State Contractors - MiLottery Response to LSJ FOIA

7/29/2019 State Contractors - MiLottery Response to LSJ FOIA

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STATE OF MICHIGAN

LANSING

RICK SNYDER

GOVERNOR

101 E. HILLSDALE P.O. BOX 30023 LANSING, MICHIGAN 48909www.michigan.gov/lottery (517) 335-5600

M. SCOTT BOW

COMMISSIONE

BUREAU OF STATE LOTTERY

August 27, 2013

Kristen M. Daum, State Government ReporterLansing State Journal

120 E. Lenawee StreetLansing, MI 48919

Dear Ms. Daum:

This written notice is issued in response to your August 20, 2013, request for information under theFreedom of Information Act (FOIA), MCL 15.231 et seq, received in this office on August 22, 2013.

Your request for non-exempt records is granted.

You have requested information that you describe as follows:

Under the Michigan Freedom of Information Act, MCL 15.231 et seq., I am formally

requesting to review of any and all active contracts with vendors who provide goods and service

to the Michigan Lottery, as of Aug. 1, 2013.

Attached to this correspondence is the current contract between the Michigan Bureau of State Lottery

and GTECH Corporation. Please note that contract amendments are at the end of the contract.

Please be advised that all other Bureau of State Lottery contracts (Engineered Protection Systems;Gassin, Huffenberger & Associates; Pollard Banknote Limited Partnership; Simons Michelson Zieve,Inc., Advertising; International Gamco, Inc.; and Trade Products) were awarded through Michigan

Department of Technology, Management and Budget and can be viewed on their website.

Sincerely,

Susan K. MateroFreedom of Information Act Coordinator
http://www.michigan.gov/http://www.michigan.gov/


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Updated 11129/07 Ad Board Date: (ver. )STATE ADMINISTRATIVE BOARDCONTRACT CHANGE RECOMMENDATION

DEPARTMENTOFMANAGEMENTAND BUDGETPURCHASING OPERA TIONS

AGENCY SUBMITTAL [gJDMB PURCHASING SUBMITTAL DCONTRACT DESCRIPTION: Contract # MSL 07-001, Modification requested for Service;Michigan Bureau of State Lottery

MICHIGANCONTRACTOR: BUSINESS INCREASEGTECH Corporation, 10 Memorial Blvd, Providence, RI $1,200,000.00oD Check if signed Purchase Request form has been received by Purchasing Operations andreviewed by DMB, or posted on the DMB Intranet in agency's pre-approved contract list.D Check if request is to exercise Contract option(s).Requested time period: :4PPROVIDo Check if request is to extend Contract (no option in base). AUG 05 2008

Time period of extension: MICHIGAN STATEADMINISTRATIVE BOARDD Check if extension is beyond Contract option year(s).

Time period of extension:o Check if request is for a MiDEAL contract.ORIGINAL CONTRACT: Term: 4/01108 - 1I19/2015Value: $285,600,000.00# of Base Years: 6 + implementation periodCURRENT CONTRACT VALUE: $285,600,000.00NEW TOTAL CONTRACT VALUE: $286,800,000.00PREVIOUS OPTION YEARS:

PERIODD Option 1 CN #D Option 2 CN #

(Years) SAB APPROVAL DATE $ Value

o Option 3 CN #Total $0.00

PREVIOUS EXTENSIONS: N/ACHANGE TOTAL: Total number of processed changes to time, scope, and/or dollars: 0


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FIRST AND LAST CHANGE NOTICES:

TYPE OF CHANGE:SAB APPROVALDATE

(i f applicable)VALUE

OFCHANGE:

