Elsinore Corp – ‘10-K’ for 12/31/97

As of:  Tuesday, 3/31/98   ·   For:  12/31/97   ·   Accession #:  311049-98-6   ·   File #:  1-07831

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Annual Report   —   Form 10-K
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Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Elsinore Corporation 1997 10-K                        80±   359K 
 2: EX-27       12/31/97 Financials                                    1      6K 

10-K   —   Elsinore Corporation 1997 10-K
Document Table of Contents

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SECURITIES AND EXCHANGE COMMISSION          
Washington, D.C. 20549        
Form 10-K       

X    Annual Report Pursuant to Section 13 or 15(d)                            
---   of the Securities Exchange Act of 1934                                    

For the fiscal year ended December 31, 1997         

Transition Report Pursuant to Section 13 or 15(d)       
of the Securities Exchange Act of 1934          

Commission File Number 1-7831             

ELSINORE CORPORATION              
(Exact name of registrant as specified in its charter)              

NEVADA                            88-0117544        
(State or other jurisdiction of             (IRS Employer                   
incorporation or organization)           Identification No.)              

202 FREMONT STREET, LAS VEGAS,  NEVADA 89101          
(Address of principal executive offices) (Zip Code)       

(702) 385-4011        
(Registrant's telephone number, including area code)        

Securities Registered Pursuant to Section 12(b) of the Act:         
NONE              

Securities Registered Pursuant to Section 12(g) of the Act:         
COMMON STOCK                

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

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

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan  
confimed by a court. YES   X      NO                                            

On March 26,  1998  there  were  4,929,313  shares of common  stock  issued  and
outstanding.  The market value of the common stock held by non-affiliates of the
registrant as of March 26, 1998 was approximately $372,131.50.  The market value
was computed by reference to the closing sales price of 1 5/8 ($1.625) per share
reported on the NASDAQ "Bulletin Board" as of March 26, 1998.                   

DOCUMENTS INCORPORATED BY REFERENCE       

Part I hereof  incorporates by reference a portion of the information  statement
for the  registrant's  special meeting held on February 4, 1998,  filed with the
Securities and Exchange Commission on Schedule 14C on January 13, 1998.         

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                   TABLE OF CONTENTS

PART 1                                                                      Page

Item 1.  Business                                             
Item 2.  Properties                                           
Item 3.  Legal Proceedings                                    
Item 4.  Submission of Matters to a                           
Vote of Security Holders                

Part II                                                                         

Item 5.  Market for Registrant=s Common Equity                
and Related Stockholder Matters         
Item 6.  Selected Financial Data                              
Item 7.  Management=s Discussion and                          
Analysis of Financial Condition         
and Results of Operations               
Item 8.  Financial Statements and                             
Supplementary Data                      
Item 9.  Changes in and Disagreements                         
with Accountants                        
on Accounting and Financial Disclosure  

PART III                                                                        

Item 10. Directors and Executive Officers                     
of the Registrant                       
Item 11. Executive Compensation                               
Item 12. Security Ownership of Certain                        
Beneficial Owners and Management        
Item 13. Certain Relationships and                            
Related Transactions                    

PART IV                                                                         

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

SIGNATURES                                                                      

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PART I  

Item 1.  BUSINESS.                                                              

General.                                                                        

         Elsinore  Corporation  ("Elsinore" or the "Company") is registered with
the Nevada Gaming  Commission  (the  "Commission")  as a publicly traded holding
company of Four Queens, Inc. ("Four Queens"),  the licensed operator of the Four
Queens Hotel and Casino in Las Vegas,  Nevada (the "Four  Queens  Casino") and a
wholly owned  subsidiary of the Company.  Four Queens also held a casino service
license in New Jersey allowing it to distribute its casino game "multiple action
blackjack." Four Queens  currently  distributes the game to eight casinos in New
Jersey.  The Four Queens' New Jersey license expired  September 30, 1997, but it
obtained  transactional  waivers from the State of New Jersey pending completion
of the license investigation  associated with the change in control of Elsinore.
Four Queens is now pursuing  extensions of those  waivers,  as discussed  below.
Gaming management activities conducted by Elsinore's other subsidiaries prior to
the bankruptcy reorganization, discussed below, have terminated.                

         The  Company's  principal  executive  office is located at 202  Fremont
Street, Las Vegas, Nevada 89101 and its telephone number is (702) 385-4011.     

Change in Control Pursuant to Elsinore's Bankruptcy Reorganization.             

         On  October  31,  1995,  Elsinore  and  certain  of  its  wholly  owned
subsidiaries filed for protection  pursuant to Chapter 11 of the U.S. Bankruptcy
Code. The resulting plan of  reorganization  of Elsinore and those  subsidiaries
(the  "Plan") was  confirmed  on August 12, 1996 (the  "Confirmation  Date") and
became effective following the close of business on February 28, 1997 (the "Plan
Effective Date"). All motions for rehearing or reconsideration of the Bankruptcy
Court's  orders  confirming  the Plan and allowing the Plan to become  effective
have been denied or withdrawn.  The time allowed for appeals of such orders have
expired without any appeal having been taken.  Pursuant to the Plan, a change in
control of the Company  occurred as of the Plan  Effective  Date,  as  described
below.                                                                          

         Under the Plan, the Company's  common stock that was outstanding  prior
to the Plan  Effective  Date was  canceled  and  4,929,313  shares of new common
stock,  par value $.001,  of the Company (the "Common  Stock") were issued.  The
Plan also  provides for the future  issuance of an  additional  70,687 shares of
Common  Stock to certain  classes of  creditors  of the Company and Four Queens,
whose claims have not yet been resolved. Of the 4,929,313 shares of Common Stock
issued pursuant to the Plan,  4,646,440 shares or 94.3% of the total outstanding
were acquired by certain  investment  accounts (the "MWV  Accounts")  managed by
Morgens, Waterfall, Vintiadis and Company, Inc. ("MWV"). Of the shares which the
MWV Accounts acquired,  995,280 shares were purchased at $5.00 per share under a
Subscription  Rights Agreement dated October 10, 1996 (the "Rights  Agreement"),
which  was  called  for by the  Plan.  Under the  Rights  Agreement,  a total of
1,000,000 shares of Common Stock were subscribed for at $5.00 per share and were
issued on the Plan Effective Date. The other 4,720 shares were subscribed for by
certain  holders of the common  stock that was  canceled  on the Plan  Effective
Date.                                                                           

         The shares of Common Stock acquired by the MWV Accounts, other than the
995,280 shares which they purchased under the Rights  Agreement,  were issued to
the MWV Accounts under the Plan (i) in partial satisfaction of the MWV Accounts'
respective  allowed claims  relating to the Company's 12.5% First Mortgage Notes
due 2000  that  were  issued in  October  1993 or (ii) as a premium  for the MWV
Accounts'  purchase  of Common  Stock under the Rights  Agreement  which was not
subscribed  for by other  persons  entitled  to  participate  under  the  Rights
Agreement.                                                                      

         Holders of the  approximately  15.9 million  shares of old common stock
that were canceled on the Plan Effective Date received, in the aggregate, 77,426
shares of Common  Stock  (including  4,720  shares  purchased  under the  Rights
Agreement).  This represents 1.6% of the Common Stock  outstanding on the record
date.                                                                           

         As a condition to the approvals by the State Gaming  Control Board (the
"Board")  and  the  Commission  which  were  required  for the  Plan  to  become
effective,  limitations were placed on the persons who could exercise voting and
investment  power  (including  dispositive  power) with  respect to Common Stock
owned by any of the MWV  Accounts.  Under  those  limitations,  John C.  "Bruce"
Waterfall is the only individual who exercises  voting and investment  authority
over the Common  Stock on behalf of any of the MWV  Accounts.  Mr.  Waterfall is
also the Company's Chairman of the Board.                                       

The Four Queens Casino.                                                         

         Four Queens owns the Four Queens  Casino,  which has been in  operation
since 1966. The Four Queens Casino has  consistently  concentrated on delivering
high quality,  traditional Las Vegas-style  gaming and  entertainment.  The Four
Queens Casino is located on a leased site of approximately two acres adjacent to
the Golden Nugget Hotel & Casino in the heart of Fremont  Street in downtown Las
Vegas. The property features approximately 690 hotel rooms, including 45 suites,
32,000  square  feet  of  casino  space,  two  full-service   restaurants,   two
fast-service  restaurants,  three  cocktail  lounges,  a gift shop,  four retail
concessions,  15,000 square feet of function space and approximately 560 parking
spaces. The casino has approximately 965 slot machines, 26 gaming tables, a keno
lounge and a sports book.  Riviera Gaming Management Corp. - Elsinore  ("RGME"),
an indirect subsidiary of Riviera Holdings Corp. ("Riviera"),  has been managing
the Four Queens Casino since the Confirmation  Date. RGME has focused  primarily
on slot play versus previous management's  philosophy of marketing to high limit
table  players.  This plan has changed the  customer  base at the  property  and
allows the Four Queens Casino to  concentrate  on what RGME  considers to be Las
Vegas' most profitable  revenue source,  which is the slot player market.  Also,
aggressive  marketing  strategy  on  Fremont  Street  was  implemented  with the
objective  of  attracting  into the Four  Queens  Casino the  20,000-plus  daily
visitors to the downtown area.                                                  

         Management.  The term of RGME's  current  management  agreement for the
Four Queens Casino (the "Management Agreement"), which went into effect on April
1, 1997 in accordance  with the terms of the Plan, is  approximately  40 months,
subject to earlier termination or extension. Either side may terminate it if the
Four Queens Casino's  cumulative earnings before interest,  taxes,  depreciation
and  amortization  ("EBIDTA") for the first two fiscal years commencing April 1,
1997 are less than $12.8 million.  The term can be extended for an additional 24
months at RGME's option if certain performance standards are met. RGME is paid a
minimum annual  management fee of $1 million in equal monthly  installments.  In
addition, RGME receives a fee of 25% of the amount by which EBITDA in any fiscal
year exceeds $8 million.  Also under the  Management  Agreement,  RGME  received
warrants to purchase  1,125,000 shares of Common Stock at $1.00 per share.  Upon
consummation  of the Merger,  RGME would receive  approximately  $2.4 million in
respect of the warrants,  net of the exercise  price.  Either side can terminate
the  Management  Agreement if (i)  substantially  all of Four Queens' assets are
sold,  (ii)  Four  Queens  is  merged or (iii) a  majority  of Four  Queens'  or
Elsinore's  shares are sold.  Upon such  termination,  RGME  would  receive a $2
million  termination  bonus  minus any amount  realized or  realizable  upon the
exercise  of the  warrants.  Prior to the  Management  Agreement,  RGME had been
managing the Four Queens Casino under an Interim Management Agreement which took
effect on the  Confirmation  Date and provided for a monthly  management  fee of
$83,000.                                                                        

         Operations. The following table sets forth the contributions from major
activities to the Company's  total  revenues from the Four Queens Casino for the
years ended December 31, 1997, 1996 and 1995.                                   

                                                                [Download Table]


                                        1997            1996             1995  
                                        ----            ----             ----  
                                                (Dollars in Thousands)         
                                                                               
Casino(1)                             $ 36,506        $ 42,300        $ 39,964 
Hotel(2)                                 9,705          11,202           9,564 
Food & beverage(2)                       9,686          12,373          12,136 
Other(3)                                 2,115           1,502           1,983 
                                      --------        --------        -------- 
                                        58,012          67,377          63,647 
Less: Promotional allowances            (4,224)        (6,178)          (6,674)
                                      ---------      ---------        ---------

                                      $ 53,788        $ 61,199       $  56,973 
                                      ========        ========       ========= 

          (1)     Consists  of the net win from  gaming  activities  (i.e.,  the
difference between gaming wins and losses). 

          (2)     Includes   revenues  from  services  provided  as  promotional
                  allowances to casino  customers and others on a  complimentary
basis.                                      

          (3)     Consists primarily of interest income, commissions from credit
                  card and  automatic  teller cash  advances  and  miscellaneous
                  other  income  (including  net  royalties of $142,000 in 1997,
                  $198,000 in 1996,  and $185,000 in 1995 from the  licensing of
      MULTIPLE ACTION "registered trademark" blackjack).

         The following  table  summarizes  the primary  aspects of the Company's
operations at the Four Queens Casino.                                           

                                                                [Download Table]

Casino:                                                    
                                                           
    Floor area (square feet)                         32,296
    Slot machines                                       965
    Blackjack tables                                     17
    Craps tables                                          3
    Big six                                               1
    Caribbean stud poker tables                           1
    Roulette wheels                                       2
    Let-it-ride tables                                    1
    Pai gow poker tables                                  1
    Keno (seats)                                         46
    Sports book                                           1
Hotel:                                                     
    Rooms                                               690
    Meeting areas (square feet)                      14,600
Restaurants and entertainment and cocktail lounges:        
  Restaurants                                             4
  Restaurant seats                                      454
  Cocktail lounges                                        3
Other:                                                     
  Gift shops                                              1
  Parking facilities (cars)                             560

         A  marketing  strategy  is  employed  for the Four  Queens  Casino that
emphasizes a high level of customer service, targeted marketing,  value-oriented
promotions, club memberships and special events.                                

         Customer  Service.  The Company believes that the Four Queens Casino is
distinguished  by its  friendly  atmosphere  and the high level of  personalized
service  provided to its patrons.  The Company  strives to maintain the level of
service  that has  allowed  the  property  to  attain a high  level of  customer
loyalty,   which  has  been  the  backbone  of  business  for  this  established
hotel/casino.                                                                   

         Employees.  At December 31, 1997,  the Four Queens Casino  employed 970
persons,  approximately  50% of  whom  were  covered  by  collective  bargaining
agreements.  New union  contracts  were entered into during 1997  covering  five
collective bargaining units.                                                    

The Las Vegas Market.                                                           

         Las  Vegas is one of the  fastest  growing  and  largest  entertainment
markets in the United  States.  For fiscal year 1997,  gaming  revenues in Clark
County  reached a new 12 month  record of $6.2  billion.  The number of visitors
traveling to Las Vegas has increased at a steady and significant rate, from 16.2
million  visitors  in 1987 to a record  30.5  million  in 1997,  representing  a
compound  annual  growth  rate of  6.5%.  Aggregate  expenditures  by Las  Vegas
visitors  increased at a compound  annual growth rate of 11.3% from $8.6 billion
in 1987 to $22.5  billion in 1996.  The  number of hotel and motel  rooms in Las
Vegas increased by  approximately  70.1% from 61,934 in 1988 to 105,347 in 1997,
surpassing  100,000 rooms in January 1997, the first market to reach that level.
Despite this significant  increase in the number of rooms, hotel occupancy rates
exceeded  on average  92.0% for the five year  period  from 1993  through  1997.
According to the Las Vegas Convention and Visitors Authority  ("LVCVA"),  by the
end of the decade it is expected  that  approximately  20,000  additional  hotel
rooms will be opened in Las Vegas, including the Bellagio,  Venetian,  Paris and
Mandalay Bay, which are currently under  construction,  the expansion at the MGM
Grand and the new developments planned at the current Aladdin site.             

         The following table sets forth certain statistical  information for the
Las Vegas market for the years 1993 through 1997, as reported by the LVCVA.     

                                                        [Enlarge/Download Table]


                               Las Vegas Market Statistics                                             

                                             1993        1994        1995        1996         1997     
                                          ----------- ----------- ----------- ----------- -------------

                                                                                                       
Visitor volume (in thousands)                 23,523      28,214      29,002      29,637        30,465 
Clark County gaming revenues                  $4,727      $5,431      $5,718      $5,784        $6,152 
 (in millions)                                                                                         
Hotel/motel rooms                             86,053      88,560      90,046      99,072       105,347 
Average hotel occupancy rate                   92.6%       92.6%       91.4%       93.4%         90.3% 
Airport passenger traffic                     22,492      26,850      28,027      30,460        30,306 
 (in thousands)                                                                                        
Convention attendance                          2,440       2,684       2,925       3,306         3,519 
 (in thousands)                                                                                        

The Downtown Market.                                                            

         General Information.  Downtown Las Vegas, with its famous neon lighting
and its 12 major  casinos  all located  within  close  proximity  of each other,
attracts a significant  number of loyal customers  comprised of both visitors to
Las Vegas and local residents.                                                  

         Recent  results of the downtown Las Vegas  casinos have been  adversely
affected by, among other things,  the opening of themed  mega-casinos on the Las
Vegas Strip.  In the 1989-1991  period,  the opening of the Mirage and Excalibur
casino/hotels  depressed the growth rate of downtown Las Vegas gaming  revenues.
Similarly,  the more recent openings of the MGM Grand,  Luxor,  Treasure Island,
Monte Carlo and New York New York  casino/hotels  have had an adverse  effect on
downtown gaming revenue.  In addition,  the scheduled  openings of the Bellagio,
Venetian,  Paris and  Mandalay  Bay,  the MGM Grand  expansion  and the  planned
development at the Aladdin site, all on the Las Vegas Strip,  may have a further
adverse effect on downtown gaming revenue when those projects are completed. The
new rooms recently  completed or under  construction  are primarily  designed to
attract the high-end gaming and convention customers,  and based on construction
costs are or will be priced at rates well above  those which have been or can be
charged by the Four Queens  Casino  based on the  Company's  investment  in that
facility.                                                                       

         The Fremont Street  Experience.  Casino operators in downtown Las Vegas
formed the Downtown Progress  Association to improve the downtown area. The most
noteworthy  improvement  is the  Fremont  Street  Experience,  which  features a
celestial vault and light show. The celestial vault is a 100-foot high, 100-foot
wide,  1,340-foot long frame spanning Fremont Street, from Main Street to Fourth
Street,  which is closed to traffic to create a pedestrian  mall.  The celestial
vault is the  framework  for a  high-tech  light show using  reflectors,  strobe
lights, and laser image projectors.  Nine major entertainment venues,  including
the Four Queens  Casino,  that  together  offer 17,000 slot  machines,  over 500
blackjack  and other  table  games,  41  restaurants  and 8,000  hotel rooms are
connected  by the project,  which opened on December 13, 1995.  The project also
includes  a  1,500-space  parking  facility.  The  goal  of the  Fremont  Street
Experience  is to create a special  attraction  for gaming  customers  and other
visitors to Las Vegas through such activities as street events and entertainment
in this  extraordinary  setting.  A special  themed event at the Fremont  Street
Experience  can draw as many as 80,000  people.  Through such  attractions,  the
Fremont  Street  Experience  draws  visitors to the  downtown  area and provides
competition with the larger and new gaming and  entertainment  complexes located
on or near the Strip.                                                           

         The  Company  and  several  of  the  other  downtown  casino  operators
collectively  own the Fremont Street  Experience  through their ownership of the
company which holds title to the project.  The Company has a one-sixth ownership
share and is responsible  for a proportionate  share of the project's  operating
costs.                                                                          

Agreement and Plan of Merger.                                                   

         In  the  first  half  of  1997,  Elsinore  and  Mr.  Allen  E.  Paulson
("Paulson")  commenced  discussions which culminated in an Agreement and Plan of
Merger  (the  "Merger  Agreement"),  dated as of  September  15,  1997,  between
Elsinore and entities controlled by Paulson, namely R&E Gaming Corp. ("R&E") and
Elsinore  Acquisition Sub, Inc. ("EAS"), to acquire by merger (the "Merger") the
outstanding  Common  Stock  for  $3.16  per  share  in cash  plus an  amount  of
additional  consideration  in cash equal to the daily  portion of the accrual on
$3.16 at 9.43%  compounded  annually,  from June 1, 1997 to the date immediately
preceding  the date  such  acquisition  is  consummated.  The  Merger  Agreement
provides for EAS to merge into  Elsinore,  and Elsinore to become a wholly owned
subsidiary of R&E.                                                              

         Contemporaneously with the Merger Agreement, R&E executed an Option and
Voting  Agreement  (the  "Option  Agreement")  with  MWV,  on  behalf of the MWV
Accounts  which  own  94.3%  of the  outstanding  Common  Stock.  Under  certain
conditions and  circumstances,  the Option  Agreement  provides for, among other
things, (i) the grant by the MWV Accounts to R&E of an option to purchase all of
their  Common  Stock;  (ii)  an  obligation  by R&E to  purchase  all of the MWV
Accounts' Common Stock, and (iii) the MWV Accounts to vote their Common Stock in
favor of the  Merger  Agreement.  Elsinore's  shareholders  approved  the Merger
Agreement  at a special  meeting of  shareholders  held on February 4, 1998 (the
"Special Meeting").                                                             

         Paulson  also  entered  into  discussions  with  Riviera  to  acquire a
controlling  interest in that  company as well.  Riviera  owns and  operates the
Riviera Hotel and Casino in Las Vegas and is the parent  corporation of RGME. On
September  16, 1997,  R&E and Riviera  Acquisition  Sub, Inc.  ("RAS")  (another
entity  controlled by Paulson) entered into an Agreement and Plan of Merger (the
"Riviera Merger  Agreement") with Riviera,  which provides for the merger of RAS
into Riviera (the  "Riviera  Merger"),  and for Riviera to become a wholly owned
subsidiary  of R&E. R&E also entered  into an Option and Voting  Agreement  with
certain  Riviera  shareholders,  including  MWV  acting  on  behalf  of the  MWV
Accounts,  containing terms similar to those described above with respect to the
Option Agreement.                                                               

         The Merger Agreement contains  conditions  precedent to consummation of
the Merger,  including (i) the Option  Agreement  being in full force and effect
and MWV  having  complied  in all  respects  with the  terms  thereof,  (ii) all
necessary  approvals  from  gaming  authorities  and (iii)  consummation  of the
Riviera Merger.                                                                 

         A  summary  of  the  material  terms  of  the  Merger  Agreement  and a
description of the Option Agreement are set forth in "THE MERGER" section of the
Information  Statement on Schedule 14C filed by Elsinore with the Securities and
Exchange  Commission  (the  "SEC") on January 13,  1998 in  connection  with the
Special Meeting,  and is incorporated herein by reference.  Copies of the Merger
Agreement and Option Agreement are included as exhibits hereto.                 

         Elsinore has received from R&E a notice,  dated March 20, 1998, stating
that the  Merger  Agreement  is void or,  alternatively,  R&E and EAS  intend to
terminate  the  Merger  Agreement.  As the  grounds  for its  position,  R&E has
alleged,  among other things,  violations  by Elsinore of the Merger  Agreement,
violations of law and  misrepresentations  by MWV in connection  with the Option
Agreement and the non-satisfaction of certain conditions precedent to completing
the Merger.  Elsinore  rejects the  allegations  against it by R&E and is of the
view that R&E is  required  to  consummate  the  Merger,  subject to approval by
gaming  authorities.  Elsinore is  reserving  all of its rights with  respect to
R&E's legal obligations.                                                        

Gaming Regulation and Licensing.                                                

         Nevada. Elsinore is registered with the Commission as a publicly traded
company and has been found suitable as the sole shareholder of Four Queens. Four
Queens holds a  nonrestricted  gaming  license to conduct  nonrestricted  gaming
operations at the Four Queens  Casino.  Ownership and operation of casino gaming
facilities in Nevada,  as well as the  manufacture  and  distribution  of gaming
devices,  are subject to extensive state and local  regulation.  Publicly traded
parent corporations and holding companies of Nevada gaming licensees, as well as
the licensed subsidiaries,  are subject to the Nevada Gaming Control Act and the
regulations promulgated thereunder (collectively,  the "Nevada Act") and various
local regulations.  A registered company and its gaming operations and companies
are subject to the  licensing  and  regulatory  control of the  Commission,  the
Board,  the Clark County Liquor Gaming  Licensing Board and possibly other local
agencies  throughout  the  State of  Nevada,  including  the  City of Las  Vegas
(collectively, the "Nevada Gaming Authorities").                                

         The laws,  regulations and supervisory  procedures of the Nevada Gaming
Authorities  have their genesis in various  declarations  of public policy which
are  concerned  with,  among other  things:  (i) the  prevention  of unsavory or
unsuitable  persons from having a direct or indirect  involvement with gaming at
any  time  or in  any  capacity;  (ii)  the  establishment  and  maintenance  of
responsible  accounting  practices  and  procedures;  (iii) the  maintenance  of
effective  controls  over the financial  practices of  licensees,  including the
establishment  of  minimum  procedures  for  internal  fiscal  affairs  and  the
safeguarding  of assets and  revenues,  providing  reliable  record  keeping and
requiring  the filing of periodic  reports with the Nevada  Gaming  Authorities;
(iv) the prevention of cheating and fraudulent  practices;  and (v) the creation
of a source of state and local  revenues  through  taxation and licensing  fees.
Neither gaming licenses nor the registration  approvals given to publicly traded
corporations are transferable.  Changes in such laws, regulations and procedures
could have an adverse effect on the Company's operation.                        

         Since the  Company  is  registered  with the  Commission  as a publicly
traded  corporation and has been found suitable as the sole  shareholder of Four
Queens,  it is required to submit,  upon  application  and on a periodic  basis,
detailed  financial and operating reports to the Commission.  Additionally,  the
Company  may be  required  to furnish  any other  information  requested  by the
Commission.  No person may become a shareholder of, or receive any percentage of
profits  from  licensed  Nevada  operating  companies  without  first  obtaining
licenses and approvals from the Nevada Gaming Authorities.                      

