State Contractors - MiLottery Response To LSJ FOIA

STATE OF MICHIGAN
LANSING

RICK SNYDER
GOVERNOR
101 E. HILLSDALE P.O. BOX 30023 LANSING, MICHIGAN 48909
www.michigan.gov/lottery (517) 335-5600
M. SCOTT BOWEN
COMMISSIONER
BUREAU OF STATE LOTTERY
August 27, 2013

Kristen M. Daum, State Government Reporter
Lansing State Journal
120 E. Lenawee Street
Lansing, MI 48919

Dear Ms. Daum:

This written notice is issued in response to your August 20, 2013, request for information under the
Freedom 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. Matero
Freedom of Information Act Coordinator

Updated 11129/07
Ad Board Date: (ver. )
STATE ADMINISTRATIVE BOARD
CONTRACT CHANGE RECOMMENDATION
DEPARTMENT OFMANAGEMENTAND BUDGET
PURCHASING OPERA TIONS
AGENCY SUBMITTAL [gJ
DMB PURCHASING SUBMITTAL D
CONTRACT DESCRIPTION: Contract # MSL 07-001, Modification requested for Service;
Michigan Bureau of State Lottery
MICHIGAN
CONTRACTOR: BUSINESS INCREASE
GTECH Corporation, 10 Memorial Blvd, Providence, RI $1,200,000.00
o
DCheck if signed Purchase Request form has been received by Purchasing Operations and
reviewed by DMB, or posted on the DMB Intranet in agency's pre-approved contract list.
DCheck if request is to exercise Contract option(s).
Requested time period:
:4PPROVID
o Check if request is to extend Contract (no option in base).
AUG 05 2008
Time period of extension:
MICHIGAN STATE
ADMINISTRATIVE BOARD
DCheck if extension is beyond Contract option year(s).
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 period
CURRENT CONTRACT VALUE: $285,600,000.00
NEW TOTAL CONTRACT VALUE: $286,800,000.00
PREVIOUS OPTION YEARS:
PERIOD
D Option 1 CN #
D Option 2 CN #
(Years) SAB APPROVAL DATE $ Value
o Option 3 CN #
Total $0.00
PREVIOUS EXTENSIONS: N/A
CHANGE TOTAL: Total number of processed changes to time, scope, and/or dollars: 0
FIRST AND LAST CHANGE NOTICES:
TYPE OF CHANGE:
SAB APPROVAL
DATE
(if applicable)
VALUE
OF
CHANGE:
DATE CCN
PROCESSED
First
CN
n/a
Last
CN
FUNDING SOURCE: PERCENTAGE COMMENTS
Lottery Restricted
Fund -100%
ESTIMATED INCREASE DETAILED BY FISCAL YEAR(S):
2008 $300,000.00
2009 $900,000.00
PURCHASE JUSTIFICATION:
Description of Product/Service Modification Requested and Process Explanation: The Bureau
of State Lottery is requesting to exercise an amendment to their competively-bid gaming system
contract (currently held by GTECH) to allow for a one-year pilot program to assist the Lottery with
Club Games recruiting and Instant Ticket merchandising. 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 (temporary support services) was contemplated under the RFP developed by the Lottery
and responded to in the bid proposal submitted by the vendor. Through the program, five Club
Games recruiters will visit potential Club Games locations throughout the state to enlist the locations
to become licensees of the Lottery. Eleven Instant Game Merchandisers will visit Instant ticket
retailers in the state with the goal of increasing sales through personal contact. One supervisor will
oversee the II merchandisers.
PurposelBusiness Case of Amendment or Extension, and Expected Outcomes: The Lottery
Merchandiser Pilot Program is a one-year program where merchandisers will 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 bi-monthly visits, the merchandisers' 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, and communicating with appropriate
personnel to maximize Lottery's presence in these targeted accounts. The merchandisers' success
will be evaluated on completion ofjob assignments and sales increases within their assigned
territories. 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 they
will be required to record their daily activities for review by designated GTECH and Lottery
personnel. Based on current volume at these targeted retailers, Lottery is projecting a $6.5 million
increase in sales, and a net to schools of $1.5 million with this pilot program. Program success will
be evaluated on a quarterly basis.
The Lottery Club Games Recruitment Pilot Program is a one-year program where recruiters, 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 corporate accounts. Recruiters will be provided
with a recruitment area defined by geographical boundaries. Recruiters will be paid a lump sum
upon successful licensing application and terminal installation being completed. Club Games
retailers average sales of $240,000 per year, and a net return to the school aid fund of $56,000 per
year. It is estimated that 200 new Club Games applications will be received, generating $11.2
million net to the school aid fund annually from these recruitments. Again, the provision of these
temporary support services, which the Lottery now wishes to exercise, was contemplated under the
the RFP and responded to in the bid proposal submitted by the vendor.
Risk Assessment: The Lottery currently has 66 district sales representatives (DSRs) calling on
retailers throughout the state. Each DSR is assigned 120-135 retailers to service. The Lottery
currently has over 10,700 licensed retailers in the state. The Lottery does not have the FTE
authorization to service all its retailers. Currently over 2,000 retailers are not able to be called on by
DSRs. This pilot program will provide staffing assistance to call on retailers to increase their sales
and recruit new retailers in the profitable Club Games market. The pilot program has the potential to
generate an additional $12.7 million for the school aid fund. Without this program, this additional
revenue from these programs will be lost.
' ,
PRICE CLAUSE: firm, fixed
CS-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-provided
stafrmg.
DCheck if> $500,000 for software development, computer hardware acquisition or quality
assur4lDce?
PURCHASING APPROVALS
Buyer Signature Manager Signature
Division Director Signature Elise A. Lancaster
Purchasing Operations Director
B. Craig Orr
Senior Deputy Director
.----
Return Information:
Contact Name: ':I>"\ \-l Au..se.c:::
ID Mail: L-On'Eo7:'-1'
Phone No.: "3"?> S - 5" L, 87
Authorized Agency Representative Signature
e-Mail: e ('1'0 i 0.14 _
SPECIAL APPROVALS
(as required)
Budget Office Representative (Printed) Budget Office Representative Sigaaturc
AMENDMENT #1 TO CONTRACT MSL07-001
GTECH CORPORATION AND STATE OF MICHIGAN
BUREAU OF STATE LOTrERY
This Amendment Agreement ("Amendment") is entered into and effective this
____ of June, 2008 by and between the State of Michigan, Michigan Bureau of
State Lottery ("Lottery"), 101 East Hillsdale, Lansing, Michigan 48909 and GTECH
Corporation ("GTECH"), 10 Memorial Boulevard, Providence, Rhode Island 02903. The
purpose of this Amendment is to establish the provision of certain services related to
recruitment and servicing of Lottery retailers throughout the State of Michigan in a pilot
program as detailed in the attached Statements of Work. This Amendment further
defines the contract term to allow for this service to be undertaken during the
implementation interval of the contract.
The Lottery issued a Request for Proposals (the "RFP") on April 10, 2007 for an online
and instant lottery gaming system and related services and GTECH responded to the
RFP by submitting a proposal. The RFP requested proposals on providing temporary
staffing services under Lottery Invited Option T, Provision of temporary support staff,
which GTECH responded to; and
The Lottery and GTECH entered into Contract No. MSL07-001 on April 1,2008, with
respect to an online and instant lottery gaming system and related services including
Section 12, Other Options which states, "The [Lottery] may, from time to time during the
term of this contract, request GTECH to submit a proposal for the provision of goods or
services which are ...outside the scope of the goods or services agreed to by the
parties to be a part of the base System requirements. With respect to such additional
goods or services, the parties agree to negotiate the terms and conditions, including
price, for the delivery of such additional goods or services."
The provision of these'temporary support services was contemplated under the RFP
and responded in the proposal submitted by GTECH. The Lottery wishes to exercise
Invited Option T, Provision of temporary support staff. GTECH has responded to and
negotiated 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 the
mutual promises given one to the other, the parties intending to be legally bound, do
hereby 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 "implementation
interval" as the period of time after approval by the SAB [State Administrative
Board] and prior to the "Conversion Date" (production start-up date) during which
time the Lottery and the Contractor prepare to convert operations to the new
system. This period of time shall also include exercising provisions to assist in a
Amendment #1 MSL07-001
successful conversion, including, but not limited to the provision of temporary
support staff needed to grow sales during the implementation period. The pilot
program term shall be one year from the date of approval by the SAB. Other
provisions under the Contract Term remain unchanged.
2. Merchandiser Pilot Program. Lottery accepts GTECH's proposal under Invited
Option T, specifically to provide up to twelve (12) merchandisers for the purpose
of increasing Lottery Instant Ticket sales at retailers not currently called on by
Lottery sales representatives. Details of the merchandiser pilot program are
outlined in the Attachment A, Statement of Work, Lottery Merchandiser Pilot
Program attached.
3. Club Games Recruiter Pilot Program. Lottery also accepts GTECH's proposal
under Invited Option T, specifically to provide up to five (5) Club Games recruiter
positions. These positions will be entirely focused on recruiting new retailers for
the Club Games program. Details of the Club Games recruiter pilot program are
outlined in the Attachment B, Statement of Work, Lottery Club Games Recruit
Pilot program.
4. FUll Force and Effect. Unless specifically amended herein, all other provisions,
terms, and conditions set forth in the Contract remain in full force and effect.
5. Effective Date. This Amendment shall be effective as of the date of approval of
this Amendment by the Michigan State Administrative Board.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and
year first written above.
For GTEY" corporationQ:
By:
Tille'sVf>{,
Date: 6/ IZI_O_g _
Page 2
Attachment A
Statement of Work
Lottery Merchandiser Pilot Program
Background:
The Lottery Merchandiser Pilot Program is a one-year program where merchandisers
will 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 bi
monthly visits, the merchandisers' 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, and communicating with appropriate personnel to
maximize Lottery's presence in these targeted accounts. The merchandisers' success
will b,e evaluated on completion of job assignments and sales increases within their
assigned territories. 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 they will be required to record their daily activities for
review by designated GTECH and Lottery personnel. Based on current volume at these
targeted retailers, Lottery is projecting a $6.5 million increase in sales with this pilot
program. 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 manage
oversight of the merchandisers in conjunction with designated Lottery personnel. Prior
to engaging in employment as a merchandiser, an applicant will be required to submit to
a background investigation and drug testing as prescribed by Lottery. Lottery will have
final approval on all hiring. The required work schedule is Monday through Friday, 8:00
a.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 and
policies including but not limited to Lottery human resource requirements, must be
observed by the merchandisers. Merchandisers will be required to sign a non
disclosure agreement agreeing to keep all information obtained during the
merchandising process confidential.
GTECH and designated Lottery personnel will interview and select merchandisers.
There will be eleven (11) merchandisers and one (1) merchandiser supervisor. The
merchandiser supervisor will monitor the daily activities of the merchandisers. Eleven
(11) routes, each averaging 135 accounts, will be established and a daily route will be
planned. (Daily routes are subject to change pending state initiatives, schedules, etc.).
The hourly rate for merchandisers will be $13.00 per hour. The merchandiser
supervisor's hourly rate will be $15.00 per hour. Merchandisers will originate from a
work station mutually agreed upon by GTECH and designated Lottery personnel.
Merchandisers will be given a $400 per month stipend for use of their personal vehicle
and fuel. Merchandisers will be provided with cellular telephones which must be used in
accordance with Lottery's policy and procedure i.e. for work purposes only. To be
reimbursed for other acceptable expenses such as photocopying, parking, and maps, a
Page 3
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 other
expenses without prior approval by designated Lottery personnel. Merchandisers must
report daily activity as directed by Lottery.
Position Duties:
Merchandisers will be responsible for promoting lottery sales through direct contact with
retailers who are not visited by Lottery District Sales Representatives. Merchandisers
will 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/or
specific products.
Surveying accounts and setting displays to Lottery standards where necessary.
Informing retailers of current and upcoming Lottery programs, promotions and
events.
Answering retailer questions.
Evaluating Lottery product inventory to determine proper placement according to
space-to-sales and standards of excellence.
Maintaining adequate traveling inventory of POS, informational brochures, and other
product related materials.
Preparing and submitting call reports, inventory reports, monthly activity reports and
other 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 hours
worked and expenses incurred by all merchandisers. Merchandisers will be paid in
accordance with the temporary agency's policy and procedure. Reimbursements for the
previous 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 a
detailed weekly invoice with documentation to support the charges.
Training:
Lottery or its designee will provide the merchandisers with training and materials related
the Lottery Act, its rules, directives, policy and procedures. Training materials relating
specifically to POS usage and availability, Standards of Excellence and Space-to-Sales
will be provided to merchandisers.
Other Considerations:
Program success will be evaluated on a quarterly basis. The pilot program may be
terminated by Lottery at any time. If terminated prior to the end of the one-year pilot
Page 4
Amendment #1 MSLO?-001
period, merchandisers will only be entitled to compensation for time worked up to the
date of termination.
Program Cost Analysis: 1
GTECH will be reimbursed for documented expenses on the following schedule which
includes 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 12
employees =$7,200
Three (3) days of training by HKC Consulting @ $3,500 per day = $10,500
Total yearly cost estimate: $590,033.00
Page 5
Attachment B
Statement of Work
Lottery Club Games Recruitment Pilot Program
Background:
The Lottery Club G a m e ~ Recruitment Pilot Program is a one-year program where
recruiters, 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 corporate
accounts. Recruiters will be provided with a recruitment area defined by geographical
boundaries. Recruiters will be required to record their daily activities for review by
designated Lottery personnel. A recruiter will be paid a lump sum for each successful
terminal installation at a licensed retail establishment within his or her geographical
boundaries.
Recruiters will be retained through a temporary agency and GTECH will be the
employer of record. Recruiters will be managed by GTECH and designated Lottery
personnel. Prior to being retained, applicants will be required to submit to a background
investigation and drug testing as prescribed by Lottery. Lottery will have final approval
of a recruiter's hiring. Work hours will be determined by the recruiter and his or her
success will be determined by the number of successful terminal installations. The
Lottery Act, its rules, and directives, as well as Lottery's rules, regulations and policies
including but not limited to Lottery human resource requirements, must be observed by
the recruiters. Recruiters will be required to sign a non-disclosure agreement agreeing
to 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. After
successfully recruiting a new Club Games retailer, a recruiter will receive a total of
$2,000 for each successful terminal placement within its geographical boundaries. The
recruiter will receive $500 of the $2,000 at the time Lottery approves a retail location for
licensure. The recruiter will be authorized to be paid the remaining $1,500 after
successful terminal placement at the retail establishment. Expenses incurred by a
recruiter 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 terminal
placement is not achieved, the $500 paid to the recruiter will be applied to future
commissions earned from successful placement of terminals. GTECH will be paid
$2,860 for each new retailer recruited and successfully installed under the pilot
program, 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 or
her designated geographical location with a specific emphasis on corporate accounts.
Within that designated geographical area, Lottery will provide the recruiter with a list of
eligible club games establishments. A recruiter will be responsible for assuring a
proposed retailer has submitted all information necessary to Lottery in order to make its
Page 6
determination of a retailer's eligibility for terminal placement. This information includes,
but is not limited to:
An application
A data sheet for each owner
Photo identification for each owner
EFT forms
Proof of ownership (i.e., lease, mortgage, etc.)
Copy of valid liquor license
Invoicing:
GrECH will provide Lottery with the weekly invoice detailing successful recruitments
under the pilot program. Detail will include retailers successfully completing the
application process, and subsequently retailers having completed the successful
terminal installation stage. GrECH will be paid $715 after a recruited retailer has been
approved for licensure by Lottery, and $2,145 after a recruited retailer's terminal
installation. GTECH is responsible for ensuring prompt payment to the temporary
agency for any fees it is entitled.
Training:
Lottery will provide the recruiters with training and materials related the Lottery Act, its
rules, directives, policy and procedures. GTECH will also provide recruiters assistance
with the subject matter upon request.
Reporting:
Recruiters will report to GTECH and will be overseen by designated Lottery personnel.
Recruiters will not be paid an hourly wage, and will therefore only be required to report
to GTECH or Lottery by prior arrangement of such. GTECH will notify the temporary
agency when a retailer has been approved by Lottery for licensure. GTECH will also
notify the temporary agency when a lottery terminal has been successfully installed at a
retail establishment. GTECH will provide Lottery a report detailing submitted
applications, active recruiters, applications per recruiter, installation schedule, invoicing
status, and any other information necessary to administer the pilot program.
It is expected that effective October 1, 2008, new retailer installations will cease
temporarily in order to allow for sufficient system testing, training, scheduling, etc. for
the upcoming terminal and network conversion. A recruiter will continue to be paid his
or her $500 for each proposed retailer approved by Lottery for licensure, however, the
balance ($1500) will not be paid until terminal placement is completed. If a retailer is
approved for licensure by Lottery and it happens that the terminal is not placed at the
retailer's location, the $500 received by that recruiter for that location will be applied to
future recruitment commissions.
Lottery reserves the right to request immediate termination of any recruiter. The pilot
program may be terminated by Lottery at any time.
Page 7
September 16, 2009
To: State Administrative Board
Form SAB-81O
1. Michigan Lottery
Contract Modification Request - MSL 07-001
Approval is requested for the following:
1) GTECH Corporation
10 Memorial Blvd.
Providence, RI 02903
$6,948,614.00 Amendment No.2
100% Lottery Restricted Fund
Lottery Gaming System,
Equipment, and Services
2) GTECH Corporation
10 Memorial Blvd.
$8,970,000.00 Amendment No.3
100% Lottery Restricted Fund
Lottery Gaming System,
Updated 09-14-09 Ad Board Date: (ver. )
CONTRACT CHANGE RECOMMENDATIONS
DEPARTMENT OFMANAGEMENTAND BUDGET
PURCHASING OPERATIONS
AGENCY SUBMITTAL ~
CONTRACT DESCRIPTION: Contract # MSL 07-001 Modification requested for Service;
Michigan Bureau of State Lottery - Amendment No.2
MICHIGAN
GTECH Corporation, 10 Memorial Blvd., Providence, RI $6,948,614.00
D
reviewed by DMB, or posted on the DMB Intranet in agency's pre-approved contract list.
DCheck if request is to extend Contract (no option in base).
DCheck if extension is beyond Contract option year(s).
DCheck if MiDEAL contract.
ORIGINAL CONTRACT: Term: 4/01108 - 1I19/2015Value: $285,600,000.00
PREVIOUS OPTION YEARSIEXTENSIONS:
PERIOD
D Option 1 CN #
D Option 2 CN #
D Option 3 CN #
D Extension CN #
Total 0
.'
PREVIOUS CHANGES NOT LISTED ABOVE:
TYPE OF CHANGE:
SAB APPROVAL
DATE
(if applicable)
VALUE OF
CHANGE:
First CN Merchandiser Program 08/05/08 $1,200,000.00
LastCN
Total number of processed changes to time, scope, and/or dollars:
PERCENTAGE COMMENTS
10 $1,303,680.00
11 $1,303,680.00
12 $1,303,680.00 (same for
FY 13, 14, and
$430,214.00 for FY 15)
........
of State Lottery is requesting to exercise an amendment to their competively-bid gaming
system contract (currently held by GTECH) to assist the Lottery with Instant Ticket
merchandising. 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 under
the RFP developed by the Lottery and responded to in the bid proposal submitted by the
vendor. This Amendment will allow the vendor to provide Instant Game merchandisers to
visit Instant Ticket retailers in the state with the goal of increasing sales through personal
contact.
PurposelBusiness Case of Amendment or Extension, and Expected Outcomes: The Lottery
inplemented a one year pilot program this previous fiscal year (Amendment 1) to test and assess the
viability and success of a program ofthis nature. The Lottery realized a return to the School Aid
fund 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 will
make bi-monthly visits to retailers selected by the Lottery. At the bi-monthly visits, the
merchandisers' 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, and
communicating with appropriate personnel to maximize Lottery's presence in these targeted retailer
locations. The merchandisers success will be evaluated on completion ofjob assignments and sales
increases within their assigned territories. Merchandisers will be provided with a set route, defined
by geographical boundaries. Specific reports will be generated to determine activity within the
merchadisers' accounts and they will be required to record their daily activities for review by
designated GTECH and Lottery personnel.
Risk Assessment: The Lottery currently has 66 district sales representatives (DSRs) calling on
retailers throughout the state. Each DSR is assigned 130 retailers to service. The Lottery currently
has over 10,700 licensed retailers in the state. The Lottery does not have the FTE authorization to
service all its retailers. Currently over 2,000 retailers are not able to be called on by DSRs. This
program will provide staffing assistance to call on retailers to increase their sales and recruit new
retailers in the profitable Instant Games market. Based upon the results of the pilot program, the
Lottery is projecting a $47,970,000.00 increase in sales and a net to the School Aid Fund (less the
cost of this Amendment) of $7,900,000.00 over the life of the contract. Failure to continue this
program 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.
D Check if> $500,000 for software development, computer hardware acquisition or quality
assurance?
RECOVERY ACT FUNDS
I_P_e_r_ce_n_t_o_f_T_o_ta_I I_N_I_A_%_o I_A_rn_o_u_nt I---'$ _
Remember to attach aSE-approved PRF to all services purchases other
than those classified as Nonjurisditional (NJ), and delete this message!
ED 2009-3 INFORMATION:
Agency Internal #: NtA
BPO#:
REQ#:
'Division Director Signature Sergio Paneque
Senior Deputy Director,
DMB Business Services Administration
,-- ----=A_G_E_N_C--,y APPr--:R:.:.O.=..V....:....:..:A=L=S _
Return Information:
Authorized Agency Representative (printed)
Contact Name: Dick Hauser
ID Mail: Lansing Run - Lottery Bldg.
Phone No.: 517-335-5687
e-Mail: hauserd@michigan.gov
BUREAU OF STATE LOTrERY
This Amendment #2 to Contract MSL07-001 ("Amendment") is entered into by and
between the State of Michigan, Michigan Bureau of State Lottery ("Lottery"), 101 East
Hillsdale, Lansing, Michigan 48909 and GTECH Corporation ("GTECH"), 10 Memorial
Boulevard, Providence, Rhode Island 02903. This Amendment is effective as of the
date of approval of this Amendment by the Michigan State Administrative Board. The
purpose of this Amendment is to establish the provision of certain services related to
servicing of Lottery retailers throughout the State of Michigan in a program as detailed
in the attached Statements of Work.
and instant lottery gaming system and related services and GTECH responded to the
RFP by submitting a proposal. The RFP requested proposals on providing temporary
staffing services under Lottery Invited Option T, Provision of temporary support staff,
which GTECH responded to; and
The Lottery and GTECH entered into Contract No. MSL07-001 on April 1, 2008, with
respect to an online and instant lottery gaming system and related services including
Section 12, Other Options which states, "The [Lottery] may, from time to time during the
term of this contract, request GTECH to submit a proposal for the provision of goods or
services which are ...outside the scope of the goods or services agreed to by the
parties to be a part of the base System requirements. With respect to such additional
goods or services, the parties agree to negotiate the terms and conditions, including
price, for the delivery of such additional goods or services."
The provision of these temporary support services was contemplated under the RFP
and responded in the proposal submitted by GTECH. Amendment #1 was a pilot
program. Due to the success of this pilot, the Lottery's intention is to continue this
program through Amendment #2. The Lottery wishes to exercise Invited Option T,
Provision of temporary support staff. GTECH has responded to and negotiated with the
Lottery 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 to
twenty one (21) merchandisers for the purpose of increasing Lottery Instant Ticket
sales. Details of the merchandiser program are outlined in the Attachment A, Statement
of Work, Lottery Merchandiser Program.
,
IN WITNESS WHEREOF, the parties have executed this Amendment.
For GrECHQrporation: Q
For the Lottery:
By: - 12 .-

