Re: Agreement and Plan of Merger re Riviera Holdings Corporation



                                R&E GAMING CORP.
                                 P.O. Box 9660
                       Rancho Santa Fe, California 92067


                                 April 6, 1998


VIA FACSIMILE (702) 794-9277 AND U.S. MAIL
------------------------------------------

Riviera Holdings Corporation
2901 Las Vegas Booulevard
South Las Vegas, Nevada 89109
Attention:  Mr. William L. Westerman

          Re:  Agreement and Plan of Merger re Riviera Holdings Corporation
               ------------------------------------------------------------

Dear Mr. Westerman:

     On March 20,  1998,  R&E  Gaming  Corp.  ("R&E  Gaming")  provided  Riviera
Holdings  Corporation  (RHC") written  notice ("March 20th Notice")  pursuant to
Seciton  6.1(d) of the  Agreement  and Plan of Merger dated as of September  15,
1997  (the  "Riviera  Merger  Agreement")  by  and  among  R&E  Gaming,  Riviera
Acquisition Sub, Inc. ("RAS") and RHC that RHC was in breach of representations,
warranties  and  covenants of the Riviera  Merger  Agreement.  No cure has taken
place of such breaches and, accordingly, R&E Gaming and RAS hereby terminate the
Riviera Merger Agreement pursuant to Section 6.1(d) for the reasons set forth in
the March 20th  Notice.  This notice is in addition to the  termination  notices
given to you on April 2, 1998.

         In  accordance  with the terms of  Section  6.2 of the  Riviera  Merger
Agreement  such  Agreement  has forthwith become void and has no effect,  except
that RHC continues to be subject to the terms of Section 6.3 thereof.

         Because  the  termination   effected  by  this  notice   constitutes  a
Non-Payment  Termination  Event, as defined in the Riviera Option Agreement,  no
RHC stockholder is entitled to any funds under the Riviera Merger  Agreement or
from the Escrow Agreement  ("Escrow  Agreement") dated as of September 15, 1997,
by and among  R&E  Gaming,  RHC and  State  Street  Bank and  Trust  Company  of
California,  N.A. R&E Gaming and RAS hereby demand, therefore,  repayment of all
monies paid and return of the Letter of Credit delivered





Riviera Holdings Corporation
April 6, 1998
Page 2


by R&E Gaming in  connection  with the  Escrow  Agreement  and the  transactions
contemplated thereby.

                                        Very truly yours,

                                        R&E GAMING CORP.


                                        By:  /s/ Allen E. Paulson
                                            ------------------------------------
                                                Allen E. Paulson
                                                President


                                        RIVIERA ACQUISITION SUB, INC.


                                        By: /s/ Allen E. Paulson
                                            ------------------------------------
                                                Allen E. Paulson
                                                President


CC:  Dechert Price & Rhoads
     30 Rockefeller Plaza
     New York, New York  10112
     Facsimile:  (212) 698-3599
     Attention:  Fredric Klink, Esq.