DATE CCNPROCESSEDFirstCN n/aLastCN

FUNDING SOURCE: PERCENTAGE COMMENTSLottery RestrictedFund -100%

ESTIMATED INCREASE DETAILED BY FISCAL YEAR(S):2008 $300,000.002009 $900,000.00


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PURCHASE JUSTIFICATION:Description of Product/Service Modification Requested and Process Explanation: The Bureauof State Lottery is requesting to exercise an amendment to their competively-bid gaming systemcontract (currently held by GTECH) to allow for a one-year pilot program to assist the Lottery withClub Games recruiting and Instant Ticket merchandising. Authority to bid a gaming system isafforded to the Lottery through Statute (Act 239 of 1972 Sec. 432.9), and provision for this kind ofprogram (temporary support services) was contemplated under the RFP developed by the Lotteryand responded to in the bid proposal submitted by the vendor. Through the program, five ClubGames recruiters will visit potential Club Games locations throughout the state to enlist the locationsto become licensees of the Lottery. Eleven Instant Game Merchandisers will visit Instant ticketretailers in the state with the goal of increasing sales through personal contact. One supervisor willoversee the II merchandisers.PurposelBusiness Case of Amendment or Extension, and Expected Outcomes: The LotteryMerchandiser Pilot Program is a one-year program where merchandisers will visit retailers who arecurrently not visited by Lottery District Sales Representatives. Merchandisers will make bi-monthlyvisits to retailers selected by Lottery. At the bi-monthly visits, the merchandisers' responsibilitieswill include, but not be limited to, refreshing Point of Sale (P .O.S.) materials, filling equipment,setting accounts to Lottery standards, checking for back-stock, and communicating with appropriatepersonnel to maximize Lottery's presence in these targeted accounts. The merchandisers' successwill be evaluated on completion of job assignments and sales increases within their assignedterritories. Merchandisers will be provided with a set route, defined by geographical boundaries.Specific reports will be generated to determine activity within the merchandisers' accounts and theywill be required to record their daily activities for review by designated GTECH and Lotterypersonnel. Based on current volume at these targeted retailers, Lottery is projecting a $6.5 millionincrease in sales, and a net to schools of $1.5 million with this pilot program. Program success willbe evaluated on a quarterly basis.The Lottery Club Games Recruitment Pilot Program is a one-year program where recruiters, whoWill be retained through a temporary agency and employed by GTECH, will recruit and secure newclub games retailers with a specific emphasis on corporate accounts. Recruiters will be providedwith a recruitment area defined by geographical boundaries. Recruiters will be paid a lump sumupon successful licensing application and terminal installation being completed. Club Gamesretailers average sales of $240,000 per year, and a net return to the school aid fund of $56,000 peryear. It is estimated that 200 new Club Games applications will be received, generating $11.2million net to the school aid fund annually from these recruitments. Again, the provision of thesetemporary support services, which the Lottery now wishes to exercise, was contemplated under thethe RFP and responded to in the bid proposal submitted by the vendor.Risk Assessment: The Lottery currently has 66 district sales representatives (DSRs) calling onretailers throughout the state. Each DSR is assigned 120-135 retailers to service. The Lotterycurrently has over 10,700 licensed retailers in the state. The Lottery does not have the FTEauthorization to service all its retailers. Currently over 2,000 retailers are not able to be called on byDSRs. This pilot program will provide staffing assistance to call on retailers to increase their salesand recruit new retailers in the profitable Club Games market. The pilot program has the potential togenerate an additional $12.7 million for the school aid fund. Without this program, this additionalrevenue from these programs will be lost.


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PRICE CLAUSE: firm, fixedCS-138 #: N/A - Majority ofthe contract remains to be commodities.COST REDUCTION/SAVINGS CONSIDERATIONS:

The use oftemporary support staff will save approximately $250,000 over state-providedstafrmg.D Check if> $500,000 fo r software development, computer hardware acquisition or qualityassur4lDce?PURCHASING APPROVALS

Buyer Signature Manager Signature

Division Direc tor Signature Elise A. LancasterPurchasing Operations Direc tor

B. CraigOrrSenior Deputy Director.---- ~ A : : . . . . = G - = = E N ~ C . = . . . . . : : , Y A P P ~ R ~ O ~ V ~ A L ~ S - - - - - - - - - - _ _ _ ,

Return Information:Contact Name: ':I>"\ ~ \-l Au..se.c:::ID Mail: L-On'Eo7:'-1' ~ L : : D c : : , . . . L . . . A " ' ~ I ( ) & -

Phone No.: "3"?> S - 5" L, 8 7Authorized Agency Representative Signature e-Mail: \ - \ A u . . s e : ~ . . . D e ('1'0 i 0.14 _ SPECIAL APPROVALS(as required)

Budget Office Representative (Printed) Budget Office Representative Sigaaturc


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AMENDMENT #1 TO CONTRACT MSL07-001GTECH CORPORATION AND STATE OF MICHIGANBUREAU OF STATE LOTrERYThis Amendment Agreement ("Amendment") is entered into and effective this____ of June, 2008 by and between the State of Michigan, Michigan Bureau ofState Lottery ("Lottery"), 101 East Hillsdale, Lansing, Michigan 48909 and GTECHCorporation ("GTECH"), 10 Memorial Boulevard, Providence, Rhode Island 02903. Thepurpose of this Amendment is to establish the provision of certain services related torecruitment and servicing of Lottery retailers throughout the State of Michigan in a pilotprogram as detailed in the attached Statements of Work. This Amendment furtherdefines the contract term to allow for this service to be undertaken during theimplementation interval of the contract.The Lottery issued a Request for Proposals (the "RFP") on April 10, 2007 for an onlineand instant lottery gaming system and related services and GTECH responded to theRFP by submitting a proposal. The RFP requested proposals on providing temporarystaffing services under Lottery Invited Option T, Provision of temporary support staff,which GTECH responded to; andThe Lottery and GTECH entered into Contract No. MSL07-001 on April 1,2008, withrespect to an online and instant lottery gaming system and related services includingSection 12, Other Options which states, "The [Lottery] may, from time to time during theterm of this contract, request GTECH to submit a proposal for the provision of goods orservices which are ...outside the scope of the goods or services agreed to by theparties to be a part of the base System requirements. With respect to such additionalgoods or services, the parties agree to negotiate the terms and conditions, includingprice, for the delivery of such additional goods or services."The provision of these'temporary support services was contemplated under the RFPand responded in the proposal submitted by GTECH. The Lottery wishes to exerciseInvited Option T, Provision of temporary support staff. GTECH has responded to andnegotiated with the Lottery for provision of services outlined in Invited Option T,Temporary support staff, as outlined in the attached Statements of Work.THEREFORE, the parties agree to amend Contract MSL07-001 in consideration of themutual promises given one to the other, the parties intending to be legally bound, dohereby covenant and agree as follows:Work Provided and Understanding of Contract Elements Being Amended:

