such  opinion of counsel  will confirm  that,
                           the  Holders  of  the  outstanding   notes  will  not
                           recognize income, gain or loss for federal income tax
                           purposes  as a result of such  Legal  Defeasance  and
                           will be  subject  to  federal  income tax on the same
                           amounts,  in the same manner and at the same times as
                           would have been the case if such Legal Defeasance had
                           not occurred;

                  (3)      in the case of Covenant  Defeasance,  the Company has
                           delivered  to  the  trustee  an  opinion  of  counsel
                           reasonably  acceptable to the trustee confirming that
                           the  Holders  of  the  outstanding   notes  will  not
                           recognize income, gain or loss for federal income tax
                           purposes as a result of such Covenant  Defeasance and
                           will be  subject  to  federal  income tax on the same
                           amounts,  in the same manner and at the same times as
                           would have been the case if such Covenant  Defeasance
                           had not occurred;

                  (4)      no Default or Event of Default  has  occurred  and is
                           continuing on the date of such deposit  (other than a
                           Default  or  Event  of  Default  resulting  from  the
                           borrowing of funds to be applied to such deposit);


                                                123


                  (5)      such Legal Defeasance or Covenant Defeasance will not
                           result in a breach or violation  of, or  constitute a
                           default  under any material  agreement or  instrument
                           (other  than the  indenture)  to which the Company or
                           any of its  Subsidiaries  is a party or by which  the
                           Company or any of its Subsidiaries is bound;

                  (6)      the Company  must deliver to the trustee an officer's
                           certificate  stating that the deposit was not made by
                           the Company with the intent of preferring the Holders
                           of notes over the other creditors of the Company with
                           the  intent  of  defeating,  hindering,  delaying  or
                           defrauding creditors of the Company or others; and

                  (7)      the Company  must deliver to the trustee an officer's
                           certificate  and an opinion of counsel,  each stating
                           that all conditions  precedent  relating to the Legal
                           Defeasance  or  the  Covenant  Defeasance  have  been
                           complied with.

Amendment, Supplement and Waiver

         Except  as  provided  in  the  next  two  succeeding  paragraphs,   the
indenture,  the notes, any Subsidiary Guarantees or the Collateral Documents may
be  amended  or  supplemented  with the  consent  of the  Holders  of at least a
majority in principal amount of the notes then outstanding  (including,  without
limitation,  consents obtained in connection with a purchase of, or tender offer
or exchange offer for,  notes),  and any existing default or compliance with any
provision  of the  indenture  or the notes may be waived with the consent of the
Holders  of a  majority  in  principal  amount  of the  then  outstanding  notes
(including, without limitation,  consents obtained in connection with a purchase
of, or tender offer or exchange offer for, notes).

         Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any notes held by a non-consenting Holder):

                  (1)      reduce the principal amount of notes whose Holders
                           must consent to an amendment, supplement or waiver;

                  (2)      reduce the principal of or change the fixed  maturity
                           of any note or alter the  provisions  with respect to
                           the  redemption  of the notes (other than  provisions
                           relating to the covenants  described  above under the
                           caption "--Repurchase at the Option of Holders");

                  (3)      reduce the rate of or change the time for payment of
                           interest on any note;

                  (4)      waive a Default or Event of Default in the payment of
                           principal  of, or interest or premium,  or Liquidated
                           Damages, if any, on the notes (except a rescission of
                           acceleration  of the notes by the Holders of at least
                           a majority in aggregate principal amount of the notes
                           and a waiver of the  payment  default  that  resulted
                           from such acceleration);


                                                124


                  (5)      make any note payable in money other than that stated
                           in the notes;

                  (6)      make any change in the  provisions  of the  indenture
                           relating to waivers of past Defaults or the rights of
                           Holders of notes to receive payments of principal of,
                           or interest or premium or Liquidated Damages, if any,
                           on the notes;

                  (7)      waive a  redemption  payment with respect to any note
                           (other  than  a  payment   required  by  one  of  the
                           covenants   described   above   under   the   caption
                           "--Repurchase at the Option of Holders");

                  (8)      release any Guarantor from any of its obligations
                           under its Subsidiary Guarantee or the indenture,
                           except in accordance with the terms of the indenture;
                           or

                  (9)      make any change in the preceding amendment and waiver
                           provisions.

         Notwithstanding  the  preceding,  without  the consent of any Holder of
notes,  the Company,  the Guarantors and the trustee may amend or supplement the
indenture, the notes, any Subsidiary Guarantees or the Collateral Documents:

                  (1)      to cure any ambiguity, defect or inconsistency;

                  (2)      to provide for uncertificated notes in addition to or
                           in place of certificated notes;

                  (3)      to provide for the assumption of the Company's
                           obligations to Holders of notes in the case of a
                           merger or consolidation or sale of all or
                           substantially all of the Company's assets;

                  (4)      to make any change that would provide any  additional
                           rights or  benefits  to the  Holders of notes or that
                           does not adversely  affect the legal rights under the
                           indenture of any such Holder; or

                  (5)      to comply with requirements of the Commission in
                           order to effect or maintain the qualification of the
                           indenture under the Trust Indenture Act; or

                  (6)      to enter into additional or supplemental Collateral
                           Documents.

Satisfaction and Discharge

         The indenture will be discharged and will cease to be of further effect
as to all notes issued thereunder, when:

                  (1)      either:


                                                125


                           (a)      all  notes  that  have  been  authenticated,
                                    except lost,  stolen or destroyed notes that
                                    have  been  replaced  or paid and  notes for
                                    whose  payment  money has been  deposited in
                                    trust and thereafter  repaid to the Company,
                                    have  been  delivered  to  the  trustee  for
                                    cancellation; or

                           (b)      all notes that have not been delivered to
                                    the trustee for cancellation have become due
                                    and payable by reason of the mailing of a
                                    notice of redemption or otherwise or will
                                    become due and payable within one year and
                                    the Company or any Guarantor has irrevocably
                                    deposited or caused to be deposited with the
                                    trustee as trust funds in trust solely for
                                    the benefit of the Holders, cash in U.S.
                                    dollars, non-callable Government Securities,
                                    or a combination of cash in U.S. dollars and
                                    non-callable Government Securities, in
                                    amounts as will be sufficient without
                                    consideration of any reinvestment of
                                    interest, to pay and discharge the entire
                                    indebtedness on the notes not delivered to
                                    the trustee for cancellation for principal,
                                    premium and Liquidated Damages, if any, and
                                    accrued interest to the date of maturity or
                                    redemption;

                  (2)      no Default or Event of Default  has  occurred  and is
                           continuing  on the date of the  deposit or will occur
                           as a result of the deposit  and the deposit  will not
                           result in a breach or violation  of, or  constitute a
                           default  under,  any  other  instrument  to which the
                           Company or any  Guarantor  is a party or by which the
                           Company or any Guarantor is bound;

                  (3)      the Company or any Guarantor has paid or caused to be
                           paid all sums payable by it under the indenture; and

                  (4)      the Company has delivered irrevocable instructions to
                           the  trustee   under  the   indenture  to  apply  the
                           deposited  money  toward the  payment of the notes at
                           maturity or the redemption date, as the case may be.

         In addition,  the Company must deliver an officer's  certificate and an
opinion of counsel to the  trustee  stating  that all  conditions  precedent  to
satisfaction and discharge have been satisfied.

Concerning the Trustee

         If the trustee becomes a creditor of the Company or any Guarantor,  the
indenture  limits its right to obtain payment of claims in certain cases,  or to
realize on certain property received in respect of any such claim as security or
otherwise.  The  trustee  will be  permitted  to engage  in other  transactions;
however, if it acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the Commission for permission to continue or resign.

         The Holders of a majority in principal  amount of the then  outstanding
notes will have the right to direct the time, method and place of conducting any
proceeding  for  exercising  any remedy  available  to the  trustee,  subject to


                                                126


certain  exceptions.  The  indenture  provides  that in case an Event of Default
occurs and is continuing,  the trustee will be required,  in the exercise of its
power,  to use the  degree of care of a prudent  man in the  conduct  of his own
affairs. Subject to such provisions,  the trustee will be under no obligation to
exercise any of its rights or powers  under the  indenture at the request of any
Holder of notes,  unless such Holder has  offered to the  trustee  security  and
indemnity satisfactory to it against any loss, liability or expense.

Registration Rights; Liquidated Damages

                  The  following is a summary of the material  provisions of the
registration  rights  agreement.  It does  not  restate  that  agreement  in its
entirety. We urge you to read the proposed form of registration rights agreement
in its entirety because it, and not this description,  defines your registration
rights as Holders of these notes. See "Available Information."

                  The Company,  the Guarantors and the Initial Purchaser entered
into  the  registration  rights  agreement  on the  date of the  closing  of the
offering of the existing  notes (June 26,  2002).  Pursuant to the  registration
rights  agreement,  the  Company  and  the  Guarantors  agreed  to file with the
Commission the Exchange Offer  Registration  Statement on the  appropriate  form
under the Securities Act with respect to the new notes.  Upon the  effectiveness
of the Exchange  Offer  Registration  Statement,  the Company and the Guarantors
will offer to the  Holders of  Transfer  Restricted  Securities  pursuant to the
Exchange Offer who are able to make certain  representations  the opportunity to
exchange their Transfer Restricted Securities for exchange notes.

                  If:

                           (1)      the Company and the Guarantors are not

                                    (a)     required to file the Exchange Offer
                                            Registration Statement; or

                                    (b)     permitted to consummate the Exchange
                                            Offer because the Exchange Offer is
                                            not permitted by applicable law or
                                            Commission policy; or

                           (2)      any Holder of Transfer Restricted Securities
                                    notifies  the Company  prior to the 20th day
                                    following consummation of the Exchange Offer
                                    that it:


                                    (a)     is prohibited by law or Commission
                                            policy from participating in the
                                            Exchange Offer; or

                                    (b)     may not  resell the  exchange  notes
                                            acquired by it in the Exchange Offer
                                            to the public  without  delivering a
                                            prospectus    and   the   prospectus
                                            contained  in  the  Exchange   Offer
                                            Registration    Statement   is   not
                                            appropriate  or  available  for such
                                            resales; or


                                                127


                                    (c)     is a broker-dealer and owns notes
                                            acquired directly from the Company
                                            or an affiliate of the Company,

         the Company and the  Guarantors  will file with the  Commission a Shelf
Registration Statement to cover resales of the notes by the Holders of the notes
who satisfy  certain  conditions  relating to the  provision of  information  in
connection with the Shelf Registration Statement.

                  The Company and the Guarantors will use their  reasonable best
efforts to cause the applicable  registration statement to be declared effective
as promptly as possible by the Commission.

                  For   purposes   of  the   preceding,   "Transfer   Restricted
Securities" means each existing note until:

                           (1)      the date on which such note has been
                                    exchanged by a Person other than a broker-
                                    dealer for a new note in the Exchange Offer;

                           (2)      following the exchange by a broker-dealer in
                                    the Exchange Offer of an existing note for a
                                    new note, the date on which such new note is
                                    sold to a purchaser  who receives  from such
                                    broker-dealer  on or  prior  to the  date of
                                    such sale a copy of the prospectus contained
                                    in   the   Exchange    Offer    Registration
                                    Statement;

                           (3)      the date on  which  such  existing  note has
                                    been   effectively   registered   under  the
                                    Securities Act and disposed of in accordance
                                    with the Shelf Registration Statement; or

                           (4)      the date on which such existing note is
                                    distributed to the public pursuant to Rule
                                    144 under the Securities Act.

                  The registration rights agreement provides that:

                           (1)      the Company and the Guarantors  will file an
                                    Exchange Offer  Registration  Statement with
                                    the  Commission  within  45  days after  the
                                    closing  of  the  offering of  the  existing
                                    notes;

                           (2)      the  Company  and the  Guarantors  will  use
                                    their  reasonable best efforts  to have  the
                                    Exchange Offer   Registration    Statement
                                    declared effective by the  Commission within
                                    120 days after the  closing of the  offering
                                    of the existing notes;

                           (3)      unless the Exchange Offer would not be
                                    permitted by applicable law or Commission
                                    policy, the Company and the Guarantors will
                                    use their reasonable best efforts to
                                    commence and consumate the Exchange Offer
                                    within 150 days closing of the offering of
                                    existing notes; and


                                                128



                           (4)      if obligated to file the Shelf Registration
                                    Statement, the Company and the Guarantors
                                    will file the Shelf Registration Statement
                                    with the Commission within 30 days after
                                    such filing obligation arises and use their
                                    resonable best efforts to cause the Shelf
                                    Registration Statement to be declared
                                    effective by the Commission within 90 days
                                    after such filing deadline.

                  If:

                           (1)      the Company and the Guarantors fail to file
                                    any of the registration statements required
                                    by the registration rights agreement on or
                                    before the date specified for such filing;
                                    or


                           (2)      any such registration statements are not
                                    declared effective by the Commission by the
                                    date specified for such effectiveness; or


                           (3)      the  Company  and  the  Guarantors  fail  to
                                    consummate  the  Exchange  Offer by the date
                                    specified above for consummation; or


                           (4)      the  Shelf  Registration  Statement  or  the
                                    Exchange  Offer  Registration  Statement  is
                                    declared  effective but thereafter ceases to
                                    be  effective or usable in  connection  with
                                    resales of  Transfer  Restricted  Securities
                                    during   the   periods   specified   in  the
                                    registration  rights  agreement  (each  such
                                    event referred to in clauses (1) through (4)
                                    above, a "Registration Default"),

then the Company and the Guarantors  will pay Liquidated  Damages to each Holder
of notes,  with respect to the first 90-day  period  immediately  following  the
occurrence of the first Registration Default in an amount equal to $.05 per week
per $1,000 principal amount of notes held by such Holder.


                                                129


                  The  amount of the  Liquidated  Damages  will  increase  by an
additional  $.05 per week per $1,000  principal  amount of notes with respect to
each subsequent  90-day period until all Registration  Defaults have been cured,
up to a maximum amount of Liquidated  Damages for all  Registration  Defaults of
$.50 per week per $1,000 principal amount of notes.

                  All accrued Liquidated Damages will be paid by the Company and
the  Guarantors  on each Damages  Payment Date to the Global Note Holder by wire
transfer of immediately available funds or by federal funds check and to Holders
of Certificated  Notes by wire transfer to the accounts  specified by them or by
mailing  checks to their  registered  addresses  if no such  accounts  have been
specified.

                  Following the cure of all Registration  Defaults,  the accrual
of Liquidated Damages will cease.

                  Holders   of  notes   will  be   required   to  make   certain
representations  to  the  Company  (as  described  in  the  registration  rights
agreement) in order to participate in the Exchange Offer and will be required to
deliver certain information to be used in connection with the Shelf Registration
Statement and to provide comments on the Shelf Registration Statement within the
time  periods set forth in the  registration  rights  agreement in order to have
their notes  included in the Shelf  Registration  Statement and benefit from the
provisions  regarding  Liquidated Damages set forth above. By acquiring Transfer
Restricted  Securities,  a Holder will be deemed to have agreed to indemnify the
Company and the  Guarantors  against  certain  losses arising out of information
furnished  by such Holder in writing  for  inclusion  in any Shelf  Registration
Statement.  Holders of notes will also be required  to suspend  their use of the
prospectus   included  in  the  Shelf   Registration   Statement  under  certain
circumstances upon receipt of written notice to that effect from the Company.

Certain Definitions

                  Set  forth  below  are  certain  defined  terms  used  in  the
indenture.  Please  refer to the  indenture  for a full  disclosure  of all such
terms,  as  well as any  other  capitalized  terms  used  herein  for  which  no
definition is provided.

                  "Acquired Debt" means, with respect to any specified Person:

                           (1)      Indebtedness of any other Person existing at
the time such other Person is merged with or into or became a Subsidiary of such
specified  Person,  whether or not such Indebtedness is  incurred in  connection
with,  or in  contemplation  of, such other  Person merging with or into, or
becoming a Subsidiary of, such specified Person; and

                           (2)      Indebtedness secured by a Lien encumbering
any asset acquired by such specified Person.

                  "Affiliate"  of any  specified  Person  means any other Person
directly or indirectly  controlling or controlled by or under direct or indirect
common  control with such  specified  Person.  For purposes of this  definition,
"control," as used with respect to any Person, means the possession, directly or


                                                130


indirectly,  of the power to direct or cause the direction of the  management or
policies of such Person, whether through the ownership of voting securities,  by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting  Stock of a Person  will be deemed to be  control.  For  purposes of this
definition,  the terms "controlling,"  "controlled by" and "under common control
with" have correlative meanings.

                  "Asset Sale" means:

                           (1)      the  sale,   lease,   conveyance   or  other
                                    disposition   of  any   assets  or   rights;
                                    provided that the sale,  conveyance or other
                                    disposition of all or  substantially  all of
                                    the   assets   of  the   Company   and   its
                                    Subsidiaries   taken  as  a  whole  will  be
                                    governed by the  provisions of the indenture
                                    described    above    under   the    caption
                                    "--Repurchase     at    the     Option    of
                                    Holders--Change   of  Control"   and/or  the
                                    provisions described above under the caption
                                    " --Certain Covenants--Merger, Consolidation
                                    or Sale of Assets" and not by the provisions
                                    of the Asset Sale covenant;

                           (2)      the issuance of Equity Interests in any of
                                    the Company's Restricted Subsidiaries or the
                                    sale of Equity Interests in any of its
                                    Subsidiaries; and

                           (3)      Event of Loss.

                  Notwithstanding  the  preceding,  none of the following  items
will be deemed an Asset Sale:

                           (1)      any single  transaction or series of related
                                    transactions  that involves  assets having a
                                    fair market value of less than $1.0 million;

                           (2)      a transfer of assets between or among the
                                    Company and its Wholly Owned Restricted
                                    Subsidiaries,

                           (3)      an issuance of Equity Interests by a
                                    Subsidiary to the Company or to another
                                    Wholly Owned Restricted Subsidiary;

                           (4)      the sale or lease of equipment, inventory or
                                    accounts receivable in the ordinary course
                                    of business;

                           (5)      the sale or other disposition of cash or
                                    Cash Equivalents;

                           (6)      the grant in the ordinary course of business
                                    of any non-exclusive license of intellectual
                                    property; and

                                                131


                           (7)      a Restricted Payment or Permitted Investment
                                    that is permitted by the covenant  described
                                    above   under   the    caption    "--Certain
                                    Covenants--Restricted Payments."

                  "Beneficial  Owner" has the  meaning  assigned to such term in
Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the
beneficial ownership of any particular "person" (as that term is used in Section
13(d)(3) of the Exchange Act),  such "person" will be deemed to have  beneficial
ownership  of all  securities  that such  "person"  has the right to  acquire by
conversion  or exercise of other  securities,  whether  such right is  currently
exercisable  or  is  exercisable  only  upon  the  occurrence  of  a  subsequent
condition.  The  terms  "Beneficially  Owns"  and  "Beneficially  Owned"  have a
corresponding meaning.

                  "Board of Directors" means:

                           (1)      with respect to a corporation, the board of
                                    directors of the corporation;

                           (2)      with respect to a partnership, the Board of
                                    Directors of the general partner of the
                                    partnership; and

                           (3)      with respect to any other Person, the board
                                    or committee of such Person serving a
                                    similar function.

                  "Capital   Lease   Obligation"   means,   at  the   time   any
determination is to be made, the amount of the liability in respect of a capital
lease that would at that time be required to be  capitalized  on a balance sheet
in accordance with GAAP.

                  "Capital Stock" means:

                           (1)      in the case of a corporation, corporate
                                    stock;

                           (2)      in the case of an association or business
                                    entity, any and all shares, interests,
                                    participations, rights or other equivalents
                                    (however designated) of corporate stock;

                           (3)      in the case of a partnership or limited
                                    liability company, partnership or membership
                                    interests (whether general or limited); and

                           (4)      any other  interest  or  participation  that
                                    confers  on a Person  the right to receive a
                                    share  of the  profits  and  losses  of,  or
                                    distributions  of  assets  of,  the  issuing
                                    Person.

                  "Cash Equivalents" means:

                           (1)      United States dollars;


                                                132


                           (2)      securities  issued  or  directly  and  fully
                                    guaranteed  or insured by the United  States
                                    government or any agency or  instrumentality
                                    of the United  States  government  (provided
                                    that the full faith and credit of the United
                                    States  is   pledged  in  support  of  those
                                    securities)  having  maturities  of not more
                                    than   six   months   from   the   date   of
                                    acquisition;

                           (3)      certificates  of deposit and eurodollar time
                                    deposits  with  maturities  of six months or
                                    less from the date of acquisition,  bankers'
                                    acceptances  with  maturities  not exceeding
                                    six months and overnight bank  deposits,  in
                                    each case, with any domestic commercial bank
                                    having  capital  and  surplus  in  excess of
                                    $500.0  million  and a  Thomson  Bank  Watch
                                    Rating of "B" or better;

                           (4)      repurchase  obligations  with a term  of not
                                    more   than   seven   days  for   underlying
                                    securities of the types described in clauses
                                    (2) and (3)  above  entered  into  with  any
                                    financial     institution     meeting    the
                                    qualifications   specified   in  clause  (3)
                                    above;

                           (5)      commercial paper having the highest rating
                                    obtainable from Moody's Investors Service,
                                    Inc. or Standard & Poor's Rating Services
                                    and in each case maturing within six months
                                    after the date of acquisition; and

                           (6)      money  market  funds  at  least  95%  of the
                                    assets of which  constitute Cash Equivalents
                                    of  the  kinds   described  in  clauses  (1)
                                    through (5) of this definition.

                  "Change  of  Control"  means  the  occurrence  of  any  of the
following:

                           (1)      the  direct  or  indirect  sale,   transfer,
                                    conveyance or other disposition  (other than
                                    by way of merger or  consolidation),  in one
                                    or a series of related transactions,  of all
                                    or  substantially  all of the  properties or
                                    assets  of the  Company  and its  Restricted
                                    Subsidiaries   taken   as  a  whole  to  any
                                    "person"  (as that  term is used in  Section
                                    13(d)(3) of the  Exchange  Act) other than a
                                    Controlling  Person or a Related  Party of a
                                    Controlling Person;

                           (2)      the adoption of a plan relating to the
                                    liquidation or dissolution of the Company;

                           (3)      the    consummation   of   any   transaction
                                    (including,  without limitation,  any merger
                                    or  consolidation)  the  result  of which is
                                    that any "person" (as defined above),  other
                                    than any Controlling  Person and its Related
                                    Parties,   becomes  the  Beneficial   Owner,
                                    directly or indirectly,  of more than 35% of


                                                133


                                    the Voting Stock of the Company, measured by
                                    voting  power  rather  than number of shares
                                    and a greater  percentage of the outstanding
                                    Voting   Stock  of  the  Company   than  the
                                    percentage of such Voting Stock beneficially
                                    owned  by the  Controlling  Persons  and its
                                    Related  Parties  holding the  largest  such
                                    percentage;

                           (4)      the first day on which a majority of the
                                    members of the Board of Directors of the
                                    Company are not Continuing Directors; or

                           (5)      the  Company  consolidates  with,  or merges
                                    with or  into,  any  Person,  or any  Person
                                    consolidates  with,  or merges with or into,
                                    the Company, in any such event pursuant to a
                                    transaction in which any of the  outstanding
                                    Voting  Stock of the  Company  or such other
                                    Person is converted  into or  exchanged  for
                                    cash,  securities or other  property,  other
                                    than any such  transaction  where the Voting
                                    Stock of the Company outstanding immediately
                                    prior to such  transaction is converted into
                                    or  exchanged  for Voting  Stock (other than
                                    Disqualified  Stock)  of  the  surviving  or
                                    transferee Person constituting a majority of
                                    the outstanding  shares of such Voting Stock
                                    of  such  surviving  or  transferee   Person
                                    (immediately  after  giving  effect  to such
                                    issuance).

                  "Collateral"  has the meaning assigned to it in the Collateral
Documents.

                  "Collateral  Documents" means,  collectively,  all agreements,
deeds of trust instruments, documents, pledges or filings executed in connection
with  granting,  or that  otherwise  evidence,  the Lien of the  trustee  in the
Collateral.

                  "Consolidated  Cash Flow" means, with respect to any specified
Person for any  period,  the  Consolidated  Net  Income of such  Person for such
period plus:

                           (1)      an amount  equal to any  extraordinary  loss
                                    plus any net loss realized by such Person or
                                    any  of  its  Restricted   Subsidiaries   in
                                    connection with an Asset Sale, to the extent
                                    such losses were deducted in computing  such
                                    Consolidated Net Income; plus

                           (2)      provision  for  taxes  based  on  income  or
                                    profits of such  Person  and its  Restricted
                                    Subsidiaries for such period,  to the extent
                                    that such  provision  for taxes was deducted
                                    in computing such  Consolidated  Net Income;
                                    plus

                           (3)      consolidated interest expense of such Person
                                    and its  Restricted  Subsidiaries  for  such
                                    period,  whether paid or accrued and whether
                                    or  not  capitalized   (including,   without
                                    limitation,  amortization  of debt  issuance
                                    costs and original issue discount,  non-cash
                                    interest payments, the interest component of



                                                134


                                    any  deferred   payment   obligations,   the
                                    interest    component    of   all   payments
                                    associated  with Capital Lease  Obligations,
                                    commissions,  discounts  and other  fees and
                                    charges  incurred  in  respect  of letter of
                                    credit or  bankers'  acceptance  financings,
                                    and net of the effect of all  payments  made
                                    or    received     pursuant    to    Hedging
                                    Obligations),  to the  extent  that any such
                                    expense  was  deducted  in  computing   such
                                    Consolidated Net Income; plus

                           (4)      depreciation,     amortization    (including
                                    amortization    of   goodwill    and   other
                                    intangibles  but excluding  amortization  of
                                    prepaid  cash  expenses  that were paid in a
                                    prior  period) and other  non-cash  expenses
                                    (excluding any such non-cash  expense to the
                                    extent that it  represents  an accrual of or
                                    reserve  for  cash  expenses  in any  future
                                    period or  amortization  of a  prepaid  cash
                                    expense that was paid in a prior  period) of
                                    such Person and its Restricted  Subsidiaries
                                    for such  period  to the  extent  that  such
                                    depreciation,    amortization    and   other
                                    non-cash expenses were deducted in computing
                                    such Consolidated Net Income; minus

                           (5)      non-cash items increasing such  Consolidated
                                    Net Income for such  period,  other than the
                                    accrual of revenue in the ordinary course of
                                    business,

  in each case, on a consolidated basis and determined in accordance with GAAP.

                  Notwithstanding  the preceding,  the provision for taxes based
on the income or profits of, and the  depreciation  and  amortization  and other
non-cash  expenses of, a Subsidiary of the Company will be added to Consolidated
Net Income to compute  Consolidated  Cash Flow of the Company only to the extent
that a corresponding  amount would be permitted at the date of  determination to
be  dividended  to the Company by such  Subsidiary  without  prior  governmental
approval  (that  has  not  been  obtained),   and  without  direct  or  indirect
restriction   pursuant  to  the  terms  of  its  charter  and  all   agreements,
instruments,  judgments,  decrees,  orders,  statutes,  rules  and  governmental
regulations applicable to that Subsidiary or its stockholders.

                  "Consolidated Net Income" means, with respect to any specified
Person for any period,  the  aggregate  of the Net Income of such Person and its
Restricted  Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that:

                           (1)      the Net Income  (but not loss) of any Person
                                    that  is  not  a   Subsidiary   or  that  is
                                    accounted   for  by  the  equity  method  of
                                    accounting  will  be  included  only  to the
                                    extent  of  the  amount  of   dividends   or
                                    distributions  paid in cash to the specified
                                    Person or a Wholly Owned  Subsidiary  of the
                                    Person;


                                                135


                           (2)      the Net Income of any Restricted  Subsidiary
                                    will be  excluded  to the  extent  that  the
                                    declaration   or  payment  of  dividends  or
                                    similar  distributions by that Subsidiary of
                                    that  Net  Income  is  not at  the  date  of
                                    determination  permitted  without  any prior
                                    governmental  approval  (that  has not  been
                                    obtained)  or,  directly or  indirectly,  by
                                    operation of the terms of its charter or any
                                    agreement,   instrument,  judgment,  decree,
                                    order,   statute,   rule   or   governmental
                                    regulation  applicable to that Subsidiary or
                                    its stockholders;

                           (3)      the Net Income of any Person acquired in a
                                    pooling of interests transaction for any
                                    period prior to the date of such acquisition
                                    will be excluded;

                           (4)      the cumulative effect of a change in
                                    accounting principles will be excluded; and

                           (5)      the  Net  Income   (but  not  loss)  of  any
                                    Unrestricted  Subsidiary  will be  excluded,
                                    whether or not  distributed to the specified
                                    Person    or   one    of   its    Restricted
                                    Subsidiaries.

                  "Consolidated  Net Worth" means, with respect to any specified
Person as of any date, the sum of:

                           (1)      the consolidated equity of the common
                                    stockholders of such Person and its
                                    consolidated Subsidiaries as of such date;
                                    plus

                           (2)      the  respective  amounts  reported  on  such
                                    Person's  balance sheet as of such date with
                                    respect  to any  series of  preferred  stock
                                    (other than Disqualified  Stock) that by its
                                    terms  is not  entitled  to the  payment  of
                                    dividends   unless  such  dividends  may  be
                                    declared  and paid only out of net  earnings
                                    in respect  of the year of such  declaration
                                    and  payment,  but only to the extent of any
                                    cash  received by such Person upon  issuance
                                    of such preferred stock.

                  "Continuing Directors" means, as of any date of determination,
any member of the Board of Directors of the Company who:

                           (1)      was a member of such Board of Directors on
                                    the date of the indenture; or

                           (2)      was  nominated  for  election  or elected to
                                    such Board of Directors with the approval of
                                    a majority of the  Continuing  Directors who
                                    were  members  of such  Board at the time of
                                    such nomination or election.

                                                136


                  "Controlling  Person"  means anyone who holds more than 10% of
the common stock of the Company as of April 30, 2002.

                  "Deed  of  Trust"  means  the  Deed of  Trust  and  Collateral
Assignment of Rents,  dated as of the date of the  indenture,  by the Company in
favor  of  the  collateral  agent  named  in  the  indenture,   as  amended  and
supplemented from time to time.

                  "Default" means any event that is, or with the passage of time
or the giving of notice or both would be, an Event of Default.

                  "Disqualified  Stock"  means any Capital  Stock  that,  by its
terms (or by the terms of any  security  into  which it is  convertible,  or for
which it is  exchangeable,  in each  case at the  option  of the  holder  of the
Capital  Stock),  or upon the happening of any event,  matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder of the Capital Stock,  in whole or in part, on or prior
to the  date  that  is 91 days  after  the  date  on  which  the  notes  mature.
Notwithstanding the preceding sentence,  any Capital Stock that would constitute
Disqualified  Stock  solely  because the  holders of the Capital  Stock have the
right  to  require  the  Company  to  repurchase  such  Capital  Stock  upon the
occurrence  of a  change  of  control  or an  asset  sale  will  not  constitute
Disqualified  Stock if the terms of such Capital  Stock provide that the Company
may not repurchase or redeem any such Capital Stock pursuant to such  provisions
unless such repurchase or redemption  complies with the covenant described above
under the caption "--Certain Covenants--Restricted Payments."

                  "Equity  Interests"  means  Capital  Stock  and all  warrants,
options  or other  rights to  acquire  Capital  Stock  (but  excluding  any debt
security that is convertible into, or exchangeable for, Capital Stock).