Title: jwll){ V r; \tLt\ Title: Ckhf'<F if'tflJrY, 1'-'\1 tA 'j1'Y"J'\:("
Date: c\ D
Date: f (1.-1/0
Page 2
Attachment A
Statement of Work
Lottery Merchandiser Program
Background:
The Lottery Merchandiser Program (Program) is a program where merchandisers will
among other things visit retailers. Merchandisers will make bi-monthly visits to retailers
selected by Lottery. At the bi-monthly visits, the merchandisers' 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, and
communicating with appropriate personnel to maximize Lottery's presence in these
targeted accounts. The merchandisers' success will be evaluated on completion of job
assignments and sales increases within their assigned territories. 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 they will be
required to record their daily activities for review by designated GTECH and Lottery
personnel. Based on current volume at these targeted retailers, Lottery is projecting a
$9 million annual increase in total sales with this program. Program success will be
evaluated on a quarterly basis.
Merchandisers will be GTECH employees. GTECH will manage oversight of the
merchandisers in conjunction with designated Lottery personnel. Prior to engaging in
employment as a merchandiser, an applicant will be required to submit to a background
investigation and drug testing as prescribed by Lottery as well as pass required GTECH
prerequisites. The applicant must also have an acceptable driving record. Lottery will
have final approval on all hiring. The required work schedule is Monday through Friday,
8:00 a.m. through 5:00 p.m., unless otherwise specified by designated Lottery
personnel. Merchandisers and the supervisor will have all GTECH holidays off and will
be paid at standard rates. If the Lottery requests that the merchandiser work on any of
these holidays, the invoice will reflect the current hourly rate times 1.5 to account for the
overtime cost, and will be marked up as appropriate to cover expenses, not to exceed
the maximum allowable all inclusive billable cap of $25.00 per hour.
The Lottery Act, its rules, and directives, as well as Lottery's rules, regulations and
policies including but not limited to Lottery human resource requirements, must be
observed by the merchandisers. Merchandisers will be required to sign a non
disclosure agreement agreeing to keep all information obtained during the
merchandising process confidential.
GTECH and designated Lottery personnel will interview and select merchandisers.
There will be up to nineteen (19) merchandisers and two (2) merchandiser supervisors.
The merchandiser supervisor(s) will monitor the daily activities of the merchandisers.
Nineteen (19) routes, each averaging 135 accounts, will be established and a daily
route will be planned. (Daily routes are subject to change pending state initiatives,
schedules, etc.). The hourly rate for merchandisers will begin at $13.00 per hour. The
Page 3
merchandiser supervisor's hourly rate will begin at $15.00 per hour. Increases to these
rates may be administered based on a competitive market analysis performed by
GTECH to determine fair market pay. All pay increases must be approved by the
Lottery in advance and may not exceed $25.00 per hour, including benefits, incentive
payments, overtime, and administrative costs. Merchandisers will originate from a work
station mutually agreed upon by GTECH and designated Lottery personnel.
Merchandisers will be provided vehicles by GTECH for use during work hours only and
will be given a fuel card to be used for the vehicle. Merchandisers will be provided with
cellular telephones which must be used in accordance with Lottery's policy and
procedure i.e. for work purposes only. To be reimbursed for other acceptable expenses
such as photocopying, parking, and maps, a 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 other expenses without prior
approval by designated Lottery personnel. Merchandisers must report daily activity as
directed by Lottery.
Position Duties:
Merchandisers will be responsible for promoting lottery sales through direct contact with
retailers. Merchandisers will 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/or
specific products.
Surveying accounts and setting displays to Lottery standards where necessary.
Informing retailers of current and upcoming Lottery programs, promotions and
events.
Answering retailer questions.
Evaluating Lottery product inventory to determine proper placement according to
space-to-sales and standards of excellence.
Maintaining adequate traveling inventory of POS, informational brochures, and other
product related materials.
Preparing and submitting call reports, inventory reports, monthly activity reports and
other 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 to
support the charges.
Actual invoices to the Lottery will reflect an all inclusive hourly charge of $16.77 per
merchandiser, and of $19.35 for the supervisor, to cover salary, benefits, administrative
Page 4
costs, etc. Benefits include short and long term disability insurance for eligible
employees on FMLA. Annual increases to the hourly salary for each position may be
administered up to the total allowable all inclusive billable cap of $25.00/hour with
GTECH and Lottery management agreement.
Actual expenses for GTECH supplied vehicles will be invoiced to the Lottery. This cost
is estimated to be approximately $750.00 per vehicle per month. This estimate includes:
vehicle cost, insurance, fuel, maintenance, etc. In the interim period between Program
deployment and the securing of GTECH vehicles, if rental cars are necessary, all rental
fees, fuel costs, and associated maintenance expenses will be invoiced to the Lottery at
cost.
Training:
Lottery or its designee will provide the merchandisers with training and materials related
the Lottery Act, its rules, directives, policy and procedures. Training materials relating
specifically to pas usage and availability, Standards of Excellence and Space-to-Sales
will be provided to merchandisers. If there are any conflicts between GTECH's and
Lottery'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 the
earlier of expiration of the Contract (as defined in the Contract) or expiration of the
Lottery Merchandiser Program, except as otherwise expressly set forth in this
Agreement.
Program success will be evaluated on a quarterly basis. The program may be
terminated or changed by Lottery at any time. If, at any time, the Lottery chooses to
discontinue or make material changes to the Program, Lottery will provide written
notification no less than thirty (30) days prior to the date of discontinuance or material
change. Any severance and continued health insurance coverage required to be made
by GTECH as a result of such change or termination of the Program will be billed to the
Lottery 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 are
provided severance and continued health insurance. Currently, GTECH's policy
provides severance payments for non-exempt employees in the amount of one (1) week
per year of service and continued health insurance for the duration of severance
payments; however, this policy is subject to change at GTECH's discretion and on prior
written notification to the Lottery.
Any incentive plans determined by the Lottery to be beneficial to overall sales will be
paid to the merchandiser or supervisor at the mutually agreed upon rate, to include
actual incentive dollars earned, and appropriate mark up for benefits, administrative
costs, etc., not to exceed the maximum allowable all inclusive billable cap of $25.00 per
hour.
Page 5
Program Cost Analysis:
GTECH will be reimbursed for documented expenses on the following schedule (Based
on maximum allowable all inclusive billable cap of $25.00 per hour):
Salary for nineteen (19) merchandisers @ $25.00 per hour x 2080 hours = $988,000
Salary for two (2) supervisors @ $25.00 per hour x 2080 hours = $104,000
Estimated vehicle expenses for 21 employees@ $750 per month x 12 months =
$189,000
Cellular phone charges estimated @ $40 per month x 21 employees x 12 months =
$10,080
Misc. expenses (photocopies, maps, parking) estimated at $50 per month x 21
employees = $12,600
Total yearly cost estimate: $1,303,680
Page 6
, .
AMENDMENT # 3 TO CONTRACT MSL07-001
GTECH CORPORATION AND THE STATE OF MICHIGAN
~ # '
~ ~ ( \ This Amendment Agreement ("Amendment") is entered into and effective this g-t'k day of
l ; , ~ ~ ' 2009 (the "Amendment Effective Date"), by and between the State of Michigan,
Michigan Bureau of State Lottery, 101 East Hillsdale, Lansing, Michigan 48909 ("Lottery") and
GTECH Corporation, 10 Memorial Boulevard, Providence, Rhode Island 02903 ("GTECH").
The Lottery and GTECH are sometimes collectively referred to herein as the "Parties" and
individually referred to as a "Party." The purpose of this Amendment is to authorize GTECH to
obtain on behalf of the Lottery, a new lottery game pursuant to the terms hereof.
RECITALS
WHEREAS, the Lottery and GTECH entered into Contract No. MSL07-001 on April 1,
2008 (the "c0:e!et"), as amended, with respect to an online and instant lottery gaming system
and related se . s which Contract includes Section 12, Other Options which states, "The
[Lottery] may, from time to time during the term of this contract, request GTECH to submit a
proposal for the provision of goods or services which are ... outside the scope of the goods or
services agreed to by the parties to be a part of the base System requirements. With respect to
such additional goods or services, the parties agree to negotiate the terms and conditions,
including price, for the delivery of such additional goods or services;" and
WHEREAS, GTECH, at the Lottery's request, has obtained an exclusive license from
Integrated Group Assets Inc., with offices at 11551 Forest Central Drive, Suite 118 Dallas, Texas
75243 ("IGA"), to use in the State of Michigan an instant online lottery game known as "Lotto
Platinum" pursuant to the contract entitled: Lotto Platinum License Agreement (the "Lotto
Platinum License Agreement"), and wishes to sublicense these rights to the Lottery.
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:
Work Provided and Understanding of Contract Elements Being Amended:
1. Sublicense Agreement. The Contract is hereby amended to add the duties and obligations
of GTECH and the Lottery as described in Schedule 1: Sublicense Agreement by and between
GTECH Corporation and the Michigan Bureau of State Lottery (the "Sublicense Agreement"),
attached hereto and made a part hereof.
2. Full Force and Effect; Conflict. Unless specifically amended herein, all other provisions,
terms, and conditions set forth in the Contract shall remain in full force and effect. In the event
of a conflict between or among the terms of Contract, this Amendment or the Sublicense
Agreement, as that conflict relates specifically to a matter addressed in this Amendment or the
Sublicense Agreement, that the terms of the Sublicense Agreement shall prevail.
{B0923702; I}
, ,
IN WITNESS WHEREOF, the Parties have executed this Amendment as of the
Amendment Effective Date.
For Corporation
By: c;? ()
"--
For the Lottery
rCJ--;-:-;
Title: V\t:. fILBr> q)eN"' Title: (., j..n 'U'
Gc:re-o.\ AMfi(l..\ c.As
{B0923702; I}
Schedule 1
SUBLICENSE AGREEMENT
by and between
GTECH CORPORATION
and
MICHIGAN 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, Michigan
Bureau of State Lottery, 101 East Hillsdale, Lansing, Michigan 48909 ("Lottery") and GTECH
Corporation, 10 Memorial Boulevard, Providence, Rhode Island 02903 ("GTECH"). The
Lottery and GTECH are sometimes collectively referred to herein as the "Parties" and
individually referred to as a "Party."
RECITALS
WHEREAS, GTECH and IGA are parties to that certain Lotto Platinum License
Agreement executed in conjunction with this Agreement, pursuant to which GTECH obtained
from IGA the exclusive right to grant a sublicense to the Lottery to use the Licensed Game in the
State of Michigan (the "Territory"); and
WHEREAS, GTECH now wishes to sublicense to the Lottery, and the Lottery wishes to
sublicense 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 this
Section 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, excepting
terminal disclaimers) or abandoned; (iii) has not been cancelled or withdrawn (for example by
amendment), or if cancelled or withdrawn, has been reinstated; (iv) has not been conclusively
disposed of by the United States Patent and Trademark Office so that no further administrative
examination or administrative or judicial appeal may be taken; provided, however that in
connection with this subsection (iv), all actions taken by IGA to continue to prosecute such
Active Claims must be in good faith; or (v) if a judicial appeal is filed by IGA, such appeal has
{B0923702; I}
not been disposed of by a federal court in the United States from which no further appeal may be
taken.
1.2 "Affiliates" means any entity that controls, is controlled by or is under common control
with the Lottery, IGA or GTECH, as applicable.
1.3 "Confidential Information" means any and all technical, business, customer or
proprietary information disclosed by one Party (the "Disclosing Party") to the other Party (the
"Receiving Party"), directly or indirectly, including, but not limited to, information regarding the
Disclosing Party's business strategies and practices, methodologies, trade secrets, know-how,
pricing, technology, software (including, in the case ofGTECH, the Software), documentation,
product plans, services, relationships with any third party, customer lists and information
regarding the Disclosing Party's employees, customers, vendors, consultants, and Affiliates,
which is in tangible form and is marked confidential or proprietary.
1.4 "IGA" means Integrated Group Assets Inc., with offices at 11551 Forest Central Drive,
Suite 118 Dallas, Texas 75243.
1.5 "Improvements" mean all IGA enhancements to the Licensed Game that are covered in
the Active Claims of all patents and pending patent applications identified in clauses (1) and (ii)
of Section 1.8 (definition of Patent Rights) below.
1.6 "Licensed Game" means the Lotto Platinum+ game concept (known by the Lottery as
"Lucky Lines") as specifically described by IGA in Exhibits B and B-1 attached hereto and made
a part hereof that, if used by GTECH or the Lottery absent the License Rights granted hereunder,
would infringe one or more Active Claims of the Patent Rights when, as, and if issued.
1.7 "License Rights" mean the exclusive and non-transferable (except as set forth in Section
8.9 below) right to implement, operate, make, have made, use, sell or offer to sell the Licensed
Game; all subject to the provisions of Section 2.1 below.
1.8 "Patent Rights" means: (i) the Active Claims of all patents and all pending patent
applications identified on Exhibit A attached hereto and made a part hereof, and the Active
Claims of all patents and all pending patent applications filed, acquired by or granted to, or
otherwise owned or under the control of, IGA and/or its Affiliates or successors, either now or in
the future, but only to the extent the Active Claims in such patents and pending patent
applications cover the Licensed Game, enhancements to the Licensed Game, or a part thereof;
and (ii) the Active Claims of all reissue, reexamination, divisional, continuation, or continuation
in-part applications of all of the foregoing, or the Active Claims of patents issued therefrom, now
or hereafter filed or issued, but only to the extent the Active Claims in such patents and pending
patent applications cover the Licensed Game, enhancements to the Licensed Game, or a part
thereof.
SECTION 2. -- GRANT OF LICENSE; GTECH SOFTWARE
{B0923702; I}
2.1 License Grant. During the term of this Agreement, GTECH hereby sublicenses to the
Lottery all ofthe License Rights for the Licensed Game in the Territory under the Patent Rights,
including all IGA Improvements; provided that (i) this sublicense is exclusive to the Lottery, and
the Lottery may not further assign or sublicense the License Rights to any third' party; and (ii) the
right to sell or offer to sell the Licensed Game is limited solely to the sale of tickets to players
wishing to play the Licensed Game in the Territory, and does not include the sale of the Licensed
Game itself or the sale of the Patent Rights.
2.2 Changes to Licensed Game by Lottery. The License Rights specifically include the right
of the Lottery from time to time to make changes to the prize structure and certain other
attributes of the Licensed Game, but only to the extent such changes maintain the essential
characteristics ofthe Licensed Game. Any changes to the Licensed Game by the Lottery that
exceed the essential characteristics of the Licensed Game shall be approved in writing by IGA
which approval shall not be unreasonably withheld or delayed.
2.3 Changes to Licensed Game by IGA. IGA has agreed to undertake commercially
reasonable efforts to make changes to the Licensed Game in order to meet any reasonable
requirements of the Lottery which the Lottery requests in writing and shall not, in the reasonable
opinion oflegal counsel for GTECH and IGA, subject IGA to (i) additional costs over and above
those set forth in Section 10.11 of the Lotto Platinum License Agreement which provides:
"Assistance. During the term of this Agreement, IGA shall provide to GTECH and/or the
Lottery consultation services relating to the Licensed Game on an as-requested basis at no cost to
the Lottery or GTECH" or (ii) any third party infringement, misappropriation or similar claim
(all such reasonable requirements which satisfy conditions (i) and (ii) above are referred to as
"Requirements"). Notwithstanding any language to the contrary in this Agreement, the Lottery
shall, to the extent allowed by law, indemnify and hold GTECH harmless from and against any
claims relating to or arising from IGA's failure to meet the Requirements.
2.4 GTECH Software. The Lottery acknowledges and agrees that GTECH has developed or
may develop software that implements and/or enables operation of the Licensed Game (the
"Software"). Notwithstanding any language to the contrary in this Agreement or the Contract, as
between the Lottery and GTECH, GTECH shall own the entire right, title and interest in and to
such Software, and all intellectual property rights developed by GTECH and/or its designees
related thereto.
SECTION 3. -- TERM AND TERMINATION
3.1 Term. This Agreement shall begin on the Effective Date and shall remain in effect until
the earlier of expiration of the Contract (as defined in the Amendment) or expiration ofthe Lotto
Platinum License Agreement, except as otherwise expressly set forth in this Agreement.
3.2 Termination by the Lottery for Convenience. Notwithstanding anything herein to the
contrary, upon thirty (30) days prior written notice to GTECH, the Lottery may terminate this
Agreement without liability of any kind.
{B0923702; I}
3.3 Effect of Termination. Upon termination of this Agreement, notwithstanding any
language to the contrary in the Contract, the License Rights granted pursuant to this Agreement
shall cease and be deemed rescinded and terminated, except that the Lottery shall have the right
to continue to use the License Rights granted hereunder during a transition period the length of
which shall be reasonably determined by the Lottery in its sole discretion, provided that the
License Fees contemplated herein continue to be paid by the Lottery through and including the
end of such transition period.
SECTION 4. - LICENSE FEES
4.1 License Fees. The Lottery shall be required to pay the license fees as set forth on Exhibit
C attached hereto and made a part hereof for its use of the Licensed Game hereunder (the
"License Fees"). Such License Fees shall be transferred by the Lottery to GTECH on a weekly
basis. Once received by GTECH, GTECH shall promptly forward all such License Fees to IGA
on a pass-through basis and without retaining any portion thereof. In no event shall GTECH be
liable in any respect for any dispute regarding computation or payment ofthe License Fees by
the Lottery, which dispute shall be resolved solely between the Lottery and IGA.
4.2 Due Consideration. The Parties acknowledge and agree that due consideration has been
provided by the Lottery to GTECH hereunder in exchange for the License Rights granted in
Section 2 above. During the term of this Agreement and thereafter, neither Party shall contest
the adequacy of such due consideration.
SECTION 5. - REPRESENTATIONS AND WARRANTIES
As of the Effective Date, the Parties hereby make the following representations to each other:
5.1 Right to License. GTECH represents and warrants that to the best of its knowledge it
holds all rights and interests necessary to grant to the Lottery the rights granted herein.
5.2 No Conflicting Obligations. GTECH and the Lottery each represent to the other that, to
the best of their respective knowledge, information and belief, there is no suit, action, arbitration,
legal or administrative or other proceeding, or governmental investigation, which is pending or
threatened against them, the outcome of which could materially impair their ability to fulfill their
respective obligations under this Agreement.
5.3 Due Authorization. Each Party represents to the other that: (i) it is duly organized and
validly existing under the laws of the jurisdiction of its organization; (ii) its execution, delivery
and performance of this Agreement are within its powers, have been duly authorized by all
necessary action, do not violate or conflict with its organizational documents or any law,
regulation, or contract applicable to it, and do not require any consents or approvals which it has
not already obtained; and (iii) its obligations under this Agreement constitute its legal, valid and
binding obligations, enforceable in accordance with the terms hereof.
SECTION 6. - LIMITATIONS
{B0923702; I}
, ,
6.1 Limitations on Warranties. OTHER THAN AS EXPRESSLY PROVIDED FOR IN
THIS AGREEMENT AND WITHOUT PREJUDICE TO THE OBLIGATIONS
SPECIFICALLY 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 A
COURSE OF DEALING, USAGE OR TRADE PRACTICE, ARE HEREBY DISCLAIMED.
6.2 Limitations of Liability. IN NO EVENT SHALL A PARTY BE LIABLE FOR ANY
CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL OR PUNITIVE DAMAGES AS A
RESULT OF THIS AGREEMENT, HOWEVER CAUSED, ON ANY THEORY OF
LIABILITY, OR ANY OTHER LEGAL THEORY RELATED TO THIS AGREEMENT OR
TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EXCEPT FOR A
PARTY'S BREACH OF ITS CONFIDENTIALITY OBLIGATIONS OR A PARTY'S
UNAUTHORIZED USE OF THE OTHER PARTY'S INTELLECTUAL PROPERTY RIGHTS,
EACH PARTY'S TOTAL CUMULATIVE LIABILITY HEREUNDER SHALL BE LIMITED
TO THE TOTAL AMOUNT OF LICENSE FEES PAID IN CONNECTION WITH THE
SUBLICENSE RIGHTS GRANTED HEREUNDER DURING THE MOST RECENT 12
MONTH PERIOD.
6.3 Prize Liabilities. GTECH ASSUMES NO LIABILITY OF ANY KIND FOR
PAYMENT OF ANY JACKPOT OR OTHER PRIZES AWARDED BY THE LOTTERY
UNDER THE LICENSED GAME. PRIZE PAYMENT IS THE SOLE RESPONSIBILITY OF
THE LOTTERY.
SECTION 7. - CONFIDENTIALITY
7.1 General. The Receiving Party: shall treat as confidential in perpetuity all Confidential
Information ofthe Disclosing Party; shall not use such Confidential Information except as
expressly set forth herein or otherwise authorized in writing by the Disclosing Party; shall
implement reasonable procedures to prohibit the unauthorized use, disclosure, duplication,
misuse or removal of the Disclosing Party's Confidential Information; and, shall not disclose
such Confidential Information to any third party except as may be necessary and required in
connection with the rights and obligations of the Receiving Party under this Agreement, and
subject to confidentiality obligations at least as protective as those set forth herein. Without
limiting the foregoing, each of the Parties shall use at least the same procedures and degree of
care that it uses to prevent the disclosure of its own Confidential Information of like importance
to prevent the disclosure of the Disclosing Party's Confidential Information, but in no event less
than reasonable care.
7.2 Exclusions. Confidential Information shall not include, or shall cease to include, as
applicable, Confidential Information that the Receiving Party can document: (i) is or becomes
generally 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 of
the Disclosing Party's Confidential Information as shown by the Receiving Party's business
records kept in the ordinary course; (iii) is disclosed with the prior written approval of the
Disclosing Party; (iv) was independently developed by the Receiving Party without use of or
{B0923702; I}
reference to the Disclosing Party's Confidential Infonnation, provided that the Receiving Party
can demonstrate such independent development by documented evidence prepared
contemporaneously with such independent development; or (v) becomes known to the Receiving
Party from a source other than the Disclosing Party without breach of this Agreement by the
Receiving Party and otherwise not in violation of the Disclosing Party's rights.
7.3 Court Order. The Receiving Party may disclose the Disclosing Party's Confidential
Infonnation pursuant to the order or requirement of a court, administrative agency, or other
governmental body, provided that the Receiving Party provides prompt, advance written notice
thereof to enable the Disclosing Party to seek a protective order or otherwise prevent such
disclosure. In the event such a protective order is not obtained by the Disclosing Party, the
Receiving Party shall disclose only that portion of the Confidential Infonnation that its legal
counsel advises it is legally required to disclose and shall exercise all efforts required to obtain
confidential treatment for such infonnation.
7.4 Remedies. If a Party breaches any of its obligations with respect to confidentiality or
unauthorized use or disclosure of Confidential Infonnation hereunder, the other Party is entitled
to obtain equitable relief to protect its interest, including injunctive relief. If this Agreement is
breached by a Party due to its unauthorized use or disclosure of the other Party's Confidential
Infonnation, including but not limited to, such other Party's intellectual property rights, and such
other Party obtains equitable relief to protect its interest in accordance with this Section 7.4, the
breaching Party shall be liable for the reasonable costs incurred by the other Party in obtaining
such equitable relief.
7.5 Return. Upon the Disclosing Party's written request, the Receiving Party shall promptly
return or destroy, at the Disclosing Party's option, all tangible copies of the Receiving Party's
Confidential Infonnation.
SECTION 8. - MISCELLANEOUS
8.1 Governing Law. This Agreement shall be governed by the law of the State of Michigan,
without regard to its conflicts-of-laws or choice-of-law principles.
8.2 Counterparts. This Agreement may be executed in counterparts, and all such
counterparts together shall constitute one Agreement. This Agreement may also be executed by
facsimile, pdf, or other electronic signatures, all of which shall be effective as fully as original
signatures.
8.3 Entire Agreement; Amendment. This Agreement, and the Exhibits attached hereto,
constitute the entire agreement between and among the Parties with regard to the subject matter
hereof, and supersede all prior representations and/or agreements, whether written and/or oral,
with respect to the same subject matter. No waiver, consent or modification oftenns of this
Agreement shall bind a Party unless in writing and signed by the Parties; and then such waiver,
consent or modification shall be effective only in the specific instance and for the specific
purpose given.
{B0923702; I}
8.4 Construction. The Parties hereto and their counsel have cooperated in the drafting and
preparation of this Agreement; and, therefore, this Agreement shall not be construed more
favorably for or against any Party. Captions, titles and headings used in this Agreement are for
convenience of reference only, are not intended to be full or accurate descriptions of the contents
hereof, and in no way define, limit, expand or describe any of the terms and conditions and/or
agreements 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 this
Agreement shall not be deemed a waiver of any other breach of such term or condition or of any
other term or condition; nor shall the failure of a Party to enforce such provision constitute a
waiver of such provision or any other provision, nor shall such action be deemed a waiver or
release 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 to
the benefit of, and be enforceable by, the Parties and their successors and permitted assigns, if
any.
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 the
validity or operation of any of the other provisions and shall be deemed to be severed from this
Agreement; 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 given
under this Agreement must be in writing to be effective. Any notice from one Party to the other
shall be delivered either personally or by United States mail, postage fully prepaid, or by a
generally recognized delivery service to the address below or via facsimile number provided
below. 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, postage
prepaid, or domestic delivery service), or (c) in the case of mail or a generally recognized
delivery service, upon verified delivery to the address provided below.
If to GTECH, to:
GTECH Corporation
10 Memorial Boulevard
Attention: John L. Capone, Esq.
Assistant General Counsel
Facsimile: 401-392-0391
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
21
5t
Floor
{B0923702; I}
Boston, MA 02109
Attention: Kimberly B. Herman, Esq.
Facsimile: 617-338-2880
If to the Lottery, to:
State of Michigan
101 East Hillsdale
Lansing, MI 48909
Attention: Tom Weber
Facsimile:517-241-0104
Either Party may change its address for purposes hereunder by providing the other Party with
written 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 prior
written consent of the other Party, provided, however, that a Party may freely assign this
Agreement to a successor-in-interest in the event of a merger, consolidation or acquisition of all
or substantially all of the assets or business of such Party. This Agreement shall be binding upon
and inure to the benefit of the successors and the permitted assigns of the respective Parties
hereto.
8.10 Force Maj eure. In the event that a Party is prevented from performing any of its
obligations under this Agreement due to any cause beyond the Party's reasonable control and not
due to the Party's negligence, the time for such Party's performance shall be extended for the
period of delay or inability to perform due to such event; provided, however, that the Party
prevented from performing shall use all reasonable efforts to resume its performance as soon as
possible.
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 any
regulatory authority (which for the purpose of this section, shall include any such authority
which regulates a Party or any related, associated or affiliated companies and entities) requires or
recommends that this Agreement be terminated or if the continuance of this Agreement in the
reasonable belief of such Party shall have a detrimental impact on the ability of such Party to be
qualified to hold or maintain any licenses, permits or approvals issued or to be granted by any
gaming regulatory authority.
8.12 Marketing Plans. With respect to the Licensed Game, the Lottery may elect to
implement the marketing and implementation plan attached hereto as Exhibit D and made a part
hereof. Notwithstanding any language to the contrary in this Agreement, the Lottery shall have
sole and exclusive authority for all decisions regarding the prize structure, naming, branding,
marketing, promotion, player and retailer education, retailer incentives, implementation,
{B0923702; I}
execution, operation, sales venues where tickets for the Licensed Game are sold, and post-launch
support for the Licensed Game within the Territory (all of the foregoing being collectively
referred to herein as the Lottery's "Marketing and Implementation Plans"); provided, however,
that the Lottery shall keep GTECH and IGA reasonably informed regarding the Lottery's then
current Marketing and Implementation Plans.
IN WITNESS WHEREOF, the Parties have entered into this Agreement as evidenced
by the signatures below oftheir authorized representatives.
MICHIGAN BUREAU OF STATE
LOTTERY
Address: 101 East Hillsdale, Lansing, Michigan
48909
B y : / J I ~
N..(.: ~ \N<s<n-
Title:
GTECH CORPORATION
Address: 10 Memorial Boulevard, Providence,
RhQe ':Ud 02903
L2Q
By:
Name:
Title: SENtQIL V,'- (ae-n fi-ENT
6"'J"FC \..\ At..... e f).. \ t:.A:s
{B0923702; I}
EXHIBIT A TO SUBLICENSE AGREEMENT
PATENT RIGHTS
1. INSTANT ONLINE LOTTERY METHOD AND SYSTEM
Appl. No. 11/315,417
Filed: 12/21/2005
2. METHOD AND APPARATUS FOR AN INSTANT ONLINE LOTTERY TICKET
Appl. No. 12/034,657
Filed: 02/20/2008
3. INSTANT ONLINE LOTTERY TICKET FOR A LINEAR PRIZE AND A POSITION
SPECIFIC PRIZE
Appl. No. 12/045,650
Filed: 03/1 0/2008
4. METHOD AND APPARATUS FOR PROVIDING A LOTTERY
Appl. No. 12/045,653
Filed: 03/1 0/2008
5. METHOD AND APPARATUS FOR PROVIDING A SCRATCH-OFF LOTTERY
GAME
Appl. No. 12/206,698
Filed: 09/08/2008
6. METHOD AND APPARATUS FOR PROVIDING AN INSTANT LOTTERY GAME
WITH AN ORDERED ASSORTMENT
Appl. No. 12/253,232
Filed: 10/16/2008
7. METHOD AND APPARATUS FOR PROVIDING AN INSTANT LOTTERY GAME
AND A SUPPLEMENTAL GAME
Appl. No. 12/396,611
Filed: 03/03/2009
8. LOTTERY TICKET PROVIDING FOR MULTIPLE GAMES
U.S. Patent No. 7,347,776
Filed: January 25, 2005
Issued: March 25,2008
9. MULTIPLE PRICING SHARED SINGLE JACKPOT IN A LOTTERY
U.S. Patent No. 6,935,948
Filed: January 27, 2004
Issued: August 30, 2005
{B0923702; I}
EXHIBIT B TO SUBLICENSE AGREEMENT
DESCRIPTION OF LICENSED GAME
General Description of the Licensed Game
The Licensed Game is graphically-described in Exhibit B-1 attached hereto and has been
named "Lucky Lines" by the Lottery (no representation, warranty, or indemnity of any kind is
given by IGA with respect to that name, as it has been chosen solely by the Lottery).
In the Licensed Game, a player purchases an instant on-line game ticket from a terminal
by choosing a price point among several offered by the Lottery. Each instant ticket includes 7
"player numbers" ("Player Numbers") printed by the on-line terminal, all between the numbers
1-49 (without any repeating numbers). Below those printed 7 Player Numbers shall also appear a
play-grid ("Grid"), in which all of the numbers between 1-49 shall be printed (also without any
repeating numbers), organized in 7 rows of 7 numbers each.
The Lottery may allow the player to either (i) self-select the 7 Player Numbers, or (ii)
select a "quick pick" option (where the system shall randomly select such 7 Player Numbers).
Each time that the player self-selects or "quick picks" hislher Player Numbers, the
terminal computer shall print the Grid where each of the numbers 1-49 shall appear (a) in
random order (in the case of Player Numbers which are self-selected by the player), or (b) in
numerical order (in the case of Player Numbers which are selected by a "quick pick").
Although winning the instant jackpot (or "top") prize shall require that all 7 of the Player
Numbers match the randomly-generated numbers in the 7 x 7 grid in the same row (either
vertically, horizontally, or diagonally), there are also numerous other ways to win various
"secondary prizes." The amount of the prizes which a player may win shall vary by price point.
The Licensed Game can also be played as a daily (or other periodic) draw game (in
which case, each ticket would have a Grid with all 49 numbers appearing in random order), but
the 7 Player Numbers would in this case be drawn by the Lottery.
{B0923702; I}
EXHIBIT B-1
Copyright 2008 Lottery Dynamics Corp.

The Game Where You Can Win Up to $10 MILLION INSTANTLY!
HorizontalVertical
theTop Jackpot!
Game Play
Match 3 to 7 numbers consecutively in
7 25
any horizontal, vertical or diagonal line
17
I
ltm

to win a prize.
(No number can be used for more than one match)
j;,ij
34 3 40

Horizontal, vertil:al or diagonal lines Odds $1 Plav $2 Play $3 Play
7 numbers consecutively 5,368,787 $500,000 $1,000,000 $1,500,000 $2,000,000""'$2,500,000 $5,000,600 .$10,000,000
6 numbers consecutively 56,663 $5,000 $10,000 $15,000 $20,000 $25,000 $50,000 $100,000.
.
11,098 $500 $1,000 $1,500 $2,000 . $2;500 ."
& 3 different numbers consecutively
5 numbers consecutively 1,618 $50 $100 $150 $200 $250 $500 $1,000
3 numbers .
366 $10 $20 $30 $40 $50 $100 $200
TWICE on Same Ticket
4 numbers consecutively 79 $5 $10 $15 $20 $25 $50 $100
3minibers consecutively 5.4 $1 $2 $3 $4 $5
':$10" "$20
$4 Play $5 Play $10 Play $20 Play
Page 1 of 3
-------- ----- --
The Game Where You Can Win
Up to $10 Million INSTANTLYI
EXAMPLE
of
Sample Ticket
Sequential order GAME BOARD formatj
Players cannot select any of their own numbers.