1. Term. The Term of this Contract is amended to further define "implementationinterval" as the period of time after approval by the SAB [State AdministrativeBoard] and prior to the "Conversion Date" (production start-up date) during whichtime the Lottery and the Contractor prepare to convert operations to the newsystem. This period of time shall also include exercising provisions to assist in a


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Amendment #1 MSL07-001

Attachment AStatement of Work

Lottery Merchandiser Pilot ProgramBackground:The Lottery Merchandiser Pilot Program is a one-year program where merchandiserswill visit retailers who are currently not visited by Lottery District Sales Representatives.Merchandisers will make bi-monthly visits to retailers selected by Lottery. At the bimonthly visits, the merchandisers' responsibilities will include, but not be limited to,refreshing Point of Sale (P.O.S.) materials, filling equipment, setting accounts to Lotterystandards, checking for back-stock, and communicating with appropriate personnel tomaximize Lottery's presence in these targeted accounts. The merchandisers' successwill b,e evaluated on completion of job assignments and sales increases within theirassigned territories. Merchandisers will be provided with a set route, defined bygeographical boundaries. Specific reports will be generated to determine activity withinthe merchandisers' accounts and they will be required to record their daily activities forreview by designated GTECH and Lottery personnel. Based on current volume at thesetargeted retailers, Lottery is projecting a $6.5 million increase in sales with this pilotprogram. Program success will be evaluated on a quarterly basis.

Staffing Requirements:Merchandisers will be attained through a temporary agency selected by GTECH.GTECH will be the employer of record for the merchandisers. GTECH will manageoversight of the merchandisers in conjunction with designated Lottery personnel. Priorto engaging in employment as a merchandiser, an applicant will be required to submit toa background investigation and drug testing as prescribed by Lottery. Lottery will havefinal approval on all hiring. The required work schedule is Monday through Friday, 8:00a.m. through 5:00 p.m., unless otherwise specified by designated Lottery personnel.The Lottery Act, its rules, and directives, as well as Lottery's rules, regulations andpolicies including but not limited to Lottery human resource requirements, must beobserved by the merchandisers. Merchandisers will be required to sign a nondisclosure agreement agreeing to keep all information obtained during themerchandising process confidential.GTECH and designated Lottery personnel will interview and select merchandisers.There will be eleven (11) merchandisers and one (1) merchandiser supervisor. Themerchandiser supervisor will monitor the daily activities of the merchandisers. Eleven(11) routes, each averaging 135 accounts, will be established and a daily route will beplanned. (Daily routes are subject to change pending state initiatives, schedules, etc.).The hourly rate for merchandisers will be $13.00 per hour. The merchandisersupervisor's hourly rate will be $15.00 per hour. Merchandisers will originate from awork station mutually agreed upon by GTECH and designated Lottery personnel.Merchandisers will be given a $400 per month stipend for use of their personal vehicleand fuel. Merchandisers will be provided with cellular telephones which must be used inaccordance with Lottery's policy and procedure i.e. for work purposes only. To bereimbursed for other acceptable expenses such as photocopying, parking, and maps, a

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Amendment#1 MSL07-001

merchandiser will be required to submit receipts and will be reimbursed at the State of Michigan applicable rate. Merchandisers will not be reimbursed for meals or any otherexpenses without prior approval by designated Lottery personnel. Merchandisers mustreport daily activity as directed by Lottery.Position Duties:Merchandisers will be responsible for promoting lottery sales through direct contact withretailers who are not visited by Lottery District Sales Representatives. Merchandiserswill not be approved to process returns or run promotions of any type.Merchandiser duties include but are not limited to: Conducting regular sales calls to assigned retailers. Placing current Lottery POS materials. Removing old and outdated POS materials. Advising retailer on effective POS materials that support statewide programs and/orspecific products. Surveying accounts and setting displays to Lottery standards where necessary. Informing retailers of current and upcoming Lottery programs, promotions andevents. Answering retailer questions. Evaluating Lottery product inventory to determine proper placement according tospace-to-sales and standards of excellence. Maintaining adequate traveling inventory of POS, informational brochures, and otherproduct related materials. Preparing and submitting call reports, inventory reports, monthly activity reports andother reports as directed. Reviewing reports in order to analyze and plan retailer sales strategies.Invoicing:The temporary agency selected will provide GrECH with a weekly invoice for all hoursworked and expenses incurred by all merchandisers. Merchandisers will be paid inaccordance with the temporary agency's policy and procedure. Reimbursements for theprevious week's expenses should be paid weekly. Vehicle/fuel stipends will be paid by .GTECH to merchandisers on a monthly basis. GTECH will provide Lottery with adetailed weekly invoice with documentation to support the charges.Training:Lottery or its designee will provide the merchandisers with training and materials relatedthe Lottery Act, its rules, directives, policy and procedures. Training materials relatingspecifically to POS usage and availability, Standards of Excellence and Space-to-Saleswill be provided to merchandisers.Other Considerations:Program success will be evaluated on a quarterly basis. The pilot program may beterminated by Lottery at any time. If terminated prior to the end of the one-year pilot

