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Rod Smith

Book Operator Proposes Plan for Restructuring

24 February 2004

LAS VEGAS -- Leroy's Horse and Sports Place, Nevada's largest independent sports book operator, filed a proposed reorganization plan Friday for emerging from bankruptcy protection.

"We're just pleased to be able to come out of reorganization with our shareholders and look forward to a bright future," Timothy Lockinger, chief financial officer of Leroy's parent American Wagering, said in announcing the reorganization plan Monday.

American Wagering Chairman Vic Salerno could not be reached for comment Monday, but previously said filing for bankruptcy protection hadn't affected the company's operations.

Gaming Control Board Chairman Dennis Neilander said his agency had reviewed the company's operations and determined the company has sufficient cash to continue operations.

"(The legal situation) didn't affect their business, certainly not from a regulatory point of view," Neilander said.

The American Wagering subsidiary, which runs race and sports books in 51 casinos statewide, filed for Chapter 11 bankruptcy protection July 25 in U.S. Bankruptcy Court in Reno.

Leroy's and American Wagering had been forced to file for protection because of a federal court judgment won against the companies by Las Vegan Michael Racusin who had helped take American Wagering public in 1996 and sued when a dispute arose over the amount he was owed.

Racusin last year won a $1.35 million judgment against American Wagering, although U.S. District Court Judge Howard McKibben ruled he was not entitled to interest. Appeals are pending in the case.

The litigation centers on Racusin's claim that when he began working for American Wagering in 1993 to take the company public, he found two underwriters who valued the company at $45 million rather the original $20 million estimate.

However, Racusin claims Salerno wanted to pay him based on the original $20 million estimated value for the company.

Industry experts said that besides claims against the company, Leroy's and other sports books in Nevada also have been feeling the brunt of competition from other states such as California.

Legislation was enacted last year to put Nevada sports books on an equal footing, but approvals from the state Gaming Control Board and the Nevada Gaming Commission are pending.

Under the proposed reorganization, Racusin would be paid in full over 48 months to 60 months, depending on the final court decision, Lockinger said. Racusin could not be reached for comment.

Las Vegas Gaming, which also had claims pending, agreed to a $1.32 million settlement with $320,000 to be paid when the plan is approved and $1 million to be paid out over 24 months.

Also under the plan, all normal creditors are being paid in full, including all trade accounts payable and all employee wages.

Leroy's operates more race and sports books in Nevada than any other company and employs 160 people.

American Wagering expects to request approval for its reorganization plan at a bankruptcy court hearing April 28 and hopes to emerge from Chapter 11 by the end of June, Lockinger said.

Besides running race and sports books, American Wagering designs and operates computerized race and sports book systems, including wagering by telephone and systems.