Ootobsr 21, 2008 Locaron:66481
$5.00
PLAYER'S NUMBERS
MATCH IN RCNJS. COLUMNSardlorDlAGONALLY
MATCH CORNERS and/or CENTER NUMBER
5 43 1 31 7 19 3
------ --.....- - ---- -
PLAYER'S GAME BOARD
""". =<-0-_ ..-..... _ _.," -.- ._ _ _ _
1 234 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30 31 32 33 34 35
36 37 38 39 40 41 42
43 44 45 46 47 48 49
- -
--
Tickgt Nurnoo.r. 4796875290
www..voursTaCsiotl9ty.com
11111111111111111111111111111111111111111"11
Page 2 of 3

The Game Where You Can Win
Up to $10 Million INSTANTLY!
EXAMPLE
of
Sample Ticket
Random order GAME BOARD format;
Players have the option to select
their own 7 PLAYER'S NUMBERS. I

0C10b;< :1, :cca LxatfX:6C4S<
$5.00
PLAYER'S NUMBERS
r'.1J;TCH IN RO\VS. COLUMNS an:!for DIAGONALLY
MATCH CORNERS and/or CENTER NUMBER
4 44 10 30 40 34 24
PLAYER'S GAME BOARD

10 38 4 28 44 16 30
48 27 14 35 5 25 43
6 18 41 13 40 2 20
32 1 19 22 29 7 39
11 15 34 9 46 49 12
36 42 45 17 26 23 47
24 8 21 3 37 31 33
__ - _0 ______ ___________
._------------------
Ticket l\'Utri$'-: 4796875290
L....
I1I1 1111111111111111111111111 II1111111111111
Page 30f3
EXHIBIT C TO SUBLICENSE AGREEMENT
LICENSE FEES
The License Fees due and payable by the Lottery hereunder shall be based on the
percentages set forth below in connection with "Licensed Game Wager Revenues" (as defined
below) generated by the Lottery's sales of "Licensed Game Wagers" (as defined below) for each
given week during the term of the Sublicense Agreement. For purposes of this Agreement,
"Licensed Game Wager Revenues" means the total gross sales revenue received by the Lottery
from all Licensed Game Wagers; and "Licensed Game Wagers" means all wagers made by
players of the Licensed Game in the purchase of their Licensed Game tickets.
Licensed Game Wa!!er Revenues Percenta!!es
Up to the first $200,000,000 of Licensed Game Wager Revenues received by
the Lottery from the Licensed Game in each full or partial fiscal year of the
Lottery.
Three Percent
(3%)
Above $200,000,000 of Licensed Game Wager Revenues, up to
$300,000,000 of Licensed Game Wager Revenues, received by the Lottery
from the Licensed Game in each full or partial fiscal year of the Lottery.
Two Percent
(2%)
Above $300,000,000 of Licensed Game Wager Revenues, up to
$400,000,000 of Licensed Game Wager Revenues, received by the Lottery
from the Licensed Game in each full or partial fiscal year of the Lottery.
One Percent
(1%)
Over $400,000,000 of Licensed Game Wager Revenues received by the
Lottery from the Licensed Game in each full or partial fiscal year of the
Lottery.
Zero Percent
(0%)
To avoid any doubt, the amount of Licensed Game Wager Revenues shall re-start at $0 as
of the beginning of the term; and again as of the beginning of each fiscal year thereafter.
Notwithstanding the foregoing, the following special caps (each, a "Special Absolute Dollar
Cap") on the amount of the aforesaid License Fees shall apply during the following time periods:
(i) during the full or partial fiscal year beginning when tickets for the Licensed Game are first
offered for sale to the public by the Lottery, and ending at the end of such same fiscal year
("First Year"), the Special Absolute Dollar Cap shall be $4,000,000.00, even if the formula
provided in the table above would result in a higher License Fee for such First Year; and (ii)
during the fiscal year beginning immediately after the First Year ("Second Year"), the Special
Absolute Dollar Cap shall be $8,000,000.00, even if the formula provided in the table above
would result in a higher License Fee for such Second Year.
No Special Absolute Dollar Cap shall apply after the Second Year; and the License Fees
for each respective fiscal year after the Second Year shall be determined solely in accordance
with the formula provided in the table above, and without any reference to any further Special
Absolute Dollar Cap of any kind.
{B0923702; I}
"
EXHIBIT D TO SUBLICENSE AGREEMENT
MARKETING AND IMPLEMENTATION PLAN
Suggested Guidelines for Effective Advertising & Marketing Implementation Plan
Launch Support Plan
1. Develop Clear Simple Game Positioning:
a. Start with a clear concept statement of game benefits and characteristics,
differences from other games (your own and competitive ones if applicable) and
description of expected users or players in terms of demographics and any
psychographic data.
b. Need to be able to say in a single sentence what the news is for a particular game
and why players should want to try the game (this becomes the creative platform
for ad development).
2. Develop a Simple, Eye-Catching Retail Brand Name/Graphic:
a. Game name/graphic or brand identity (logo) is critical to attracting players within
a retail environment full of other marketers' brands. In addition, the brand logo
will be the unifying element in whatever form of advertising/marketing
communication is used with the retail presentation anywhere within the lottery
jurisdiction.
b. May help to have a brief statement under the logo to reinforce a key
distinguishing point, e.g. for a daily draw game like Pick 3 the statement can be
"Every day's a play day."
c. Also, important that the game dynamic and promise be expressed in the logo so
that it is reinforces player expectations as they get ready to play (excitement,
chances of winning, winning lots of money, etc.).
3. Retail Display:
a. Retail display or brand presentation must be complete since it involves all
retailers. Absolutely critical for retailer cooperation with displaying the brand and
for player awareness and trial of the brand when they are most likely to make
purchases.
b. Retail display or point-of-sale materials should cover the brand and its
benefits/differences, educational materials (how to play instructions/demos), any
promotional "news" and any winner awareness such as showing in a poster that a
retailer paid out a meaningful winning amount of money at his/her location.
4. Pre-Launch Field Communication:
a. Regardless of level of spending available for marketing efforts - retail display
only, retail with in-store and regional promotion, or retail display, promotion and
mass media advertising - it is important for these efforts to be communicated in
advance to lottery field staff and, in turn, the retailers. This pre-promotion
communication has several benefits: clear understanding of the brand messages;
{B0923702; I}
encouraging retailer cooperation with brand display and "asking for the sale"
when players are most likely to have seen or heard the promotional messages;
ensuring that the brand logo and associated benefits are tied together. It also
reinforces the lottery commitment to its sales success with the retailers, players
and public.
5. Consumer Promotions Support:
a. Implement Consumer Promotion to generate awareness and trial at retail.
Examples:
1. System-wide terminal cross-promotion offers such as Buy X, get Y
(new game) free play
11. Early-bird special of discounted tickets for the first week of
drawings;
111. Include a new game playcard insert into newspapers with a Buy One,
Get One Free coupon (can also be done as a special mailing to
Lottery player database);
IV. BOGO free play coupons given away at major state sport events as
part of a New Game Pack of game merchandise and coupons
Suggested Advertising Media Selection to Maximize Brand Impact
6. Flexibility of Media Selection to Maximize Brand Impact:
a. Most lottery products are in the retail business so rapid deployment of advertising
weight with visual impact (for brand recognition in addition to the immediate
news) is critical. Media with long production lead times and less precise timing
for message delivery may be unsuitable if the goal is drive player performance
within a specific timeframe.
7. Marketing Communications Depends on Budget Available:
a. The more limited the budget, the concentrated the marketing communications
effort has to be (very likely, the more limited the sales impact will be). For
example, if the budget is so limited that a major advertising (multi-media) effort
cannot be afforded on a consistent basis, allocation of spending will have to
consider (a) the nature of the game such as jackpot driven or some other "news"
factor (b) the stage of the brand's development such as launch versus sustaining
promotional news (c) the importance of covering the entire lottery jurisdiction
versus areas that may have a higher rate of sales return (d) continuity of the effort,
i.e. short bursts of advertising versus on-going effort (e) importance of measuring
returns since a promotional period is usually shorter and easier to track compared
to a longer-term image effort.
8. Marketing Communications Investment for optimum Sales Return:
a. If the budget is limited, it's usually smart to start with programs that have
immediate measurable results. In-store promotions with retailers, regional
second-chance sweepstakes requiring players to mail in non-winning tickets with
entry forms, direct mail discount coupons are examples on investments that can
be measured easily. Sales tracking on a pre/post basis (length oftime before the
{B0923702; I}
promotion equal to the length of time for the promotion and versus year ago sales)
is another performance measurement. Also, player attitude surveys and field staff
surveys of retailers' responses provide valuable anecdotal information.
9. Spending against Brand Development Indices to Maximize Sales Return:
a. If the budget is large enough, spending can be allocated against brand
development indices or per capita sales performance by all market areas within
the total lottery jurisdiction. This involves comparing each market's index or per
cap against the overall jurisdiction per cap to determine which the amount of the
budget each area should receive (percent of sales by market for a mature business
also works). This approach ensures that the marketing funds are being spent
where the greatest sales potential exists. It also determines the amount of funds
available for each market based on expected return before media costs are taken
into account. Since media costs can vary by market, it is important to establish
how money should be invested based on sales rather than media costs.
10. Using the Lottery Website:
a. The lottery website should be considered another foundation type media for
advertising/marketing communications. Since the site is typically visited
regularly by players looking for winning game results, it is an opportunity to
present new games and promotions, especially those with forms that can be
downloaded and either mailed in or taken to retailers.
b. The website also provides an opportunity to encourage players to register and be a
part of the lottery loyalty rewards program, if applicable. These registrations
combined with those from large prize winners and entrants into other lottery
promotions form a database for customer relationship management. In its
simplest form this database can be used effectively for direct mail discount
coupon distribution.
{B0923702; I}
"
September 16, 2009
To: State Administrative Board
Form SAB-810
1. Michigan Lottery
Contract Modification Request - MSL 07-001
Approval is requested for the following:
1) GTECH Corporation $6,948,614.00 Amendment No.2
10 Memorial Blvd. 100% Lottery Restricted Fund
Providence,Rl 02903 Lottery Gaming System,
2) GTECH Corporation $8,970,000.00 Amendment No.3
10 Memorial Blvd. 100% Lottery Restricted Fund
Providence, Rl 02903 Lottery Gaming System,
Updated 09-14-09 Ad Board Date: (ver. )
DEPARTMENTOFMANAGEMENTAND BUDGET
PURCHASING OPERATIONS
AGENCY SUBMITTAL I:8J
CONTRACT DESCRIPTION: Contrract # MSL 07-001 Modification requested for Commodity;
Michigan Bureau of State Lottery - Amendment No.3
MICHIGAN
GTECH Corporation, 10 Memorial Blvd., Providence, RI $8,970,000.00
D
reviewed by DMB, or posted on the DMB Intranet in a.gency's pre-approved contract list.
DCheck if request is to extend Contract (no option in base).
D Check if extension is beyond Contract option year(s).
DCheck if MiDEAL contract.
ORIGINAL CONTRACT: Term: 4/01108 - 1I1912015Value: $285,600,000.00
PREVIOUS OPTION YEARS/EXTENSIONS:
PERIOD
D Option 1 CN #
D Option 2 CN #
D Option 3 CN #
D Extension CN #
Total 0
"
PREVIOUS CHANGES NOT LISTED ABOVE:
TYPE OF CHANGE:
SAB APPROVAL
DATE
(if applicable)
VALUE OF
CHANGE:
First CN Merchandiser Pilot Program 08/05/08 $1,200,000.00
Last CN Merchandiser Program (Amend. 2 Pending) $6,948,614.00
Total number of processed changes to time, scope, and/or dollars: 1
I FUNDING SOURCE: COMMENTS
I
PERCENTAGE
I Lottery Rest. Fund
I
10 $1,170,000.00
11 $1,560,000.00
12 $1,560,000.00 (same for
FY 13, 14, and 15)
of State Lottery is requesting to exercise an amendment to their competively bid gaming
system contract (currently held by GTECH) to procure a new game license allowing the
Lottery to introduce a new on-line game (Lotto Platinum) in the State. 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 game role out was contemplated under the RFP developed by the
Lottery and responded to in the bid proposal submitted by the vendor. This Amendment will
allow the vendor to provide the necessary game license agreement to the Michigan Lottery
with the goal of introducing a new game to players and increasing Lottery sales.
Purpose/Business Case of Amendment or Extension, and Expected Outcomes: In order to
increase Lottery revenues and support to the School Aid Fund, the Lottery intends to roll out a new
on-line game (Lotto Platinum) for Michigan players. Due to the proprietary nature of this game
(exclusive property of Integrated Group Assets Inc.), the Michigan Lottery is obligated to procure a
license, through GTECH, allowing it to introduce the game to the players within the state. A
detailed analysis of the game play indicates that the Lottery can realize anticipated net revenues to
the School Aid Fund of$14,000,000.00 in the first year upon roll out and $18,700,000.00 in
subsequent years.
Risk Assessment: Failure to engage in the roll-out ofthis new on-line game may result in less net
revenue to the School Aid Fund.
PRICE CLAUSE: Fixed price based on percentage of ticket sales.
CS-138 #: N/A - Majority of contract remains to be commodities
D Check if> $500,000 for software development, computer hardware acquisition or quality
assurance?
RECOVERY ACT FUNDS
I Percent of Total I.::::....c:: _
N
-/A-ex-o----------rlA-m-o-u-n-t------I_$
Remember to attach aSE-approved PRF to all services purchases other
than those classified as Nonjurisditional (NJ), and delete this message!
ED 2009-3 INFORMATION:
Agency Internal #: N/A
BPO#:
REQ#:
Division Director Signature Sergio Paneque
DMB Business Services Administration
AGENCY APPROVALS
- - - - ~ I ~ - - - - - - - - - - - ,
Return Infonnation:
Authorized Agency Representative (printed)
ID Mail: Lansing Run - Lottery Bldg.
Phone No.: 517-335-5687
e-Mail: hauserd@michigan.gov
------------- ------
AMENDMENT#4 TO CONTRACT MSL07-001
This Amendment Agreement ("Amendment") is entered into and effective this 20
th
day of October,
2009 by and between the State of Michigan, Michigan Bureau of State Lottery, 101 East Hillsdale,
Lansing, Michigan 48909 (the "Lottery") and GTECH Corporation ("GTECH"), 10 Memorial Boulevard,
Providence, Rhode Island 02903.
The purpose of this Amendment is to provide the Lottery with additional equipment, resolve certain
outstanding claims made by the Lottery and modify certain liquidated damages provisions. Capitalized
terms used but not defined herein shall have the meanings ascribed to such terms in the Contract (as
defined below).
The Lottery and GTECH entered into Contract No. MSL07-001 on April 1, 2008, with respect to an online
and instant lottery gaming system and related services (the "Contract"). The term of the Contract was
for six (6) years commencing January 20, 2009, in addition to an implementation interval which
commenced on April 1, 2008 and covered the period of time subsequent to April 1, 2008 and prior to
the Conversion Date during which time the Lottery and GTECH agreed to prepare to convert operations
to a new lottery system;
During a portion of this implementation interval, the Lottery experienced terminal downtime because a
number of communication devices that GTECH was installing to replace the existing communications
network were hot functioning properly which, in turn, caused those terminals connected to the faulty
portion of the communication networks to go down (the "Downtime");
On February 2, 2009, Lottery advised GTECH of a possible liquidated damages assessment for the
Downtim-e during the period up to and including January 19, 2009 (the "Incident").
Section 2.2 of RFP (the "RFP") Number MSLOO7-001 dated April 10, 2007 (and which is incorporated by
reference into the Contract) provides that the parties may amend the Contract in a writing executed by
both parties.
The Lottery and GTECH have subsequently negotiated this Amendment to resolve the Downtime issue
and amend the Contract by modifying certain liquidated damages provisions as set forth below. In
consideration of the mutual promises given one to the other, the parties intending to be legally bound,
do hereby agree to the following:
1. Provision of Additional Equipment.
GTECH agrees to provide to the Lottery, at no additional cost, the following equipment:
-Two hundred (200) Altura Terminals, configured identically to the Altura terminals
previously delivered to the Lottery under the Contract, as described in Section 3.2.1 of
GTECH's Proposal (the "Proposal") in response to the RFP, such Proposal incorporated
by reference into the Contract; and '
,c. ' Amendment # 4 to MSL07-001

Two hundred (200) Self-Service Ticket Checkers, configured identically to the Self
Service Ticket Checkers previously delivered to the Lottery under the Contract, as
described in Section 3.2.1.3.C of the Proposal; and

One hundred (100) Self-Service Kiosk Terminals (Lotto to Go units), configured
identically to the Self-Service Kiosk Terminals (Lotto to Go units) previously delivered
to the Lottery under the Contract, as described in Section 3.2.3.1 of the Proposal
(collectively, the "Additional Equipment").
GTECH shall deliver the Additional Equipment to the Lottery within approximately one hundred fifty
(150) calendar days following the Effective Date of this Amendment.
2. Release. In consideration for GTECH's delivery of the Additional Equipment in accordance with
the terms of this Amendment, the Lottery fully and forever releases, acquits, and discharges GTECH, its
predecessors, successors and assigns, its past and present parents, operating divisions, subsidiaries, and
affiliated companies, and its past and present shareholders, directors, officers, employees, agents and
attorneys (collectively referred to as the "GTECH Releases"), from any and all claims, causes of action,
demands, liabilities, damages, obligations, and debts of every kind and nature, whether known or
unknown, suspected or unsuspected, or fixed or contingent, which the Lottery holds or at anytime
previously held against the GTECH Releases, or any of them, arising out of or in any way related to the
Incident.
3. Amendments to the RFP. The following sections of the RFP are amended by mutual agreement
of the parties:
2.26.8 Actual Sales Calculations. As contemplated by Section 2.26.7 of the Contract, the
Parties have modified certain liquidated damages provisions to reflect actual damages.
Liquidated damages calculations will be provided by GTECH weekly, to be audited and approved
by the Lottery.
Certain Definitions. As used in this Amendment, the following terms have the following meanings:
"Actual Sales" means the aggregate net online lottery ticket sales during the Applicable
Period.
"Average Comparison Sales" means the average weekly lottery ticket sales for the
Applicable Period during the thirteen (13) operating weeks preceding the week in which the
gaming system was down.
"Applicable Period" means the period of time which the central computer system is
down or experiencing degraded performance expressed as a time of operating day and a day of
the week for the beginning and the ending of the Applicable Period.
"Comparison Terminal Sales" means with respect to non-operational terminals that
have been deployed for at least thirteen (13) operating weeks, the weekly average of the net
online lottery ticket sales generated by the applicable non-operational terminal during the
thirteen (13) operating weeks preceding the week in which such terminal became non
operational and (b) with respect to non-operational terminals that have been deployed for less
than thirteen (13) operating weeks, the weekly average of the net online lottery ticket sales
Page 2
Amendment # 4 to MSL07-001
generated by the applicable non-operational terminal during the operating weeks preceding
the week in which such terminal became non-operational.
"Duration" means the duration of the Applicable Period in operating minutes.
"Estimated lost System Net Revenue [System Down]" means the product of (i) the ratio
of (A) the Average Comparison Sales to (B) the Duration, (ii) the Net Duration (Down) and (iii)
thirty-six percent (36%).
"Estimated lost System Net Revenue [System Degraded)" means the greater of (a) the
product of (i) the ratio of (A) the Average Comparison Sales minus the Actual Sales to (B) the
Duration, (ii) the Net Duration [Degraded] and (iii) thirty-six percent (36%) and (b) zero.
"Estimated lost Terminal Net Revenue" means the product of (a) the ratio of (i) the
applicable Comparison Terminal Sales to (ii) one hundred nine (109) (note: 109 hours is the
agreed-upon average number of operating hours per week during which lottery retailers are in
operation), (b) the number of hours (excluding non-operating hours) of maintenance delay in
excess of two (2) hours and (c) thirty-six percent (36%).
"Net Duration (Down)" means the Duration minus (a) three (3) minutes if the applicable
incident is the first or second incident of the applicable operating week or (b) zero (0) minutes if
the applicable incident is not the first or second incident of the applicable operating week.
"Net Duration (Degraded)" means the Duration minus (a) ten (10) minutes if the
applicable incident is the first or second incident of the applicable operating week or (b) zero (0)
minutes if the applicable incident is not the first or second incident of the applicable operating
week.
A. Appendix C-Item 3. Gaming Host Systems Down
Service levels Damages
The Contractor will ensure that the gaming
host systems are not "down" for more than
three (3) minutes during the operational
hours for sales or validation on any day.
Gaming host systems are considered
"down" if gaming tickets cannot be sold,
gaming tickets cannot be canceled
(pursuant to permitted conditions), or
winning gaming tickets cannot be validated
during the operational sales period each
day.
If the gaming host system is down for more
than three (3) minutes but less than thirty
(30) minutes during the operational hours
for sales or validation on any day, the
lottery may assess damages in an amount
equal to Estimated lost System Net
Revenue [System Down]. The Estimated
lost System Net Revenue [System Down]
shall be used to calculate the damages
during this initial thirty (30) minute period
(less the three (3) minute grace period).
If the gaming host system is down greater
than thirty (30) minutes during the
operational hours for sales or validations on
any day, the lottery may assess damages in
an amount equal to the Estimated lost
System Net Revenue [System Down]
Page 3
calculated for the first thirty (30) minutes
(less the three (3) minute grace period) plus
$5,000 for each 1 minute of system
downtime, or fraction thereof, for each
minute (or fraction thereof) in excess of the
initial thirty (30) minutes.
The total time during which the gaming
host systems are down during the day will
be calculated as the sum of all time during
such daily operational sales period when
the systems are down. For example, three
(3) one-minute long instances of down time
in one day constitute three (3) minutes of
daily down time. To address chronic
problems, in the event that two (2)
downtime events of any length have
already occurred in a business week, the
grace period of three (3) minutes shall be
rescinded , and Liquidated Damages shall
begin immediately with any subsequent
outage in that week.
B. Appendix C-Item 4. Gaming Host Systems Degraded Performance
Service Levels
host systems do not evidence "degraded
performance" for more than ten (10)
minutes during the operational hours of
sales or validation on any day. The gaming
host systems shall be considered as having
degraded performance if:
i. Retailer terminals on average exceed the
response time requirements, or the System
is incapable of meeting the throughput
specifications set forth in the Contract;
ii. The System processes transactions from
less than 95% of the installed and
operational terminals;
iii. The System processes transactions from
all terminals, but not for all gaming
Damages
If the gaming host system experiences
degraded performance for more than ten
(10) minutes but less than thirty (30)
minutes during the operational hours for
sales or validation on any day, the Lottery
may assess damages in an amount equal to
Estimated Lost System Net Revenue
[System Degraded]. The Estimated Lost
System Net Revenue [System Degraded]
shall be used to calculate the damages
during this initial thirty (30) minute period
(less the ten (10) minute grace period
If the gaming host system experiences
degraded performance greater than thirty
(30) minutes during the operational hours
for sales or validations on any day the
Lottery may assess damages in an amount
Page 4
products and retailer-related activities
(degraded performance exists if the gaming
host systems do not allow sales, cashes, or
cancellations for On-line games, or do not
support activations, disabling, or
settlements for Instant tickets);
iv. transactions do not log to at least two
(2) Local systems, one (1) remote system,
and to the Lottery's ICS;
v. Critical functions of System management
and administration cannot be conducted by
the management workstations (e.g., file
transfers to Lottery);
vi. Instant ticket inventory management is
compromised (e.g., the ability to receive,
order, pack, and ship Instant tickets in a
manner concordant with production
schedules); or
vii. During a defined promotion period the
System cannot issue tickets or conduct
transactions to support an intended
promotion.
equal to the Estimated Lost System Net
Revenue [System Degraded] calculated for
the first thirty (30) minutes (less ten (10)
minute grace) plus $1,500 for each one (1)
minute of system degraded time, or fraction
thereof, for each minute (or fraction thereof)
in excess of the initial thirty (30) minutes.
The total time during which the gaming
host systems are down during the ay will be
calculated as the sum of all time during
such daily operational sales period when
the systems are operating at "degraded
performance level." For example, ten (10)
one-minute long instances of down time in
one day constitute ten (10) minutes of daily
degraded performance. To address chronic
problems, in the event that two (2)
degraded performance events of more than
ten (10) minutes in length have already
occurred in a business week, the grace
period of ten (10) minutes shall be
rescinded, and Liquidated Damages shall
begin immediately with any subsequent
degraded performance event in that
business week.
C. Appendix C-Item 7. Terminal and Peripheral Repair
Service Levels
The Contractor shall ensure that "non
operational" terminals are repaired or
replaced and operational within two (2)
hours of terminal problem notification
from the retailer -or from a network
monitoring process. A retailer terminal is
considered non-operational if tickets
cannot be sold or canceled (under
permitted conditions) or validations
cannot be performed, or if the reader
and/or scanner cannot process wagers or
playslips. "Terminal" includes the retailer
terminal, all associated peripherals, and
check writing equipment provided by the
Damages
For critical failures which either (a) are not
resolved within eight (8) hours of terminal
problem notification from the retailer or from
a network monitoring process (including only
those hours in which the relevant retailer is
open) or (b) adversely effect ten percent
(10%) or more of the installed terminal
network, the Lottery may impose Liquidated
Damages of one-hundred dollars ($100.00)
per non-operational terminal per hour in
excess of the two (2) hour grace period
(excluding Gaming System non-operating
hours), or fraction thereof, until a repair has
been completed; provided that Estimated Lost
Page 5
Contractor. Critical failures are any failures
that involve readers, scanners, retailer
display screens, or printers or any other
items required to sell or validate Lottery
products.
For less critical failures that do not render
the terminal non-operational as defined
above (for example, the terminal's jackpot
display is out of service), the Contractor
shall complete such repair within twenty
four (24) hours from the time of notice by
the retailer.
Terminal Net Revenue shall be used to
calculate the damages for the initial six (6)
hours subsequent to the two (2) hour grace
period, and the Liquidated Damages formula
set forth in this paragraph shall be used to
calculate Liquidated Damages for all hours in
excess of the initial six (6) hours subsequent
to the two (2) hour grace period.
For critical failures which are resolved within
eight (8) hours of terminal problem
notification from the retailer or from a
network monitoring process (including only
those hours in which the relevant retailer is
open), the Lottery may impose damages in an
amount equal to Estimated Lost Terminal Net
Revenue.
For less critical failures, the Lottery may
impose Liquidated Damages of one-hundred
dollars ($100.00) per non-operational
terminal per day, or fraction thereof, until a
repair has been completed.
If an individual retailer has a terminal (or
associated peripheral device) that has failed
and required a dispatch and repair three (3)
times in anyone (1) month (including
terminal replacements), the Lottery may
impose Liquidated Damages of five hundred
dollars ($500). Chronic failure does not apply
under situations of Force Majeure or
tampering or abuse by the retailer or its
customers.
4. Full Force and Effect. Unless specifically amended herein, all other provisions, terms, and
conditions set forth in the Contract remain in full force and effect. The provisions of numbered
paragraph 3 of this Amendment shall apply to both (i) any incidents which occurred on or after January
20, 2009 and prior to the Effective Date and (ii) any incidents which may occur subsequent to the
Effective Date.
5. Effective Date. This Amendment shall be effective as of the last date set forth on the signature
page of this Amendment.
Page 6
Amendment # 4 to MSL07-001 '" :5,
IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and year first written
above.
For the Lottery:
Title: _S_VP_-_G_T_E_C_H_A_m_e_r_i_c_a_s_
Date: _1_1_
2
_6_1_0_9 _
Page 7
CONTRACT BETWEEN GTECH CORPORATION AND
STATE OF MICHIGAN, BUREAU OF STATE LOTTERY
Contract #MSL07-001
This contract (the Contract) is entered into and effective this 1st day of April, 2008, by
and between the State of Michigan, Bureau of State Lottery (the MBSL), also referred
to as the Michigan Lottery, or Lottery, with its primary office at 101 E. Hillsdale
Street, Lansing, Michigan 48909, and GTECH Corporation (the Contractor), with
offices at 10 Memorial Boulevard, Providence, Rhode Island 02903. The purpose of
this Contract is to obtain on-line and instant gaming systems and associated gaming
products and services, offered by the Contractor in response to Request for Proposal
No. MSL07-001, as amended (the RFP). The principal objective of this Contract is to
maximize net revenues to the State of Michigan, consonant with the general welfare of
the people and in accordance with the McCauley-Traxler-Law-Bowman-McNeely Lottery
Act 239 of 1972 and rules promulgated thereunder.

NOW THEREFORE, the parties hereby agree as follows:

1. Contract Elements. The terms and conditions of this Contract are as set forth in the
RFP, and in the Contractors response thereto (the Proposal), which are hereby
incorporated herein by reference and made part hereof, as modified below. Any
provisions herein modifying sections of the RFP or Proposal are strictly limited to the
specific reference and do not waive requirements or provisions of those documents
unless specifically identified and referenced in the Contract. In the event of any
inconsistency between the RFP, the Proposal and this Contract, the documents will be
interpreted in the following order of priority:

This Contract
The RFP
The Proposal

2. Term. The Term of this Contract will be for six (6) years commencing J anuary 20, 2009
in addition to an implementation interval which commences on the date of approval by
the State Administrative Board (SAB). The implementation interval is defined as the
period of time after approval by the SAB and prior to the Conversion Date (production
start-up date) during which time the Lottery and the Contractor prepare to convert
operations to the new system. The system Conversion Date is established as April 19,
2009. The Contractor and the Lottery shall work toward an earlier, mutually agreeable
Conversion Date. The Term may also include such time as is necessary to complete
the MBSL business week in progress at the end of the Contract. The MBSL shall have
the right to exercise options to extend the Contract at its sole option for up to a
maximum of six (6) additional one-year periods or any combination thereof; provided
that any option to renew is exercised by the Lottery at least ninety (90) days prior to the
MBSL/GTECH Contract

2

end of the initial period, or any renewal thereof, or at a time mutually agreed upon by
both parties.
3. Number of Retailer Terminals. During the term of the Contract, the Contractor will
provide and support eleven thousand (11,000) operating terminals. Operating terminals
is defined as fully functional terminals connected to the central system, capable of
producing tickets for sale, and are located at retailer points of sale throughout the State
of Michigan. Other terminal requirements provided for in the RFP located at other than
retailer locations (such as for testing, training, or other non-retail requirements), shall
not be included in this 11,000 operating terminal requirement, but would be in addition
to the 11,000 operating terminal requirement.

4. Additional Equipment.

A. Contractor will continuously support up to six thousand (6,000) operating flat
panel Club Keno monitors throughout the term of the Contract. New flat panel
monitors will be installed in all existing locations at commencement of operational
interval. This includes an estimated ratio of twenty percent (20%) of 32-inch flat
panel monitors, seventy percent (70%) of 26-inch flat panel monitors and ten
percent (10%) of 20 inch monitors. These percentages are estimates only and
the actual size and location of monitors installed at each retailer location shall be
mutually agreed by the MBSL and Contractor. Upon Contract execution, the
Contractor will deplete its in-house inventory of Club Keno monitors (which is
approximately 100 TV monitors), at no charge to the MBSL and will begin early
installation of flat panel monitors in accordance with the terms of this Section 4.

B. Contractor will provide flat panel displays in place of the Player Message displays
and Player Transaction displays and functionality at all non-Club Keno locations
(up to 8,700 points of sale). No Player Message (Starlight Unit) displays or
Player Transaction (Vacuum Fluorescent Display- VFD) displays are required at
Club Keno locations. Up to 8,700 flat panel display attachments will be provided
by Contractor. The flat panel display program, known as Enterprise Series
Multimedia (ESMM) including necessary hardware, software and support, will
provide the ability to have up to six (6) retail groups, each displaying a unique
show of up to ten (10) slides per show. Each show can be updated once per
quarter, for a maximum of twenty four (24) show changes per year. The
functionality contemplated by this subsection shall be at no additional charge to
the Lottery.

C. MBSL exercises Invited Option K. for three hundred (300) Self-service kiosk
terminals (Lotto to Go) units at the Contract conversion date. Price for these
units is established at .0279% of total net sales.

MBSL/GTECH Contract

3

D. MBSL exercises Invited Option M. for one hundred (100) ITVMs (Instants to Go)
units. Price for these units is established as .0093% of total net sales. In
addition to the one hundred (100) Instants to Go units, Contractor will provide an
additional one thousand two hundred fifty (1250) Instants to Go units at no
additional charge. Contractor shall deploy and install in a fully operational status,
the ITVMs commencing One Hundred Twenty (120) days after ITVM order date.
ITVMs shall be ordered within twenty-one (21) days of Contract approval by the
State Administrative Board, or as soon as the Lottery and the Contractor have
mutually agreed upon the final specifications of such ITVMs. The Lottery agrees
to purchase up to an additional Seven Hundred Fifty (750) ITVMs subject to
retailer availability and needs, at the discretion of the Lottery. Should the Lottery
purchase additional ITVMs during the Contract Term, Lottery agrees to purchase
such ITVMs from the Contractor under the terms identified in this Section 4 (D).
The Contractor and the Lottery shall act in good faith and use best efforts to
identify productive Retailer environments for deployment. Purchase of ITVMs
shall be ordered in lots of one hundred (100). The Lottery shall pay the
Contractor $195.50 per month (for a sixty (60) month term) for each of these
additional ITVMs, such monthly compensation to commence at the time of
delivery and acceptance of such ITVMs in a fully installed and operational status.