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Amendment #1 MS LO?-001

period, merchandisers will only be entitled to compensation for time worked up to thedate of termination.Program Cost Analysis: 1GTECH will be reimbursed for documented expenses on the following schedule whichincludes temporary agency fees as well as merchandiser costs: Salary for eleven (11) merchandisers @ $20.13 per hour x 2080 hours =$460,574.40 Salary for one (1) supervisor @ $23.27 per hour x 2080 hours = $48,401.60 Monthly car stipend for 12 employees@ $400 per month x 12 months = $57,600 Cellular phone charges estimated @ $40 per month x 12 employees x 12 months =$5,760 Misc. expenses (photocopies, maps, parking) estimated at $50 per month x 12employees =$7,200 Three (3) days of training by HKC Consulting @ $3,500 per day = $10,500 Total yearly cost estimate: $590,033.00

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Attachment BStatement ofWork

Lottery Club Games Recruitment Pilot ProgramBackground:The Lottery Club G a m e ~ Recruitment Pilot Program is a one-year program whererecruiters, who will be retained through a temporary agency and employed by GTECH,will recruit and secure new club games retailers with a specific emphasis on corporateaccounts. Recruiters will be provided with a recruitment area defined by geographicalboundaries. Recruiters will be required to record their daily activities for review bydesignated Lottery personnel. A recruiter will be paid a lump sum for each successfulterminal installation at a licensed retail establishment within his or her geographicalboundaries.Staffing Requirements:Recruiters will be retained through a temporary agency and GTECH will be theemployer of record. Recruiters will be managed by GTECH and designated Lotterypersonnel. Prior to being retained, applicants will be required to submit to a backgroundinvestigation and drug testing as prescribed by Lottery. Lottery will have final approvalof a recruiter's hiring. Work hours will be determined by the recruiter and his or hersuccess will be determined by the number of successful terminal installations. TheLottery Act, its rules, and directives, as well as Lottery's rules, regulations and policiesincluding but not limited to Lottery human resource requirements, must be observed bythe recruiters. Recruiters will be required to sign a non-disclosure agreement agreeingto keep all information obtained during the recruiting process confidential.GTECH and designated Lottery personnel will interview and select recruiters. Up to five(5) club games recruiters will be provided as part of this pilot program. Aftersuccessfully recruiting a new Club Games retailer, a recruiter will receive a total of$2,000 for each successful terminal placement within its geographical boundaries. Therecruiter will receive $500 of the $2,000 at the time Lottery approves a retail location forlicensure. The recruiter will be authorized to be paid the remaining $1,500 aftersuccessful terminal placement at the retail establishment. Expenses incurred by arecruiter such as mileage, fuel, meals, and time, will not be reimbursed to the recruiter.Once a retail location has been approved for licensure by Lottery, if successful terminalplacement is not achieved, the $500 paid to the recruiter will be applied to futurecommissions earned from successful placement of terminals. GTECH will be paid$2,860 for each new retailer recruited and successfully installed under the pilotprogram, which represents the total cost of recruiters and temporary agency charges.Position Duties:A recruiter is responsible for recruiting and securing new club games retailers in his orher designated geographical location with a specific emphasis on corporate accounts.Within that designated geographical area, Lottery will provide the recruiter with a list ofeligible club games establishments. A recruiter will be responsible for assuring aproposed retailer has submitted all information necessary to Lottery in order to make its

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September 16, 2009

To: State Administrative Board

Form SAB-81O

1. Michigan LotteryContract Modification Request - MSL 07-001Approval is requested for the following:1) GTECH Corporation

10 Memorial Blvd.Providence, RI 02903$6,948,614.00 Amendment No.2100% Lottery Restricted FundLottery Gaming System,Equipment, and Services

2) GTECH Corporation10 Memorial Blvd.Providence, RI 02903

$8,970,000.00 Amendment No.3100% Lottery Restricted FundLottery Gaming System,Equipment, and Services