                  "Event of Loss"  means,  with respect to any property or asset
(tangible or intangible,  real or personal) constituting Collateral owned by the
Company  or any  Restricted  Subsidiary,  any of the  following:  (a) any  loss,
destruction  or damage of such property or asset;  (b) any actual  condemnation,
seizure or taking by exercise  of the power of eminent  domain or  otherwise  of
such  property  or  asset,  or  confiscation  of such  property  or asset or the
requisition of the use of such property or asset;  or (c) any settlement in lieu
of clause (b) above, in the case of clause (a), (b) or (c),  whether in a single
event or a series of related events,  which results in Net Proceeds in excess of
$500,000.

                  "FF&E Agreements" means:

                           (1)      the Master Lease  Agreement,  dated December
                                    13,  1999,  by  and  between  PDS  Financial
                                    Corporation--Colorado   and  Riviera   Black
                                    Hawk, Inc.;

                           (2)      the Master Lease Agreement, dated January
                                    14, 1999, between Matrix Funding Corporation
                                    and the Company;

                                                137


                           (3)      the Master Security Agreement, dated as of
                                    July 13, 1999, between General Electric
                                    Capital Corporation and the Company; and

                           (4)      IBM Credit Corporation Conditional Sales
                                    Contract, dated September 1, 1998, between
                                    IBM and Riviera Operating Corporation.

                  "Fixed  Charges" means,  with respect to any specified  Person
for any period, the sum, without duplication, of:

                           (1)      the  consolidated  interest  expense of such
                                    Person and its Restricted  Subsidiaries  for
                                    such   period,   whether  paid  or  accrued,
                                    including, without limitation,  amortization
                                    of debt  issuance  costs and original  issue
                                    discount,  non-cash interest  payments,  the
                                    interest  component of any deferred  payment
                                    obligations,  the interest  component of all
                                    payments   associated   with  Capital  Lease
                                    Obligations,   commissions,   discounts  and
                                    other fees and  charges  incurred in respect
                                    of letter of credit or  bankers'  acceptance
                                    financings,  and  net of the  effect  of all
                                    payments   made  or  received   pursuant  to
                                    Hedging Obligations; plus

                           (2)      the consolidated interest of such Person and
                                    its Restricted Subsidiaries that was
                                    capitalized during such period; plus

                           (3)      any  interest  expense  on  Indebtedness  of
                                    another  Person that is  Guaranteed  by such
                                    Person or one of its Restricted Subsidiaries
                                    or  secured  by a Lien  on  assets  of  such
                                    Person    or   one    of   its    Restricted
                                    Subsidiaries,  whether or not such Guarantee
                                    or Lien is called upon; plus

                           (4)      the  product of (a) all  dividends,  whether
                                    paid or accrued  and whether or not in cash,
                                    on any  series  of  preferred  stock of such
                                    Person    or   any    of   its    Restricted
                                    Subsidiaries, other than dividends on Equity
                                    Interests payable solely in Equity Interests
                                    of  the  Company  (other  than  Disqualified
                                    Stock) or to the Company or a Subsidiary  of
                                    the  Company,  times  (b)  a  fraction,  the
                                    numerator   of   which   is  one   and   the
                                    denominator  of which is one  minus the then
                                    current  combined  federal,  state and local
                                    statutory tax rate of such Person, expressed
                                    as  a   decimal,   in   each   case,   on  a
                                    consolidated  basis and in  accordance  with
                                    GAAP.

                  "Fixed  Charge  Coverage  Ratio"  means  with  respect  to any
specified Person for any period, the ratio of the Consolidated Cash Flow of such
Person and its Restricted  Subsidiaries  for such period to the Fixed Charges of
such Person and its Restricted  Subsidiaries for such period.  In the event that
the specified  Person or any of its  Restricted  Subsidiaries  incurs,  assumes,
Guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary
working capital  borrowings) or issues,  repurchases or redeems  preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage


                                                138


Ratio is being  calculated  and on or prior to the date on which  the  event for
which  the  calculation  of  the  Fixed  Charge  Coverage  Ratio  is  made  (the
"Calculation  Date"),  then the Fixed Charge  Coverage  Ratio will be calculated
giving pro forma effect to such incurrence,  assumption,  Guarantee,  repayment,
repurchase  or  redemption  of  Indebtedness,  or such  issuance,  repurchase or
redemption of preferred stock,  and the use of the proceeds  therefrom as if the
same had occurred at the  beginning  of the  applicable  four-quarter  reference
period.

                  In  addition,  for  purposes of  calculating  the Fixed Charge
Coverage Ratio:

                           (1)      acquisitions  that  have  been  made  by the
                                    specified  Person  or any of its  Restricted
                                    Subsidiaries,  including  through mergers or
                                    consolidations  and  including  any  related
                                    financing    transactions,     during    the
                                    four-quarter  reference period or subsequent
                                    to such reference  period and on or prior to
                                    the Calculation Date will be given pro forma
                                    effect as if they had  occurred on the first
                                    day of the four-quarter reference period and
                                    Consolidated  Cash  Flow for such  reference
                                    period  will be  calculated  on a pro  forma
                                    basis  in  accordance  with  Regulation  S-X
                                    under the Securities Act, but without giving
                                    effect  to  clause  (3) of the  proviso  set
                                    forth in the definition of Consolidated  Net
                                    Income;

                           (2)      the Consolidated  Cash Flow  attributable to
                                    discontinued  operations,  as  determined in
                                    accordance  with  GAAP,  and  operations  or
                                    businesses   disposed   of   prior   to  the
                                    Calculation Date, will be excluded; and

                           (3)      the   Fixed    Charges    attributable    to
                                    discontinued  operations,  as  determined in
                                    accordance  with  GAAP,  and  operations  or
                                    businesses   disposed   of   prior   to  the
                                    Calculation Date, will be excluded, but only
                                    to the extent  that the  obligations  giving
                                    rise  to  such  Fixed  Charges  will  not be
                                    obligations  of the specified  Person or any
                                    of its Restricted Subsidiaries following the
                                    Calculation Date.

                  "GAAP" means  generally  accepted  accounting  principles  set
forth in the opinions and  pronouncements of the Accounting  Principles Board of
the American  Institute of  Certified  Public  Accountants  and  statements  and
pronouncements  of the  Financial  Accounting  Standards  Board or in such other
statements by such other entity as have been  approved by a significant  segment
of the accounting profession, which are in effect from time to time.

                  "Gaming Authority" means any agency, authority, board, bureau,
commission,  department,  office or  instrumentality of any nature whatsoever of
the United States of America or foreign government,  any state,  province or any
city or other political  subdivision,  whether now or hereafter existing, or any
officer or official  thereof,  including without  limitation,  the Nevada Gaming
Commission,  the Nevada Gaming Control Board, the Colorado Gaming Commission and


                                                139


any other agency with  authority to regulate any gaming  operation  (or proposed
gaming  operation)  owned,  managed  or  operated  by the  Company or any of its
Subsidiaries.

                  "Gaming  Law" means the  gaming  laws of any  jurisdiction  or
jurisdictions  to  which  the  Company,  any of its  Subsidiaries  or any of the
Guarantors is, or may at any time after the date of the indenture, be subject.

                  "Gaming  License" means every material  license,  franchise or
other authorization  required to own, lease, operate or otherwise conduct gaming
activities  of  the  Company  or  any of  its  Subsidiaries,  including  without
limitation  all  such  licenses   granted  under  the  Nevada  Gaming  Act,  the
regulations  promulgated pursuant thereto, and other applicable federal,  state,
foreign or local laws.

                  "Gaming  Project"  means  the  project  in  Jefferson  County,
Missouri substantially as described in this Prospectus or another gaming project
with final plans showing at least 1,000 slot machines on the date of opening.

                  "Guarantee"  means a guarantee  other than by  endorsement  of
negotiable instruments for collection in the ordinary course of business, direct
or indirect, in any manner including,  without limitation, by way of a pledge of
assets or  through  letters  of credit or  reimbursement  agreements  in respect
thereof, of all or any part of any Indebtedness.

                  "Guarantors" means each of:

                           (1)      ROC, RGM, RGMC and RBH; and

                           (2)      any other Subsidiary that executes a
                                    Subsidiary Guarantee in accordance with the
                                    provisions of the indenture;

and their respective successors and assigns.

                  "Hedging  Obligations"  means,  with respect to any  specified
Person, the obligations of such Person under:

                           (1)      interest rate swap agreements, interest rate
                                    cap agreements and interest rate collar
                                    agreements; and

                           (2)      other agreements or arrangements designed to
                                    protect such Person against fluctuations in
                                    interest rates.

                  "Indebtedness"  means,  with respect to any specified  Person,
any indebtedness of such Person, whether or not contingent:

                           (1)      in respect of borrowed money;

                           (2)      evidenced by bonds, notes, debentures or
                                    similar instruments or letters of credit (or
                                    reimbursement agreements in respect
                                    thereof);

                           (3)      in respect of bankers' acceptances;

                           (4)      representing Capital Lease Obligations;

                                                140


                           (5)      representing the balance deferred and unpaid
                                    of  the  purchase  price  of  any  property,
                                    except any such balance that  constitutes an
                                    accrued expense or trade payable; or

                           (6)      representing any Hedging Obligations,

         if and to the extent any of the preceding  items (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of the specified Person prepared in accordance with GAAP. In addition,  the term
"Indebtedness"  includes  all  Indebtedness  of others  secured by a Lien on any
asset of the specified  Person  (whether or not such  Indebtedness is assumed by
the specified Person) and, to the extent not otherwise  included,  the Guarantee
by the specified Person of any indebtedness of any other Person.

                  The amount of any Indebtedness outstanding as of any date will
be:

                           (1)      the accreted value of the Indebtedness, in
                                    the case of any Indebtedness issued with
                                    original issue discount; and

                           (2)      the  principal  amount of the  Indebtedness,
                                    together    with   any   interest   on   the
                                    Indebtedness  that is more than 30 days past
                                    due, in the case of any other Indebtedness.

                  "Intercompany  Notes" means the  intercompany  notes issued by
Subsidiaries  of the Company in favor of the Company or a Guarantor  to evidence
advances by the Company or such Guarantor, in each case, in the form attached as
Annex B to the indenture.

                  "Intercreditor Agreement" means the Intercreditor Agreement in
the form attached to the indenture.

                  "Investments" means, with respect to any Person, all direct or
indirect  investments by such Person in other Persons (including  Affiliates) in
the forms of loans  (including  Guarantees  or other  obligations),  advances or
capital  contributions  (excluding  commission,  travel and similar  advances to
officers and employees  made in the ordinary  course of business),  purchases or
other acquisitions for consideration of Indebtedness,  Equity Interests or other
securities,  together  with  all  items  that  are or  would  be  classified  as
investments on a balance sheet prepared in accordance  with GAAP. If the Company
or any  Subsidiary  of the  Company  sells or  otherwise  disposes of any Equity
Interests of any direct or indirect  Subsidiary of the Company such that,  after
giving  effect  to any such  sale or  disposition,  such  Person  is no longer a
Subsidiary of the Company, the Company will be deemed to have made an Investment
on the date of any such sale or  disposition  equal to the fair market  value of
the Company's  Investments in such  Subsidiary that were not sold or disposed of
in an amount  determined  as provided  in the final  paragraph  of the  covenant
described above under the caption  "--Certain  Covenants--Restricted  Payments."
The acquisition by the Company or any Subsidiary of the Company of a Person that
holds an  Investment in a third Person will be deemed to be an Investment by the
Company or such  Subsidiary  in such third Person in an amount equal to the fair
market value of the Investments held by the acquired Person in such third Person
in an amount  determined  as provided  in the final  paragraph  of the  covenant
described above under the caption "--Certain Covenants--Restricted Payments."

                                                141


                  "Lien" means,  with respect to any asset, any mortgage,  lien,
pledge, charge,  security interest or encumbrance of any kind in respect of such
asset,  whether or not filed,  recorded or otherwise  perfected under applicable
law,  including any  conditional  sale or other title retention  agreement,  any
lease in the nature  thereof,  any option or other  agreement  to sell or give a
security  interest  in and any  filing  of or  agreement  to give any  financing
statement  under the Uniform  Commercial  Code (or  equivalent  statutes) of any
jurisdiction.

                  "Net Income" means, with respect to any specified Person,  the
net income (loss) of such Person,  determined in accordance with GAAP and before
any reduction in respect of preferred stock dividends, excluding, however:

                           (1)      any gain (but not loss),  together  with any
                                    related  provision  for  taxes on such  gain
                                    (but not loss), realized in connection with:
                                    (a) any Asset Sale;  or (b) the  disposition
                                    of any  securities  by such Person or any of
                                    its   Restricted    Subsidiaries    or   the
                                    extinguishment  of any  Indebtedness of such
                                    Person    or   any    of   its    Restricted
                                    Subsidiaries; and

                           (2)      any  extraordinary   gain  (but  not  loss),
                                    together  with  any  related  provision  for
                                    taxes on such  extraordinary  gain  (but not
                                    loss).

                  "Net Proceeds"  means the aggregate cash proceeds  received by
the Company or any of its Restricted  Subsidiaries  in respect of any Asset Sale
(including,  without  limitation,  any  cash  received  upon  the  sale or other
disposition of any non-cash  consideration  received in any Asset Sale),  net of
the direct costs  relating to such Asset Sale,  including,  without  limitation,
legal,  accounting and investment banking fees, and sales  commissions,  and any
relocation  expenses  incurred  as a result of the  Asset  Sale,  taxes  paid or
payable as a result of the Asset Sale,  in each case,  after taking into account
any available tax credits or deductions  and any tax sharing  arrangements,  and
any reserve for  adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.

                  "1999  Indenture"  means the  indenture,  dated  June 3, 1999,
between RBH and IBJ Whitehall Bank & Trust Company for the 13% Notes, as amended
to substitute The Bank of New York as trustee.

                  "1997 Indenture"  means the indenture,  dated August 13, 1997,
between the  Company and Norwest  Bank  Minnesota,  N.A.  for the 10% Notes,  as
amended to substitute Bank One as trustee.

                  "Non-Recourse Debt" means Indebtedness:

                           (1)      as to which  neither  the Company nor any of
                                    its  Restricted  Subsidiaries  (a)  provides
                                    credit  support of any kind  (including  any
                                    undertaking,  agreement or  instrument  that
                                    would  constitute   Indebtedness),   (b)  is
                                    directly or indirectly liable as a guarantor
                                    or otherwise, or (c) constitutes the lender;

                                                142


                           (2)      no default with respect to which  (including
                                    any   rights   that  the   holders   of  the
                                    Indebtedness  may  have to take  enforcement
                                    action against an  Unrestricted  Subsidiary)
                                    would permit upon  notice,  lapse of time or
                                    both any holder of any other Indebtedness of
                                    the   Company  or  any  of  its   Restricted
                                    Subsidiaries  to  declare a default  on such
                                    other  Indebtedness  or cause the payment of
                                    the   Indebtedness   to  be  accelerated  or
                                    payable prior to its stated maturity; and

                           (3)      as to which the lenders  have been  notified
                                    in  writing  that  they  will  not  have any
                                    recourse  to  the  stock  or  assets  of the
                                    Company    or   any   of   its    Restricted
                                    Subsidiaries.

                  "Obligations" means any principal,  interest, penalties, fees,
indemnifications,  reimbursements,  damages and other liabilities  payable under
the documentation governing any Indebtedness.

                  "Permitted Business" means the lines of business engaged in by
the Company and its Subsidiaries on the date of the indenture,  and all business
related,  complementary,  or  incidental  thereto,  including but not limited to
gaming,  lodging,  entertainment  and food and  beverage  service,  retail store
leasing and  concessions,  licensing  products,  services and trade  names,  and
consulting  with and managing third parties who are engaged in the foregoing and
similar lines of businesses.

                  "Permitted Investments" means:

                           (1)      any Investment in the Company or in a Wholly
                                    Owned Restricted Subsidiary of the Company
                                    that is a Guarantor;

                           (2)      any Investment in Cash Equivalents;

                           (3)      any Investment by the Company or any
                                    Subsidiary of the Company in a Person, if as
                                    a result of such Investment:

                                    (a)     such Person becomes a Restricted
                                            Subsidiary of the Company and a
                                            Guarantor; or

                                    (b)     such Person is merged,  consolidated
                                            or  amalgamated  with  or  into,  or
                                            transfers  or conveys  substantially
                                            all  of  its   assets   to,   or  is
                                            liquidated  into,  the  Company or a
                                            Restricted Subsidiary of the Company
                                            that is a Guarantor;

                           (4)      any  investment  made  as a  result  of  the
                                    receipt of  non-cash  consideration  from an
                                    Asset Sale that was made  pursuant to and in
                                    compliance with the covenant described above
                                    under  the  caption   "--Repurchase  at  the
                                    Option of Holders--Asset Sales";

                                                143


                           (5)      any acquisition of assets solely in exchange
                                    for the issuance of Equity Interests (other
                                    than Disqualified Stock) of the Company;

                           (6)      any  Investments  received in  compromise of
                                    obligations of such persons  incurred in the
                                    ordinary   course  of  trade   creditors  or
                                    customers that were incurred in the ordinary
                                    course of  business,  including  pursuant to
                                    any  plan  of   reorganization   or  similar
                                    arrangement    upon   the    bankruptcy   or
                                    insolvency   of  any   trade   creditor   or
                                    customer;

                           (7)      Hedging Obligations;

                           (8)      Investments  in  Unrestricted   Subsidiaries
                                    solely  for  the  purpose  of  financing  or
                                    effecting the acquisition,  construction and
                                    development of a Gaming  Project;  provided,
                                    however,  that the  aggregate  book value of
                                    such  Investments  made by the Company after
                                    the date of the indenture  (measured in each
                                    case as of the time of Investment)  does not
                                    exceed  $30.0  million;  provided,  further,
                                    that such  Unrestricted  Subsidiary does not
                                    conduct  any  material  business  operations
                                    other than those related to the acquisition,
                                    construction  and development of such Gaming
                                    Project;

                           (9)      any contribution of all or any portion of
                                    the Six Acre Tracts to an Unrestricted
                                    Subsidiary of the Company; and

                           (10)     contribution  pursuant to any  keep-well  or
                                    completion  guarantee  for a Gaming  Project
                                    provided  that  the  indebtedness   incurred
                                    pursuant to such  keep-well or  contribution
                                    agreement  could be incurred under the terms
                                    of the covenant  "Incurrence of Indebtedness
                                    and  Issuance  of  Preferred  Stock" in this
                                    indenture.

                  "Permitted Liens" means:

                           (1)      Liens on specific  assets of the Company and
                                    any  Guarantor  securing   Indebtedness  and
                                    other  Obligations  under  Revolving  Credit
                                    Facilities  that were permitted by the terms
                                    of the indenture to be incurred;

                           (2)      Liens on the assets of the Company and the
                                    Guarantees created by the indenture and the
                                    Collateral Documents securing the notes and
                                    Guarantees;

                           (3)      Liens in favor of the Company or the
                                    Guarantors;

                                                144


                           (4)      Liens on  property  of a Person  existing at
                                    the time such  Person is merged with or into
                                    or  consolidated  with  the  Company  or any
                                    Subsidiary  of the  Company;  provided  that
                                    such  Liens were in  existence  prior to the
                                    contemplation     of    such    merger    or
                                    consolidation  and  do  not  extend  to  any
                                    assets other than those of the Person merged
                                    into or consolidated with the Company or the
                                    Subsidiary;

                           (5)      Liens on  property  existing  at the time of
                                    acquisition  of the  property by the Company
                                    or any  Subsidiary of the Company,  provided
                                    that such Liens were in  existence  prior to
                                    the contemplation of such acquisition;

                           (6)      Liens to secure the performance of statutory
                                    obligations,   surety   or   appeal   bonds,
                                    performance  bonds or other obligations of a
                                    like nature  incurred in the ordinary course
                                    of business;

                           (7)      Liens  to  secure  Indebtedness   (including
                                    Capital  Lease  Obligations)   permitted  by
                                    clause  (3) of the second  paragraph  of the
                                    covenant         entitled         "--Certain
                                    Covenants--Incurrence  of  Indebtedness  and
                                    Issuance of Preferred  Stock"  covering only
                                    the assets acquired with such Indebtedness;

                           (8)      Liens existing on the date of the indenture;

                           (9)      Liens for taxes, assessments or governmental
                                    charges   or   claims   that   are  not  yet
                                    delinquent  or that are being  contested  in
                                    good   faith  by   appropriate   proceedings
                                    promptly     instituted    and    diligently
                                    concluded,  provided  that  any  reserve  or
                                    other  appropriate  provision as is required
                                    in  conformity   with  GAAP  has  been  made
                                    therefor;

                           (10)     Liens  incurred  in the  ordinary  course of
                                    business of the Company or any Subsidiary of
                                    the Company with respect to obligations that
                                    do not exceed  $2.5  million at any one time
                                    outstanding;

                           (11)     Liens on assets of Unrestricted Subsidiaries
                                    that secure Non-Recourse Debt of
                                    Unrestricted Subsidiaries;

                           (12)     leases, subleases,  easements,  licenses and
                                    rights of way not in  existence  on the date
                                    of the indenture and not  interfering in any
                                    material  respect with the ordinary  conduct
                                    of the business of the Company or any of its
                                    Subsidiaries   and  not   impairing  in  any
                                    material    respect   the   value   of   the
                                    Collateral; and

                           (13)     Liens  on  any  leasehold  interest  in  the
                                    Collateral   granted   by  the   Company  as
                                    permitted by this indenture,  which Liens do
                                    not   encumber   the  fee  interest  in  the
                                    Collateral,  are  subordinate  to the  Liens
                                    created by the  Collateral  Documents and do
                                    not  otherwise   impair  the  value  of  the
                                    Collateral.

                  "Permitted Refinancing Indebtedness" means any Indebtedness of
the Company or any of its Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend, refinance,  renew, replace, defease or
refund other  Indebtedness of the Company or any of its Restricted  Subsidiaries
(other than intercompany Indebtedness); provided that:

                                                145


                           (1)      the principal  amount (or accreted value, if
                                    applicable)  of such  Permitted  Refinancing
                                    Indebtedness  does not exceed the  principal
                                    amount (or accreted value, if applicable) of
                                    the   Indebtedness   extended,   refinanced,
                                    renewed,  replaced,   defeased  or  refunded
                                    (plus   all   accrued    interest   on   the
                                    Indebtedness  and the amount of all expenses
                                    and   premiums    incurred   in   connection
                                    therewith);

                           (2)      such Permitted Refinancing  Indebtedness has
                                    a final  maturity  date later than the final
                                    maturity date of, and has a Weighted Average
                                    Life to  Maturity  equal to or greater  than
                                    the  Weighted  Average  Life to Maturity of,
                                    the Indebtedness being extended, refinanced,
                                    renewed, replaced, defeased or refunded;

                           (3)      if   the   Indebtedness    being   extended,
                                    refinanced,  renewed, replaced,  defeased or
                                    refunded is subordinated in right of payment
                                    to the  notes,  such  Permitted  Refinancing
                                    Indebtedness has a final maturity date later
                                    than the  final  maturity  date  of,  and is
                                    subordinated  in right of  payment  to,  the
                                    notes on terms at least as  favorable to the
                                    Holders of notes as those  contained  in the
                                    documentation   governing  the  Indebtedness
                                    being   extended,    refinanced,    renewed,
                                    replaced, defeased or refunded; and

                           (4)      such  Indebtedness is incurred either by the
                                    Company or by the Restricted  Subsidiary who
                                    is the  obligor  on the  Indebtedness  being
                                    extended,  refinanced,   renewed,  replaced,
                                    defeased or refunded.

                  "Person" means any individual, corporation, partnership, joint
venture,  association,  joint-stock company, trust, unincorporated organization,
limited liability company or government or other entity.

                  "Public Equity  Offering" means a firmly  underwritten  public
offering of the Company's  common stock that is registered  under the Securities
Act.

                  "Related Party" means:

                           (1)      any controlling stockholder, 80% (or more)
owned Subsidiary, or immediate family member (in the case of an individual) of
any Principal; or

                                                146


                           (2)     any trust, corporation, partnership or other
entity,   the  beneficiaries,   stockholders,   partners,   owners  or  Persons
beneficially  holding an 80% or more controlling  interest of which  consist  of
any  one  or  more  Principals  and/or such  other Persons  referred  to in  the
immediately preceding clause (1).

                  "RBH" means Riviera Black Hawk, Inc.

                  "RGM" means Riviera Gaming Management, Inc.

                  "RGMC" means Riviera Gaming Management of Colorado, Inc.

                  "ROC" means Riviera Operating Corporation.

                  "Restricted  Investment"  means  an  Investment  other  than a
Permitted Investment.

                  "Restricted  Subsidiary"  of a Person means any  Subsidiary of
the referent Person that is not an Unrestricted Subsidiary.

                  "Revolving   Credit   Facility"   means  a  debt  facility  or
commercial  paper  facility,  in each  case  with  banks or other  institutional
lenders providing for revolving credit loans or letters of credit, in each case,
as amended, restated,  modified,  renewed,  refunded,  replaced or refinanced in
whole or in part from time to time.

                  "Significant  Subsidiary" means any Subsidiary that would be a
"significant  subsidiary" as defined in Article 1, Rule 1-02 of Regulation  S-X,
promulgated  pursuant to the Securities  Act, as such Regulation is in effect on
the date hereof.

                  "Six Acre Tracts" shall have the meaning specified in the Deed
of Trust.

                  "Stated  Maturity"  means,  with respect to any installment of
interest  or  principal  on any  series of  Indebtedness,  the date on which the
payment of  interest  or  principal  was  scheduled  to be paid in the  original
documentation  governing such Indebtedness,  and will not include any contingent
obligations to repay,  redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.

                  "Subsidiary" means, with respect to any specified Person:

                           (1)      any   corporation,   association   or  other
                                    business  entity  of which  more than 50% of
                                    the total  voting power of shares of Capital
                                    Stock  entitled   (without   regard  to  the
                                    occurrence  of any  contingency)  to vote in
                                    the  election  of  directors,   managers  or
                                    trustees of the corporation,  association or
                                    other  business  entity is at the time owned
                                    or controlled,  directly or  indirectly,  by
                                    that  Person  or one or  more  of the  other
                                    Subsidiaries    of   that   Person   (or   a
                                    combination thereof); and

                           (2)      any partnership (a) the sole general partner
                                    or the managing  general partner of which is
                                    such Person or a  Subsidiary  of such Person
                                    or (b) the only  general  partners  of which
                                    are that Person or one or more  Subsidiaries
                                    of that Person (or any combination thereof).

                  "10% Notes" means the Company's 10% First Mortgage Notes due
2004.

                  "13% Notes" means the 13% First  Mortgage  Notes due 2005 With
Contingent Interest of RBH.

                                                147


                  "Voting  Stock" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.

                  "Unrestricted  Subsidiary" means any Subsidiary of the Company
(other  than ROC,  RGM,  RGMC and RBH or any  successor  to any of them) that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution, but only to the extent that such Subsidiary:

                           (1)      has no Indebtedness other than Non-Recourse
                                    Debt;

                           (2)      is not  party  to any  agreement,  contract,
                                    arrangement   or   understanding   with  the
                                    Company or any Restricted  Subsidiary of the
                                    Company   unless   the  terms  of  any  such
                                    agreement,    contract,    arrangement    or
                                    understanding  are no less  favorable to the
                                    Company or such  Restricted  Subsidiary than
                                    those  that  might be  obtained  at the time
                                    from Persons who are not  Affiliates  of the
                                    Company;

                           (3)      is a Person  with  respect to which  neither
                                    the  Company  nor  any  of  its   Restricted
                                    Subsidiaries  has  any  direct  or  indirect
                                    obligation  (a) to subscribe for  additional
                                    Equity  Interests  or  (b)  to  maintain  or
                                    preserve such Person's  financial  condition
                                    or to  cause  such  Person  to  achieve  any
                                    specified levels of operating results;

                           (4)      has not guaranteed or otherwise directly or
                                    indirectly provided credit support for any
                                    Indebtedness of the Company or any of its
                                    Restricted Subsidiaries; and

                           (5)      has at least  one  director  on its Board of
                                    Directors   that  is  not  a   director   or
                                    executive  officer of the  Company or any of
                                    its Restricted Subsidiaries and has at least
                                    one executive officer that is not a director
                                    or  executive  officer of the Company or any
                                    of its Restricted Subsidiaries.

                  Any   designation  of  a  Subsidiary  of  the  Company  as  an
Unrestricted  Subsidiary  will be  evidenced  to the  trustee by filing with the
trustee  a  certified  copy  of the  Board  Resolution  giving  effect  to  such
designation  and an  officer's  certificate  certifying  that  such  designation
complied  with  the  preceding  conditions  and was  permitted  by the  covenant
described above under the caption  "--Certain  Covenants--Restricted  Payments."
If, at any time, any  Unrestricted  Subsidiary  would fail to meet the preceding
requirements as an Unrestricted  Subsidiary,  it will thereafter  cease to be an
Unrestricted  Subsidiary for purposes of the indenture and any  Indebtedness  of
such Subsidiary will be deemed to be incurred by a Restricted  Subsidiary of the
Company  as of such  date  and,  if such  Indebtedness  is not  permitted  to be
incurred  as of such  date  under the  covenant  described  under the  caption "
--Certain  Covenants--Incurrence  of  Indebtedness  and  Issuance  of  Preferred
Stock," the Company will be in default of such covenant.  The Board of Directors
of the Company may at any time  designate  any  Unrestricted  Subsidiary to be a
Restricted  Subsidiary;  provided that such  designation will be deemed to be an
incurrence  of  Indebtedness  by a Restricted  Subsidiary  of the Company of any
outstanding  Indebtedness of such  Unrestricted  Subsidiary and such designation
will only be permitted if (1) such  Indebtedness is permitted under the covenant
described under the caption "--Certain Covenants--Incurrence of Indebtedness and
Issuance  of  Preferred  Stock,"  calculated  on a pro  forma  basis  as if such
designation had occurred at the beginning of the four-quarter  reference period;
(2) no  Default  or  Event  of  Default  would be in  existence  following  such
designation;  and (3) the  provisions  of the  covenant  entitled  "--Additional
Subsidiary Guarantees" have been satisfied with respect to such Subsidiary.

                                                148


                  "Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:

                           (1)      the  sum  of  the   products   obtained   by
                                    multiplying  (a) the  amount  of  each  then
                                    remaining installment,  sinking fund, serial
                                    maturity  or  other  required   payments  of
                                    principal,   including   payment   at  final
                                    maturity, in respect of the Indebtedness, by
                                    (b) the number of years  (calculated  to the
                                    nearest   one-twelfth)   that  will   elapse
                                    between  such  date and the  making  of such
                                    payment; by

                           (2)      the then outstanding principal amount of
                                    such Indebtedness.

                  "Wholly Owned  Restricted  Subsidiary" of any specified Person
means a Subsidiary of such Person all of the outstanding  Capital Stock or other
ownership  interests of which (other than directors'  qualifying shares) will at
the time be owned  by such  Person  or by one or more  Wholly  Owned  Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.