E. MBSL exercises Invited Option N. for two hundred (200) combined self-service
On-line and Instant terminals (Lottery to Go) units at the Contract Conversion
date. Price is established as .0310% of total net sales.

F. MBSL exercises the Invited Option O(1). for two hundred (200) In-counter and
on-counter Instant ticket dispensers (Instant Showcase units) at the Contract
Conversion date. Price for these units is established as .0164% of total net
sales.

5. UPS Routing Software. Throughout the Contract term, Contractor will provide UPS
routing software, including on-going licensing costs and personnel time to support the
usage of this software in conjunction with MBSL Sales Representatives at no additional
charge to the MBSL.

6. Schafer Systems and Sales Staff Training Services. MBSL exercises Invited Option
O.2. and Offered Option N. Contractor's initial pricing for the Schafer Systems Inc.
products and for the Lottery Sales Staff Training services are set forth in the Proposal
Price Quotation Sheet. During the term of the Contract, should the Lottery request such
products and services, GTECH will pass through any subsequent price increases for
Schafer products and for Lottery Sales Staff Training services at Contractor's cost to
acquire such products and services.
MBSL/GTECH Contract

4

7. Website support. The Contractor will provide a data feed to the MBSL's website at no
additional charge in addition to web services as described in the proposal.

8. Subscription System. The Lottery exercises Specified Option C for a subscription
system as described in the Proposal at no additional charge. Anticipated delivery of the
subscription system is year two (2) of the operational interval of the Contract.

9. Base System Pricing. In compensation for the base System and services provided by
the Contractor in accordance with this Contract, the MBSL shall pay the Contractor
1.18% of total net sales on tickets issued through the Contractors system or distributed
by the Contractor and further defined in the RFP in Appendix A.

10. Communication Network Option. The MBSL exercises Specified Option B.
Communications Network priced at $62.00 per retailer location per month. Multiple
terminals at any one retailer location will be supported under one $62.00 per month
charge.

11. District Sales Representative automation (Cole Systems) option. The MBSL exercises
Specified Option E District Sales Representative automation. Pricing for this option
will be .0111% of total net sales.

12. Other Options. The MBSL may, from time to time during the term of this Contract,
request GTECH to submit a proposal for the provision of goods or services which are
not contemplated in the Price Quotation Sheet attached to this Contract and which are
outside the scope of the goods or services agreed to by the parties to be part of the
base System requirements. With respect to such additional goods or services, the
parties agree to negotiate the terms and conditions, including price, for the delivery of
such additional goods or services.

13. Inter-site Communications Links Replacement. Contractor agrees to replace the FDDI
(fiber distributed data interface) ring that connects Lottery headquarters to GTECH
primary and backup data centers during the implementation interval and assume the
recurring monthly service fee.

14. Software Customization. Software customizations required to meet the invited option as
proposed in response to Section 3.9 of the RFP - Back Office Systems - shall be limited
to two thousand (2,000) man-hours. These man-hours shall be limited to programming
and application development and shall not include hours for specification development,
business analysis, testing, or other hours related to defining and testing the
customizations. Contractor shall provide an estimate of number of customization hours
MBSL/GTECH Contract

5

needed within thirty (30) days after specifications have been agreed to by both parties.
Any software customization required beyond the agreed upon man-hour allotment will
be charged at the rate of one hundred seventy five dollars ($175.00) per hour.

15. Amendments to the RFP. The following sections of the RFP are amended by mutual
agreement of the parties, as set forth in Exhibit A and attached hereto. Said
amendments are incorporated into the RFP document itself and further identified on the
cover sheet on the amended RFP, identified as Amended December 21, 2007.
Amendments to the RFP agreed to during Q & A and identified on the Amended RFP
dated May 9, 2007 have been incorporated into the document and are not further
identified here.

1. Section 2.15 End of Contract Conversion
2. Section 2.18 Software Documentation
3. Section 2.22 Attachment of Third Party Systems, Terminals, or Products
4. Section 2.26.6 Liquidated Damages
5. Section 2.26.7 Added to Liquidated Damages
6. Section 3.7.1.2.G Telemarketer staffing requirement.
7. Appendix C, Section 24 Hotline SLA

16. No Additional Charge Options Accepted. The Lottery exercises all options proposed at
no additional charge by the Contractor. Further options not accepted in this document
are not exercised at this time but may be negotiated in future contract amendments.

17. Lottery Growth Fund. The Contractor agrees to invest One Million dollars ($1,000,000)
annually to be used at the sole discretion of the Lottery during each of the first three (3)
years of the Contract, for a total of Three Million dollars ($3,000,000), subject to the
following terms and conditions set forth in this Section 17. The first annual investment
shall be made fully available by the Contractor to the Lottery on J anuary 20, 2009, the
date of the new Contract commencement. Funds paid by the Lottery to the Contractor
under a mutually developed Statement of Work (under Contract 98MSL00001) to provide
Club Keno recruiting in fiscal year 2008 may be submitted to the Contractor for
reimbursement within the Growth fund allowance in year one. In no case shall the
allowance in any year exceed One Million dollars ($1,000,000). The second and third
annual investments shall be made fully available by the Contractor to the Lottery at the
beginning of each October, commencing in October 2009, which is the commencement of
the Lotterys next fiscal year.
After the initial three (3) fiscal years of the Contract and for the remainder of the
Contracts term (which includes the initial six (6) year term plus any renewals thereof),
and subject to the conditions set out below, the Contractor shall make subsequent annual
investments of between $500,000 and $1,000,000 at the commencement of each
additional October, which is the commencement of the Lotterys next fiscal year.
MBSL/GTECH Contract

6

On or prior to the commencement of each fiscal year during the term of the Contract,
the Lottery shall consult with the Contractor to develop an annual plan and budget, with
such budget to be monitored quarterly. The plan and budget will set forth growth
initiatives, including marketing strategies and dedicated personnel, each of which are
designed to enhance the Lotterys revenues and result in net transfers to the State of
Michigan.
Following the first three (3) fiscal years during which the One Million dollars ($1,000,000)
annual investments are guaranteed, the Contractor agrees to continue to make annual
investments of between $500,000 and $1,000,000 at the commencement of each
subsequent October of the Contract, the size of such investment to be calculated based
upon the Lotterys year-over-year total sales growth (Growth) achieved during the
previous fiscal year.
Beginning during the third fiscal year of the Contract, (October 1, 2010 September 30,
2011) in the event that the Lottery achieves six percent (6%) or greater Growth than the
preceding fiscal year, the Contractor shall make the maximum annual investment of
One Million dollars ($1,000,000) to the Lotterys growth fund for the next succeeding
fiscal year. If six percent (6%) Growth is not achieved in a given fiscal year, the
Contractors annual investment for the next succeeding fiscal year shall be pro-rated
based on the percentage of Growth achieved, as compared to the annual six percent
(6%) target. For example, if Growth in a fiscal year were to equal five percent (5%),
Contractor would contribute $833,000 to the Lotterys growth fund ($1,000,000*(5/6)) for
the next succeeding fiscal year.
Once the size of the annual investment is determined and the annual plan and budget
are determined, the use of the funds is at the discretion of the Lottery.
18. Assignment of Contract. The Contract is not assignable by the Contractor except with
the prior written approval of the Lottery. Monies payable under the Contract are not
assignable except with the prior written approval of the Lottery. In the event of such
approval, the terms and conditions hereof shall apply to and bind the party or parties to
whom the Contract is assigned as fully and completely as Contractor is thereunder
bound and obligated. No assignment, if any, shall operate to release the Contractor
from its liability from the prompt and effective performance of its obligations under the
Contract.
Upon written notice to the Contractor, the Lottery may assign some or all of its rights
and obligations under the Contract to a third party. In the event of such assignment by
the Lottery, the terms and conditions hereof shall apply to and bind the party or parties
to whom the Contract is assigned as fully and completely as the Lottery is thereunder
bound and obligated. It is further agreed that if Lottery assigns some or all of its rights
and obligations under the Contract to a third party it is released from all liability or
obligation to the extent those obligations are assigned and the Contractor waives any
and all rights to enforce them against Lottery. In the event that the Lottery assigns the
Contract to a third party, the Lottery and the Contractor agree in good faith to negotiate
prior to the effective date of such assignment revisions to the confidentiality provisions
of the Contract to ensure commercially reasonable protections for the Contractor's
proprietary information. In the event that the Lottery assigns the Contract to a third
MBSL/GTECH Contract

7

party, the termination for convenience provision set forth in Section 2.45 of the RFP
shall be deleted in its entirety.
19. Installation of Altura Terminals. The Contractor agrees to install its Altura terminal in
lieu of its Imagine terminal and convert the Lotterys existing online lottery system on
or prior to the April 19, 2009, Conversion Date. The number of Altura terminals to be
installed shall be identical to the number of Imagine terminals previously proposed by
Contractor. The Contractor shall use its best efforts to convert the Lotterys existing
online lottery system earlier than the Conversion Date. Notwithstanding the actual
conversion date, the Contractors new compensation rate under the Contract shall be
effective as of J anuary 20, 2009 (as specified in the Contract and RFP).
20. Entire Understanding. This Contract contains the entire understanding between the
parties. There are no representations, warranties, promises, covenants or undertakings
other than those expressly set forth herein.

21. State Administrative Board Approval. Award of this Contract to the Contractor has been
approved by action of the State Administrative Board on April 1, 2008.

The State of Michigan, Witnessed:
Bureau of State Lottery
___________________________

By ____________________________ ___________________________
M. Scott Bowen Date:
Commissioner

GTECH Corporation Witnessed:

____________________________

By ___________________________ ____________________________
Alan Eland Date:
Senior Vice President
GTECH Americas
MBSL/GTECH Contract

8

PRICE QUOTATION SHEET

Prices are indicated as percentage of Net Total Sales as defined in Appendix A of the
RFP unless otherwise indicated.

Base System 1.1800%
Options Price for the first five (5) years of the Contract
(J anuary 20, 2009-J anuary 19, 2014)
300 Lotto-to-Go Units 0.0279%
100 Instant-to-Go Units 0.0093%
200 Lottery-to-Go Units 0.0310%
200 Instant Showcase Units 0.0164%
DSR Automation 0.0111%

Total Price Years One through Five (1-5) of the Contract 1.2757%

Total Price Year Six (6) of the Contract (J anuary 20, 2014
J anuary 19, 2015) 1.1800%

Telecommunications Network, per retailer location $62 per month

On-counter Dispensers, Schafer Systems Inc., per unit:

Dual 5: Snap-together Modular Mini $ 23.95
Dual 4 Modular Mini $ 14.92
Dual 6 Modular Mini $ 16.90
In-counter Ticket Menu Dispenser, 12 game $ 205.50
In Counter Ticket Menu Dispenser, 16 game $ 217.75

Sales Staff Training, HKC, per session
Sales Staff Training $3,500.00
MBSL/GTECH Contract

9

APPENDIX A
AMENDMENTS TO THE RFP

A) 2.15 End of Contract Conversion
It is contemplated that the Lottery, approximately eighteen (18) months prior to the
expiration of the Contract resulting from this RFP, will award a new contract for
replacement of the System. The parties understand and agree that the Lottery may utilize
part of the last year of the Contract resulting from this RFP or any renewal or extension
thereof for conversion to the replacement gaming system.
The Contractor shall cooperate fully and in good faith in the conversion. Cooperation may
include, but not be limited to, sharing of liability files, Instant ticket pack inventory files,
retailer authority files, and cross-validation of winning tickets; provided, that the Contractor
shall have the right to take all reasonable precautionary measures, consistent with this
Contract and past practices, to protect its confidential and proprietary information in
connection with such cooperation, in accordance with Michigan law.
The Lottery may determine at its sole discretion that cooperation by the Contractor shall
include providing information to allow ticket bar codes to be read by a third-party system for
validation.
The Contractor shall remove all equipment and materials relating solely to the Contractor's
System from each retailer location and from Lottery property after final conversion of any
location to the new gaming system, within a reasonable period as set by the Lottery.
Equipment and materials not so removed by the Contractor shall be considered abandoned
and shall be disposed of at the Lottery's discretion at the cost of the Contractor.

B) 2.18 Software Documentation
Before production operations under the System, a complete set of the Contractor's software
source programs, program object code, operations manuals, service manuals, written
procedures, and any such other materials necessary for the Lottery to operate the System
must be delivered either to the Lottery or to a mutually-agreed upon independent third party
escrow agent. The software source and object programs, and documentation can be
delivered on mutually agreeable media. Installation packages for third party software
products licensed by the Contractor must be included. If the above materials are delivered
to an escrow agent, a mutually agreed escrow agreement will be executed prior to
production operations under the System between the Contractor, the Lottery and the
escrow agent which would provide that these materials will be released to the Lottery to (i)
enable the Lottery to continue operations in the event the Contractor becomes unable to
perform, and (ii) confirm that only authorized software procedures are employed with the
System.
MBSL/GTECH Contract

10

As System changes are implemented, both the change and change documentation shall be
provided to the escrow agent to continue the Lottery's protection. Changes to the escrow
agent's copy of these materials must occur within one (1) week if installation in production
operations.
C) 2.22 Attachment of Third Party Systems, Terminals, or Products
The Lottery reserves the right to attach to the System or otherwise install terminals,
terminal peripherals, games, software, products, or systems other than those required by
this RFP.
The Contractor shall be required to supply to the Lottery, interface specifications to permit
other products to carry out all functions and capabilities desired by the Lottery, subject to
Contractors right to take commercially reasonable measures to protect any proprietary
information, in accordance with Michigan law. The Contractor shall provide support to the
Lottery in conducting future procurements for such products including providing facilities
and support to allow other vendors to attach or install and test products during the
evaluation process. The Lottery will monitor progress to ensure full cooperation.
Should the Lottery propose to add terminals, products, systems, or services not supplied by
the Contractor for this RFP, but for which the Contractor would gain responsibility or
obligations, appropriate remuneration of the Contractor shall be negotiated under RFP
2.16.
D) Liquidated Damages Provisions
2.26.6 Liquidated Damages and Services Levels.
The Contractor shall not be required to pay Liquidated Damages for delays solely due to
matters affected by force majeure, or for time delays specifically due to, or approved by, the
Lottery, or for delays caused by the actions or omission of third parties not under the direct
or indirect control of the Contractor, its subcontractors, and their respective employees,
consultants or agents. Liquidated damages and services levels for this implementation are
documented in Appendix C.

2.26.7 Additional Provisions. The Contractor may furnish, and the Lottery may consider
in its assessment of liquidated damages, factual evidence where available which
establishes in the Lotterys opinion that the Lotterys actual damages were less than the
liquidated sum. The Lottery will assess liquidated damages within six (6) months of the
date that the Lottery becomes aware of the incident giving rise to liquidated damages or
waive the right to make a claim with respect to such liquidated damages.

E) 3.7.1.2.G - Telemarketers, at a ratio of one (1) per one thousand (1000) retailers,
(Section 3.4.8.1).

MBSL/GTECH Contract

11

F) Appendix C - 24. Hotline and Telemarketing Communication Outages and Hold
Times
Service Levels: Liquidated Damages:
The Contractor shall maintain a
reliable communications service for
retailers to reach the Hotline for
service or the Telemarketing group
to discuss and/or place an Instant
ticket order. Caller hold times
should be reasonable.

Service Level Requirements for
inbound retailer calls are:
a. 85% of inbound calls to be
answered within 60 seconds
b. 99% of all calls without a busy
signal
c. Abandoned call rate not to exceed
2%
d. Average hold time not to exceed
two minutes

If the Contractor fails to maintain a
reliable communications service
for retailers to use to reach the
Hotline for service or the
Telemarketing group for Instant
ticket issues, the Lottery may
impose Liquidated Damages of
one thousand dollars ($1,000.00)
per hour (after a ten (10) minute
grace period) that the service is
interrupted. The Lottery may
impose Liquidated Damages of
fifty dollars ($50.00) per call that
does not meet Hotline and
Telemarketing Communication
Service Level Requirements.

AMENDMENTS TO RPF MSL07-001
May 9 and December 21, 2007

Sections Amended:
1.15.1 (B), Section Reference correction

1.15.1 (C), Section Reference correction

1.15.1 (D), Section Reference correction

1.31, clarification of other Defendants

2.8, allow certificates of insurance in lieu of copies of insurance policies

2.9, clarification of bond ratings

2.15, provides proprietary information projection for contractor

2.18, provides for use of escrow agent

2.22, provides for proprietary information projection for contractor

2.24, change in requirements for performance bond

2.26.6 and 2.26.7 Amends Liquidated Damages

2.49, addition of No Surreptitious Code Warranty

3.2.1.3(H), change in requirement for number of keno monitors to 6,000

3.7.1.2.G Amends telemarketer staffing requirement

5.6, Section Reference correction

Appendix C Section 24 amends Hotline response requirement

Michigan Bureau of State Lottery ii Lottery Gaming System RFP

Michigan Lottery
101 E Hillsdale
PO Box 30023
Lansing MI 48909

Request for Proposals

RFP Number: MSL07-001
April 10, 2007
As Amended May 9 and December 21, 2007

Title and Purpose of RFP:

Development and Implementation of Lottery Gaming System,
System Support and Maintenance

Michigan Bureau of State Lottery iii Lottery Gaming System RFP

Table of Contents Michigan Lottery RFP
Page
PART 1 PROPOSAL SUBMISSION INFORMATION ................................................... 1

1.0 Introduction ........................................................................................................ 1
1.1 Lottery Objectives .............................................................................................. 3
1.2 Overview of RFP ................................................................................................ 3
1.3 Issuing Officer .................................................................................................... 4
1.4 Disclosure and Investigation Requirements ....................................................... 4
1.5 Restrictions on Communication ......................................................................... 4
1.6 Schedule ............................................................................................................ 5
1.7 Inquiries (RFP Clarification, Change, or Protest) ............................................... 5
1.8 Pre-Proposal Conference (Mandatory) .............................................................. 6
1.9 Time Period to File or Commence Protest ......................................................... 6
1.10 Addenda to the RFP .......................................................................................... 6
1.11 Acceptance of RFP Terms ................................................................................. 6
1.12 Waiver of Deficiencies and Rejection for Non-Compliance ............................... 7
1.13 Rejection of Proposals ....................................................................................... 7
1.14 Proposals Valid for One Year ............................................................................ 7
1.15 Proposal Form ................................................................................................... 7
1.15.1 VOLUME I Technical (Non-Price) Proposal ............................................ 8
1.15.2 VOLUME II Price Proposal ..................................................................... 9
1.16 Proposal Opening .............................................................................................. 9
1.17 Withdrawal of Responses .................................................................................. 9
1.18 Late Proposals ................................................................................................... 9
1.19 Demonstrability of Proposed System ................................................................. 9
1.20 Readiness for Production and Delivery ............................................................ 10
1.21 Proposal Clarification Process ......................................................................... 10
1.22 Latitude in Proposal Contents .......................................................................... 10
1.23 Proposal Disclosure ......................................................................................... 11
1.24 Disclosure and Ownership of Proposal Contents by the Lottery ...................... 11
1.25 Public Records and Requests for Confidentiality ............................................. 11
1.26 J oint Proposal Responses ............................................................................... 12
1.27 Multiple Proposals from One Bidder Not Allowed ............................................ 12
1.28 Costs Associated with Proposal ....................................................................... 12
1.29 Mandatory and Desirable ................................................................................. 12
1.30 Proposal Bid Bond ........................................................................................... 12
1.31 Litigation Bond ................................................................................................. 13
1.32 Assurance of Bonds ......................................................................................... 13
1.33 Disclosure of RFP Assistance .......................................................................... 13
1.34 Investigations During Proposal Evaluation ....................................................... 14
1.35 Litigation .......................................................................................................... 14
1.36 Change of Financial Condition ......................................................................... 15
1.37 Specified, Invited and Offered Options ............................................................ 15
1.38 Independent Price Determination ................................................................... 16
Michigan Bureau of State Lottery iv Lottery Gaming System RFP

1.39 Hiring and other Business Relationships with Lottery Staff .............................. 16
1.40 Disqualification for Non-Responsibility ............................................................. 16
1.41 Applicable Laws and Procedures ..................................................................... 16
1.42 Protest of Award .............................................................................................. 17
1.43 News Release Prohibition ................................................................................ 17
1.44 Headings .......................................................................................................... 17
PART 2 SPECIAL TERMS AND CONDITIONS ......................................................... 18
2.0 Introduction ...................................................................................................... 18
2.1 Contract Elements ........................................................................................... 18
2.2 Amendments to the Contract ........................................................................... 18
2.3 Severability ...................................................................................................... 19
2.4 Term of Contract .............................................................................................. 19
2.5 Emergency Extension ...................................................................................... 19
2.6 Covenant Against Contingent Fees ................................................................. 19
2.7 Audit and Accounting Requirements ................................................................ 20
2.8 Bonds and Insurance Qualifications................................................................. 20
2.9 Insurance ......................................................................................................... 21
2.10 Contractor Error Liability .................................................................................. 23
2.11 Ownership of Materials .................................................................................... 24
2.12 Right of Use ..................................................................................................... 24
2.13 Force Majeure .................................................................................................. 24
2.14 Production-Ready Acceptance Test Following Award ..................................... 25
2.15 End of Contract Conversion ............................................................................. 25
2.16 Equipment and Software Corrections and Upgrades ....................................... 26
2.16.1 Corrections and Supported Products ....................................................... 26
2.16.2 Workload Growth ..................................................................................... 26
2.16.3 Reporting Changes .................................................................................. 26
2.16.4 Other Changes ........................................................................................ 27
2.17 Approval of Hardware and Software Changes and Upgrades ......................... 27
2.18 Software and Documentation ........................................................................... 27
2.19 Compensation During Contract ........................................................................ 28
2.20 Title to, Use of, and Compensation for, Intellectual Property ........................... 28
2.21 Exclusive Use of the Transaction Processing Systems ................................... 28
2.22 Attachment of Third Party Systems, Terminals, or Products ............................ 28
2.23 Ticket Purchase and Prize Payment Restrictions ............................................ 29
2.24 Performance Bond ........................................................................................... 29
2.25 Fidelity Bond .................................................................................................... 30
2.26 Liquidated Damages Provisions ...................................................................... 30
2.26.1 Notification of Liquidated Damages ........................................................ 30
2.26.2 Conditions for Termination of Liquidated Damages ................................. 30
2.26.3 Severability of Individual Liquidated Damages ........................................ 31
2.26.4 Waivers of Liquidated Damages .............................................................. 31
2.26.5 Payment of Liquidated Damages ............................................................ 31
2.26.6 Liquidated Damages and Service Levels ................................................. 31
2.27 Security Program Under the Contract .............................................................. 32
2.27.1 Personnel Security ................................................................................... 33
Michigan Bureau of State Lottery v Lottery Gaming System RFP

2.27.2 Security Violation Reporting ..................................................................... 34
2.27.3 Security Information (Disclosure) Updates ............................................... 34
2.28 Contractor Ethics and Integrity ......................................................................... 35
2.29 Compliance with Association Standards .......................................................... 36
2.30 IT Security ........................................................................................................ 36
2.31 Non-Appropriation ............................................................................................ 36
2.32 Electronic Payment Requirement .................................................................... 36
2.33 Freedom of Information .................................................................................... 36
2.34 Confidentiality .................................................................................................. 36
2.35 Indemnification ................................................................................................. 37
2.36 Continuation of Indemnification Obligations ..................................................... 38
2.37 Nondiscrimination ............................................................................................ 38
2.38 Unfair Labor Practices ..................................................................................... 38
2.39 Workplace Safety and Discriminatory Harassment .......................................... 39
2.40 Governing Law ................................................................................................. 39
2.41 Compliance with Laws ..................................................................................... 39
2.42 Media Releases, Advertising and Contract Distribution ................................... 39
2.43 Assignment of the Contract .............................................................................. 39
2.44 Call Center Disclosure ..................................................................................... 40
2.45 Termination ...................................................................................................... 40
2.46 Contractors Responsibilities Upon Termination .............................................. 41
2.47 Invoicing and Payment ..................................................................................... 42
2.48 Non-Exclusive Rights ....................................................................................... 43
2.49 Warranty .......................................................................................................... 43
2.50 Sufficiency and Practices of Operational Staff ................................................. 44
2.51 Contractor Responsibilities as Primary Contractor and in Subcontracting ....... 44
2.52 Taxes, Fees and Assessments ........................................................................ 44
PART 3 SPECIFICATIONS ........................................................................................ 45
3.0 Introduction ...................................................................................................... 45
3.1 Central Configuration ....................................................................................... 45
3.1.1 Gaming Host Systems at the Primary Data Center .................................. 46
3.1.2 Gaming Host Systems at the Backup Data Center .................................. 46
3.1.3 Lottery Acceptance Testing System ........................................................ 47
3.1.4 Internal Control System (ICS) Configuration ............................................ 48
3.1.5 Gaming System Quantitative Performance Criteria ................................. 48
3.1.6 Systems Management and Monitoring .................................................... 49
3.1.7 Operating Hours ...................................................................................... 50
3.1.8 Host Systems Security ............................................................................. 50
3.1.9 Support of Non-Traditional Gaming Environments .................................. 51
3.2 Retailer Terminals ............................................................................................ 51
3.2.1 Retailer On-line Terminal Hardware ........................................................ 51
3.2.2 Multiple Terminals per Retailer ................................................................ 61
3.2.3 Specialty Retailer Terminals .................................................................... 61
3.2.4 Additional Retailer Game Support Items .................................................. 62
3.2.5 Retailer Terminal Security ........................................................................ 63
3.3 Communications Networks .............................................................................. 64
Michigan Bureau of State Lottery vi Lottery Gaming System RFP

3.3.1 Network Design and Implementation ....................................................... 64
3.3.2 Network Design Features ........................................................................ 65
3.3.3 Network Administration Services ............................................................. 67
3.3.4 Network Monitoring and Fault Resolution ................................................ 68
3.3.5 Advanced Communications Technologies ............................................... 69
3.4 Software Controls and Data Management ....................................................... 69
3.4.1 Gaming Software Security and Control Features and Functions ............. 69
3.4.2 Application and Database Security .......................................................... 74
3.4.3 On-Line Games Drawing Controls ........................................................... 75
3.4.4 Games Management Application ............................................................. 75
3.4.5 Support of Instant Ticket Transactions at Retailers ................................. 78
3.4.6 Instant Game Support .............................................................................. 80
3.4.7 Instant Ticket Accounting and Management ............................................ 81
3.4.8 Instant Ticket Order Fulfillment: Telemarketing System .......................... 83
3.4.9 Instant Ticket Order Distribution .............................................................. 85
3.4.10 Instant Ticket Logistics by the Contractor ................................................ 86
3.4.11 Retailer Accounting .................................................................................. 86
3.4.12 Claims and Payments .............................................................................. 88
3.4.13 Data Management and Reporting ............................................................ 89
3.4.14 System Interfaces .................................................................................... 90
3.4.15 Security Information Reporting ................................................................ 91
3.4.16 On-line Subscription System (Specified Option) ...................................... 91
3.4.17 Internal Control System ........................................................................... 92
3.4.18 Websites .................................................................................................. 94
3.4.19 Retailer Account Creation and Management ........................................... 94
3.5 Games and Marketing ...................................................................................... 97
3.5.1 Corporate Marketing Support ................................................................... 97
3.5.2 Games Menu ........................................................................................... 98
3.5.3 Promotional Features............................................................................... 99
3.5.4 External Coupons .................................................................................. 100
3.5.5 System-Generated Coupons ................................................................. 100
3.5.6 Additional Non-Traditional Gaming and Non-Gaming Capabilities ........ 100
3.6 Contractor Facilities and Disaster Recovery Plan .......................................... 100
3.6.1 Primary Data Center Specifications ....................................................... 101
3.6.2 Backup Data Center .............................................................................. 103
3.6.3 Training Facilities ................................................................................... 104
3.6.4 Instant Ticket Warehouse ...................................................................... 104
3.6.5 Service Centers and Depots .................................................................. 104
3.6.6 System Disaster Recovery Plan ............................................................ 104
3.6.7 Contractor Capabilities Protection Plan ................................................. 105
3.7 Staffing, Services, and Operations Security Plan .......................................... 105
3.7.1 Bidder Personnel ................................................................................... 105
3.7.2 Operations Services............................................................................... 106
3.7.3 Terminal Provisioning Services: Moves, Adds, Changes, Removal ....... 107
3.7.4 Support of the Lottery's Partnership with Retailers ................................ 108
3.7.5 Retailer Training Programs, Initial and Ongoing .................................... 109
Michigan Bureau of State Lottery vii Lottery Gaming System RFP