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PURCHASE JUSTIFICATION:Description of Product/Service Modification Requested and Process Explanation: The Bureauof State Lottery is requesting to exercise an amendment to their competively-bid gamingsystem contract (currently held by GTECH) to assist the Lottery with Instant Ticketmerchandising. Authority to bid a gaming system is afforded to the Lottery through Statute(Act 239 of 1972 Sec. 432.9) and provision for this kind of program was contemplated underthe RFP developed by the Lottery and responded to in the bid proposal submitted by thevendor. This Amendment will allow the vendor to provide Instant Game merchandisers tovisit Instant Ticket retailers in the state with the goal of increasing sales through personalcontact.PurposelBusiness Case of Amendment or Extension, and Expected Outcomes: The Lotteryinplemented a one year pilot program this previous fiscal year (Amendment 1) to test and assess theviability and success of a program of this nature. The Lottery realized a return to the School Aidfund of $2,306,289.00 on their investment of$488,799.00 with increased sales of$9,016,414.00.Vendor merchadisers will visit retailers currently not visited by Lottery DSRs. Merchandisers willmake bi-monthly visits to retailers selected by the Lottery. At the bi-monthly visits, themerchandisers' responsibilities will include, but not be limited to, refreshing Point of Sale (P.O.S.)materials, filling equipment, setting accounts to Lottery standards, checking for back-stock, andcommunicating with appropriate personnel to maximize Lottery's presence in these targeted retailerlocations. The merchandisers success will be evaluated on completion of job assignments and salesincreases within their assigned territories. Merchandisers will be provided with a set route, definedby geographical boundaries. Specific reports will be generated to determine activity within themerchadisers' accounts and they will be required to record their daily activities for review bydesignated GTECH and Lottery personnel.Risk Assessment: The Lottery currently has 66 district sales representatives (DSRs) calling onretailers throughout the state. Each DSR is assigned 130 retailers to service. The Lottery currentlyhas over 10,700 licensed retailers in the state. The Lottery does not have the FTE authorization toservice all its retailers. Currently over 2,000 retailers are not able to be called on by DSRs. Thisprogram will provide staffing assistance to call on retailers to increase their sales and recruit newretailers in the profitable Instant Games market. Based upon the results of the pilot program, theLottery is projecting a $47,970,000.00 increase in sales and a net to the School Aid Fund (less thecost of this Amendment) of $7,900,000.00 over the life of the contract. Failure to continue thisprogram will result in the loss of additional revenue generated by the pilot program.

PRICE CLAUSE: Time and Materials - Tiered Labor Costs (See Amendment for details)

CS-138 #: N/A - Majority of the contract remains to be commodities.COST REDUCTION/SAVINGS CONSIDERATIONS:

D Check if> $500,000 for software development, computer hardware acquisition or qualityassurance?

RECOVERY ACT FUNDS


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AMENDMENT #2 TO CONTRACT MSL07-001GTECH CORPORATION AND STATE OF MICHIGANBUREAU OF STATE LOTrERYThis Amendment #2 to Contract MSL07-001 ("Amendment") is entered into by andbetween the State of Michigan, Michigan Bureau of State Lottery ("Lottery"), 101 EastHillsdale, Lansing, Michigan 48909 and GTECH Corporation ("GTECH"), 10 MemorialBoulevard, Providence, Rhode Island 02903. This Amendment is effective as of thedate of approval of this Amendment by the Michigan State Administrative Board. Thepurpose of this Amendment is to establish the provision of certain services related toservicing of Lottery retailers throughout the State of Michigan in a program as detailedin the attached Statements of Work.The Lottery issued a Request for Proposals (the "RFP") on April 10, 2007 for an onlineand instant lottery gaming system and related services and GTECH responded to theRFP by submitting a proposal. The RFP requested proposals on providing temporarystaffing services under Lottery Invited Option T, Provision of temporary support staff,which GTECH responded to; andThe Lottery and GTECH entered into Contract No. MSL07-001 on April 1, 2008, withrespect to an online and instant lottery gaming system and related services includingSection 12, Other Options which states, "The [Lottery] may, from time to time during theterm of this contract, request GTECH to submit a proposal for the provision of goods orservices which are ...outside the scope of the goods or services agreed to by theparties to be a part of the base System requirements. With respect to such additionalgoods or services, the parties agree to negotiate the terms and conditions, includingprice, for the delivery of such additional goods or services."The provision of these temporary support services was contemplated under the RFPand responded in the proposal submitted by GTECH. Amendment #1 was a pilotprogram. Due to the success of this pilot, the Lottery's intention is to continue thisprogram through Amendment #2. The Lottery wishes to exercise Invited Option T,Provision of temporary support staff. GTECH has responded to and negotiated with theLottery for provision of services outlined in Invited Option T, Temporary support staff.Lottery accepts GTECH's proposal under Invited Option T, specifically to provide up totwenty one (21) merchandisers for the purpose of increasing Lottery Instant Ticketsales. Details of the merchandiser program are outlined in the Attachment A, Statementof Work, Lottery Merchandiser Program.