         The Nevada Gaming  Authorities may investigate any individual who has a
material  relationship to, or material  involvement with, any registered company
or its licensed  subsidiary  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 the licensed  subsidiary  must
file applications  with the Nevada Gaming  Authorities and may be required to be
licensed or found suitable by the Nevada Gaming Authorities. Officers, directors
and key  employees  of the  registered  company who are  actively  and  directly
involved in the gaming activities of the licensed  subsidiary 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 deemed
reasonable.  A finding of  suitability  is  comparable  to  licensing,  and both
require the submission of detailed personal and financial  information  followed
by a  thorough  investigation.  An  applicant  for  licensing  or a  finding  of
suitability must pay all of the costs of the investigation.  Changes in licensed
positions  with  the  registered  company  or its  licensed  subsidiary  must be
reported to the Nevada  Gaming  Authorities.  In addition to their  authority to
deny an application for a finding of suitability or licensure, the Nevada Gaming
Authorities  also  have  jurisdiction  to  disapprove  a change  in a  corporate
position.                                                                       

         If the Nevada Gaming  Authorities were to find an officer,  director or
key  employee  unsuitable  for  licensing  or  unsuitable  to continue  having a
relationship  with  the  registered  company  or its  licensed  subsidiary,  the
companies  involved  would be  required to sever all  relationships  with such a
person.  Additionally,  the Commission may require the registered company or its
licensed  subsidiary  to terminate  the  employment of any person who refuses to
file  appropriate  applications.  Determinations  of  suitability  or  questions
pertaining to licensing are not subject to judicial review in Nevada.           

         Elsinore and Four Queens are required to submit detailed  financial and
operating reports to the Commission.  Substantially all loans,  leases, sales of
securities and similar  financing  transactions  by Four Queens must be reported
to, or approved by, the Commission.                                             

         If it were  determined that the Nevada Act was violated by the licensed
subsidiary or the registered  company,  the gaming licenses or registration held
by the  registered  company  and  its  licensed  subsidiary  could  be  limited,
conditioned,  suspended or revoked subject to compliance with certain  statutory
and regulatory  procedures.  Moreover, at the discretion of the Commission,  the
registered  company and its licensed  subsidiary  and persons  involved could be
subject to substantial fines for each separate violation of the Nevada Act.     

         A beneficial  holder of the  registered  company's  voting  securities,
regardless  of  the  number  of  shares  owned,  may  be  required  to  file  an
application, be investigated, and have his suitability as a beneficial holder of
the  registered  company's  voting  securities  determined if the Commission has
reason to believe that such ownership would  otherwise be inconsistent  with the
declared  policies of the State of Nevada.  The applicant  must pay all costs of
the investigation  incurred by the Nevada Gaming  Authorities in conducting such
an  investigation.  Also, the Clark County Liquor Gaming Licensing Board and the
City of Las Vegas have taken the position  that it has the  authority to approve
all persons owning or  controlling  the stock of any  corporation  controlling a
gaming license.                                                                 

         The Nevada Act  requires  any person who  acquires  more than 5% of the
registered  company's  voting  securities  to  report  the  acquisition  to  the
Commission.  The Nevada Act requires that beneficial  owners of more than 10% of
the registered company's voting securities apply to the Commission for a finding
of  suitability  within 30 days after the  Chairman of the Board  mails  written
notice requiring such a filing. Under certain  circumstances,  an "institutional
investor," as defined in the Nevada Act,  which  acquires more than 10%, but not
more than 15% of the  registered  company's  voting  securities may apply to the
Commission for a waiver of such a finding of  suitability if such  institutional
investor  holds  the  voting   securities  for  investment   purposes  only.  An
institutional  investor  shall not be deemed to hold the voting  securities  for
investment purposes only unless the voting securities were acquired and are held
in the ordinary course of business as an institutional  investor and not for the
purpose of causing,  directly or  indirectly,  the election of a majority of the
members of the board of directors of the registered  company,  any change in the
registered  company's  corporate  charter,  bylaws,   management,   policies  or
operations of the registered  company,  or any of its gaming affiliates,  or any
other  action which the  Commission  finds to be  inconsistent  with holding the
registered company's voting securities for investment purposes only.  Activities
which are not deemed  inconsistent with holding voting securities for investment
purposes only include: (i) voting on all matters voted on by shareholders;  (ii)
making  financial and other inquiries of management of the type normally made by
securities analysts for informational  purposes and not to cause a change in its
management,  policies  or  operations;  and (iii) such other  activities  as the
Commission may determine to be consistent  with such investment  intent.  If the
Commission  grants a waiver to an  "institutional  investor" the waiver does not
include  a waiver or  exemption  from the  requirement  for  prior  approval  to
"acquire  control" of a  registered  corporation.  If the  beneficial  holder of
voting  securities who must be found  suitable is a corporation,  partnership or
trust, it must submit detailed  business and financial  information  including a
list of  beneficial  owners.  The  applicant  is  required  to pay all  costs of
investigation.                                                                  

         Any person  who fails or refuses to apply for a finding of  suitability
or a license  within 30 days after being  ordered to do so by the  Commission or
the Chairman of the Board may be found unsuitable.  The same restriction applies
to a record  owner if the record  owner,  after  request,  fails to identify the
beneficial owners.  Any shareholder found unsuitable and who holds,  directly or
indirectly,  any  beneficial  ownership  of the  common  stock  of a  registered
corporation  beyond such period of time as may be prescribed  by the  Commission
may be guilty of a  criminal  offense.  The  registered  company  is  subject to
disciplinary  action if, after it receives notice that a person is unsuitable to
be a shareholder or to have any other  relationship with the registered  company
or its subsidiaries, the registered company (i) pays that person any dividend or
interest on voting securities of the registered company, (ii) allows that person
to  exercise,  directly  or  indirectly,  any  voting  right  conferred  through
securities  held by that  person,  (iii) pays  remuneration  in any form to that
person for services  rendered or  otherwise,  or (iv) fails to pursue all lawful
efforts to require such  unsuitable  person to relinquish his voting  securities
for cash at fair market value.                                                  

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

         The  registered  company is required to maintain a current stock ledger
in Nevada which may be examined by the Nevada Gaming Authorities at any time. If
any securities are held in trust by an agent or by a nominee,  the record holder
may be required to disclose the identity of the  beneficial  owner to the Nevada
Gaming  Authorities.  A failure to make such a  disclosure  may be  grounds  for
finding the record holder unsuitable. The registered company is also required to
render maximum  assistance in determining the identity of the beneficial  owner.
The  Commission  has  the  power  to  require  the  registered  company's  stock
certificates to bear a legend  indicating that the securities are subject to the
Nevada Act.                                                                     

         Elsinore may not make a public  offering of its securities  without the
prior approval of the Commission if the securities or the 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.  Any such
approval, if given, does not constitute a finding, recommendation or approval by
the  Commission or the Board as to the accuracy or adequacy of the prospectus or
the investment merits of the securities.  Any  representation to the contrary is
unlawful.                                                                       

         Application for approval of public  offerings and the like may be filed
without  complete  documentation  related  thereto so long as the  documents and
information are supplied to the Board and Commission as they become available in
accordance  with the normal and customary  practice of the securities  industry.
Additionally,  the Commission may, either generally or specifically,  exempt any
person,  security or transaction  from  application  pursuant to its regulations
regarding publicly traded corporations.                                         

         Changes  in  control  of the  registered  company  or its  subsidiaries
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  Commission.  Entities
seeking to acquire  control of a registered  corporation  must satisfy the Board
and the Commission in a variety of stringent standards prior to assuming control
of such  registered  corporation.  The Commission  may also require  controlling
shareholders,   officers,   directors  and  other  persons   having  a  material
relationship or involvement with the entity proposed to acquire  control,  to be
investigated  and  licensed  as  part of the  approval  process  related  to the
transaction.                                                                    

         License  fees and taxes,  computed in various ways  dependent  upon the
type of gaming activity involved,  are payable to the State of Nevada and to the
counties and cities in which the Nevada  licensee's  respective  operations  are
conducted.  Depending upon the  particular  fee or tax involved,  these fees and
taxes are payable  either  monthly,  quarterly  or  annually  and are based upon
either: (i) a percentage of gross revenues  received;  (ii) the number of gaming
devices  operated;  or (iii)  the  number  of  table  games  operated.  A casino
entertainment  tax is also  paid by casino  operations  where  entertainment  is
furnished  in  connection  with  the  selling  of food or  refreshments.  Nevada
licensees  that  hold  a  license  as  an  operator  of  a  slot  route,   or  a
manufacturer's or distributor's  license, also pay certain fees and taxes to the
State of Nevada.                                                                

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

         The granting of any registrations, amendment of orders of registration,
findings of suitability, approvals or licenses are discretionary with the Nevada
Gaming Authorities.  The burden of demonstrating the suitability or desirability
of  certain  business  transactions  is at all times  upon the  applicants.  Any
licensing or approval  process  requires the  submission of detailed  financial,
business and possible  personal  information,  and the  completion of a thorough
investigation.                                                                  

         New Jersey.  The New Jersey Casino Service  license held by Four Queens
expired  September  30,  1997. A new license  application  has been filed and is
being  investigated,  which  was  required  due to a change  in  control  of the
Company.  Transactional  waivers have been obtained from the State of New Jersey
pending completion of the license investigation.  The transactional waivers will
expire on April 1, 1998. The Four Queens, through its legal counsel, is pursuing
extensions of these transactional waivers which, if obtained,  would be expected
to expire on October 1, 1998.                                                   

         Washington.  Elsinore's subsidiary, Olympia Gaming Corporation, has not
renewed its gaming  license issued by the State of Washington as it is no longer
performing under, or seeking, a management contract in that state.              

Item 2.  PROPERTIES.                                                            

         Except  for  certain  small  parcels  of land  owned  in fee,  the real
property  underlying  the Four  Queens  Casino is  leased  pursuant  to  several
long-term  leases,  none of which expire before  October 31, 2024. The adjoining
garage is occupied  under a lease that  expires in 2034.  Such leases  generally
provide for annual  minimum rental and  adjustments  relating to cost of living.
The Four Queens  Casino is subject to  security  interests  under the  Company's
restated 1993 Mortgage  Notes and restated 1994 Mortgage  Notes.  See Note 12 of
Notes to Consolidated Financial Statements.                                     

Item 3.  LEGAL PROCEEDINGS.                                                     

         The Company is a defendant in two consolidated  lawsuits pending in the
federal court for the District of New Jersey,  alleging violation by the Company
and certain of its  subsidiaries  and  affiliates of the Worker  Adjustment  and
Retraining Notification Act (the "WARN Act") and breach of contract.            

         The  plaintiffs  filed three proofs of claims in the Company's and Four
Queens' bankruptcy  proceedings.  Two of the proofs of claims, one for the union
employees  and one for the non-union  employees,  totaled $14 million and allege
liability under the WARN Act for failure to notify employees properly in advance
of cessation of  operations  of Elsinore  Shore  Associates.  The third proof of
claim in the amount of  $800,000  was based  upon  retroactive  wage  agreements
executed by Elsinore Shore  Associates  promising to pay its employees  deferred
compensation if the employees remained with Elsinore Shore Associates during its
reorganization.  The proofs of claims were filed as priority claims, not general
unsecured claims.                                                               

         Based upon the Order For Verdict Upon  Liability  Issues  issued by the
presiding judge in New Jersey,  as well as the Bankruptcy Code, the Bondholders'
Committee in the bankruptcy proceeding filed an objection to the WARN Act proofs
of  claims.  The  Bankruptcy  Court  tentatively   approved  the  objection  and
disallowed  the  claims  pending  entry of the final  order  from the New Jersey
court.  No final  appealable  order has been entered as of yet by the Bankruptcy
Court.                                                                          

         On October 22, 1997,  the New Jersey court entered its Findings of Fact
and  Conclusions of Law and Judgment Upon Liability  Issues,  which affirmed its
prior holding  denying WARN Act  liability.  The  plaintiffs  have appealed that
decision to the Third Circuit Court of Appeals. The appeal is currently pending.

         A second objection was filed on behalf of the Bondholders' Committee to
the $800,000 proof of claim regarding the retroactive wage benefits. Because the
New  Jersey  court  had  found the  Company  to be  liable on these  obligations
together with Elsinore Shore Associates, the objection filed by the Bondholders'
Committee did not dispute the  allowability of the proof of claim to participate
with the other  unsecured  creditors in the  Company's  bankruptcy  proceedings.
However, the Bondholders'  Committee objected to the claim of priority status in
the Company's  proceedings.  The Bondholders' Committee objected to the claim in
its entirety in the Four Queens'  bankruptcy  proceeding.  The Bankruptcy  Court
granted the  objections and ruled that the proof of claim for  retroactive  wage
benefits would be an allowed  unsecured  claim against the Company to be treated
in Class 10 of the Plan with final  determination  of the  actual  amount of the
claim to be made by the New Jersey District Court.  The amount was  subsequently
determined by stipulation to be $675,000,  inclusive of interest. The plaintiffs
thereafter filed a motion for  reconsideration  regarding the Bankruptcy Court's
order,  which motion was ultimately  denied.  The final order was entered by the
court in July 1997,  and the  plaintiffs  have  appealed  the order to the Ninth
Circuit Bankruptcy Appellate Panel. The appeal is currently pending.            

         In summary,  the Company  believes  that any claims  listed  above,  if
allowed,  would be included  in the Class 10  Unsecured  Creditor's  pool of the
bankruptcy proceedings, which is capped at $1.4 million and, therefore, will not
have a material financial effect on the Company.                                

         The  Company  is a party  to  other  claims  and  lawsuits.  Management
believes  that such matters are either  covered by insurance or, if not insured,
will not have a material adverse effect on the financial  position or results of
operations of the Company.                                                      

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                    

         There were no matters  submitted  to a vote of the  Company's  security
holders during the fourth quarter of fiscal 1997.                               

PART II         

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. 

    There is no organized or established trading market for the Common
Stock.  The Common Stock's prices are reported on the NASDAQ "Bulletin Board."  

         As of the close of business on March 26, 1998, there were approximately
637 record owners of Common Stock.                                              

         The trading  market for the Common  Stock is  extremely  thin.  The MWV
Accounts own 94.3% of the outstanding Common Stock, which they acquired pursuant
to the Plan,  and they have not bought or sold any Common  Stock  since the Plan
became  effective.  The  Common  Stock  held  by  the  MWV  Accounts  is  deemed
beneficially owned by Elsinore's Chairman of the Board, and Elsinore's directors
and executive  officers as a group are deemed to own  beneficially  95.4% of the
outstanding Common Stock. The remaining 4.6% of the outstanding shares is widely
dispersed among numerous small shareholders.                                    

         On May 14, 1997, the last full day preceding Elsinore's filing with the
SEC of its Form 10-Q which  reported,  among  other  things,  that  Paulson  had
expressed an interest in acquiring all of the outstanding Common Stock, both the
high and low sale prices of the Common  Stock  reported on the NASDAQ  "Bulletin
Board" were $0.13 1/2 (13 1/2 cents).  On December 31,  1997,  both the high and
low sale prices of the Common Stock reported on the NASDAQ "Bulletin Board" were
$2.25. In view of the lack of an organized or established trading market for the
Common  Stock,  the extreme  thinness of whatever  trading  market  exists,  the
limited  number of shares that are not held by the MWV Accounts,  and the recent
notice from R&E stating that the Merger Agreement is void or, alternatively, R&E
and EAS  intend to  terminate  the Merger  Agreement  (see Item 1.  BUSINESS.  -
Agreement and Plan of Merger),  these  reported  prices may not be indicative of
the price at which any shareholder may be able to sell his or her shares.       

         Elsinore has not paid any dividends on the Common Stock in the past two
years and does not  currently  expect to pay any  dividends  in the  foreseeable
future.                                                                         

Item 6.   SELECTED FINANCIAL DATA.                                              

         Set forth below is selected consolidated historical financial data with
respect to the Company for the five years ended  December  31,  1997.  This data
should be read in conjunction  with the  consolidated  financial  statements and
notes thereto set forth elsewhere herein.                                       

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                                                                    December 31,                         
                       Reorganized      Predecessor     -----------------------------------------------  
                         Company          Company                                                        
                         March 1         January 1                                                       
                            to              to                                                           
                       December 31      February 28                                                      
                           1997            1997           1996         1995         1994         1993    
                           ----            ----           ----         ----         ----         ----    
                                       (Dollars in thousands except per share amounts)                   
Balance sheet data:                                                                                      
                                                                                                         
Total assets                 $49,823                       $42,627      $37,101      $67,315     $71,923 
Current portion                                                                                          
  of long-term debt            1,477                            50           54           59         204 
Long-term debt less                                                                                      
  current maturities          38,141                        62,912       62,858       60,330      54,368 

Shareholders' equity                                                                                     
  (deficit)                   $3,086                      $(40,710)    $(43,441)     $(1,664)     $4,567 
                              ======                     =========    =========     ========      ====== 

Operations data:                                                                                         
Revenues (net)               $43,992           $9,796      $61,199      $56,973      $62,706     $66,852 
                             =======           ======      =======      =======      =======     ======= 
(Loss) before                                                                                            
  extraordinary items         (1,914)            (190)      (1,556)     (45,749)     (10,716)     (2,252)
Extraordinary items:                                                                                     
  Gain (loss) on                                                                                         
   extinguishment of                                                                                     
   debt                            0           35,977            0            0          735        (285)
                            ---------          ------     --------     --------      -------     --------
Net loss                     $(1,914)          35,787      $(1,556)    $(45,749)     $(9,441)    $(2,537)
                             =======           ======     =========    =========     ========    ========

Basic per share                                                                                          
  amounts:                                                                                               
Loss before                                                                                              
  extraordinary items          $(.38)           $(.01)       $(.10)      $(2.95)       $(.84)      $(.19)
Extraordinary items                0             2.26            0            0          .06        (.02)
Net income (loss) per                                                                                    
  share                        $(.38)           $2.25        $(.10)      $(2.95)       $(.78)      $(.21)
                               ======           =====        ======      =======       ======      ======

Capital costs:                                                                                           
Depreciation and                                                                                         
  amortization                $1,774             $529       $3,816       $3,948       $3,990      $3,206 
Interest related to                                                                                      
  prior-period tax                                                                                       
  obligation                       0                0            0          590          885       4,256 
Interest expense               4,239              772        2,505        8,006        9,086       1,385 
Capital costs                 $6,013           $1,301       $6,321      $12,544      $13,961      $8,847 
                              ======           ======       ======      =======      =======      ====== 

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Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.                                                                  

This discussion and analysis should be read in conjunction with the consolidated
financial statements and notes thereto set forth elsewhere herein.              

LIQUIDITY AND CAPITAL RESOURCES                                                 

The  Company  had cash and cash  equivalents  (including  restricted  amounts of
$914,000)of  approximately  $6.8 million at December 31, 1997,  as compared with
$11.7 million at December 31, 1996 (including  restricted cash of $4.4 million),
a decrease of $4,831,000 from December 31, 1996. Significant debt service on the
Company's  restated 1993 13 1/2% Mortgage  Notes due 2001("New  Second  Mortgage
Notes")  and  other  debt  issued  pursuant  to the Plan is paid in  August  and
February and should be considered in evaluating  cash  increases or decreases in
the second and fourth quarters.  Pursuant to the  Subscription  Rights Agreement
provided for in the Plan, an additional  $5,000,000 in cash became  available to
the  Company  following  the close of business on  February  28,  1997.  Of that
amount,  $4.4  million  had been  received  prior to  December  31, 1996 and was
considered  restricted  cash until the Plan  Effective  Date,  and  $600,000 was
received in 1997.                                                               

For the  twelve  months of 1997,  the  Company's  net cash  (used) by  operating
activities  was  $(2,232,000)  compared  to  $4,852,000  provided  by  operating
activities in 1996 due  primarily to the payment of accrued  interest on the New
Second  Mortgage Notes which had accrued since August 12, 1996.  EBITDA for 1997
and 1996 was $5.6 million and $7 million, respectively. Management believes that
sufficient  cash flow will be available to cover the Company's  debt service for
the next 12 months and enable  investment in budgeted  capital  expenditures  of
approximately  $3.9 million for 1998,  including an  arrangement to finance slot
machine purchases of $2.6 million in 1998.                                      

Scheduled  interest  payments  on  the  New  Second  Mortgage  Notes  and  other
indebtedness  were $4.3 million in 1997 declining to $3.9 million in 2001.  Cash
flow from  operations  is not expected to be  sufficient  to pay 100% of the $30
million  principal  of the New Second  Mortgage  Notes at maturity on August 20,
2001.  Accordingly,  the ability of the Company to repay the New Second Mortgage
Notes at maturity will be dependent upon its ability to refinance the New Second
Mortgage  Notes.  There can be no  assurance  that the  Company  will be able to
refinance the principal amount of the New Second Mortgage Notes at maturity. The
New Second Mortgage Notes are redeemable at the option of the Company at 100% at
any time without premium.                                                       

The New Second Mortgage Note indenture provides for mandatory  redemption by the
Company upon the order of the Nevada  Gaming  Authorities.  The  indenture  also
provides  that, in certain  circumstances,  the Company must offer to repurchase
the New  Second  Mortgage  Notes upon the  occurrence  of a change of control or
certain other events at 101%.  The Company is also required to offer to purchase
all of its  restated  1994 11 1/2% First  Mortgage  Notes due 2000  ("New  First
Mortgage Notes"),  the principal amount of which is approximately  $3.9 million,
at 101% upon any  "Change of  Control,"  as defined in the  agreement  governing
those notes.  (See the "Proposed  Merger"  discussion in Note 5 to the Company's
consolidated  financial  statements  included  herein  and  Item 1.  BUSINESS  -
Agreement  and Plan of Merger.)  In the event of such  mandatory  redemption  or
repurchase  prior to maturity,  the Company would be unable to pay the principal
amount of the New Second Mortgage Notes without a refinancing.                  

Management considers it important to the competitive position of the Four Queens
Casino that  expenditures be made to upgrade the property.  Management  budgeted
approximately $7 million for capital expenditures in 1997 and $3.9 million in 
1998.  The Company  expects to finance  such capital  expenditures  from cash on
hand,  cash flow and slot lease  financing.  Uses of cash during  1997  included
capital  expenditures of $4.6 million.  Based upon current operating results and
cash on hand, the Company has sufficient operating capital to fund its operation
and capital expenditures for the next 12 months.                                

COMPUTERIZED OPERATIONS AND THE YEAR 2000                                       

During  recent  years,  there  has  been  significant  global  awareness  raised
regarding the potential  disruption to business  operations  worldwide resulting
from the inability of current technology to process properly the change from the
year 1999 to 2000. Although, based on a review of its data processing, operating
and other computer-based systems, the Company does not currently believe that it
will experience any significant  adverse  effects or material  unbudgeted  costs
resulting  therefrom,  the Company  cannot provide any assurance in this regard,
and any  such  costs  or  effect  could  materially  and  adversely  affect  the
operations of the Company.                                                      

FORWARD-LOOKING STATEMENTS                                                      

The Private  Securities  Litigation  Reform Act of 1995 provides a "safe harbor"
for certain forward-looking statements. Certain matters discussed in this filing
could be characterized as forward-looking statements such as statements relating
to business strategies,  plans for future development and upgrading,  as well as
other capital spending, financing and refinancing sources, existing and expected
competition and effects of regulation.  Such forward-looking  statements involve
important  known and unknown  risks and  uncertainties  that could cause  actual
results and liquidity to differ  materially  from those expressed or anticipated
in any forward-looking statements. Such risks and uncertainties include, but are
not limited  to,  those  related to effects of  competition,  leverage  and debt
service,   financing  and  refinancing   needs  or  efforts,   general  economic
conditions, changes in gaming laws or regulations (including the legalization of
gaming in various  jurisdictions),  risks related to  development  and upgrading
activities,   uncertainty  of  casino  customer   spending  and  vacationing  in
hotel/casinos in Las Vegas, occupancy rates and average room rates in Las Vegas,
and the  popularity  of Las Vegas as a  convention  and trade show  destination.
Readers should not place undue  reliance on  forward-looking  statements,  which
reflect  management's  view  only as of the  date of this  filing.  The  Company
undertakes no obligation to revise publicly these forward-looking  statements to
reflect subsequent events or circumstances.                                     

RESULTS OF OPERATIONS                                                           

1997 COMPARED TO 1996                                                           

REVENUES                                                                        

Net revenues  decreased by approximately  $7,411,000 or 12.1%,  from $61,199,000
for 1996 to $53,788,000 for 1997.                                               

Casino  revenues   decreased  by  approximately   $5,794,000,   or  13.7%,  from
$42,300,000  during the 1996  period to  $36,506,000  during the 1997 period due
primarily to a $2,520,000,  or 24.8%  decrease in net table games revenues and a
$2,789,000,  or 9.2% decrease in net slot  revenue.  Management  has  eliminated
certain  complimentary  programs  which  generated  significant  volume in 1996.
During 1997,  table games drop  decreased  $26,631,000  or 34%, and slot coin-in
decreased  $106,422,000,  or  18.9%.  The  decrease  in table  game  volume  was
partially offset by a 1% increase in win percent.                               

Hotel revenues decreased by approximately $1,497,000, or 13.4%, from $11,202,000
during the 1996 period to  $9,705,000  during the 1997 period due primarily to a
decrease  in  complimentary  room  revenues  of  $1,094,000  resulting  from the
elimination  of certain  table games  marketing  programs.  The  majority of the
complimentary  rooms were  replaced  with cash  paying  customers  at lower room
rates.                                                                          

Food and beverage revenues decreased  approximately  $2,687,000,  or 21.7%, from
$12,373,000 during the 1996 period to $9,686,000 during the 1997 period due to a
decrease in complimentary  revenues of $1,614,000 resulting from the elimination
of the table games marketing  programs and the closure of two unprofitable  food
outlets which were replaced by profitable leased fast-food franchises.          

Other revenues  increased by approximately  $613,000,  or 40.8%, from $1,502,000
during the 1996 period to  $2,115,000  during the 1997 period,  due primarily to
payments totaling $711,000 received under the settlement  agreement reached with
the Twenty-Nine Palms Band of Mission Indians.                                  