3.7.6 Lottery Staff Training ............................................................................. 110
3.7.7 Retailer Consumables Supply ................................................................ 110
3.7.8 Retailer Equipment Maintenance Program ............................................ 111
3.7.9 Other Host, Systems, and Network Equipment Maintenance ................ 112
3.7.10 Gaming System Engineering Support Services ..................................... 112
3.7.11 System Change Control and Configuration Management ...................... 113
3.7.12 Operations Security Plan ....................................................................... 114
3.7.13 Electronic Media, Computer Room Paper, Supplies .............................. 115
3.7.14 Trouble Tracking, Dispatch, and Reporting System (Hotline Support) ... 115
3.8 Gaming System Implementation .................................................................... 117
3.8.1 Conversion Strategy .............................................................................. 117
3.8.2 Formal Implementation Plan .................................................................. 117
3.8.3 Interim Facilities and Processes ............................................................ 118
3.8.4 Installation and Lottery Quality Assurance/Acceptance Testing ............ 118
3.8.5 Project Reporting and Monitoring .......................................................... 119
3.8.6 Validation After Conversion ................................................................... 119
3.8.7 Historical Data ....................................................................................... 119
3.8.8 Removal of Previous Retailer Terminals ................................................ 119
3.9 Back-Office Processing System (BOPS) Environment .................................. 120
3.9.1 Overview of Requirements ..................................................................... 120
3.9.2 Lottery Information Management (IM) Support ...................................... 120
3.9.3 Hardware and Software Requirements .................................................. 121
3.9.4 BOPS Communications ......................................................................... 123
3.9.5 BOPS Site Preparation .......................................................................... 123
3.9.6 BOPS Ongoing Maintenance and System Support ............................... 124
3.9.7 BOPS Training ....................................................................................... 124
3.9.8 BOPS Implementation Plan ................................................................... 124
3.9.9 BOPS Recovery ..................................................................................... 124
3.9.10 BOPS Acceptance Testing .................................................................... 126
3.9.11 BOPS Project Management ................................................................... 126
3.10 Bidder Corporate Capability ........................................................................... 126
3.10.1 Corporate Background Review .............................................................. 126
3.10.2 Gaming Systems Experience ................................................................. 127
3.10.3 Contract Performance ............................................................................ 127
3.10.4 Manufacturing Capabilities for Terminals ............................................... 128
3.10.5 Software Development and Support Capabilities ................................... 129
3.10.6 Project Management Capabilities .......................................................... 129
3.10.7 Security Management Capabilities ........................................................ 129
3.10.8 Research and Development Program .................................................... 129
3.10.9 Financial Viability ................................................................................... 130
PART 4 - PRICING ...................................................................................................... 132
4.0 Introduction .................................................................................................... 132
4.1 Separately Sealed Price Proposal ................................................................. 132
4.2 Form of the Price Submission ........................................................................ 132
4.3 Pricing and Scoring of Options ...................................................................... 132
PART 5 PROPOSAL EVALUATION ........................................................................ 138
Michigan Bureau of State Lottery viii Lottery Gaming System RFP

5.0 Introduction .................................................................................................... 138
5.1 Evaluation Committee and Lottery Commissioner ......................................... 138
5.2 Evaluation Steps ............................................................................................ 138
5.3 Information from Other Sources ..................................................................... 139
5.4 Technical Proposal Scoring ........................................................................... 139
5.4.1 Criteria and Weights (Available Points).................................................. 139
5.4.2 Award Scale for Evaluation .................................................................... 140
5.4.3 Scoring of Desirable Items ..................................................................... 141
5.4.4 Scoring of Options ................................................................................. 142
5.5 Site Visits for Discussions and Demonstrations ............................................. 142
5.6 Price Evaluation ............................................................................................. 142
5.7 Technical Scoring and Pricing Combined ...................................................... 143
5.8 Notice of Award and Contract Signing ........................................................... 144
APPENDIX A: GLOSSARY ......................................................................................... 145
APPENDIX B: DEMONSTRABILITY OF SYSTEM ..................................................... 151
Inspection Tests....................................................................................................... 151
Functional Tests ...................................................................................................... 152
Performance Tests .................................................................................................. 153
Failover, Recovery and Security .............................................................................. 153
APPENDIX C: SERVICE LEVELS AND LIQUIDATED DAMAGES............................. 155
APPENDIX D: EXISTING LOTTERY BACK-OFFICE ENVIRONMENT ...................... 169
APPENDIX E: MANAGEMENT AND ADMINISTRATIVE REPORTS ......................... 178
APPENDIX F: RETAILER TERMINAL REPORTS ...................................................... 182
On-Line Games ....................................................................................................... 182
Instant Games ......................................................................................................... 182
General .................................................................................................................... 183
APPENDIX G: BOPS SOFTWARE APPLICATIONS .................................................. 184
APPENDIX H: IT SECURITY POLICIES ..................................................................... 185
APPENDIX I: INSTANT TICKET VENDING MACHINE (ITVM) SPECIFICATIONS .... 190

Michigan Bureau of State Lottery 1 Lottery Gaming System RFP

PART 1 PROPOSAL SUBMISSION INFORMATION
1.0 Introduction
The Michigan Bureau of State Lottery ("Lottery" also represented in this document as
the State) was established by Public Act 239 of 1972 (as amended) and operates as
an autonomous agency within the Department of Treasury. The mission of the Lottery
is: to generate revenue for the State of Michigan consistent with the public good; to
provide quality entertainment to the public consistent with the Bureau of Lotterys
statutory mandate; to maintain the integrity of lottery games and activities. The Lottery
Commissioner is responsible for directing the activities of the Lottery and reports directly
to the Governor. The Lottery appropriation and authorization for full-time equivalent
employees (FTEs) are established by the Legislature annually.
Currently the Lottery has approximately 11,000 retailers consisting of several distinct
groupings based on products sold. Approximately 8,200 retailers sell On-line game
tickets (except Club Keno) through a terminal and Instant game tickets. Approximately
800 retailers sell only Instant game tickets and are supported with a dial-up validation
device. These first two retailer types are primarily grocery stores, convenience stores,
and liquor stores. Approximately 2,100 Club retailers sell primarily Club Keno and/or
Pull-tab tickets. These locations are primarily bars, bowling centers and restaurants.
Approximately 1,400 of these Club retailers sell Pull-tabs and must provide their own
vending machines for the sale of Pull-tab tickets. Refer to specifications in Section 3.0
of this document for anticipated retailer configuration after conversion under this
contract.
The Lottery uses a consignment system of Instant ticket distribution where retailers are
automatically shipped inventory based on sales history. The current gaming system
vendor provides warehousing and distribution services. This vendor analyzes every
retailers Instant sales by price point every two weeks, which predicts a replenishment
order intended to keep the retailer stocked appropriately for three weeks. New games
introductions are also calculated for enough quantity to last three weeks. Those
quantities are shipped automatically. Lottery District Sales Representatives verify these
inventory levels, and make adjustments via the current vendor. The Lottery currently
has 500 Instant Ticket Vending Machines through a contract that expires in December
2010.
Pull-tab tickets are currently shipped by the printer on a three-week consignment basis.
Retailers manage their own inventory and orders are placed through a toll-free number
or via a website.
The Lottery currently consists of approximately 201 full-time employees. Among these
are a sales staff of 79 employees including seven regional managers and a state sales
manager. In addition, the Lottery employs 94 employees in its five divisions: Executive,
Marketing, Administration, Operations, and Charitable Gaming. Information Technology
services are provided by 28 employees of the Department of Information Technology.


The Lottery has six prize payment claim centers in the southern Lower Peninsula. The
northern Lower Peninsula and the Upper Peninsula are served by Lottery claim centers
located in banks. Approximately 30 banks are under contract to pay claims between
$600 - $50,000. See the Lottery website for more information regarding Lottery claim
centers.
Telecommunication services are currently provided by AT&T and consist of a land-
based network of 1800-baud leased lines. This contract expires in J anuary 2009.
For further information regarding the Lottery including game description, organization
chart, statistical information, and a complete financial history including sales by game,
go to www.michigan.gov/lottery and refer to 2005 and 2006 Comprehensive Annual
Financial Reports (CAFR).
The Lottery is issuing this Request for Proposal (the RFP) to invite interested Bidders
to submit Proposals for the procurement and implementation of a Lottery Gaming
System (System) including associated gaming products and support services.
Minimum Bidder Qualification: A Bidder submitting a Proposal must, at a
minimum, have one or more current U.S. clients to whom it has supplied a Lottery
Gaming System comparable to the functional specifications of this RFP for
products and services.
The system and services required under this RFP include, but are not limited to:
On-line games;
Instant ticket validation, capabilities, Instant and Pull-tab games management
and distribution systems, and combined Instant, Pull-tab and On-line accounting ;
Primary and back-up computer systems and facilities;
Computer operations, and
Installation, repair, maintenance, and updates for equipment and software.
Several options permitted in the RFP augment this list.
This RFP, and all activities leading toward the anticipated signing of a Contract pursuant
to this RFP, are enabled under Michigan statutes which establish the purpose, powers,
duties, and procedural framework of the Lottery.
In the RFP the Lottery has defined a series of objectives, requirements, and a proposal
evaluation approach that will represent its best interests in performance of its mission.
The Contractor is expected to enter into a written agreement (the Contract) with the
Lottery within thirty (30) calendar days after notice of award identifying it as the
Contractor. The Contract will cover an implementation period plus five (5) years of


production operations including such time as is necessary to complete the Lottery
business week then in progress. The Contract may be extended, under its original
terms, for a maximum of five (5) additional one-year periods or any combination thereof.
A base of approximately eleven thousand (11,000) retailer terminals, together with all
related computer hardware and software and their support services, must be provided
as a result of this RFP. All proposed System components must be delivered, installed,
implemented, acceptance tested, approved, and ready to be fully operational by the
agreed-upon schedule.
The new System must be capable of supporting all gaming products offered by the
Lottery at the time of conversion. As well, the Contractor must be able to incorporate
additional games and promotions into the System to support the Lotterys objectives.
1.1 Lottery Objectives
The Lottery has the following objectives for issuing this RFP and entering into a
Contract for the implementation and operation of the System.
Install an integrated System that will meet the gaming product needs of the
Lottery for the term of the Contract.
Obtain retailer terminals, supporting systems, and services that are operationally
sound, incorporate the highest level of integrity and security, and minimize risk
for the Lottery.
Obtain retailer terminals that will lead to high retailer and player satisfaction for
quality and performance.
Obtain a System that is sufficiently flexible to meet the Lottery's evolving
requirements.
Ensure that all proposed systems and services are ready to be operational by the
agreed-upon schedule.
Increase sales and maximize net lottery proceeds for the State of Michigan.
Fulfillment of these objectives is consistent with the Proposal evaluation criteria cited in
this RFP.
1.2 Overview of RFP
This RFP will provide the information necessary to submit Proposals. Part One provides
background and proposal preparation information. Part Two defines special terms and
conditions that will apply to the Contract. Part Three contains technical and business
specifications. Part Four defines how pricing must be submitted. Part Five describes
Proposal evaluation criteria, the evaluation process, and the proceedings leading to
execution of a Contract with the Contractor.


Appendix A provides a glossary for terms used in this RFP.
1.3 Issuing Officer
The Issuing Officer, acting on Lottery's behalf, is the sole point of contact with regard to
this RFP, from the date of release of this RFP until the Lotterys notice of award.
All communications concerning this procurement must be addressed in writing to the
Issuing Officer:
Mr. Richard Hauser
Procurement Manager
Michigan Lottery
P.O. Box 30023
101 East Hillsdale
Lansing, Michigan 48909
E-mail: Hauserd@michigan.gov
Fax: 517-335-5685

1.4 Disclosure and Investigation Requirements
This RFP requires a series of disclosures and willingness to comply with background
investigational requirements of the Lottery. This is a major procurement solicitation and
all relevant Michigan statutes are applicable. Questions regarding the disclosures and
investigation requirements are to be directed to the Issuing Officer.

1.5 Restrictions on Communication
Other than the Issuing Officer, potential Bidders and their agents or representatives
shall make no unsolicited contact with any elected official or office of the State of
Michigan, any Lottery employee, or any agent, or representative of the Lottery regarding
this RFP. Bidders shall not represent themselves to anyone, including Michigan Lottery
retailers, as having the endorsement of the Lottery, nor as the Lotterys next supplier of
gaming products and services. For Vendors currently doing business with the Lottery,
any communication regarding this RFP is prohibited except as provided for in this RFP.
Any Bidder causing or attempting to cause a violation or circumvention of this ethical
standard may, in the sole discretion of the Lottery, be disqualified from further
consideration.


1.6 Schedule
The following dates are set forth for informational and planning purposes. The Lottery
reserves the right to change any of the dates.
Event (Time) Date
RFP issued April 10, 2007
Inquiry Deadline #1 (First Round) May 1, 2007
Pre-Proposal Conference (2:00 pm EST) May 8, 2007
Lotterys Response to Inquiries (First Round) May 8, 2007
Inquiry Deadline #2 (Final Round) May 21, 2007
Lotterys Response to Inquiries (Final Round) J une 5, 2007
Proposal Submission (4:00 pm EST) June 19, 2007
Site visits / Bidder presentations August 20-31, 2007
Best and Final Offers Tendered (if requested) September 7, 2007
Notice of Award September 24, 2007
Administrative Board Approval October 16, 2007
Contract Execution October 17, 2007
Readiness for Lottery Quality Assurance Testing October 15, 2008
Lottery Quality Assurance Testing Completed J anuary 15, 2009
Full conversion completed* January 25, 2009
* NOTE: Full conversion will occur on or about J anuary 25, 2009. The Lottery
prefers to convert on an even boundary of accounting periods.

1.7 Inquiries (RFP Clarification, Change, or Protest)
By submitting a Proposal, Bidders agree that they understand the requirements of this
RFP, and they fully understand their obligations if they were to enter into a Contract with
the Lottery. If a Bidder needs clarification or would like to request a change to the
procurement technical or contractual requirements, the Bidder shall submit these to the
Issuing Officer on or before the Inquiry Deadlines stated in Section 1.6.
If the Bidder believes that the requirements are unnecessarily restrictive or limit
competition, the Bidder shall include the reason, and any and all documented, factual
information that supports this opinion, and any proposed changes to the requirements.
This protest period will be the sole opportunity for Bidders to protest any terms and
conditions contained in the RFP in Part 2.


If a Bidder discovers any ambiguity, conflict, discrepancy, exclusionary specifications,
omission or other errors in this RFP, and fails to notify the Lottery on or before the
Inquiry deadlines, the Bidder submits a response to this RFP at its own risk. The Lottery
will consider no requests for change or modifications after this deadline. The Bidder will
not be entitled to additional compensation, relief, or time by reason of the error or its
later correction.
Inquiries must be mailed, faxed, or e-mailed to the Issuing Officer at the location set
forth in Section 1.3. Bidders must observe the time schedule for submitting inquiries.
This schedule will ensure that the Lottery has adequate time to respond and that the
responses will be provided to Bidders in time to be incorporated into their Proposals.
Bidders are cautioned that an RFP inquiry shall be written in generic terms and
must not contain cost information. The inclusion of specific cost in an inquiry may
result in the Bidder's disqualification.
A copy of all questions and any changes in the RFP resulting from such requests
will be available via published addenda. Written acknowledgement of all addenda
issued prior to the Proposal due date shall become part of the Proposal.
Copies of this RFP, and the response to Bidder Questions, will be available from the
Issuing Officer.
1.8 Pre-Proposal Conference (Mandatory)
The Lottery will hold a Pre-Proposal conference in association with this RFP. The
conference will be held at the date and time shown in the schedule section, RFP 1.6, at
the Lotterys headquarters at 101 East Hillsdale, Lansing, Michigan. In addition, two
rounds of Inquiries will allow Bidders to be clear on the RFP terms, conditions, and
requirements, and the associated Proposal submission and evaluation processes.
Attendance at the Pre-Proposal Conference is mandatory.
1.9 Time Period to File or Commence Protest
Notwithstanding any limitations period prescribed by statute or otherwise, as a condition
for the right to submitting a Proposal in response to this RFP, the Bidder agrees that
any and all administrative clarification, protest, legal action, or any other proceeding of
whatever nature, arising from or related to this RFP, must be filed or commenced within
five (5) business days following the issuance of the RFP.

1.10 Addenda to the RFP
If any part of this RFP is amended, addenda will be provided to all Bidders to which the
Lottery provides the initial RFP.
1.11 Acceptance of RFP Terms
A Proposal submitted in response to this RFP will be considered a binding offer. By
submitting a Proposal, each Bidder covenants and agrees that it fully understands and
will abide by the terms and conditions of this RFP and it will not make claims for or have


any rights to cancel or withdraw its Proposal or for other relief due to any
misunderstanding or lack of information. The signature of the Bidder or an officer of the
Bidder legally authorized to execute contractual obligations will indicate
acknowledgement of this condition.
1.12 Waiver of Deficiencies and Rejection
for Non-Compliance
Proposals that do not meet all material requirements of this RFP or that fail to provide
all required information, documents, or supporting materials, or include language that is
conditional or contrary to terms, conditions, and requirements, may be rejected as non-
responsive.
The material requirements of the RFP are those set forth as: (i) mandatory; (ii) without
which an adequate analysis of Proposals is impossible; (iii) affect the competitiveness of
Proposals, or (iv) affect the cost to the Lottery.
The Lottery reserves the right to waive minor deficiencies in the Proposals.
The decision as to whether a deficiency will be waived or will require the rejection of a
Proposal will be solely within the discretion of the Lottery. Failure to comply with or
respond to any part of this RFP may result in rejection of the Proposal. A waiver of
non-compliance for a minor deficiency in the Proposal does not relieve the Contractor of
a contractual obligation.
1.13 Rejection of Proposals
The Lottery reserves the right to reject any Proposal at any point prior to an award of
the Contract, or to reject all Proposals and cancel this procurement, if such action has
been determined by the Lottery in its sole discretion, to be in its best interest.
1.14 Proposals Valid for One Year
All Proposals submitted will remain valid for one year from the date on which Proposals
are due, unless the period is extended by mutual agreement of the Lottery and the
affected Bidder or Bidders.
1.15 Proposal Form
The Proposal must be submitted in two (2) separate volumes and mailed or hand
delivered. All responses must be in a sealed package and identified on the outside by
the Bidder's full name and address and the RFP number and must be specifically
addressed to the Issuing Officer. Responses must be received by the Issuing Officer no
later than the date and time shown in the schedule section, RFP 1.6.
Proposals that are unsigned or otherwise materially non-conforming may be rejected as
non-responsive.


1.15.1 VOLUME I Technical (Non-Price) Proposal
The Technical Proposal volume shall include descriptive and technical matters only and
shall be appropriately labeled on the exterior of the Proposal. Cost figures shall not be
contained in the Technical Proposal; however, options offered by the Bidder at no
additional cost must be so noted.
The original plus seven (7) copies of the Technical Proposal are to be provided at the
time of submission. In addition, the Technical Proposal must be submitted on a CD
using a Microsoft Word or PDF file. The electronic version should include all proposal
sections within a single file to facilitate searches for terms across the breadth of the
Proposal.
The Technical Proposal must follow the outline provided below and employ divider
pages with tabs to separate the response sections:
A. Transmittal letter. The transmittal letter shall contain names, addresses, e-
mail and telephone numbers of individuals for the Lottery to contact regarding
contractual, technical, site visit, and background investigation matters
regarding the Proposal.
B. Bid Bond and Litigation Bond (see Sections 1.30 and 1.31).
C. Disclosure of RFP Assistance (see Section 1.33)
D. Disclosure of litigation, investigations, and other information (see Section
1.35).
E. Acknowledgement of all RFP addenda.
F. Agreement to comply with all terms and conditions (from Part 2).
G. Trade secret protection request letter (if needed). See Section 1.25.
H. Response to all paragraphs of Specifications (Part 3) in identical order to Part
3 subsections. An original and two copies of the required financial
information (Section 3.10.9) shall be filed with the Proposal original
only, and not with all seven (7) copies.
I. Bidder-supplied technical documentation as appendices.
J . List of Invited and Offered Options noting whether they are provided within
the baseline cost (without separate charge), or at additional cost. If there is
additional cost, pricing should not be disclosed in Volume I, Technical
Proposal.

K. One retailer terminal in working order, operating in stand-alone mode must be
delivered to the Lottery. A retailer manual and/or user guide, bet slips, ticket


stock, and quick reference card must be included. (Terminals need not play
current Lottery games.)
1.15.2 VOLUME II Price Proposal
The Price Proposal volume shall be appropriately labeled on the exterior of the
Proposal. The Price Proposal shall be signed in ink, and must be signed by an
individual authorized to legally bind the Bidder. All monetary values are to be proposed
in US dollars. The original plus one (1) copy of the Price Proposal are to be
provided at the time of submission.
The Price Proposal must follow the outline provided below and, employ divider pages
with tabs to separate these response sections:
A. Transmittal Letter.
B. Pricing for the Baseline System.
C. Pricing for Options.
The pricing response must be in the form prescribed in Part 4 (Price Quotation Sheet).
1.16 Proposal Opening
Proposals will not be subject to public opening or review from the time of receipt by the
Issuing Officer until the issuance of the Lotterys intent to award notification. At the time
the Lottery issues its intent to award notification, Proposals may be viewed by written
request directed to the Issuing Officer.
1.17 Withdrawal of Responses
A Bidder may withdraw its Proposal by written notice submitted on the Bidders
letterhead, signed by an authorized representative of the Bidder, delivered to the Lottery
Issuing Officer and received prior to the Proposal Submission deadline. The Bidder or
its authorized representative may also withdraw its Proposal in person prior to the
Proposal Submission deadline, upon presentation of appropriate identification and
evidence of authority satisfactory to the Lottery.

1.18 Late Proposals
Proposals pursuant to this RFP must be received by the Issuing Officer no later than the
Proposal Submission deadline. Failure of a Bidder to submit its Proposal by the
specified time may result in rejection. Proposals that are rejected for being late will be
returned unopened to the Bidder.
1.19 Demonstrability of Proposed System
The Lottery requires that all equipment and software proposed be capable of a
demonstration that indicates the Bidder's ability to meet the requirements specified in
this RFP. Failure to propose demonstrable products may result in rejection of the
Proposal. Refer to RFP Section 5.5, Site Visits for Discussions and Demonstrations and


Appendix B: Demonstrability of System for related information regarding demonstrability
of proposed system.
While functions and features demonstrated upon request for the Proposal evaluation
effort need not be identical in all respects to specifications of this RFP, traditional lottery
gaming functions and operations are expected.
In particular, the Lottery requires that the Bidders System be capable of a performance
simulation demonstrating the sale of 110,000 tickets per minute and 5,000 combined
cancel and winning ticket validations per minute, concurrently. These rates must be
sustained while meeting the performance specifications of 3.1.5 Gaming System
Quantitative Performance Criteria.
Demonstrations may consist of a simulation at the Bidder's facilities, observing
operations at another lottery, or a presentation at some other appropriate venue, as
requested by the Lottery during the evaluation process.
1.20 Readiness for Production and Delivery
The Lottery requires that every software and hardware item and network technology in
the proposed baseline configuration already be operational in some U.S. lottery
environment by the Bidder, with the exception that equivalent or improved newer
releases or models of the proposed products and their architectures are acceptable.
The Lottery will not consider or accept configuration items that are at the specifications
or concept stage only, are early in development, or are products announced but not
engineered and not ready for manufacture and delivery. The Lottery acknowledges that
a Bidders System would require adaptation to the Michigan requirements and that
component parts would be created, ordered, and assembled or integrated for delivery. A
Proposal based on undeveloped products will be rejected.
1.21 Proposal Clarification Process
The Lottery may request in writing, clarifications from Bidders for the purpose of
resolving ambiguities or questioning information presented in the Proposals.
Clarifications may occur throughout the proposal evaluation process. Clarification
responses shall be in writing and shall address only the information requested.
Responses shall be submitted to the Lottery within the reasonable time stipulated at the
occasion of the request.
Clarifications are for the purpose of resolving ambiguities and improving the
understanding of the Lottery regarding a Proposal. In no case does the clarification or
any other process permit revision or supplementation of Proposal after submission.
Clarifications are an opportunity to explain, but not enhance, the Proposal.
1.22 Latitude in Proposal Contents
Each Bidder is expected to provide the Lottery with information, evidence, and
demonstrations that will make possible an award that best serves Lotterys objectives
and requirements as set forth in the RFP.


Bidders are given wide latitude in the degree of detail they offer in their Proposal and
the extent to which they reveal plans, designs, systems, processes, and procedures in
the Proposal.
There is no limit on the number of pages; however, Bidders should prepare their
Proposals simply and economically, providing a straightforward and concise description
of their ability to satisfy the requirements of this RFP. Proposals that are of excessive
length, or contain a preponderance of boilerplate text, are discouraged. Emphasis in
each Proposal should be on completeness and clarity of content.
Failure of a Bidder to provide the appropriate information or materials in response to
each stated requirement or request for information may result in lower scores during the
evaluation or may ultimately result in Proposal rejection based on non-responsiveness
to the requirements of the RFP. Responses to complex RFP requirements that are
stated in a form semantically equivalent to Bidder agrees to comply may be rejected
for non-responsiveness at the discretion of the Lottery.
1.23 Proposal Disclosure
Disclosure by a Bidder or agent of the Bidder, of Proposal contents prior to the Lotterys
notification of its intent to award a Contract may result in rejection of the Proposal.
1.24 Disclosure and Ownership of Proposal Contents by
the Lottery
All matters set forth in a Proposal, including technical and price information, may be
subject to disclosure after the Lotterys notification of its intent to award a Contract. All
information in a Proposal and any Contract resulting from this RFP are subject to the
provisions of Michigans public records laws regardless of copyright status or Bidder
designations on pages of the Proposal.
Any and all materials submitted become the exclusive property of the Lottery. The
Bidder waives all rights relating to the proposal, including without limitation, any and all
rights of identification of authorship and any and all rights of approval, restriction or
limitation on use unless prohibited by law.
1.25 Public Records and Requests for Confidentiality
Proposals will not be returned to the Bidder.
In the event that a Bidder desires to claim that portions of its submittal are exempt from
public disclosure, it is incumbent upon the Bidder to identify those portions in a
transmittal letter attached to the Proposal. The claimed exemption from public
disclosure must be supported by specific reference to Michigan public records law. The
transmittal letter must identify the page and the particular exemption(s) from disclosure
upon which the claim is made. Each page claimed to be exempt from disclosure under
Michigan public records law must be clearly identified, on the page, by the words: "This
data constitutes a trade secret and shall not be disclosed except in accordance with the
Michigan public records laws.


If the Lottery receives a request for public records disclosure of the information so
designated as exempt from public disclosure by the Bidder, the Lottery may make a
reasonable attempt to notify the Bidder of the request so the Bidder may claim any
exemption entitled under applicable laws.
Michigan public records laws provides that certain records may be exempt from
disclosure. A decision made by Lottery to exempt a record from public disclosure is
subject to judicial review and will be made in accordance with Michigan laws. If the
public interest requires disclosure, a record will not be exempt from disclosure.
1.26 Joint Proposal Responses
Two or more Bidders may together submit a Proposal. If a joint Proposal is submitted,
the Proposal shall define the responsibilities that each Bidder is proposing to undertake.
Of the Bidders submitting a joint Proposal, one must be designated as the primary. The
Proposal shall designate a single authorized official to serve as the sole point of contact
between the Lottery and the joint responding Bidder.
1.27 Multiple Proposals from One Bidder Not Allowed
A Bidder shall submit a single proposal only. Within the single proposal the Bidder may
identify options, including solicited and unsolicited products, services, and features that
the Bidder believes may be appealing and useful to the Lottery. The inclusion of options
(see Section 1.38) accommodates the purpose of defining alternatives through multiple
proposals.
1.28 Costs Associated with Proposal
Neither the Lottery nor the State of Michigan shall be liable for any of the costs of
preparing or submitting a Proposal, including, but not limited to preparation, copying,
postage, and delivery fees or expenses associated with any demonstrations or
presentations that may be required by the RFP.
1.29 Mandatory and Desirable
Specifications in the RFP shall be regarded by the Bidder as mandatory, as denoted by
terms such as required, must, shall and will, except where a function, feature, or
capability is specifically noted as being desirable or an option In the case of a
desirable item, the Bidder is not required to offer such as expressly described in the
RFP; however, the evaluation of the Bidder's Proposal may be more favorable if
desirable functions, features, and capabilities are offered. Options are explained in
Section 1.38.
1.30 Proposal Bid Bond
Each Bidder must submit with the Proposal a Bid Bond, in form and substance and
issued by an issuer acceptable to the Lottery, in the amount of one hundred thousand
dollars ($100,000) to guarantee for one (1) year after submission of the Proposal the
availability of the goods and services at the price(s) quoted in the Proposal. The bid
bond (a check is acceptable) shall be payable to the State of Michigan.


The Bid Bond will be returned to all but the Successful Bidder upon the execution of the
Contract. The Bid Bond of the Successful Bidder will be retained until the Contract is
executed and the Lottery is furnished with an acceptable performance bond. The check
or bond will be forfeited to the Lottery if the Successful Bidder fails to submit in a timely
manner the performance bond or other security, as required, or fails to execute the
Contract in a timely manner as determined by Lottery.
1.31 Litigation Bond
Each Bidder must submit with the Proposal a Litigation Bond in the amount of five
hundred thousand dollars ($500,000). The purpose of the Litigation Bond is to permit
the Lottery or other Defendants (as indicated under subsection 1) to recover damages,
including reasonable attorneys' fees, expenses and court costs resulting from the
Bidders initiation of legal action. The Litigation Bond shall remain in effect for a period
of two (2) years from the date of submission of the Proposal.
A claim upon the Litigation Bond may be made by the Lottery under the following
conditions:
1. The Bidder initiates legal action against the Lottery or the State of Michigan or
any of its officers, employees, agents, or representatives, ,or any State of
Michigan employees, other contractors, or retailers with regard to any matter
relating to this RFP and the awarding of a Contract pursuant to this RFP;
2. The Lottery, the State of Michigan, or any of its officers, employees, agents,
or representatives, other contractors, or retailers is the prevailing party in
such an action.
Following signing of a Contract with the Contractor, the Litigation Bond of any Bidder
may be released upon acceptance by the Lottery of a Covenant Not to Sue.
1.32 Assurance of Bonds
Lottery will only accept bonds that are issued by a reliable surety company that is
licensed by the State of Michigan and has a record of successful continuous operation.
Failure to provide the required bonds will result in rejection of the Bidders proposal.
1.33 Disclosure of RFP Assistance
The Bidder shall notify the State in its Bid Proposal, if it, or any of its subcontractors, or
its officers or directors have assisted with the drafting of this RFP, either in whole, or in
part. This includes the conducting or drafting of surveys designed to establish a system
inventory, and/or arrive at an estimate for the value of the solicitation.
The Bidder shall provide a listing of all materials provided to the State by the Contractor,
or by the State to the Contractor, containing information relevant to this RFP, including,
but not limited to: questionnaires, requirements lists, budgetary figures, assessments,
white papers, presentations, or RFP draft documents. The Bidder shall provide a list of
all individuals within the State with whom any of their personnel, and/or subcontractors
personnel has discussed this RFP or any portion of this RFP.