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merchandiser supervisor's hourly rate will begin at $15.00 per hour. Increases to theserates may be administered based on a competitive market analysis performed byGTECH to determine fair market pay. All pay increases must be approved by theLottery in advance and may not exceed $25.00 per hour, including benefits, incentivepayments, overtime, and administrative costs. Merchandisers will originate from a workstation mutually agreed upon by GTECH and designated Lottery personnel.Merchandisers will be provided vehicles by GTECH for use during work hours only andwill be given a fuel card to be used for the vehicle. Merchandisers will be provided withcellular telephones which must be used in accordance with Lottery's policy andprocedure i.e. for work purposes only. To be reimbursed for other acceptable expensessuch as photocopying, parking, and maps, a merchandiser will be required to submitreceipts and will be reimbursed at the State of Michigan applicable rate.Merchandisers will not be reimbursed for meals or any other expenses without priorapproval by designated Lottery personnel. Merchandisers must report daily activity asdirected by Lottery.Position Duties:Merchandisers will be responsible for promoting lottery sales through direct contact withretailers. Merchandisers will not be approved to process returns or run promotions ofany type.Merchandiser duties include but are not limited to: Conducting regular sales calls to assigned retailers. Placing current Lottery POS materials. Removing old and outdated POS materials. Advising retailer on effective POS materials that support statewide programs and/orspecific products. Surveying accounts and setting displays to Lottery standards where necessary. Informing retailers of current and upcoming Lottery programs, promotions andevents. Answering retailer questions. Evaluating Lottery product inventory to determine proper placement according tospace-to-sales and standards of excellence. Maintaining adequate traveling inventory of POS, informational brochures, and otherproduct related materials. Preparing and submitting call reports, inventory reports, monthly activity reports andother reports as directed. Reviewing reports in order to analyze and plan retailer sales strategies.Invoicing:GTECH will provide Lottery with a detailed weekly invoice with documentation tosupport the charges.Actual invoices to the Lottery will reflect an all inclusive hourly charge of $16.77 permerchandiser, and of $19.35 for the supervisor, to cover salary, benefits, administrative

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costs, etc. Benefits include short and long term disability insurance for eligibleemployees on FMLA. Annual increases to the hourly salary for each position may beadministered up to the total allowable all inclusive billable cap of $25.00/hour withGTECH and Lottery management agreement.Actual expenses for GTECH supplied vehicles will be invoiced to the Lottery. This costis estimated to be approximately $750.00 per vehicle per month. This estimate includes:vehicle cost, insurance, fuel, maintenance, etc. In the interim period between Programdeployment and the securing of GTECH vehicles, if rental cars are necessary, all rentalfees, fuel costs, and associated maintenance expenses will be invoiced to the Lottery atcost.Training:Lottery or its designee will provide the merchandisers with training and materials relatedthe Lottery Act, its rules, directives, policy and procedures. Training materials relatingspecifically to pas usage and availability, Standards of Excellence and Space-to-Saleswill be provided to merchandisers. If there are any conflicts between GTECH's andLottery's policy, procedures, rules, or directives, the Lottery's will prevail.Terms:This Agreement shall begin on the Effective Date and shall remain in effect until theearlier of expiration of the Contract (as defined in the Contract) or expiration of theLottery Merchandiser Program, except as otherwise expressly set forth in thisAgreement.Other Considerations:Program success will be evaluated on a quarterly basis. The program may beterminated or changed by Lottery at any time. If, at any time, the Lottery chooses todiscontinue or make material changes to the Program, Lottery will provide writtennotification no less than thirty (30) days prior to the date of discontinuance or materialchange. Any severance and continued health insurance coverage required to be madeby GTECH as a result of such change or termination of the Program will be billed to theLottery at actual cost, not to exceed the maximum allowable all inclusive billable cap of$25.00 per hour. In accordance with current GTECH policy, non-exempt employees areprovided severance and continued health insurance. Currently, GTECH's policyprovides severance payments for non-exempt employees in the amount of one (1) weekper year of service and continued health insurance for the duration of severancepayments; however, this policy is subject to change at GTECH's discretion and on priorwritten notification to the Lottery.Any incentive plans determined by the Lottery to be beneficial to overall sales will bepaid to the merchandiser or supervisor at the mutually agreed upon rate, to includeactual incentive dollars earned, and appropriate mark up for benefits, administrativecosts, etc., not to exceed the maximum allowable all inclusive billable cap of $25.00 perhour.