                       GOVERNMENT REGULATION AND LICENSING

Nevada

Nevada Gaming Authority

                  The ownership  and  operation of casino  gaming  facilities in
Nevada are subject  to: (a) The Nevada  Gaming  Control Act and the  regulations
promulgated  thereunder  (collectively,  the "Nevada Act") and (b) various local
ordinances and regulations.  Our gaming  operations are subject to the licensing
and   regulatory   control  of  the  Nevada  Gaming   Commission   (the  "Nevada
Commission"), the Nevada Gaming Control Board (the "Nevada Board") and the Clark
County  Liquor  and  Gaming   Licensing   Board  (the  "Clark  County   Board"),
collectively referred to as the "Nevada Gaming Authorities."

                                                149


                  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: (a) the prevention of unsavory or unsuitable
persons from having a direct or indirect involvement with gaming at any time and
in any capacity; (b) the establishment and maintenance of responsible accounting
practices and  procedures;  (c) 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;  (d) the prevention of cheating and
fraudulent  practices;  and (e)  providing a source of state and local  revenues
through  taxation and  licensing  fees.  Changes 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 a 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  from the Nevada  Gaming  Authorities,  the  various
registrations, approvals, permits, findings of suitability and licenses required
in order to engage in  gaming  activities  and  manufacturing  and  distribution
activities in Nevada.

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

                                                150


                  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 or Riviera 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 the Nevada  Commission  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.  If the  beneficial  holder  who must be found  suitable  is a
corporation,  partnership,  limited  liability  company or trust, it must submit
detailed  business and  financial  information,  including a list of  beneficial
owners. The applicant must pay all costs of investigation incurred by the Nevada
Gaming Authorities in conducting any such investigation.

                  The Nevada Act requires  any person who acquires  more than 5%
of a Registered Corporation's voting securities to report the acquisition to the
Nevada  Commission.  The Nevada Act requires that beneficial owners of more than
10% of our 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 our voting  securities  may apply to the Nevada
Commission  for a waiver of such finding of  suitability  if such  institutional
investor  holds  our  voting   securities  for  investment   purposes  only.  An
institutional  investor  shall not be deemed to hold our 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 our board of directors,  any change in our corporate charter, bylaws,
management,  policies or  operations,  or any of our gaming  affiliates,  or any
other action which the Nevada  Commission finds to be inconsistent  with holding
our voting securities for investment purposes only.  Activities which are deemed
to be consistent with holding our voting securities for investment purposes only
include:  (a)  voting  on all  matters  voted  on by  stockholders;  (b)  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 (c) such other activities as the Nevada
Commission may determine to be consistent  with such investment  intent.  If the
beneficial  holder of our  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.


                                                151


                  Any  person  who fails or  refuses  to apply for a finding  of
suitability  or a license  within 30 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 (a) pay that person any  dividend  or interest  upon voting our
securities,  (b) allow that  person to  exercise,  directly or  indirectly,  any
voting  right  conferred  through  securities  held  by  that  person,  (c)  pay
remuneration in any form to that person for services  rendered or otherwise,  or
(d) 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 of our  debt  or  similar  securities  to file  applications,  be
investigated  and be found  suitable to own our 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, we can be  sanctioned,  including  the loss of our
approvals, if without the prior approval of the Nevada Commission, we (a) pay to
the unsuitable person any dividend,  interest,  or any distribution  whatsoever;
(b) recognize any voting right by such unsuitable person in connection with such
securities;  (c) pay the unsuitable person remuneration in any form; or (d) make
any  payment  to  the  unsuitable  person  by  way  of  principal,   redemption,
conversion, exchange, liquidation, or similar transaction.

                  We and Riviera Operating  Corporation 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. The approval, if given, does not constitute a finding,  recommendation
of approval by the Nevada  Commission  or the Nevada Board as to the accuracy or
adequacy  of the  prospectus  or the  investment  merit of the  securities.  Any
representation  to the contrary is unlawful.  The exchange  offer of  registered
debt  securities for the notes will  constitute a public  offering as defined in
the Nevada Act and will require the prior approval of the Nevada Commission upon



                                                152


the  recommendation of the Nevada Board. In addition,  (a) 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,  (b) the  pledge 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 (c) 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.  We have
filed an application  for approval of the exchange offer and for the approval of
the issuance of a guarantee by, and the  hypothecation of the assets of, Riviera
Operating   Corporation,   and  for   approval  of  a  Stock  Pledge  and  Stock
Restrictions.  No assurance can be given that such approvals will be granted or,
if granted, that such approvals will be given on a timely basis.

          Changes in control of us 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: (a) assure the financial  stability of corporate  gaming Licensees and their
affiliates;  (b) preserve the beneficial  aspects of conducting  business in the
corporate form; and (c) 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  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:  (a) a  percentage  of the gross  revenues  received;  (b) the number of
gaming devices  operated;  or (c) the number of table games  operated.  A casino



                                                153


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.

Colorado

Colorado Gaming and Liquor Regulation

Summary

         In general,  we, Riviera Black Hawk, our principal  executive  officers
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 original retail gaming
license was approved by the Colorado Gaming Commission on November 18, 1999, and
has been successfully renewed each subsequent year.

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.


                                                154


         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  Act  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 paid by a licensee  to the state of Colorado as
tax for the privilege of conducting limited stakes gaming. Such percentage is to
be established by the Colorado Commission annually.

         The Colorado Act declares  public policy on limited stakes gaming to be
that:  (1) the  success  of  limited  stakes  gaming is  dependent  upon  public
confidence and trust that licensed  limited stakes gaming is conducted  honestly
and  competitively;  the rights of the  creditors  of licensees  are  protected;
gaming is free from criminal and corruptive elements;  (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 affirmative commission
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 the Colorado Act 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.


                                                155


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  Director  of the  Division of Gaming.  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.

         While the  process  of a  background  check for a  support  license  is
limited to a criminal  history record check and such cursory  examination as the
Division of Gaming may feel appropriate,  an applicant for any of the other four
gaming licenses 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,  to such extent as may be deemed


                                                156


necessary by the Division. 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 for the license.

         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 on or concerning the licensed premises 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  to become a party.  The  Division
Director or the Colorado  Commission may require  changes in the lease or gaming
contract before an applicant is approved or  participation  in such agreement is
allowed or may require termination of the lease or gaming contract.

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

         Licensees have a continuing duty to report  immediately 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, held or applied for by the licensee.

         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.


                                                157


         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  Constitution  permits an annual  tax on  limited  gaming
proceeds 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.  Annually during April, May
and June,  the Colorado  Commission,  as mandated by the  Colorado  Regulations,
shall conduct rule-making hearings concerning the gaming tax rate and device fee
rate for the subsequent gaming year. However, rigid compliance with the Colorado
Regulations  is not mandatory and shall in no way be construed to limit the time
periods or  subject  matters  which the  Colorado  Commission  may  consider  in
determining the various tax rates. 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 tax rate structure has remained  relatively  stable  throughout the
existence  of limited  gaming  within the state.  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 $62.50
per device on all devices  exceeding 50. 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
$7.42 per device and a monthly transportation  authority device fee of $8.84 per
device also may apply  depending  upon the location of the licensed  premises in
Black Hawk.

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

         Violation  of the  Colorado  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.


                                                158


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 five 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


                                                159


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.

         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,  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.


                                                160


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.

                              PLAN OF DISTRIBUTION

         Each  broker-dealer  that receives new notes for its own account in the
exchange offer must  acknowledge that it will deliver a prospectus in connection
with any resale of those new  notes.  This  Prospectus,  as it may be amended or
supplemented  from time to time,  may be used by a  broker-dealer  in connection
with resales of new notes  received in exchange  for  existing  notes where such
existing  notes were acquired as a result of  market-making  activities or other
trading activities. We have agreed that, for a period of up to one year from the
exchange  offer,  we will make this  Prospectus,  as  amended  or  supplemented,
available to any  broker-dealer  for use in connection with any such resale.  In
addition, through January 23, 2003 (90 days after commencement of this exchange
offer), all dealers effecting transactions in the new notes must deliver a
prospectus.

         We will  not  receive  any  proceeds  from  any  sale of new  notes  by
broker-dealers.  New notes received by  broker-dealers  for their own account in
the exchange  offer may be resold from time to time in  over-the-counter  market
transactions, in negotiated transactions,  through the writing of options on the
new  notes  or a  combination  of such  methods  of  resale,  at  market  prices
prevailing at the time of resale,  at prices related to such  prevailing  market
prices or negotiated prices. Any such resale may be made directly to purchasers,
or to or through brokers or dealers who may receive  compensation in the form of
commissions or concessions from any such  broker-dealer or the purchasers of any
such new notes.  Any  broker-dealer  that resells new notes that it received for
its own account in the exchange offer and any broker or dealer that participates
in a  distribution  of such new notes may be deemed an  "underwriter"  under the
Securities Act and any profit on any such resale of new notes and any commission
or  concessions  received  by  any  such  persons  may  be  deemed  underwriting
compensation  under the Securities Act. The letter of transmittal states that by
acknowledging   that  it  will  deliver  and  by  delivering  a  prospectus,   a
broker-dealer will not be deemed to admit that it is an "underwriter"  under the
Securities Act.

         For up to one year from the  closing  of the  exchange  offer,  we will
promptly  send  additional  copies  of this  Prospectus  and (any  amendment  or
supplement) to any broker-dealer that requests such documents. We have agreed to
pay expenses  incidental  to the exchange  offer,  including the expenses of one
counsel for the holders of the notes,  other than  commissions or concessions of
any brokers or dealers.  We will  indemnify the holders of the notes,  including
any broker-dealers, against certain liabilities, including liabilities under the
Securities Act.

         Broker-dealers  that acquired  existing  notes  directly from us in the
initial offering and not as a result of market-making or trading  activities can
not use this Prospectus in connection  with resales of the new notes.  Absent an
exemption,  such broker-dealers must comply with the registration and prospectus
delivery  requirements  of the Securities  Act in connection  with such resales.
Under  certain of these and other  circumstances  described in the  registration
rights  agreement,  we have  agreed to file  with the  Securities  and  Exchange


                                                161


Commission a shelf registration statement to cover resales. (See "Description of
Notes - Registration Rights; Liquidated Damages.")

                                  LEGAL MATTERS

     Certain  legal  matters  regarding  the  validity  of the new notes will be
passed  upon for us by Gordon & Silver,  Ltd.,  Las  Vegas,  Nevada.  Jeffrey A.
Silver,  a  shareholder  in Gordon & Silver,  Ltd.,  is a member of our Board of
Directors.  Mr.  Silver  beneficially  owns 5,800  shares of our  common  stock.
Certain  matters  with  respect to  Colorado  law will be passed  upon for us by
Robinson,  Waters & O'Dorisio,  P.C.,  Denver,  Colorado.  Certain  matters with
respect  to Nevada  gaming law will be passed  upon for us by  Schreck  Brignone
Godfrey, Las Vegas, Nevada.

                                   EXPERTS

         The consolidated  financial  statements of Riviera Holdings Corporation
as of December 31, 2000 and 2001,  and for each of the three years in the period
ended  December  31, 2001  included  in this  Prospectus,  have been  audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
elsewhere  in this  Prospectus,  and have been so included in reliance  upon the
reports of such firm given upon its  authority  as an expert in  accounting  and
auditing.

                              AVAILABLE INFORMATION

         We file annual and  quarterly  reports and other  information  with the
Securities and Exchange  Commission.  You may read and copy any document that we
file at the Securities and Exchange  Commission's  Public  Reference Room at 450
Fifth Street,  N.W.,  Washington,  D.C. 20549.  Please call  1-800-SEC-0300  for
further  information  on the operation of the Public  Reference  Room.  Reports,
proxy statements and other  information  regarding  issuers,  including us, that
file  electronically  with  the  Securities  and  Exchange  Commission  are also
available to the public from the Securities and Exchange  Commission's  Web site
at http://www.sec.gov.

                                             162


         We  have  filed  with  the   Securities   and  Exchange   Commission  a
Registration  Statement on Form S-4 under the Securities Act with respect to the
new notes  offered  hereby.  As  permitted by the rules and  regulations  of the
Securities and Exchange  Commission,  this Prospectus omits certain information,
exhibits and undertakings contained in the Registration  Statement.  For further
information  about  us and the  new  notes,  we  refer  you to the  Registration
Statement, including the related exhibits and schedules.

         Potential  investors may obtain a copy of the  indenture,  registration
rights  agreement and other documents  described  herein as being available from
us, without charge, by writing to us at Riviera Holdings  Corporation,  2901 Las
Vegas Boulevard South, Las Vegas, Nevada 89109.

         We have not authorized any dealer,  salesperson or other person to give
any information or to make any representations not contained in this Prospectus.
This  Prospectus  does not constitute an offer to sell, or a solicitation  of an
offer to buy, any of the Notes offered  hereby in any  jurisdiction  where it is
unlawful.  Neither the delivery of this  Prospectus  nor any sale made hereunder
shall,  under any  circumstances,  create any  implication  that the information
contained herein is correct as of any time subsequent to the date hereof or that
there has been no change in our affairs since such date.

                 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     Our  Annual  Report  on Form  10-K for the year  ended  December 31,  2001,
Quarterly  Reports  on Form  10-Q  for the  quarters  ended  March 31,  2002 and
June 30,  2002,  and Current  Reports on Form 8-K filed with the  Securities and
Exchange  Commission in 2002 on February 4,  11 and 12, April 22, June 6, 21, 27
and 28,  July 31 and  September 19  are hereby  incorporated  by reference.  All
documents  that we file pursuant to Sections  13(a),  13(c),  14 or 15(d) of the
Securities  Exchange Act of 1934 after the date of this  Prospectus and prior to
the termination of this exchange offer shall be deemed incorporated by reference
in this Prospectus and a part hereof from the date we file those documents.  The
statements  in this  Prospectus  shall be deemed  modified or  superseded to the
extent that a  statement  in any  subsequently  filed  document  which is deemed
incorporated by reference  herein modifies or supersedes  such  statements.  Any
such  statements  so modified or  superseded  shall not be deemed a part of this
Prospectus, except as so modified or superseded.

     We will  provide,  without  charge,  to each  person to whom a copy of this
Prospectus is delivered,  on the request of such person, a copy of any or all of
the documents  incorporated  herein by reference (other than exhibits  thereto).
Requests for such copies  should be directed to our  principal  office:  Riviera
Holdings Corporation,  2901 Las Vegas Boulevard South, Las Vegas,  Nevada 89109,
Attention: Chief Financial Officer (telephone: (702) 734-5110).



                                                163







                          RIVIERA HOLDINGS CORPORATION
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                                            Page

                                                                                          
INDEPENDENT AUDITORS' REPORT..............................................................   F-2

CONSOLIDATED  FINANCIAL  STATEMENTS  AS OF AND FOR THE SIX MONTHS ENDED JUNE 30,
   2002 AND FOR THE SIX MONTHS  ENDED JUNE 30, 2001  (UNAUDITED),  AND AS OF AND
   FOR THE  YEARS  ENDED  DECEMBER  31,  2001 AND  2000  AND FOR THE YEAR  ENDED
   DECEMBER 31, 1999:

   Balance Sheets.........................................................................   F-3

   Statements of Operations...............................................................   F-4

   Statements of Stockholders' Equity.....................................................   F-5

   Statements of Cash Flows...............................................................   F-6

   Notes to Consolidated Financial Statements.............................................   F-8














                                                        F-1



                          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, 2001
and 2000 and the related  consolidated  statements of operations,  stockholders'
equity,  and cash flows for each of the three years in the period ended December
31, 2001.  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 auditing standards generally
accepted in the United States of America.  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, 2001 and 2000 and the results of its  operations and its cash flows for each
of the three years in the period  ended  December  31, 2001 in  conformity  with
accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

February 12, 2002
Las Vegas, Nevada








                                                F-2





                          RIVIERA HOLDINGS CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                      (In Thousands, Except Share Amounts)

                                                                                        June 30, 2002             December 31,
                                                                                                              2001           2000
                                                                                                          ------------   --------
                                                                                         (Unaudited)
ASSETS

CURRENT ASSETS:
                                                                                                                    
   Cash and cash equivalents....................................................         $    21,974      $   46,606      $  52,174
   Accounts receivable, net.....................................................               2,921           3,528          5,548
   Inventories..................................................................               1,807           2,253          3,342
   Prepaid expenses and other assets............................................               3,493           3,083          4,599
   Treasury bills held to retire debt...........................................             226,632                          4,599
                                                                                        ------------     -----------    -----------
      Total current assets......................................................             256,827          55,470         65,663

PROPERTY AND EQUIPMENT, Net.....................................................             195,060         200,531        207,030

OTHER ASSETS, Net...............................................................              18,638           6,728          8,128

DEFERRED INCOME TAXES, Net......................................................               5,089           5,089          2,889
                                                                                        ------------     -----------    -----------
TOTAL...........................................................................         $   475,614      $  267,818      $ 283,710
                                                                                         ===========      ==========      =========



LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Current portion of long-term debt............................................         $     3,297      $    3,151      $   2,871
   Accounts payable.............................................................              10,517           8,200          9,731
   Accrued interest.............................................................                 343           8,084          7,727
   Accrued expenses.............................................................              13,040          14,740         16,731
   Bonds(including accrued interest payable of $7,434) to be retired with
   U.S. Treasury Bills..........................................................             217,374
                                                                                         -----------     -----------    -----------
      Total current liabilities.................................................             244,571          34,175         37,060
                                                                                         -----------     -----------    -----------
OTHER LONG-TERM LIABILITIES.....................................................               7,766           7,391          6,533
                                                                                         -----------     -----------    -----------
LONG-TERM DEBT, Net of current portion..........................................             218,234         217,288        223,172
                                                                                         -----------     -----------        -------

COMMITMENTS AND CONTINGENCIES (Note 12)

STOCKHOLDERS' EQUITY:
   Common stock ($.001 par value; 20,000,000 shares authorized; 5,106,776 shares
      issued at June 30, 2002 and December 31, 2001 and 2000, respectively).....                   5               5              5
   Additional paid-in capital...................................................              13,485          13,485         13,446
   Treasury stock (1,653,594, 1,674,144 and 1,431,648 shares at June 30, 2002 and
      December 31, 2001 and 2000, respectively).................................             (11,145)        (11,246)        (9,633)
   Retained earnings............................................................               2,798           6,720         13,127
                                                                                         ------------    -----------    -----------
      Total stockholders' equity................................................               5,143           8,964         16,945
                                                                                         ------------    -----------    -----------
TOTAL...........................................................................         $   475,614      $  267,818      $ 283,710
                                                                                         ===========      ==========      =========





                    See notes to consolidated financial statements.

                                                F-3





                          RIVIERA HOLDINGS CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In Thousands, Except Per Share Amounts)

                                                                Six Months Ended
                                                             June 30,     June 30,
                                                               2002         2001                Year Ended December 31,
                                                           ------------ ------------     ---------------------------------
                                                                                           2001           2000          1999
                                                                                           ----           ----          ----
                                                                  (Unaudited)
REVENUES:
                                                                                                         
   Casino................................................    $  54,926    $ 58,314    $   114,039    $  107,693     $   73,181
   Rooms.................................................       21,386      24,471         44,255        43,819         39,899
   Food and beverage.....................................       16,378      16,410         31,256        30,756         25,117
   Entertainment.........................................        8,580      11,763         20,692        24,526         20,994
   Other.................................................        4,251       4,928          9,119        10,538         11,713
                                                           -----------    --------    -----------    ----------     ----------

        Total revenues...................................      105,521     115,886        219,361       217,332        170,904
   Less promotional allowances...........................      (9,169)      (8,858)        17,330        15,801         13,636
                                                           ----------     --------    -----------    ----------     ----------

        Net revenues.....................................       96,352     107,028        202,031       201,531        157,268
                                                           -----------    --------    -----------    ----------     ----------

COSTS AND EXPENSES:
   Direct costs and expenses of operating departments:
      Casino.............................................       29,186      32,111         62,845        57,450         42,306
      Rooms..............................................       11,726      12,228         23,339        23,364         21,909
      Food and beverage..................................       10,635      11,002         21,426        21,372         18,307
      Entertainment......................................        5,674       8,386         14,900        18,959         16,271
      Other..............................................        1,421       1,609          3,068         3,146          3,228
   Other operating expenses:
      General and administrative.........................       19,363      21,420         42,239        41,312         29,568
      Preopening expenses--Black Hawk, Colorado, project..           0           0                        1,222            595
      Depreciation and amortization......................        8,949       8,546         17,243        17,827         13,991
                                                           -----------    --------    -----------    ----------     ----------

        Total costs and expenses.........................       86,954      95,302        185,060       184,652        146,175
                                                           -----------    --------    -----------    ----------     ----------

INCOME FROM OPERATIONS...................................        9,398      11,726         16,971        16,879         11,093
                                                           -----------    --------    -----------    ----------     ----------

OTHER (EXPENSE) INCOME:
   Interest expense......................................       (13,169)    (13,453)      (26,864)      (27,805)       (23,448)
   Interest expense - bonds held for retirement..........          (364)
   Interest income.......................................           229         675         1,274         2,429          2,255
   Interest capitalized..................................                                                   616          4,733
   Other, net............................................           (16)        (31)          (28)        1,171         (1,963)
                                                               ---------   ----------  -----------    ----------     ----------

        Total other expense..............................       (13,320)     (12,809)     (25,618)      (23,589)       (18,423)
                                                              ----------    ----------  -----------    ----------     ----------

LOSS BEFORE BENEFIT FOR INCOME TAXES.....................        (3,922)      (1,083)      (8,647)       (6,710)        (7,330)
BENEFIT FOR INCOME TAXES.................................                       (355)      (2,240)       (2,495)        (4,461)
                                                              ----------  ----------  -----------    ----------     ----------
NET LOSS.................................................     $  (3,922)   $    (728) $    (6,407)   $   (4,215)    $   (2,869)
                                                               =========    ==========  ===========    ==========     ==========

EARNINGS (LOSS) PER SHARE DATA:
   Loss per share--
      Basic and diluted..................................    $   (1.14)    $ (0.20)  $     (1.79)   $    (1.05)    $    (0.58)
                                                             =========     =========  ===========    ==========     ==========
   Weighted-average common shares outstanding............        3,444        3,670         3,573         4,013          4,978
                                                           ===========    =========   ===========    ==========     ==========
   Weighted-average common and common equivalent shares..        3,444        3,670         3,573         4,013          4,978
                                                           ===========    =========   ===========    ==========     ==========




               See notes to consolidated financial statements.

                                                F-4





                          RIVIERA HOLDINGS CORPORATION
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  (Dollars In Thousands, Except Share Amounts)




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

                                                                                                  
BALANCE, JANUARY 1, 1999......... 5,107,676  $     5     $ 13,457      $ 20,211       (34,300) $  (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....... 5,106,776        5       13,446        17,342     (583,755)  (3,115)                 27,678
   Purchase of treasury stock....                                                   (847,893)  (6,518)                 (6,518)
   Net loss......................                                        (4,215)                                       (4,215)
                                  --------   --------    --------      ---------   ---------   --------   --------     -------

BALANCE, DECEMBER 31, 2000....... 5,106,776        5       13,446        13,127    (1,431,648)  (9,633)                 16,945
   Purchase of treasury stock,
      general                                                                       (158,437)    (993)                   (993)
   Purchase of treasury stock,
      deferred compensation trust                                                   (118,091)    (786)                   (786)
   Issuance of restricted stock..                              39                     34,032      166                     205
   Net loss......................                                        (6,407)                                       (6,407)
                                  --------   --------     --------      ---------   ---------   --------   --------      ------

BALANCE, DECEMBER 31, 2001....... 5,106,776        5       13,485         6,720    (1,674,144) (11,246)                  8,964
   Issuance of restricted stock
      (unaudited)................                                                      20,550      101                     101
   Net loss (unaudited)..........                                        (3,922)                                        (3,922)
                                  --------   --------     --------      ---------   ---------   --------   --------      ------

BALANCE, JUNE 30, 2002
   (Unaudited)................... 5,106,776  $     5     $ 13,485      $  2,798    (1,653,594) $(11,145)    $   --     $ 5,143
                                  =========  --------     ========      ========    ==========  =========    ======      ======




                 See notes to consolidated financial statements



                                                  F-5





                          RIVIERA HOLDINGS CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)

                                                                Six Months Ended
                                                                June 30,  June 30,                        Year Ended
                                                                   2002     2001                        December 31,
                                                                                   -----------------------------------------------
                                                                 (Unaudited)                    2001           2000           1999
                                                                                                ----           ----           ----
CASH FLOWS FROM OPERATING ACTIVITIES:
                                                                                                                
   Net loss.............................................        $(3,922)  $    (728)          $(6,407)       $(4,215)       $(2,869)
   Adjustments to reconcile net loss to net cash (used
      in) provided by operating activities:
      Gain on sale of equipment.........................                                                                        (55)
      Depreciation and amortization.....................          8,949       8,546            17,243         17,827         13,991
      Provision for bad debts...........................           (345)        139               225            326            297
      Provision for gaming discounts....................            (48)        (21)              (70)            45
      Interest expense..................................         13,533      13,453            26,864         27,805         23,448
      Interest paid.....................................        (12,123)    (11,796)          (23,490)       (24,410)       (20,132)
      Interest capitalized on construction projects.....                                                        (616)        (4,733)
      Changes in operating assets and liabilities:
        Decrease (increase) in accounts receivable, net.          1,000       1,802             1,865           (877)            50
        Increase in Interest receivable on U.S. Treasury
            Bills purchased to retire bonds.............            (57)
        Decrease (increase) in inventories..............            445         795             1,089             90           (705)
        (Increase) decrease in prepaid expenses and
           other assets.................................           (410)        304             1,516           (607)            39
        (Increase)decrease in accounts payable..........          1,400         (48)           (1,748)        (2,071)          (884)
        (Decrease) increase in accrued liabilities......           (969)     (4,820)           (2,420)         7,348          1,896
        Increase in other long-term liabilities deferred
           compensation plan obligation.................            105         494               579
        Decrease in deferred tax assets.................                       (355)           (2,200)        (2,534)        (3,478)
        Decrease in other long-term liabilities slot
           annuities payable............................                                                          (3)           (55)
        (Decrease) increase in other long-term
           liabilities non-qualified pension plan
           obligation to CEO upon retirement............           (250)       (250)             (500)         1,247            (61)
                                                               --------    ----------        ---------      ----------   -----------
           Net cash (used in) provided by operating
              activities................................          7,308       7,515            12,546         19,355          6,749
                                                                --------     -------         ---------      ---------    ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures, Las Vegas......................         (2,268)     (4,595)           (7,622)        (7,465)       (11,735)
   Capital expenditures, Black Hawk.....................         (1,208)     (1,594)           (2,640)       (16,969)       (27,291)
   Interest capitalized on construction projects........                                                         616          4,733
   Decrease (increase) in short-term investments........                                                       5,258         (5,258)
   Decrease (increase) in restricted funds..............                                                      15,060        (15,060)
   Sale of equipment....................................                                                                        174
   (Increase) decrease in other assets..................         (1,737)        (15)               85           (661)        (3,558)
                                                               --------  ----------       ------------     ---------      ---------
           Net cash used in investing activities........         (5,213)     (6,204)          (10,177)        (4,161)       (57,995)
                                                              ---------    --------           -------       --------       --------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from long-term borrowings...................         211,781                                       9,552         48,764
   U.S. Treasury bills purchased to retire bonds........       (226,576)
   Increase in deferred loan fees.......................        (10,381)
   Payments on long-term borrowings.....................         (1,651)     (1,370)           (2,865)        (2,299)          (641)
   Purchase of treasury stock, general..................                        (49)             (993)        (6,518)        (2,948)
   Purchase of treasury stock, deferred compensation
      trust.............................................                       (193)             (786)
   Increase in paid-in capital..........................                         41
   Purchase of 13% First Mortgage Notes--Black Hawk......                    (2,500)           (3,500)        (6,559)
   Issuance of restricted stock, deferred competition...            100         116               166
   Net cancellations of employee stock purchase plan,
      and exercise of employee stock options............                                           41                            (8)
                                                              ---------- --------------   -----------    ------------     ---------
           Net cash (used in) provided by financing
              activities................................        (26,727)     (3,955)           (7,937)        (5,824)        45,167
                                                              ----------   ---------          --------       --------        -------

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........        (24,632)     (2,644)           (5,568)         9,370         (6,079)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..........         46,606      52,174            52,174         42,804         48,883
                                                               --------    ---------         ---------      --------        -------

CASH AND CASH EQUIVALENTS, END OF PERIOD................        $21,974     $49,530           $46,606        $52,174        $42,804
                                                                =======     =======           =======        =======        =======

                                                                                                                         (Continued)


                                                        F-6





                         RIVIERA HOLDINGS CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (In Thousands) (Continued)

                                                                Six Months Ended
                                                                June 30,    June 30,                 Year Ended
                                                                  2002        2001                   December 31,
                                                                 ------      -----     -------------------------------------------
                                                                   (Unaudited)                 2001           2000           1999
                                                                                               ----           ----           ----

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
    INFORMATION -
                                                                                                            
    Income taxes (refunded) paid, State of Colorado.....                                     $  (110)      $   (110)
                                                                                             =========      ========

SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES:
   Property acquired with accounts payable, Las Vegas,
      Nevada............................................      $    65         $   232        $   132
                                                              ========        ========       =======

   Property acquired with debt, Black Hawk, Colorado....                                     $   454                      $   126
                                                                                             =======                      =======

   Property acquired with accounts payable, Black Hawk,
      Colorado..........................................                                     $   90         $   304       $ 2,566
                                                                                             =======        ========      =======

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

                                                                                                                         (Concluded)
























                See notes to consolidated financial statements.




                                                F-7






                          RIVIERA HOLDINGS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Basis  of  Presentation  and  Nature  of  Operations--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.

         The primary  line of business  of the Company is the  operation  of the
Riviera  Hotel & Casino  (the  "Riviera  Las  Vegas") 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  through  December  1999 (see  Note 13).  RGM also  provided  services  to
Peninsula  Gaming Partners,  LLC ("PGP") through  September 2000 with respect to
that company's riverboat, Diamond Jo, operating in Dubuque, Iowa.

         In  February  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 Black Hawk casino.

         On March 15, 2002, Riviera Gaming Management of New Mexico, Inc. was
incorporated in the State of New Mexico.

         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 comply, in all material respects, with the applicable regulations for
supervising casino operations, recording casino and other revenues, and granting
credit.

         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.

         Unaudited Financial  Information--The financial information at June 30,
2002 and for the six months  ending June 30, 2002 and the six months  ended 2001
is unaudited.  However,  such information  reflects all adjustments  (consisting
solely  of  normal  and  recurring  adjustments)  that are,  in the  opinion  of
management, necessary for a fair presentation of the financial position, results
of operations, and cash flows for the interim periods. The results of operations
for the six months ended June 30, 2002 and 2001 are not  necessarily  indicative
of the  results  that will be  achieved  for the entire  year.  These  financial
statements should be read in conjunction with the audited consolidated financial
statements  and notes  thereto for the years ended  December 31, 2001,  2000 and
1999.

         Cash and Cash Equivalents--All highly liquid investment securities with
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.



                                                F-8



                      RIVIERA HOLDINGS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         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, 2001 and 2000,  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
$27,449,767 and $34,754,983, 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 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  ("13%  Notes")
interest payments.

         Stock-Based   Compensation--The   effect  of  stock   options   in  the
consolidated  statements of operations is reported in accordance with Accounting
Principles  Board  ("APB")  Opinion  No.  25,  Accounting  for  Stock  Issued to
Employees.  The Company has adopted the  disclosure-only  provisions of SFAS No.
123, Accounting for Stock-Based Compensation.  Accordingly, no compensation cost
has been  recognized  for unexercised  stock  options in the stock option plan
(see Note 15).