The following constitutes a list of actions that would preclude the developer/co-
developer of a Request for Proposal (RFP) from bidding on an RFP. This list is not
comprehensive, and the State reserves the right to disqualify any Bidder, if the State
determines that the Bidder has used its position (whether as an incumbent vendor, or as
a contractor hired to assist with the RFP development, or as a vendor offering
assistance gratis), to gain a leading edge on the competitive solicitation:
1. The RFP development results in a unique solution, having proprietary
influence for the benefit of the developer, or a very limited source list. The
resulting RFP must be of a nature that displays neutrality and fairness; any
implication of impropriety will preclude the developer from participating in the
ensuing bid process.
2. Retaining information assembled or compiled for the development of the RFP
by the developer. The Bidder must share all pertinent information assembled
for the RFP development, by making such information equally and fully
available to all potential bidders, via the Issuing Officer.
3. The use of information assembled that would lead to an early response to the
RFP by the RFP developer. This includes, but is not limited to: assessments,
surveys, white papers, RFP draft documents, questionnaires, requirements
lists, budgetary figures, presentations, notes from conversations with State
personnel, and any other form of information resulting in a competitive
advantage.
1.34 Investigations During Proposal Evaluation
Subsequent to Proposal submission, the Lottery may initiate investigations into the
backgrounds of the Bidder and individuals or entities related to any officers, trustees,
board members, principals, investors, owners, subcontractors, employees, or any other
individuals or entities related to the Bidders as deemed appropriate. Such background
investigations may include fingerprint identification by the Michigan State Police and the
Federal Bureau of Investigation, or any other public or private agencies deemed
appropriate, and shall require the provision of information, as requested by the
investigators. Any costs of fingerprinting are the responsibility of the Bidder.
The Lottery may reject a Proposal based upon the results of these background checks.
The Bidder is advised that any person who knowingly provides false or intentionally
misleading information in connection with any investigation by the Lottery may cause
the Proposal to be rejected, or a subsequent Contract to be canceled.
If the Bidder or a substantial subcontractor is a subsidiary of a parent entity, the Lottery
may request the above disclosures from the parent entity as necessary.
1.35 Litigation
Since the Lottery has a strong interest in the Contractor's continuing ability to produce
secure high quality products and services, the Lottery requires that Bidders list and
summarize pending or threatened litigation, administrative or regulatory proceedings,


investigations, or similar matters that could materially affect the Bidder. As part of this
disclosure requirement, Bidders must state whether they or any owners of at least 5%
interest in the bidding company , officers, trustees, board members, subcontractors,
agents, or partners have ever been convicted of a felony, or a misdemeanor including
but not limited to larceny, a gaming related offense, uttering and publishing, or any civil
or criminal offenses excluding driving offenses. Failure to disclose such matters may
result in rejection of the Proposal or in termination of a Contract. Upon review of such
matters a determination will be made that might result in rejection of the Proposal or in
termination of a Contract. Such disclosures shall be submitted with the Proposal.
This is a continuing disclosure requirement; any such matter commencing after
submission of a Proposal and, with respect to the Contractor after the execution of a
Contract, must be disclosed within 30 days of notification in a written statement to the
Lottery Security Director.
1.36 Change of Financial Condition
If a Bidder who has submitted a Proposal in response to this RFP experiences a
material change in financial condition prior to award, or during the term of a Contract
with the Lottery, the Lottery must be notified in writing at the time the change occurs or
is identified. "Material change" is defined as any event which, following Generally
Accepted Accounting Principles (GAAP) (or the international equivalents to the extent
available) would require a disclosure in the annual report of a publicly traded United
States corporation or that would be required to be disclosed under State or Federal law.
Failure to notify the Lottery of such a change may result in the rejection of a Proposal or
termination of the Contract.
1.37 Specified, Invited and Offered Options
A Specified Option as noted in this RFP is identified as being of specific interest to the
Lottery and the Lottery anticipates acquiring such from the Contractor. However, the
Lottery may choose not to exercise such an option, and makes no commitment in this
RFP to the quantity or timing for acquisition. The Bidder is required to include a
Specified Option in the Proposal.
An Invited Option as noted in this RFP is identified as being of specific interest to the
Lottery. However the Lottery makes no commitment in this RFP to any quantity or timing
for acquisition. The Bidder is not obligated to include an Invited Option in the Proposal.
Offered Options are not identified in this RFP but may be identified by the Bidder and
included in the Proposal. This is an opportunity for Bidders to offer options that the
Lottery may not have been aware of at the time the RFP was written. The Lottery makes
no commitment to quantity or timing for acquisition of Offered Options.
Proposal options that the Lottery chooses to exercise for the Contract under different
quantity and/or timing considerations than suggested by the RFP will be negotiated with
the Successful Bidder.


1.38 Independent Price Determination
By submission of a Proposal, the Bidder certifies that in connection with the Proposal:
1. The prices in the Proposal have been arrived at independently, without
consultation, communication, or agreement for the purpose of restricting
competition with any other vendor or with any competitor.
2. Unless otherwise required by law, the prices quoted have not been knowingly
disclosed by the Bidder and will not knowingly be disclosed by the Bidder
prior to award directly or indirectly to any other vendor or to any person not
representing the Bidder.
3. No attempt has been made or will be made by the Bidder to induce any other
person or entity to submit or not submit a Proposal for the purpose of
restricting competition.
1.39 Hiring and other Business Relationships with Lottery
Staff
During the period from the RFP release until the signing of the Contract, Bidders are
prohibited from officially or unofficially making any employment offer or proposing any
business arrangement whatsoever to any Lottery employee. A Bidder making such an
offer or proposition may be disqualified from further consideration, or a Contract signed
pursuant to this RFP may be terminated.
Furthermore, for the duration of this RFP process, Bidders, their employees and any
representative, designee or agent of the Bidder shall refrain from:
1. Providing meals, entertainment, or other expenses for Lottery officers,
employees, agents, or representatives.
2. Providing gifts of any value to Lottery officers, employees, agents or
representatives.
1.40 Disqualification for Non-Responsibility
Financial and business stability and wherewithal to perform and support the Lottery are
required. Bidders that, in the Lotterys judgment after the evaluation of documents
required to be submitted in response to this RFP, do not possess the capability to
perform the Contract requirements, have a conflict of interest in serving the Lottery, or
fail to demonstrate sufficient financial responsibility, security, integrity, and reliability to
assure good faith performance, shall be rejected as non-responsible.
1.41 Applicable Laws and Procedures
Any dispute arising from this RFP, the Proposals, and the resulting Contract and the
processes associated with the procurement, shall be resolved in the State of Michigan.
With respect to any claim between the parties, Bidder consents to venue in Ingham


County, Michigan, and irrevocably waives any objections it may have to such jurisdiction
on the grounds of lack of personal jurisdiction of such court or the laying of venue of
such court or on the basis of forum non-conveniens or otherwise. Bidder agrees to
appoint agents in the State of Michigan to receive service of process.
1.42 Protest of Award
Bidders that have submitted a Proposal may protest an award and signing of a
Contract. Eligible Bidders protesting award shall follow the procedures described herein.
Protests that do not follow these procedures will not be considered. This protest
procedure constitutes the sole administrative remedy available to Bidders.
1. Protests must be received within five (5) business days after issuance of the
notice of intent to award the Contract (See schedule in Section 1.6.).
2. All protests must be in writing, signed by the protesting party or an authorized
Agent and submitted to the Issuing Officer listed in Section 1.3. The protest
must state all facts and arguments on which the protesting party is basing the
protest.
1.43 News Release Prohibition
Bidders will not issue any news release or make any statement to the news media
pertaining to this RFP, Proposal, proposed Contract or the work to be performed without
the prior written approval of the Lottery.
1.44 Headings
The headings used in this RFP are for convenience only and shall not affect the
interpretation of any of the terms and conditions thereof.


PART 2 SPECIAL TERMS AND CONDITIONS
2.0 Introduction
This section describes certain special terms and conditions which apply to the Lottery
procurement and which by virtue of incorporation will become part of the Contract
executed pursuant to this RFP. The basic contractual terms for this procurement are
those of Lottery standard contracts. The Successful Bidder will be expected to sign a
Contract based on the terms of this section.
By submission of a Proposal, the Bidder shall agree to the Terms and Conditions
contained in this section.
2.1 Contract Elements
The Contract between the Lottery and the Contractor shall include as integral parts
thereof:
1. This RFP
2. Clarifications and addenda to this RFP
3. The Proposal
4. Amendments to the Proposal and any Proposal clarifications.
In the event of a conflict in language between any of the above-mentioned documents,
the provisions and requirements set forth or referenced in the RFP and its addenda
shall govern. In the event that an issue is addressed in the Proposal or its clarifications
that is not addressed in the RFP, no conflict in language shall be deemed to occur.
In the event of a conflict in language between any of the above-mentioned documents
and the Contract, the provisions and requirements set forth or referenced in the
Contract and its amendments shall govern. In the event that an issue is not addressed
in the Contract, no conflict in language shall be deemed to occur.
The failure of a party to insist upon strict adherence to any term of a Contract resulting
from this RFP shall not be considered a waiver or deprive the party of the right
thereafter to insist upon strict adherence to that term, or any other term, of the Contract.
2.2 Amendments to the Contract
Any Contract provision resulting from this RFP may not be modified, amended, altered,
changed, renewed, varied, waived or augmented, except in writing executed by the
parties hereto, and any breach or default by a party shall not be waived or released
other than in writing and signed by the other party.


2.3 Severability
If a court of competent jurisdiction determines any portion of a Contract to be invalid, it
shall be severed and the remaining portion of a Contract shall remain in effect.

2.4 Term of Contract
The Contract resulting from this RFP will be in effect from the Contract effective date,
including an implementation period and five (5) years of production operations, plus
such time as is necessary to finish out the Lottery business week in progress. The
Contract term may run a shorter period, as determined by the Lottery, due to causes
such as Contract termination or loss of statutory authority by the Lottery.
The Lottery reserves the right to renew the Contract at its sole option up to a maximum
of five (5) renewals of one (1) year each, provided that any such option to renew is
exercised by the Lottery at least ninety (90) days prior to the end of the initial period, or
any renewal thereof, or at a time mutually agreed upon by both parties. The Lottery may
opt to award more than one renewal at a time, and may negotiate the terms of the
renewal.
2.5 Emergency Extension
The Lottery reserves the right to reactivate or further extend the initial Contract, or any
renewal thereof, at the rates and upon the terms and conditions then in effect on seven
(7) days notice for one (1) or more thirty (30) day periods if a different vendor is chosen
for a subsequent contract and the subsequent vendor's system does not meet the
requirements of the Lottery. The Lottery reserves to exercise this right until the
subsequent system is operational. To meet this requirement, the Contractor for this
Contract must maintain the System in a state of readiness through the date of full
conversion and for thirty (30) calendar days thereafter.
Exercising these rights shall not be construed as obligating the Lottery to repeat the
procurement process for any subsequent contract or conferring any right or expectation
for the Contractor to continue operating the System after the expiration of any such
emergency extension period.
2.6 Covenant Against Contingent Fees
The Bidder warrants that no person or selling agency has been employed or retained to
solicit or secure an agreement pursuant to this RFP upon an agreement or
understanding for a commission, percentage, brokerage or contingent fee, excepting
bona fide employees and established commercial or selling agencies retained by the
Bidder for the purpose of securing business. For breach or violation of this warranty, the
Lottery shall have the right to terminate any Contract in accordance with the termination
clause, and in its sole discretion, to deduct from any Contract any price or consideration
or otherwise recover the full amount of any such commission, percentage, brokerage or
contingent fee.


2.7 Audit and Accounting Requirements
Under the Contract, the Contractor must meet specific auditing and accounting
obligations:
1. The Contractor shall have a complete financial audit conducted annually, at its
own expense. The audit must follow Generally Accepted Auditing Standards
(GAAS), or the appropriate non-U.S. equivalent. A copy of the Contractor's
certified financial statements shall be provided within one quarter after the close
of the Contractors fiscal year.
2. The Contractor shall provide the Lottery with Securities and Exchange
Commission (SEC) 10-K reports (or the appropriate non-U.S. equivalent) as they
are issued, together with any other reports required pursuant to Section 13 of the
Securities and Exchange Act of 1934, as amended.
3. A third party review of the Contractor's Michigan operations shall be conducted
annually. This audit will be a Statement on Auditing Standards (SAS) 70 audit, or
other relevant audit as required by the Lottery, and shall be paid for by the
Contractor. For this review the Contractor will suggest, for the Lotterys approval,
the firm(s) to perform the work. All aspects shall be conducted pursuant to
auditing standards as issued by the American Institute of Certified Public
Accountants. Annual reviews shall occur on a May-to-May basis with the
complete audit and Contractor response reported no later than J uly to the
Lottery.
4. The Contractor is required to maintain its books, records and all other evidence
pertaining to the contract in accordance with Generally Accepted Accounting
Principals (GAAP) (or the appropriate non-U.S. equivalent) and such other
procedures specified by the Lottery. These records shall be available to the
Lottery, its internal auditors or external auditors (and other designees) at all times
during the contract period and for five (5) years from the contract expiration date
or final payment on the contract, whichever is later.
2.8 Bonds and Insurance Qualifications
All required bonds and insurance must be issued by companies which are rated A-
(Excellent) or higher by A.M. Best & Co., have a record of successful continuous
operation, are licensed, admitted, and authorized to do business in the State of
Michigan, and are approved by the State. Required coverages must be put into effect as
of the effective date of the Contract and must remain in effect throughout the term of the
Contract, as determined by the Lottery. The Contractor must submit copies of each
required insurance contract or certificates of insurance, and any renewals thereof, to the
Lottery on an annual basis. The insurance policies must provide for thirty (30) days'
advance written notice to the Lottery of cancellation, termination or failure to renew any
policy.
Section amended 05/09/2007


2.9 Insurance
The Contractor is required to provide proof of the minimum levels of insurance coverage
as indicated below. The purpose of this coverage shall be to protect the State from
claims which may arise out of or result from the Contractors performance of services
under the terms of this Contract, whether such services are performed by the
Contractor, or by any subcontractor, or by anyone directly or indirectly employed by any
of them, or by anyone for whose acts they may be liable.
The Contractor waives all rights against the State of Michigan, its departments,
divisions, agencies, offices, commissions, officers, employees and agents for recovery
of damages to the extent these damages are covered by the insurance policies the
Contractor is required to maintain pursuant to this Contract.
All insurance coverages provided relative to this Contract are PRIMARY and NON-
CONTRIBUTING to any comparable liability insurance (including self-insurances)
carried by the State.
The insurance shall be written for not less than any minimum coverage specified in this
Contract or required by law, whichever is greater.
The insurers selected by the Contractor shall have an A.M. Best rating of A- or better, or
as otherwise approved in writing by the State, or if such ratings are no longer available,
with a comparable rating from a recognized insurance rating agency. All policies of
insurance required in this Contract shall be issued by companies that have been
approved to do business in the State.
Where specific limits are shown, they are the minimum acceptable limits. If the
Contractors policy contains higher limits, the State shall be entitled to coverage to the
extent of such higher limits.
Before the Contract is signed by both parties or before the purchase order is issued by
the State, the Contractor must furnish to the Lottery, certificate(s) of insurance verifying
insurance coverage (Certificates). The Certificate must be on the standard accord
form or equivalent. THE CONTRACT OR PURCHASE ORDER NO. MUST BE
SHOWN ON THE CERTIFICATE OF INSURANCE TO ASSURE CORRECT FILING.
All Certificate(s) are to be prepared and submitted by the Insurance Provider. All
Certificate(s) shall contain a provision indicating that coverages afforded under the
policies WILL NOT BE CANCELLED, MATERIALLY CHANGED, OR NOT RENEWED
without THIRTY (30) days prior written notice, except for ten (10) days for non-payment
of premium, having been given to the Lottery. The notice must include the Contract
number affected and be mailed to: Michigan Lottery, Manager, Department Services,
P.O. 30023, Lansing, Michigan 48909. Failure to provide evidence of coverage, may, at
the States sole option, result in this Contracts termination.


The Contractor is required to pay for and provide the type and amount of insurance
listed below:
1. Commercial General Liability with the following minimum coverage:
$2,000,000 General Aggregate Limit other than Products/Completed Operations
$2,000,000 Products/Completed Operations Aggregate Limit
$1,000,000 Personal & Advertising Injury Limit
$1,000,000 Each Occurrence Limit
$500,000 Fire Damage Limit (any one fire)
The Contractor must list the State of Michigan, its departments, divisions,
agencies, offices, commissions, officers, employees and agents as ADDITIONAL
INSUREDS on the Commercial General Liability certificate. The Contractor also
agrees to provide evidence that insurance policies contain a waiver of
subrogation by the insurance company.
2. If a motor vehicle is used to provide services or products under this Contract, the
Contractor must have vehicle liability insurance on any vehicle including owned,
hired and non-owned vehicles used in the Contractors business for bodily injury
and property damage as required by law.
The Contractor must list the State of Michigan, its departments, divisions,
agencies, offices, commissions, officers, employees and agents as ADDITIONAL
INSUREDS on the vehicle liability certificate. The Contractor also agrees to
provide evidence that insurance policies contain a waiver of subrogation by the
insurance company.
3. Workers compensation coverage must be provided in accordance with
applicable laws governing the employees and employers work activities in the
state of the Contractors domicile. If the applicable coverage is provided by a
self-insurer, proof must be provided of approved self-insured authority by the
jurisdiction of domicile. For employees working outside of the state of
qualification, the Contractor must provide appropriate certificates of insurance
proving mandated coverage levels for the jurisdictions where the employees
activities occur.
Any Certificates received must also provide a list of states where the coverage is
applicable.
The Contractor also agrees to provide evidence that insurance policies contain a
waiver of subrogation by the insurance company. This provision shall not be
applicable where prohibited or limited by the laws of the jurisdiction in which the
work is to be performed.


4. Employers liability insurance with the following minimum limits:
$100,000 each accident
$100,000 each employee by disease
$500,000 aggregate disease
5. Employee Fidelity, including Computer Crimes, insurance naming the State as a
loss payee, providing coverage for direct loss to the State and any legal liability
of the State arising out of or related to fraudulent or dishonest acts committed by
the employees of the Contractor or its Subcontractors, acting alone or in
collusion with others, in a minimum amount of one million dollars ($1,000,000.00)
with a maximum deductible of fifty thousand dollars ($50,000.00).
6. Umbrella or Excess Liability Insurance in a minimum amount of ten million dollars
($10,000,000.00), which shall apply, at a minimum, to the insurance required in
Subsection 1 (Commercial General Liability) above.
7. Professional Liability (Errors and Omissions) Insurance with the following
minimum coverage: three million dollars ($3,000,000.00) each occurrence and
three million dollars ($3,000,000.00) annual aggregate.
The Contractor shall maintain all required insurance coverage throughout the term of
the Contract and any extensions thereto and, in the case of claims-made
Commercial General Liability policies, shall secure tail coverage for at least three (3)
years following the expiration or termination for any reason of this Contract. The
minimum limits of coverage specified above are not intended, and shall not be
construed, to limit any liability or indemnity of the Contractor under this Contract to
any indemnified party or other persons. The Contractor shall be responsible for all
deductibles with regard to such insurance. If the Contractor fails to pay any
premium for required insurance as specified in this Contract, or if any insurer
cancels or significantly reduces any required insurance as specified in this Contract
without the States written consent, at the States election (but without any obligation
to do so) after the State has given the Contractor at least thirty (30) days written
notice, the State may pay such premium or procure similar insurance coverage from
another company or companies; and at the States election, the State may deduct
the entire cost (or part thereof) from any payment due the Contractor, or the
Contractor shall pay the entire cost (or any part thereof) upon demand by the State.
Section amended 05/.09/2007
2.10 Contractor Error Liability
The Contractor will be liable for any specific and definite financial obligations arising as
a result of errors or faults by the Contractors staff, subcontractors, and the System.
These cases include, but are not limited to, errors in entry or posting of winning
numbers by System operators, software or hardware errors that create retailer or payout
liabilities, and apparent winning tickets issued by the Contractor's System and


presented for redemption which are not identified as valid, winning, saleable tickets in
the transactions supplied by the vendor to the Lotterys internal control system (ICS).
The Contractor will pay all prize costs for any such ticket, and shall pay any additional
cost incurred by the Lottery.
2.11 Ownership of Materials
Ownership of all data, documentary material, and operating reports originated and
prepared exclusively for the Lottery pursuant to any Contract resulting from this RFP
shall belong to the Lottery.
The Contractor will retain ownership of the retailer terminals, terminal peripherals,
gaming computer systems, network systems, system documentation, software, and
other materials originally supplied by the Contractor.
2.12 Right of Use
If for any reason other than a breach of the Contract by the Lottery, the Contractor
should lose its ability or refuse to service the Lottery as provided by Contract, the
Lottery shall acquire a usufruct in the source and object program instructions, and the
documentation for those programs as owned by the Contractor, in conjunction with any
products or services to the Lottery which are necessary to provide the central facility,
the backup facility, the communications network, all terminals, related equipment,
procedures, and production gaming scripts.
Such usufruct shall be limited to the right of the Lottery to possess and make use of
these items solely for the use and benefit of the Lottery in maintaining, altering and
improving the operational characteristics of the programs and systems being used
under the Contract. Such usufruct shall be limited in time for the duration of the Contract
and in scope to those items being used by the Lottery and on the Lotterys behalf under
the Contract. All items, including modifications or alterations thereof, shall be kept in
confidence, except to the extent that they are public records under Michigan law, and
shall be returned to the Contractor when their usufruct purposes have been fulfilled.
If there has been a determination, in the sole discretion of the Lottery, that continuity of
the Contractor's operations are in jeopardy and this provision may be exercised, the
Contractor shall provide training to the Lottery in the operation of the System, at the
Lotterys request.
2.13 Force Majeure
A force majeure occurrence is an event or effect that cannot be reasonably anticipated
or controlled and without the fault or negligence of the non-performing party. As herein
used, force majeure includes but is not limited to fire, explosion, action of the elements,
strike or labor disturbance, rationing, war, terrorism, act of any governmental authority
or agency, civil disturbance, governmental interference, or any other cause which is
beyond the control of the party affected, and which, by the exercise of reasonable
diligence, said party is unable to prevent delays arising as a result thereof or to predict
and through advance planning avoid such delays.


Except as otherwise provided herein, neither the Contractor nor the Lottery shall be
liable to the other for any delay in, or failure of performance of, any covenant contained
herein nor shall any such delay or failure of performance constitute default hereunder,
to the extent that such delay or failure is caused by force majeure. The existence of
such causes of delay or failure shall extend the schedule for performance to such extent
as may be necessary to complete performance in the exercise of reasonable diligence
after the causes of delay or failure have been removed.
Any such delay in or failure of performance shall not in and of itself give rise to any
liability for damages; however, the Lottery may elect to terminate the Contract for cause
should its continuing operations, in its sole judgment, be materially threatened or
harmed by reason of extended delay or failure of performance.
During a period of non-performance due to force majeure, payments from the Lottery to
the Contractor will be suspended.
2.14 Production-Ready Acceptance Test Following Award
The Lottery will conduct a series of acceptance tests to fully determine the passing or
failing of the Contractor's installation in accordance with the specifications of this RFP,
the Proposal, the Contract, and working papers developed jointly by the Contractor and
the Lottery during the implementation project. The Contractors assistance in arranging
these tests is obligatory.
The Lottery will not consider System components ready for Lottery acceptance testing
while still under development by the Contractor, or still subject to Quality Assurance
verification by the Contractor. The Lottery may establish standards for readiness of the
System for acceptance testing, known as entry criteria.
All defects discovered during acceptance testing must be corrected in a timely manner
by the Contractor, for re-testing. If the software is shown to contain such number of
defects as to render the system un-testable in a practical sense and their remedy is
untimely, the Lottery reserves the right to halt acceptance testing until the System is
corrected and testable in a practical sense once again. Acceptance testing halts may
lead to delays in System delivery and to Liquidated Damages for the Contractor.
The Lottery, at its sole discretion, will determine whether performance against the
acceptance tests is adequate, and whether conversion can proceed to production as
scheduled. Passing an acceptance test in no way removes the obligation for the
Contractor to meet, and to continue to meet, all documented specifications. Failure of
the Contractor to pass these tests may result in the Contractor having to make
corrections, delay conversion or installation, pay Liquidated Damages, or pay up to the
full amount of the Performance Bond.
2.15 End of Contract Conversion
It is contemplated that the Lottery, approximately eighteen (18) months prior to the
expiration of the Contract resulting from this RFP, will award a new contract for
replacement of the System. The parties understand and agree that the Lottery may


utilize part of the last year of the Contract resulting from this RFP or any renewal or
extension thereof for conversion to the replacement gaming system.
The Contractor shall cooperate fully and in good faith in the conversion. Cooperation
may include, but not be limited to, sharing of liability files, Instant ticket pack inventory
files, retailer authority files, and cross-validation of winning tickets; provided, that the
Contractor shall have the right to take all reasonable precautionary measures,
consistent with this Contract and past practices, to protect its confidential and
proprietary information in connection with such cooperation, in accordance with
Michigan law.
The Lottery may determine at its sole discretion that cooperation by the Contractor shall
include providing information to allow ticket bar codes to be read by a third-party system
for validation.
The Contractor shall remove all equipment and materials relating solely to the
Contractor's System from each retailer location and from Lottery property after final
conversion of any location to the new gaming system, within a reasonable period as set
by the Lottery. Equipment and materials not so removed by the Contractor shall be
considered abandoned and shall be disposed of at the Lottery's discretion at the cost of
the Contractor.
As amended 12/21/07
2.16 Equipment and Software Corrections and Upgrades

2.16.1 Corrections and Supported Products
The Contractor must report any relevant deficiencies in its own software or licensed
third party software used in the System and is responsible for ensuring that corrections
are incorporated in the configuration in a timely and responsible manner. At the time the
Contractor is notified by any supplier that a software or hardware release in the
configuration is scheduled to have support dropped, it is the Contractors obligation to
acquire and install an appropriate upgrade (with the Lotterys prior written approval).
2.16.2 Workload Growth
The Contractor must provide equipment and software changes necessary to support
increased System workload as follows:
A. Increased volumes of On-line transactions and Instant product distribution
and sales must be included in the Bidders base price for the System.
B. Fulfillment of expanded requirements from multi-jurisdictional organizations
(e.g., Mega Millions) in which the Lottery participates or elects to participate in
the future must be included in the Bidders base price for the System.
2.16.3 Reporting Changes
All software and/or stored procedure changes for scheduled administrative reports, ad
hoc reports, screen displays, processing options, and other features required for the
Lottery to manage the System, meet reporting obligations, and respond to new business


needs or rules, are included in the baseline. This section shall pertain to any expanded
reporting necessary for management information terminals, as well as to the interface
reporting necessary for accurate tracking by Lottery staff for service and repair calls.
2.16.4 Other Changes
Changes and enhancements to the equipment and software that exceed RFP-specified
and current requirements (and which are not otherwise accommodated by the pricing
method and Options in Part 4) such as additional terminal peripherals, game
enhancements, game options, promotions, new games, new terminal types, new
administrative reporting or changes to existing administrative reporting and new retailer
user interface features, will be handled as follows:
A. Software changes are included in the baseline price, even if additional
developments are required to create or adapt software for the Lotterys
needs.
B. Capital equipment, facilities, third-party licenses, or substantive service
additions or changes will have their pricing negotiated with the Lottery.
2.17 Approval of Hardware and Software Changes and
Upgrades
The Contractor's configuration management system and practices shall preclude
unauthorized changes to the System. Any engineering changes or variations from the
designs and specifications of the RFP, the Proposal, the Contract, or signed-off working
papers must be approved in writing by the Lottery prior to installation or implementation.
2.18 Software and Documentation
Before production operations under the System, a complete set of the Contractor's
software source programs, program object code, operations manuals, service manuals,
written procedures, and any such other materials necessary for the Lottery to operate
the System must be delivered either to the Lottery or to a mutually-agreed upon
independent third party escrow agent. The software source and object programs, and
documentation can be delivered on mutually agreeable media. Installation packages for
third party software products licensed by the Contractor must be included. If the above
materials are delivered to an escrow agent, a mutually agreed escrow agreement will be
executed prior to production operations under the System between the Contractor, the
Lottery and the escrow agent which would provide that these materials will be released
to the Lottery to (i) enable the Lottery to continue operations in the event the Contractor
becomes unable to perform, and (ii) confirm that only authorized software procedures
are employed with the System.
As System changes are implemented, both the change and change documentation shall
be provided to the escrow agent to continue the Lottery's protection. Changes to the
escrow agent's copy of these materials must occur within one (1) week if installation in
production operations.
As amended 12/21/2007


2.19 Compensation During Contract
The Lottery is obligated to compensate the Contractor only as a result of delivered
products and services, from the time that the retailer network is fully converted to the
Contractors System and in production, for the term of the Contract. Compensation
shall be based on a series of periodic payments. Invoices shall be submitted on a
periodic schedule, but no more frequently than weekly.

2.20 Title to, Use of, and Compensation for, Intellectual
Property
To the extent that the Contractor utilizes or relies upon the Intellectual Property Rights
of a third party in fulfilling its obligations under the Contract, the Contractor will provide
the Lottery with whatever assurance the Lottery deems necessary that the use of such
third party Intellectual Property Rights is permissible. In addition, in the event of failure
to perform or breach of contract the Contractor must ensure continued right of use of
licensed intellectual property by the Lottery.