Promotional  allowances  decreased by approximately  $1,954,000,  or 31.6%, from
$6,178,000  during the 1996 period to $4,224,000 during the 1997 period due to a
decrease  in  complimentary   rooms,  food  and  beverage   resulting  from  the
elimination of the table games marketing programs.                              

DIRECT COSTS AND EXPENSES OF OPERATING DEPARTMENTS                              

Total direct costs and expenses of operating  departments  (including  taxes and
licenses) decreased by approximately  $5,956,000, or 11.0%, from $54,242,000 for
1996 to $48,286,000 for 1997.                                                   

Casino expense decreased by approximately $3,395,000, or 19.2%, from $17,694,000
during the 1996 period to  $14,299,000  during the 1997 period due to a decrease
in payroll  and  complimentary  expenses.  Casino  expenses as a  percentage  of
revenues  decreased from 41.8% to 39.2% due to  management's  redirection of the
Company's marketing efforts from table games to slots.                          

Hotel expense increased by approximately $169,000, or 2%, from $8,482,000 during
the 1996 period to $8,651,000 during the 1997 period,  and costs as a percentage
of revenues increased from 75.7% to 89.1%, due to the reduction in cost of comps
transferred to the Casino department.                                           

Food and beverage costs and expenses  decreased by  approximately  $911,000,  or
12.9%,  from  $7,088,000  during the 1996 period to  $6,177,000  during the 1997
period resulting from a corresponding decrease in revenues.                     

OTHER OPERATING EXPENSES                                                        

Selling,   general  and  administrative   expenses  decreased  by  approximately
$830,000,  or 8%, from $10,331,000 for 1996 to $9,501,000 for 1997 primarily due
to reduced energy, maintenance and complimentary costs. As a percentage of total
net revenues,  selling, general and administrative expenses increased from 16.9%
during the 1996  period to 17.7%  during the 1997  period due to lower  revenues
over which fixed costs are incurred.                                            

EBITDA AND MORTGAGE NOTE COVENANTS                                              

EBITDA decreased by approximately  $1,455,000,  or 20.9%, from $6,957,000 during
1996 to $5,502,000 during 1997 due to lower revenues, as discussed above.       

Pursuant to covenants  applicable to the New First Mortgage Notes and New Second
Mortgage Notes, the Company is required to maintain a minimum consolidated fixed
charges  coverage  ratio (the "Ratio") of 1.25 to 1.00.  The Ratio is defined as
the ratio of aggregate  consolidated EBITDA to the aggregate  consolidated fixed
charges for the 12-month  reference  period.  For the reference  periods  ending
December  31, 1997 and March 31,  1998,  the Company  obtained  waivers of those
covenants from the holders of the First Mortgage Notes and Second Mortgage Notes
due to the Ratio being  lower than  required as of the  reference  period  ended
December 31, 1997 and the expectation  that it will be lower than required as of
the reference  period ended March 31, 1998. As of year-end  1997,  the Ratio was
1.12 to 1.00. The waivers further  provided that the  noteholders  will not take
action  prior to January  2, 1999 in respect of a Ratio  lower than 1.25 to 1.00
for the reference periods ending June 30 and September 30, 1998.                

OTHER EXPENSES                                                                  

Depreciation and amortization decreased by approximately  $1,513,000,  or 39.6%,
from $3,816,000  during the 1996 period to $2,303,000 during the 1997 period due
to revaluation of property and equipment as a result of fresh start accounting. 

Interest expense increased by approximately $2,506,000, or 100%, from $2,505,000
during 1996 to  $5,011,000  for 1997,  due to the  restatement  of the Company's
mortgage notes as a result of the Plan.  These notes began accruing  interest as
of August 12, 1996, the Confirmation Date.                                      

Reorganization  items  totaling  $2,192,000  were incurred by the Company during
1996. These consisted primarily of professional fees incurred as a result of the
reorganization  under Chapter 11 of the Bankruptcy Code.  During 1997, there was
$292,000 incurred for additional reorganization items.                          

NET INCOME (LOSS)                                                               

As a result of the factors  discussed above, net loss increased by approximately
$358,000,  from a loss of $1,556,000  during 1996 to a loss of $1,914,000 during
1997.                                                                           

1996 COMPARED TO 1995                                                           

REVENUES                                                                        

Total revenues,  net of promotional  allowances,  increased  $4,226,000  (7.4%).
Casino revenues,  increased $2,336,000 (5.8%), as compared to 1995.  Promotional
allowances,  which are subtracted from gross revenues, decreased $496,000 (7.4%)
in 1996 compared to 1995. Overall, management believes that the increase in 1996
revenues over 1995 was at least partially  attributable to increased visitors to
downtown  because of (1) the Fremont  Street  Experience  attraction and (2) the
related  improvement of vehicular  traffic flow to downtown Las Vegas  following
completion of its construction in November, 1995.                               

The  increase  in casino  revenues  in 1996,  as  compared  to 1995,  included a
$2,971,000  (10.9%)  increase in slot revenues and a $635,000 (5.0%) decrease in
table games  revenues.  The increase in slot  revenues was in both the volume of
play and win percentage. The decrease in table games revenues resulted primarily
from a decrease in the volume of play.                                          

Hotel revenues  increased  $1,638,000  (17.1%)during  1996 due to an increase in
average room rate and slightly higher room occupancy. Food and Beverage revenues
increased  $237,000  (2.0%)  where an increase in beverage  revenues  reflecting
increased  customer traffic was partially offset by decreased food complimentary
sales during the year.                                                          

Interest and other income decreased  $481,000  primarily because of decreases in
interest income accrued on Native  American loans,  which were fully reserved at
December 31, 1995.  However,  in 1996,  the Company  received its first  payment
under the  settlement  agreement  reached  with the  Twenty-nine  Palms  Band of
Mission  Indians  - For  additional  information  see  ANative  American  Gaming
Projects@, elsewhere herein.                                                    

DIRECT COSTS AND EXPENSES OF OPERATING DEPARTMENTS                              

Total costs and expenses, excluding interest,  depreciation and amortization and
provisions for losses on loans  receivable from Native American  Tribes,  casino
development costs and reorganization  items decreased  $1,337,000 (2.4%) in 1996
as compared to 1995.                                                            

Casino  costs and  expenses  decreased  $2,011,000  (10.2%)  primarily  due to a
decrease in costs allocated to the casino for promotional  allowances (which was
lower, as a result of a reduction in the ratio of  complimentary  sales to total
sales of rooms, food and beverages) and to a lesser extent by cost containment. 

Correspondingly,  hotel  expenses  increased  $585,000  (7.4%)  because of lower
promotional  costs  allocation  to the casino and  because  of  slightly  higher
payroll costs. Food and beverage expenses increased $1,078,000 (17.9%) over 1995
almost  entirely  because of a lesser  allocation  of  promotional  costs to the
casino.                                                                         

OTHER EXPENSES                                                                  

Taxes and licenses were comparable with 1995 consisting of increased payroll and
slot taxes which were mostly  offset by lower  table games and  property  taxes.
Selling,  general and administrative  expenses decreased  $1,057,000 (9.3%) from
1995 primarily as a result of reduced payroll costs of corporate  administrative
and development staff. Rent expenses were comparable with 1995.                 

Depreciation  and  amortization  decreased  $132,000  (3.3%)  in 1996  primarily
because the remaining unamortized balance of debt issue costs related to the old
1993 First  Mortgage  Notes was charged to  reorganization  items at October 31,
1995  (See  notes 1 and 8 of Notes to  Consolidated  Financial  Statements)  and
slightly lower  depreciation of property and equipment,  which was mostly offset
by the  start-up  (January  1,  1996) of  amortization  (over 60  months) of the
$3,000,000 investment in the Fremont Street Experience.                         

Interest  expense  for 1996  decreased  $5,501,000  from 1995 as  reorganization
proceedings  continued.  Interest expense of  approximately  $1,575,000 has been
accrued from the August 12, 1996 Confirmation Date on the face amount of the New
Second  Mortgage  Notes ($30  million at 13.5% per annum) which are to be issued
when the Plan becomes effective. In addition, interest of approximately $170,000
has been  accrued from the  Confirmation  Date on the New First  Mortgage  Notes
(approximately  $3.8 million  face) which are to be issued when the Plan becomes
effective.  Because of the Chapter 11 proceedings,  there has been no accrual of
interest on the old  $57,000,000  12.5% First  Mortgage  Notes since October 31,
1995. If accrued to the Confirmation Date, the interest expense on the old 12.5%
notes  would have been  approximately  $4,394,000  in 1996.  (In  addition,  the
remaining  unaccreted  discount  balance related to the old 12.5% First Mortgage
Notes was  charged to expense as a  reorganization  item at October  31,  1995).
There also has been no accrual of interest on the $1,425,000,  7.5%  Convertible
Subordinated  Notes since October 31, 1995. If accrued to the Confirmation Date,
the interest expense on the 7.5% notes would have been approximately  $67,000 in
1996.  In addition,  there has been no accrual of interest on the  $2,950,000 of
prior period tax  obligations  since October 31, 1995. If accrued,  the interest
expense to the Confirmation Date on prior period tax obligations would have been
approximately $185,000 for 1996.                                                

Reorganization expense is comprised of items incurred by the Company as a result
of  reorganization  under Chapter 11 of the Bankruptcy Code. At the Confirmation
Date, the Company expensed  approximately $761,000 of executive severance costs,
of which approximately  $318,000 was immediately due, with the remainder payable
in monthly installments which continue into 1997. Other administrative  expenses
of $1,431,000 were included in reorganization expenses during 1996.             

Item 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.                          

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS        

AND FINANCIAL STATEMENT SCHEDULES             

For the years ended December 31, 1997, 1998 and 1995              

                                                                Page

Independent Auditor's Report                                                    

Consolidated Balance Sheets as of December 31, 1997                             
(Reorganized Company) and December 31, 1996                                     
(Predecessor Company)                                                           

Consolidated Statements of Operations for the Ten Months Ended                  
December  31, 1997  (Reorganized  Company),  Two Months  Ended                  
February  28, 1997 and Years Ended  December 31, 1996 and 1995                  
(Predecessor  Company);  Combined  Reorganized and Predecessor                  
Company for the Year Ended December 31, 1997                                    

Consolidated  Statements of Shareholders'  Equity (Deficiency)                  
for the Years Ended December 31, 1997, 1996 and 1995                            

Consolidated Statements of Cash Flows for the Ten Months Ended                  
December  31, 1997  (Reorganized  Company),  Two Months  Ended                  
February  28, 1997 and Years Ended  December 31, 1996 and 1995                  
(Predecessor  Company);  Combined  Reorganized and Predecessor                  
Company for the Year Ended December 31, 1997                                    

Notes to Consolidated Financial Statements                                      

         All Financial Statement Schedules  are omitted  because they are either
not required or not applicable,  or the required information is presented in the
Notes to Consolidated Financial Statements.                                     

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INDEPENDENT AUDITOR'S REPORT

The Board of Directors and Shareholders                                         
Elsinore Corporation:                                                           

We have audited the  consolidated  balance  sheets of Elsinore  Corporation  and
subsidiaries as of December 31, 1997 and the related consolidated  statements of
operations,  shareholders'  equity and cash  flows for the period  from March 1,
1997 (effective date) through December 31, 1997 and of Elsinore  Corporation and
subsidiaries,  Debtor-In-Possession  as of  December  31,  1996 and the  related
consolidated  statements of operations,  shareholders'  equity  (deficiency) and
cash flows for the period from January 1, 1997 through February 28, 1997 and for
each of the  years  in the  two-year  period  ended  December  31,  1996.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.                                       

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit 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, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of Elsinore Corporation
and subsidiaries as of December 31, 1997 and the results of their operations and
cash flows for the period from March 1, 1997 (effective  date) through  December
31, 1997 and of Elsinore Corporation and subsidiaries,  Debtor-In-Possession  as
of December 31, 1996,  and the results of their  operations and their cash flows
for the period from  January 1, 1997  through  February 28, 1997 and for each of
the years in the two-year  period ended  December 31, 1996, in  conformity  with
generally accepted accounting principles.                                       

                              /s/  KPMG Pear Marwick LLP

Las Vegas, Nevada                                                               
February 13, 1998                                                               

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                                       Elsinore Corporation and Subsidiaries                                 
                                            Consolidated Balance Sheets                                      
                                            December 31, 1997 and 1996                                       
                                              (Dollars in thousands)                                         

                                                                       Reorganized           Predecessor     
                                                                         Company               Company       
                                                                    December 31, 1997       December 31,     
                                                                                                1996         
                                                                   --------------------  --------------------

                             Assets                                                                          
Current Assets:                                                                                              
                                                                                                             
  Cash and cash equivalents                                                      5,908                 7,208 
  Accounts receivable, less allowance for                                                                    
    doubtful accounts of $165 and $347,                                                                      
    respectively                                                                   623                   815 
Inventories                                                                        382                   354 
Prepaid expenses                                                                 1,846                 1,177 
                                                                   --------------------  --------------------
     Total current assets                                                        8,759                 9,554 

Restricted cash                                                                    914                 4,445 
Property and equipment, net                                                     39,042                25,485 
Investment in Fremont Street Experience LLC                                          -                 2,400 

Reorganization value in excess of amounts                                                                    
    allocable to indentifiable assets, net                                         367                     - 

Other assets                                                                       741                   743 
                                                                   --------------------  --------------------

    Total assets                                                                49,823                42,627 
                                                                   ====================  ====================

See accompanying notes to consolidated financial statements.                    

                                   F-2

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                                       Elsinore Corporation and Subsidiaries                                     
                                      Consolidated Balance Sheets (continued)                                    
                                            December 31, 1997 and 1996                                           
                                              (Dollars in thousands)                                             

                                                                           Reorganized           Predecessor     
                                                                             Company               Company       
                                                                        December 31, 1997       December 31,     
                                                                                                    1996         
                                                                       --------------------  --------------------

Liabilities and shareholders' equity (deficiency)                                                                
Current liabilities:                                                                                             
                                                                                                                 
  Accounts payable                                                                   1,174                 1,065 
  Accrued interest                                                                   1,492                 2,137 
  Accrued expenses                                                                   4,453                 6,176 
  Current maturities of long-term debt                                               1,477                    50 
                                                                       --------------------  --------------------
     Total current liabilities                                                       8,596                 9,428 

Estimated liabilities subject to Chapter 11                                                                      
  proceedings                                                                            -                73,909 
Long-term debt, less current maturities                                             38,141                     - 
                                                                       --------------------  --------------------
     Total liabilities                                                              46,737                83,337 
                                                                       --------------------  --------------------

Commitments and contingencies                                                                                    

Shareholders' equity (deficit):                                                                                  
  Predecessor company,                                                                                           
  Common stock, $.001 par value per share.                                                                       
     Authorized 100,000,000 shares.  Issued                                                                      
     and outstanding 15,891,793 shares                                                   -                    16 

  Reorganized company, Common stock, $.001 par value per share.                                                  
     Authorized 100,000,000 shares.  Issued                                                                      
     and outstanding 4,929,313 shares                                                    5                     - 
Additional paid-in capital                                                           4,995                69,602 
Accumulated deficit                                                                 (1,914)             (110,328)
                                                                       --------------------  --------------------
     Total shareholders' equity (deficiency)                                         3,086               (40,710)
                                                                       --------------------  --------------------

     Total liabilities and shareholders'                                                                         
       equity (deficiency)                                                          49,823                42,627 
                                                                       ====================  ====================

See accompanying notes to consolidated financial statements.                    

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                                       Elsinore Corporation and Subsidiaries                                                    
                                       Consolidated Statements of Operations                                                    
                                 (Dollars in thousands, except per share amounts)                                               
                                                                                                                  Combined      
                                                                                                                 Reorganized    
                                                                                                                     and        
                           Reorganized                                                                           Predecessor    
                             Company                            Predecessor     Company                            Company      
                        ------------------    --------------------------------------------------------------  ------------------
                           Period from           Period from                                                       Twelve       
                             March 1              January 1               Year                  Year               Months       
                                to                   to                   Ended                 Ended               Ended       
                        December 31, 1997       February 28,          December 31,          December 31,        December 31,    
                                                    1997                  1996                  1995                1997        
                        ------------------    ------------------    ------------------    ------------------  ------------------
Revenues, net:                                                                                                                  
                                                                                                                                
 Casino                            29,584                 6,922                42,300                39,964              36,506 
 Hotel                              7,969                 1,736                11,202                 9,564               9,705 
 Food and beverage                  7,941                 1,745                12,373                12,136               9,686 
 Other                              1,962                   153                 1,502                 1,983               2,115 
 Promotional                                                                                                                    
   allowances                      (3,464)                 (760)               (6,178)               (6,674)             (4,224)
                        ------------------    ------------------    ------------------    ------------------  ------------------
   Total revenues,                                                                                                              
     net                           43,992                 9,796                61,199                56,973              53,788 
Costs and expenses:                                                                                                             
 Casino                            11,589                 2,710                17,694                19,705              14,299 
 Hotel                              7,241                 1,410                 8,482                 7,897               8,651 
 Food and beverage                  5,072                 1,105                 7,088                 6,010               6,177 
 Taxes and licenses                 4,497                   980                 6,592                 6,627               5,477 
 Selling, general and                                                                                                           
   administrative                   7,694                 1,807                10,331                11,385               9,501 
 Rents                              3,508                   673                 4,055                 3,955               4,181 
 Provision for losses                                                                                                           
  on loans receivable                                                                                                           
  from Native American                                                                                                          
  Tribes                                                                                             23,598                     
Casino development                                                                                                              
  costs                                                                                               2,323                     
Depreciation and                                                                                                                
   amortization                     1,774                   529                 3,816                 3,948               2,303 
Interest                            4,239                   772                 2,505                 8,006               5,011 
Interest, prior                                                                                                                 
  period income tax                                                                                                             
  obligation                            -                     -                     -                   590                   - 
                        ------------------    ------------------    ------------------    ------------------  ------------------
   Total costs and                                                                                                              
     expenses                      45,614                 9,986                60,563                94,044              55,600 
                        ------------------    ------------------    ------------------    ------------------  ------------------
 Income (loss) before                                                                                                           
   reorganization                                                                                                               
   items and                                                                                                                    
   extraordinary                                                                                                                
   gain on                                                                                                                      
   elimination of                                                                                                               
   debt                            (1,622)                 (190)                  636               (37,071)             (1,812)
                                                                                                                         =======

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                                     Elsinore Corporation and Subsidiaries                                  
                               Consolidated Statements of Operations(continued)                             
                               (Dollars in thousands, except per share amounts)                             

                         Reorganized                                                                        
                           Company                             Predecessor     Company                      
                      ------------------    ------------------------------------------------------------    
                         Period from           Period from                                                  
                           March 1              January 1               Year                   Year         
                              to                   to                   Ended                  Ended        
                      December 31, 1997       February 28,          December 31,           December 31,     
                                                  1997                  1996                   1995         
                      ------------------    ------------------    ------------------    --------------------

                                                                                                            
Reorganization items                292                     -                 2,192                   8,678 
Extraordinary gain                                                                                          
  on elimination of                                                                                         
  debt                                -                35,977                 -                           - 
                      ------------------    ------------------    ------------------    --------------------
  Net income (loss)              (1,914)               35,787                (1,556)                (45,749)
                      ==================    ==================    ==================    ====================

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Basic and diluted                                                                                           
  income (loss) per                                                                                         
  share:                                                                                                    
  Income                                                                                                    
    (loss) before                                                                                           
    extraordinary                                                                                           
    gain on                                                                                                 
    elimination                                                                                             
    of debt                       ($.39)               ($0.01)               ($0.10)                 ($2.95)

  Extraordinary                                                                                             
    gain on                                                                                                 
    elimination of                                                                                          
    debt                              -                 $2.26                     -                       - 
                      ------------------    ------------------    ------------------    --------------------
  Net income (loss)               ($.39)                $2.25                ($0.10)                 ($2.95)
                      ==================    ==================    ==================    =================== 

Weighted average                                                                                            
  number of common                                                                                          
  shares                                                                                                    
  outstanding                 4,929,313            15,891,793            15,891,793              15,511,983 
                      ==================    ==================    ==================    =================== 


See accompanying notes to consolidated financial statements.                    

                                   F-5

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                                       Elsinore Corporation and Subsidiaries                       
                               Consolidated Statements of Shareholders' Equity (Deficiency)        
                                       Years Ended December 31, 1997, 1996 and 1995                
                                                  (Dollars in thousands)                           

Additional                                                                                         
                               Common        Common    Paid-in     Accumulated     Treasury        
                               Shares        Stock     Capital     Deficiency       Stock     Total

                                                                                                   
Balance, December 31, 1994   13,135,214      $13      $61,346       $(63,023)       $-   $(1,664)  

  Issuance of shares          2,500,000        3        3,744              -         -     3,747   

  Issuance of shares upon                                                                          
  partial conversion of                                                                            
  7.5% convertible notes        256,579        -          225              -         -       225   

  Net loss                          -          -          -          (45,749)        -   (45,749)  
                             --------------------------------------------------------------------  
 Balance, December 31, 1995  15,891,793       16       65,315       (108,772)        -   (43,441)  

  Issuance of common stock                                                                         
  subscription rights               -          -        4,287              -         -     4,287   

  Net loss                          -          -          -           (1,556)        -    (1,556)  
                             --------------------------------------------------------------------  
Balance, December 31, 1996   15,891,793       16       69,602       (110,328)        -   (40,710)  

  Proceeds from issuance of                                                                        
  common stock subscription                                                                        
  rights                            -          -          713              -         -       713   

  Net income predecessor company                                                                   
  Jan. 1, 1997-Feb. 28, 1997        -          -           -          35,787         -    35,787   

  Fresh Start Adjustments   (10,962,480)     (11)     (65,320)        74,541         -     9,210   

  Net loss of reorganized company                                                                  
  Mar. 1, 1997-Dec. 31, 1997        -          -           -          (1,914)        -    (1,914)  
                              -------------------------------------------------------------------  

Balance December 31, 1997     4,929,313        5        4,995         (1,914)        -     3,086   
                              ==================================================================   

See accompanying notes to consolidated financial statements.          