Fair Value Disclosures:

         Cash and Cash Equivalents,  Accounts Receivable,  Accounts Payable, and
Accrued Expenses--The  carrying value of these items is a reasonable estimate of
their fair value.

         Long-Term  Debt--The  fair  value of the  Company's  long-term  debt 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  outstanding is  approximately  $186,246,000  and $202,628,000 in
2001 and 2000, respectively.



                                                F-9



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.

         Preopening   Costs--The  Company   recognizes   preopening  costs  when
incurred.

         Promotional  Allowances--Revenues include the estimated retail value of
rooms,  food  and  beverage,  and  entertainment  provided  to  customers  on  a
complimentary  basis.  Such amounts are then deducted as promotional  allowance.
The estimated cost of providing these  promotional  allowances is charged to the
casino department in the following amounts:



                                                              Year Ended December 31
                                                            2001        2000        1999
                                                         ----------  ----------  -------
                                                                          
        Food and beverage.............................. $   9,560   $    9,007  $   6,266
        Rooms..........................................     1,195        1,297      1,676
        Entertainment..................................     1,950        1,319      1,312
                                                        ---------   ----------  ---------

        Total costs allocated to casino departments.... $  12,705   $   11,623  $   9,254
                                                        =========    =========  =========





         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


                                                F-10


consequences  of events that have been  included in the  consolidated  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.

         The cash flow  projections  used by the Company in the  application  of
SFAS  No.  109 for the  realization  of  deferred  tax  assets  indicate  that a
valuation  allowance should be recorded on the tax benefit earned by the Company
in the first quarter of 2002. The estimates used are based upon recent operating
results and budgets for future operating results. These estimates are made using
assumptions about the economic,  social, and regulatory environments in which we
operate.  These  estimates  could be  impacted by  numerous  unforeseen  events,
including  changes  to  regulations  affecting  how  the  Company  operates  the
business,  changes in the labor market, or economic downturns in the areas where
the Company operates.

         Estimates and  Assumptions--The  preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America  ("GAAP")  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,  realizability of deferred tax
assets and liabilities,  and the estimated  allowances for  receivables.  Actual
results may differ from estimates.

         Recently  Adopted  Accounting Pronouncements--The Financial Accounting
Standards Board ("FASB") 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 adopted SFAS
No. 133 in the quarter ended March 31, 2001. The adoption of SFAS No. 133 had no
impact on the Company or the Company's consolidated financial statements.

         The Emerging  Issues Task Force  ("EITF") of the American  Institute of
Certified Public Accountants  ("AICPA") issued EITF Issue No. 00-22,  Accounting
for "Points' and Certain Other Timed-Based  Sales Incentive  Offers,  and Offers
for Free  Products  or Services to Be  Delivered  in the Future,  on January 18,
2001.  EITF Issue No. 00-22  concluded that when a company or vendor offers to a
customer  (a) free or  discounted  products or services  that will be  delivered
(either by the vendor or by another  unrelated entity) at a future date (1) as a
result of a single  revenue  transaction  with the  customer  or (2) only if the
customer completes a specified cumulative level of revenue transactions with the
vendor or remains a customer of the vendor for a specified time period and (b) a
rebate or refund of a determinable cash amount only if the customer  completes a
specified  cumulative level of revenue transactions with the vendor or remains a
customer of the vendor for a  specified  time  period,  such  rebates  should be
reported as a reduction  of  revenues.  EITF Issue No.  00-22 was required to be
adopted by the Company during the first quarter of 2001. As a result of adopting
EITF Issue No. 00-22, the Company  reclassified  approximately  $3.4 million and
$905,000  of such  "Points"  from  casino  operating  expense,  reducing  casino
revenues for the years ended December 31, 2000 and 1999, respectively.

                                                F-11


         The EITF of the AICPA  issued  EITF  Issue No.  00-14,  Accounting  for
Certain Sales Incentives, on April 18, 2001. EITF Issue No. 00-14 concluded that
when a company  or vendor  offers  its  customers  sales  incentives,  including
discounts,   coupons,  rebates,  and  free  products  or  services,  such  sales
incentives  should be reported as a reduction of revenues.  EITF Issue No. 00-14
is required to be adopted by the Company during the first quarter of 2002. Early
adoption is  permitted.  The Company  chose to adopt EITF Issue No. 00-14 in the
first quarter of 2001. As a result of adopting EITF Issue No. 00-14, the Company
reclassified  approximately  $1.9 million and $0 of such sales  incentive  "Cash
Vouchers" from casino  operating  expense to net against casino revenues for the
years ended December 31, 2000 and 1999, respectively.

         In June  2001,  the  FASB  issued  SFAS No.  142,  Goodwill  and  Other
Intangible  Assets,  which is effective  January 1, 2002. SFAS No. 142 requires,
among other things,  the discontinuance of goodwill  amortization.  In addition,
the standard includes  provisions for the  reclassification  of certain existing
recognized intangibles as goodwill, reassessment of the useful lives of existing
recognized   intangibles,   reclassification   of  certain  intangibles  out  of
previously  reported  goodwill,  and the  identification  of reporting units for
purposes of assessing  potential  future  impairments of goodwill.  SFAS No. 142
also requires the Company to complete a transitional  goodwill  impairment  test
six months  from the date of  adoption.  The  Company  has  determined  that the
adoption  of SFAS No.  142 will not have a material  effect on its  consolidated
financial position and results of operations.

         In June  2001,  the FASB  issued  SFAS No.  143,  Accounting  for Asset
Retirement  Obligations.   SFAS  No.  143  addresses  financial  accounting  and
reporting for obligations  associated with the retirement of tangible long-lived
assets and the associated  asset retirement  costs.  SFAS No. 143 applies to all
entities.  It applies to legal  obligations  associated  with the  retirement of
long-lived assets that result from the acquisition,  construction,  development,
and/or the normal operation of long-lived assets, except for certain obligations
of lessees. SFAS No. 143 is effective for financial statements issued for fiscal
years  beginning  after June 15, 2002. The Company  determined that SFAS No. 143
will not have a  material  impact on its  consolidated  financial  position  and
results of operations.

         In June 2001, the FASB issued SFAS No. 141, Business Combinations. SFAS
No. 141 requires the purchase  method of  accounting  for business  combinations
initiated  after June 30, 2001 and eliminates the  pooling-of-interests  method.
The adoption of SFAS No. 141 did not have a significant  impact on the Company's
consolidated financial statements or results of operations.

      Recently Issued Accounting Pronouncements--In August 2001, the FASB issued
SFAS No. 144,  Accounting for the  Impairment or Disposal of Long-Lived  Assets.
SFAS No. 144 addresses financial  accounting and reporting for the impairment or
disposal of long-lived  assets and supersedes  SFAS No. 121,  Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and
the  accounting  and reporting  provisions of APB Opinion No. 30,  Reporting the
Results  of  Operations--Reporting  the  Effects of  Disposal  of a Segment of a
Business,  and  Extraordinary,  Unusual and  Infrequently  Occurring  Events and
Transactions, for the disposal of a segment of a business (as previously defined
in that opinion).  SFAS No. 144 also amends APB No. 51,  Consolidated  Financial
Statements,  to eliminate the exception to  consolidation  for a subsidiary  for
which  control is likely to be  temporary.  The  provisions  of SFAS No. 144 are
effective  for  financial  statements  issued for fiscal years  beginning  after
December 15, 2001 and interim periods within those fiscal years.  The Company is
currently assessing but has not yet determined the impact of SFAS No. 144 on its
consolidated financial position and results of operations.

                                                F-12


2.  ACCOUNTS RECEIVABLE

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




                                                            2001        2000
                                                                 
           Casino.................................... $    1,761   $   2,066
           Hotel.....................................      3,252       4,812
                                                      ----------   ---------

           Total.....................................      5,013       6,878
           Allowance for bad debts and discounts.....     (1,485)     (1,330)
                                                      ----------   ---------

           Ending balance............................ $    3,528   $   5,548
                                                      ==========   =========



                          RIVIERA HOLDINGS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.  ACCOUNTS RECEIVABLE (Continued)

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



                                                                                  2001       2000       1999
                                                                                  ----       ----       ----
                                                                                              
             Beginning balance.............................................    $1,330     $1,611     $1,314
             Write-offs....................................................      (122)      (220)      (872)
             Recoveries....................................................        45         29        107
             Provision for bad debts and gaming discounts..................       232        (90)     1,062
                                                                             --------   --------    -------

             Ending balance................................................    $1,485     $1,330     $1,611
                                                                               ======     ======     ======




3.  PREPAID EXPENSES AND OTHER ASSETS

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




                                                                                             2001       2000
                                                                                                
            Prepaid gaming taxes......................................................       $939     $1,440
            Prepaid insurance.........................................................        413        749
            Other prepaid expenses....................................................      1,731      2,410
                                                                                          -------    -------

            Total.....................................................................     $3,083     $4,599
                                                                                           ======     ======


                                                F-13



4.  PROPERTY AND EQUIPMENT

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




                                                                                          2001        2000
                                                                                              
            Land and improvements................................................ $    38,130  $   37,718
            Buildings and improvements...........................................     143,414     142,115
            Equipment, furniture, and fixtures...................................     113,366     104,361
                                                                                  -----------  ----------

            Total property and equipment.........................................     294,910     284,194
            Accumulated depreciation.............................................     (94,379)    (77,164)
                                                                                  -----------  ----------

            Net property and equipment........................................... $   200,531    $207,030
                                                                                  ===========  ==========



         Approximately  $0,  $616,000,  and  $4,733,000  in interest  costs were
capitalized on  construction  projects in 2001,  2000,  and 1999,  respectively.
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.

         Property under capital leases totaled  $11,242,000 and $11,242,000 with
accumulated  amortization  of $4,507,000 and $2,258,000 at December 31, 2001 and
2000, respectively.


                          RIVIERA HOLDINGS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



5.  OTHER ASSETS

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



                                                                                             2001       2000
                                                                                                  
               Deposits...............................................................       $177       $152
               Bond offering costs and commissions, net of accumulated amortization
                  of $6,756 and $5,187, respectively..................................      4,916      6,585
               Other..................................................................      1,635      1,391
                                                                                            -----      -----

               Total..................................................................     $6,728     $8,128
                                                                                           ======     ======



                                                F-14



6.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES

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



                                                                                             2001       2000
                                                                                                  
              Outstanding chip and token liability....................................       $597       $563
              Slot club liabilities...................................................      1,283      1,115
              Progressive liabilities.................................................        312        439
              Casino account deposits and miscellaneous gaming........................        139        146
                                                                                           ------     ------

              Total liabilities related to gaming activities..........................      2,331      2,263
              Accounts payable to vendors.............................................      4,406      5,196
              Hotel deposits..........................................................      1,032      1,189
              Construction payables...................................................                   304
              Other...................................................................        431        779
                                                                                         --------   --------

              Total...................................................................     $8,200     $9,731
                                                                                           ======     ======




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




                                                                                            2001        2000
                                                                                                
             Payroll, related payroll taxes, and employee benefits.................       $7,907      $7,999
             Incentive, retention, and ESOP........................................        2,639       4,831
             Other.................................................................        4,194       3,901
                                                                                       ---------   ---------

             Total.................................................................      $14,740     $16,731
                                                                                         =======     =======





7.  OTHER LONG-TERM LIABILITIES

         Other long-term  liabilities  consist of the nonqualified  pension plan
obligation to the CEO of the Company,  payable upon expiration of his employment
contract or with a change of control,  including  accrued  interest and deferred
compensation plan liabilities for eligible employees.

                       RIVIERA HOLDINGS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.  OTHER LONG-TERM LIABILITIES (Continued)

         See Note 14 for a description of these plans.



                                                                                             2001       2000
                                                                                                
          Nonqualified pension obligation, CEO, unfunded..............................     $4,163     $4,663
          Accrued interest on pension, CEO, unfunded..................................      2,649      1,870
          Deferred compensation, funded...............................................        579
                                                                                         --------

          Total.......................................................................     $7,391     $6,533
                                                                                           ======     ======



                                                F-15




8.  LONG-TERM DEBT

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



                                                                                          2001          2000
                                                                                               
                                                                                          ----          ----
     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  and
        secondarily  the assets of Riviera  Black Hawk  beginning  in March 2002
        (with a carrying value at December 31, 2001 of $130,938 for RHC and
        $61,425 for RBH).........................................................    $174,193      $173,885

     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 collateralized by the land and physical structures
        comprising the Riviera Black Hawk Casino (with a carrying value at
        December 31, 2001 of $61,425)............................................      34,941        38,441

     5.6% to 9% Notes collateralized by equipment and vehicles, payable monthly,
        including interest, maturing through October 2004 (with a carrying value
        at December 31, 2001 of $2,424)..........................................       2,424         3,227

     Capitalized lease obligations (Note 10).....................................       7,921         9,887

     5.5% Special Improvement District  Bonds--issued by the City of Black Hawk,
        Colorado, interest and principal payable monthly over 10 years beginning
        in 2000..................................................................          960          603
                                                                                  ------------ ------------
     Total long-term debt........................................................     220,439       226,043
     Current maturities by terms of debt.........................................      (3,151)       (2,871)
                                                                                   ----------    ----------
     Total.......................................................................    $217,288      $223,172
                                                                                     ========      ========



                          RIVIERA HOLDINGS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.  LONG-TERM DEBT (Continued)

         Maturities  of  long-term  debt for the years ended  December 31 are as
follows (in thousands):




                                                                                             
            2002............................................................................. $     3,151
            2003.............................................................................       3,474
            2004.............................................................................     177,553
            2005.............................................................................      35,726
            2006.............................................................................         124
            Thereafter.......................................................................         411
                                                                                              -----------

            Total............................................................................ $   220,439
                                                                                              ===========



                                                F-16




         In February 1997, the Company  entered into a $15.0 million,  five-year
reducing revolving line of credit (the "Credit  Facility").  The Credit Facility
bears  interest  at prime plus 0.5% or the London  Interbank  Offered  Rate plus
2.9%.  The Company has not utilized this line of credit because it does not meet
the requirements under the ratio of the allowable funded debt to earnings before
interest,  taxes,  depreciation,  and amortization  ("EBITDA") of 4.75 to 1. The
Credit  Facility  is  callable  upon a change in control and expired in February
2002.

         On August 13, 1997,  the Company  issued 10% First Mortgage Notes ("10%
Notes") with a principal amount of $175 million.  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%  First  Mortgage  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.  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 did not initially include RBH. RBH
became collateral for the 10% Notes upon the filing of its financial  statements
with  the  Securities  and  Exchange  Commission  because  certain  consolidated
operating  ratios as defined in the 10% Notes were met as of December  31, 2001,
which causes RBH to become a restricted subsidiary.

         On June 3, 1999, RBH completed a $45 million  private  placement of 13%
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  "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 13% Notes  were  issued  at a cost of $3.5  million.  The  deferred
financing cost is being  amortized over the life of the notes on a straight-line
basis, which approximates the effective interest method.


                                                F-17


         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 its capital  expenditure  programs under
these circumstances,  which could have an adverse effect on RBH's operations. At
December 31, 2001, RBH believes that it is in compliance with the covenants.

         The Company has a credit  facility  totaling  $1,500,000 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 were substantially completed
in 2000 at a cost of $2,240,000,  including interest and reserves.  During 2001,
another phase was  completed.  RBH's share of the final phase was $454,000.  The
excess proceeds have been returned to the bondholders by the City of Black Hawk,
Colorado.  RBH is  responsible  for  50% of the  debt,  payable  over  10  years
beginning in 2000.

See also Note 19.

9.  GUARANTOR INFORMATION

         The  Company's  10% Notes (see Note 8) are  guaranteed by a majority of
the Company's wholly owned existing significant  subsidiaries.  These guaranties
are full,  unconditional,  and joint and several.  The  following  consolidating
schedules  present  separate  condensed  financial  statement  information  on a
combined  basis  for  the  parent  only,  as  well  as the  Company's  guarantor
subsidiaries  and  non-guarantor  subsidiaries,  as of and for the  years  ended
December 31, 2001 and 2000.  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 represented 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  management fee to Riviera  Holdings  Corporation  from  guarantors
represents cost to the Company of depreciation  and interest  expense on the 10%
Notes.




                                                F-18


                         RIVIERA HOLDINGS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9.  GUARANTOR INFORMATION (Continued)



                          RIVIERA HOLDINGS CORPORATION
                CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
                        DECEMBER 31, 2001 (in thousands)

                                                                                   Combined
                                                     Parent        Combined          Non-          Elimination       Consolidated
                                                      Only        Guarantors      Guarantors         Entries            Totals
ASSETS
CURRENT ASSETS:
                                                                                                              
   Cash and cash equivalents...................        $10,237         $24,910         $11,459                              $46,606
   Current assets..............................                          8,102             762                                8,864
                                                  ---------------    ---------      ----------                          -----------
      Total current assets.....................         10,237          33,012          12,221                               55,470

PROPERTY AND EQUIPMENT, Net....................        130,938           2,044          67,549                              200,531
OTHER ASSETS, NET..............................          2,269           2,485           1,974                                6,728
INVESTMENT IN SUBSIDIARIES.....................         51,189          24,946                       $(76,135)(1)
DEFERRED INCOME TAXES..........................                          3,356           1,733                                5,089
                                                  -------------      ---------      ----------  ----------------        -----------
TOTAL..........................................       $194,633         $65,843         $83,477       $(76,135)             $267,818
                                                      ========         =======         =======        ========             ========



LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Current portion of long-term debt...........                         $1,198          $1,953                               $3,151
   Due to parent company.......................                         24,716           3,335       $(28,051)(1)
   Accounts payable............................                          3,876           4,324                                8,200
   Accrued interest............................         $6,563               1           1,520                                8,084
   Accrued expenses............................                         13,092           1,648                               14,740
                                                  -------------         ------         -------  ----------------            -------
      Total current liabilities................          6,563          42,883          12,780        (28,051)(1)            34,175
                                                     ---------          ------          ------      ---------               -------
OTHER LONG-TERM LIABILITIES....................                          7,391                                                7,391
                                                  --------------       -------     -----------  ----------------           --------
LONG-TERM DEBT, Net of current portion.........        174,116           2,402          40,770                              217,288
                                                       -------         -------          ------  ----------------            -------

STOCKHOLDERS' EQUITY:
   Common stock................................              5                                                                    5
   Additional paid-in capital..................         11,283          17,528          32,758        (48,084)(1)            13,485
   Treasury stock..............................        (10,460)           (786)                                             (11,246)
   Retained earnings...........................         13,126          (3,575)         (2,831)                               6,720
                                                    ----------        --------        --------- ----------------        -----------
      Total stockholders' equity...............         13,954          13,167          29,927        (48,084)                8,964
                                                    ----------       ---------       ---------       ---------          -----------
TOTAL..........................................       $194,633         $65,843         $83,477       $(76,135)             $267,818
                                                      ========        ========        ========        ========             ========


-----------
Elimination entries--

(1)      To eliminate investment in and advances to subsidiaries.



                                                F-19





                          RIVIERA HOLDINGS CORPORATION
                CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
                                DECEMBER 31, 2000
                                 (in thousands)

                                                                                   Combined
                                                     Parent        Combined          Non-          Elimination       Consolidated
                                                      Only        Guarantors      Guarantors         Entries            Totals

ASSETS
CURRENT ASSETS:
                                                                                                               
   Cash and cash equivalents...................      $  11,957          $32,473       $  7,744                              $52,174
   Current assets..............................                          12,489          1,000                               13,489
                                                  --------------      ---------       --------                            ---------
      Total current assets.....................         11,957           44,962          8,744                               65,663

PROPERTY AND EQUIPMENT, Net....................        135,542            2,983         68,505                              207,030
OTHER ASSETS, Net..............................          3,156            2,887          2,510          $(425)(1)             8,128
INVESTMENT IN SUBSIDIARIES.....................         46,737           32,869                       (79,606)(1)
DEFERRED INCOME TAXES..........................                             764          2,125                                2,889
                                                  ---------------    ----------      ---------- --------------          -----------
TOTAL..........................................       $197,392          $84,465        $81,884      $(80,031)              $283,710
                                                      ========          =======        =======      ========               ========



LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Current portion of long-term debt...........                        $  1,101       $  1,770                               $2,871
   Due to parent company.......................                          29,713                      $(29,713)(1)
   Accounts payable............................                           6,565          3,591           (425)(1)             9,731
   Accrued interest............................          $6,563               2          1,162                                7,727
   Accrued expenses............................                          13,440          3,291                               16,731
                                                  -------------          ------        -------  ---------------            --------
      Total current liabilities................          6,563           50,821          9,814        (30,138)(1)            37,060
                                                     ---------           ------        -------        -------              --------
OTHER LONG-TERM LIABILITIES....................                           6,533                                               6,533
                                                  -------------         -------   ------------  ---------------           ---------
LONG-TERM DEBT, Net of current portion.........        173,885            3,510         45,777                              223,172
                                                       -------          -------         ------  ---------------             -------

STOCKHOLDERS' EQUITY:
   Common stock................................              5                                                                    5
   Additional paid-in capital..................         13,447           20,179         29,713        (49,893)(1)            13,446
   Treasury stock..............................         (9,633)                                                              (9,633)
   Retained earnings...........................         13,125            3,422         (3,420)                              13,127
                                                    ----------        ---------       --------  ---------------         -----------
      Total stockholders' equity...............         16,944           23,601         26,293        (49,893)               16,945
                                                    ----------         --------       --------       ---------          -----------
TOTAL..........................................       $197,392          $84,465        $81,884       $(80,031)             $283,710
                                                      ========          =======        =======       ========              ========


-----------
Elimination entries--

(1)      To eliminate investment in and advances to subsidiaries.




                                                        F-20






                          RIVIERA HOLDINGS CORPORATION
           CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
                          YEAR ENDED DECEMBER 31, 2001
                                 (in thousands)

                                                                                   Combined
                                                     Parent        Combined          Non-          Elimination       Consolidated
                                                      Only        Guarantors      Guarantors         Entries            Totals

REVENUES:
                                                                                                              
   Casino.....................................                         $67,389         $46,650                             $114,039
   Rooms......................................                          44,255                                               44,255
   Food and beverage..........................                          25,696           5,560                               31,256
   Entertainment..............................                          20,418             274                               20,692
   Other......................................                           8,547             572                                9,119
   Management fee.............................         $30,113                                       $(30,113)(1)
                                                       -------  ---------------  -------------       --------      ----------------
        Total revenues........................          30,113         166,305          53,056        (30,113)              219,361
   Less promotional allowances................                          13,320           4,010                               17,330
                                                 --------------      ---------       ---------- --------------          -----------
        Net revenues..........................          30,113         152,985          49,046        (30,113)              202,031
                                                     ---------        --------        --------       ---------           ----------

COSTS AND EXPENSES:
   Direct costs and expenses of operating departments:
      Casino..................................                          40,197          22,648                               62,845
      Rooms...................................                          23,339                                               23,339
      Food and beverage.......................                          19,333           2,093                               21,426
      Entertainment...........................                          14,823              77                               14,900
      Other...................................                           3,068                                                3,068
   Other operating expenses:
      General and administrative..............                          30,733          11,506                               42,239
      Management fees.........................                          28,759           1,354        (30,113)(1)
      Depreciation and amortization...........          11,431           2,066           3,746                               17,243
                                                      --------      ----------        --------  --------------            ---------
        Total costs and expenses..............          11,431         162,318          41,424        (30,113)              185,060
                                                      --------        --------         -------     ---------               --------
INCOME (LOSS) FROM OPERATIONS.................          18,682          (9,333)          7,622                               16,971
                                                      --------       ---------        --------  --------------            ---------

OTHER (EXPENSE) INCOME:
   Interest expense...........................         (18,938)         (1,186)         (6,740)                             (26,864)
   Interest income............................             256             919              99                                1,274
   Other, net.................................                             (28)                                                 (28)
                                                 ----------------    ---------  ------------------------------           ----------
        Total other expense...................         (18,682)           (295)         (6,641)                             (25,618)
                                                       -------        --------        --------  --------------             --------

LOSS BEFORE BENEFIT FOR INCOME TAXES..........                          (9,628)            981                               (8,647)
BENEFIT FOR INCOME TAXES......................                          (2,632)            392                               (2,240)
                                                 ----------------    ---------        --------  --------------            ---------

NET INCOME (LOSS).............................   $           --       $ (6,996)        $   589  $         --               $ (6,407)
                                                 ==============       ========         =======   ============              ========


-----------
Elimination entries--

(1)      To eliminate intercompany revenue and expense.


                                                F-21





                          RIVIERA HOLDINGS CORPORATION
           CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
                          YEAR ENDED DECEMBER 31, 2000
                                 (in thousands)

                                                                                   Combined
                                                     Parent        Combined          Non-          Elimination       Consolidated
                                                      Only        Guarantors      Guarantors         Entries            Totals

REVENUES:
                                                                                                              
   Casino.....................................                         $74,057         $33,636                             $107,693
   Rooms......................................                          43,819                                               43,819
   Food and beverage..........................                          26,738           4,018                               30,756
   Entertainment..............................                          24,526                                               24,526
   Other......................................                           9,607             374         $557                  10,538
   Management fee.............................         $31,140             557                      (31,697)(1)
                                                       -------     -----------  --------------      ---------      ----------------
        Total revenues........................          31,140         179,304          38,028      (31,140)                217,332
   Less promotional allowances................                          13,034           2,767                               15,801
                                                 --------------      ----------      ---------  --------------           ----------
        Net revenues..........................          31,140         166,270          35,261      (31,140)                201,531
                                                     ---------        --------       ---------     --------               ---------

COSTS AND EXPENSES:
   Direct costs and expenses of operating departments:
      Casino..................................                          40,164          17,286                               57,450
      Rooms...................................                          23,364                                               23,364
      Food and beverage.......................                          19,773           1,599                               21,372
      Entertainment...........................                          18,954               5                               18,959
      Other...................................                           3,144               2                                3,146
   Other operating expenses:
      General and administrative..............                          31,540           9,772                               41,312
      Management fees.........................                          30,583             557      (31,140)(1)
      Preopening expenses Black Hawk, Colorado                                           1,222                                1,222
      Depreciation and amortization...........          13,090           1,800           2,937                               17,827
                                                     ---------       ---------        --------  -----------------          --------
        Total costs and expenses..............          13,090         169,322          33,380       (31,140)               184,652
                                                     ---------         -------         -------     ---------                -------
INCOME FROM OPERATIONS........................          18,050          (3,052)          1,881                               16,879
                                                     ---------         -------        --------  -----------------          --------

OTHER (EXPENSE) INCOME:
   Interest expense...........................         (18,550)         (1,568)         (7,687)                             (27,805)
   Interest income............................             500           1,611             318                                2,429
   Interest capitalized.......................                              39             577                                  616
   Other, net.................................                           1,171                                                1,171
                                                 --------------      ---------   -------------  -----------------         ---------
        Total other (expense) income..........         (18,050)          1,253          (6,792)                             (23,589)
                                                      --------       ---------        --------  -----------------          --------

LOSS BEFORE BENEFIT FOR INCOME TAXES..........                          (1,799)         (4,911)                              (6,710)
BENEFIT FOR INCOME TAXES......................                            (530)         (1,965)                              (2,495)
                                                 -----------------   ---------        --------  -----------------         ---------
NET LOSS......................................   $             --    $  (1,269)      $  (2,946) $              --         $  (4,215)
                                                 ================    =========       =========  =================         =========


-----------
Elimination entries--
(1)      To eliminate intercompany revenue and expense.




                                                F-22






                          RIVIERA HOLDINGS CORPORATION
           CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
                          YEAR ENDED DECEMBER 31, 2001
                                 (in thousands)

                                                                                        Combined
                                                          Parent       Combined           Non-         Elimination       Combined
                                                           Only       Guarantors       Guarantors        Entries           Total

CASH FLOWS FROM OPERATING ACTIVITIES:
                                                                                                               
   Net (loss) income..............................                         $(6,996)             $589       $ --             $(6,407)
   Adjustments to reconcile net (loss) income to net
      cash provided by (used in) operating activities:
      Depreciation and amortization...............         $11,431           2,066             3,746                         17,243
      Provision for bad debts.....................                              89              136                             225
      Provision for gaming discounts..............                             (70)                                             (70)
      Interest expense............................          18,938           1,186            6,740                          26,864
      Interest paid...............................         (17,500)           (170)          (5,820)                        (23,490)
      Changes in operating assets and liabilities:
        Decrease (increase) in accounts receivable, net                      2,005             (140)                          1,865
        Decrease (increase) in inventories........                           1,003               86                           1,089
        Decrease (increase) in prepaid expenses and
           other assets...........................                           1,360              156                           1,516
        Increase (decrease) in accounts payable...                          (1,738)             (10)                         (1,748)
        Increase (decrease) in accrued expenses...                          (2,888)             468                          (2,420)
        Increase (decrease) in other long-term
           liabilities deferred compensation plan
           obligation.............................                             579                                              579
        Increase (decrease) in deferred tax asset.                          (2,592)             392                          (2,200)
        Increase (decrease) in other long term
           liabilities............................                            (500)                                            (500)
                                                        ------------      ---------     -----------  -----------------     ---------
           Net cash provided by (used in) operating
              activities..........................          12,869          (6,666)           6,343                          12,546
                                                        ----------         --------       ---------- -----------------      -------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures for property and equipment                          (7,622)          (2,640)                        (10,262)
   Decrease (increase) in other assets............        (13,800)          13,911              (26)                             85
                                                        ----------        --------        ---------- ----------------- ------------

           Net cash (used in) provided by investing
              activities..........................        (13,800)           6,289           (2,666)                        (10,177)
                                                        ----------        --------          -------- -----------------     ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Payments on long-term borrowings...............                          (1,087)          (1,778)                         (2,865)
   Purchase of treasury stock, general............            (993)                                                            (993)
   Increase in paid in capital....................              41                                                               41
   Purchase of treasury stock, deferred compensation
      trust.......................................                            (786)                                            (786)
   Issuance of restricted stock...................             166                                                              166
   Advances to/from subsidiaries..................                          (2,271)           2,271
   Purchase of 13% Mortgage Notes--Black Hawk......                                          (3,500)                         (3,500)
   Contribution of capital to Riviera Black Hawk, Inc                       (3,045)            3,045
                                                        -----------      ---------         --------  ----------------- ------------
          Net cash (used in) provided by financing
              activities..........................            (786)        (7,189)               38                          (7,937)
                                                        -----------      ---------       ----------  -----------------   -----------

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS..          (1,717)         (7,566)           3,715                          (5,568)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR......          11,957          32,473            7,744                          52,174
                                                         ----------      ----------      ----------- -----------------   ----------

CASH AND CASH EQUIVALENTS, END OF YEAR............        $ 10,240        $ 24,907         $ 11,459  $     --             $  46,606
                                                          ========        ========         ========  ===================  =========





                                                F-23





                          RIVIERA HOLDINGS CORPORATION
           CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
                          YEAR ENDED DECEMBER 31, 2000
                                 (in thousands)
                                                                                        Combined
                                                          Parent       Combined           Non-       Elimination     Combined
                                                           Only       Guarantors       Guarantors        Entries      Totals
CASH FLOWS FROM OPERATING ACTIVITIES:
                                                                                                            
   Net loss.......................................                         $(1,269)         $(2,946) $    --          $   (4,215)
   Adjustments to reconcile net loss to net cash
      provided by operating activities:
      Depreciation and amortization...............         $13,090           1,800             2,937                      17,827
      Provision for bad debts.....................                             283                43                         326
      Provision for gaming discounts..............                              45                                            45
      Interest expense............................          18,550           1,568             7,687                      27,805
      Interest paid...............................         (17,500)         (1,566)          (5,344)                     (24,410)
      Interest capitalized on construction projects                            (39)            (577)                        (616)
      Changes in operating assets and liabilities:
        Increase in accounts receivable, net......                            (669)            (208)                        (877)
        Decrease (increase) in inventories........                             360             (270)                          90
        (Increase) decrease in prepaid expenses and
           other assets...........................                          (1,226)              619                        (607)
        (Decrease) increase in accounts payable...                          (5,918)            3,847                      (2,071)
        Increase in accrued expenses..............                           6,278             1,070                       7,348
        Decrease in deferred tax assets...........                            (569)          (1,965)                      (2,534)
        Decrease in other long-term liabilities--slot
           annuities payable......................                              (3)                                           (3)
        Increase in other long-term liabilities...                           1,247                                         1,247
                                                        ----------------- --------  ---------------- ---------------------------

           Net cash provided by operating activities         14,140            322            4,893                       19,355
                                                        -----------      ---------      -----------  ---------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures for property and equipment                          (7,465)         (16,969)                     (24,434)
   Interest capitalized on construction projects..                              39              577                          616
   Decrease in short-term investments.............                           2,438            2,820                        5,258
   Decrease in restricted funds...................                           7,887            7,173                       15,060
   Decrease (increase) in other assets............            1,389        (2,044)               (6)                        (661)
                                                        -----------    -----------       ----------- ----------------------------

           Net cash provided by (used in) investing
              activities..........................            1,389            855           (6,405)                      (4,161)
                                                        -----------  -------------          -------- ----------------- ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from long-term borrowings.............                              34            9,518                        9,552
   Payments on long-term borrowings...............                          (1,076)          (1,223)                      (2,299)
   Purchase of treasury stock.....................          (6,518)                                                       (6,518)
   Advances to/from subsidiaries..................          (4,772)          5,301             (529)
   Purchase of 13% First Mortgage Notes--Black Hawk                                          (6,559)                      (6,559)
   Contribution of capital to Riviera Black Hawk,Inc        (6,239)                           6,239
                                                        ----------- ---------------       ---------  ----------------------------

           Net cash (used in) provided by financing
              activities..........................         (17,529)          4,259            7,446                       (5,824)
                                                         ----------    -----------        ---------  ----------------------------

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS..          (2,000)          5,436            5,934                        9,370
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR......          13,957          27,037            1,810                       42,804
                                                        -----------     -----------       ---------- ---------------------------

CASH AND CASH EQUIVALENTS, END OF YEAR............       $  11,957       $  32,473         $  7,744  $    --          $   52,174
                                                         =========       =========         ========  ==============   ==========




                                                F-24


                          RIVIERA HOLDINGS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


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  that 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, 2001 (in thousands):




                                                                                         
               2002........................................................................... $  2,979
               2003...........................................................................    2,979
               2004...........................................................................    2,979
               2005...........................................................................      674
                                                                                               --------

               Total minimum lease payments...................................................    9,611
               Taxes, maintenance, and insurance..............................................      (295)
               Interest portion of payments...................................................    (1,395)
                                                                                                  ------

               Present value of net minimum lease payments.................................... $  7,921
                                                                                               ========





         Rental expense under operating  leases for the years ended December 31,
2001,  2000,  and 1999 was  approximately  $903,555,  $1,133,983,  and $453,772,
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  2006.  Rental  income,  which is
included in other income,  for the years ended December 31, 2001, 2000, and 1999
was approximately $1,800,000, $1,584,300, and $1,803,000, respectively.