The Contractor shall indemnify and hold harmless the State of Michigan, the Lottery, the
Lotterys Commissioner, other staff, other State contractors, retailers, and all agents,
employees, officers and directors thereof, from any and all claims, damages, fees and
expenses (including any attorneys' fees) arising from or related to any claims that any or
all of the products or services provided by the Contractor under the contract violate the
Intellectual Property Rights of a third party.
While the Lottery and the Contractor agree that Intellectual Property associated with any
product or service provided by (or developed solely by) the Contractor during the term
of this Contract and used by the Lottery will remain the property of the Contractor, the
Contractor will grant a license or authority to the Lottery to make use of any such
Intellectual Property on an indefinite basis with respect to Lottery conduct of games and
business. There shall be no additional charge for this right of the Lottery.
The Contractor may not separately charge the Lottery an Intellectual Property fee for
any items owned by the Contractor.

2.21 Exclusive Use of the Transaction Processing Systems
Use of the Contractors hardware and software configuration that processes ticket
transactions for the Lottery must be exclusive to the Lottery. Transactions from other
sources shall not be commingled with the gaming transactions of the Lottery.
2.22 Attachment of Third Party Systems, Terminals, or
Products
The Lottery reserves the right to attach to the System or otherwise install terminals,
terminal peripherals, games, software, products, or systems other than those required
by this RFP.


The Contractor shall be required to supply to the Lottery, interface specifications to
permit other products to carry out all functions and capabilities desired by the Lottery,
subject to Contractors right to take commercially reasonable measures to protect any
proprietary information, in accordance with Michigan law. The Contractor shall provide
support to the Lottery in conducting future procurements for such products including
providing facilities and support to allow other vendors to attach or install and test
products during the evaluation process. The Lottery will monitor progress to ensure full
cooperation.
Should the Lottery propose to add terminals, products, systems, or services not
supplied by the Contractor for this RFP, but for which the Contractor would gain
responsibility or obligations, appropriate remuneration of the Contractor shall be
negotiated under RFP 2.16.
As amended 12/21/2007
2.23 Ticket Purchase and Prize Payment Restrictions
Restrictions apply to the purchase of tickets and payment of prizes regarding individuals
related to the Contractor or the Contractors significant subcontractors. No officer,
employee, or immediate supervisor of such employee, or relative living in the same
household as these individuals shall purchase a Lottery ticket or be paid a prize in any
Lottery game if (i) they conduct duties directly pursuant to the Contract; or (ii) they have
access to information made Confidential by the Lottery. The Contractor shall ensure that
this requirement is made known to each affected individual.
To ensure compliance with this requirement, the Contractor and its subcontractors shall
provide a list of such individuals to the Lottery Security Director. The list shall include
name, address, date of birth, and social security number, and shall be updated to
maintain current information. This requirement applies throughout the life of the
Contract.
2.24 Performance Bond
Upon notification of receiving the award, the Contractor will be required to obtain a
performance bond or other acceptable form of security in the amount of five million
dollars ($5,000,000) for the first year of the contract. The performance bond
requirement for the second and subsequent years of the contract shall be one million
dollars ($1,000,000.00) plus the total of all liquidated damages assessed to the
Contractor during the preceding 12 months of operation under the contract. The
performance bond may be paid in full or in part to the Lottery if the Contractor defaults
in the performance of the Contract or has occasioned uncompensated Liquidated
Damages.
The performance bond may be assessed Liquidated Damages payments due the
Lottery that have not been received within thirty (30) calendar days after written notice
of their being incurred has been given to the Contractor.


Other forms of security may be acceptable but are subject to the Lotterys discretion.
Failure to post an additional bond or security within seven (7) days after notice that
proposed security is inadequate, shall be grounds for immediate termination of the
Contract. Section amended 05/09/2007
2.25 Fidelity Bond
Prior to Contract execution, the Contractor will be required to obtain a fidelity bond in
the amount of ten million dollars ($10,000,000) covering any loss to the Lottery due to
any fraudulent or dishonest act on the part of the Contractors officers, employees,
agents or subcontractors. Such an event, in the sole discretion of the Lottery, could be
grounds for termination of the contract, whether or not the losses arising as a result
thereof were paid under the crime insurance policy.
2.26 Liquidated Damages Provisions
In all the below Liquidated Damages sections, and Appendix C, the Lottery and the
Contractor agree that it would be extremely impractical and difficult to determine actual
damages that the Lottery will sustain. The goods and services to be provided under the
Contract are not readily available on the open market; any breach by the Contractor will
delay and disrupt the Lottery's operations and will lead to damages. Therefore, the
parties agree that the Liquidated Damages as specified in all the sections are
reasonable and are not to be construed as a penalty.
In no case shall Liquidated Damages be measured in terms of potential lost revenue or
potential lost net profit to the Lottery, unless and to the extent that a court of competent
jurisdiction should determine that a Liquidated Damages provision is unenforceable as a
matter of law.
Assessment of Liquidated Damages shall be in addition to, and not in lieu of, such other
remedies as may be available to the Lottery. Except and to the extent expressly
provided herein, the Lottery shall be entitled to recover Liquidated Damages under each
section applicable to any given incident.
All references to monetary values are in US dollars.
2.26.1 Notification of Liquidated Damages
Upon determination that Liquidated Damages are to or may be assessed, the Lottery
shall notify the Contractor of the assessment in writing. The availability of any period of
cure will depend on the situation and will be at the sole discretion of the Lottery.
2.26.2 Conditions for Termination of Liquidated Damages
As determined appropriate by the Lottery, the following are the conditions under which
the Contractor may obtain relief from the continued assessment of Liquidated Damages.
A. Except as waived in writing by the Lottery, no liquidated damages imposed
shall be terminated or suspended until the Contractor issues a written notice
verifying the correction of the condition(s) for which Liquidated Damages were


imposed, and all corrections have been subjected to system testing or other
verification at the discretion of the Lottery.
B. As appropriate, the Contractor shall conduct system testing of any correction
as the Lottery deems necessary. Such testing shall be developed jointly by
the Lottery and the Contractor, and must be approved by the Lottery,
including the test script, test environment, and test results. A notice of
correction will not be accepted until verification by the Lottery.

2.26.3 Severability of Individual Liquidated Damages
If any portion of the Liquidated Damages provisions is determined to be unenforceable
in one or more applications, that portion remains in effect in all applications not
determined to be invalid and is severable from the invalid applications. If any portion of
the Liquidated Damages provisions is determined to be unenforceable, the other
provision(s) shall remain in full force and effect.
2.26.4 Waivers of Liquidated Damages
The waiver of any Liquidated Damages due the Lottery shall constitute a waiver only as
to such Liquidated Damages and not a waiver of any future Liquidated Damages.
Failure to assess Liquidated Damages or to demand payment of Liquidated Damages
within any period of time shall not constitute a waiver of such claim by the Lottery.
2.26.5 Payment of Liquidated Damages
All assessed Liquidated Damages will be deducted from any moneys owed the
Contractor by the Lottery and in the event the amount due the Contractor is not
sufficient to satisfy the amount of the Liquidated Damages, the Contractor shall pay the
balance to the Lottery within thirty (30) calendar days of written notification. If the
amount due is not paid in full, the balance will be deducted from subsequent payments
to the Contractor. At the Lottery's sole option, the Lottery may obtain payment of
assessed Liquidated Damages through one (1) or more claims upon the performance
bond.
2.26.6 Liquidated Damages and Service Levels
The Contractor shall not be required to pay Liquidated Damages for delays solely due to
matters affected by force majeure, or for time delays specifically due to, or approved by,
the Lottery, or for delays caused by the actions or omission of third parties not under the
direct or indirect control of the Contractor, its subcontractors, and their respective
employees, consultants or agents. Liquidated damages and services levels for this
implementation are documented in Appendix C.
As Amended 12/21/2007

2.26.7 Additional Provisions.
The Contractor may furnish, and the Lottery may consider in its assessment of
liquidated damages, factual evidence where available which establishes in the Lotterys


opinion that the Lotterys actual damages were less than the liquidated sum. The
Lottery will assess liquidated damages within six (6) months of the date that the Lottery
becomes aware of the incident giving rise to liquidated damages or waive the right to
make a claim with respect to such liquidated damages.

2.27 Security Program Under the Contract
Prior to operations under the Contract, the Contractor shall establish and maintain an
approved security program for the entire System, subject to the written approval of the
Lottery. This program must be updated, reviewed, and approved annually by the
Lottery. As part of this requirement the Contractor must maintain an approved
Operations Security Plan.
The security program shall include the following procedural, administrative, and physical
elements:
1. Methods and procedures for conducting background checks on all personnel
and compliance with requirements for compilation of information for
background checks by the Lottery.
2. Inspection by personnel authorized by the Lottery of the premises of the
Contractor or any subcontractor where work under this contract occurs, to
determine the degree of compliance with security and operational
requirements. Such inspection may be unannounced.
3. Security measures and systems which preclude unauthorized persons from
accessing all facilities and supplies, and equipment within the facilities. The
Lottery reserves the right to prohibit physical access to operations areas by
non-operations personnel.
4. Security measures which preclude the unauthorized use of equipment and
materials, without written authorization from the Commissioner.
5. Security measures which ensure the integrity of the preparation, storage,
distribution, or use of any data or documentation relating to winner
information.
6. A disaster recovery and contingency plan for maintaining the successful
operation of the development and manufacturing processes. Such a plan
must include a method and timeframe for recovery and continuation of these
processes.
7. Other security measures to ensure the integrity and proper functioning of the
work conducted under this Contract.


2.27.1 Personnel Security
The Lottery may initiate investigations into the backgrounds of any officers, principals,
investors, owners, subcontractors, employees, or any other associates of the Contractor
it deems appropriate. Such background investigations may include fingerprint
identification by Michigan State Police, Federal Bureau of Investigation, and any other
appropriate public or private agencies selected by the Lottery. Any costs of
fingerprinting are the responsibility of the Contractor.
Personnel who will be performing services under the Contract and as determined by the
Lottery will be required to undergo a background investigation by the Lottery. This
Lottery background check does not relieve the Contractor of their responsibility to
conduct their own background investigations (see 2.27). After an employee being
considered for work on the Lottery contract has been cleared by the Contractors
background checks, the person shall be submitted to Lottery for clearance. The results
of the background check by the Contractor shall be shared with Lottery.
The Contractor consents to cooperate with such investigations, and to instruct its
employees to cooperate. The Lottery may terminate the Contract or require the
Contractor to remove an employee from the Lottery project based upon adverse results
of background checks if the Lottery determines that its integrity, security, or goodwill
may be in jeopardy. The Lottery may disapprove any employee or subcontractor of the
Contractor who is assigned to this project, either at contract inception or at any time
during the term of the contract.
The Contractor shall not allow the engagement of unfit or unqualified persons not skilled
in the tasks assigned to them with respect to the Contract and shall at all times employ
sufficient personnel for carrying out work to full completion in the manner and time
prescribed by the Contract. The Contractor shall be responsible to the Lottery for the
acts and omissions of the Contractors employees or subcontractors.
Any person employed by the Contractor shall, at the written and reasonable request of
the Lottery, be removed forthwith by the Contractor from work relating to the Contract.
The Contractors subcontractors are in this respect considered employees of the
Contractor.
The ability to conduct such investigations is a continuing right of the Lottery throughout
the Contract.
The Contractor shall at the start of the contract, and for each new employee prior to
their assignment on Michigan contract work, submit to the Lottery the name, address,
date of birth, social security number, driver license number, and fingerprint cards and/or
other release forms bearing the persons signed authorization to allow criminal justice
agencies to release to the Lottery any criminal history that pertains to such person, of all
officers and employees of the Contractor and of any subcontractor, who are involved in
any phase or aspect of the Lottery Gaming System. The Lottery reserves the right to
review and approve or disapprove any persons prior to or during their assignment to this
contract. No employee is to be given access to facilities or assigned to work on this


contract until the employee has been cleared by the Lottery. The Lottery reserves the
right to review all security clearances and to disapprove any contractor or subcontractor
employee.
The Contractor shall notify the Lottery of departures of persons who are involved in the
Lottery Gaming System contract and shall provide a roster of current employees to the
Lottery at least every six months during the life of the contract.
2.27.2 Security Violation Reporting
The Contractor shall immediately report to the Lottery any security procedural violation,
system compromise, violation of law (e.g., theft), or disappearance of any playslips,
Instant tickets, On-line ticket stock, validation files, claimant information, or other
equipment, software or material used or to be used in the performance of this Contract.
2.27.3 Security Information (Disclosure) Updates
The Contractor shall report any change in, addition to, or deletion from, the information
disclosed to the Lottery. The report shall be in the form of a letter addressed to the
Lottery and shall be delivered to the Lotterys Security Director within thirty (30) days of
the effective date of the change, addition, or deletion. In particular the Contractor must
report the involvement of any of the Contractor's employees, owners, or agents in any
known criminal arrest (exclusive of minor traffic violations) or investigation.
1. Disclosure. The Contractor must disclose any material criminal litigation,
investigations or proceedings involving the Contractor (and each Subcontractor)
or any of its officers or directors or any litigation, investigations or proceedings
under the Sarbanes-Oxley Act. In addition, each Contractor (and each
Subcontractor) must notify the Lottery of any material civil litigation, arbitration or
proceeding which arises during the term of the Contract and extensions thereto,
to which the Contractor (or, to the extent the Contractor is aware, any
Subcontractor hereunder) is a party, and which involves: (i) disputes that might
reasonably be expected to adversely affect the viability or financial stability of the
Contractor or any Subcontractor hereunder; or (ii) a claim or written allegation of
fraud against the Contractor or, to the extent the Contractor is aware, any
Subcontractor hereunder by a governmental or public entity arising out of their
business dealings with governmental or public entities. Any such litigation,
investigation, arbitration or other proceeding (collectively, "Proceeding") must be
disclosed in a written statement to the Lottery Security Director within thirty (30)
days of its occurrence. Details of settlements which are prevented from
disclosure by the terms of the settlement may be annotated as such. Information
provided to the State from the Contractors publicly filed documents referencing
its material litigation will be deemed to satisfy the requirements of this Section.
2. Assurances. In the event that any such Proceeding disclosed to the State
pursuant to this Section, or of which the State otherwise becomes aware, during
the term of this Contract would cause a reasonable party to be concerned about:


A. the ability of the Contractor (or a Subcontractor hereunder) to continue to
perform this Contract in accordance with its terms and conditions, or
B. whether the Contractor (or a Subcontractor hereunder) in performing
Services for the State is engaged in conduct which is similar in nature to
conduct alleged in such Proceeding, which conduct would constitute a
breach of this Contract or a violation of Michigan law, regulations or public
policy, then the Contractor shall be required to provide the State all
reasonable assurances requested by the State to demonstrate that:
1. The Contractor and/or its Subcontractors hereunder will be able to
continue to perform this Contract and any Statements of Work in
accordance with its terms and conditions, and
2. The Contractor and/or its Subcontractors hereunder have not and will
not engage in conduct in performing the Services which is similar in
nature to the conduct alleged in such Proceeding.
3. The Contractor shall make the following notifications in writing:
A. Within thirty (30) days of the Contractor becoming aware that a change in
its ownership or officers has occurred, or is certain to occur, or a change
that could result in changes in the valuation of its capitalized assets in the
accounting records, the Contractor shall notify the Lottery Contract
Administrator.
B. The Contractor shall also notify the Lottery Contract Administrator within
thirty (30) days whenever changes to asset valuations or any other cost
changes have occurred or are certain to occur as a result of a change in
ownership or officers.
C. The Contractor shall also notify the Lottery Contract Administrator within
thirty (30) days whenever changes to company affiliations occur.
2.28 Contractor Ethics and Integrity
The Contractor is obligated to meet high standards for ethics and integrity under this
Contract. The Contractor and employees:

1. Shall accept no pay, remuneration, or gratuity of any value for performance on or
information derived from this project from any party other than the Lottery as
described in this Contract, or from any party under contract to the Lottery or
seeking to contract with the Lottery with respect to this project.
2. Shall not offer or give any gift, gratuity, favor, entertainment, loan, or any other
thing of material monetary value to any Lottery employee.


3. Shall not disclose any business sensitive or confidential information gained by
virtue of this Contract to any party without the written consent of the Lottery.
4. Shall take no action in the performance of this Contract to create an unfair,
unethical, or illegal competitive advantage for itself or others.
5. Shall not have any financial or personal interests relating to this project (other
than the Contract itself) without the explicit written consent of the Lottery.
For violation of the above provisions, the Lottery may terminate the Contract, or take
any other action provided for in this Contract against the Contractor.
2.29 Compliance with Association Standards
All services, products, systems, and procedures to be employed by the Contractor must
comply with the game security and operational standards current at the time of Contract
performance as issued by any multi-jurisdictional association of which the Lottery is a
member or in the event the Lottery becomes a member.
2.30 IT Security
The Contractor shall comply with the Lottery IT Security Policies as outlined in Appendix
H.
2.31 Non-Appropriation
The Contractor acknowledges that continuation of this Contract is subject to
appropriation or availability of funds for this Contract. If funds to enable the Lottery to
effect continued payment under this Contract are not appropriated or otherwise made
available, the Lottery shall have the right to terminate this Contract and all affected
Statements of Work, in whole or in part, at the end of the last period for which funds
have been appropriated or otherwise made available by giving written notice of
termination to the Contractor.
2.32 Electronic Payment Requirement
Electronic transfer of funds is mandatory for State of Michigan vendors. The Contractor
is required to register with the State at http://www.cpexpress.state.mi.us.
2.33 Freedom of Information
All information in any Proposal submitted by the Contractor and this Contract are
subject to the provisions of the Michigan Freedom of Information Act, 1976 Public Act
No. 442, as amended, MCL 15.231, et seq (the FOIA).
2.34 Confidentiality
The Contractor and the Lottery each acknowledge that the other possesses and will
continue to possess confidential information that has been developed or received by it.
As used in this Section, Confidential Information of the Contractor shall mean all non-
public proprietary information of the Contractor which is marked confidential, restricted,
proprietary or with a similar designation. Confidential Information of the Lottery shall


mean any information which is retained in confidence by the Lottery (or otherwise
required to be held in confidence by the Lottery pursuant to applicable federal, state and
local laws and regulations) or which, in the case of tangible materials provided to the
Contractor by the Lottery pursuant to its performance under this Contract, is marked as
confidential, proprietary or with a similar designation by the Lottery. In the case of
information of either the Contractor or the Lottery Confidential Information shall
exclude any information (including this Contract) that is publicly available pursuant to
the Michigan FOIA.
2.35 Indemnification
1. General Indemnification - To the extent permitted by law, the Contractor shall
indemnify, defend and hold harmless the State from liability, including all claims
and losses, and all related costs and expenses (including reasonable attorneys
fees and costs of investigation, litigation, settlement, judgments, interest and
penalties), accruing or resulting to any person, firm or corporation that may be
injured or damaged by the Contractor in the performance of this Contract and
that are attributable to the negligence or tortious acts of the Contractor or any of
its subcontractors, or by anyone else for whose acts any of them may be liable.
2. Code Indemnification - To the extent permitted by law, the Contractor shall
indemnify, defend and hold harmless the State from any claim, loss, or expense
arising from the Contractors breach of the No Surreptitious Code Warranty.
3. Employee Indemnification - In any and all claims against the State of Michigan,
its departments, divisions, agencies, sections, commissions, officers, employees
and agents, by any employee of the Contractor or any of its subcontractors, the
indemnification obligation under the Contract shall not be limited in any way by
the amount or type of damages, compensation or benefits payable by or for the
Contractor or any of its subcontractors under workers disability compensation
acts, disability benefit acts or other employee benefit acts. This indemnification
clause is intended to be comprehensive. Any overlap in provisions, or the fact
that greater specificity is provided as to some categories of risk, is not intended
to limit the scope of indemnification under any other provisions.
4. Patent/Copyright Infringement Indemnification - To the extent permitted by law,
the Contractor shall indemnify, defend and hold harmless the State from and
against all losses, liabilities, damages (including taxes), and all related costs and
expenses (including reasonable attorneys fees and costs of investigation,
litigation, settlement, judgments, interest and penalties) incurred in connection
with any action or proceeding threatened or brought against the State to the
extent that such action or proceeding is based on a claim that any piece of
equipment, software, commodity or service supplied by the Contractor or its
subcontractors, or the operation of such equipment, software, commodity or
service, or the use or reproduction of any documentation provided with such
equipment, software, commodity or service infringes any United States patent,
copyright, trademark or trade secret of any person or entity, which is enforceable
under the laws of the United States.


In addition, should the equipment, software, commodity, or service, or its operation,
become or in the States or the Contractors opinion be likely to become the subject of a
claim of infringement, the Contractor shall at the Contractors sole expense (i) procure
for the State the right to continue using the equipment, software, commodity or service
or, if such option is not reasonably available to the Contractor, (ii) replace or modify to
the States satisfaction the same with equipment, software, commodity or service of
equivalent function and performance so that it becomes non-infringing, or, if such option
is not reasonably available to the Contractor, (iii) accept its return by the State with
appropriate credits to the State against the Contractors charges and reimburse the
State for any losses or costs incurred as a consequence of the State ceasing its use
and returning it.
Notwithstanding the foregoing, the Contractor shall have no obligation to indemnify or
defend the State for, or to pay any costs, damages or attorneys fees related to, any
claim based upon (i) equipment developed based on written specifications of the State;
or (ii) use of the equipment in a configuration other than implemented or approved in
writing by the Contractor, including, but not limited to, any modification of the equipment
by the State; or (iii) the combination, operation, or use of the equipment with equipment
or software not supplied by the Contractor under this Contract.
2.36 Continuation of Indemnification Obligations
The Contractors duty to indemnify continues in full force and effect, notwithstanding the
expiration or early cancellation of the Contract, with respect to any claims based on
facts or conditions that occurred prior to expiration or cancellation.
2.37 Nondiscrimination
In the performance of the Contract, the Contractor agrees not to discriminate against
any employee or applicant for employment, with respect to his or her hire, tenure, terms,
conditions or privileges of employment, or any matter directly or indirectly related to
employment, because of race, color, religion, national origin, ancestry, age, sex, height,
weight, marital status, physical or mental disability. The Contractor further agrees that
every subcontract entered into for the performance of this Contract or any purchase
order resulting from this Contract will contain a provision requiring non-discrimination in
employment, as specified here, binding upon each Subcontractor. This covenant is
required pursuant to the Elliot Larsen Civil Rights Act, 1976 PA 453, MCL 37.2101, et
seq., and the Persons with Disabilities Civil Rights Act, 1976 PA 220, MCL 37.1101, et
seq., and any breach of this provision may be regarded as a material breach of the
Contract.
2.38 Unfair Labor Practices
Pursuant to 1980 PA 278, MCL 423.231, et seq., the State shall not award a Contract or
subcontract to an employer whose name appears in the current register of employers
failing to correct an unfair labor practice compiled pursuant to section 2 of the Act. This
information is compiled by the United States National Labor Relations Board. A
Contractor of the State, in relation to the Contract, shall not enter into a contract with a
Subcontractor, manufacturer, or supplier whose name appears in this register.


Pursuant to section 4 of 1980 PA 278, MCL 423.324, the State may void any Contract if,
subsequent to award of the Contract, the name of the Contractor as an employer or the
name of the Subcontractor, manufacturer or supplier of the Contractor appears in the
register.
2.39 Workplace Safety and Discriminatory Harassment
In performing services for the State, the Contractor shall comply with the Department of
Civil Services Rule 2-20 regarding Workplace Safety and Rule 1-8.3 regarding
Discriminatory Harassment. In addition, the Contractor shall comply with Civil Service
regulations and any applicable agency rules provided to the Contractor. For Civil
Service Rules, see http://www.mi.gov/mdcs/.
2.40 Governing Law
The Contractor shall in all respects be governed by, and construed in accordance with,
the substantive laws of the State of Michigan without regard to any Michigan choice of
law rules that would apply the substantive law of any other jurisdiction to the extent not
inconsistent with, or pre-empted by federal law.
2.41 Compliance with Laws
The Contractor shall comply with all applicable state, federal, and local laws and
ordinances (Applicable Laws) in providing the Services/Deliverables.
2.42 Media Releases, Advertising and Contract Distribution
1. Media Releases - Neither the Contractor nor the Lottery will make any news
releases, public announcements or public disclosures, nor will they have any
conversations with representatives of the news media, pertaining to the Contract,
the Services or the Contract without the prior written approval of the other party,
and then only in accordance with explicit written instructions provided by that
party. In addition, neither the Contractor nor the Lottery will use the name,
trademarks or other proprietary identifying symbol of the other party or its
affiliates without such partys prior written consent. Prior written consent of the
Contractor must be obtained from authorized representatives.
2. The Contractor shall not use its relationship with the Lottery as a part of any
commercial advertising without prior written consent of the Lottery.
3. Contract Distribution - The Lottery shall retain the sole right of Contract
distribution.
2.43 Assignment of the Contract
The Contract is not assignable except with the prior written approval of the Lottery.
Monies payable under the Contract are not assignable except with the prior written
approval of the Lottery. In the event of such approval, the terms and conditions hereof
shall apply to and bind the party or parties to whom the Contract is assigned as fully and
completely as the Contractor is there under bound and obligated. No assignment, if any,


shall operate to release the Contractor from its liability for the prompt and effective
performance of its obligations under the Contract.
2.44 Call Center Disclosure
The Contractor and/or all subcontractors involved in the performance of this Contract
providing call or contact center services to the Lottery must disclose the location of its
call or contact center services for inbound callers. Failure to disclose this information
shall be a material breach of this Contract. Any change in location of call centers must
be presented in writing to the Lottery thirty (30) days in advance of the change. The
Lottery reserves the right to approve location of call centers.
2.45 Termination
Termination for Cause The Lottery reserves the right to immediately terminate the
Contract by providing written notice to the Contractor if the Lottery determines, in its
sole discretion, that any of the following have occurred:
1. The Contractor knowingly furnished any statement, representation, warranty or
certification in connection with the solicitation or the Contract, which
representation is materially false, deceptive, incorrect, or incomplete.
2. The Contractor fails to perform to the Lotterys satisfaction any material
requirements of the Contract or defaults in performance of the Contract.
3. The performance of the Contract is substantially endangered by the action or
inaction of the Contractor, or such occurrence can be reasonably anticipated.
4. The State enacts a law which removes or restricts the authority or ability of the
Lottery to employ the product or service offered.
5. The Contractor's firm or assets are acquired by or combined with another
company or concern during the Contract period.
6. The Contractor or any substantial subcontractor fails to maintain the standards of
financial responsibility, character, reputation or integrity as determined by the
Lottery.
7. The actions or inaction of the Contractor or Contractor's employees pose a threat
to the security or integrity of the Lottery. In such an event, the Lottery may
terminate the Contract immediately by telephonic notification followed by written
notice.
Should the Lottery give notice of termination for reasons 2 and/or 3 above, the
Contractor shall have seven (7) days after receipt of said notice to remedy the failures
or problems. If the Contractor fails to remedy, the Lottery may order the Contractor to
stop immediately all work and terminate the Contract.


If the Contract is terminated for cause by the Lottery, the Lottery shall be obligated only
for the goods actually delivered and accepted or services actually rendered prior to the
date of notice of termination, less any Liquidated Damages or other damages that may
be assessed for non-performance.
Termination for Convenience The Lottery reserves the right to terminate the
Contract or any part of the Contract at its convenience upon sixty (60) calendar days
written notice. The Lottery shall incur no liability for materials or services not yet ordered
if it terminates for convenience. If the Lottery terminates for convenience after an order
for goods or services has been placed, the Contractor shall be entitled to compensation
upon submission of invoices and proper proof of claim, in that proportion which its
services and products were satisfactorily rendered or provided, as well as expenses
necessarily incurred in the performance of work up to time of termination.
Termination by Mutual Agreement With the mutual written agreement of both
parties, the Contract or any part of the Contract may be terminated on an agreed date
prior to the end of the Contract period without penalty to either party.
2.46 Contractors Responsibilities Upon Termination
After receipt of a Notice of Termination, and except as otherwise specified by the
Lottery, the Contractor shall:
1. Stop work under this Contract on the date, and to the extent specified, in the
notice.
2. Place no further orders or subcontracts for materials, services, or facilities except
as may be necessary for completion of such portion of the work under this
Contract that is not terminated.
3. Assign to the Lottery effective on the date of Contract termination, in the manner,
at the time, and to the extent specified by the Lottery, all of the right, title, and
interest of the Contractor under the orders and subcontracts so terminated, in
which case the Lottery has the right, at its discretion, to settle or pay any or all
claims arising out of the termination of such orders and subcontracts and to
reduce any settlement amount determined by the amount paid for such orders or
subcontracts.
4. Settle all outstanding liabilities and all claims arising out of such termination of
orders and subcontracts, with the approval or ratification of the Lottery to the
extent the Lottery may require. The Lotterys approval or ratification shall be final
for the purposes of this part.
5. Upon the effective date of termination of this Contract and the payment by the
Lottery of all items properly chargeable to the Lottery hereunder, the Contractor
shall transfer, assign, and make available to the Lottery all property and materials
belonging to the Lottery, all right and claims to any and all reservations, contracts
and arrangements regarding this Contract. No extra compensation is to be paid


to the Contractor for its services in connection with any such transfer or
assignment. The Lottery, concurrently with such transfer or assignment, shall
assume the obligations of the Contractor, if any, on all non-cancelable contracts
with third parties for such items.
6. Upon termination of the Contract by the Lottery, the Contractor shall be deemed
to have released and relinquished to the Lottery any and all claims or rights it
may otherwise have to common law or statutory copyright with respect to all or
any part of unpublished material prepared or created by the Contractor in the
course of its performance hereunder.
7. Complete performance of the work that has not been terminated by the Lottery.
8. Take such action as may be necessary, or as the Lottery may specify, to protect
and preserve any property related to this Contract which is in the possession of
the Contractor and in which the Lottery has or may acquire an interest.
All proprietary materials and associated information are considered to be the property of
the Lottery and will be returned to the Lottery upon termination of the Contract.
2.47 Invoicing and Payment
Invoices for commodities and/or services delivered shall be submitted in detail sufficient
for a proper pre-audit and post audit thereof. All invoices for commodities provided
and/or services performed prior to September 30 of any year must be received by
October 10 of the same year to ensure payment. The Lottery reserves the right to
disallow any invoice received after October 10 for commodities provided or services
performed prior to September 30 of that year.
Each Contractor invoice will show details as to charges by Service/Deliverable
component and location at a level of detail reasonably necessary to satisfy the Lotterys
accounting and charge-back requirements. The charges for Services billed on a time
and materials basis shall be determined based on the actual number of hours of
Services performed. Invoices for Services performed on a time and materials basis will
show, for each individual, the number of hours of Services performed during the billing
period, the billable skill/labor category for such person and the applicable hourly billing
rate. Prompt payment by the Lottery is contingent on the Contractors invoices showing
the amount owed by the Lottery minus any holdback amount to be retained by the
Lottery. Correct invoices will be due and payable by the Lottery, in accordance with the
States standard payment procedure as specified in 1984 Public Act No. 279, MCL
17.51 et seq., within forty-five (45) days after receipt, provided the Lottery determines
that the invoice was properly rendered. The Lottery is exempt from Federal Excise Tax,
State and Local Sales Taxes, and Use Tax with respect to the sale to and use by it of
tangible personal property. Such taxes shall not be included in the Contractor prices as
long as the Lottery maintains such exemptions. Copies of all tax exemption certificates
shall be supplied to the Contractor, if requested.