                                   F-6

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                                       Elsinore Corporation and Subsidiaries                                                     
                                       Consolidated Statements of Cash Flows                                                     
                                              (Dollars in thousands)                                                             

                                                                                                                  Combined       
                                                                                                               Reorganized and   
                                  Reorganized                                                                    Predecessor     
                                    Company                        Predecessor       Company                      Company        
                              -------------------  ---------------------------------------------------------  -------------------
                                  Period from         Period from            Year               Year               Twelve        
                                  March 1 to         January 1 to           Ended               Ended           Months Ended     
                               December 31, 1997     February 28,     December 31, 1996     December 31,        December 31,     
                                                         1997                                   1995                1997         
                              -------------------  ---------------  -------------------  -------------------  -------------------
Cash flows from operating activities:                                                                                            
                                                                                                                                 
 Net income (loss)                        ($1,914)       $35,787            ($1,556)           ($45,749)            $33,873      
 Adjustments to reconcile                                                                                                        
   net income (loss) to net                                                                                                      
   cash provided by (used                                                                                                        
   in) operating activities:                                                                                                     
 Extraordinary gain on                                                                                                           
   elimination of debt                          -        (35,977)                 -                   -             (35,977)     
 Depreciation                                                                                                                    
   and amortization                         1,774            529              3,816               3,948               2,303      
 Loss on sale of equipment                      3              -                  -                   -                   3      
 Accretion of discount on                                                                                                        
   long-term debt                               -              -                 98               1,170                   -      
 Write-off loans                                                                                                                 
   receivable, FSE operating                                                                                                     
   costs and casino                                                                                                              
   development costs                            -              -                  -              26,446                   -      
 Reorganizational items                         -              -              2,192               8,678                   -      
(Increase) decrease in                                                                                                           
   accounts receivable                        (77)           269                (85)                 13                 192      
(Increase) decrease in                                                                                                           
   inventories                                (34)             6               (106)                148                 (28)     
(Increase) decrease in                                                                                                           
   prepaid expenses                          (558)          (111)              (149)                630                (669)     
(Increase) decrease in                                                                                                           
   restricted cash                           (561)         4,092             (4,445)              3,685               3,531      
(Increase) decrease in                                                                                                           
   other assets                                 -              2                 80              (2,665)                  2      
Increase (decrease) in                                                                                                           
   accounts payable                            72           (178)              (116)              2,658                (106)     
Increase (decrease) in                                                                                                           
   accrued expenses                        (2,314)           591             (1,368)             (2,073)             (1,723)     
Increase (decrease) in                                                                                                           
   accrued interest                          (868)           749              2,037               2,455                (119)     
                              ------------------------------------------------------------------------------------------------   
 Net cash provided by (used                                                                                                      
   in) operating activities                (4,477)         5,759                398                (656)              1,282      
                              ------------------------------------------------------------------------------------------------   

                                   F-7

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                                       Elsinore Corporation and Subsidiaries                                                      
                                 Consolidated Statements of Cash Flows (continued)                                                
                                              (Dollars in thousands)                                                              

                                                                                                                    Combined      
                                                                                                                Reorganized and   
                                   Reorganized                                                                    Predecessor     
                                     Company                          Predecessor       Company                     Company       
                               -------------------  -------------------------------------------------------  ---------------------
                                   Period from         Period from                                                  Twelve        
                                     March 1            January 1             Year               Year                Months       
                                        to                 to                 Ended              Ended               Ended        
                                   December 31,        February 28,        December 31,       December 31,        December 31,    
                                      1997                1997                1996                1995                1997        
                               -------------------  ---------------  --------------------  ----------------  ---------------------
Cash flows from investing activities:                                                                                             
 Notes and loans receivable,                                                                                                      
   casino development costs                                                                                                       
   and investment in                                                                                                              
                                                                                                                                  
   FSE, LLC                                      -              -                  -              (8,244)                  -      
 Capital expenditures                       (2,688)          (141)            (1,001)               (148)             (2,829)     
 Proceeds from sale of                                                                                                            
   equipment                                    95              -                  -                   -                  95      
                               ---------------------------------------------------------------------------------------------------
 Net cash used in investing                                                                                                       
   activities                               (2,593)          (141)            (1,001)             (8,392)             (2,734)     
                               ---------------------------------------------------------------------------------------------------

Cash flows from financing activities:                                                                                             
 Principal payments on                                                                                                            
   long-term debt                             (549)           (12)               (48)                (62)               (561)     
 Proceeds from issuance                                                                                                           
   of long-term debt                             -              -                  -               1,983                   -      
 Proceeds from issuance of                                                                                                        
   Common stock, net                             -              -                  -               3,747                   -      
 Proceeds from issuance of                                                                                                        
   common stock and                                                                                                               
   subscription rights                           -            713              4,287                   -                 713      
 Debt issuance costs                             -              -                  -                (140)                  -      
                               ---------------------------------------------------------------------------------------------------
Net cash provided by (used                                                                                                        
   in) financing activities                   (549)           701              4,239               5,528                 152      
                               ---------------------------------------------------------------------------------------------------

                                   F-8

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                                      Elsinore Corporation and Subsidiaries                                                      
                                Consolidated Statements of Cash Flows (continued)                                                
                                             (Dollars in thousands)                                                              

                                                                                                                  Combined       
                                                                                                               Reorganized and   
                                  Reorganized                                                                    Predecessor     
                                    Company                        Predecessor      Company                        Company       
                              ------------------  ---------------------------------------------------------  --------------------
                                  Period from         Period from                                                  Twelve        
                                    March 1            January 1             Year               Year                Months       
                                       to                  to               Ended               Ended               Ended        
                                  December 31,        February 28,        December 31,       December 31,         December 31,   
                                     1997                 1997               1996                1995                 1997       
                              ------------------  -------------------  ----------------  ------------------  ------------------- 

Net increase (decrease) in                                                                                                       
                                                                                                                                 
 cash and cash equivalents              (7,619)          6,319              3,636              (3,520)             (1,300)       

Cash and cash equivalents at                                                                                                     
 beginning of period                    13,527           7,208              3,572               7,092               7,208        
                                        ------           -----              -----               -----               -----        

Cash and cash equivalents at                                                                                                     
 end of period                          $5,908         $13,527             $7,208              $3,572              $5,908        
                                        ======         =======             ======              ======              ======        

                                   F-9

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                                       Elsinore Corporation and Subsidiaries                                                      
                                 Consolidated Statements of Cash Flows (continued)                                                
                                              (Dollars in thousands)                                                              

                                                                                                                   Combined       
                                                                                                                Reorganized and   
                                   Reorganized                                                                    Predecessor     
                                     Company                        Predecessor      Company                        Company       
                               -----------------  -----------------------------------------------------------  -------------------
                                   Period from         Period from                                                  Twelve        
                                     March 1            January 1             Year               Year                Months       
                                        to                 to                Ended               Ended               Ended        
                                   December 31,        February 28,       December 31,        December 31,         December 31,   
                                       1997                1997              1996                 1995               1997         
                               -----------------  ------------------  ------------------  -------------------  -------------------
Supplemental  disclosure of                                                                                                       
non-cash investing and financing                                                                                                  
activities:                                                                                                                       

Fresh start adjustments                                                                                                           
which result in increase (decrease)                                                                                               
to the following:                                                                                                                 
                                                                                                                                  
  Property and                                                                                                                    
    equipment,net                           -             (13,130)                 -                   -             (13,130)     
  Leasehold acquisitions                                                                                                          
    costs, net                              -               1,907                  -                   -               1,907      
  Reorganization value                                                                                                            
    in excess of amounts                                                                                                          
    allocable                                                                                                                     
    to identifiable                                                                                                               
    assets                                  -                (387)                 -                   -                (387)     
  Investment in Fremont                                                                                                           
    Street Experience LLC                   -               2,400                  -                   -               2,400      
  Accounts payable                          -                 344                  -                   -                 344      
  Accrued interest                          -                (525)                 -                   -                (525)     
  Estimated liabilities                                                                                                           
    subject to Chapter 11                                                                                                         
    proceedings                             -             (72,552)                 -                   -             (72,552)     
  Long-term debt, less                                                                                                            
    current maturities                      -              36,756                  -                   -              36,756      
  Common stock, predecessor                                                                                                       
    company                                 -                 (16)                 -                   -                 (16)     
  Common stock, reorganized                                                                                                       
    company                                 -                   5                  -                   -                   5      
  Additional paid                                                                                                                 
    in capital                              -             (65,320)                 -                   -             (65,320)     
  Accumulated deficit                       -             110,518                  -                   -             110,518      

                                  F-10

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                                       Elsinore Corporation and Subsidiaries                                                        
                                 Consolidated Statements of Cash Flows (continued)                                                  
                                              (Dollars in thousands)                                                                

                                                                                                                     Combined       
                                                                                                                  Reorganized and   
                                   Reorganized                                                                      Predecessor     
                                     Company                        Predecessor      Company                          Company       
                               ------------------  ---------------------------------------------------------------  -------------   

                                   Period from        Period from                                                          Twelve   
                                     March 1           January 1                    Year                Year               Months   
                                        to               to                         Ended               Ended              Ended    
                                   December 31,       February 28,               December 31,        December 31,       December 31,
                                       1997             1997                         1996                1995              1997     
                               ------------------  --------------------  ----------------------  -----------------  -------------   
Cash paid during the year for:                                                                                                      
                                                                                                                                    
  Interest                           5,129                  -                        367               3,998               5,129    
  Income taxes                           -                  -                          -               3,475                   -    
  Equipment purchased with                                                                                                          
    capital leases                   1,889                  -                          -                   -               1,889    
  Conversion of convertible                                                                                                         
    notes to common stock                -                  -                          -                 225                   -    

See accompanying notes to consolidated financial statements.  

                                  F-11

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Elsinore Corporation and Subsidiaries 

  Notes to Consolidated Financial Statements

On October 31, 1995, Elsinore Corporation,  D. I. P. (the "Predecessor Company")
filed a  voluntary  petition  to  reorganize  under  Chapter  11 of the  Federal
Bankruptcy  Code. On August 12, 1996,  the Plan of  Reorganization  filed by the
Predecessor  Company (the "Plan") was confirmed and became  effective  following
the close of business on February  28,  1997 (the  "Effective  Date").  Upon the
effectiveness of the Plan,  Elsinore  Corporation (the "Reorganized  Company" or
the  "Company")  adopted fresh start  reporting in accordance  with Statement of
Position  90-7,  "Financial  Reporting by Entities in  Reorganization  under the
Bankruptcy  Code" ("SOP  90-7") of the American  Institute  of Certified  Public
Accountants.  Accordingly,  the Company's  post-reorganization balance sheet and
statement of operations  have not been prepared on a consistent  basis with such
pre-reorganization  financial statements. For accounting purposes, the inception
date of the Reorganized  Company is deemed to be March 1, 1997. A vertical black
line is shown in the financial  statements to separate the  Reorganized  Company
from the  Predecessor  Company since they have not been prepared on a consistent
basis of accounting.                                                            

1.       Chapter 11 Reorganization                                              

On August 12, 1996 (the "Confirmation Date"), the United States Bankruptcy Court
for the District of Nevada (the "Bankruptcy Court") confirmed the Plan. The Plan
became effective on the Effective Date.                                         

Pursuant to the Plan, the following occurred upon the Effective Date:           

The old common stock interests in the Predecessor  Company were canceled and the
Reorganized Company issued 4,929,313 shares of new common stock (the "New Common
Stock").  The New  Common  Stock was  distributed  to the  following  classes of
creditors and equity holders:                                                   

                                                                [Download Table]

                                                    
12.5% First Mortgage noteholders           3,750,000
7.5% Convertible Subordinated noteholders     68,234
Internal Revenue Service                      38,373
Old common stockholders                       72,706
                                           ---------
     Total                                 3,929,313
                                           =========

The  Reorganized  Company issued the remaining 1 million shares through a rights
offering  which  raised $5 million to assist in funding the Plan.  These  shares
were subscribed for by members of the following  classes of creditors and equity
holders:                                                                        

                                                                [Download Table]

                                           
12.5% First Mortgage noteholders    995,280
Old common stockholders               4,720
                                  ---------
     Total                        1,000,000
                                  =========

The  Plan  also  calls  for the  Reorganized  Company  to  issue  the  following
additional  shares of New Common Stock to the following  creditor groups as soon
as disputed claims within those groups are resolved:                            

                                                                [Download Table]

                                                                      
Unsecured Creditors of Four Queens, Inc.                        50,491
Unsecured Creditors of Elsinore Corporation                     20,196
                                                                ------
     Total                                                      70,687
                                                                ======

After giving  effect to this  issuance of  additional  shares,  the  Reorganized
Company will have 5 million issued and outstanding shares of New Common Stock.  

The proceeds  from the rights  offering were held in a separate bank account and
use was restricted until the Effective Date.                                    

Riviera Gaming  Management Corp. - Elsinore ("RGME") holds a warrant to purchase
1,125,000  shares of New Common Stock for $1 per share.                         

The old 1994  Mortgage  Notes were  amended and restated to include the original
principal amount of $3,000,000, accrued interest at 20% through the Confirmation
Date in the amount of $726,000,  and attorney's fees and  disbursements  through
the  Effective  Date  of  $130,000  resulting  in  a  new  principal  amount  of
$3,856,000.  On the Effective  Date, each 1994 Mortgage Note holder received its
prorata share of restated first mortgage notes (the "New First Mortgage Notes").
The  New  First  Mortgage  Notes  bear  interest  at  11.5%,  payable  quarterly
commencing on the fourth month following the Confirmation  Date and are due four
years  from  the  Confirmation  Date.  These  noteholders  retained  their  lien
interests as collateral for repayment.                                          

The old 1993  First  Mortgage  Notes were  amended  and  restated  to reduce the
principal  amount of $57,000,000 to $30,000,000  which  represented  the secured
portion of the claim.  On the  Effective  Date,  each 1993 First  Mortgage  Note
holder  received its prorata share of restated  second  mortgage notes (the "New
Second Mortgage  Notes").  The New Second Mortgage Notes bear interest at 13.5%,
payable  semi-annually  and are due five years from the  Confirmation  Date. The
unsecured portion of their claim, approximately $4,000,000 (representing accrued
interest  through  the date of filing the  Chapter 11  petition  at 12.5%),  was
exchanged for shares of New Common Stock as described above.                    

The Convertible Notes with the principal amount of $1,425,000 were exchanged for
63,234 shares of New Common Stock on a prorata basis.                           

The  general  unsecured  creditors  with  claims in the amount of  approximately
$3,510,000  received a prorata  share of  $1,400,000  and are entitled to 70,687
shares of New Common Stock. The stock  distribution will take place once certain
litigation  has been settled which will  determine the number of shares to which
each individual unsecured creditor is entitled.                                 

The Internal  Revenue Service ("IRS") has agreed to a note payable in the amount
of $629,000 in  settlement  of an  unsecured  claim to be fixed in the amount of
$1,893,000  which was  calculated  based on the  percentage of the allowed claim
compared to the total general unsecured claims. The note is non-interest bearing
and payable in semi-annual payments beginning August 1997. Additionally, the IRS
received a note  payable in the amount of  $1,087,000  and 38,373  shares of New
Common Stock in settlement of its secured claim.  The note will accrue  interest
at 8% per annum and is due four years from the Effective Date. Finally,  the IRS
had an unsecured priority claim in the amount of $5,000 which was paid.         

The Company's Board of Directors was  reconstituted to include five members,  of
which four were designated by the Bondholders Committee and one was appointed by
the Equity Committee in the bankruptcy proceedings.                             

2.       Fresh Start Reporting                                                  

In connection  with its emergence  from  bankruptcy on the Effective  Date,  the
Company  adopted fresh start  reporting in accordance  with SOP 90-7.  The fresh
start  reporting  common  equity  value of $5.0  million was  determined  by the
Company.  The significant  factors used in the  determination of this value were
analyses of industry,  economic and overall  market  conditions,  historical and
estimated  performance  of  the  Company  as  well  as of the  gaming  industry,
discussions with various potential investors and certain financial analyses.    

Under fresh start  reporting,  the  reorganization  value of the entity has been
allocated  to the  Reorganized  Company's  assets  and  liabilities  on a  basis
substantially consistent with purchase accounting. The portion of reorganization
value not  attributable  to  specific  tangible  assets  has been  reflected  as
"Reorganization  Value in Excess of Amounts Allocable to Identifiable Assets" in
the  accompanying  balance sheet as of March 1, 1997. The fresh start  reporting
adjustments,  primarily  related to the  adjustment of the Company's  assets and
liabilities  to estimated fair market value,  will have a significant  effect on
the Company's  future  statements of operations.  The more  significant of these
adjustments relates to reduced  depreciation  expense on property and equipment,
increased  amortization  expense relating to  reorganization  value in excess of
amounts allocable to identifiable assets and increased interest expense.        

The  effects  of the Plan and fresh  start  reporting  on the  balance  sheet at
February 28, 1997 are as follows:                                               

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                                     Predecessor            (a)            (b)              (c)              Reorganized        
                                       Company             Debt          Issue of        Fresh Start           Company          
                                     February 28,       Discharge         Stock          Adjustments            March 1,        
                                         1997                                                                     1997          
                                  ------------------- --------------- -------------- ------------------- -----------------------
Assets                                                                                                                          
Current assets:                                                                                                                 
                                                                                                                                
      Cash and cash equivalents           13,527                                                                  13,527        
      Accounts receivable, net               546                                                                     546        
      Inventories                            348                                                                     348        
      Prepaid expenses                     1,288                                                                   1,288        
                                  ------------------- --------------- -------------- ------------------- --------------------   
Total current assets                      15,709                                                                  15,709        

Property and equipment, net               23,191                                             13,130               36,321        
Leasehold acquisition costs, net           1,907                                             (1,907)                            
Reorganization value in excess of amounts                                                                                       
      allocable to identifiable assets                                                          387                  387        
Investment in Fremont Street                                                                                                    
      Experience LLC                       2,400                                             (2,400)                            
Restricted cash available                                                                                                       
     for payment on long-term debt           353                                                                     353        
Other assets                                 740                                                                     740        
                                  ------------------- --------------- -------------- ------------------- --------------------   
Total assets                             $44,300             $ -            $ -              $9,210              $53,510        
                                  =================== =============== ============== =================== ====================   

Liabilities and Shareholders' Equity                                                                                            
(Deficiency)                                                                                                                    

Current liabilities:                                                                                                            
      Current maturities of                                                                                                     
          long-term   debt                    41                                                873                  914        
      Accounts payable                       757             344                                                   1,102        
      Accrued expenses                     6,766                                                                   6,766        
      Accrued interest                     2,886            (525)                                                  2,361        
                                  ------------------- --------------- -------------- ------------------- --------------------   
Total current liabilities                 10,451            (181)                               873               11,143        

Estimated liabilities subject to                                                                                                
      Chapter 11 proceedings              72,552         (72,552)                                                               
Long-term debt, less                                                                                                            
     current maturities                    1,484          36,756                               (873)              37,367        
                                  ------------------- --------------- -------------- ------------------- --------------------   
Total Liabilities                         84,487         (35,977)                                                 48,510        
                                  ------------------- --------------- -------------- ------------------- --------------------   

Shareholders' equity (deficiency)                                                                                               
      Common stock,                                                                                                             
          Predecessor company                 16                                                (16)                            
      Common stock,                                                                                                             
          Reorganized company                                                 4                   1                    5        
      Additional paid in capital          70,315                             (4)            (65,316)               4,995        
      Accumulated deficiency            (110,518)         35,977                             74,541                             
                                  ------------------- --------------- -------------- ------------------- --------------------   

Total Shareholders'                                                                                                             
     equity (deficiency)                 (40,187)         35,977                              9,210                5,000        
                                  ------------------- --------------- -------------- ------------------- --------------------   
Total liabilities and shareholders'                                                                                             
      equity (deficiency)                $44,300             $ -            $ -              $9,210              $53,510        
                                  =================== =============== ============== =================== ====================   

      (a) To record the  discharge of  prepetition  obligations  pursuant to the
      Plan of Reorganization.  (b) To record the issuance of 3,929,313 shares of
      New  Common  Stock.  (c) To  record  adjustments  to  reflect  assets  and
      liabilities  at fair market values and to record  reorganization  value in
excess of amounts allocable to identifiable assets.                 

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3.       Reorganization Items                                                   

Reorganization expense is comprised of items incurred by the Company as a result
of  reorganization  under Chapter 11 of the Federal  Bankruptcy Code. Such items
for 1997, 1996 and 1995 consisted of the following (in thousands):              

                                            1997      1996      1995
                                            ----      ----      ----
Administrative expenses                      $  192     $1,431   $  293   
Severance expenses                              100        761        -   
Write-off of debt issuance costs                  -          -    2,695   
Write-off of original issue discount on debt      -          -    5,690   
                                           -----      -----    -----
                                          $  292     $2,192   $8,678
                                           =====      =====    =====

4.       Summary of Significant Accounting Policies                             

(a)   Reorganization Value in Excess of Amounts Allocable to Identifiable Assets

Reorganization  value in excess of amounts  allocable to identifiable  assets is
amortized on a straight line basis over 15 years.  Accumulated  amortization  at
December 31, 1997 is approximately  $20,000. The Company will continue to assess
the  recoverability  of this asset based upon expected future  undiscounted cash
flows and other relevant information.                                           

(b)      Principles of Consolidation                                            

The  consolidated   financial   statements  include  the  accounts  of  Elsinore
Corporation  and  its  wholly-owned  subsidiaries.   All  material  intercompany
balances and transactions have been eliminated in consolidation.                

(c)      Accounting for Casino Revenue and Promotional Allowances               
In accordance with industry  practice,  the Company recognizes as casino revenue
the net win from gaming activities,  which is the difference between gaming wins
and losses. The retail value of complimentary food, beverages and hotel services
furnished to customers is included in the respective revenue classifications and
then deducted as promotional  allowances.  The estimated costs of providing such
promotional  allowances are included in casino costs and expenses and consist of
the following:                                                                  

Years Ended December 31,                
1997         1996        1995                 
----         ----        ----                 
(Dollars in thousands)                    

Hotel           $  703        $1,215      $1,608                                
Food & beverage  2,219         3,908       4,869                                
-----         -----      ------               
Total          $2,922        $5,123      $6,477                               
=======        ======      ======                 

(d)      Cash Equivalents                                                       

Cash equivalents  include highly liquid  investments  purchased with an original
maturity date of 90 days or less.                                               

(e)      Inventories                                                            

Inventories are stated at the lower of cost (first-in, first-out) or market.    

(f)      Property and Equipment                                                 

Property and  equipment  are stated at cost.  Depreciation  is provided over the
estimated  useful lives of the assets  using the  straight-line  method.  Useful
lives range from 7 to 40 years.  Equipment held under capital leases is recorded
at the net present value of minimum lease payments at the inception of the lease
and  amortized  over the shorter of the terms of the leases or estimated  useful
lives of the related assets.                                                    

(g)     Investment in Fremont Street Experience                                 

The Company and seven other  downtown Las Vegas  property  owners,  who together
operate ten casinos, have formed the Fremont Street Experience LLC ("FSELLC"), a
limited  liability company of which the Company is a one-sixth owner, to develop
the Fremont Street Experience. The Company's $3,000,000 capital contribution for
its one-sixth ownership of FSELLC was paid in full by January 1994. During 1995,
the Company paid  approximately  $525,000 to FSELLC,  representing its allocated
share of the 1995 operating costs of the Fremont Street Experience.  These costs
were  capitalized  and expensed upon the opening of the project.  As a result of
fresh start reporting,  the Company deemed that the capital  contribution had no
future value and the remaining $2,400,000 was expensed.  The Company=s allocated
share of the operating  costs of the Fremont  Street  Experience  ($1,000,000 in
1996 and $600,000 in 1997) are expensed as incurred.                            

(h)      Income Taxes                                                           

Under the asset and liability  method of accounting  for income taxes,  deferred
tax assets  and  liabilities  are  recognized  for the  future tax  consequences
attributable to differences  between the financial statement carrying amounts of
existing  assets and liabilities  and their  respective tax bases.  Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled.  The effect on deferred tax assets and liabilities of a
change in tax rates is  recognized  in income in the period  that  includes  the
enactment date.                                                                 

(i)      Loss Per Share                                                         

Basic loss per share is computed by dividing  net loss by the number of weighted
average  common shares  outstanding  during the year.  Diluted loss per share is
computed by dividing net loss by the number of weighted  average  common  shares
outstanding during the year,  including common stock equivalents.  There were no
common stock equivalents, therefore basic and diluted loss per share are equal. 

(j)      Stock Based Compensation                                               

Prior to January 1, 1996,  the Company  accounted  for its stock  option plan in
accordance  with the provisions of Accounting  Principles  Board ("APB") Opinion
No.  25,   "Accounting   for  Stock  Issued  to  Employees,"   and  its  related
interpretations.  As such, compensation expense would be recorded on the date of
grant only if the current  market  price of the  underlying  stock  exceeded the
exercise price.  On January 1, 1996, the Company adopted  Statement of Financial
Accounting   Standards   ("SFAS")   No.   123,   "Accounting   for   Stock-Based
Compensation,"  which permits  entities to recognize as expense over the vesting
period  the  fair  value  of all  stock-based  awards  on  the  date  of  grant.
Alternatively,  SFAS No.  123 also  allows  entities  to  continue  to apply the
provisions  of APB Opinion No. 25 and provide  proforma  net income and proforma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based  method defined in SFAS No. 123 had been
applied.  The Company has  elected to  continue to apply the  provisions  of APB
Opinion No. 25 and provide the pro forma disclosure  provisions of SFAS No. 123.
The Company has no stock-based plans outstanding at December 31, 1997.          

(k)      Long-lived Assets                                                      

In March,  1995, the Financial  Accounting  Standards Board ("FASB") issued SFAS
No. 121,  "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," which  requires  impairment  losses to be recorded on
long-lived  assets used in operations  when indicators of impairment are present
and the  undiscounted  cash flows  estimated to be generated by those assets are
less  than the  assets'  carrying  amount.  SFAS  No.  121  also  addresses  the
accounting  for  long-lived  assets that are  expected  to be  disposed  of. The
Company  adopted  SFAS No.  121 in the  first  quarter  of 1996 and there was no
write-down  of assets for the years ended  December 31, 1997 and 1996 other than
in connection with the application of fresh start accounting.                   

(l)      Reclassification                                                       

Certain  prior  period  reclassifications  have  been  made  in the  Predecessor
Company's  financial   statements  to  conform  to  the  Reorganized   Company's
presentation.                                                                   

(m)      Use of Estimates                                                       

Management  of the Company has made  estimates and  assumptions  relating to the
reporting of assets and liabilities and the 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 to prepare  these  financial
statements in conformity with generally accepted accounting  principles.  Actual
results could differ from those estimates.                                      

(n)      Fair Value of Financial Instruments                                    

The carrying  amounts of cash  equivalents,  receivables  and  accounts  payable
approximates fair value because of the short term maturity of these instruments.
The carrying amount of the long-term debt  approximates fair value because it is
deemed to be fully secured and bears interest at an appropriate rate.           

(o)      Recently Issued Accounting Standards                                   

In June 1997, the FASB issued SFAS No. 130,  "Reporting  Comprehensive  Income."
SFAS No. 130 requires companies to classify items of other comprehensive  income
by their nature in a financial  statement and display the accumulated balance of
other  income  by  their  nature  in  a  financial  statement  and  display  the
accumulated  balance of other  comprehensive  income  separately  from  retained
earnings and additional  paid-in capital in the equity section of a statement of
financial position,  and is effective for financial statements issued for fiscal
years beginning after December 15, 1997.                                        

In June 1997,  the FASB issued SFAS No. 131,  "Disclosure  About  Segments of an
Enterprise  and  Related  Information."  SFAS  No.  131  established  additional
standards for segment reporting in the financial statements and is effective for
fiscal years beginning after December 15, 1997.                                 

The Company believes there is no material impact of these  pronouncements on the
Company's financial statements.                                                 

5.       Long-Term Debt                                                         

Long-term debt consists of the following:                                       

                                      December 31,
                                     1997       1996
                                     ---------------
11.5% New First Mortgage Notes                                
    ("11.5% Notes")               $ 3,856     $    -
13.5% New Second Mortgage Notes                               
    ("13.5% Notes")                30,000          -
Notes payable - IRS                      1,404          -     
Notes payable - Other                    1,104          -     
Capital leases                           3,254          -     
Prepetition liabilities:                                      
    Subject to compromise               -      4,487
    Not subject to compromise           -     69,422
                                   --------   --------
                                   39,618     73,909
Less current maturities                 (1,477)         -     
                                   --------   --------
                                  $38,141    $73,909
                                   ========   ========

The 11.5% Notes bear interest at 11.5% payable on March 1, June 1,  September 1,
and  December 1 of each year.  Principal  is due on August 20,  2000.  The 11.5%
Notes are redeemable at any time at 102% of par. The Company is required to make
an offer to  purchase  all 11.5%  Notes at 101% upon any  "Change of Control" as
defined in the Amended and Restated  Note  Agreement  governing  the 11.5% Notes
("Note Agreement").  The Company is also required to offer to purchase a portion
of the 11.5% Notes in the amount of any  proceeds  received on the Palm  Springs
East Limited  Partnership  Note. The 11.5% Notes are  collateralized  by a first
priority  deed of trust on and pledge of  substantially  all assets of  Elsinore
Corporation,  Elsub Management Corporation,  Four Queens, Inc., and Palm Springs
East Limited Partnership. The 11.5% Notes are guaranteed by certain wholly owned
subsidiaries of the Company.                                                    

The Note Agreement,  among other things, places significant  restrictions on the
incurrence of additional indebtedness by the Company, the creation of additional
liens on the collateral  securing the 11.5% Notes,  transactions with affiliates
and  payment of  certain  restricted  payments  (as  defined).  In order for the
Company to incur  additional  indebtedness  or make a  restricted  payment,  the
Company must, among other things,  meet a specified  consolidated  fixed charges
coverage  ratio and have  earned $1  million in EBITDA.  The  Company  must also
maintain a minimum amount of consolidated net worth (as defined).               