         At December  31, 2001,  the Company had future  minimum  annual  rental
income due under noncancelable operating leases as follows (in thousands):




                                                                                    
        2002............................................................................. $  1,356
        2003.............................................................................    1,358
        2004.............................................................................    1,358
        2005.............................................................................    1,358
        2006.............................................................................    1,358
                                                                                          --------

        Total............................................................................ $  6,788
                                                                                          ========






11.  FEDERAL INCOME TAXES

         The Company  computes  deferred  income taxes based upon the difference
between the financial  statement and tax bases of assets and  liabilities  using
enacted tax rates in effect in the years in which the  differences  are expected
to reverse.


                                                F-25



                          RIVIERA HOLDINGS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11.  FEDERAL INCOME TAXES (Continued)

         The  effective  income tax rates on income  attributable  to continuing
operations  differ  from the  statutory  federal  income tax rates for the years
ended December 31 as follows (in thousands):


                                               2001                    2000                     1999
                                    ------------------------------------------------------------------------
                                        Amount       Rate        Amount      Rate       Amount        Rate
Benefit for income taxes at
                                                                                    
   federal statutory rate.........      $(3,026)    (35.0)%      $(2,349)    (35.0)%      $(2,565)    (35.0)%
Taxes, state, other...............          392       4.5
Benefit from outcome of IRS
   examination....................                                                         (1,874)    (25.6)
Other.............................          394       4.6           (146)     (2.2)           (22)     (0.2)
                                      ---------- --------      ---------  -------      ----------     ------

Benefit for income taxes..........      $(2,240)    (25.9)%      $(2,495)    (37.2)%      $(4,461)    (60.8)%
                                        =======     =====        =======     =====        =======     =====




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



                                                                              2001        2000          1999
                                                                              ----        ----          ----
                                                                                                
Current...........................................................           $157       $1,223         $(984)
Deferred..........................................................         (2,397)      (3,718)       (3,477)
                                                                          -------      -------      --------

Total.............................................................        $(2,240)     $(2,495)      $(4,461)
                                                                          =======      =======       =======




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



                                                                                             2001        2000
Deferred tax liabilities:
                                                                                                 
   Reserve differential for hospitality and gaming activities......................          $559      $1,393
   Difference between book and tax-depreciable property............................         4,845       5,217
   Other...........................................................................           579         560
                                                                                           ------      ------

Total..............................................................................         5,983       7,170
                                                                                            -----       -----

Deferred tax assets:
   Net operating loss carryforward.................................................         4,383       3,309
   Reserves not currently deductible...............................................         2,647       2,416
   Bad debt reserves...............................................................           583         483
   AMT and other credits...........................................................         3,459       3,851
                                                                                          -------      ------

Total..............................................................................        11,072      10,059
                                                                                           ------      ------

Net deferred tax assets............................................................        $5,089      $2,889
                                                                                           ======      ======




         The Company has  $3,453,000 of  alternative  minimum tax ("AMT") credit
and $7,000 of general  business  credit  available to offset  future  income tax
liabilities. The AMT credit has no expiration date. The credit will not begin to
expire until 2012.

         The Company  performed an analysis of the realizability of its deferred
tax assets at December  31, 2001.  The  realizability  of the assets  related to
Rivera Las Vegas is dependent upon future earnings and tax strategies  which the
Company may transact in 2002 and 2003. No allowance was required at December 31,
2001 or 2000.



                                                F-26

                          RIVIERA HOLDINGS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


12.  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  consolidated  financial  position,  results of
operations, or cash flows of the Company.

         Allen Paulson Merger/Litigation--The Company and the plaintiffs to this
action  entered into a Settlement  Agreement  dated 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) the Company
would pay plaintiff  Allen E. Paulson (and his heirs or successors)  ("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
$1,522,587.50  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  against  the  Company  with
prejudice  and  barred  the  other   defendants  to  the  lawsuit  from  seeking
indemnification  against  the  Company  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,  the  Company
acquired  Paulson's stock, and funds were disbursed from escrow as per the terms
of the Settlement Agreement.

         Morgens,  Waterfall,  Vintiadis  Litigation (the "Nevada  Action")--The
plaintiff in this action  ("Morgens,  Waterfall")  is a  stockholder  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 the Company from  obtaining a Settlement Bar Order in
the California Action. The Company 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. The Company and the other defendants  opposed the motion,  and on May 24,
2000, the Court denied Morgens, Waterfall's motion.

         On January 31, 2000, Morgens, Waterfall served an Amended Summons and a
First Amended Verified Complaint on Riviera Holdings Corporation with subsequent
service on directors. The Amended Complaint asserted four claims for relief.

         On April 17,  2000,  the  Company  and its  directors  moved to dismiss
Morgens,  Waterfall's Amended Complaint. In response, Morgens, Waterfall opposed
the  directors'  motion but  "conceded"  its claim  against  the  Company.  As a
consequence,  Morgens,  Waterfall  no  longer  asserted  any claim  against  the
Company,  but it has  opposed  dismissing  the  Company  from the  action on the
grounds  that  the  Company  was a  "nominal  defendant"  with  respect  to  the
derivative claims asserted by Morgens, Waterfall against the directors.



                                                F-27


                          RIVIERA HOLDINGS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12.  COMMITMENTS AND CONTINGENCIES (Continued)

         On October 1, 2001, Morgens,  Waterfall, the Company, and the directors
entered into a Settlement  Agreement settling the Nevada Action. That Settlement
Agreement  provides that the plaintiff  would release its claims with  prejudice
against  each  defendant  and each  defendant  would  release  its  claims  with
prejudice  against the plaintiff,  conditioned  upon Mr. William L.  Westerman's
accepting service of a subpoena to personally appear and testify at the trial of
the California Action.

See also Note 19.

         Employees and Labor Relations--As of December 31, 2001, the Company had
approximately  1,782 full-time  equivalent  employees and collective  bargaining
contracts  with  eight  unions  covering  approximately  813 of such  employees,
including food and beverage employees,  rooms department employees,  carpenters,
engineers,  stage hands, musicians,  electricians,  painters, and teamsters. The
Company's  agreements with the Southern Nevada Culinary and Bartenders Union and
Stage  Hands  Union,  which  cover  the  majority  of  the  Company's  unionized
employees,  were  renegotiated  in 1998 and expire in the year 2002.  Collective
bargaining agreements with the operating engineers,  painters,  and electricians
were  renegotiated in 2000 and expire in 2004, 2005, and 2004,  respectively.  A
new agreement was  negotiated  with the  carpenters  which expires in 2005.  The
Company is also in  negotiations  with the Musicians  Union. A new agreement was
negotiated with the Teamsters,  which expires in 2003. Although unions have been
active  in  Las  Vegas,  management  considers  its  employee  relations  to  be
satisfactory.  There can be no assurance,  however,  that new agreements will be
reached without union action or will be on terms satisfactory to the Company.

         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).  On
February 14, 2001, the Company advanced  approximately $3.1 million to RBH under
this agreement.  As of December 31, 2001, Riviera Holdings  Corporation does not
owe amounts under the Keep-Well Agreement.


                                                F-28


13.  MANAGEMENT AGREEMENTS

         From August 1996 until  December  1999, RGM operated the Four Queens in
downtown Las Vegas under a management  agreement for a minimum annual management
fee of $1.0 million. The Company completed its requirements under the agreement,
and the Four Queens Management Agreement was terminated December 30, 1999.

         RBH has a management  agreement (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,
manages RBH. The management fee consists of a revenue fee and a performance fee.
The  revenue  fee  is  based  on  1%  of  net  revenues   (gross  revenues  less
complimentaries)  and is payable  quarterly in arrears.  The  performance fee is
based on the following  percentages  of EBITDA,  which  components  are based on
GAAP:  (1) 10% of EBITDA from $5 million to $10 million,  (2) 15% of EBITDA from
$10 million to $15 million,  and (3) 20% of EBITDA in excess of $15 million. The
performance  fee is 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  intercompany  service fees. At December 31,
2001,  RBH had accrued  but not  paid, and the Manager had recognized management
fees of, $1,911,229, which are eliminated in consolidation.

14.  EMPLOYMENT AGREEMENTS AND EMPLOYEE BENEFIT PLANS

         Chairman--William  L.  Westerman  serves  as  Chairman  of  the  Board,
President and Chief Executive Officer ("CEO") of the Company, and as Chairman of
the Board and Chief Executive Officer of ROC.

         Under Mr. Westerman's  existing employment  agreement with the Company,
which was last amended on December 6, 2000, Mr.  Westerman  shall be employed by
the Company  for an  indefinite  period,  subject to  termination  by either the
Company or Mr.  Westerman on not less than 120 days' prior written  notice.  Mr.
Westerman's base compensation is $600,000.

         Under  his  employment   agreement,   Mr.   Westerman  is  entitled  to
participate in the Company's Senior  Management  Compensation Plan or such other
executive bonus plan as shall be established by the Company's Board of Directors
(collectively the "Plan"). If at least 80% of targeted net income, as defined by
the Plan, is met, Mr.  Westerman  shall be entitled to receive a bonus under the
Plan  expressed as a percentage  of his  $600,000  base salary  depending on the
percentage of targeted net income realized by the Company in a particular  year,
with a maximum bonus of $900,000. Pursuant to the December 6, 2000 amendment, to
the extent Mr.  Westerman's  bonus exceeds  $400,000 in 2001 and each succeeding
year,  such excess amount shall be deducted  from the  principal  balance of his
retirement  account at the time the bonus is paid.  Mr.  Westerman  received  an
incentive  bonus of $900,000 for 2001,  $500,000 of which was deducted  from the
principal  balance  of his  retirement  account,  resulting  in a net  bonus  of
$400,000.

                                                F-29


         The  employment  agreement  provides that the Company fund a retirement
account for Mr. Westerman. Pursuant to the employment agreement, an aggregate of
$6,812,000  had been  credited  to the  retirement  account  from its  inception
through  December 31, 2001. Under the employment  agreement,  each year that Mr.
Westerman  continues to be employed,  an amount  equal to Mr.  Westerman's  base
salary  for that year is  credited  to the  account  on  January 1 of that year.
Pursuant  to the  December  6,  2000  amendment  to Mr.  Westerman's  employment
agreement, the January 1, 2001 contribution was the final principal contribution
to the  retirement  account.  As of December 31, 2001,  none of this account has
been funded.

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

         On February 5, 1998, the stockholders of the Company by a majority vote
approved  the  Agreement  and the Plan of Merger with R&E Gaming  Corp.  and its
wholly owned subsidiary Riviera Acquisition Sub, Inc. Such stockholder  approval
constituted a Change of Control. On March 5, 1998,  subsequent to this Change of
Control,  Mr. Westerman  exercised his right to require the Company to establish
and fund a Rabbi Trust for his benefit. On March 20, 1998, Mr. Westerman and the
Company entered into an agreement whereby Mr. Westerman waived his right to have
the Company fund the Rabbi Trust in exchange for the Company's  agreeing to fund
such Rabbi Trust



                                                F-30

                          RIVIERA HOLDINGS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14.  EMPLOYMENT AGREEMENTS AND EMPLOYEE BENEFIT PLANS (Continued)

within five business days after notice from Mr. Westerman.  The merger agreement
was subsequently terminated and litigation ensued.

         In the event that Mr.  Westerman  is no longer  employed by the Company
(except for termination for cause, in which case Mr. Westerman would forfeit all
rights to monies in the retirement  account),  Mr. Westerman will be entitled to
receive the amount in the retirement account (principal and current interest) in
20 equal  quarterly  installments as of the date he ceases to be employed by the
Company.  In the event that Mr. Westerman's Rabbi Trust has not yet been funded,
the balance of principal  and interest of the  retirement  account shall be paid
directly to Mr. Westerman upon his retirement,  termination  (except for cause),
or upon a change in control of the Company. As of December 31, 2001, none of the
Trust has been funded.

         Pursuant  to the  employment  agreement,  the  retirement  account  was
credited  quarterly with interest and shall be credited with additional  amounts
on the first day of each succeeding calendar quarter equal to the product of (i)
the Company's average borrowing cost for the immediately  preceding fiscal year,
as determined by the Company's  chief  financial  officer,  and (ii) the average
outstanding  balance in the  retirement  account  during the preceding  calendar
quarter.  This  interest  continues  to accrue  pursuant to the December 6, 2000
amendment.  Total interest earned was $779,000 for 2001,  $647,418 for 2000, and
$487,729  for  1999.  In the event the  Rabbi  Trust has been  funded,  upon Mr.
Westerman's  death, an amount equal to the applicable  federal estate tax on the
retirement  account  will be  prepaid  prior to the date or dates such taxes are
due.

         Mr. Westerman's  employment  agreement provides (a) that the sum of Mr.
Westerman's base salary, bonus, and credits to his retirement account in any one
year shall not exceed  that which  would have been  payable  under his  previous
employment agreement with the Company, and (b) that Mr. Westerman shall instruct
the  Company  of any  reductions  in base  salary,  bonus,  and  credits  to his
retirement  account  necessary  to comply  with  this  limitation.  The  Company
determined  that for the year 1999,  a reduction  of $467,000  was  necessary to
comply with this provision.  For 1998 the Company determined that a reduction of
$194,000 was necessary to comply with this provision. Prior to December 31, 1999
and 1998,  Mr.  Westerman  instructed the Company that this be applied to reduce
the amount to be credited to his  retirement  account from  $600,000 to $133,000
and to $406,000,  respectively.  No such  reductions  under this  provision were
required in 2001 or 2000.

         Incentive Plan--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 CEO. During the years ended December 31, 2001,  2000, and 1999, the
Company  recorded  accrued  bonuses of $1,873,939,  $2,258,500,  and $1,871,632,
respectively, based upon the above incentive compensation plan and the incentive
compensation plan established for the Chairman of the Board under his employment
agreement.

         Pension Plan  Contributions--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
$1,672,000,  $1,688,000,  and  $1,637,000 for the years ended December 31, 2001,
2000, and 1999,  respectively.  These  contributions  were for approximately 813
employees,  including food and beverage  employees,  room department  employees,
carpenters,  engineers, stagehands,  electricians,  painters, and teamsters. The
Company's share of any unfunded  liability related to  multi-employer  plans, if
any, is not determinable.

         Profit Sharing and 401(k)  Plans--On June 30, 1993, the Company and ROC
assumed the  combined  profit  sharing and 401(k)  plans of Riviera,  Inc.  (the
"Profit Sharing and 401(k)  Plans"),  and the Company and ROC have continued the
Profit  Sharing and 401(k) Plans after June 30,  1993.  The Company and ROC have
amended the Adoption  Agreement to provide that all current employees of Riviera
Las Vegas who were employed on April 1, 1992, were at least 21 years of age, and
are not covered by a collective bargaining agreement are immediately eligible to
participate  in the Profit  Sharing and 401(k)  Plans.  The  amendment  provides
further that all current  employees who were employed by Riviera Las Vegas after
April 1, 1992, are at least 21 years of age, and are not covered by a collective
bargaining  agreement are eligible to  participate  after one year of service at
the Riviera Las Vegas.

                                                F-31


         The  Company  has  identical  plans  for  its  100%  indirectly   owned
subsidiary,  Riviera Black Hawk,  Inc., which operates its casino in Black Hawk,
Colorado.  Employees  hired prior to June 30, 2000 who were at least 21 years of
age and were not covered by a collective  bargaining  agreement were immediately
eligible to participate  in the Profit Sharing and 401(k) Plans.  After June 30,
2000,  all new employees who are at least 21 years of age and are not covered by
a collective  bargaining agreement are eligible to participate after one year of
service at Riviera Black Hawk.

         The  Company may make a  contribution  to the 401(k)  component  of the
Profit Sharing and 401(k) Plans in an amount not to exceed  twenty-five  percent
(25%) of the first eight percent (8%) of each participant's compensation,  which
is contributed as a salary deferral.  The Company also paid administrative costs
of the Plan of $21,851,  $25,000,  and $24,343 for the years ended  December 31,
2001, 2000, and 1999, respectively.

         The profit  sharing  component  of the Profit  Sharing and 401(k) Plans
provides that the Company will make a contribution  equal to 1% of each eligible
employee's annual  compensation if a prescribed annual operating earnings target
is attained and an additional 1% thereof for each $2 million by which  operating
earnings is exceeded,  up to a maximum of 3% thereof.  The Company may elect not
to  contribute  to the  Profit  Sharing  and  401(k)  Plans if it  notifies  its
employees  by January of the plan year.  An employee  will become  vested in the
Company's  contributions  based on the employee's years of service.  An employee
will receive a year of vesting  service for each plan year in which the employee
completed  1,000  hours of service.  Vesting  credit  will be  allocated  in 20%
increments for each year of service  commencing with the attainment of two years
of service.  An employee will be fully vested  following  the  completion of six
years of service.

         Effective January 1, 2000, the Company  suspended  contributions to the
Profit Sharing Plan and substituted contributions to an Employee Stock Ownership
Plan (see "Employee Stock Ownership Plan," directly below).

         Employee  Stock  Ownership  Plan - An  Employee  Stock  Ownership  Plan
("ESOP") was established effective January 1, 2000  and it replaces  the  profit
sharing  contribution  component  of  the  Profit Sharing and 401(k) Plans.  The
other components of the 401(k) Plan remain unchanged. The ESOP provides that all
employees  of  Riviera  Las Vegas and  Riviera  Black Hawk who had  completed  a
minimum  of  one  thousand  hours  of  service  in a plan  year,  were  employed
through  December 31 of that plan year,  were at least 21 years of age, and were
not covered by a collective  bargaining agreement are eligible to participate in
the ESOP.  The ESOP  provides that the Company will make a  contribution  to the
ESOP's  participants at its Las Vegas and Black Hawk properties  relative to the
economic  performance of each property.  For Riviera Las Vegas, the Company will
make a contribution equal to 1% of each eligible  employee's annual compensation
if a prescribed  annual operating  earnings target is attained and an additional
1% thereof for each $2 million by which operating earnings is exceeded,  up to a
maximum of 4% for 2000 and 5%  thereafter.  For Riviera Black Hawk,  the Company
will  make  a  contribution  equal  to 1% of  each  eligible  employee's  annual
compensation if a prescribed annual operating earnings target is attained and an
additional  1%  thereof  for each $1  million  by which  operating  earnings  is
exceeded, up to a maximum of 4% for 2000 and 5% thereafter.  Under the ESOP, the
Company  contribution  will be made in cash,  which will be used to buy  Company
common stock.

                                                F-32


         Deferred  Compensation Plan--On October 2, 2000, the Board of Directors
adopted a Deferred Compensation Plan (the "Plan"). The purpose of the Plan is to
provide  eligible  employees  of the Company with the  opportunity  to defer the
receipt of cash compensation.  Participation in the nonqualified Plan is limited
to highly compensated  employees who receive  annual  compensation  of  at least
$100,000. The deferred funds are maintained on  the  Company  books  as unfunded
liabilities. All elections to defer the receipt of compensation  must be made no
later  than  the  December  1st  preceding  the  plan year to which the election
relates and  are irrevocable  for the  duration  of that plan year.  Six Company
executives are currently participating in the Plan.

         Restricted  Stock  Plan--On  October  2, 2000,  the Board of  Directors
adopted a  Restricted  Stock Plan to provide  incentives  that will  attract and
retain highly competent  persons as officers and key employees by providing them
opportunities  to  receive  restricted  shares of the  Company's  common  stock.
Participants  will consist of such  officers and key employees of the Company as
the Company's Compensation Committee determines to be significantly  responsible
for the success and future growth and  profitability  of the Company.  Awards of
restricted  stock are  subject  to such  terms  and  conditions  as the  Company
determines to be appropriate at the time of the grant, including restrictions on
the  sale or  other  disposition  of such  shares  and  the  provisions  for the
forfeiture of such shares for partial or no  consideration  upon  termination of
the   participant's   employment  within  specified  periods  or  under  certain
conditions.  Mr.  Robert  Vannucci  and Mr.  Jerome  P.  Grippe,  President  and
Executive  Vice  President,   respectively,   of  the  Company's   wholly  owned
subsidiary,  Riviera Operating Corporation,  are currently the only participants
in the Restricted Stock Plan.

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

         Stay  Bonus   Agreements--Approximately   85  executive   officers  and
significant  employees (excluding Mr. Westerman) of ROC were party to agreements
pursuant to which each such  employee  was  entitled  to receive a "stay  bonus"
(varying  amounts) if the employee was  discharged  without cause (as defined in
the stay bonus  agreements),  or continued to be employed by the Company on each
of January 1, 2000,  January 1, 2001,  and June 30, 2001.  The total amount that
was payable under all such agreements was approximately  $2.2 million,  of which
approximately  $610,000 was paid in January 2000, $1,068,000 was paid in January
2001, and $462,500 was paid on June 30, 2001.

                                                F-33


         Termination  Fee  Agreements--Approximately  85 executive  officers and
significant  employees  (excluding Mr.  Westerman) of ROC have  termination  fee
agreements  effective  through  December  2003,  pursuant  to which each of such
employees  will be entitled to receive (1) either six months' or one year's base
salary if their employment with the Company is terminated, without cause, within
12 or 24 months of a change of  control  of the  Company  or ROC;  and (2) group
health  insurance  for  periods  of either  one or two  years.  The base  salary
payments are payable in biweekly installments, subject to the employee's duty to
mitigate  by using his or her best  efforts to find  employment.  The  estimated
total amount  payable under all such  agreements was  approximately  $5 million,
including $1.2 million in benefits, as of December 31, 2001.

15.  STOCK OPTION PLANS

     Stock  Compensation  Plans--At  December  31,  2001,  the Company has three
stock-based  compensation plans, which are described below. The Company accounts
for the fair  value of its  grants  under  those  plans in  accordance  with APB
Opinion No. 25. The  compensation  cost that has been charged against income for
those plans was  $142,977,  $250,988,  and  $357,118 for 2001,  2000,  and 1999,
respectively.  Under the 1993 Employee  Stock Option Plan, the Company may grant
options to its employees for up to one million shares of common stock. Under the
1996  Non-Qualified  Stock  Option  Plan,  the  Company  may  grant  options  to
non-employee  directors  for  up  to 50,000 shares of common stock.  Under these
plans,  the  exercise  price  of each  option  equals  the  market  price of the
Company's stock on the date of grant and an option's maximum term is 10 years (5
years in the case of an incentive  option  granted to a stockholder  owning more
than 10% of the common stock). Under the 1993 plan, options vest 25% on the date
of grant and 25% each subsequent year. Under the 1996  plan, options vest over 5
years.  Under  the  1996  Stock  Compensation  Plan,  directors  serving  on the
Compensation  Committee may receive all or part of their annual fees in the form
of common stock, up to an aggregate of 50,000 shares of common stock.

         Option  Surrenders--On  November 26, 1996,  410,000  stock options were
granted  to  18  Riviera  executives  at  an  option price of $13.625 per share,
320,000  of  which  were  granted  to Mr.  Westerman.  Two of  these executives'
options totaling 11,000 shares have since been canceled due to those executives'
leaving the Company,  resulting in a balance of 399,000  options at $13.625 per
share held by 16 Company  executives.  These  options were vested in
their entirety for these 16 executives.

                                                F-34


         On January 16, 2001, the Board  approved a Stock Option  Surrender Plan
(the  "Surrender  Plan").  Pursuant to the Surrender  Plan, each executive could
surrender all or any portion of his or her $13.625 options. Further, the Company
may,  but is not  obligated  to, grant new options in an amount no less than the
shares  surrendered,  to  be  issued  no sooner  than six months and a day after
the  surrender of the $13.625  options.  Any new options  granted will be at the
price of the Company's  common stock on the date of grant and are subject to the
vesting requirements of the Company's ESOP.

         All 16 Company executives surrendered the entire balance of 399,000 of
the $13.625 options effective January 31, 2001.

         The  activity  of the Stock  Option  Plan and the  Non-Qualified  Stock
Option Plan is as follows:




                                                                                                  Weighted-
                                                                                                    Average
                                                                                                  Per Share
                                                                                                   Exercise
                                                                                        Shares        Price
Stock Option Plan
                                                                                            
Outstanding, January 1, 2000.................................................         619,000        $10.75
   Grants....................................................................          97,000         $7.69
   Canceled..................................................................          (4,000)        $7.69
                                                                                   ----------
Outstanding, December 31, 2000...............................................         712,000        $10.35
   Grants....................................................................         170,500         $6.00
   Canceled..................................................................        (423,000)       $13.28
                                                                                     --------
Outstanding, December 31, 2001...............................................         459,500         $6.04
                                                                                    =========



Non-Qualified Stock Option Plan
Outstanding, January 1, 2000.................................................          14,000         $8.70
   Automatic grant to directors..............................................           6,000         $7.75
   Canceled..................................................................          (6,000)        $7.67
                                                                                      -------
Outstanding, December 31, 2000...............................................          14,000         $9.09
   Automatic grant to directors..............................................           6,000         $6.55
   Canceled..................................................................          (4,000)       $13.37
                                                                                      -------
Outstanding, December 31, 2001...............................................          16,000         $7.07
                                                                                      =======






                                    Options Outstanding                            Options Exercisable
                                    -------------------                            -------------------
                              Number            Weighted-                         Number
                            Outstanding          Average       Weighted-       Exercisable       Weighted-
                                at              Remaining       Average             at            Average
Range of                   December 31,        Contractual      Exercise       December 31,       Exercise
Exercise Prices                2001               Life           Price             2001            Price
---------------                ----               ----           -----             ----            -----
                                                                                     
$4.00 to $6.00......           285,500           1.4 years        $4.18           44,000           $4.32
$6.55 to $9.00......           190,000           1.4 years        $7.26           44,000           $7.13



                                                    F-35



         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
loss and pro forma net loss per common share and common share  equivalent  would
have been increased to the pro forma amounts  indicated below at December 31 (in
thousands, except per share amounts):



                                                                           2001        2000         1999
                                                                          ------  ----------------------
                                                                                            
          Net loss--as reported.....................................   $ (6,407)     $ (4,215)    $(2,869)
          Net loss--pro forma.......................................   $ (6,550)     $ (4,466)    $(3,226)
          Basic loss per common share--as reported..................   $  (1.79)     $  (1.05)    $ (0.58)
          Basic loss per common share--pro forma....................   $  (1.83)     $  (1.11)    $ (0.65)
          Diluted loss per common and common share equivalent--as
             reported..............................................    $  (1.79)     $  (1.05)    $ (0.58)
          Diluted loss per common and common share equivalent--pro
             forma.................................................    $  (1.83)     $  (1.11)    $ (0.65)



         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 2001,  2000,  and 1999,  respectively:  dividend
yield of 0% for all years;  expected  volatility of 44%, 60%, and 62%; risk-free
interest rates of 5.00%,  5.00%, and 5.46%; and expected lives of five years for
all years.  The weighted fair value of options  granted in 2001,  2000, and 1999
was $2.34, $3.56, and $4.57, respectively.

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

16.  EARNINGS PER SHARE

         Basic earnings per share ("EPS") are computed by dividing net income by
the weighted-average number of common shares outstanding for the period. Diluted
EPS are  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 years ended December 31, 2001,  2000, and 1999 were
495,500, 732,000, and 633,000, respectively.

         The  effect  of  options   outstanding  was  not  included  in  diluted
calculations  for the six months  ending June 30, 2002 and the six months  ended
June 30, 2001 since the Company  incurred a net loss.  The number of potentially
dilutive options was 117,000 and 125,000 for the six months ending June 30, 2002
and the six months ended June 30, 2001, respectively.