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, ,

IN WITNESSWHEREOF, the Parties have executed this Amendment as of theAmendment Effective Date.For T E ~ CorporationBy: ~ c;? ()"--

For the LotteryrCJ--;-:-;- - : ; : : . . . . . - ? C ~ Title: S e N \ ~ o - V\t:. fILBr> q)eN" ' Title: ~ t V C (., j..n 'U'

Gc:re-o.\ AMfi(l..\ c.As

{B0923702; I}


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Schedule 1SUBLICENSE AGREEMENT

by and betweenGTECH CORPORATION

andMICHIGAN BUREAU OF STATE LOTTERY

/: 6 ~ THIS SUBLICENSE AGREEMENT (this "Agreement") is entered into as of this ~ day o f k ~ 2009 (the "Effective Date"), by and between the State of Michigan, MichiganBureau of State Lottery, 101 East Hillsdale, Lansing, Michigan 48909 ("Lottery") and GTECHCorporation, 10 Memorial Boulevard, Providence, Rhode Island 02903 ("GTECH"). TheLottery and GTECH are sometimes collectively referred to herein as the "Parties" andindividually referred to as a "Party."RECITALS

WHEREAS, GTECH and IGA are parties to that certain Lotto Platinum LicenseAgreement executed in conjunction with this Agreement, pursuant to which GTECH obtainedfrom IGA the exclusive right to grant a sublicense to the Lottery to use the Licensed Game in theState of Michigan (the "Territory"); andWHEREAS, GTECH now wishes to sublicense to the Lottery, and the Lottery wishes tosublicense from GTECH, the exclusive right to use the Licensed Game in the Territory.NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency

of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:SECTION 1. - DEFINED TERMS

The capitalized terms used herein shall have the definitions assigned to them in thisSection 1 and shall include the singular as well as the plural.1.1 "Active Claim" means a claim of a patent or patent application in the United States that(i) has not expired; (ii) has not been disclaimed (as defined under 37 CFR 1.321, exceptingterminal disclaimers) or abandoned; (iii) has not been cancelled or withdrawn (for example byamendment), or if cancelled or withdrawn, has been reinstated; (iv) has not been conclusivelydisposed of by the United States Patent and Trademark Office so that no further administrativeexamination or administrative or judicial appeal may be taken; provided, however that inconnection with this subsection (iv), all actions taken by IGA to continue to prosecute suchActive Claims must be in good faith; or (v) if a judicial appeal is filed by IGA, such appeal has

{B0923702; I}


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, ,

6.1 Limitations on Warranties. OTHER THAN AS EXPRESSLY PROVIDED FOR INTHIS AGREEMENT AND WITHOUT PREJUDICE TO THE OBLIGATIONSSPECIFICALLY SET FORTH IN THIS AGREEMENT, ALL IMPLIED WARRANTIES,INCLUDING, BUT NOT LIMITED TO, THOSE OF DESIGN, MERCHANTABILITY,FITNESS FOR A PARTICULAR PURPOSE, AND WARRANTIES ARISING FROM ACOURSE OF DEALING, USAGE OR TRADE PRACTICE, ARE HEREBY DISCLAIMED.6.2 Limitations of Liability. IN NO EVENT SHALL A PARTY BE LIABLE FOR ANYCONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL OR PUNITIVE DAMAGES AS ARESULT OF THIS AGREEMENT, HOWEVER CAUSED, ON ANY THEORY OFLIABILITY, OR ANY OTHER LEGAL THEORY RELATED TO THIS AGREEMENT ORTO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EXCEPT FOR APARTY'S BREACH OF ITS CONFIDENTIALITY OBLIGATIONS OR A PARTY'SUNAUTHORIZED USE OF THE OTHER PARTY'S INTELLECTUAL PROPERTY RIGHTS,EACH PARTY'S TOTAL CUMULATIVE LIABILITY HEREUNDER SHALL BE LIMITEDTO THE TOTAL AMOUNT OF LICENSE FEES PAID IN CONNECTION WITH THESUBLICENSE RIGHTS GRANTED HEREUNDER DURING THE MOST RECENT 12MONTH PERIOD.6.3 Prize Liabilities. GTECH ASSUMES NO LIABILITY OF ANY KIND FORPAYMENT OF ANY JACKPOT OR OTHER PRIZES AWARDED BY THE LOTTERYUNDER THE LICENSED GAME. PRIZE PAYMENT IS THE SOLE RESPONSIBILITY OFTHE LOTTERY.SECTION 7. - CONFIDENTIALITY7.1 General. The Receiving Party: shall treat as confidential in perpetuity all ConfidentialInformation ofthe Disclosing Party; shall not use such Confidential Information except asexpressly set forth herein or otherwise authorized in writing by the Disclosing Party; shallimplement reasonable procedures to prohibit the unauthorized use, disclosure, duplication,misuse or removal of the Disclosing Party's Confidential Information; and, shall not disclosesuch Confidential Information to any third party except as may be necessary and required inconnection with the rights and obligations of the Receiving Party under this Agreement, andsubject to confidentiality obligations at least as protective as those set forth herein. Withoutlimiting the foregoing, each of the Parties shall use at least the same procedures and degree ofcare that it uses to prevent the disclosure of its own Confidential Information of like importanceto prevent the disclosure of the Disclosing Party 's Confidential Information, but in no event lessthan reasonable care.7.2 Exclusions. Confidential Information shall not include, or shall cease to include, asapplicable, Confidential Information that the Receiving Party can document: (i) is or becomesgenerally available to the public through no improper action or inaction by the Receiving Party;(ii) was known by the Receiving Party or in the Receiving Party's possession prior to receipt ofthe Disclosing Party's Confidential Information as shown by the Receiving Party's businessrecords kept in the ordinary course; (iii) is disclosed with the prior written approval of theDisclosing Party; (iv) was independently developed by the Receiving Party without use of or