The 13.5% Notes bear interest at 13.5%,  payable on February 28 and August 31 of
each year.  Principal is due on August 20, 2001.  The 13.5% Notes are redeemable
by the  Company  at any time at 100% of par,  without  premium.  The  Company is
required to make an offer to  purchase  all 13.5% Notes at 101% upon any "Change
of Control" as defined in the  Indenture  governing  the 13.5% Notes.  The 13.5%
Notes are guaranteed by Elsub Management Corporation, Four Queens, Inc. and Palm
Springs  East Limited  Partnership  and are  collateralized  by a second deed of
trust on and  pledge of  substantially  all the  assets of the  Company  and the
guarantors.  The  13.5%  Notes  have  substantially  the same  restrictions  and
covenants as the 11.5% Notes.                                                   

At December 31, 1997, the Company was not in compliance with consolidated  fixed
charges coverage ratio covenants  applicable to the 11.5% Notes and 13.5% Notes.
Waivers of  compliance  were  received from holders of the 11.5% Notes and 13.5%
Notes.                                                                          

The Company has various unsecured notes payable with certain vendors as a result
of the  bankruptcy.  These  notes are  non-interest-bearing  and are  payable in
either quarterly installments of $31,000 or semiannual  installments of $240,000
through October 2001.                                                           

The  Company has two  unsecured  notes  payable  with the IRS as a result of the
bankruptcy. One note bears interest at 8% and the other is non-interest-bearing.
The notes are payable in semiannual  installments of $266,000  through  February
2000.                                                                           

Maturities of the Company's long-term debt are as follows:                      

Year Ending December 31,                                      
        1998                      $  1,477
        1999                         1,268
        2000                         4,956
        2001                        30,440
        2002                             4
        Thereafter                   1,473
                                  --------
                                  $ 39,618
                                  ========

6.       Native American Casino Operations                                      

Spotlight 29 Casino                                                             

Since March 1995,  Elsinore  Corporation,  its wholly  owned  subsidiary,  Elsub
Management Corporation and Palm Springs East Limited Partnership, of which Elsub
is the general partner  (collectively for purposes of this section of this Note,
the "Company"),  and the Twenty-Nine  Palms Band of Mission Indians (the "Band")
have been involved in a dispute  regarding,  among other things,  the terms of a
management  contract (the "contract")  under which the Company had the exclusive
right to manage and operate the Spotlight 29 Casino (the "Spotlight  29"), owned
by the Band, located near Palm Springs, California.                             

During 1995, the Company was ousted as manager. As a result,  casino development
costs of $1,037,000 were written off, accrued interest and working capital loans
of $3,500,000 were written off and a reserve of $9,000,000 was recorded  against
the principal balance of the note receivable.                                   

On March 29, 1996, the Company reached a settlement with the Band which has been
approved by the Bankruptcy  Court and which has received final  clearance by the
Bureau of Indian  Affairs.  The Company has received a promissory  note from the
Band in the  principal  amount  of  $9,000,000.  While  the note has a  36-month
amortization  schedule,  monthly  payments are limited to 20% of Spotlight  29's
monthly net income.  In the event that net income is  insufficient  to fully pay
the note at the end of 36 months, the note will be automatically extended for up
to an additional two years.  If still not fully paid at the end of the extension
period,  it may be extended up to an  additional  two years upon the approval of
the  National  Indian  Gaming  Commission.  If not paid at the end of the  final
extension  period,  the note  will be  forgiven.  Interest  on the note is at an
annual  rate  equal to the  greater of 10% or the  maximum  rate  allowed  under
California  law,  not to exceed  12%.  The  Company has  received  $711,000  and
$353,000  of  interest  which  was  recorded  in the years  ended  1997 and 1996
respectively.  Given that the $9 million  recovery  is limited to 20% of the net
income  generated  by  Spotlight  29  management  determined  not to reduce  the
allowance for loss in the amount of $9,000,000  against the receivable which was
provided during the quarter ended December 31, 1995.                            

7 Cedars Casino                                                                 

Elsinore  Corporation,  through  its  wholly-owned  subsidiary,  Olympia  Gaming
Corporation  (collectively  for  purposes  of this  section  of this  Note,  the
"Company"),  had a Gaming  Project  Development  and  Management  Agreement (the
"Contract")  to operate the 7 Cedars Casino (the "7 Cedars") which is located on
the Olympic  Peninsula in the state of Washington  and is owned by the Jamestown
S'Klallam Tribe (the "Tribe").  In addition,  pursuant to a loan agreement,  the
Company loaned $9,000,000 to the Tribe for the construction of 7 Cedars.        

During 1995, the contract was terminated by 7 Cedars.  As a result,  the Company
recorded  a reserve  on the  $9,000,000  note and wrote off  unamortized  casino
development  costs in the amount of $242,000  and all accrued  interest.  During
1997, the Company wrote off the note receivable and related reserve.            

Mojave Valley Resort Project                                                    

During 1995,  management wrote off approximately  $807,000 of casino development
costs related to this unsuccessful project.                                     

7.       Property and Equipment, Net                                            

Property and equipment, net, consists of the following:                         

                        December 31,
                       1997             1996

    (Dollars in thousands)

Land                           $ 2,800         $  1,275       
Buildings                       27,088           39,240       
Equipment                       10,265           24,488       
Leasehold acquisition costs          -            6,839       
Construction in progress           399               53       
                        -------          -------
                         40,552           71,895
Less accumulated depreciation                                 
and amortization              1,510           46,410    
                        -------          -------
                        $39,042          $25,485
                        =======          =======

8.       Accrued Expenses                                                       

Accrued expenses consist of the following:                                      

                                  December 31,
                                 1997         1996
                                  (Dollars in thousands)

Salaries and wages                            $1,471        $1,584              
Payroll taxes and employee benefits              931           883              
Gaming taxes                                     143           107              
Slot club liability                              616           546              
Outstanding chip & token liability               515           692              
Other                                            777         2,364              
                                ------        ------
                                $4,453        $6,176
                                ======        ======
9.       Income Taxes                                                           

No income  tax  benefit  related  to the  1997,  1996 and 1995  losses  has been
recorded  due to the  uncertain  ability  of the  Company  to  utilize  its  net
operating loss carryforwards.                                                   

The tax effects of temporary  differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented below:    

                                December 31,
                               1997         1996
                                (Dollars in thousands)
Deferred tax assets:                                                            
Accounts receivable, principally                                              
due to allowance for doubtful                                           
accounts                                   $  56          $135          
Accrued compensation, principally                                             
due to accrual for financial                                            
reporting purposes                           635           738          
Progressive slot and slot club accruals         414           143             
Merger costs, principally due to amounts                                      
not currently deductible for tax                                        
purposes                                     103             -          
Tax asset from predecessor company            6,721             -             
Net operating loss carryforwards                  -        34,887             
General business credit carryforward,                                         
principally due to investment                                           
tax credit generated in prior years            -           640          
Alternative minimum tax (AMT)                                                 
credit carry-forward from AMT                                           
paid in prior years                            -           312          
Contribution deduction carryforward,                                          
principally due to amounts                                              
not deductible in prior periods               63            63          
Tax loss due to sale of New Jersey                                              
subsidiaries in prior periods                726           714          
Loan receivable principal due to                                                
allowance for uncollectibility                  -         8,023           
Reorganization items, principally due                                           
to amounts not currently                                                  
deductible for tax purposes                     -         3,723           
                              --------      --------
Total gross deferred tax assets                8,718        49,378              

Less valuation allowance                     (4,337)      (45,099)            
                             -----------     ---------
Net deferred tax assets                  4,381         4,279        
                            -----------     --------
Deferred tax liabilities:                                                       
Plant and equipment, principally due to                                       
differences in depreciation               (4,018)       (3,966)         
Prepaid expenses, principally due to                                          
deduction for tax purposes                  (363)         (313)         
                              ----------     ---------
Total gross deferred tax                                                        
liabilities                               (4,381)       (4,279)         
                              ----------     ---------

Net deferred tax liability             $    -       $     -       
                              ==========      ========

     Prior to  emergence  from  bankruptcy  following  the close of  business on
February 28, 1997, the Company had a net operating loss carryforward for federal
income tax  purposes of  approximately  $102,600,000.  As a result of  ownership
changes in prior  years,  Internal  Revenue  Code  Section 382  ("Section  382")
limited the amount of loss  carryforward  currently  available to offset federal
taxable  income.  As a result  of the  bankruptcy  and the  resulting  change in
ownership,  the existing net  operating  loss is limited  under Section 382. The
loss  carryforwards  begin to expire in the year 1999 and will completely expire
by 2007.                                                                        

The Company had general business tax credit carryforwards for federal income tax
purposes of approximately  $640,000 which are available to reduce future federal
income taxes,  if any,  through 1999. In addition,  the Company had  alternative
minimum tax credit  carryforwards of approximately  $312,000 which are available
to reduce future federal income taxes, if any, over an indefinite  period.  Both
of these  amounts are limited by Section 382 and may not be available for use in
future periods.                                                                 

Prior Period Tax Obligation                                                     

Due to IRS examinations of the Company's consolidated income tax returns for the
fiscal years ended  January 31,  1980,  1981,  1982 and the eleven  months ended
December 31, 1983, the Company was assessed  additional tax and interest of $5.7
million.  The Company and the IRS entered into an installment  payment agreement
to satisfy this  obligation.  Upon filing for protection under Chapter 11 of the
bankruptcy code, the Company had a remaining obligation to the IRS in the amount
of  approximately  $2,985,000.  The  settlement  of  this  obligation  is  fully
described in Note 1.                                                            

10.  Common Stock Offering                                                      

On January 25, 1995, the Company completed a public offering of 2,500,000 shares
of common stock for $1.75 per share.  Net proceeds to the Company  after payment
of underwriting discounts and commissions and other direct costs of the offering
were approximately $3,747,000.                                                  

11.      Commitments and Contingencies                                          

RGME manages the Four Queens Hotel & Casino in  accordance  with the  management
agreement  effective  April 1, 1997.  RGME  receives a minimum  annual fee of $1
million  in  equal  installments  plus  25% of the  excess  of  earnings  before
interest,  taxes, depreciation and amortization ("EBITDA") over $8 million. RGME
also received  warrants to purchase  1,125,000  shares of common stock at $1 per
share.  The agreement is for  approximately 40 months and can be extended for an
additional 24 months at RGME's option if certain performance standards are met. 

The  Company is liable for  one-sixth  of the  operating  expenses  incurred  by
Fremont Street Experience, LLC.                                                 

The Company is a defendant in two  consolidated  lawsuits pending in the federal
court for the  District of New  Jersey,  alleging  violation  by the Company and
certain  of its  subsidiaries  and  affiliates  of  the  Worker  Adjustment  and
Retraining Notification Act and breach of contract.                             

The  Company  believes  that this claim is  included  in the Class 10  Unsecured
Creditor's pool of the bankruptcy  proceedings,  which is capped at $1.4 million
and, therefore, will not have a material financial effect on the Company.       

The Company is a party to other claims and  lawsuits.  Management  believes that
such matters are either covered by insurance or, if not insured, will not have a
material  adverse  effect on the financial  position or results of operations of
the Company.                                                                    

12.  Leases                                                                     

All  non-cancelable  leases have been classified as capital or operating leases.
At December  31,  1997,  the Company had leases for real and  personal  property
which expire in various years through 2075. Under most leasing arrangements, the
Company pays the taxes,  insurance,  and the operating  expenses  related to the
leased  property.  Certain  leases on real property  provide for  adjustments of
rents based on the  cost-of-living  index.  Buildings and equipment leased under
capital leases, included in property and equipment, are as follows:             

                  December 31,
                          1997              1996
                          ----              ----
                          (Dollars in thousands)
Building                            $1,364           $2,062           
Equipment                            1,477              324           
                         ------           ------
                          2,841            2,386
Less accumulated amortization         (110)            (817)          
                         ------           ------
                         $2,731           $1,569
                         ======           ======

Amortization  of assets held under capital leases is included with  depreciation
and amortization expense in the Consolidated Statements of Operations.          

The  following is a schedule of future  minimum  lease  payments for capital and
operating  leases (with initial or remaining  terms in excess of one year) as of
December 31, 1997:                                                              

                       Capital       Operating
                      Leases        Leases
                      (Dollars in thousands)
Years Ending December 31,                                             

1998                              $   971         $  2,979            
1999                                  680            2,967            
2000                                  680            2,945            
2001                                  511            2,945            
2002                                  223            2,946            
Thereafter                          7,022           91,761            
                       ------         --------
Total minimum lease payments         10,087         $106,543              
                                      ========
Less: amount representing                                                 
interest(at imputed rates                                     
ranging from 11.5%                                            
to 15.0%                        6,833                         
      ------
Present value of net                                                  
minimum capital lease                                         
payments                        3,254                         
Less: current maturities                676                               
      ------
Capital lease obligations,                                                
excluding current maturities        $2,578                              
      ======

13.  Benefit Plans                                                              

Four Queens,  Inc. makes  contributions  to several  multi-employer  pension and
welfare  benefit plans covering its union  employees.  The plans provide defined
benefits to covered  employees.  Amounts charged to pension cost and contributed
to the plans for the years 1997, 1996 and 1995 totaled  $149,000,  $87,000,  and
$97,000,  respectively.  While the  Company is liable for its share of  unfunded
vested benefits,  the Company believes the amount, if any, would not be material
to the consolidated financial statements.                                       

On October 1, 1990,  the  Company  instituted  a savings  plan  qualified  under
Section  401(k) of the Internal  Revenue Code of 1986,  as amended.  The savings
plan covers  substantially  all  employees  who are not covered by a  collective
bargaining   agreement.   Employee   contributions   to  the  savings  plan  are
discretionary. The Company matches and contributes to each employee's account an
amount equal to 25% of the employee's  contributions to the savings plan up to a
maximum employee  contribution of 8% of each employee's gross compensation.  The
Company's  contribution was $120,000,  $130,488, and $138,000 for 1997, 1996 and
1995,  respectively.  There were 438, 469, and 496  participants  in the savings
plan as of December 31, 1997, 1996 and 1995, respectively.                      

14.  Taxes and Licenses, Other Than Income Taxes                                

Taxes and licenses,  other than income taxes, principally include payroll taxes,
gaming licenses and gross revenue taxes, and are summarized as follows:         

Operating Departments       
(Dollars in thousands)        

Food and
Casino        Hotel      Beverage     Other     Total     

1997       $3,513      $   477       $ 413       $1,074    $5,477               
1996       $4,496      $   468       $ 497       $1,132    $6,592               
1995       $4,377      $   454       $ 483       $1,313    $6,627               
======      =======       =====       ======    ======    

15.  Supplemental Financial Information                                         

A summary of additions and  deductions  to the  allowance for doubtful  accounts
receivable for the years ended December 31, 1997, 1996 and 1995 follows:        

 Balance at                              Balance
Allowance for  Beginning of                            At End of                
Doubtful Accounts   Year     Additions     Deductions     Year                  
Years Ended                                                                     
1997               $347        $ 64           $246          $165                
1996               $201        $321           $175          $347                
1995               $214        $ 68           $ 81          $201                
   ====        ====           ====          ====

16.      Event After Date of Auditor's Report                                   

The  Company   entered   into  an   Agreement   and  Plan  of  Merger   ("Merger
Agreement")with  R&E Gaming Corp.  ("R&E") and Elsinore  Acquisition  Sub,  Inc.
("EAS"),  entities  controlled  by Mr.  Allen  Paulson.  Pursuant  to the Merger
Agreement,  the Company  would merge with EAS and, as a result,  would  become a
wholly-owned  subsidiary of R&E and the Company's shareholders (other than those
who exercise  dissenter's rights under Nevada law) would receive, for each share
of the Company's common stock owned by them, cash in the amount of $3.16 plus an
amount  equal to the  daily  accrual  on $3.16  at  9.43%  compounded  annually,
accruing from June 1, 1997 to the date immediately preceding consummation of the
merger.                                                                         

The Company has received from R&E a notice,  dated March 20, 1998,  stating that
the Merger Agreement is void or, alternatively,  R&E and EAS intend to terminate
the Merger Agreement.  As the grounds for its position,  R&E has alleged,  among
other things,  violations by the Company of the Merger Agreement,  violations of
law  and   misrepresentations  by  the  Company's  controlling   shareholder  in
connection with the Option and Voting Agreement  relating to the Company's stock
which  that  shareholder  entered  into with R&E,  and the  non-satisfaction  of
certain  conditions  precedent to completing the merger. The Company rejects the
allegations  against  it by R&E  and is of the  view  that  R&E is  required  to
consummate the merger, subject to approval by gaming authorities. The Company is
reserving all of its rights with respect to R&E's legal obligations.            

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Item 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING           
AND FINANCIAL DISCLOSURE.                             

None.                                       

PART III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.                   

Directors and Executive Officers.                                               

         The following  sets forth the names,  ages and positions of each person
who is a director or executive officer of the Company.  Each person listed below
assumed his position with the Company on the Plan Effective Date.               

                                                                [Download Table]

Name                       Age  Position                                       

                                                                               
John C. "Bruce" Waterfall  60   Chairman of the Board                          

Jeffrey T. Leeds           42   President, Chief Executive Officer and Director

S. Barton Jacka            61   Treasurer, Secretary and Director              

Edward M. Nigro            55   Director                                       

Harry C. Hagerty, III      37   Director                                       

         Each director assumed his position  pursuant to the Plan, which further
provided  that (i) the  Company's  board of directors  shall consist of at least
five members, one of whom is selected by the holders of the Company's old common
stock that was canceled on the Plan  Effective  Date (the "Equity  Nominee") and
(ii) the Equity Nominee is to serve as a director for two years. Mr. Hagerty was
selected as the Equity Nominee.                                                 

John C. "Bruce"  Waterfall.  Mr. Waterfall has been a professional money manager
and  analyst  for the past 29 years  with MWV,  of which he is  President  and a
co-founder.  Certain  investment  accounts  managed  by  MWV  own  94.3%  of the
outstanding Common Stock, and Mr. Waterfall exercises sole voting and investment
authority  over that Common Stock.  Mr.  Waterfall  also serves as a director of
Darling  International,  Inc., a publicly reporting company under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").                          

Jeffrey T. Leeds. Since 1993, Mr. Leeds has been President of Leeds Group, Inc.,
a private  investment  banking  firm which he  co-founded.  Mr.  Leeds is also a
Principal of Advance  Capital  Management,  LLC, a private  equity firm which he
formed in 1995.  Mr.  Leeds also  serves as a director of  Alarmguard  Holdings,
Inc., a publicly reporting company under the Exchange Act.                      

S. Barton Jacka. Mr. Jacka is a gaming  consultant and serves as chairman of the
gaming  compliance  committees of two other publicly held companies  licensed by
the  Nevada  Gaming  Authorities.  From 1993 to 1996,  Mr.  Jacka was with Bally
Gaming,  Inc.  and  Bally  Gaming  International,  Inc.,  first as  Director  of
Government Affairs and Gaming Compliance and later as Vice President.  Mr. Jacka
retired from the position of Chairman of the Nevada State Gaming  Control Board,
a position he held from 1985 to 1987, prior to entering the private sector.     

Edward M. Nigro.  Since 1980,  Mr. Nigro has been  President of Nigro,  Inc. and
Nigro Associates,  both of which he founded.  The companies'  activities include
business  consulting,  casino/hotel  management,  construction,  residential and
commercial real estate development and capital formation.                       

Harry C. Hagerty,  III. Mr.  Hagerty is Managing  Director - Investment  Banking
Department of Deutsche Morgan Grenfell, which he joined in 1994. Previously,  he
was a Senior Vice  President in the  investment  banking  group of Dillon Reed &
Co., Inc.                                                                       

Section 16(a) Beneficial Ownership Reporting Compliance.                        

         Based  solely upon a review of Forms 3 and 4  furnished  to the Company
pursuant to SEC Rule 16a-3(e)  during  fiscal year 1997,  Form 3 was filed later
than the due date by the Company's directors other than Mr. Waterfall.  The Form
3 filed by Mr.  Hagerty  reports  his  acquisition  of Common  Stock on the Plan
Effective Date. Each Form 3 filed by Directors Leeds, Jacka and Nigro reports no
ownership of Common Stock.                                                      

Item 11. EXECUTIVE COMPENSATION.                                                

         The following  table provides  certain summary  information  concerning
compensation  paid by the Company to each  person who served as Chief  Executive
Officer  during any part of the year ended December 31, 1997. No person who held
any other  executive  officer  position during any part of 1997 received a total
annual salary and bonus in excess of $100,000 in such year.                     

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                                                                    Long Term                    
                                                                   Compensation                  
                                    Annual Compensation               Awards                     
                                                                 ------------------              
                                                                      Securities      All Other  
Name and Principal Position                                           Underlying     Compensation
                             Year  Salary ($)         Bonus($)        Options (#)        ($)     
                             ----  ----------         --------        -----------        ---     

                                                                                                 
Jeffrey T. Leeds             1997   35,000                  -0-           -0-          -0-       
    President and Chief      1996      -0-                  -0-           -0-          -0-       
    Executive Officer (1)    1995      -0-                  -0-           -0-          -0-       

Thomas E. Martin             1997    7,583                  -0-           -0-          60,000(3) 
    President and Chief      1996  540,683 (3)              -0-           -0-             672(4) 
    Executive Officer (2)    1995  343,344                  -0-           -0-           2,310(4) 


(1) Mr. Leeds assumed his positions on the Plan Effective Date.                 

(2) Mr. Martin  resigned from his positions,  effective as of the Plan Effective
Date.                                                                           

(3) In 1996 Mr.  Martin was given a  severance  of one year's  annual  salary of
$360,000. (See "Employment Contracts and Termination of Employment and Change-in
Control  Arrangements"  below.) In 1997 Mr.  Martin  received  the last  $60,000
installment of that severance payment.                                          

(4) These amounts represent matching contributions under the Company's          
401(k) Plan.                                                                    

Stock Options and Similar Rights.                                               

         The  Company  granted  no stock  options or stock  appreciation  rights
(collectively,  "Stock Rights") during 1997 nor were any Stock Rights  exercised
in 1997. As of the Plan Effective Date, all previously  outstanding Stock Rights
were canceled.                                                                  

Employment Contracts and Termination of Employment and Change-in-Control        
Arrangements.                                                                   

        In March  1993,  the  Company  under its  former  management  adopted an
Amended and Restated Senior Executive  Severance Plan (the "Severance Plan"). At
the time of, and  pursuant  to,  adoption  of the  Severance  Plan,  the Company
entered  into  severance  agreements  with then  Chairman  of the Board Frank L.
Burrell,  Jr. and then President and Chief  Executive  Officer Thomas E. Martin.
Under such agreements, these two officers were to receive an amount equal to two
times their respective annual salaries,  in each case, 30 days after termination
(subject to certain  limitations) if such termination  occurred within two years
after a change in control of the Company.  The Severance Plan also provided that
a covered officer may "put" to the Company any stock options theretofore granted
to him under the Company's option plans in return for cash payments equal to the
difference (if greater than zero) between the "fair market value" (as defined in
the  relevant  option plan) and the  exercise  price per share of such  options.
Pursuant to the Plan, Mr. Burrell's and Mr. Martin's  severance  agreements,  as
modified  by the U.S.  Bankruptcy  Court,  were  assumed by the  Company.  Those
agreements  provided for severance  payments of $240,000 and $360,000 to Messrs.
Burrell and Martin,  respectively,  to be paid over six months commencing on the
Confirmation Date.                                                              

Compensation Committee Interlocks.                                              

         During  1997  prior to the  Plan  Effective  Date,  the  Company  had a
Compensation  Committee  whose  duties  were to  establish  the  salaries of the
Company's  executive  officers;  to  exercise  the  authority  of the  Board  of
Directors  concerning  the Company's  benefit plan; to administer  the Company's
stock option plans; to make recommendations to the Board of Directors concerning
salary  increases  and bonus awards for he Company's  executives,  including the
Chairman of the Board and the President/Chief  Executive Officer;  and to advise
the Board of Directors on other compensation and benefit matters. The members of
the  Compensation  Committee  were  Chairman of the Board  Burrell (who received
compensation  as an executive  officer),  Director  Howard  Carlson and Director
Robert McKerroll.                                                               

         Since the  current  directors  and  executive  officers  assumed  their
positions on the Plan  Effective  Date, the full Board of Directors has made all
decisions  regarding  executive officer  compensation.  Messrs.  Leeds and Jacka
receive  compensation  as  executive  officers  and are  members of the Board of
Directors.                                                                      

Compensation of Directors.                                                      

         Current Board of Directors. Mr. Waterfall receives no compensation from
the  Company  for  serving  as  Chairman  of the  Board and  attending  Board of
Directors  meetings.  Each of the other  directors  receives  an  annual  fee of
$25,000 in  consideration of his attendance at each quarterly Board of Directors
meeting  plus  $1,000  for each  additional  meeting  (other  than  meetings  by
telephone conference) at which his attendance is required. All directors receive
reimbursement for reasonable  expenses incurred in attending each meeting of the
Board of  Directors.  Jeffrey T. Leeds and S. Barton Jacka also receive  $10,000
per year in consideration of serving as executive officers of the Company.      