                                                F-36

                          RIVIERA HOLDINGS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16.  EARNINGS PER SHARE (Continued)

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


                                                                     Year Ended 2001
                                                      ----------------------------------------------
                                                          Income          Shares        Per Share
                                                       (Numerator)     (Denominator)      Amount

Basic EPS--
                                                                                 
    Loss available to common stockholders..........      $(6,407)             3,573       $(1.79)
                                                                                          ======

Effect of dilutive securities--
    Options........................................      _______           _______

Diluted EPS--
    Loss available to common stockholders plus
    assumed conversions............................      $(6,407)             3,573       $(1.79)
                                                         ========             =====       ======



                                                                            Year Ended 2000
                                                            -------------------------------------------------
                                                                 Income            Shares        Per Share
                                                               (Numerator)     (Denominator)      Amount

      Basic EPS--
          Loss available to common stockholders..........        $(4,215)            4,013         $(1.05)
                                                                                                   ======

      Effect of dilutive securities--
          Options........................................         _______          _______

      Diluted EPS--
          Loss available to common stockholders plus
          assumed conversions............................        $(4,215)            4,013         $(1.05)
                                                                 =======             =====         ======


                                                                            Year Ended 1999
                                                            -------------------------------------------------
                                                                 Income           Shares        Per Share
                                                               (Numerator)     (Denominator)      Amount

      Basic EPS--
           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)
                                                                 =======             =====         ======




         During 2001, 2000, and 1999, the Company  purchased  276,528,  257,893,
and  4,800  shares  of  treasury  stock on the  open  market  for  approximately
$1,779,000,  $2,093,000, and $22,000,  respectively. In addition to the purchase
of stock from Paulson as described in Note 12, 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 less than 15%. On
February 8, 2000,  the Company  completed a tender offer  wherein  approximately
590,000  shares of stock were  purchased for $7.50 per share.  During 2001,  the


                                                F-37


Company completed various tender offers wherein  approximately 277,000 shares of
stock were  purchased at an average  price of $6.43 per share.  The Company used
its cash and cash  equivalents  to purchase the shares.  After giving  effect to
such  share  repurchases,  the  Company  had  3,432,632  shares of common  stock
outstanding.  Approximately  118,100  shares of  treasury  stock are held in the
deferred compensation trust at December 31, 2001.

17.  SEGMENT DISCLOSURES

         The Company  reviews its  operations  by its  geographic  gaming market
segments:  Riviera  Las Vegas  and  Riviera  Black  Hawk.  Since the  management
division  represents  all other  revenue,  it is also  shown.  All  intersegment
revenues have been eliminated.




                                                                      Six Months Ended                     Years Ended
                                                                          June 30,                         December 31,
                                                                     2002         2001          2001          2000          1999
                                                                  ----------   ----------    ----------    ----------    -------
                                                                        (Unaudited)
                                                                                           (In thousands)
Net revenues:
                                                                                                          
   Riviera Las Vegas............................................   $71,936       $84,068      $152,985      $166,038     $156,204
   Riviera Black Hawk...........................................    24,416        22,960        49,046        35,261
   Riviera Gaming Management....................................                                                 232        1,064
                                                                 -------------------------- ------------  -----------   -----------
Total net revenues..............................................   $96,352      $107,028      $202,031      $201,531     $157,268
                                                                   =======      ========      ========      ========     ========



Income (loss) from operations:
   Riviera Las Vegas............................................    $5,789        $8,770        $9,350       $14,910      $10,641
   Riviera Black Hawk (loss pertains to preopening expenses in
      1999).....................................................     3,609         2,956         7,622         1,881         (595)
   Riviera Gaming Management....................................                                    (1)           88        1,047
                                                                 -------------------------- ------------  -----------   ---------
Total income from operations....................................    $9,398       $11,726       $16,971       $16,879      $11,093
                                                                    ======       =======       =======       =======      =======



EBITDA:
   Riviera Las Vegas............................................   $11,652       $14,910       $21,493       $29,243      $24,631
   Riviera Black Hawk...........................................     6,695         5,362        12,722         6,597            1
   Riviera Gaming Management....................................                                    (1)           88        1,047
                                                                 -------------------------- ------------  -----------   ---------
Total EBITDA....................................................   $18,347       $20,272       $34,214       $35,928      $25,679
                                                                   =======       =======       =======       =======      =======



EBITDA margin(1):
   Riviera Las Vegas............................................        16.2%         17.7%       14.0%         17.6%        15.8%
   Riviera Black Hawk...........................................        27.4%         23.4%       25.9          18.7
   Riviera Gaming Management....................................                                                37.9         98.4
                                                                 -------------------------- -------------  ------------  --------

Total EBITDA....................................................        19.0%         18.9%       16.9%         17.8%        16.3%
                                                                    ==========   =========     =========     =========     ========


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




                                                F-38

                          RIVIERA HOLDINGS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17.  SEGMENT DISCLOSURES (Continued)




                                                                                                  December 31
                                                                                           ---------------------------
                                                                             June 30, 2002          2001         2000
                                                                             -------------          ----         ----
                                                                                (unaudited)
                                                                                           (In thousands)
 Fixed assets(2):
                                                                                                      
    Riviera Las Vegas..................................................           $128,619      $132,982     $138,525
    Riviera Black Hawk.................................................             66,441        67,549       68,505
    Riviera Gaming Management..........................................
                                                                                  --------     ---------     --------
 Total assets..........................................................           $195,060      $200,531     $207,030
                                                                                  ========      ========     ========


-----------
(2)      Assets represent property and equipment and intangible assets, net of
accumulated depreciation and amortization.


         EBITDA   consists   of  earnings   before   interest,   income   taxes,
depreciation,   and  amortization  (excluding  preopening  expense Black  Hawk,
Colorado  project,   and  other,  net,  which  includes  expense  and  insurance
recoveries from Paulson Merger and litigation  activity in 1999 and 2000.) While
EBITDA should not be construed as a substitute for operating  income or a better
indicator  of liquidity  than cash flows from  operating  activities,  which are
determined in accordance with GAAP, it is included herein to provide  additional
information  with  respect to the ability of the Company to meet its future debt
service, capital expenditure, and working capital requirements.  Although EBITDA
is not  necessarily a measure of the  Company's  ability to fund its cash needs,
management  believes that certain  investors find EBITDA to be a useful tool for
measuring  the  ability  of the  Company  to  service  its debt.  The  Company's
computation of EBITDA may not be comparable to other  similarly  titled measures
of other companies.

RIVIERA LAS VEGAS

         The primary  marketing  of the  Riviera  Las Vegas is not aimed  toward
residents of Las Vegas, Nevada.  Significantly all revenues derived from patrons
visiting  the Riviera  Las Vegas are from other  parts of the United  States and
other  countries.  Revenues for the Riviera Las Vegas from a foreign  country or
region may exceed 10% of all reported segment revenues; however, the Riviera Las
Vegas  cannot  identify  such  information,  based  upon the  nature  of  gaming
operations.

RIVIERA BLACK HAWK

         The casino in Black Hawk,  Colorado,  primarily serves the residents of
metropolitan Denver,  Colorado.  As such, management believes that significantly
all revenues are derived from within 250 miles of that geographic area.

18.  RELATED PARTY TRANSACTIONS

         Robert R.  Barengo,  a member of the Board of Directors of the Company,
is a former  director  of  American  Wagering,  Inc.  ("AWI") and owns 7% of the
outstanding stock of AWI, which leases  approximately  12,000 square feet of the
Riviera Hotel & Casino's casino floor.  AWI is the operator of the Riviera Hotel
& Casino's  sport book  operations  and has operated  under a lease  arrangement
since  before Mr.  Barengo was  appointed to the Board.  The lease  provides for
rental payments based upon the monthly and annual  revenues  derived by AWI from
the location. AWI paid



                                                F-39

                          RIVIERA HOLDINGS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18.  RELATED PARTY TRANSACTIONS (Unaudited) (Continued)

aggregate rent to ROC of approximately $144,500,  $188,000, and $250,000 in each
of the years ended December 31, 2001, 2000, and 1999, 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 least 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
received a fee of $10,000 per month for his counseling services. Fees paid under
this agreement were $0, $120,000,  and $120,000 for the years ended December 31,
2001, 2000, and 1999,  respectively.  Mr. Barengo became an employee director in
January 2001. He and the Company  mutually  terminated  the agreement  effective
December 31, 2000.

         Jeffrey A. Silver,  a member of the Board,  is a shareholder in the law
firm of Gordon & Silver,  Ltd, which  has  been  engaged  by the Company for
legal matters.

         PGP  engaged  RGM  to  assist,  on  an  interim  basis  in  2000,  with
transitional  matters  relating  to the  operations  of the  Diamond  Jo  gaming
riverboat in Dubuque, Iowa. Such services included assisting in the selection of
a new chief operating  officer to oversee  riverboat casino operations and other
matters.  RGM earned fees and  expenses  in the amount of $232,000  for the year
ended  December 31, 2000.  PGP  terminated  its agreement  with RGM in September
2000.  Mr.  Westerman  served as a manager on the board of managers of PGP until
his resignation, effective December 31, 2000. The Company believes that the fees
were no less favorable than would have been paid in an arm's length transaction.

19.  SUBSEQUENT EVENTS (Unaudited)

         Guarantor  Information--The  Company's  10%  First  Mortgage  Notes are
guaranteed  by  all  of  the  Company's   wholly  owned   existing   significant
subsidiaries effective March 2002. These guaranties are full, unconditional, and
joint and several.

         Morgens, Waterfall Litigation--In the first quarter of 2002 all parties
to both of the actions  described in Note 12 have since resolved all outstanding
issues and entered into settlement  agreements,  with each party  dismissing all
actions against all other parties.

         Issuance of  Restricted  Stock--There  were  15,779  shares of treasury
stock issued at an average cost of $4.75 under the  Restricted  Stock Plan at an
average market value of $4.75 per share, for executive compensation in the first
quarter of 2002. The stock has  restrictions as to when it can be traded or sold
by its  holder;  primarily  the  shares  cannot  be  sold  until  the  executive
terminates his employment with the Company.  On April 1, 2002 the Company issued
4,771 shares of treasury  stock at an average cost of $4.75 under the Restricted
Stock Plan at an average market value of $5.24 per share.



                                                F-40

                          RIVIERA HOLDINGS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19.  SUBSEQUENT EVENTS (Unaudited) (Continued)

Recently Issued Accounting Pronouncements

         In  April  2002,  the FASB  issued  SFAS No.  145,  Rescission  of FASB
Statement Nos. 4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical
Corrections.  SFAS No. 145 requires that gains and losses from extinguishment of
debt be classified as extraordinary  items only if they meet the criteria in APB
Opinion No. 30.  Applying the provisions of APB Opinion No. 30 will  distinguish
transactions that are part of an entity's  recurring  operations from those that
are  unusual  and  infrequent  that  meet  criteria  for  classification  as  an
extraordinary  item. SFAS No. 145 is effective for the Company beginning January
1, 2003,  but  the  Company may  adopt it prior to this date.  The effect on the
Company's  consolidated  financial  position  and  results  of operations of the
adoption  of  SFAS No. 145  will be that we recognize and report bond retirement
costs as an operating expense.

         In June  2002,  the FASB  issued  SFAS No.  146,  Accounting  for Costs
Associated with Exit or Disposal  Activities.  SFAS No. 146 addresses  financial
accounting and reporting for costs  associated with exit or disposal  activities
and nullifies Emerging Issues Task Force Issue No. 94-3,  Liability  Recognition
for Certain  Employee  Termination  Benefits and Other Costs to Exit an Activity
(including  Certain Costs  Incurred in a  Restructuring).  SFAS No. 146 requires
that a liability  for a cost  associated  with an exit or  disposal  activity be
recognized when the liability is incurred.  A fundamental  conclusion reached by
the FASB in this statement is that an entity's  commitment to a plan, by itself,
does not create a present  obligation  to others that meets the  definition of a
liability.  SFAS No. 146 also  establishes  that fair value is the objective for
initial  measurement  of the  liability.  The  provisions of this  statement are
effective for exit or disposal  activities that are initiated after December 31,
2002, with early application encouraged.

     Long Term Debt - In June 2002,  Riviera  Holdings  Corporation  issued $215
million 11% Notes in a private placement. Proceeds of the 11% Notes will be used
to retire the 10% and 13% Notes in the third quarter of 2002.The Company expects
to register securities identical to the 11% Notes under the 1933 Act, as amended
in the third  quarter  of 2002 and  exchange  them for the  Notes  issued in the
private  placement.  The  Company's  11%  Notes  are  guaranteed  by  all of the
Company's wholly-owned,  existing,  significant restricted  subsidiaries.  These
guaranties are full, unconditional, and joint and several.


                                                F-41


     The net proceeds from the offer and sale of the existing notes,  which were
issued on June 26, 2002,  were  approximately  $202.6 million after deduction of
the  initial  purchaser's  discounts  and  expenses  of the  offering.  The  net
proceeds,  along with cash on hand,  were used to defease our 10% First Mortgage
Notes due 2004 and Riviera Black Hawk's 13% First  Mortgage  Notes due 2005 with
Contingent  Interest.  The Funds  required  to defease  these  obligations  were
deposited in accounts with the respective trustees. The Riviera Black Hawk Notes
ere  subsequently  redeemed  by the  trustee  on July 26,  2002 at 106.5% of the
outstanding  principal  amount.  The  Company's  First  Mortgage  Notes  will be
redeemed by the trustee in August  2002 at 102.5% of the  outstanding  principal
amount.  The Company incurred fees of  approximately  $9.3 million in connection
with the  issuance of the $215  million 11% Notes,  which are  included in other
assets at June 30, 2002 and are being  amortized  to interest  expense  over the
life of the indebteness.

         Effective  July 26,  2002,  the  Company  entered  into a $30  million,
five-year  revolving credit arrangement with a financial  institution.  Terms of
the  arrangement  include  interest at prime plus .75 percent or a LIBOR derived
rate. No advances on this revolver have been requested.  the Company incurred
loan fees of approximately $1.5 million which are being expensed over the life
of the credit arrangement.

     Interest  Expense  on  Bonds  Held for  Retirement  - The  Company  reports
interest  expense  separately  for  bonds to be  retired  when  funds  have been
segregated for that specific purpose.

     Other - On March 15, 2002,  Riviera Gaming  Management of New Mexico,  Inc.
was  incorporated  in the state of New Mexico.  On June 5, 2002,  Riviera Gaming
Management of Missouri, Inc. was incorporated in the State of Missouri.

     The cash flow  projections  used by the Company in the  application of SFAS
109 for the  realization of deferred tax assets  indicate a valuation  allowance
should be recorded on the tax benefit earned in the first quarter of 2002

      In July 2002, the Company received an income tax refund of approximately
$1.9 million.



                                ******




                                         F-42


                           TABLE OF CONTENTS
                           -----------------

                                                                         Page

Prospectus Summary.....................................................     6
Risk Factors...........................................................    16
Use of Proceeds........................................................    26
Capitalization.........................................................    27
Selected Consolidated Financial Data...................................    28
Management's Discussion and Analysis of Financial
         Condition and Results of Operations...........................    30
The Exchange Offer.....................................................    46
United States Federal Income Tax Considerations........................    56
Business...............................................................    59
Management.............................................................    72
Ownership of the Company...............................................    87
Certain Relationships and Related Transactions.........................    89
Description of New Credit Facility and Intercreditor Agreement.........    89
Description of Notes...................................................    94
Government Regulation and Licensing....................................   150
Plan of Distribution...................................................   161
Legal Matters..........................................................   162
Experts................................................................   163
Available Information..................................................   163
Incorporation of Certain Documents by Reference........................   163
Index to Consolidated Financial Statements.............................   F-1

     Through January 23, 2003 (90 days after commencement of this exchange offer
all  dealers   effecting   transactions  in  the  new  notes,   whether  or  not
participating  in the  original  distribution,  may be  required  to  deliver  a
prospectus.  This is in  addition  to the  obligation  of  dealers  to deliver a
prospectus  when  acting  as  underwriters  and with  respect  to  their  unsold
allotments or subscriptions.





                                                i


                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20.  Indemnification of Directors and Officers

         Nevada law  provides  that  Nevada  corporations  may  include in their
articles  of  incorporation  provisions  eliminating  or limiting  the  personal
liability of their  directors  and officers in  shareholder  actions  brought to
obtain damages for alleged breaches of fiduciary  duties, as long as the alleged
acts or  omissions  did not involve  intentional  misconduct,  fraud,  a knowing
violation of law or payment of  dividends  in violation of the Nevada  statutes.
Nevada law also  allows  Nevada  corporations  to include in their  articles  of
incorporation  or bylaws  provisions to the effect that expenses of officers and
directors  incurred in defending a civil or criminal  action must be paid by the
corporation  as they are incurred,  subject to an  undertaking  on behalf of the
director or officer to repay such expenses if it is  ultimately  determined by a
court of competent jurisdiction that such officer or director is not entitled to
be  indemnified by the  corporation  because he or she did not act in good faith
and in a  manner  reasonably  believed  to be in or  not  opposed  to  the  best
interests of the corporation.

         The   articles  of   incorporation   of  the  Company  and  its  Nevada
subsidiaries  provide  that a director or officer of such  company  shall not be
personally liable to such company or its shareholders for damages for any breach
of fiduciary duty as a director or officer, except for liability for (a) acts or
omissions which involve intentional misconduct,  fraud or a knowing violation of
law,  or (b) the  payment  of  distributions  in  violation  of NRS  78.300.  In
addition,  NRS 78.751 and Article  VII of the bylaws of each of such  companies,
under certain circumstances, provide for the indemnification of the officers and
directors  of such  company  against  liabilities  which  they may incur in such
capacities.  A summary of the  circumstances  in which such  indemnification  is
provided  for is set  forth in the  following  paragraph,  but such  summary  is
qualified  in its  entirety  by  reference  to Article VII of the bylaws of such
company.

         In  general,  any  director  or  officer  of the  Company or its Nevada
subsidiaries  (each, an "Indemnitee") who was or is a party to, or is threatened
to be made a party to, or is otherwise  involved in any  threatened,  pending or
completed  action or suit  (including  without  limitation  an  action,  suit or
proceeding  by or in the  right  of  such  company),  whether  civil,  criminal,
administrative  or investigative (a "Proceeding") by reason of the fact that the
Indemnitee  is or was a director or officer of such company or is or was serving
in any capacity at the request of such company as a director, officer, employee,
agent,  partner  or  fiduciary  of,  or  in  any  other  capacity  for,  another
corporation or any partnership,  joint venture,  trust or other enterprise shall
be  indemnified  and held  harmless by such  company  for  actions  taken by the
Indemnitee  and for all  omissions  to the full extent  permitted  by Nevada law
against all expense, liability and loss (including without limitation attorneys'
fees,  judgments,  fines,  taxes,  penalties  and amounts  paid or to be paid in
settlement) reasonably incurred or suffered by the Indemnitee in connection with
any Proceeding. The rights to indemnification  specifically include the right to
reimbursement  from such company for all reasonable costs and expenses  incurred
in  connection  with  the  Proceeding  and  indemnification  continues  as to an
Indemnitee  who has ceased to be a director or officer.  The board of  directors
may include  employees  and other persons as though they were  Indemnitees.  The


                                II-1


rights to indemnification  are not exclusive of any other rights that any person
may have by law, agreement or otherwise.

         The bylaws of the Company and its Nevada subsidiaries provide that such
company may purchase and maintain insurance or make other financial arrangements
on behalf of any person  who  otherwise  qualifies  as an  Indemnitee  under the
foregoing provisions.  Other financial arrangements to assist the Indemnitee are
also  permitted,  such as the creation of a trust fund, the  establishment  of a
program  of  self-insurance,  the  securing  of  such  company's  obligation  of
indemnification  by  granting  a security  interest  or other lien on any assets
(including  cash) of such company and the  establishment  of a letter of credit,
guarantee or surety.

         The bylaws and  articles of  incorporation  of the  Company's  Colorado
subsidiaries provide that those companies shall, to the full extent permitted by
the Colorado Business  Corporation Act, as amended from time to time,  indemnify
all of their  directors  and  officers.  Sections  7-109-101 to 7-109-110 of the
Colorado Business  Corporation Act provide in part that a corporation shall have
the power to indemnify  any person who was or is a party or is  threatened to be
made a party to any threatened, pending or completed action, suit or proceedings
(other  than an action by or in the right of the  corporation)  by reason of the
fact that such  person is or was a director,  officer,  employee or agent of the
corporation  or is or  was  serving  at the  request  of  the  corporation  as a
director, officer, employee or agent of another corporation or other enterprise,
against expenses (including attorneys' fees), judgments,  fines and amounts paid
in settlement  actually and reasonably  incurred by him in connection  with such
action,  suit or  proceedings  if he acted  in good  faith  and in a  manner  he
reasonably  believed  to be in or not  opposed  to  the  best  interests  of the
corporation,  and with respect to any  criminal  action or  proceedings,  had no
reasonable  cause to believe his  conduct was  unlawful.  Similar  indemnity  is
authorized  for  such  persons  against  expenses  (including  attorneys'  fees)
actually and  reasonably  incurred in defense or settlement  of any  threatened,
pending or completed  action or suit by or in the right of the  corporation,  if
such person acted in good faith and in a manner he reasonably  believed to be in
or not opposed to the best interests of the  corporation,  and provided  further
that (unless a court of competent  jurisdiction  otherwise provides) such person
shall not have been adjudged liable to the corporation. Any such indemnification
may be made only as authorized in each specific case upon a determination by the
shareholders or disinterested  directors that  indemnification is proper because
the  indemnitee has met the  applicable  standard of conduct.  The indemnitee is
presumed to be entitled to indemnification and the corporation has the burden of
proof to overcome that presumption. Where an officer or a director is successful
on the merits or otherwise in the defense of any action  referred to above,  the
corporation must indemnify him or her against the expenses which such officer or
director actually or reasonably incurred.

         Additionally, the articles of incorporation and bylaws of the Company's
Colorado subsidiaries provide for mandatory  indemnification of directors to the
fullest extent  permitted by Colorado law. This provision does not eliminate the
liability  of a director for (a) a breach of the  director's  duty of loyalty to
the corporation or its  shareholders;  (b) acts or omissions by the director not
in good faith or which involve intentional  misconduct or a knowing violation of
law; (c)  liability  arising under  Section  7-108-403 of the Colorado  Business
Corporation Act (relating to  distributions  to shareholders in violation of the
Colorado  Business  Corporation  Act);  or (d) any  transaction  from  which the
director derived an improper personal benefit.


                                                II-2


Item 21.  Exhibits and Financial Statement Schedules

(a)......Exhibits.

Exhibit
Number            Description

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 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)

3.8*              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)

3.9*              Articles of Amendment to the Articles of Incorporation of
                  Riviera Black Hawk, Inc. (see Exhibit 3.01 to Amendment No. 1
                  to Registration Statement on Form S-4 filed by Riviera Black
                  Hawk, Inc. with the Commission on August 31, 1999, Commission
                  File No. 333-81613)

                                                II-3


3.10*             Articles of Incorporation of Riviera Black Hawk, Inc. (see
                  Exhibit 3.02 to Amendment No. 1 to Registration Statement on
                  Form S-4 filed by Riviera Black Hawk, Inc. with the Commission
                  on August 31, 1999, Commission File No. 333-81613)

3.11*             Bylaws of Riviera Black Hawk, Inc. (see Exhibit 3.03 to
                  Amendment No. 1 to Registration Statement on Form S-4 filed
                  by Riviera Black Hawk, Inc. with the Commission on August 31,
                  1999, Commission File No. 333-81613)

4.1**             Indenture dated as of June 26, 2002 among the Company, the
                  Guarantors party thereto and The Bank of New York, as trustee

4.2**             Form of the Company's 11% Senior Secured Notes due 2010
                  (included in Exhibit 4.1)

5.1**             Opinion of Gordon & Silver, Ltd.

10.1**            Registration Rights Agreement dated as of June 26, 2002 by and
                  among the Company, the Guarantors party thereto, and Jefferies
                  & Company, Inc.

10.2**            Purchase Agreement dated June 19, 2002 among the Company, the
                  Guarantors party thereto, and Jefferies & Company, Inc.

10.3**            Amended and Restated Lease Agreement between Riviera Operating
                  Corporation and Mardi Gras Food Court, Inc. dated  March 15,
                  1998

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

10.5*             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, Commission File No. 33-67206)

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

10.7*             Operating Agreement dated June 30, 1993, between the Company
                  and Riviera Operating Corporation (see Exhibit 10.15 to
                  Registration Statement on Form S-1 filed with the Commission
                  on August 11, 1993, Commission File No. 33-67206)

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

                                                II-4


10.9**            Merrill Lynch Special Prototype Defined Contribution Plan
                  Adoption Agreement dated June 29, 1993, as amended through
                  November 15, 1996

10.10**           Form of Termination Agreement with the Company dated June 11,
                  2002

10.11*            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 on Form S-1 filed
                  with the Commission on August 19, 1993, Commission File No.
                  33-67206)

10.12**           Tax Sharing Agreement between the Company and Riviera Black
                  Hawk dated March 31,1999

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

10.14**           The Company's 1996 Non-Qualified Stock Option Plan

10.15*            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. 0-21430)

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

10.17*            Amendment to Employment Agreement between the Company and
                  Robert A. Vannucci effective October 1, 2000 (see Exhibit
                  10.39 to Form 10-K filed March 23, 2001)

10.18*            Amendment to Employment Agreement between the Company and
                  William L. Westerman effective January 1, 2001 (see Exhibit
                  10.40 to Form 10-K filed March 23, 2001)

10.19*            Deferred Compensation Plan dated November 1, 2000, adopted by
                  the Company on October 2, 2000 (see Registration Statement on
                  Form S-8 filed with the Commission on February 14, 2001)

10.20*            Restricted Stock Plan dated January 2, 2001, adopted by the
                  Company on October 2, 2000 (see Registration Statement on
                  Form S-8 filed with the Commission on February 14, 2001)

                                                II-5


10.21**           Deed of Trust, Assignment of Rents, Leases, Fixture Filing and
                  Security Agreement dated June 26, 2002, executed by the
                  Company for the benefit of The Bank of New York

10.22**           Deed of Trust to Public Trustee, Security Agreement, Fixture
                  Filing and Assignment of Rents, Leases and Leasehold Interests
                  dated as of June 26, 2002, by Riviera Black Hawk, Inc. for the
                  benefit of The Bank of New York

10.23**           Security Agreement dated June 26, 2002 by and among the
                  Company, Riviera Operating Corporation, Riviera Gaming
                  Management, Inc., Riviera Gaming Management of Colorado, Inc.,
                  Riviera Black Hawk, Inc, and The Bank of New York

10.24**           Assignment of Rents, Leases and Leasehold Interests dated as
                  of June 26, 2002 by Riviera Black Hawk, Inc. for the benefit
                  of The Bank of New York

10.25**           Stock Pledge and Security Agreement dated June 26, 2002,
                  executed by the Company

10.26**           Stock Pledge and Security Agreement dated June 26, 2002,
                  executed by Riviera Operating Corporation

10.27**           Stock Pledge and Security Agreement dated June 26, 2002,
                  executed by Riviera Gaming Management, Inc.

10.28**           Environmental Indemnity dated as of June 26, 2002 by and among
                  the Company and Riviera Black Hawk, Inc., as  indemnitors, and
                  The Bank of New York, as trustee

10.29**           Environmental Indemnity dated as of June 26, 2002 by and
                  between the Company, as indemnitor, and The Bank of New York,
                  as trustee

10.30**           Loan and Security Agreement dated as of July 26, 2002 by and
                  among the Company and the other Borrower parties
                  thereto, the Guarantors parties thereto and Foothill Capital
                  Corporation

10.31**           Intercreditor Agreement dated as of July 26, 2002 by and
                  between The Bank of New York, as trustee, and Foothill
                  Capital Corporation

10.32**           Fee Letter, dated July 26, 2002, issued by the Company,
                  Riviera Black Hawk, Inc. and Riviera Operating Corporation
                  to Foothill Capital Corporation

10.33**           Intellectual Property Security Agreement dated as of July 26,
                  2002 by and between the Company and the other Debtors
                  parties thereto, and Foothill Capital Corporation


                                                II-6


10.34***          Deed of Trust, Assignment of Rents, Leases, Fixture Filing and
                  Security Agreement dated July 26, 2002, executed by  the
                  Company for the benefit of Foothill Capital Corporation

10.35**           Environmental Indemnity dated July 26, 2002 from the Company
                  in favor of Foothill Capital Corporation

10.36**           Continuing Guaranty dated July 26, 2002 by and among the
                  Company, the other Borrowers parties thereto and the
                  Guarantors parties thereto in favor of Foothill Capital
                  Corporation

10.37**           Subordination Agreement dated July 26, 2002 by and among the
                  Company and the other Creditors parties thereto in favor of
                  Foothill Capital Corporation

10.38**           Stock Pledge and Security Agreement dated July 26, 2002,
                  executed by the Company

10.39**           Stock Pledge and Security Agreement dated July 26, 2002,
                  executed by Riviera Operating Corporation

10.40**           Stock Pledge and Security Agreement dated July 26, 2002,
                  executed by Riviera Gaming Management, Inc.

10.41***          Deed of Trust to Public Trustee, Security Agreement, Fixture
                  Filing and Assignment of Rents, Leases and Leasehold
                  Interests dated July 26, 2002, executed by Riviera Black Hawk,
                  Inc. for the benefit of Foothill Capital Corporation

10.42**           Environmental Indemnity dated July 26, 2002 from the Company
                  and Riviera Black Hawk, Inc. in favor of Foothill Capital
                  Corporation

10.43**           The Company's Stock Compensation Plan

12.1**            Statement regarding the computation of the ratio of earnings
                  to fixed charges

15***             Letter regarding unaudited interim financial information

21.1**            Subsidiaries of the Company

23.1**            Consent of Deloitte & Touche LLP

23.2**            Consent of Gordon & Silver, Ltd. (included in Exhibit 5.1)

23.3***           Consent of Robinson, Waters & O'Dorisio, P.C.

23.4***           Consent of Schreck Brignone Godfrey


                                                II-7


24**              Power of Attorney

25***             Statement of Eligibility of Trustee

99.1***           Form of Letter of Transmittal

99.2***           Form of Notice of Guaranteed Delivery

99.3***           Form of Letter to Brokers, Dealers, Commercial Banks, Trust
                  Companies and Other Nominees.

99.4***           Form of Letter to Clients

99.5***           Guidelines for Certification of Taxpayer Identification Number

* These are incorporated  herein by reference as exhibits hereto.  Following the
description  of each such  exhibit  is a  reference  to it as it  appeared  in a
specified  document  previously  filed with the Commission,  to which there have
been no amendments or changes.

** Previously filed.

*** Filed herewith.

         (b)  Schedules  not listed above are omitted  because of the absence of
the conditions under which they are required or because the information required
by such omitted schedules is set forth in the financial  statements or the notes
thereto.

Item 22.  Undertakings

         (a)      Each of the undersigned registrants hereby undertakes:

                  (1) to file,  during any  period in which  offers or sales are
being made, a post-effective amendment to this registration statement:

                           (i)      to include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;

                           (ii)     to reflect in the prospectus any facts or
events arising after the effective date of the registration  statement (or the
most recent  post-effective  amendment  thereof) which,  individually or in the
aggregate,  represent a fundamental change in the information  set  forth  in
the  registration  statement.  Notwithstanding  the foregoing,  any  increase or
decrease  in volume of  securities  offered (if the total  dollar  value of
securities  offered  would not  exceed  that  which was registered) and any
deviation from the low or high end of the estimated  maximum offering  range may
be  reflected  in the  form of  prospectus  filed  with the Commission  pursuant
to Rule 424(b) if, in the aggregate,  the changes in volume and price represent
no more than a 20% change in the maximum aggregate  offering price set forth in
the "Calculation of Registration  Fee" table in the effective registration
statement; and

                           (iii)    to include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;

                                                II-8


                  (2) that, for the purpose of determining  any liability  under
the Securities Act of 1933, each such post-effective amendment shall be deemed a
new registration  statement relating to the securities offered therein,  and the
offering of such  securities at that time shall be deemed to be the initial bona
fide offering thereof; and

                  (3) to remove from  registration by means of a  post-effective
amendment  any of the  securities  being  registered  which remain unsold at the
termination of the offering.