{B0923702; I}


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8.4 Construction. The Parties hereto and their counsel have cooperated in the drafting andpreparation of this Agreement; and, therefore, this Agreement shall not be construed morefavorably for or against any Party. Captions, titles and headings used in this Agreement are forconvenience of reference only, are not intended to be full or accurate descriptions of the contentshereof, and in no way define, limit, expand or describe any of the terms and conditions and/oragreements contained herein with respect to the same subject matter.8.5 Waiver. Any waiver by any Party of any breach of any term or condition of thisAgreement shall not be deemed a waiver of any other breach of such term or condition or of anyother term or condition; nor shall the failure of a Party to enforce such provision constitute awaiver of such provision or any other provision, nor shall such action be deemed a waiver orrelease of any other Party for any claims arising out of or connected with this Agreement.8.6 Binding Effect. All of the terms of this Agreement shall be binding upon, and inure tothe benefit of, and be enforceable by, the Parties and their successors and permitted assigns, ifany.8.7 Partial Invalidity. If a court of competent jurisdiction holds any provision hereof invalid,illegal, or unenforceable, such invalid, illegal, or unenforceable provision shall not affect thevalidity or operation of any of the other provisions and shall be deemed to be severed from thisAgreement; and the invalid, illegal, or unenforceable provision shall be replaced by a valid,legal, or enforceable provision that comes closest to the mutual intent of the Parties.8.8 Notice. Unless otherwise specified herein, all notices required or permitted to be givenunder this Agreement must be in writing to be effective. Any notice from one Party to the othershall be delivered either personally or by United States mail, postage fully prepaid, or by agenerally recognized delivery service to the address below or via facsimile number providedbelow. Any notice being delivered shall be deemed delivered upon (a) personal service, (b)transmission via facsimile (with the original thereofto be immediately sent by mail, postageprepaid, or domestic delivery service), or (c) in the case ofmail or a generally recognizeddelivery service, upon verified delivery to the address provided below.I f to GTECH, to:

GTECH Corporation10 Memorial BoulevardProvidence, RI 02903Attention: John L. Capone, Esq.Assistant General CounselFacsimile: 401-392-0391

with a copy to:Sullivan & Worcester LLPOne Post Office Square21 5t Floor

{B0923702; I}


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Boston, MA 02109Attention: Kimberly B. Herman, Esq.Facsimile: 617-338-2880

I f to the Lottery, to:State of MichiganMichigan Bureau of State Lottery101 East HillsdaleLansing, MI 48909Attention: Tom WeberFacsimile:517-241-0104

Either Party may change its address for purposes hereunder by providing the other Party withwritten notice of the new address pursuant to the provisions of this Section 8.8.8.9 Assignment. No Party shall have the right to assign this Agreement without the priorwritten consent of the other Party, provided, however, that a Party may freely assign thisAgreement to a successor-in-interest in the event of a merger, consolidation or acquisition of allor substantially all of the assets or business of such Party. This Agreement shall be binding uponand inure to the benefit of the successors and the permitted assigns of the respective Partieshereto.8.10 Force Majeure. In the event that a Party is prevented from performing any of itsobligations under this Agreement due to any cause beyond the Party's reasonable control and notdue to the Party's negligence, the time for such Party's performance shall be extended for theperiod of delay or inability to perform due to such event; provided, however, that the Partyprevented from performing shall use all reasonable efforts to resume its performance as soon aspossible.8.11 Regulatory Authority. Notwithstanding any language to the contrary in this Agreement,this Agreement may be terminated by a Party upon prior written notice to the other Parties if anyregulatory authority (which for the purpose of this section, shall include any such authoritywhich regulates a Party or any related, associated or affiliated companies and entities) requires orrecommends that this Agreement be terminated or if the continuance of this Agreement in thereasonable beliefof such Party shall have a detrimental impact on the ability of such Party to bequalified to hold or maintain any licenses, permits or approvals issued or to be granted by anygaming regulatory authority.8.12 Marketing Plans. With respect to the Licensed Game, the Lottery may elect toimplement the marketing and implementation plan attached hereto as Exhibit D and made a parthereof. Notwithstanding any language to the contrary in this Agreement, the Lottery shall havesole and exclusive authority for all decisions regarding the prize structure, naming, branding,marketing, promotion, player and retailer education, retailer incentives, implementation,

{B0923702; I}


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The Game Where You Can WinUp to $10 Million INSTANTLYI

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The Game Where You Can WinUp to $10 Million INSTANTLY!

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State Contractors - MiLottery Response to LSJ FOIA

Documents