         The Company has approved in principle the payment of an additional  fee
to  Directors  Leeds and Nigro for  serving on the Special  Committee  which the
Board of Directors  appointed to consider,  and to make  recommendations  to the
Board  of  Directors  concerning,  the  Merger  Agreement.  The  amount  of such
compensation  has not yet been fixed.  The Company approved in principle the fee
payment and the two directors agreed to serve on the Special  Committee based on
the  mutual  understanding  that  the  compensation  would  not be  based on the
conclusions  reached by the Special  Committee or by the full Board of Directors
or on whether the Merger is ultimately consummated.                             

         Board of  Directors  Prior to the  Effective  Date.  An  annual  fee of
$25,000,  prorated on a monthly basis,  was payable to each former  non-employee
director of the Company.  In 1997 prior to the Plan  Effective  Date,  they each
received two monthly fee  payments.  Annual fees,  prorated on a monthly  basis,
were also paid to former directors for service on Board of Directors committees,
as follows:  Executive - $12,000;  Nominating  - $2,500;  Compensation  - $2,500
($5,000 for Chairman);  Audit - $2,500;  and Finance - $6,000.  In 1997 prior to
the Plan Effective Date, each committee  member received two monthly payments of
these  respective  annual fees. In addition,  the directors were  reimbursed for
out-of-pocket  expenses  incurred in  connection  with  attendance  at board and
committee meetings.                                                             

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.       

Security Ownership of Certain Beneficial Owners.                                

         As of March 26, 1998, the beneficial  ownership of Common Stock,  which
is the only outstanding class of Elsinore equity or voting  securities,  by each
person who is known by  Elsinore to be the  beneficial  owner of more than 5% of
the outstanding Common Stock, is as follows (1):                                

                                                        [Enlarge/Download Table]


Name and Address of Beneficial Owner                              Amount and Nature of   Percent of
------------------------------------                              --------------------   ----------
                                                                  Beneficial Ownership      Class  
                                                                  --------------------      -----  

John C. "Bruce"  Waterfall,  who exercises voting and investment                                   
authority over the Common Stock owned by the MWV Accounts,                                         
as follows (2)(3):                                                                                 

                                                                                                   
     The Common Fund for Non-Profit                                                                
        Organizations                                                           232,322       4.7  
     Morgens Waterfall Income Partners, L.P.                                    130,100       2.6  
     MWV Employee Retirement Plan Group Trust                                    41,818         *  
     Restart Partners, L.P.                                                     813,127      16.5  
     Restart Partners II, L.P.                                                1,156,964      23.5  
     Restart Partners III, L.P.                                                 803,834      16.3  
     Restart Partners IV, L.P.                                                  506,462      10.3  
     Betje Partners                                                             134,747       2.7  
     Restart Partners V, L.P.                                                   213,736       4.3  
     Phoenix Partners, L.P.                                                     613,330      12.4  
                                                                                -------      ----  
                  Total                                                       4,646,440      94.3  
                                                                              =========      ====  
     * Less than 1% of the outstanding shares.                                                     

         (1) In  addition  to the  persons  reported  in the  table,  RGME holds
warrants to purchase  1,125,000 shares of Common Stock.  (See Item 1. BUSINESS -
The Four Queens Casino.) If RGME were to exercise the warrants,  it would become
the owner of approximately  18.5% of the outstanding  Common Stock. The relevant
Exchange  Act rules  generally  provide  that a person is deemed the  beneficial
owner of a security if that person has the right to acquire beneficial ownership
of such security  within 60 days through the exercise of any option,  warrant or
right.  Although the warrants,  by their terms, are exercisable at any time, the
Company understands that as a condition  precedent to such exercise,  RGME would
have to apply for and obtain the approval of the Nevada Gaming Authorities.  The
Company  is not  aware  of any  such  application  having  been  filed  by RGME.
Furthermore, the Company's understanding is that the timing of the Nevada Gaming
Authorities'  decisions on any such  applications to exercise the warrants would
be subject to substantial uncertainty.  Accordingly, RGME is not reported in the
table as beneficially owning more than 5% of the Common Stock.                  

       (2)  The address for Mr. Waterfall and each of the MWV Accounts is 10
East 50th Street, New York, New York 10022.                                     

         (3)  Pursuant to  agreements  and  undertakings  with the Board and the
Commission  which were required in order for the Plan to become  effective,  Mr.
Waterfall is the only  individual  who  exercises  voting and  investment  power
(including  dispositive  power)  with  respect to Common  Stock owned by the MWV
Accounts.  MWV and its affiliates other than Mr. Waterfall are either investment
advisors to, or trustees or general partners of, the MWV Accounts.  Accordingly,
for purposes of the relevant  Exchange Act rules,  they could also be deemed the
beneficial  owners  of  Common  Stock  held by the MWV  Accounts.  The  possible
attribution of such beneficial ownership of Common Stock, expressed in number of
shares and percent of the class, to MWV and those affiliates is as follows:  MWV
-- 446,058 (9.0%);  MW Capital,  L.L.C. -- 130,100 (2.6%);  Prime Group, L.P. --
813,127  (16.5%);  Prime Group II, L.P. -- 1,156,964  (23.5%);  Prime Group III,
L.P. -- 803,834 (16.3%); Prime Group IV, L.P. -- 506,462 (10.3%); Prime Group V,
L.P. -- 134,747 (2.7%);  Prime,  Inc. -- 3,415,134  (69.3%);  and MW Management,
L.L.C. -- 613,330 (12.4%). In view of Mr. Waterfall's  possession of sole voting
and investment power over the Common Stock on behalf of the MWV Accounts,  these
entities disclaim beneficial ownership of Common Stock.                         

Security Ownership of Management.                                               

         As of March 26, 1998, the beneficial  ownership of Common Stock by each
of Elsinore's  directors and by its directors and executive officers as a group,
as such ownership is known by Elsinore, is as follows:                          

                                                        [Enlarge/Download Table]

Name of Beneficial Owner                Amount and Nature of Beneficial  Percent of Class
                                        Ownership                                        

                                                                                         
John C. "Bruce" Waterfall, Chairman of           4,646,440 (1)                    94.3   
  the Board                                                                              
Harry C. Hagerty, III,                              53,869 (2)                     1.1   
  Director                                                                               
Directors and executive                          4,700,309 (1)(2)                 95.4   
  officers as a group                                                                    

         (1) See note (3) to the preceding table discussing beneficial owners of
more than 5% of the  outstanding  Common  Stock for  information  regarding  Mr.
Waterfall's beneficial ownership.                                               

         (2) Mr.  Hagerty is deemed  the  beneficial  owner of 53,869  shares of
Common Stock by virtue of his ownership of a corporation which serves as general
partner of a limited partnership which owns these shares.                       

Changes in Control.                                                             

         A change  in  control  of the  Company  will  result  if the  Merger is
consummated  or if the Common  Stock held by the MWV Accounts is acquired by R&E
pursuant to the Option  Agreement.  Upon the  occurrence  of either  event,  the
Company  would be  controlled  by R&E which,  in turn, is controlled by Allen E.
Paulson. See Item 1. BUSINESS Agreement and Plan of Merger.                     

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.                       

         Chairman  of  the  Board   Waterfall  is  President   and  a  principal
shareholder  of MWV,  which manages the MWV Accounts.  Since the Plan  Effective
Date,  the MWV Accounts  have  beneficially  owned 94.3% of the Common Stock and
$29,104,000 principal amount of the New Second Mortgage Notes.                  

         As  discussed  in Item 1.  BUSINESS - The Four Queens  Casino,  RGME, a
subsidiary  of  Riviera,  manages the Four Queens  Casino  under the  Management
Agreement.  In connection with RGME's management,  RGME's principal officer also
serves,  at the request of  Elsinore,  as the sole  director and officer of Four
Queens on a  non-salaried  basis and is excluded from  performing  policy-making
functions  for  Elsinore.  Also as discussed in Item 1. BUSINESS - Agreement and
Plan of Merger,  Riviera is also a party to an agreement  with R&E providing for
the Riviera Merger. Effectiveness of the Riviera Merger is a condition precedent
to consummation of the Merger.  Upon  consummation of the Merger,  RGME would be
entitled to certain payments under the Management Agreement as discussed in Item
1. BUSINESS - The Four Queens Casino.                                           

         The Management Agreement was negotiated and went into effect before R&E
or any of its  affiliates  entered  into  negotiations  with Riviera or Elsinore
concerning the Merger,  the Riviera Merger,  the Option Agreement or the Riviera
Option Agreement.                                                               

         Under  the  Merger  Agreement  Elsinore  has  agreed  to  obtain a tail
insurance policy covering Elsinore's directors and officers for acts or failures
to act prior to the  effectiveness of the Merger,  and having  substantially the
same coverage and deductibles as Elsinore's  directors' and officers'  liability
insurance  policy as in effect on July 1, 1997.  The Merger  Agreement  provides
that the cost to Elsinore (net of any amounts paid by third parties) of the tail
insurance policy shall not exceed $150,000.  Based on discussions which Elsinore
has had with a nationally  recognized  insurance  provider,  Elsinore expects to
obtain that policy for a six-year term for a premium of approximately $95,000.  

PART IV         

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM          
8-K.                                                        

(a)      1. and 2. Financial Statements and Schedules                           

     The financial statements and schedules filed as part of this report
    are listed in the Index to Consolidated Financial Statements under
Item 8.                                                       

                                                        [Enlarge/Download Table]

         3.  List of exhibits                                                                                      

                                                                                                                   
         2.1*     First Amended Plan of Reorganization [2.1](5)                                                    

         2.2*     Order Confirming First Amended Plan of Reorganization [2.2](5)                                   

         2.3*     Bankruptcy Court Order Approving Plan Documentation [2.3](6)                                     

         3.1*     Amended and Restated Articles of Incorporation of Elsinore Corporation [3.1](7)                  

         3.2*     Amended and Restated Bylaws of Elsinore Corporation [3.2](7)                                     

         10.1*    Sublease, dated May 26, 1964, by and between A.W. Ham, Jr. and Four Queens, Inc. [10.1](1)       

         10.2*    Amendment of Sublease, dated June 15, 1964, by and between A.W. Ham, Jr. and Four Queens, Inc.   
                  [10.2](1)                                                                                        

         10.3*    Amendment of Sublease, dated February 25, 1965, by and between A.W. Ham, Jr. and Four Queens,    
                  Inc. [10.3](1)                                                                                   

         10.4*    Amendment of Sublease, dated January 29, 1973, by and between A.W. Ham, Jr. and Four Queens,     
                  Inc. [10.4](1)                                                                                   

         10.5*    Supplemental  Lease,  dated January 29, 1973, by and between A.W. Ham, Jr. and Four Queens,  Inc.
                  [10.5](1)                                                                                        

         10.6*    Lease Agreement, dated April 25, 1972, by and between Bank of Nevada and Leon H. Rockwell, Jr.,  
                  as Trustees of Four Queens, Inc. [10.6](1)                                                       

         10.7*    Lease, dated January 1, 1978, between Finley Company and Elsinore                                
                  Corporation [10.7](1)                                                                            

         10.8*    Ground Lease, dated October 25, 1983, between Julia E. Albers, Otto J. Westlake, Guardian, and   
                  Four Queens, Inc. [10.8](1)                                                                      

         10.9*    Ground Lease, dated October 25, 1983, between Katherine M. Purkiss and Four Queens, Inc.         
                  [10.9](1)                                                                                        

         10.10*   Ground Lease, dated October 25, 1983, between Otto J. Westlake and Four Queens, Inc. [10.10](2)  

         10.11*   Indenture of Lease, dated March 28, 1984, by and between the City of Las Vegas and Four Queens,  
                  Inc. [10.11](1)                                                                                  

         10.12*   Lease Indenture, dated May 1, 1970, by and between Thomas L. Carroll, et al. and Four Queens,    
                  Inc. [10.12](1)                                                                                  

         10.13*   Memorandum of Lease, dated January 26, 1973, between President and Board of Trustees of Santa    
                  Clara College and Four Queens, Inc. [10.13](1)                                                   

         10.14*   Indemnification Agreement, dated August 8, 1996, by and between Elsinore Corporation and Frank   
                  L. Burrell, Jr. [10.14](7)                                                                       

         10.15*   Indemnification  Agreement,  dated  August  8,  1996,  by  and                                   
                  between Elsinore Corporation and Howard Carlson [10.15](7)                                       

         10.16*   Indemnification  Agreement,  dated  August  8,  1996,  by  and                                   
                  between   Elsinore   Corporation   and  Robert  A.   McKerroll                                   
                  [10.16](7)                                                                                       

         10.17*   Indemnification  Agreement,  dated  August  8,  1996,  by  and                                   
                  between Elsinore Corporation and Thomas E. Martin [10.17](7)                                     

         10.18*   Agreement,  dated April 29,  1992,  by and among Four  Queens,                                   
                  Inc.,  Jeanne Hood,  Edward M. Fasulo and Richard A. LeVasseur                                   
                  [10.28](1)                                                                                       

         10.19*   Settlement  Agreement,  dated March 29,  1996,  by and between                                   
                  Palm Springs East Limited Partnership and the 29 Palms Band of                                   
                  Mission Indians [10.19](7)                                                                       

         10.20*   Loan  Agreement,  dated  November 12, 1993, by and between The                                   
                  Jamestown S'Klallam Tribe and JKT Gaming, Inc. [10.31](3)                                        

         10.21*   First Amendment to Loan Agreement,  dated January 28, 1994, by                                   
                  and between The Jamestown S'Klallam Tribe and JKT Gaming, Inc.                                   
                  [10.32](3)                                                                                       

         10.22*   Form of 13 1/2% Second Mortgage Note Due 2001 [10.22](7)                                         

         10.23*   Amended and Restated Indenture,  dated as of March 3, 1997, by                                   
                  and among Elsinore  Corporation,  the Guarantors named therein                                   
                  and  First  Trust  National   Association,   as  Trustee  (the                                   
                  "Restated Indenture") [10.23](7)                                                                 

         10.24    Waiver of Compliance, dated February 27 and March 3, 1998, under the Restated Indenture          

         10.25*   Pledge  Agreement,  dated as of October 8, 1993, from Elsinore                                   
                  Corporation  and ELSUB  Management  Corporation to First Trust                                   
                  National Association [10.7](2)                                                                   

         10.26*   Amendment of 1993 Pledge Agreement, dated March 3, 1997 [10.25](7)                               

         10.27*   Deed of Trust, Assignment of Rents and Security Agreement, dated as of October 8, 1993, by and   
                  among Four Queens, Inc., Land Title of Nevada, Inc. and First Trust National Association         
                  [10.8](2)                                                                                        

         10.28*   Modification of Subordinated Deed of Trust, dated March 3, 1997, by and between Four Queens,     
                  Inc. and First Trust National Association [10.27](7)                                             

         10.29*   Agreement, dated May 14, 1997, by Elsinore Corporation to file                                   
                  with  the  Securities  and  Exchange   Commission   copies  of                                   
                  instruments  defining  the rights of  holders  of 11.5%  First                                   
                  Mortgage Notes Due 2000 [10.28](7)                                                               

         10.30    Waiver of Compliance, dated March 17, 1998, under the 11.5% First Mortgage Notes Due 2000        

         10.31*   Assignment of Operating Agreements, dated as of October 8, 1993, by Palm Springs East Limited    
                  Partnership to First Trust National Association [10.9](2)                                        

         10.32*   Assignment of Operating Agreement, dated as of October 8, 1993, by Olympia Gaming Corporation    
                  to First Trust National Association [10.10](2)                                                   

         10.33    Common  Stock  Registration  Rights  Agreement,  dated  as  of                                   
                  February 28, 1997, among Elsinore  Corporation and the Holders                                   
                  of Registrable  Shares  referred to therein  (incorporated  by                                   
                  reference  herein and filed as (i)  Exhibit  10.31 to Elsinore                                   
                  Corporation's  Quarterly  Report  on Form  10-Q for the  three                                   
                  months  ended  March 31,  1997 and (ii)  Exhibit B to Schedule                                   
                  13D,  dated  March  10,  1997,  by  Morgens  Waterfall  Income                                   
                  Partners,  L.P.; Restart Partners,  L.P.; Restart Partners II,                                   
                  L.P.;  Restart Partners III, L.P.;  Restart Partners IV, L.P.;                                   
                  Restart  Partners  V,  L.P.;  The Common  Fund for  Non-Profit                                   
                  Organizations; MWV Employee Retirement Plan Group Trust; Betje                                   
                  Partners;   Phoenix  Partners,   L.P.;   Morgens,   Waterfall,                                   
                  Vintiadis & Company,  Inc.; MW Capital,  L.L.C.;  Prime Group,                                   
                  L.P.; Prime Group II, L.P.; Prime Group III, L.P.; Prime Group                                   
                  IV, L.P.;  Prime Group V, L.P.;  Prime,  Inc.; MW  Management,                                   
                  L.L.C.; John C. "Bruce" Waterfall;  and Edwin H. Morgens, with                                   
                  respect to the Common Stock)                                                                     

         10.34*   Description of Compensation Plan or Arrangement for Elsinore Corporation Directors and           
                  Executive Officers (filed pursuant to Item 14(c) of this report) [10.32](8)                      

         10.35*   First Amendment to Lease by and among Finley Company, Elsinore Corporation and Four Queens,      
                  Inc. effective May 14, 1997 [10.33] (9)                                                          

         10.36*   Agreement  and Plan of Merger by and among R & E Gaming Corp.,                                   
                  Elsinore  Acquisition Sub, Inc. and Elsinore Corporation dated                                   
                  September 15, 1997 [10.34] (9)                                                                   

         10.37    Option and Voting Agreement by and between R&E Gaming Corp. and Morgens, Waterfall,              
                  Vintiadis & Company, Inc. on behalf of certain investment accounts, dated September 15, 1997     

         10.38*   Amended Lease Schedule No. 1 to Master Lease Agreement by and between IGT North America, Inc.    
                  and Four Queens, Inc., and PDS Financial Corporation-Nevada, as assignee of Lessor's interest,   
                  dated November 28, 1994 [10.35](9)                                                               

         10.39*   Master Lease Agreement by and between PDS Financial Corporation-Nevada and Four Queens, Inc.     
                  dated May 1, 1997 [10.36] (9)                                                                    

         10.40*   Amendment to Master Lease Agreement by and between PDS Financial Corporation-Nevada and Four     
                  Queens, Inc. dated August 1, 1997 [10.37](9)                                                     

         10.41*   Warrants to Purchase 1,125,000 Shares of Common Stock of Elsinore Corporation Issued to Riviera  
                  Gaming Management Corp.-Elsinore [10.38](9)                                                      

         10.42*   Assignment by Richard A. LeVasseur to Four Queens, Inc. dated July 14, 1992 [10.39](9)           

         10.43*   First Supplemental Amended and Restated Indenture by and among                                   
                  Elsinore  Corporation,  the guarantors named therein and First                                   
                  Trust National Association,  as trustee, dated as of September                                   
                  18, 1997 [10.40](9)                                                                              

         10.44*   Form of Management Agreement among the Company, Four Queens, Inc. and Riviera Gaming Management  
                  Corp.-Elsinore, as approved by the Bankruptcy Court [10.41](9)                                   

         21.1     Subsidiaries of Elsinore Corporation                                                             

         27.1     Financial Data Schedule                                                                          

         99.1*    Voluntary Petition for Bankruptcy Pursuant to Chapter 11 of the Bankruptcy Code dated October    
                  31, 1995 [99.2](4)                                                                               

         99.2*    Olympia Gaming Corporation Voluntary Petition for Bankruptcy Pursuant to Chapter 11 of the       
                  Bankruptcy Code dated October 31, 1995 [99](4)                                                   

         99.3     "THE MERGER" Section of Information Statement, incorporated by                                   
                  reference herein and filed by Elsinore Corporation on Schedule                                   
                  14C with the Securities and Exchange Commission on January 13,                                   
                  1998.                                                                                            

         99.4*    Press release of Elsinore Corporation dated March 23, 1998 [99](10)                              

*Previously  filed with the Securities and Exchange  Commission as an exhibit to                                   
the  document  shown below under the Exhibit  Number  indicated  in brackets and                                   
incorporated herein by reference and made a part hereof:                                                           

         (1)       Annual Report on Form 10-K for the year ended December 31, 1992 (Securities and Exchange        
                   Commission File Number 1-7831)                                                                  

         (2)       Current Report on Form 8-K dated October 19, 1993                                               

         (3)       Annual Report on Form 10-K for the year ended December 31, 1993                                 

         (4)       Current Report on Form 8-K dated November 7, 1995                                               

         (5)       Current Report on Form 8-K dated August 8, 1996                                                 

         (6)       Current Report on Form 8-K dated March 14, 1997                                                 

         (7)       Quarterly Report on Form 10-Q for the three months ended March 31, 1997                         

         (8)       Quarterly Report on Form 10-Q for the six months ended June 30, 1997                            

         (9)       Quarterly Report on Form 10-Q for the nine months ended September 30, 1997                      

         (10)      Current Report on Form 8-K dated March 24, 1998                                                 

(b) No reports on Form 8-K were filed during the last quarter of 1997.          

(c) Exhibits required by Item 601 of Regulation S-K.                            

Exhibits, other than those incorporated by reference as listed in               
Item 14(a) (3), appear after the signature page of this report.                 

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SIGNATURES                                                                      

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

                            ELSINORE CORPORATION
                    (Registrant)

                                   By:    /s/ Jeffrey T. Leeds
                                   JEFFREY T. LEEDS, President
                                   And Chief Executive Officer

                                  By:    /s/ S. Barton Jacka
                                   S. BARTON JACKA, Secretary,
                               Treasurer and Principal
                          Accounting Officer

Dated: March 31, 1998                                                           

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities as indicated on March 31, 1998.                

/s/ John C. "Bruce Waterfall         /s/ Jeffrey T. Leeds                       
John C. "Bruce" Waterfall            Jeffrey T. Leeds                           
Chairman of the Board of Directors   President and Director                     
                   (Chief Executive Officer)

/s/ S. Barton Jacka                 /s/ Edward M. Nigro                       
S. Barton Jacka                      Edward M. Nigro                            
Secretary, Treasurer,                Director                                   
Principal Accounting                                                            
Officer and Director                                                            

/s/ Harry C. Hagerty, III                                                       
Harry C. Hagerty, III                                                           
Director                                                                        

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 EXHIBIT 10.24

MORGAN STANLEY                                                                  

MORGAN STANLEY & CO.                                                            
INCORPORATED                                                                    
ONE PIERREPONT PLAZA                                                            
BROOKLYN, NEW YORK 11201                                                        
(718) 754-1000                                                                  

WAIVER OF COMPLIANCE                                                            

February 27, 1998                                                               

To:  Elsinore Corporation                                                       

First Trust  National  Association,  as trustee  ("Trustee")  under that certain
Amended and Restated Indentures dated as of March 3, 1997 ("the Indenture"),  by
and among Elsinore  Corporation (the  "Company"),  the guarantors named therein,
and Trustee.                                                                    

Re:  $30,000,000 13 1/2% Second Mortgage Notes due 2001 of Elsinore Corporation.
     ---------------------------------------------------------------------------

Cede & Co., the nominee of the  Depository  Trust  Company  ("DTC")  pursuant to
Section 7.12 and 10.2 of the Indenture hereby.                                  

1.   Certifies  that it is the holder of record of $29,104.00  principal  amount
     (the "Principal  Amount") of the Securities,  which Principal  amount is on
the date hereof, on deposit in the DTC account of Morgan Stanley      

2.   At the request of Morgan Stanley & Co. Incorporated and as holder of record
     of the Principal  amount waives  compliance by the Company,  as of December
     31, 1997 and March 31, 1998, with Section 5.15 of the Indenture  pertaining
     to  maintenance  of  certain   Consolidated  Fixed  Charges  Coverage  Rule
("Ratio"); and                                                        

3.   In  connection  with such  waiver,  agrees that it will not take any action
     with respect to the principal amount, including providing or requesting the
     Trustee  to  provide a notice of any  Default  based  upon the Ratio  under
Section 7.1 (4) of the Indenture, prior to January 2, 1999.           

This Waiver shall be effective upon delivery to the company and the Trustee. All
capitalized words not defined herein are used as defined in the Indenture.      

Cede & Co.                                                                      

2/27/98                                                                         

By:      /s/ John L. Shuermann                                                  
PRINCIPAL                                                     
JOHN L. SHUERMANN, Partner                                    

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MORGAN STANLEY                                                                  

MORGAN STANLEY & CO.                                                            
INCORPORATED                                                                    
ONE PIERREPONT PLAZA                                                            
BROOKLYN, NEW YORK 11201                                                        
(718) 754-1000                                                                  

WAIVER OF COMPLIANCE                                                            

March 3, 1998                                                                   

To:  Elsinore Corporation                                                       

First Trust  National  Association,  as trustee  ("Trustee")  under that certain
Amended and Restated Indentures dated as of March 3, 1997 ("the Indenture"),  by
and among Elsinore  Corporation (the  "Company"),  the guarantors named therein,
and Trustee.                                                                    

Re:  $30,000,000.13 1/2% Second Mortgage Notes due 2001 of Elsinore Corporation.
     ---------------------------------------------------------------------------

Cede & Co., the nominee of the  Depository  Trust  Company  ("DTC")  pursuant to
Section 7.12 and 10.2 of the Indenture hereby.                                  