         (b)  Insofar  as  indemnification  for  liabilities  arising  under the
Securities Act of 1933 may be permitted to directors,  officers and  controlling
persons of each registrant pursuant to the foregoing  provisions,  or otherwise,
each  registrant  has been  advised  that in the opinion of the  Securities  and
Exchange  Commission such  indemnification is against public policy as expressed
in the Act and is,  therefore,  unenforceable.  In the  event  that a claim  for
indemnification  against  such  liabilities  (other  than  the  payment  by  the
registrants of expenses  incurred or paid by a director,  officer or controlling
person of the  registrant  in the  successful  defense  of any  action,  suit or
proceeding)  is  asserted by such  director,  officer or  controlling  person in
connection with the securities being registered, each registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit  to a  court  of  appropriate  jurisdiction  the  question  whether  such
indemnification  by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

         (c) Each of the undersigned registrants hereby undertakes to respond to
requests for  information  that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b),  11 or 13 of this Form,  within one  business  day of
receipt of such request,  and to send the incorporated  documents by first class
mail or other equally  prompt  means.  This  includes  information  contained in
documents filed subsequent to the effective date of the  registration  statement
through the date of responding to the request.

                                   SIGNATURES

         Pursuant  to the  requirements  of the  Securities  Act  of  1933,  the
registrants  have duly caused this  Registration  Statement  to be signed on its
behalf by the undersigned,  thereunto duly authorized, in the City of Las Vegas,
State of Nevada, on September 25, 2002.

                                            RIVIERA HOLDINGS CORPORATION


                                            By:
                                                  -------------------------
                                                  William L.  Westerman
                                                  President

                                            ADDITIONAL REGISTRANTS:


                                            By:
                                                  -------------------------
                                                  William L.  Westerman
                                                  President


                                                II-9



         Pursuant  to the  requirements  of the  Securities  Act of  1933,  this
Registration  Statement  has  been  signed  by  the  following  persons  in  the
capacities and on the dates indicated.


                    RIVIERA HOLDINGS CORPORATION

        Name                        Title                           Date

                          Chairman of the Board,
                          Chief Executive Officer,
                          President and Director
------------------------- (Principal Executive Officer)     September 25, 2002
William L. Westerman


                          Treasurer (Principal
                          Financial Officer and
------------------------- Accounting Officer)               September 25, 2002
Duane R. Krohn



------------------------- Director                          September 25, 2002
Robert R. Barengo


------------------------- Director                          September 25, 2002
Jeffrey A. Silver


------------------------- Director                          September 25, 2002
Paul A. Harvey



                                                II-10




------------------------- Director                          September 25, 2002
Vincent L. DiVito


                      RIVIERA OPERATING CORPORATION

           Name                    Title                         Date


                          Chairman of the Board,
                          Chief Executive Officer
                          and Director (Principal
------------------------- Executive Officer)                September 25, 2002
William L. Westerman


                          Treasurer (Principal
                          Financial Officer and
                          Accounting Officer)
-------------------------                                   September 25, 2002
Duane R. Krohn


------------------------- Director                          September 25, 2002
Robert R. Barengo


------------------------- Director                          September 25, 2002
Jeffrey A. Silver



------------------------- Director                          September 25, 2002
Paul A. Harvey



------------------------- Director                          September 25, 2002
Vincent L. Divito


                           RIVIERA GAMING MANAGEMENT, INC.

           Name                    Title                         Date


                           Chairman of the Board,
                           Chief Executive Officer
                           and Director (Principal
-------------------------  Executive Officer)               September 25, 2002
William L. Westerman


                                                II-11


                        Treasurer and Director
                        (Principal Financial
                         Officer and Accounting
-------------------------Officer)                           September 25, 2002
Duane R. Krohn


------------------------ Director                           September 25, 2002
Ronald P. Johnson


                 RIVIERA GAMING MANAGEMENT OF COLORADO, INC.

           Name                                           Title


                           Chairman of the Board,
                           Chief Executive Officer
                           and Director (Principal
---------------------------Executive Officer)               September 25, 2002
William L. Westerman



                        Treasurer and Director
                        (Principal Financial Officer
------------------------and Accounting Officer)             September 25, 2002
Duane R. Krohn



------------------------ Director                           September 25, 2002
Ronald P. Johnson



                             RIVIERA BLACK HAWK, INC.


           Name                                           Title


                         Chairman of the Board,
                         Chief Executive Officer
                         and Director (Principal
-------------------------Executive Officer)                 September 25, 2002
William L. Westerman



                        Treasurer and Director
                        (Principal Financial
                         Officer and Accounting
------------------------ Officer)                           September 25, 2002
Duane R. Krohn



------------------------ Director                           September 25, 2002
Ronald P. Johnson



                                                II-12


EXHIBIT 21.1              SUBSIDIARIES OF THE COMPANY


                         RIVIERA HOLDINGS CORPORATION
                           Organizational Structure


                           RIVIERA HOLDINGS CORPORATION
                               a Nevada corporation
             ___________________________|_____________________
            |                           |                     |
Riviera Gaming Management      Riviera Operating     Riviera Gaming Management
New Mexico, Inc. a New           Corporation         Missouri, Inc., a Missouri
Mexico corporation                      |             corporation
            |                           |
Riviera-Reston-Newton, LLC.             |
   a New Mexico                         |
limited liability company               |
             ___________________________|__________________________
            |                                                     |
Riviera Gaming Management, Inc.,                       Riviera Black Hawk, Inc.,
a Nevada corporation                                   a Colorado corporation
            |
Riviera Gaming Management
of Colorado, Inc.,
a Colorado corporation











                                                II-13




EXHIBIT 99.1               FORM OF LETTER OF TRANSMITTAL

THE  EXCHANGE  OFFER  WILL  EXPIRE AT 5:00 P.M.,  _____ NEW YORK CITY  TIME,  ON
NOVEMBER 25, 2002, UNLESS EXTENDED (THE "EXPIRATION DATE").  TENDERS OF EXISTING
NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE

                          RIVIERA HOLDINGS CORPORATION

                              LETTER OF TRANSMITTAL

                        11% SENIOR SECURED NOTES DUE 2010

                            TO: THE BANK OF NEW YORK
                               THE EXCHANGE AGENT


                          By Mail or Overnight Courier:
                              The Bank of New York
                               101 Barclay Street
                               New York, NY 10286
                         Attn.:  Santino Ginocchietti, Reorganization Unit-7E
                         Reference: Riviera Holdings Corporation

                                    By Hand:
                              The Bank of New York
                               101 Barclay Street
                         Corporate Trust Services Window
                               New York, NY 10286
                         Attn.:Santino Ginocchietti, Reorganization Unit-7E
                         Reference: Riviera Holdings Corporation

                        Confirm by Telephone: (212) 815-6331
                   Fax (for Eligible Institutions Only): (212) 298-1915

 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
                                IS COMPLETED.

 HOLDERS                WHO WISH TO BE  ELIGIBLE  TO RECEIVE NEW NOTES FOR THEIR
                        EXISTING  NOTES  PURSUANT  TO THE  EXCHANGE  OFFER  MUST
                        VALIDLY  TENDER (AND NOT WITHDRAW)  THEIR EXISTING NOTES
                        TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.

     The  undersigned  acknowledges  receipt of the Prospectus  dated October 3,
2002 (the "Prospectus") of Riviera Holdings Corporation (the "Company") and this
Letter of Transmittal (the "Letter of Transmittal"),  which together  constitute
the Company's offer to exchange (the "Exchange  Offer")  $215,000,000  principal
amount of its 11% Senior Secured Notes due 2010 (the "New

                                                II-14


Notes"), which have been registered under the Securities Act of 1933, as amended
(the  "Securities  Act"),  pursuant  to a  Registration  Statement  of which the
Prospectus is a part, for each $1,000  principal  amount of its  outstanding 11%
Senior  Secured Notes due 2010 (the  "Existing  Notes"),  of which  $215,000,000
principal  amount is  outstanding,  on the terms and conditions set forth in the
Prospectus and this Letter of Transmittal.  Other capitalized terms used but not
defined herein have the meaning given to them in the Prospectus.

         For each  Existing  Note  accepted  for  exchange,  the  holder of such
Existing Note will receive a New Note having a principal amount equal to that of
the  surrendered  Existing Note.  Interest on the New Notes will accrue from the
last  interest  payment date on which  interest  was paid on the Existing  Notes
surrendered  in  exchange  therefor.  Holders of  Existing  Notes  accepted  for
exchange  will be deemed to have waived the right to receive any other  payments
or accrued  interest on the Existing Notes.  The Company  reserves the right, at
any time or from time to time, to extend the Exchange  Offer at its  discretion,
in which event the term "Expiration Date" shall mean the latest time and date to
which the Exchange  Offer is extended.  The Company shall notify  holders of the
Existing  Notes of any  extension  by means of a press  release or other  public
announcement  prior to 9:00 A.M.,  New York City time,  on the next business day
after the previously scheduled Expiration Date.

         This  Letter of  Transmittal  is to be used by Holders if  certificates
representing their Existing Notes are to be physically delivered to the Exchange
Agent  herewith  by  Holders.   In  the  case  of  physical   delivery  of  such
certificates,  delivery  to  The  Depository  Trust  Company  ("DTC")  will  not
constitute delivery to the Exchange Agent.

         The term "Holder" with respect to the Exchange  Offer means any person:
(i) in whose name Existing  Notes are  registered on the books of the Company or
any other  person  who has  obtained a  properly  completed  bond power from the
registered  Holder;  or (ii) whose  Existing Notes are held of record by DTC (or
its  nominee)  and who  desires to deliver  such  Existing  Notes by  book-entry
transfer at DTC. The  undersigned  has  completed,  executed and delivered  this
Letter of  Transmittal  to indicate the action the  undersigned  desires to take
with respect to the Exchange Offer.

         Holders of Existing Notes that are tendering by book-entry  transfer to
the  Exchange  Agent's  account at DTC can  execute  the tender  through the DTC
Automated  Tender Offer  Program  ("ATOP"),  for which the  transaction  will be
eligible.  DTC participants  that are accepting the Exchange Offer must transmit
their  acceptance  to DTC,  which  will  verify  the  acceptance  and  execute a
book-entry  delivery to the Exchange Agent's DTC account.  DTC will then send an
Agent's Message to the Exchange Agent for its acceptance.  DTC  participants may
also accept the  Exchange  Offer prior to the  Expiration  Date by  submitting a
Notice of Guaranteed  Delivery or Agent's Message  relating thereto as described
herein under Instruction 1, "Delivery of this Letter of Transmittal and Existing
Notes; Guaranteed Delivery Procedures."

         The  instructions  included  with this  Letter of  Transmittal  must be
followed.  Questions and requests for assistance or for additional copies of the
Prospectus,  this Letter of Transmittal or the Notice of Guaranteed Delivery may
be directed to the Exchange Agent. See Instruction 11 herein.

                                                II-15


    HOLDERS OF CERTIFICATED EXISTING NOTES WHO WISH TO ACCEPT THE EXCHANGE OFFER
     AND TENDER THEIR EXISTING NOTES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN
     ITS  ENTIRETY.  PLEASE READ THIS  ENTIRE  LETTER OF  TRANSMITTAL  CAREFULLY
     BEFORE CHECKING ANY BOX BELOW.




----------------------------------------------------------------------------------------------------------------------
                          DESCRIPTION OF 11% SENIOR SECURED NOTES DUE 2010 (Existing Notes)
------------------------------- ---------------------------- ---------------------------- ----------------------------
  Name(s) and Address(es) of                                 Aggregate Principal Amount    Principal Amount Tendered
     Registered Holder(s)          Certificate Number(s)           Represented by             (If Less Than All)*
                                                                   Certificate(s)
                                                                                            
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------

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

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

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

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

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


 * Unless  indicated in the column  labeled  "Principal  Amount  Tendered,"  any
tendering  Holder of Existing  Notes will be deemed to have  tendered the entire
aggregate   principal  amount  represented  by  the  column  labeled  "Aggregate
Principal Amount Represented by  Certificate(s)." If the space provided above is
inadequate,  list the  certificate  numbers and principal  amounts on a separate
signed schedule and affix the list to this Letter of Transmittal.

         The minimum  permitted tender is $1,000 in principal amount of Existing
Notes. All other tenders must be integral multiples of $1,000.



                                                                               
------------------------------------------------------------ ---------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 4, 5 AND 6)    SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 4, 5
                                                                                      AND 6)
------------------------------------------------------------ ---------------------------------------------------------
To be completed ONLY if certificates for New Notes issued      To be completed ONLY if certificates for Existing Notes
in exchange for Existing Notes accepted for exchange or        in a principal amount not tendered or not  accepted for
Existing Notes not tendered or not  accepted  for exchange     exchange are to be sent to someone other than the
are to be issued in the name of  someone  other than the       undersigned,  or to the undersigned at an address other
undersigned or, if such Existing Notes are being tendered      than that shown above.
by book-entry transfer, to someone other than DTC or to
another account maintained by DTC.

Issue certificate(s) to:                                     Issue certificate(s) to:
Name:                                                        Name:
       -------------------------------------                     ---------------------------------------

Address:                                                     Address:
       ----------------------------------------                  ---------------------------------------

                    (Include Zip Code)                                     (Include Zip Code)



                                                II-16


Taxpayer ID or SSN:
                   -------------
DTC Acct. No.:                    Taxpayer ID or SSN:
-------------------------------- ----------------------------------------------

              [ ] CHECK HERE IF TENDERED  EXISTING  NOTES ARE BEING  DELIVERED
                  PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO
                  THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:

         Name(s) of Registered Holder(s):
                                           -----------------------------------

         Window Ticket Number (if any):
                                         -------------------------------------

         Date of Execution of Notice of Guaranteed Delivery:
                                                              ----------------

IF DELIVERED BY BOOK-ENTRY TRANSFER, PLEASE COMPLETE THE FOLLOWING:

         Account Number:                  Transaction Code Number:
                        ------------------                      ---------------

         [        ] CHECK HERE IF YOU ARE A BROKER-DEALER  AND ARE RECEIVING NEW
                  NOTES FOR YOUR OWN ACCOUNT IN EXCHANGE FOR EXISTING NOTES THAT
                  WERE ACQUIRED AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER
                  TRADING ACTIVITIES.

         Name:
                --------------------------------------------------------------

         Address:
                   -----------------------------------------------------------


Ladies and Gentlemen:

         Subject  to the  terms  and  conditions  of  the  Exchange  Offer,  the
undersigned hereby tenders to the Company the principal amount of Existing Notes
indicated  above.  Subject to and effective  upon the acceptance for exchange of
the principal  amount of Existing Notes tendered in accordance  with this Letter
of  Transmittal,  the undersigned  sells,  assigns and transfers to, or upon the
order of, the Company all right, title and interest in and to the Existing Notes
tendered hereby. The undersigned hereby irrevocably constitutes and appoints the
Exchange  Agent its agent and  attorney-in-fact  (with full  knowledge  that the
Exchange  Agent also acts as the agent of the Company  and as Trustee  under the
Indenture  for the  Existing  Notes and New Notes) with  respect to the tendered
Existing Notes with full power of substitution to (i) deliver  certificates  for
such Existing Notes to the Company, or transfer ownership of such Existing Notes
on the account books maintained by DTC and deliver all accompanying  evidence of
transfer and authenticity to, or upon the order of, the Company and (ii) present
such  Existing  Notes for  transfer  on the books of the Company and receive all
benefits  and  otherwise  exercise  all rights of  beneficial  ownership of such
Existing  Notes,  all in accordance with the terms and subject to the conditions


                                                II-17


of the Exchange Offer.  The power of attorney granted in this paragraph shall be
deemed irrevocable and coupled with an interest.

         The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Existing Notes
tendered  hereby and that the Company will acquire good and  unencumbered  title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim, when the same are acquired by the Company. The
undersigned  hereby further  represents  that any New Notes acquired in exchange
for  Existing  Notes  tendered  hereby will have been  acquired in the  ordinary
course of business of the person  receiving such New Notes,  whether or not such
person is the undersigned, that neither the Holder nor any such other person has
any  arrangement  or  understanding  with  any  person  to  participate  in  the
distribution  of such New Notes and that  neither  the Holder nor any such other
person is an  "affiliate,"  as defined in Rule 405 under the Securities  Act, of
the Company or any of its subsidiaries.

         The undersigned also acknowledges that the Exchange Offer is being made
in reliance on an  interpretation  by the staff of the  Securities  and Exchange
Commission  (the "SEC") that the New Notes  issued in exchange  for the Existing
Notes  pursuant to the  Exchange  Offer may be offered  for  resale,  resold and
otherwise  transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company,  as defined in Rule 405 under the  Securities  Act),
without compliance with the registration and prospectus  delivery  provisions of
the  Securities  Act,  provided that such New Notes are acquired in the ordinary
course of such  holders'  business  and such  holders  have no  arrangements  or
understandings  with any person to participate in the  distribution  of such New
Notes. If the  undersigned is not a  broker-dealer,  the undersigned  represents
that it is not engaged in, and does not intend to engage in, a  distribution  of
New Notes. If the undersigned is a broker-dealer that will receive New Notes for
its own account in exchange for Existing Notes that were acquired as a result of
market-making  activities or other trading  activities,  it acknowledges that it
will  deliver a  prospectus  in  connection  with any  resale of such New Notes;
however,  by so  acknowledging  and by delivering a prospectus,  the undersigned
will not be deemed  to admit  that it is an  "underwriter,"  as  defined  in the
Securities Act.

         The undersigned will, upon request,  execute and deliver any additional
documents deemed by the Exchange Agent or the Company  necessary or desirable to
complete the  assignment,  transfer and purchase of the Existing  Notes tendered
hereby.  All  authority  conferred  or agreed to be  conferred by this Letter of
Transmittal   shall  survive  the  death,   incapacity  or  dissolution  of  the
undersigned  and  every  obligation  of the  undersigned  under  this  Letter of
Transmittal   shall   be   binding   on  the   undersigned's   heirs,   personal
representatives,  successors and assigns,  trustees in bankruptcy or other legal
representatives.  This  tender  may be  withdrawn  only in  accordance  with the
procedures set forth in "The Exchange Offer - Withdrawal  Rights" section of the
Prospectus.

         For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly  tendered  Existing Notes when, as and if the Company has given
oral or written notice thereof to the Exchange Agent.

                                                II-18


         If any tendered  Existing Notes are not accepted for exchange  pursuant
to the  Exchange  Offer for any  reason,  certificates  for any such  unaccepted
Existing  Notes will be returned  (except as noted below with respect to tenders
through DTC), without expense,  to the undersigned at the address shown below or
at  such  different   address  as  may  be  indicated  under  "Special  Delivery
Instructions" as promptly as practicable after the Expiration Date.

         The undersigned  understands that tenders of Existing Notes pursuant to
the procedures  described under the caption "The Exchange Offer - Procedures for
Tendering Existing Notes" in the Prospectus and in the instructions  hereto will
constitute a binding  agreement between the undersigned and the Company upon the
terms and subject to the conditions of the Exchange Offer.

         Unless  otherwise  indicated  under  "Special  Issuance  Instructions,"
please issue the certificates  representing the New Notes issued in exchange for
the Existing  Notes  accepted  for  exchange  and return any Existing  Notes not
tendered or not accepted for exchange in the name(s) of the  undersigned  (or in
either such event in the case of the  Existing  Notes  tendered  through DTC, by
credit  to the  undersigned's  account  at  DTC).  Similarly,  unless  otherwise
indicated under "Special  Delivery  Instructions,"  please send the certificates
representing  the New Notes issued in exchange for the Existing  Notes  accepted
for  exchange  and any  certificates  for  Existing  Notes not  tendered  or not
accepted  for exchange  (and  accompanying  documents,  as  appropriate)  to the
undersigned at the address shown below the undersigned's signature(s) unless, in
either event,  tender is being made through DTC. In the event that both "Special
Issuance Instructions" and "Special Delivery Instructions" are completed, please
issue the  certificates  representing  the New Notes  issued in exchange for the
Existing  Notes accepted for exchange and return any Existing Notes not tendered
or not accepted for exchange in the name(s) of, and send said  certificates  to,
the person(s) so indicated.  The undersigned  recognizes that the Company has no
obligation pursuant to the "Special Issuance Instructions" and "Special Delivery
Instructions"  to transfer  any Existing  Notes from the name of the  registered
Holder(s)  thereof  if the  Company  does not  accept  for  exchange  any of the
Existing Notes so tendered.

         Holders of Existing  Notes who wish to tender their  Existing Notes and
(i)  whose  Existing  Notes are not  immediately  available  or (ii) who  cannot
deliver their Existing Notes,  this Letter of Transmittal or any other documents
required  hereby to the Exchange  Agent,  or cannot  complete the  procedure for
book-entry  transfer,  prior to the  Expiration  Date, may tender their Existing
Notes  according  to  the  guaranteed  delivery  procedures  set  forth  in  the
Prospectus  under  the  caption  "The  Exchange  Offer  -  Guaranteed   Delivery
Procedures."  See  Instruction  1  regarding  the  completion  of the  Letter of
Transmittal printed below.

                                 SIGNATURE PAGE

                               PLEASE SIGN HERE IF
               EXISTING NOTES ARE BEING PHYSICALLY TENDERED HEREBY


X
  -----------------------------------------   --------------------------
                                                             Date

                                                II-19


X
  -----------------------------------------   --------------------------
        Signature(s) of Registered Holder(s)                 Date
              or Authorized Signatory

Area Code and Telephone Number:
                                 -----------------------------------------------


         The above lines must be signed by the registered  Holder(s) of Existing
Notes  as their  name(s)  appear(s)  on the  Existing  Notes  or by a  person(s)
authorized to become a registered  Holder(s) by a properly  completed bond power
from the registered  Holder(s),  a copy of which must be  transmitted  with this
Letter of  Transmittal.  If Existing  Notes to which this Letter of  Transmittal
relates are held of record by two or more joint  Holders,  then all such holders
must sign this Letter of  Transmittal.  If signature is by a trustee,  executor,
administrator,  guardian,  attorney-in-fact,  officer of a corporation  or other
person acting in a fiduciary or  representative  capacity,  such person must (i)
set forth his or her full title  below and (ii)  unless  waived by the  Company,
submit evidence  satisfactory to the Company of such person's  authority to act.
See Instruction 4 regarding the completion of this Letter of Transmittal printed
below.


Name(s):
          --------------------------------------------------------------------
                                 (Please Print)

Capacity:
           -------------------------------------------------------------------
                                     (Title)

Address:
          --------------------------------------------------------------------
                               (Include Zip Code)

Signature(s)  Guaranteed by an Eligible  Institution (if required by Instruction
4):



                              (Authorized Signature



                                     (Title)



                                 (Name of Firm)


Dated:
        ------------------------------------



                                                II-20


                                  INSTRUCTIONS

            Forming Part of the Terms and Conditions of the Exchange Offer

         1.  Delivery  of  this  Letter  of  Transmittal   and  Existing  Notes;
Guaranteed  Delivery  Procedures.  This Letter of Transmittal is to be used by a
Holder if certificated  Existing Notes are to be forwarded herewith.  An Agent's
Message is to be used if delivery of Existing  Notes is to be made by book-entry
transfer to the account maintained by the Exchange Agent at DTC (the "Book-Entry
Transfer  Facility")  under the procedures set forth in the Prospectus under the
caption "The Exchange Offer - Book-Entry  Transfer." The term "Agent's  Message"
means a message, transmitted by the Book-Entry Transfer Facility and received by
the  Exchange  Agent and  forming  a part of the  confirmation  of a  book-entry
transfer ("Book-Entry Confirmation"),  which states that the Book-Entry Transfer
Facility has received an express  acknowledgement  from a participant  tendering
existing notes which are the subject of such  Book-Entry  Confirmation  and that
such participant has received and agrees to be bound by the terms of this Letter
of  Transmittal  and that the Company may enforce  such  agreement  against such
participant.  Certificates for all physically tendered existing notes as well as
a properly completed and duly executed Letter of Transmittal (or manually signed
facsimile  thereof)  must be received by the  Exchange  Agent at the address set
forth herein by the  Expiration  Date, or the tendering  holder must comply with
the guaranteed  delivery  procedures  described herein.  Existing notes tendered
must be in principal amount  denominations  of $1,000 or any integral  multiples
thereof.

         Holders  whose  certificates  for  Existing  Notes are not  immediately
available  or who  cannot  deliver  their  certificates  and all other  required
documents  to the  Exchange  Agent on or prior to the  Expiration  Date,  or who
cannot  complete the procedure for  book-entry  transfer on a timely basis,  may
tender their  Existing  Notes under to the  guaranteed  delivery  procedures set
forth in "The Exchange Offer - Guaranteed  Delivery  Procedures"  section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through an
Eligible  Institution  (as defined in  Instruction  4 below),  (ii) prior to the
Expiration Date, the Exchange Agent must receive from such Eligible  Institution
a properly  completed  and duly  executed  Letter of  Transmittal  (or facsimile
thereof) and Notice of Guaranteed Delivery (by facsimile  transmission,  mail or
hand delivery), substantially in the form provided by the Company, setting forth
the name and address of the Holder of Existing  Notes and the amount of Existing
Notes tendered,  stating that the tender is being made thereby and  guaranteeing
that within five New York Stock Exchange ("NYSE") trading days after the date of
execution  of the  Notice  of  Guaranteed  Delivery,  the  certificates  for all
physically tendered Existing Notes, or a Book-Entry Confirmation,  and any other
documents  required  by this  Letter of  Transmittal  will be  deposited  by the
Eligible Institution with the Exchange Agent, and (iii) the certificates for all
physically tendered Existing Notes, in proper form for transfer, or a Book-Entry
Confirmation,  as the case may be,  and all  other  documents  required  by this
Letter of  Transmittal,  are  received by the  Exchange  Agent  within five NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery.

         THE METHOD OF  DELIVERY  OF THIS LETTER OF  TRANSMITTAL,  THE  EXISTING
NOTES  AND ALL  OTHER  REQUIRED  DOCUMENTS  IS AT THE  ELECTION  AND RISK OF THE
TENDERING  HOLDERS,  BUT THE  DELIVERY  WILL BE DEEMED  MADE ONLY WHEN  ACTUALLY


                                                II-21


RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF EXISTING NOTES ARE SENT BY MAIL,
IT IS  SUGGESTED  THAT  THE  MAILING  BE MADE  SUFFICIENTLY  IN  ADVANCE  OF THE
EXPIRATION DATE TO PERMIT THE DELIVERY TO THE EXCHANGE AGENT PRIOR TO 5:00 P.M.,
NEW YORK CITY TIME, ON THE EXPIRATION DATE.

         See "The Exchange Offer" section of the Prospectus.

         2. Tender by Holder.  Only a Holder of  Existing  Notes may tender such
Existing Notes in the Exchange  Offer.  Any beneficial  holder of Existing Notes
who is not the  registered  Holder and who wishes to tender should  arrange with
the  registered  Holder to execute and deliver this Letter of Transmittal on his
or her  behalf  or must,  prior to  completing  and  executing  this  Letter  of
Transmittal  and delivering his or her Existing Notes,  either make  appropriate
arrangements  to register  ownership of the Existing Notes in such holder's name
or obtain a properly completed bond power from the registered Holder.

         3. Partial Tenders.  Tenders of Existing Notes will be accepted only in
integral  multiples of $1,000.  If less than the entire  principal amount of any
Existing  Notes is tendered,  the tendering  Holder should fill in the principal
amount  tendered in the fourth  column of the box entitled  "Description  of 11%
Senior Secured Notes due 2010  (Existing  Notes)"  above.  The entire  principal
amount of Existing Notes  delivered to the Exchange Agent will be deemed to have
been tendered unless  otherwise  indicated.  If the entire principal amount of a
Holder's  Existing Notes is not tendered,  then Existing Notes for the principal
amount  of  Existing  Notes  not  tendered  and a  certificate  or  certificates
representing  New Notes issued in exchange for any Existing  Notes  accepted for
exchange will be sent to the Holder at his or her registered  address  (unless a
different  address  is  provided  in the  appropriate  box  on  this  Letter  of
Transmittal) promptly after the Existing Notes are accepted for exchange.

         4. Signatures on this Letter of Transmittal; Endorsements and Powers of
Attorney;  Guarantee of  Signatures.  If this Letter of Transmittal is signed by
the registered Holder of the Existing Notes tendered hereby,  the signature must
correspond  exactly  with  the name as written on the face of the certificate(s)
with no change whatsoever.

         If any tendered Existing Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.

         If any tendered  Existing  Notes are  registered in different  names on
several certificates,  it will be necessary to complete, sign and submit as many
separate   copies  of  this  Letter  of   Transmittal  as  there  are  different
registrations of certificates.

         When this Letter of Transmittal  is signed by the registered  Holder(s)
of the Existing Notes specified herein and tendered  hereby,  no endorsements of
certificates or separate bond powers are required.  If,  however,  the New Notes
are to be  issued,  or any  Existing  Notes not  tendered  or not  accepted  for
exchange are to be reissued,  to a person or persons  other than the  registered
Holder(s),  then  endorsements  of  any  certificate(s)  transmitted  hereby  or
separate bond powers are required. Signatures on such certificate(s) or power(s)


                                                II-22


must be guaranteed by an Eligible Institution.

     If this  Letter  of  Transmittal  is  signed  by a  person  other  than the
registered Holder(s) of any certificate(s) specified herein, such certificate(s)
must be  endorsed  or  accompanied  by  appropriate  bond  powers  or  powers of
attorney, in each case signed exactly as the name(s) of the registered Holder(s)
appear(s)  on the  certificate(s)  and  signatures  on  such  certificate(s)  or
power(s)  must  be  guaranteed  by  a  participant  in a  recognized  signature
guarantee medallion program (an Eligible Institution).

         If this  Letter of  Transmittal  or any  certificates,  bond  powers or
powers of attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact,  officers of  corporations or others acting in a fiduciary or
representative  capacity,  such  persons  should so indicate  when  signing and,
unless waived by the Company,  proper  evidence  satisfactory  to the Company of
their authority to so act must be submitted.

         Endorsements on  certificates  for Existing Notes or signatures on bond
powers or powers of attorney  required by this  Instruction 4 must be guaranteed
by an Eligible Institution.

         Signatures  on this  Letter of  Transmittal  must be  guaranteed  by an
Eligible  Institution unless the Existing Notes are tendered (i) by a registered
Holder  of  Existing  Notes  who has not  completed  the box  entitled  "Special
Issuance  Instructions"  or "Special  Delivery  Instructions"  on this Letter of
Transmittal, or (ii) for the account of an Eligible Institution.

         5. Special Issuance and Delivery Instructions. Tendering Holders should
indicate,  in the applicable box(es), the name and address to which New Notes or
substitute  Existing  Notes not  tendered or not accepted for exchange are to be
issued or sent,  if  different  from the name and address of the person  signing
this Letter of Transmittal (or in the case of a tender of Existing Notes through
DTC, if different  from DTC). In the case of issuance in a different  name,  the
taxpayer  identification or social security number of the person named must also
be  indicated.  If no such  instructions  are given,  such New Notes or Existing
Notes not  exchanged  will be  returned  to the name and  address  of the person
signing this Letter of Transmittal.