1.   Certifies  that it is the holder of record of $29,104.00  principal  amount
     (the "Principal  Amount") of the Securities,  which Principal  amount is on
the date hereof, on deposit in the DTC account of Morgan Stanley      

2.   At the request of Morgan Stanley & Co. Incorporated and as holder of record
     of the Principal  amount waives  compliance by the Company,  as of December
     31, 1997 and March 31, 1998, with Section 5.15 of the Indenture  pertaining
     to  maintenance  of  certain   Consolidated  Fixed  Charges  Coverage  Rule
("Ratio"); and                                                        

3.   In  connection  with such  waiver,  agrees that it will not take any action
     with respect to the principal amount, including providing or requesting the
     Trustee  to  provide a notice of any  Default  based  upon the Ratio  under
Section 7.1 (4) of the Indenture, prior to January 2, 1999.           

This Waiver shall be effective upon delivery to the company and the Trustee. All
capitalized words not defined herein are used as defined in the Indenture.      

Cede & Co.                                                                      
3/3/98                                                                          

By:      /s/ John L. Shuermann                                                  
PRINCIPAL                                                     
JOHN L. SHUERMANN, Partner                                    

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                                   EXHIBIT 10.30

                                  WAIVER OF COMPLIANCE

To:      Elsinore Corporation (the "Company")                                   

        Re: $3,855,739.39 11.5% Mortgage Notes due 2000 of Elsinore Corporation.
            --------------------------------------------------------------------

         The  undersigned,  pursuant  to Sections  7.2 and 10.3 of that  certain
Amended and Restated Note Agreement  ("Agreement") dated as of March 3, 1997, by
and among the Company and the undersigned, hereby:                              

       1.       Certify that they are the Holders of a majority in aggregate
principal amount of the outstanding Notes;                                      

         2. Waive  compliance by the Company,  as of December 31, 1997 and March
31, 1998,  with Section 5.17 of the  Agreement  pertaining to  maintenance  of a
certain Consolidated Fixed Charges Coverage Ratio ("Ratio"); and                

         3. In  connection  with such  waiver,  agree that they and each of them
will  not  take  any  action  prior  to  January  2,  1999  in  respect  of  any
non-compliance  by the Company with Section 5.17 of the  Agreement in the fiscal
quarter ending June 30, 1998 and September 30, 1998,  including providing notice
of any Default based upon the Ratio under Section 7.1(d) of the Agreement.      

         This  Waiver  shall be  effective  upon  delivery to the  Company.  All
capitalized words not defined herein are used as defined in the Agreement.      

                                          PUTNAM DIVIERSIFIED INCOME TRUST

                                   By:      /s/  John Verani
                                                     JOHN VERANI, Vice President

                                        PUTNAM HIGH INCOME CONVERTIBLE
                       AND BOND FUND

                                   By:      /s/  John Verani
                                                     JOHN VERANI, Vice President

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PUTNAM MASTER INTERMEDIATE
INCOME TRUST  

                                     By:      /s/  John Verani
                                                     JOHN VERANI, Vice President

                                           PUTNAM MANAGED HIGH YIELD TRUST

                                     By:      /s/  John Verani
                                                     JOHN VERANI, Vice President

 PUTNAM VARIABLE TRUST

                                           PUTNAM VT DIVERSIFIED INCOME FUND

                                   By:      /s/  John Verani
                                                     JOHN VERANI, Vice President

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Exhibit 10.37                                                                   

                           OPTION AND VOTING AGREEMENT

                          by
                           and
                           between

                           R&E GAMING CORP.,
                           as Purchaser,

                           and

                          MORGENS, WATERFALL, VINTIADIS & COMPANY, INC.,
                           on behalf of certain investment accounts,
                           as Seller

                          Dated as of September 15, 1997

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   OPTION AND VOTING AGREEMENT

                  OPTION AND VOTING  AGREEMENT (this  "Agreement"),  dated as of
September 15, 1997, by and between R & E Gaming  Corp.,  a Delaware  corporation
(together  with its  assignees  or  designees,  the  "Purchaser"),  and Morgens,
Waterfall,  Vintiadis & Company,  Inc., on behalf of certain investment accounts
identified on the signature pages hereto (the "Seller").                        

                  WHEREAS,  concurrently with the execution and delivery of this
Agreement,  the  Purchaser is entering into an Agreement and Plan of Merger (the
"Elsinore  Merger  Agreement")  with Elsinore  Acquisition  Sub,  Inc., a Nevada
corporation and a wholly owned subsidiary of the Purchaser  ("Acquisition Sub"),
and Elsinore  Corporation,  a Nevada corporation  ("EC"),  pursuant to which the
Acquisition Sub shall merge with and into EC (the "Elsinore  Merger"),  upon the
terms and conditions set forth therein;                                         

                  WHEREAS,  the Seller desires that the  Purchaser,  Acquisition
Sub and EC enter into the Elsinore Merger Agreement;                            

                  WHEREAS, as partial  consideration for the grant by the Seller
of the option hereunder,  the Purchaser agrees to pay the Seller an amount equal
to  $2,936,550.08,  if the  transactions  contemplated  by the  Elsinore  Merger
Agreement are not consummated,  other than as a result of certain  circumstances
specified herein;                                                               

                  WHEREAS,   in  order  to  ensure  payment  of  the  obligation
described  in  the  immediately  preceding  paragraph,   concurrently  with  the
execution and delivery of this Agreement and the Elsinore Merger Agreement,  the
Purchaser has  delivered a letter of credit in the face amount of  $2,936,550.08
to the  Seller,  which is  substantially  in the form of  Exhibit A hereto  (the
"Letter of  Credit"),  which shall  provide that it may be drawn on in the event
the  transactions   contemplated  by  the  Elsinore  Merger  Agreement  are  not
consummated, other than as a result of certain circumstances specified herein;  

                  WHEREAS,  the Seller  beneficially owns 4,646,440 shares of EC
common stock, par value $.001 per share (all shares of EC common stock being the
"Common  Stock" and all shares of Common  Stock owned by the  Seller,  being the
"Shares"),  which  Shares  represent  approximately  94.3%  of  the  issued  and
outstanding shares of Common Stock; and                                         

                         1

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                  WHEREAS,  in  consideration  for  entering  into the  Elsinore
Merger Agreement,  the Seller desires to (i) grant to the Purchaser an option to
purchase  from the  Seller  all (but not less than all) of the  Shares  upon the
terms and subject to the conditions set forth herein and (ii) vote the Shares in
the manner set forth herein;                                                    

                  NOW, THEREFORE, in consideration of the foregoing premises and
the agreements contained herein, and for other good and valuable  consideration,
the receipt and adequacy of which are hereby  acknowledged,  the parties hereto,
intending to be legally bound, agree as follows:                                

     ARTICLE I
       GRANT OF OPTION

                  SECTION 1.1 Grant of Option. Upon the terms and subject to the
conditions  set forth  herein,  the Seller  hereby  grants to the  Purchaser  an
irrevocable option (the "Purchase Option") to purchase the Shares.              

                  The Purchase Option shall be exercisable,  in whole and not in
part, by written  notice (the "Exercise  Notice") by the Purchaser  delivered to
the Seller,  at any time after the date  hereof,  but not later than the date on
which the Elsinore  Merger  Agreement is terminated  pursuant to Section  6.1(c)
thereof or if the Elsinore Merger Agreement has otherwise been terminated,  then
June 1,  1998  (such  period  being  hereinafter  referred  to as the  "Exercise
Period");  provided,  however, that the Purchase Option shall not be exercisable
at any time when such exercise  would  violate any  applicable  law,  including,
without  limitation,  any  statute or  regulation  related to the  ownership  or
control  of  a  publicly  traded  company  registered  with  the  Nevada  Gaming
Commission  (the "Gaming  Commission").  In addition,  in the event the Elsinore
Merger is consummated,  the Purchase Option shall terminate  automatically,  the
Shares shall be converted into the right to receive the Merger Consideration set
forth in the Elsinore Merger  Agreement;  it being  understood that the Elsinore
Merger Agreement  provides for a reduction of the  consideration  payable,  upon
consummation  of the Elsinore  Merger,  to the Seller on account of any interest
previously  paid to the Seller  pursuant to Section  1.2(b)  hereof.  The Seller
hereby  consents to the reduction of the  consideration  payable to it under the
terms of the  Elsinore  Merger  Agreement  by the amount of interest  paid to it
pursuant to Section 1.2(b) hereof.                                              

                         2

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                  Upon  exercise of the  Purchase  Option or the exercise of the
Put  Option  (as  defined  in Section  4.7  hereof),  subject to the  conditions
contained in Article V hereof, the Seller shall sell, assign,  transfer,  convey
and deliver to the Purchaser,  and the Purchaser  shall purchase and accept from
the Seller at the closing (the  "Closing") to be held as soon as possible  after
the  satisfaction  or waiver of the  conditions set forth in this Agreement (the
date on which the Closing  occurs  shall be  referred to herein as the  "Closing
Date"), the Seller's rights, title and interest in and to the Shares in exchange
for the Purchase Price (as defined below).                                      

SECTION  1.2  Purchase Price.               

                    (a)  Upon exercise of the Purchase Option or the Put Option,
the Purchaser  agrees to pay to the Seller on the Closing Date, in consideration
for the  purchase of the Shares,  an  aggregate  amount equal to $3.16 per Share
(the  "Initial  Purchase  Price" and,  when adjusted as provided in this Section
1.2, the "Purchase  Price"),  for an aggregate of  $14,682,750.40 in addition to
any accrued but unpaid interest payments required by Section 1.2(b).            

                           (b)  During the period commencing on June 1, 1997 and
ending on the date immediately  preceding the earlier of the Closing Date or the
date this  Agreement is terminated in accordance  with its terms,  the Purchaser
agrees  to pay to the  Seller  $3,793.38  per  day,  which  represents  interest
calculated at 9.43% per annum on the Initial Purchase Price,  payable monthly in
arrears on each monthly  anniversary  of such  execution  and not later than the
fifth day following such monthly  anniversary of such period,  unless  otherwise
provided in this Section  1.2(b).  The first payment to be made by the Purchaser
shall be made on the date of execution of this  Agreement  and shall  consist of
all amounts due and payable to such date under this Section 1.2(b). All payments
required to be made in accordance with this Section 1.2(b) shall be made by wire
transfer or immediately available funds to such account as the Seller shall have
designated on Exhibit B hereto.                                                 

                     (c)  If, between the date of this Agreement and the Closing
Date,  the number of issued and  outstanding  shares of Common  Stock shall have
been  changed  (or EC shall  have  declared  a record  date  with  respect  to a
prospective  change of the Common Stock) into a different  number of shares or a
different  class  of  shares  by  reason  of any  stock  dividend,  subdivision,
reclassification,  recapitalization,  split,  combination or exchange of shares,
this Agreement  (including the terms "Share" and "Common  Stock") will be deemed
to relate to all  securities  issued with respect to the Common  Stock,  and the
Purchase Price shall be correspondingly                                         

                         3

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adjusted  to  reflect  such  stock  dividend,   subdivision,   reclassification,
recapitalization, split, combination or exchange of shares.                     

                     (d)  If, between the date of this Agreement and the Closing
Date,  EC issues or commits to issue any shares of Common  Stock (other than (i)
the issuance of 70,687 shares of Common Stock to the holders of unsecured claims
against EC or Four Queens, Inc., (ii) the issuance of 1,125,000 shares of Common
Stock to Riviera pursuant to warrants held by Riviera (the "Riviera  Warrants"),
and (iii) any other options,  convertible securities and other rights to acquire
shares of  Common  Stock  referred  to in  Section  2.2 or  Schedule  2.2 of the
Elsinore  Merger  Agreement  or issued in  accordance  with Section 4.1 thereof,
without  consideration  or for a consideration  per share less than the Purchase
Price in effect  immediately  prior to such  issuance  (in the case of  non-cash
consideration,  deemed to be the fair market value thereof),  the Purchase Price
shall  immediately be reduced to the price determined by dividing (1) the sum of
(A) the number of shares of Common Stock  outstanding  immediately prior to such
issuance  multiplied by the Purchase Price in effect  immediately  prior to such
issuance and (B) the  consideration,  if any, received by EC upon such issuance,
by (2) the total number of shares of Common Stock outstanding  immediately after
such issuance.                                                                  

                     (e)  If, between the date of this Agreement and the Closing
Date, any dividend or other  distribution  (other than a stock  dividend,  which
shall require the  adjustment set forth in clause (c) above) is declared or paid
upon the Common Stock (whether in cash,  property or  securities),  the Purchase
Price shall be reduced by the per share amount of such dividend or  distribution
(in the case of non-cash  dividends or distributions,  by an amount equal to the
fair market value thereof).                                                     

                     (f)  If, between the date of this Agreement and the Closing
Date, EC or any of its subsidiaries  shall  repurchase or otherwise  acquire any
shares of Common Stock (other than shares issued pursuant to warrants,  options,
convertible  securities  and other  rights  to  acquire  shares of Common  Stock
referred to in Section 2.2 or Schedule 2.2 of the Elsinore  Merger  Agreement or
issued in accordance with Section 4.1 thereof),  and the per share consideration
paid by EC or its subsidiaries (in the case of non-cash consideration, valued of
the fair market value thereof)  exceeds the Purchase Price per share,  the total
Purchase  Price shall be reduced to the price  determined  by  dividing  (i) the
difference  between  (A) the  number  of  shares  of  Common  Stock  outstanding
immediately  prior to such  repurchase or redemption  multiplied by the Purchase
Price in effect  immediately  prior to such purchase or redemption minus (B) the
consideration, if any, paid by                                                  

                         4

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EC for such  repurchase  or  redemption,  by (ii) the total  number of shares of
Common Stock outstanding immediately after such repurchase or redemption.       

           SECTION  1.3  Termination of Elsinore Merger Agreement.

                        (a)  The Seller shall be entitled to receive, as partial
consideration  for  the  grant  by the  Seller  of the  Purchase  Option  to the
Purchaser hereunder, an amount equal to $2,936,550.08 if (A) the Elsinore Merger
Agreement is terminated (except pursuant to a Non-Payment  Termination Event (as
defined herein) or (B) the Elsinore Merger does not occur in accordance with the
terms  thereof on or before  April 1, 1998 (or, if the  termination  date of the
Elsinore Merger Agreement is extended in accordance with Section 6.1(c) thereof,
June 1,  1998)  for any  reason  other  than  the  occurrence  of a  Non-Payment
Termination  Event;  provided,  that the Seller shall be entitled to receive the
consideration  described above in the event that the Seller shall be entitled to
receive the  consideration  described  in Section 1.3 of the Riviera  Option and
Voting Agreement (as defined in Section 4.7 hereof) in accordance with the terms
thereof;  and,  provided  further  that  the  Seller  shall be  entitled  to the
consideration  described  above if the Elsinore  Merger is not  consummated as a
result of the breach by Purchaser,  Acquisition  Sub, or Allen E. Paulson of any
covenants  or  warranties   made  by  or  about  them  in  the  Elsinore  Merger
Agreement;and,  provided  further,  that the Seller shall not be entitled to the
consideration  described  above if the Elsinore  Merger is not  consummated as a
result of the breach of this Agreement by the Seller. A "NonPayment  Termination
Event" shall mean the termination of the Elsinore Merger  Agreement  pursuant to
Sections  6.1(a),  6.1(b),  6.1(c)  (because of the failure to satisfy  Sections
5.1(a), 5.1(c), 5.1(d),  5.2(c), or 5.2(f)),  6.1(d),  6.1(e)(iii) or 6.1(e)(iv)
thereof.  In  addition,  in the event  that the  Elsinore  Merger  Agreement  is
terminated  pursuant  to Section  6.1(c)  because of the  failure of  Purchaser,
Acquisition Sub or Mr. Allen E. Paulson to obtain the required  approvals of the
Gaming Authorities,  then such event shall constitute a Non-Payment  Termination
Event  unless  Mr.  Allen E.  Paulson  is in  breach of his  representation  and
covenant contained in Section 6.2(d) of the Elsinore Merger Agreement.          

                  (b)  In order to ensure payment of the obligation described in
Section  1.3(a)  hereof,  concurrently  with the  execution and delivery of this
Agreement,  the Purchaser shall deliver a Letter of Credit in the face amount of
$2,936,550.08  to the Seller.  In the event that the Seller shall be entitled to
receive  compensation  pursuant to Section  1.3(a)  hereof,  the Seller shall be
entitled to demand payment under the Letter of Credit issued to the Seller.     

                         5

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                   (c)  In the event the Elsinore Merger Agreement is terminated
pursuant to Sections 6.1(b),  6.1(d)(i),  6.1(d)(ii),  6.1(d)(iii),  6.1(d)(iv),
6.1(d)(v),  6.1(e)(iii) or 6.1(e)(iv) thereof,  the Seller shall immediately pay
to the Purchaser an amount equal to all payments received by the Seller pursuant
to this  Agreement;  provided  that the Seller  shall be entitled to retain such
payments if either (i) the Shares shall be purchased  pursuant to this Agreement
or (ii) the Elsinore  Merger is not consummated as a result of the breach by the
Purchaser,  Acquisition  Sub or Allen E. Paulson of any  covenants or warranties
made by or about them in the Elsinore Merger Agreement.                         

ARTICLE II    
REPRESENTATIONS AND WARRANTIES  

                  SECTION 2.1  Representations and Warranties of the Seller. The
Seller represents and warrants to the Purchaser as follows:                     

                  (a)  Organization and Standing.  The Seller is duly organized,
validly  existing  and  in  good  standing  under  the  laws  of  its  state  of
organization,  and has all  requisite  power  and  authority  to enter  into and
perform its obligations under this Agreement.                                   

                  (b)  Authority.  The execution and delivery of this Agreement,
and the performance by the Seller of its obligations  hereunder,  have been duly
authorized by all  necessary  action on the part of the Seller and the owners of
the investment  accounts as to which it is acting.  This Agreement has been duly
executed  and  delivered  by the Seller  and,  assuming  the due  execution  and
delivery hereof by the Purchaser, this Agreement constitutes a valid and binding
obligation of the Seller,  enforceable against the Seller in accordance with its
terms.                                                                          

                  (c)  The Stock.  The Seller is the record and beneficial owner
of, and has good and valid title to, the number of Shares recited to be owned in
the recitals hereof, free and clear of all liens, encumbrances, claims, charges,
security   interests,   pledges,   restrictions,   assessments  and  limitations
(including voting limitations) of every kind whatsoever (collectively, "Liens").
The Seller shall deliver to the Purchaser,  and the Purchaser will acquire, good
and valid title in the Shares,  with full voting  rights,  free and clear of any
Liens.   Except  for  this  Agreement,   there  are  no  outstanding   warrants,
subscriptions, rights (including preemptive rights), options, calls, commitments
or other agreements or Liens to encumber,  purchase or acquire any of the Shares
of the Seller or securities convertible into the Shares of the                  

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Seller.  Neither the Seller nor any of its  affiliates  or  associates  (as such
terms are defined in Rule 12b-2 promulgated under the Securities Exchange Act of
1934,  as amended)  holds either of record or  beneficially  any  securities  or
capital  stock of EC or any of EC's direct or indirect  subsidiaries  other than
the Seller's Shares.                                                            

                      (d)  No Conflict.  The execution of this Agreement and the
consummation of the transactions contemplated hereby will not require notice to,
or the  consent of, any party to any  contract,  lease,  agreement,  mortgage or
indenture  (each a "Contract")  to which the Seller is a party or by which it is
bound, or the consent, approval, order or authorization of, or the registration,
declaration or filing with,  any  governmental  authority,  except for those (i)
required under the Hart-Scott-  Rodino  Antitrust  Improvements  Act of 1976, as
amended (the "HSR Act"),  if any, (ii) required by the Nevada Gaming  Commission
(the "Gaming  Commission"),  the Nevada State Gaming Control Board (the "Control
Board"),  the City of Las Vegas ("Las  Vegas") and the Clark  County  Liquor and
Gaming  Licensing Board (the "CCB") (the Gaming  Commission,  the Control Board,
Las Vegas and the CCB are collectively referred to as the "Gaming Authorities"),
including, without limitation, approvals under the Nevada Gaming Control Act, as
amended, and the rules and regulations promulgated thereunder (the "Nevada Act")
or (iii)  set  forth on  Schedule  2.1(d)  hereto.  Assuming  that the  notices,
consents and approvals  referred to in the  preceding  sentence have been given,
made or obtained, the execution,  delivery and performance by the Seller of this
Agreement and the consummation of the transactions  contemplated hereby will not
(i)  violate  any  law,  statute,  ordinance,  regulation,  rule or order of any
Federal or Nevada authority  (collectively,  "Laws"), (ii) result in a breach or
violation of any  provision  of,  constitute a default  under,  or result in the
termination  of, or an  acceleration  of  indebtedness  or  creation of any Lien
under,  any  material  contract to which the Seller is a party or by which it is
bound or (iii)  conflict  with or violate any  provision  of the  organizational
documents of the Seller.                                                        

                   (e)  Brokers, Finders, etc.  The Seller is not a party to any
agreement or understanding  that would make it subject to any valid claim of any
broker,  investment banker,  finder or other intermediary in connection with the
transactions contemplated by this Agreement.                                    

                  SECTION 2.2  Representations  and Warranties of the Purchaser.
The Purchaser hereby represents and warrants to the Seller as follows:          

               (a)  Organization and Standing.  The Purchaser is duly organized,
validly existing and in good standing under the laws of its state of incorpo-   

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ration,  and has all requisite power and authority to enter into and perform its
obligations under this Agreement.                                               

                  (b)  Authority.  The execution and delivery of this Agreement,
and the  performance by the Purchaser of its  obligations  hereunder,  have been
duly  authorized  by all  necessary  action on the part of the  Purchaser.  This
Agreement has been duly  executed and delivered on behalf of the Purchaser  and,
assuming the due execution  and delivery  hereof by the Seller,  this  Agreement
constitutes a valid and binding obligation of the Purchaser, enforceable against
the Purchaser in accordance with its terms.                                     

                      (c)  No Conflict.  The execution of this Agreement and the
consummation of the transactions contemplated hereby will not require notice to,
or the consent of, any party to any  Contract to which the  Purchaser  or any of
its  affiliates  is a party or by which  any of them is bound,  or the  consent,
approval, order or authorization of, or the registration,  declaration or filing
with, any  governmental  authority,  except for (i) those required under the HSR
Act, if any, (ii) approvals, as necessary, by the Gaming Authorities, including,
without limitation, approvals under the Nevada Act, and (iii) approval by the EC
Board of Directors  (which Seller  represents has been  granted).  Except as set
forth in the preceding sentence, the execution,  delivery and performance by the
Purchaser  of  this  Agreement  and  the   consummation   of  the   transactions
contemplated  hereby will not (i)  violate any Laws,  (ii) result in a breach or
violation of any provision of, or  constitute a default  under,  any contract to
which the  Purchaser is a party or by which it is bound or (iii)  conflict  with
any provision of the certificate of incorporation or bylaws of the Purchaser.   

                     (d)  Purchase For Investment.  Upon exercising the Purchase
Option or in  connection  with the Put  Option,  the  Purchaser  represents  and
warrants  that it intends to acquire  the Shares for its own  account,  not as a
nominee or agent,  and not with a view to, or for offer or resale in  connection
with,  any  distribution  thereof in violation of the Securities Act of 1933, as
amended,  and the rules  and  regulations  thereunder  (the  "Securities  Act"),
without  prejudice,  however,  to the Purchaser's  right at all times to sell or
otherwise  dispose of all or any part of said  Shares  pursuant  to a  effective
registration  statement  under  the  Securities  Act  and any  applicable  state
securities  laws, or under an exemption from  registration  available  under the
Securities Act and such other  applicable  state  securities laws. The Purchaser
represents  and  warrants  that  it  (i)  is  knowledgeable,  sophisticated  and
experienced  in  business  and  financial  matters,  and fully  understands  the
limitations                                                                     

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on transfer  described above, and (ii) is an "accredited  investor" as such term
is defined in Rule 501(a) of Regulation D under the Securities Act.             

                 (e)  No Brokers.  Except for Jefferies & Co., Inc., neither the
Purchaser  nor  Acquisition  Sub has employed  any broker or finder,  nor has it
incurred any liability for any brokerage  fees,  commissions or finders' fees in
connection with the transactions  contemplated by this Agreement or the Elsinore
Merger Agreement.                                                               

ARTICLE III     
VOTING AGREEMENTS   

                  SECTION 3.1 Merger.  The Seller  agrees and  covenants  to the
Purchaser  that at any  meeting  of  stockholders  of EC called to vote upon the
Elsinore Merger and the Elsinore Merger Agreement or at any adjournment  thereof
or in any other  circumstances upon which a vote, consent or other approval with
respect to the Elsinore Merger and the Elsinore Merger Agreement is sought,  the
Seller shall cause its Shares to be present for quorum  purposes and to vote (or
caused to be voted)  its  Shares in favor of the terms  thereof  and each of the
other transactions contemplated by the Elsinore Merger Agreement.               