         6. Tax  Identification  Number.  Federal tax law provides that a Holder
whose  Existing Notes are accepted for exchange must give the Company (as payer)
his, her or its correct taxpayer  identification  number ("TIN"),  which, in the
case of an exchanging Holder who is an individual, is his or her social security
number.  If the Company is not given the  correct  TIN or an adequate  basis for
exemption,  such Holder may be subject to a $50 penalty  imposed by the Internal
Revenue Service (the "IRS"),  and payments made with respect to the New Notes or
Exchange  Offer may be subject to backup  withholding  at a 30% rate (which rate
may be adjusted annually).  If withholding results in an overpayment of taxes, a
refund  may  be  obtained.   Exempt  Holders   (including,   among  others,  all
corporations  and certain foreign  individuals)  are not subject to these backup
withholding and reporting requirements.

         To prevent backup  withholding,  each exchanging  Holder must give his,
her or its correct TIN by completing the  Substitute  Form W-9 included below in
this Letter of  Transmittal,  certifying  that the TIN given is correct (or that


                                                II-23


such  Holder  is  awaiting  a TIN) and that the  Holder is  exempt  from  backup
withholding because (i) the Holder has not been notified by the IRS that he, she
or it is  subject to backup  withholding  as a result of a failure to report all
interest or  dividends,  or (ii) the IRS has notified the Holder that he, she or
it is no longer subject to backup  withholding.  In order to satisfy the Company
that a foreign  individual  qualifies as an exempt  recipient,  such Holder must
submit a statement  signed  under  penalty of perjury  attesting  to such exempt
status. Such statements may be obtained from the Exchange Agent. If the Existing
Notes  are in more  than one name or are not in the  name of the  actual  owner,
consult the substitute Form W-9 for  information on which TIN to report.  If you
do not give your TIN to the Company within 60 days, backup withholding may begin
and continue until you give your TIN to the Company.

         7.  Transfer  Taxes.  The Company will pay any and all  transfer  taxes
applicable to the exchange of Existing Notes pursuant to the Exchange Offer. If,
however,  certificates  representing New Notes or Existing Notes not tendered or
accepted for exchange are to be delivered  to, or are to be registered or issued
in the  name of,  any  person(s)  other  than the  registered  Holder(s)  of the
Existing Notes tendered hereby,  or if tendered Existing Notes are registered in
the name of any person other than the person signing this Letter of Transmittal,
or if a transfer  tax is  imposed  for any reason  other  than the  exchange  of
Existing  Notes  pursuant  to the  Exchange  Offer,  then the amount of any such
transfer  taxes  (whether  imposed on the  registered  Holder(s) or on any other
person(s)) will be payable by the tendering Holder(s).  If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted  herewith,  the
amount  of  such  transfer  taxes  will be  billed  directly  to such  tendering
Holder(s).

         Except as provided in this  Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Existing Notes listed in this Letter of
Transmittal.

     8.  Waiver of Conditions. The Company reserves the absolute right to amend,
waive or modify conditions to, or in, the Exchange Offer in the case of any
Existing Notes tendered (or to refuse to do so).

     9.  No Conditional Transfers.  No alternative, conditional, irregular or
contingent tenders will be accepted.  All tendering Holders of Existing Notes,
by execution of this Letter of Transmittal, waive any right to receive notice of
the acceptance of their Existing Notes for exchange.

         Neither  the  Company,  the  Exchange  Agent  nor any  other  person is
obligated  to give  notice of any  defect or  irregularity  with  respect to any
tender of Existing Notes,  nor shall any of them incur any liability for failure
to give any such notice.

    10.   Mutilated, Lost, Stolen or Destroyed Existing Notes.  Any tendering
Holder whose Existing Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated herein for further
instructions.

    11.   Requests for Assistance or Additional Copies.  Questions and requests
for assistance for additional copies of the Prospectus, this Letter of
Transmittal or the Notice of Guaranteed Delivery may be directed to the Exchange


                                                II-24


Agent at the address specified in the Prospectus.


                             (DO NOT WRITE IN THE SPACE BELOW)




Account Number:                                   Transaction Code Number:
                 ---------------------------                               ----------------------


                                                                                    
---------------------------------------- -------------------------------------- --------------------------------------
        Certificate Surrendered                 Existing Notes Tendered                Existing Notes Accepted
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------

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

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

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

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



Delivery Prepared by:
                       ------------------------------------------------

Checked by:
             -------------------------------------------------------------------

Date:
       -------------------------------------------------------------------------


                   PAYER'S NAME: RIVIERA HOLDINGS CORPORATION

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

                                Name (if joint names,  list first and circle the
                                name of the  person or entity  whose  number you
                                enter in Part 1 below.  See instructions if your
                                name has changed.)





                                Address:
SUBSTITUTE
                                City, state and zip code:
Form W-9
Department of the Treasury List account number(s) here (optional):
Internal Revenue Service
Payer's Request
                                                                                    
------------------------------- --------------------------------------------------------------------------------------
------------------------------- ------------------------------------------------- ------------------------------------
                                Part 1.  PLEASE PROVIDE YOUR TAXPAYER
                                IDENTIFICATION NUMBER ("TIN") IN THE BOX AT       Taxpayer Identification Number
                                RIGHT AND CERTIFY BY SIGNING AND DATING BELOW.


                                                II-25




                                                                                   
------------------------------- ------------------------------------------------- ------------------------------------
------------------------------- --------------------------------------------------------------------------------------
                                Part 2. Check the box if you are not  subject to
                                backup   withholding  under  the  provisions  of
                                Section  3408(a)(1)(c)  of the Internal  Revenue
                                Code because (1) you have not been notified that
                                you  are  subject  to  backup  withholding  as a
                                result of  failure  to report  all  interest  or
                                dividends  or (2) the Internal  Revenue  Service
                                has notified you that you are no longer  subject
                                to backup withholding.
------------------------------- --------------------------------------------------------------------------------------
------------------------------- ------------------------------------------------- ------------------------------------
                                CERTIFICATION - UNDER PENALTIES OF PERJURY, I
                                CERTIFY THAT THE INFORMATION PROVIDED ON THIS     Part 3.
                                FORM IS TRUE, CORRECT AND COMPLETE.
                                                                                  AWAITING TIN
                                Signature:

                                Date:

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



NOTE:        FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
             WITHHOLDING OF 30% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
             EXCHANGE OFFER.



                                                II-26




EXHIBIT 99.2          FORM OF NOTICE OF GUARANTEED DELIVERY

                          NOTICE OF GUARANTEED DELIVERY
                                       FOR
                        11% SENIOR SECURED NOTES DUE 2010
                                       OF
                          RIVIERA HOLDINGS CORPORATION

         As  set  forth  in  the  Prospectus  dated  October 3,   2002  (the
"Prospectus")  of  Riviera  Holdings  Corporation  (the  "Company")  and  in the
accompanying  Letter of Transmittal (the "Letter of Transmittal"),  this form or
one  substantially  equivalent hereto must be used to accept the Company's offer
to exchange (the  "Exchange  Offer") all of its  outstanding  11% Senior Secured
Notes due 2010 (the "Existing  Notes") for its 11% Senior Secured Notes due 2010
which have been  registered  under the  Securities  Act of 1933, as amended,  if
certificates  for the  Existing  Notes are not  immediately  available or if the
Existing  Notes,  the  Letter of  Transmittal  or any other  documents  required
thereby  cannot  be  delivered  to the  Exchange  Agent,  or the  procedure  for
book-entry transfer cannot be completed, prior to 5:00 P.M., New York City time,
on the  Expiration  Date (as defined  below).  This form may be  delivered by an
Eligible Institution by hand or transmitted by facsimile transmission, overnight
courier or mail to the Exchange Agent as set forth below. Capitalized terms used
but not defined herein have the meaning given to them in the Prospectus.

THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON NOVEMBER 25,
2002, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE").  TENDERS OF EXISTING
NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE.

                            To: The Bank of New York
                               The Exchange Agent

                          By Mail or Overnight Courier:
                              The Bank of New York
                               101 Barclay Street
                               New York, NY 10286
                         Attn.:  Santino Ginocchietti, Reorganization Unit-7E
                         Reference: Riviera Holdings Corporation

                                    By Hand:
                              The Bank of New York
                        101 Barclay Street, Ground Level
                         Corporate Trust Services Window
                               New York, NY 10286
                         Attn.:  Santino Ginocchietti, Reorganization Unit-7E
                         Reference: Riviera Holdings Corporation

                                                II-27


         DELIVERY  OF  THIS  INSTRUMENT  TO  AN  ADDRESS,   OR  TRANSMISSION  OF
INSTRUCTIONS VIA FACSIMILE,  OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.

         This form is not to be used to guarantee signatures.  If a signature on
the Letter of Transmittal to be used to tender  Existing Notes is required to be
guaranteed by an "Eligible  Institution"  under the instructions  thereto,  such
signature  guarantee must appear in the space provided therefor in the Letter of
Transmittal.


Ladies and Gentlemen:

         The  undersigned  hereby  tenders  to the  Company,  upon the terms and
subject  to the  conditions  set  forth  in the  Prospectus  and the  Letter  of
Transmittal (which together  constitute the "Exchange Offer"),  receipt of which
is hereby  acknowledged,  __________________  [fill in number of Existing Notes]
Existing Notes pursuant to the guaranteed  delivery  procedures set forth in the
Prospectus and Instruction 1 of the Letter of Transmittal.

         The  undersigned  understands  that  tenders of Existing  Notes will be
accepted only in principal amounts of $1,000 or integral multiples thereof.  The
undersigned  understands that tenders of Existing Notes pursuant to the Exchange
Offer  may not be  withdrawn  after  5:00  p.m.,  New  York  City  time,  on the
Expiration Date.

         All authority herein conferred or agreed to be conferred by this Notice
of Guaranteed Delivery shall survive the death, incapacity or dissolution of the
undersigned  and  every  obligation  of the  undersigned  under  this  Notice of
Guaranteed  Delivery  shall be binding on the heirs,  personal  representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.

        NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW.

Certificate No(s). for Existing Notes            Name(s) of Record Holder(s):
(if available):

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

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


Principal Amount of Existing Notes:             PLEASE PRINT OR TYPE

                                                Address:
-------------------------------------          ------------------------------

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

If Existing  Notes will be delivered by  book-entry  transfer at The  Depository
Trust Company, Depository Account No.:

                                                II-28



                                  Area Code/ Tel. No.:
----------------------                                ----------------------

                                  Signature(s):
                                              ------------------------------

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

                                             Dated:                     , 2002
                                                    -------------------



         This Notice of  Guaranteed  Delivery  must be signed by the  registered
holder(s)  of Existing  Notes  exactly as its (their)  name(s)  appear(s) on the
certificate(s)  for Existing Notes covered hereby or on a DTC security  position
listing  naming it (them) as the owner of such Existing  Notes,  or by person(s)
authorized  to  become  registered   holder(s)  by  endorsements  and  documents
transmitted  with this  Notice of  Guaranteed  Delivery.  If  signature  is by a
trustee, executor, administrator,  guardian, attorney-in-fact,  officer or other
person acting in a fiduciary or  representative  capacity,  such  person(s) must
provide the following information:

                Please print name(s), title(s) and address(es)

Name(s):
          ------------------------------------------------------------------

Capacity(ies):
           -----------------------------------------------------------------

Address(es):
              --------------------------------------------------------------


                                    GUARANTEE
                 (NOT TO BE USED FOR SIGNATURE GUARANTEE)

         The  undersigned,  a member firm of a  registered  national  securities
exchange or of the  National  Association  of  Securities  Dealers,  Inc.,  or a
commercial bank or trust company having an office or correspondent in the United
States or an "eligible  guarantor  institution" as defined in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), hereby (a)
represents  that the tender of Existing Notes effected hereby complies with Rule
14e-4 under the Exchange Act and (b) guarantees to deliver to the Exchange Agent
a certificate or certificates  representing  the Existing Notes tendered hereby,
in proper form for transfer (or a  confirmation  of the  book-entry  transfer of
such Existing Notes into the Exchange  Agent's  account at DTC,  pursuant to the
procedures for book-entry transfer set forth in the Prospectus),  and a properly
completed and duly executed Letter of Transmittal (or manually signed  facsimile
thereof) together with any required signatures and any other required documents,
at the  Exchange  Agent's  address set forth  above,  within five New York Stock
Exchange  trading days after the date of execution of this Notice of  Guaranteed
Delivery.


                                                II-29


         THE  UNDERSIGNED  ACKNOWLEDGES  THAT  IT MUST  DELIVER  THE  LETTER  OF
TRANSMITTAL  AND EXISTING NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE
TIME  PERIOD  SPECIFIED  ABOVE  AND THAT ANY  FAILURE  TO DO SO COULD  RESULT IN
FINANCIAL LOSS TO THE UNDERSIGNED.

Name of Firm:
               -----------------------------       -----------------------
                                                   Authorized Signature(s)
Address:
         -----------------------------------   Name:--------------------------
                                                         Please Print or Type
         -----------------------------------
                                Zip Code       Title:-------------------------
Area Code
and Tel. No.:                                  Date:--------------------------
               ----------------------------



NOTE: DO NOT SEND EXISTING  NOTES WITH THIS FORM;  EXISTING NOTES SHOULD BE SENT
   WITH YOUR LETTER OF  TRANSMITTAL  SO THAT THEY ARE  RECEIVED BY THE  EXCHANGE
   AGENT WITHIN THE TIME PERIOD SET FORTH ABOVE.


                                                 II-30

EXHIBIT 99.3
                             FORM OF LETTER TO BROKERS, DEALERS,
                  COMMERCIAL BANKS, TRUST COMPANIES AND OTHER NOMINEES

                                RIVIERA HOLDINGS CORPORATION

                                     Offer to Exchange
                                $1,000 principal amount of
                             11% Senior Secured Notes due 2010
               which have been registered under the Securities Act of 1933,
                            for each $1,000 principal amount of
                       outstanding 11% Senior Secured Notes due 2010
                             that were issued in a transaction
                 exempt from registration under the Securities Act of 1933


To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:

     Enclosed for your consideration is a Prospectus dated October 3,  2002 (as
it may be amended or supplemented  from time to time, the Prospectus) and a form
of Letter of Transmittal (the Letter of Transmittal)  relating to the offer (the
Exchange Offer) by Riviera  Holdings  Corporation to exchange up to $215,000,000
aggregate  principal  amount of its 11% Senior  Secured Notes due 2010 for up to
$215,000,000  aggregate  principal  amount of its outstanding 11% Senior Secured
Notes due 2010 (the  Existing  Notes) that were issued and sold in a transaction
exempt from registration under the Securities Act of 1933, as amended.

     We ask you to  contact  your  clients  for  whom you  hold  Existing  Notes
registered  in your  name or in the  name of your  nominee.  We also  ask you to
contact your clients who, to your knowledge,  hold Existing Notes  registered in
their own name. We will not pay any fees or commissions to any broker, dealer or
other person in  connection  with the  solicitation  of tenders  pursuant to the
Exchange  Offer.  We will,  though,  reimburse  you for  customary  mailing  and
handling expenses incurred in forwarding the enclosed materials to your clients.
We will pay all transfer  taxes,  if any,  applicable  to the tender of Existing
Notes to us, except as otherwise  provided in the  Prospectus  and the Letter of
Transmittal.

         Enclosed are copies of the following documents:

1. the Prospectus;
2. a form of Letter of Transmittal for your use in connection with the exchange
   of Existing Notes and for the information of your clients (facsimile copies
   of the Letter of Transmittal may be used to exchange Existing Notes);
3. a form of letter that you may send to your clients for whose accounts you
   hold Existing Notes registered in your name or the name of your nominee, with
   space provided for obtaining the clients instructions with regard to the
   Exchange Offer;


                                                II-31


4. a form of Notice of Guaranteed Delivery;
5. guidelines of the Internal Revenue Service for Certification of Taxpayer
   Identification Number on Substitute Form W-9; and
6. a return envelope addressed to The Bank of New York, which is the Exchange
   Agent.

     YOUR PROMPT  ACTION IS  REQUESTED.  THE EXCHANGE  OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON NOVEMBER25,  2002,  UNLESS EXTENDED (THE EXPIRATION
DATE).  EXISTING NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN,
SUBJECT TO THE PROCEDURES DESCRIBED IN THE PROSPECTUS,  AT ANY TIME PRIOR TO THE
EXPIRATION DATE.

     To tender Existing Notes,  certificates  for Existing Notes or a book-entry
confirmation  (as  described in the  Prospectus),  a duly  executed and properly
completed Letter of Transmittal or a facsimile  thereof,  and any other required
documents,  must be received by the Exchange Agent as provided in the Prospectus
and the Letter of Transmittal.

     If a holder desires to accept the Exchange Offer and time will not permit a
Letter of  Transmittal  or Existing Note to reach the Exchange  Agent before the
Expiration Date or the procedure for book-entry  transfer cannot be completed on
a timely  basis,  a tender may be effected by delivery of a Notice of Guaranteed
Delivery by an Eligible Institution (as defined in the Prospectus).

     Any inquiries  you may have with respect to the Exchange  Offer or requests
for additional  copies of the enclosed  material may be directed to the Exchange
Agent at its address or telephone number set forth in the Prospectus.

                                                  Very truly yours,


                                                  RIVIERA HOLDINGS CORPORATION


NOTHING  CONTAINED  HEREIN OR IN THE ENCLOSED  DOCUMENTS SHALL CONSTITUTE YOU OR
ANY PERSON AS AN AGENT OF RIVIERA  HOLDINGS  CORPORATION,  THE EXCHANGE AGENT OR
ANY OF THEIR RESPECTIVE AFFILIATES, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE
ANY  STATEMENTS OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM WITH RESPECT TO THE
EXCHANGE OFFER,  EXCEPT FOR THE ENCLOSED DOCUMENTS AND THE STATEMENTS  EXPRESSLY
MADE IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL.


                                                II-32



EXHIBIT 99.4
                                 FORM OF LETTER TO CLIENTS

                               RIVIERA HOLDINGS CORPORATION

                                     Offer to Exchange
                                $1,000 principal amount of
                             11% Senior Secured Notes due 2010
               which have been registered under the Securities Act of 1933,
                            for each $1,000 principal amount of
                     outstanding 11% Senior Secured Notes due 2010 and
                             that were issued in a transaction
                     exempt from registration under the Securities Act


To Our Clients:

     Enclosed for your consideration is a Prospectus dated October 3,  2002 (as
it may be amended or supplemented  from time to time, the Prospectus) and a form
of Letter of Transmittal (the Letter of Transmittal)  relating to the offer (the
Exchange Offer) by Riviera  Holdings  Corporation (the Issuer) to exchange up to
$215,000,000 aggregate principal amount of its 11% Senior Secured Notes due 2010
(New Notes) for up to $215,000,000 aggregate principal amount of its outstanding
11% Senior Secured Notes due 2010 (Existing  Notes) that were issued and sold in
a transaction  exempt from  registration  under the  Securities  Act of 1933, as
amended.

     This material is being forwarded to you as the beneficial owner of Existing
Notes  carried by us for your  account or benefit,  but not  registered  in your
name.  A tender of any Existing  Notes may be made only by us as the  registered
holder and pursuant to your instructions. Therefore, the Issuer urges beneficial
owners of Existing Notes registered in the name of a broker, dealer,  commercial
bank, trust company or other nominee to contact such registered  holder promptly
if they wish to tender Existing Notes in the Exchange Offer.

     Accordingly,  we request  instructions  as to whether you want us to tender
any or all of the Existing  Notes held by us for your  account,  pursuant to the
terms and conditions set forth in the Prospectus and Letter of  Transmittal.  We
urge you to read  carefully  the  Prospectus  and Letter of  Transmittal  before
instructing us to tender your Existing Notes.

     Your  instructions  should be  forwarded  to us as  promptly as possible in
order to permit us to tender  Existing  Notes on your behalf in accordance  with
the  provisions  of the  Exchange  Offer.  The  Exchange  Offer  will  expire at
5:00 p.m.,  New York City time,  on  November 25,  2002,  unless  extended  (the
Expiration  Date).  Existing Notes tendered pursuant to the Exchange Offer may
be withdrawn, subject to the procedures described in the Prospectus, at any time
prior to the Expiration Date.


                                                II-33


         Your attention is directed to the following:

7.The Exchange Offer is for the exchange of $1,000 principal amount of New Notes
  for each $1,000 principal amount of Existing Notes.  The Issuer has reported
  that the terms of the New Notes are substantially identical (including
  principal amount, interest rate, maturity, security, guarantees and ranking)
  to the terms of the Existing Notes, except that the New Notes (a)are freely
  transferable by holders thereof (except as otherwise provided in the
  Prospectus) and (b) are not entitled to certain rights which are applicable to
  the Existing Notes under a registration rights agreement (the Registration
  Rights Agreement) among the Issuer; certain of the Issuers subsidiaries who
  are guarantors; and Jefferies & Company, Inc., as the initial purchaser of the
  Existing Notes.
8.The Exchange Offer and withdrawal rights will expire at 5:00 p.m., New York
  City time, on November 25, 2002, unless extended.
9.The Issuer has agreed to pay expenses of the Exchange Offer, except as
  otherwise provided in the Prospectus and the Letter of Transmittal.
10.Any transfer taxes incident to the transfer of Existing Notes from the
   tendering Holder to the Issuer will be paid by the Issuer, except as
   otherwise provided in the Prospectus and the Letter of Transmittal.

     The Exchange Offer is not being made to, nor will exchange be accepted from
or on behalf of,  holders of  Existing  Notes in any  jurisdiction  in which the
making  of  the  Exchange  Offer  or  the  acceptance  thereof  would  not be in
compliance with the laws of such jurisdiction.

     If you wish to have us tender any or all of your Existing  Notes held by us
for your account or benefit, please so instruct us by completing,  executing and
returning to us the  instruction  form that appears below.  Please note that the
accompanying  Letter  of  Transmittal  is  furnished  to you  for  informational
purposes only and may not be used by you to tender Existing Notes held by us and
registered in our name for your account or benefit.

                              INSTRUCTIONS

     The  undersigned  acknowledge(s)  receipt of your  letter and the  enclosed
material  referred to therein in connection  with the Exchange  Offer of Riviera
Holdings  Corporation  relating to the Existing Notes,  including the Prospectus
and the Letter of Transmittal.

     This form  instructs  you to exchange  the  aggregate  principal  amount of
Existing  Notes  indicated  below  (or,  if no  aggregate  principal  amount  is
indicated  below,  all Existing Notes) held by you for the account or benefit of
the  undersigned,  pursuant  to  the  terms  and  conditions  set  forth  in the
Prospectus and Letter of Transmittal.

                                                II-34



              Aggregate Principal Amount of Existing Notes to
                              be Exchanged:

                         $____________________ *




     *I (we)  understand  that if I (we)  sign  this  instruction  form  without
indicating an aggregate principal in the space above, all Existing Notes held by
you for my (our) account will be exchanged.

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

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

Signature(s)

Capacity (full title), if signing in a
fiduciary or representative capacity:

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


Name(s) and address, including zip code:


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

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

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

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

Date:__________________________________

_______________________________
Area Code and Telephone Number

___________________________________
Taxpayer Identification Number or
Social Security Number

                                                II-35




EXHIBIT 99.5 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER

                GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
                                NUMBER ON SUBSTITUTE FORM W-9

Guidelines for Determining the Proper  Identification  Number to Give the Payer:
Social  security  numbers  have  nine  digits  separated  by two  hyphens:  i.e.
000-00-0000.  Employer  identification numbers have nine digits separated by one
hyphen: i.e., 00-0000000. The table below will help determine the number to give
the payer.


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

                                Give the                                                 Give the
For this type of account:       SOCIAL SECURITY             For this type of account:    EMPLOYER IDENITIFICATION
                                NUMBER OF:                                               NUMBER OF:
-----------------------------------------------------------------------------------------------------------------

                                                                                      
1.   An individuals account     The individual              9.  A valid trust, estate    The legal entity (Do not
                                                                or pension trust         furnish the identifying
2.   Two or more individuals    The actual owner of the                                  number of the personal
     (joint account)            account or, if combined                                  representative or trustee
                                funds, the first                                         unless the legal entity
                                individual on the account                                itself is not designated in
                                (1)                                                      the account title.) (5)

3.   Husband and wife           The actual owner of the     10. Corporate Account        The corporation
     (joint account)            account or, if joint
                                funds, either person (1)    11. Religious, charitable    The organization
                                                                or educational
4.   Custodian account of a     The minor (2)                   organization account
     minor

5.   Adult and minor (joint                                 12. Partnership account      The partnership
     account)                   The adult or, if the            held in the name of
                                minor is the only               the business
6.   Account in the name of     contributor, the minor (1)
     the guardian or                                       13. Association, club or     The organization
     committee for a                                            other tax - exempt
     designated ward, minor,    The ward, minor, or             organization
     or incompetent person      incompetent person (3)
                                                            14. A broker or registered   The broker or nominee
7.   a.  The usual revocable                                    nominee
         savings trust          The grantor-trustee (1)
         account (grantor is                                15.  Account with the        The public entity
         also trustee)                                           Department of
     b.  So-called trust                                         Agriculture in the
         account that is not    The actual owner (1)             name of a public
         a legal or valid                                        entity (such as a
         trust under state law                                   state or local
                                                                 government, school
8.   Sole proprietorship        The owner (4)                    district, or prison)
     account                                                     that receives
                                                                 agricultural program
                                                                 payments (5)



                                                II-36


(1)      List first and circle the name of the person whose number you furnish.
         If only one person on a joint account has a social security number,
         that persons number must be furnished.

(2)      Circle the minors name and furnish the minors social security number.

(3)      Circle the wards, minors or incompetent persons name and furnish such
         persons social security number.

(4)      You must show your individual name.  You may also enter your business
         name or DBA name.  You may use either your social security number or
         your employer identification number.

(5)      List first and circle the name of the legal trust, estate or pension
         trust (Do not furnish the TIN of the personal representative or trustee
         unless the legal entity itself is not designated in the account title).

NOTE:    If no name is circled when there is more than one name, the number will
         be considered to be that of the first name listed.

                                                II-37



Obtaining a Number

If you dont  have a  taxpayer  identification  number  of you  dont  know your
number,  obtain Form SS-5,  Application  for a Social  Security Number Card (for
individuals),  Form W-7,  Application  for  Individual  Taxpayer  Identification
Number  (ITIN)  Form SS-4,  Application  for  Employer  Identification  Number
(EIN), at a local office of the Social Security Administration or the Internal
Revenue Service (the IRS) and apply for a number.

Payee Exempt from Backup Withholding

Payees specifically exempted from backup withholding on ALL payments include the
following:

o       An organization exempt from tax under section 501(a) of the Internal
        Revenue Code of 1986, as amended (the Code), or an individual retirement
        plan or a custodial account under Section 403(b)(7) of the Code, if the
        account satisfies the requirements of Section 401(f)(2) of the Code.
o       The U.S. or any agency or instrumentality thereof.
o       A State, the District of Columbia, a possession of the U.S., or any
        subdivision or instrumentality thereof.
o       A foreign government, a political subdivision of a foreign government,
        or any agency or instrumentality thereof.
o       An international organization or any agency or instrumentality thereof.

Payees that may be exempted from backup withholding on ALL payments include the
following:

o       A registered dealer in securities or commodities registered in the U.S.,
        the District of Columbia or a possession of the U.S.
o       A futures commission merchant registered with the Commodity Futures
        Trading Commission.
o       A corporation.
o       A financial institution.
o       A real estate investment trust.
o       A common trust fund operated by a bank under Section 584(a) of the Code.
o       An exempt charitable remainder trust, or a trust described in Section
        4947 of the Code.
o       An entity registered at all times during the tax year under the
        Investment Company Act of 1940, as amended.
o       A middleman known in the investment community as a nominee or custodian.
o       A foreign central bank of issue.

Payment of dividends and patronage dividends not generally subject to backup
withholding include the following:

                                                II-38


o       Payments to nonresident aliens subject to withholding under Section 1441
        of the Code.
o       Payments to partnerships not engaged in a trade or business in the U.S.
        and which have at least one nonresident partner.
o       Payments of patronage dividends where the amount received is not paid in
        money.
o       Payments made by certain foreign organizations.
o       Section 404(k) payments made by an ESOP.

Payments of interest not generally subject to backup withholding include the
following:

o       Payment of interest on obligations issued by individuals.
        Note:  You may be subject to backup withholding if this interest is $600
        or more and is paid in the course of the payers trade or business and
        you have not provided your correct taxpayer identification number to the
        payer.
o       Payments of tax-exempt interest (including exempt interest dividends
        under Section 852 of the Code).
o       Payments described in Section 6049(b)(5) of the Code to nonresident
        aliens.
o       Payments on tax-free covenant bonds under Section 1451 of the Code.
o       Payments made by certain foreign organizations.
o       Mortgage or student loan interest paid to you.

Exempt payees  described above should file Form W-9 to avoid possible  erroneous
backup  withholding.  FILE FORM W-9 (OR  SUBSTITUTE  FORM  W-9) WITH THE  PAYER,
FURNISH YOUR TAXPAYER  IDENTIFICATION  NUMBER, WRITE EXEMPT ON THE FACE OF THE
FORM,  SIGN  AND  DATE  THE  FORM  AND  RETURN  IT TO THE  PAYER.  IF YOU  ARE A
NONRESIDENT  ALIEN OR A FOREIGN ENTITY NOT SUBJECT TO BACKUP  WITHHOLDING,  FILE
WITH THE PAYER A COMPLETED  INTERNAL  REVENUE FORM W-8  (CERTIFICATE  OF FOREIGN
STATUS).

     Certain  payments  other than interest,  dividends and patronage  dividends
that are not  subject to  information  reporting  are also not subject to backup
withholding.  For details, see Sections 6041, 6041A(a),  6042, 6044, 6045, 6049,
6050A and 6050N of the Code and the regulations promulgated thereunder.

Privacy  Act  Notice--Section  6109 of the  Code  requires  most  recipients  of
dividends, interest or other payments to give taxpayer identification numbers to
payers who must  report the  payments  to the IRS.  The IRS uses the numbers for
identification  purposes.  Payers  must be  given  the  numbers  whether  or not
recipients are required to file tax returns.  Payers must generally withhold 30%
of taxable  interest,  dividends and certain other  payments to a payee who does
not furnish a taxpayer  identification  number to a payer. Certain penalties may
also apply.

Penalties

(1)      Penalty for Failure to Furnish Taxpayer Identification Number.  If you
         fail to furnish your taxpayer identification number to a payer, you are
         subject to a penalty of $50 for each such failure unless your failure
         is due to reasonable cause and not to willful neglect.
(2)      Civil Penalty for False Information With Respect to Withholding.  If
         you make a false statement with no reasonable basis which results in no
         imposition of backup withholding, you are subject to a penalty of $500.

                                                II-39


(3)      Criminal Penalty for Falsifying Information.  Willfully falsifying
         certifications or affirmations may subject you to criminal penalties
         including fines and/or imprisonment.
(4)      Misuse of TINs.  If the requestor discloses or uses TINs in violation
         of federal law, the requestor my be subject to civil and criminal
         penalties.

FOR ADDITIONAL INFORMATION, CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.

                                                II-40