                  SECTION  3.2  Competing  Transaction.  The  Seller  agrees and
covenants to the Purchaser that at any meeting of  stockholders  of EC or at any
adjournment thereof or in any other circumstances upon which their vote, consent
or other  approval is sought,  the Seller  shall vote (or cause to be voted) its
Shares  against (i) any merger  agreement  or merger  (other  than the  Elsinore
Merger Agreement and the Elsinore Merger),  consolidation,  combination, sale of
substantial  assets,  sale or issuance of securities of EC or its  subsidiaries,
reorganization,  joint venture,  recapitalization,  dissolution,  liquidation or
winding  up of or by EC or its  subsidiaries  and  (ii)  any  amendment  of EC's
Restated Articles of Incorporation (the "Articles of Incorporation") or Restated
and Amended Bylaws or other  proposal or transaction  involving EC or any of its
subsidiaries  which  amendment  or other  proposal or  transaction  would in any
manner  impede,  frustrate,  prevent,  nullify  or  result  in a  breach  of any
covenant,  representation or warranty or any other obligation or agreement of EC
under or with respect to, the Elsinore Merger,  the Elsinore Merger Agreement or
any of the other  transactions  contemplated by the Elsinore Merger Agreement or
by this  Agreement  (each  of the  foregoing  in  clause  (i) or (ii)  above,  a
"Competing Transaction").                                                       

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  ARTICLE IV
   COVENANTS

                  SECTION 4.1 Exclusive Dealing.  The Seller agrees that it will
not,  directly or indirectly,  through any director,  officer,  agent,  partner,
shareholder, affiliate, representative or otherwise:                            

                       (a)  solicit, initiate, encourage submission of offers or
proposals  from, or participate in any  discussions,  negotiations,  agreements,
arrangements  or  understandings  with,  any person in  respect  of a  Competing
Transaction; or                                                                 

                   (b)   participate in any discussions or negotiations with, or
furnish or afford  access to any  information  to, any other person  regarding a
Competing  Transaction,  or otherwise cooperate in any manner with, or assist or
participate  in,  facilitate  or  encourage,  any effort or attempt by any other
person to engage in any Competing Transaction.                                  

                  SECTION  4.2 No Sale.  Without  limiting  the  foregoing,  the
Seller  agrees that it will not,  directly or  indirectly,  (i) sell,  transfer,
assign,  pledge,  hypothecate  or otherwise  encumber or dispose of, (ii) give a
proxy with  respect to, or (iii)  limit the right to vote in any manner,  any of
the Shares owned by it, except pursuant to the express terms of this Agreement. 

                  SECTION 4.3  Further  Assurances.  From time to time,  whether
before,  at, or after the  Closing,  each party  hereto  agrees to  execute  and
deliver,  or cause to be executed and delivered,  such  additional  instruments,
certificates  and other documents,  and to take such other action,  as the other
party  hereto  may  reasonably  require  in  order to carry  out the  terms  and
provisions  of  this  Agreement  and  the   transactions   contemplated   hereby
(including,  without  limitation,  voting  the  Shares  in  favor  of  any  such
transaction).                                                                   

                  SECTION  4.4  Expenses.  All  reasonable  actual out of pocket
costs and  expenses,  including  reasonable  legal  fees,  incurred  solely  and
directly in  connection  with the  negotiation,  execution  and delivery of this
Agreement and the consummation of the transactions  contemplated hereby shall be
paid by the Purchaser upon receipt of reasonably detailed statements or invoices
therefor.                                                                       

              SECTION  4.5  Publicity.  The Seller and the Purchaser agree that,
prior to the Closing, no public release or announcement concerning this         
Agreement                                                                       

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shall be issued by any such  party  without  the prior  written  consent  (which
consent shall not be unreasonably  withheld) of the other parties hereto, except
as such release or announcement may be required by Law (in which event the other
parties  hereto  shall have  reasonable  opportunity  to comment on the form and
content of the disclosure).                                                     

                  SECTION  4.6  Notice of  Certain  Events.  The  Seller and the
Purchaser each agrees to notify the other party hereto promptly of (a) any event
or condition that,  with or without notice or lapse of time,  would cause any of
the  representations  and  warranties  made by such party herein to be no longer
complete  and  accurate  as of any date on or before the Closing  Date,  (b) any
failure,  with or without  notice or lapse of time, on the part of such party to
comply with any of the covenants or agreements on its part  contained  herein at
any time on or before the Closing Date or (c) the occurrence of any event,  with
or without notice or lapse of time, that may make the satisfaction of any of the
conditions set forth in Section 5.1 hereof impossible or unlikely.              

                  SECTION  4.7  Seller's  Put.  If any time prior to the Closing
Date the  transactions  contemplated  by (i) the  Agreement  and Plan of Merger,
dated as of September 15, 1997 (the "Riviera  Merger  Agreement"),  by and among
the Purchaser,  Riviera  Acquisition Sub Inc., a Nevada corporation and a wholly
owned subsidiary of the Purchaser ("RAS"), and Riviera Holdings  Corporation,  a
Nevada  corporation  ("Riviera"),  which provides for,  among other things,  the
merger of RAS with and into  Riviera (the  "Riviera  Merger") or (ii) the Option
and Voting  Agreement,  dated as of September 15, 1997 (the "Riviera  Option and
Voting  Agreement"),  by and among  the  Purchaser,  the  Seller,  Keyport  Life
Insurance  Company,  on behalf of a certain investment  account,  and SunAmerica
Life Insurance Company,  are consummated and a closing has occurred  thereunder,
then,  upon written notice to the Purchaser by the Seller,  the Purchaser  shall
purchase all of the Shares at the aggregate  Purchase  Price in accordance  with
and subject to the terms and  conditions of this  Agreement  (the "Put Option").
Notwithstanding the foregoing,  the obligations of the Purchaser to purchase the
Shares pursuant to the Put Option shall be suspended for up to ten business days
if the Purchaser  gives notice to the Seller that it intends to  consummate  the
Elsinore Merger within such time period.                                        

                  SECTION  4.8  Action  with  Respect to 13.5%  Second  Mortgage
Notes. Seller represents that it is the owner of $29,104,000 principal amount of
13.5% Second Mortgage Notes due 2001, of EC (the "13.5% Notes") issued under the
Indenture  dated as of March 3,  1997,  by and among EC,  the  Guarantors  named
therein and First Trust National  Association (the  "Indenture").  Seller hereby
agrees                                                                          

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that, if the Elsinore Merger is consummated,  it hereby waives any rights it may
have to require EC to  repurchase  all or a part of the 13.5% Notes  pursuant to
Article XII of the Indenture.                                                   

 ARTICLE V
    CONDITIONS PRECEDENT

                  SECTION  5.1  Conditions  Precedent  to  Exercise  of Purchase
Option and Put Option.  The  Purchaser  shall have no obligation to exercise the
Purchase  Option;  provided,  however,  that the  Purchaser  shall  use its best
efforts to take,  or cause to be taken,  all actions,  and to do, or cause to be
done, all things  reasonably  necessary and proper under all applicable laws and
regulations to consummate and make effective the  transactions  contemplated  by
this Agreement,  including  cooperation (i) in the preparation and filing of any
required  filings under the HSR Act and the laws referred to in Sections  2.1(d)
and 2.2(c) hereof,  (ii) in  determining  whether action by or in respect of, or
filing with, any governmental body,  agency,  official or authority is required,
proper or advisable, or any actions, consents, waivers or approvals are required
to be obtained from parties to any contracts in connection with the transactions
contemplated  by this  Agreement,  (iii) in seeking to obtain any such  actions,
consents and waivers and in making any such filings, and (iv) in seeking to lift
any order, decree or ruling restraining, enjoining, or otherwise prohibiting the
exercise of the Purchase Option or the Put Option. Upon exercise of the Purchase
Option or the Put Option, the obligation of the Purchaser to purchase the Shares
shall  be  subject  to the  satisfaction  or  (except  in the  case  of  Section
5.1(c)(i),  which may not be waived) waiver by the Purchaser on the Closing Date
of each of the following conditions precedent:                                  

                         (a)  HSR Act.  The waiting period under the HSR Act, if
applicable, shall have expired or been terminated.                              

                    (b)  No Injunctions or Restraints.  No temporary restraining
order or  preliminary  or permanent  injunction  of any court or  administrative
agency of competent  jurisdiction  prohibiting the transactions  contemplated by
this  Agreement,  the Elsinore Merger  Agreement,  the Riviera Option and Voting
Agreement  or the  Riviera  Merger  Agreement  shall  be in  effect  or shall be
threatened.                                                                     

                     (c)  Consents.  All consents, approvals, authorizations and
waivers from the Board of Directors and governmental and regulatory authorities 

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required to consummate the transactions  contemplated  hereby (the  "Approvals")
shall have been  obtained  before the  Closing  Date and, in the case of clauses
(ii) and (iii) below,  before the execution of this Agreement and shall not have
expired or been rescinded, including the following:                             

                                    (i)   All   necessary   gaming    approvals,
                  including,   without  limitation,   licensing  or  finding  of
                  suitability  of the  Purchaser  and  approval  of a change  of
control of EC by the Gaming Authorities;    

                                    (ii) Waiver by the Board of  Directors of EC
                  of any voting restrictions under the Articles of Incorporation
                  that are applicable to a purchaser of greater than ten percent
             of the issued and outstanding shares of Common Stock; and

                                    (iii) All approvals and waivers necessary to
                  exempt  the  Purchaser   for  purposes  of  the   transactions
                  contemplated hereby from applicable merger moratorium statutes
                  and control share  acquisition  statutes,  including,  without
                  limitation,  Nevada Revised Statutes Sections  78.411-.444 and
78.378-.3793;                               

                   (d)  Representations and Warranties.  The representations and
warranties of the Seller set forth in this  Agreement  shall be true and correct
in all material respects on and as of the Closing Date, as though made on and as
of the Closing Date (and by delivery of the Shares the Seller shall be deemed to
affirm the satisfaction of this condition).                                     

                    (e)  Performance of Obligations of Seller.  The Seller shall
have delivered the Shares to the Purchaser.                                     

                  (f)  Consummation of Riviera Transactions.  Either the Riviera
Merger shall have been consummated or the shares of Riviera common stock,  $.001
par value,  which are the  subject of the Riviera  Option and Voting  Agreement,
shall have been purchased by the Purchaser.                                     

                     (g)  No Violation of Law.  The consummation of the Purchase
Option or the Put Option shall not constitute a violation of any Laws.          

                  SECTION 5.2 Conditions  Precedent to the Seller's  Obligation.
The obligation of the Seller to sell, assign,  transfer,  convey and deliver the
Shares owned by it or the investment  accounts it manages,  as applicable,  upon
exercise of                                                                     

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the  Purchase  Option by the  Purchaser  or the Put  Option  by Seller  shall be
subject  to the  satisfaction  or  (except  in the case of  Sections  5.2(a) and
5.2(c),  which may not be  waived),  waiver on the  Closing  Date of each of the
following conditions precedent:                                                 

                         (a)  HSR Act.  The waiting period under the HSR Act, if
applicable to the Purchaser, shall have expired or been terminated.             

                    (b)  No Injunctions or Restraints.  No temporary restraining
order or  preliminary  or permanent  injunction  of any court or  administrative
agency of competent  jurisdiction  prohibiting the transactions  contemplated by
this Agreement shall be in effect.                                              

                (c)  Consents.  All Approvals shall have been obtained and shall
not have expired or been rescinded, including those set forth in Section 5.1(c).

                     (d)  No Violation of Law.  The consummation of the Purchase
Option or the Put Option shall not constitute a violation of any Laws.          

                   (e)  Representations and Warranties.  The representations and
warranties  of the  Purchaser  set  forth  in this  Agreement  shall be true and
correct in all material  respects on and as of the Closing  Date, as though made
on and as of  the  Closing  Date,  except  as  otherwise  contemplated  by  this
Agreement (and by its acceptance of the Shares, the Purchaser shall be deemed to
reaffirm the accuracy of such representations and warranties).                  

                          (f)  Performance of Obligations of the Purchaser.  The
Purchaser  shall have performed all  obligations  required to be performed by it
under this  Agreement on or prior to the Closing Date (and by its  acceptance of
the Shares,  the Purchaser  shall be deemed to affirm the  satisfaction  of this
condition),  including the payment of the Purchase Price and all unpaid amounts,
if any payable under Section 1.2(b).                                            

                        (g)  Occurrence of Riviera Merger or Exercise of Riviera
Option.  The Riviera Merger (as defined in Section 4.7) or the Closing of the   
Riviera Option and Voting Agreement (as defined in Section 4.7) shall have      
occurred.                                                                       

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  ARTICLE VI
     TERMINATION AND AMENDMENT

                  SECTION  6.1  Termination.   This  Agreement  shall  terminate
without any further action on the part of the Purchaser or the Seller if (i) the
Purchase  Option  or the Put  Option  has been  exercised  and the  Closing  has
occurred or (ii) the  Purchase  Option or the Put Option has not been  exercised
and either (x) the  Elsinore  Merger has been  consummated  or (y) the  Elsinore
Merger  Agreement  has been  terminated  pursuant  to Sections  6.1(a),  6.1(b),
6.1(c),  6.1(d),  6.1(e)(i),  6.1(e)(ii) or 6.1(f) thereof or (iii) June 1, 1998
shall have occurred.                                                            

                  SECTION 6.2 Effect of Termination. In the event this Agreement
shall have been  terminated  in accordance  with Section 6.1 of this  Agreement,
this Agreement shall forthwith become void and have no effect, except (i) to the
extent such  termination  results from a breach by any of the parties  hereto of
any of its  obligations  hereunder (in which case such breaching  party shall be
liable for all damages allowable at law and any relief available in equity), and
(ii) as otherwise set forth in any written  termination  agreement,  if any, and
(iii) that Sections  1.2(b),  1.3 and 6.2 shall survive the  termination of this
Agreement.                                                                      

                  SECTION 6.3  Amendment.  This  Agreement and the Schedules and
Exhibits  hereto may not be amended  except by an instrument or  instruments  in
writing  signed and  delivered on behalf of each of the parties  hereto.  At any
time prior to the  Closing  Date,  any party  hereto  which is  entitled  to the
benefits  hereof  may (a)  extend  the  time for the  performance  of any of the
obligations  or other acts of any other party,  (b) waive any  inaccuracy in the
representations  and  warranties  of any other party  contained  herein,  in any
Schedule and Exhibit hereto, or in any document  delivered  pursuant hereto, and
(c),  subject to applicable law, waive  compliance with any of the agreements of
any other party hereto or any conditions  contained herein. Any agreement on the
part of any of the parties  hereto to any such  extension or waiver (i) shall be
valid only if set forth in an  instrument  in writing  signed and  delivered  on
behalf of each  such  party,  and (ii)  shall  not be  construed  as a waiver or
extension of any subsequent breach or time for performance hereunder.           

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ARTICLE VII 
MISCELLANEOUS 

                  SECTION 7.1 Notices. All notices,  requests,  claims,  demands
and other  communications  hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person,  by
overnight  courier  with receipt  requested,  by  facsimile  transmission  (with
receipt confirmed by automatic  transmission report), or two business days after
being sent by registered  or certified  mail (postage  prepaid,  return  receipt
requested), to the other party as follows:                                      

   (a)  if to the Purchaser, to:

P.O. Box 9660                                                                   
Rancho Santa Fe, CA 92067                                                       
Attention:  Mr. Allen E. Paulson                                                

       with a copy to:

Skadden,  Arps, Slate, Meagher & Flom LLP 300 South Grand Avenue, Suite 3400 Los
Angeles, California 90071 Attention: Brian J. McCarthy, Esq.                    

(b)  if to Seller, to:    

        Swiss Bank Tower
 10 East 50th Street
New York, New York 10022
                       Attention:  Mr. Bruce Waterfall

       with a copy to:

O'Melveny & Myers, LLP
 400 South Hope Street
Los Angeles, CA 90071-2899
 Attention: C. James Levin, Esq.

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                  SECTION 7.2 Release. Upon the purchase by the Purchaser of the
Shares,  the  Purchaser  shall  hereby  release  on behalf of itself  and EC all
claims,  causes of actions,  rights and liabilities  held by the Purchaser or EC
against the Seller based on or arising from the Seller's ownership of the Shares
or actions as a  Stockholder  of EC at all times to and  including  the  Closing
Date,   and  the  sale  of  the  Shares  to  the   Purchaser,   except  for  the
representations  and  warranties of the Seller set forth in Sections  2.1(b) and
2.1(c) hereof which shall survive indefinitely.                                 

                  SECTION 7.3  Interpretation.  When a reference is made in this
Agreement  to a Section,  Schedule or Exhibit,  such  reference  shall be to the
applicable  Section,  Schedule  or Exhibit of this  Agreement  unless  otherwise
indicated.  The headings  contained in this Agreement are for reference purposes
only and  shall not  affect in any way the  meaning  or  interpretation  of this
Agreement.  When the words "includes" or "including" are used in this Agreement,
they  shall be deemed to be  followed  by the words  "without  limitation."  All
accounting  terms  not  defined  in  this  Agreement  shall  have  the  meanings
determined by generally  accepted  accounting  principles as of the date hereof.
All capitalized terms defined herein are equally applicable to both the singular
and plural forms of such terms.                                                 

                  SECTION 7.4  Severability.  If any provision of this Agreement
or the  application  of any such  provision  shall be held  invalid,  illegal or
unenforceable  in  any  respect  by a  court  of  competent  jurisdiction,  such
invalidity,  illegality or unenforceability shall not affect any other provision
hereof.  In lieu of any such invalid,  illegal or unenforceable  provision,  the
parties  hereto  intend  that there  shall be added as part of this  Agreement a
valid,  legal and  enforceable  provision  as similar in terms to such  invalid,
illegal or unenforceable  provision as may be possible or practicable  under the
circumstances.                                                                  

                  SECTION 7.5  Counterparts.  This  Agreement may be executed in
one or more counterparts,  each of which shall be deemed an original, and all of
which,  when taken together,  shall be deemed to constitute but one and the same
instrument.                                                                     

                  SECTION 7.6 Entire Agreement. This Agreement and the Schedules
and Exhibits  hereto  constitute the entire  agreement,  and supersede all prior
agreements  and  understandings,  both written and oral,  among the parties with
respect to the subject matter hereof.                                           

               SECTION  7.7  Governing Law.  This Agreement shall be governed by
and construed in accordance with the laws of the State of Nevada, regardless of 

                    17

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the laws  that  otherwise  might  govern  under  any  applicable  principles  of
conflicts of law, except that gaming approval  requirements shall be governed by
and construed in accordance with the laws of the State of Nevada.               

                  SECTION 7.8  Assignment.  This Agreement shall be binding upon
and shall  inure to the  benefit  of the  parties  hereto  and their  respective
successors and assigns.  Neither this Agreement nor any of the rights, interests
or  obligations  hereunder  shall be assigned or delegated by any of the parties
hereto without the prior written  consent of the other parties;  provided,  that
the  Purchaser  may assign the Purchase  Option and the  obligations  under this
Agreement to any other person who is designated by the  Purchaser  and;  further
provided,  that the Purchaser  shall remain  responsible  for the performance of
such designee's obligations.                                                    

                  SECTION  7.9  No  Third-Party  Beneficiaries.  Nothing  herein
expressed  or  implied  shall be  construed  to give any  person  other than the
parties  hereto  (and their  respective  successors  and  assigns)  any legal or
equitable rights hereunder.                                                     

                    18

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                  IN WITNESS WHEREOF,  each of the parties hereto has caused its
duly  authorized  officers to execute this  Agreement as of the date first above
written.                                                                        

R&E GAMING CORP.                                                                

By: ____________________________                                                
Name:                                                                 
Title:                                                                

MORGENS, WATERFALL,                                                             
VINTIADIS & COMPANY,                                                            
INC.                                                                            

By: ____________________________                                                
Name:                                                                 
Title:                                                                

on behalf of the investment accounts                                            
for the entities listed below                                                   

BETJE PARTNERS                                                                  

THE COMMON FUND                                                                 

MORGENS WATERFALL INCOME                                                        
PARTNERS                                                                        

PHOENIX PARTNERS, L.P.                                                          

MWV EMPLOYEE RETIREMENT                                                         
PLAN GROUP TRUST                                                                

RESTART PARTNERS, L.P.                                                          

RESTART PARTNERS II, L.P.                                                       

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RESTART PARTNERS III, L.P.                                                      

RESTART PARTNERS IV, L.P.                                                       

RESTART PARTNERS V, L.P.                                                        

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EXHIBIT A   

CERTIFICATE FOR DRAWING WITH RESPECT TO 
IRREVOCABLE LETTER OF CREDIT NO. ____ 
DATED ______________, 1997  

                  The  undersigned,   a  duly  authorized  officer  of  Morgens,
Waterfall, Vintiadis & Company, Inc. ("Morgens,  Waterfall") hereby certifies to
City National Bank (the "Bank"),  with reference to irrevocable letter of credit
No.  ____ (the  "Letter of  Credit";  any  capitalized  term used herein and not
defined shall have its respective  meaning as set forth in the Letter of Credit)
issued by the Bank in favor of Morgens, Waterfall, that all of the following has
occurred:                                                                       

                           (1)  Either  (x) the  Agreement  and Plan of  Merger,
         dated as of September 15, 1997 (the "Elsinore  Merger  Agreement"),  by
         and among R&E Gaming Corp., a Delaware corporation ("Gaming"), Elsinore
         Acquisition Sub, Inc., a Nevada corporation,  and Elsinore Corporation,
         a Nevada  corporation,  has  terminated or (y) the Elsinore  Merger (as
         defined  in  the  Elsinore  Merger   Agreement)  has  not  occurred  in
         accordance  with the terms  thereof on or before  April 1, 1998 (or, if
         the termination  date of the Elsinore  Merger  Agreement is extended in
accordance with Section 6.1(c) thereof, June 1, 1998); and    

                           (2) Morgens,  Waterfall is entitled to payment in the
         amount of $_______ in  accordance  with the terms of Section  1.3(a) of
         the Option and Voting Agreement, dated as of September 15, 1997, by and
between Gaming and Morgens, Waterfall.                        

                  Demand is hereby made under the Letter of Credit for $_______.
Please remit payment to Morgens, Waterfall, Vintiadis & Company, Inc., account  
number ___________ at ___________, ABA No. ____________, REF. : ___________.    

                             A-1

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         EXHIBIT B

             Seller                                                      Account

Morgens, Waterfall                                                              

Citibank N.Y.                                                                   
ABA #:  021000089                                                               
For:  Morgan Stanley & Co.                                                      
Account #:  38890774                                                            
Credit To:    Edwin Morgens and                                                 
Bruce Waterfall as                            
Agents                                        
Sub-Account #:  038-30008                                                       

Ref:  Elsinore/Riviera Option                                                   
Agreement Interest                                                

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EXHIBIT 21.1          

SUBSIDIARIES OF ELSINORE CORPORATION            
AS OF 12/31/97          

STATE OF    
CORPORATION OR  
NAME                            ORGANIZATION         D.B.A.                     
----                            ------------         ------                     

ELSINORE CORP.                      NEVADA           ELSINORE CORP.             

FOUR QUEENS, INC.                   NEVADA           FOUR QUEENS HOTEL & CASINO 

PINNACLE GAMING CORP.               NEVADA          ELSINORE MANUFACTURING CORP.

ELSUB MANAGEMENT CORP.              NEVADA           ELSUB MANAGEMENT CORP.     

PALM SPRINGS EAST L.P.              NEVADA           PALM SPRINGS EAST L.P.     

OLYMPIA GAMING CORP.                NEVADA           OLYMPIA GAMING CORP.       

FOUR QUEENS EXPERIENCE CORP.        NEVADA          FOUR QUEENS EXPERIENCE CORP.

EAGLE GAMING, INC.                  NEVADA           EAGLE GAMING, INC.         

ELSINORE TAHOE, INC.                NEVADA           ELSINORE TAHOE, INC.       

ELSUB CORPORATION                   NEW JERSEY       ELSUB CORPORATION          

ELSINORE OF NEW JERSEY, INC.        NEW JERSEY      ELSINORE OF NEW JERSEY, INC.

ELSINORE OF ATLANTIC CITY,          NEW JERSEY       ELSINORE OF ATLANTIC CITY, 
L.P.                                                L.P.                    

ELSINORE SHORE ASSOCIATES           NEW JERSEY       ELSINORE SHORE ASSOCIATES  

ELSINORE FINANCE COMPANY            NEW JERSEY       ELSINORE FINANCE COMPANY   

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K’ Filing		Date		First		Last			Other Filings
		10/31/24		3
		8/20/01		5		20
		8/20/00		20
		1/2/99		5		26
		12/31/98		5		20			10-K,  3,  4,  4/A
		10/1/98		3
		9/30/98		5		26			10-Q,  3,  4
		6/30/98		26					10-Q
		6/1/98		30		49
		4/1/98		3		49
Filed on:		3/31/98		5		26			10-Q
		3/26/98		1		22			SC 13D/A
		3/24/98		22					8-K
		3/23/98		22
		3/20/98		3		20
		3/17/98		22
		3/3/98		22		25
		2/27/98		24
		2/13/98		6
		2/4/98		1		3
		1/13/98		1		22			DEFM14C
For Period End:		12/31/97		1		26
		12/15/97		20
		10/22/97		3					SC 13D/A
		9/30/97		3		22			10-Q,  10-Q/A
		9/18/97		22
		9/16/97		3
		9/15/97		3		49
		8/1/97		22
		7/1/97		22
		6/30/97		22					10-Q
		6/1/97		3		31
		5/14/97		3		22
		5/1/97		22
		4/1/97		3		20
		3/31/97		22					10-Q,  10-Q/A
		3/14/97		22					8-K
		3/10/97		22					SC 13D
		3/3/97		22		39
		3/1/97		6		18
		2/28/97		3		22
		1/1/97		6		12
		12/31/96		3		20			10-K
		10/10/96		3
		8/12/96		3		18
		8/8/96		22					8-K
		3/29/96		20		22
		1/1/96		5		20
		12/31/95		3		20			10-K
		12/13/95		3
		11/7/95		22					8-K
		10/31/95		3		22
		1/25/95		20
		11/28/94		22
		1/28/94		22
		12/31/93		22
		11/12/93		22
		10/19/93		22
		10/8/93		22
		12/31/92		22
		7/14/92		22
		4/29/92		22
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