2.48 Non-Exclusive Rights
The right to provide services and/or commodities under the Contract shall not be
exclusive. The Lottery reserves the right to contract simultaneously for and purchase
these services from as many firms as it deems necessary without infringing upon or
terminating the Contract.
2.49 Warranty
The Contractor covenants and warrants as follows:
1. It is lawfully organized and constituted under all federal, state and local laws,
ordinances and other authorities of its domicile and is otherwise in full
compliance with all legal requirements of its domicile.
2. It is possessed of the legal authority and capacity to enter into and perform the
Contract; and the Contractors representative who is executing the Contract is so
authorized by the Contractor.
3. It has been duly authorized to operate and do business in the State of Michigan
and all places where it shall be required to conduct business under the Contract;
that it has obtained, at no cost to the State of Michigan, all necessary licenses
and permits required in connection with the Contract; and that it shall fully comply
with all laws, decrees, labor standards and regulations of its domicile and such
other location where performance may occur during the term of the Contract.
4. It has no present interest and shall not acquire any interest that would conflict in
any manner with Contract duties and obligations under the Contract.
5. The services rendered shall in all respects conform to, and function in
accordance with, the specifications and designs requested in this solicitation.
6. Its performance under the Contract shall not infringe on any patent, copyright,
trademark, service mark or other intellectual property rights of any other person
or entity and shall not constitute the unauthorized use of any trade secret of any
other person or entity.

7. That software provided will be free from any self-help code or unauthorized code.
Self-help code means any backdoor, time bomb, or drop dead device or other
routine designed to disable a computer program automatically with the passage
of time or under positive control of a person other than the State. Unauthorized
code means any virus, Trojan horse, worm or other software routines or
equipment components designed to permit unauthorized access, to disable,
erase, or otherwise harm software, equipment, or data; or to perform any other
such actions.
Section amended 05/09/2007


2.50 Sufficiency and Practices of Operational Staff
The Lottery will conduct periodic reviews with the Contractor regarding the adequacy of
Contractor staff skills, service practices, and headcount. The Contractor is required to
provide quality service and failure to do so must be reflected in additions and
improvements. Inadequate staffing and performance will be reflected in Liquidated
Damages and other remedies available to the Lottery. The Lottery will provide formal
notice of inadequacy and will determine whether a cure period is reasonable prior to
initiating any actions against the Contractor. The Lottery has established thirty (30)
days as a reasonable cure period, unless otherwise negotiated.

The Lottery reserves the right to review, and if perceived necessary, disapprove any
employee of the Contractor who is assigned to the Lottery Contract, either at Contract
inception or during the term or any extension thereof. In addition, the Lottery may
require the Contractor to provide minimum levels of staffing or service to meet the
requirements as set out in the Contract.
2.51 Contractor Responsibilities as Primary Contractor
and in Subcontracting
The Contractor will assume sole responsibility and liability for delivery, installation and
maintenance of all equipment, software and support services offered in its Proposal,
and will directly make such representations and warranties whether or not the
Contractor is the manufacturer, producer or direct provider of the equipment, software
or services.

The Contractor shall select subcontractors on a competitive basis to the maximum
practical extent consistent with the objectives and requirements of the Contract. Any
proposed subcontracts shall be subject to the prior approval of the Lottery. The
contractor is required to replace subcontractors found to be unacceptable. When
awarding subcontracts, the contractor shall ensure that preference is given to products
manufactured or services offered by Michigan-based firms, if all other things are equal
and if not inconsistent with federal statute.

2.52 Taxes, Fees and Assessments
The Contractor shall pay all taxes, fees and assessments upon the System, however
designated, levied or based. The Lottery is exempt from Federal, State and Local sales
and use taxes on the services provided pursuant to this Contract. Such taxes must not
be included in the Proposal prices.


PART 3 SPECIFICATIONS
3.0 Introduction
This section describes the systems and services specifications for the Lottery Gaming
System (the System). Prior to the detailed responses to each paragraph of Part 3, the
Bidder must provide the following summary level responses:
1. Overview. Present an overview of the Systems design and field experience.
2. Flexibility of the System. The System must be flexible, able to grow, and
adaptable to the business needs and rules of the Lottery. Flexibility and
adaptability are critical as the gaming environment can be expected to evolve
over the course of the Contract.
Response Note: Only an overview is required here. These capabilities
should be supported by responses to other RFP items to follow.
3. Certified Equipment. The proposed equipment must have been inspected for
safety and approved by a reputable testing laboratory, and all proposed
equipment must be in compliance with FCC regulations suitable for devices of
the types proposed. Alternatively, if the devices proposed are new models,
and not yet inspected and/or certified, the Bidder must commit to providing a
document showing certification as of the Contract signing.
4. New and Unused Equipment. All proposed transaction processing and
database computers, front-end processors, networking equipment, retailer
terminals and associated peripherals, diagnostic equipment, etc. must be new
and unused. Equipment proposed must be compliant with current electronic
technology manufacturing standards and be of current manufacture by the
Bidder or its suppliers. All hardware models and software versions installed at
start-up must represent the then-current equivalent or better version in case a
proposed offering is phased out or superseded.
Response Note: Any time the Instant ticket product or related functionality is
addressed the Bidder should interpret this to include the Instant product and
the Pull-tab product and related functionality. Any unique requirements
regarding the Pull-tab product should be addressed in the Bidders response.
3.1 Central Configuration
The Lottery requires a configuration capable of handling the immediate and long-range
needs of the Lottery, as defined in the following sections.
Response Note: Configuration block diagrams, down to the component level of
the proposed System, must be submitted with the Proposal. Each hardware and
software item must be identified by manufacturer, product name, and model number, as
applicable. For software, version numbers must be provided, or such will be assumed to


be the latest release at the time of conversion. Any deviations from the suppliers
standard hardware and software products must be disclosed and an explanation
provided. (Installation of any such deviations would require prior approval of the
Lottery.)
3.1.1 Gaming Host Systems at the Primary Data Center
1. Transaction Processing/Database/Games Administration Hosts. All game,
database, and games administration functions for mission-critical On-line and
Instant gaming support must be supported by a protectively redundant
configuration. At the primary data center, each processing complex must
consist of at least two (2) physically separate systems, networked or coupled
for high availability processing and storage redundancy. A component failure
in one primary data center system must not cause a failure in the other
system(s). The Lotterys acceptance test system (3.1.3) will also be housed
at the primary data center.
2. Failover. The remaining system(s) will immediately provide access and
assume the load in case of a failure in one of the systems, without loss or
corruption of any data and transactions received prior to the time of the
failure.
3. Operations Procedures. Procedures for computer operations staff, especially
regarding failure situations, must be straightforward. It is required that in
addition to operator-prompted failover that the System be able to recover from
failures without operator intervention (auto-failover).
Response Note: The Proposal must discuss a typical failure scenario
and describe the procedures that operators would use for corrections.
4. Time Synchronizing. All gaming hosts at the primary data center must have a
time-synchronizing mechanism to ensure consistent time recording and
reporting for events and transactions. Synchronization with an external time
source is required.
5. Disaster Recovery. In the event of irreparable damages at the primary data
center, or of an unplanned, extended abandonment of the primary data
center, the Contractor shall provide at no additional cost those host systems,
facilities, and other components necessary to resume Lottery sales under an
operational scenario using two data centers. Such host systems, facilities,
and other components shall be furnished, installed, and operational within
thirty (30) days after the disaster. Until a permanent primary data center can
be re-established, substitute facilities must meet Lottery-approved
environmental and security measures.
3.1.2 Gaming Host Systems at the Backup Data Center
1. Backup Gaming Host Systems. The Contractor shall provide two (2) or more
remote backup systems that will take over for the primary data center


systems if necessary. Data transferred to and recorded at the remote backup
systems will always contain the most recent transactions, allowing a takeover.
The wide-area-network (WAN) connection (covered in Section 3.3) will
provide routing of gaming transactions from the Lotterys retailers to the
backup as well as the primary data center. Games administration functions
must be available at the backup data center, as well as being available
remotely by communications from the primary data center. The Contractor
shall demonstrate on a scheduled basis that the backup data center is fully
functional by operating in production from that site upon request of the
Lottery.
2. Gaming System Backup Sizing. The remote backup systems must be of the
same processing capacity, configuration, storage capacity and architecture as
the primary data center host systems.
3. Time Synchronizing. Gaming hosts at the backup data center must have a
time-synchronizing mechanism to ensure consistent time recording and
reporting for events and transactions. Synchronization with an external time
source is required.
4. Disaster Recovery. This section has the same specification as Section 3.1.1.5
and the response may reference that response, if identical.
3.1.3 Lottery Acceptance Testing System
A testing system for the Lottery must be provided, and as well any of the above
production systems must be available for testing by the Lottery, with full support from
the Contractor. (The Lottery will work with the Contractor to identify and assess any
possible risks or impacts on production operations.)
1. Lottery Testing System. The Contractor must provide a separate system for
testing by the Lottery. The testing system must be located at the primary data
center and must support testing from Lottery Headquarters. The testing
system must be identical in architecture and capacity to the production
systems provided for all transaction processing, front-end processing, and
games management applications. In the event of multiple failures of active
production systems, the testing system must be able to be updated and
activated for production in case of further hardware or software failure.
2. Lottery Testing Retailer Terminals. At least eight (8) retailer terminals must be
permanently installed at Lottery Headquarters for testing by the Lottery. (At
times the Lottery may require the installation of more retailer terminals for
specialized tests. All these terminals shall be supplied within the baseline cost
to the Lottery.) These terminals must support testing of all features and
options available on the production System; thus these terminals must be
configured in all logical configurations (e.g., retailer, privileged retailer) with all
peripherals that represent configurations at retailer and claim payment
locations.


3. Testing System Communications. The testing terminals must be supplied with
any and all communications mechanisms employed by the Contractors
retailer terminals in the field.
4. Additional Test Equipment. All gaming and distribution system related
equipment is to be available for on-going User Acceptance Testing. (e.g.,
prize payment equipment, pick and pack, label printers, self-service terminal,
etc.)
5. Contractors Development and Test System. The Contractor must not conduct
software development or its own quality assurance activities on any of the
production systems, nor on the Lottery testing system identified above, but
rather must employ separate system(s), located conveniently for the
Contractor.
3.1.4 Internal Control System (ICS) Configuration
All components and maintenance services for the ICS systems shall be provided by the
Contractor. An independent 3rd party ICS vendor shall furnish, install, and maintain the
ICS computer hardware, operating system, and provide technical and maintenance
support services. The primary ICS system will be located at the Lottery and the ICS
backup system will be located at the Contractors primary data center. The ICS must
receive and process a near-real time feed of gaming transactions from the System. The
Contractor will provide the near real time feed from the Lotterys Gaming System and in
the event that the real time transmission fails, the ICS must be capable of using
magnetic or digital media as the source of ICS data.
The Internal Control System will be used to check the Gaming System independently by
re-processing transactions, allowing auditing of the daily transactions, winner
selection/verification, prize payout calculations, sales summaries, and various inquiry
and reconciliation activities.
Refer to Section 3.4.17 for ICS requirements.
3.1.5 Gaming System Quantitative Performance Criteria
1. The System must initially support a network of approximately eleven
thousand (11,000) On-line retailer terminals.
2. The ability to expand the System to accommodate up to fifteen thousand
(15,000) active retailer terminals must be available, should such an
expansion opportunity be desired by the Lottery.
3. The System as delivered must be capable of handling up to one hundred
ten thousand (110,000) sales transactions per minute on a continuous
basis.


4. The System as delivered must be capable of processing up to five thousand
(5,000) combined cash (validation) and cancel transactions per minute,
while selling at the rate above.
5. Each single play (single panel) On-line ticket shall be produced in no more
than four (4) seconds from completion of data entry ("Send" is pressed or
playslip is inserted) to availability of the ticket for the retailer or player.
Faster response time is desirable.
6. Variable length, multi-play (up to 10 [ten] panel) On-line tickets shall be
produced in no more than six (6) seconds after completion of data entry
("Send" is pressed or playslip is inserted) to availability of the ticket for the
retailer or player. Faster response time is desirable.
7. All other transactions (e.g. Instant pack transactions, winning ticket
validations, cancels, and brief On-line and Instant ticket reports, etc.) shall
be produced in no more than five (5) seconds after completion of data entry
("Send" is pressed) to availability of the ticket or report to the retailer. Faster
response time is desirable.
8. Primary data center system recovery in auto-failover mode from a one-
system failure must be accomplished in no more than two (2) minutes while
still maintaining current transactions. Faster recovery time is desirable.
9. Backup data center system recovery from a primary data center failure in
auto-failover mode must be accomplished in no more than ten (10) minutes
without loss of any transactions or interruption of user access. Faster
recovery time is desirable.
10. The System must have the as-delivered capacity in all hardware and
software aspects to accommodate three hundred (300) concurrent Instant
games being in any status (e.g. loaded, distributed, sold, validated, closed
out), an On-line sales day of at least fifty million dollars ($50,000,000) and
an On-line jackpot over one billion dollars ($1,000,000,000).
The response time specifications of this section shall be considered met if greater than
95% of the transactions of particular types comply with the specifications.
3.1.6 Systems Management and Monitoring
Systems management and monitoring capabilities must be available at both the primary
and backup data centers. Systems management tools must create visual and/or audible
alarms to provide warning of problems with host operating system or system hardware
components. The capability must be included to identify whether a failure has occurred
in any of the host systems at the primary or backup data center.


3.1.7 Operating Hours
The ability to accommodate near twenty-four (24) hour-a-day operations is
required by the Lottery (specified as a minimum of 23 hours of sales and validations,
including Instant ticket processing). Current operating hours are 6:00 a.m. through 2:00
a.m. (Eastern Time).
3.1.8 Host Systems Security
Host systems security represents a critical component of the Contractors role in
ensuring the integrity of the System. The following security requirements apply to all
systems in the Contractors primary and backup data center configuration including the
production, backup and testing systems as well as any administrative host systems
supporting games management or other applications operated by the Contractor. See
additional IT security policy requirements in appendix H
1. Systems Access. All systems and users requiring access to a host system
(for any purpose) must be approved by the Lottery. Host systems must also
support controls and procedures that allow the Lottery to audit all system
access.
2. Authentication, Authorization and Access Controls. The Proposal must clearly
identify controls related to user authentication, authorization and access
controls for operating systems.
3. Principle of Least Privilege. All operating systems must be configured to
support only those services required to provide the intended System
functions. System users must be granted access only to the operating system
functions and file systems needed to perform their job functions.
4. Compliance with Security Requirements. Gaming host systems must be
compliant with all systems security and fault tolerance requirements accepted
as operating principles by the Lottery, or promulgated by any multi-
jurisdictional (e.g., Mega Millions) game organization of which the Lottery may
be a member.
5. Protection against Unauthorized Access or Service Disruption. The
Contractor will ensure that host systems are not vulnerable to unauthorized
access. The Proposal must specify the methods by which host systems will
be protected against unauthorized access, viruses, spyware, denial of
service, and other attacks.
6. Other Systems Security Controls. The Proposal must provide any additional
information on other systems security components and controls that will be
implemented including such as the following. The acceptability of all system
security controls will be subject to Lottery approval.
a. Host intrusion protection (e.g., IDS, IPS, ADS) with alert capability
b. Operating system hardening
c. Login and password controls


d. System security log management
e. Primary and failover firewall protection for the computing environment.
Describe rule application for network traffic filtering (e.g., default to deny
all).

f. Patch and policy management for application(s), database(s), server
operating systems, firmware, etc. to protect against vulnerabilities.
Describe any testing procedures that occur for deploying patches.

g. Separation of Lottery network and systems from any other network
systems that reside at the Contractor data center.

h. Remote access security procedures (e.g., identification, authentication,
traceability of actions, notifications) if remote access is used for tasks such
as server administration, etc.

i. Network security for authorized only traffic to the hosting center.

j. The Contractor will provide a network diagram that specifically identifies all
IT infrastructure protections at the primary and backup data centers for the
Lottery Gaming System.

3.1.9 Support of Non-Traditional Gaming Environments

The System must have the capability, as delivered or through upgrades, to support a
population of Class II or Class III gaming devices in selected locations, should the
Lottery become authorized to exercise such options. If the System proposed by the
Bidder can support other non-traditional gaming format or environments, the Bidder
should describe these environments. These items would be subject of future
negotiations, should the Lottery be authorized to exercise them.

3.2 Retailer Terminals
The Contractor is required to supply the Lottery with terminals as specified in this
section. The initial terminal counts are set forth below and the Contractor must be
able to deliver, install, and support additional terminals as ordered by the Lottery
under the terms defined in the Contract.

3.2.1 Retailer On-line Terminal Hardware
At conversion the System will support approximately eleven thousand (11,000) full
function On-line terminals for retailers. Within the baseline price, the Bidder must also
supply additional terminals for training, testing, and spares. As an Invited Option the
Bidder may propose additional terminals in groups of 100.


3.2.1.1 On-line Terminal Identification
No manufacturer or Vendor logo or identification shall be attached. The terminal may
bear a serial number or bar code for maintenance and logistics.
3.2.1.2 Retailer On-line Terminal Features and Functions
Requirements include, but are not limited to, the following retailer operated terminal
features and functions.
A. Size. A compact size is required that will ensure retailer acceptance. If the
terminal is modular, then it is important that the connecting data and power
cables not be unwieldy or obtrusive.
Response Note: The Bidder shall list the dimensions and weight of the
proposed terminal and its peripherals, and shall identify the external
data and power cables required.
B. Retailer Touchscreen. There must be included a retailer touchscreen that will
automatically display the entire transaction being processed, and will
accommodate graphics as well as text.
1. The screen must be capable of displaying retailer messages, reports, and
transactions, including lists of past transactions, using such readability
features as fonts, colors, and screen layouts to provide displays easily
read by the user.
2. There shall be sufficient screen functions to provide for the current Lottery
games, and for reasonable expansion into new games and gaming
options. The colors, locations, graphics, and text labels will be at the
discretion of the Lottery.
3. The screen must be readable from a variety of user distances and viewing
angles, and under various lighting conditions.
C. ID Card Reader. The terminal shall be capable of reading identification cards
using a bar code or equivalent identifier. A password entry will also be
required. The ID cards may be used, for example, by District Sales
Representatives (DSRs), other Lottery staff, or Contractor maintenance
technicians. The ID card shall cause certain capabilities to be made available
to the individual via a menu of options, and shall record on the Gaming
System any transactions which may be performed. Privileges for these
identification cards shall be set through a games management application.
D. Ticket/Report Printer and Stock. A thermal printer or an essentially equivalent
alternative must be proposed. Printers must provide high resolution images
suitable for rendering logos, messages, and symbols, as well as play data,
and must be fast, quiet, and reliable.


Tickets must be highly readable and long-lived under ordinary consumer use
in the Michigan environment (e.g., ticket folding, hot weather, rain, spilled
potables). At all times the ticket and report printer and its stock must be in
compliance with multi-jurisdictional security standards that apply to the Lottery
(e.g., Mega Millions rules).
1. The printer must be capable of producing tickets and reports using a
variety of fonts as approved by the Lottery. Graphics, such as the Lottery
or game logo, or a promotional coupon, must be producible. Multiple
graphics, per game or promotion, must be producible on the same ticket.
2. The printer must be capable of issuing tickets having uniform size or
variable length as determined by the Lottery. Tear off tickets are not
acceptable. Each ticket regardless of length must contain a pre-printed
stock number on the back.
3. The printer must provide stacking for printed tickets which will
accommodate up to fifty (50) tickets printing serially in a multiple ticket
request (bulk buy or repeat).
4. Ticket stock for the printer must be able to be pre-printed front and back
with text, images, and colors, using designs provided by, or approved by,
the Lottery.
5. Thermal ticket stock must withstand at least 170 degrees Fahrenheit
ambient temperature for greater than four (4) hours and must be top-
coated. It is desirable that thermal ticket stock also be back-coated.
6. The Contractor must provide methods to investigate and verify damaged
and altered tickets, and these shall include security features of the ticket
stock.
Response Note: Security features of the Bidders ticket stock and
methods to investigate and verify damaged and altered tickets must
be addressed.
Response Note: Bidders must include one (1) roll of sample ticket
stock with the Proposal.
E. Software Loading. Gaming software (the logic to perform gaming functions
must be software driven) must be available via down-line loading and must
also be available through a local load by a service technician.
1. Gaming software may be either solicited by the terminal (when such
resident software needs replacement) or driven by the central system
(when gaming software enhancements, e.g., new Lottery games, or
corrections, are required).


2. Downloading must not preclude near-24 hour operation of the terminal on
the network. Software must be downloadable in a modular fashion; only
the modules requiring a change shall need to be downloaded. Background
downloading with storage of more than one software version is required,
with scheduling or prompting from central to activate the new version or
return to the prior version. System must support a multicast download
feature.
F. Secure Sign-On. The terminal must prohibit unauthorized use through a
coded sign-on procedure. The System must permit changing of the code
without a service call to the terminal. A password, for security purposes, is not
to be displayed, printed or visible in any manner whatsoever at the terminal.
The password facility must permit multiple levels of secure access, including
Lottery representative, Contractor representative, store manager/owner, and
clerks. This capability could be used to restrict privileged transaction types to
authorized users; for example, store managers (but not clerks) may be able to
display retailer financial reports and monitor transactions by individual clerks.
G. User Interface Design. The design must minimize keystrokes and minimize
navigation through levels of nested screens to ensure utility and productivity
for the user. Each game shall be set up with default play parameters and a
subsequent wager shall use the same parameter setting unless the wager is
altered by the retailer.
Response Note: Examples must be provided in the Proposal to depict
selling a ticket. The final user interface design shall be developed jointly
with the Lottery.
H. Playslip and Document Scanner. There must be a reader able to read player-
completed playslips and other gaming relevant documents.
1. The reader must be capable of scanning playslip-sized documents or
larger.
2. The reader must provide flexibility in terms of its ability to read various
colors and graphics on the playslips, and the latitude it allows for markings
by players. Special markers shall not be needed for the playslips.
3. The reader must provide flexibility in the manner documents can be
inserted, for example, top or bottom first.
4. The reader must allow the retailer to quickly process a stack of playslips.
Response Note: Bidders shall describe the speed and manner in
which the reader is capable of processing playslips.


5. The reader must be capable of reading and processing existing game
playslips.
6. The reader shall be jam-resistant and have a simple mechanism for
immediately clearing any jam or non-readable document.
7. The reader must accommodate documents/forms whose purpose is to
collect information at the retailer location, perhaps from retailers, players,
or field service or maintenance personnel. The Contractor may be called
upon to collect such data and furnish a data file to the Lottery.
8. The reader must accommodate adjustment request forms that allow
Retailers to request adjustments for mis-printed ticket(s).
9. The reader must accommodate a request by DSR for retailer adjustment
for promotional purposes.
I. Random Play Wager. The terminal or system must have a mechanism for
generating one (1) or more random play wagers (quick pick numbers) for any
game as requested by the retailer, keyed entry or via playslip. During
implementation the random number generator mechanism must be certified
by a Lottery-designated testing agency.
Response Note: The Proposal shall describe the algorithms, seeding
process, and any other mechanisms employed to ensure that the
random number generator produces random outcomes.
J . Ticket Serial Numbers. Tickets produced by the terminals must bear a unique
serial number in Arabic numerals and in a code that is readable by the
terminal. The serial number must allow tickets to be unambiguously identified
for the term of the Contract.
K. On-Line Ticket Reader. The terminal must include a reader that will allow
reading of On-line tickets, for validating or canceling a ticket under Lottery-
specified terms. Winners must be able to be validated by manual entry also.
Canceling is currently allowed through the reader only.
1. First read rate is a key factor in the success of the terminal. A first read
rate exceeding ninety-five percent (95%) is mandatory.
2. The ticket reader must default to ticket validation mode when a play ticket
is inserted.
L. Instant Ticket Reader. The terminal must read bar codes, primarily for Instant
ticket processing.
1. The terminal must be capable of validating winning Instant tickets, both
through bar code scanning and manual entry, and supporting other


administrative functions which employ machine-readable codes such as
the interleaved two (2) of five (5) bar code, PDF-417, two-dimensional
matrix bar codes, UPC, and other standards.
2. The Lottery considers the bar code reader's first read rate for validating a
winning Instant ticket as a key retailer satisfaction item. A first read rate in
excess of ninety-five percent (95%) is mandatory. The bar code reader
may not be a pen wand. Other bar code reading technologies, such as
Charge Coupled Device, CMOS, and laser, may be proposed.
3. The terminal must be capable of reading and processing serialized, bar
coded coupons. Characteristics of the coupon bar code shall be similar to
that for Instant tickets.
4. The retailer terminals bar code reader must have the capability to read
different size and shape items (such as POS items, bar coded Instant
ticket packs, On-line ticket stock boxes), and in addition, Instant tickets in
racks. It is desirable that retailer terminals bar code reader be
movable/removable with a means to operate at least eight (8) feet from
the terminal.
5. The terminals reader must allow customer age verification through
reading a drivers license or similar identification using a barcode.
M. Training Mode. The terminal must be capable of operating in a training mode.
Training mode transactions that generate ticket facsimiles shall be marked
"VOID - DEMO - NOT FOR SALE" or equivalent in the body of the ticket.
Training mode at retailer locations must be controllable from the central
system and create a transaction for the central system advising that the
terminal has entered/exited training mode. All retailer-site training
transactions shall be logged to the central system and labeled as training
transactions. Training mode must be capable of simulating all transactions
allowed without updating production files such as the winner file, etc.
N. Self Diagnostics. The terminal must be equipped with self-diagnostics and
indicators that enable the retailer and service technicians to monitor the
operating status of the terminal. It is desirable that terminal diagnostics and
internal status conditions can be initiated and observed remotely by
technicians or hotline operators.
Response Note: Bidders must submit a listing of all such indicators and
operator messages available.
O. Transaction Integrity with Consumables Fault.
1. The terminal must provide a method of preserving the integrity of the
transaction when a printer fault, misprint, jam, or end-of-ticket-stock


condition occurs. The Proposal shall describe how this condition is
handled.
2. The terminal must return to service after problem resolution without
notable delay or disruption for the retailer.
P. Peripheral Slots/Ports. The Lottery anticipates the possibility of using various
peripheral attachments for the retailer terminals. Flexibility to enhance the
terminals in such a manner is an important characteristic. In addition to
interfaces for terminal features and peripherals identified in this RFP as
required upon delivery, there must be a minimum of four (4) additional, initially
unoccupied slots/ports for other peripherals. These ports shall be physically
or logically secured when they are not in authorized use.
Q. Environmental Fitness. Bidders shall describe how the terminal is suitable for
the conditions of Michigan retailer locations: dedicated 110V 15 amp electrical
circuit; small counter top spaces; difficult environmental conditions such as
heat, cold, moisture, dust, grease, spilled liquids, and operator abuse.
Response Note: Bidders must describe electric requirements at Retailer
locations.
R. Power Cord. Each terminal must come equipped with a power cord at least
ten feet (10') in length, with a three-prong grounded plug.
S. Memory and Storage.
1. The Lottery requires the ability to add games and to insert promotions
which may consume terminal memory. It is required that the terminal as-
delivered provide at least a fifty percent (50%) margin of available game
and promotion memory for future games and promotions as that
anticipated to be consumed at conversion time by the current Michigan
games.
2. The terminal must have sufficient memory to support at least three
hundred (300) concurrent Instant games using up to three (3) different bar
code algorithms without an upgrade of terminal resources.
3. The terminals memory must be upgradeable.
Response Note: The Bidder shall describe the extent of this
capability.
4. Should AC power to the terminal be interrupted, the gaming software
(stored in the terminals memory) must not be destroyed, modified or lost
for a minimum period of one (1) week from the occurrence of such failure.


T. Casework Color. The casework of the terminal and any peripherals must be
provided in a color selected by the Lottery among options available, using a
manufacturers standard color chart. The Lottery requires a durable and
uniform color.
Response Note: The Bidder must identify whether the color is a surface
coating or molded throughout the casework.
U. Sound Generator. The terminal must be capable of producing tones and high
fidelity audio when certain transactions or functions are performed, or
specified events occur. The use of sounds must not unduly delay the
transaction processing time. The Lottery will define to the Contractor which
functions shall trigger this feature. It is required that the terminal be capable of
supporting auxiliary speakers as a peripheral.
V. Broadcast Messages. Messages from the central computer must be received
and displayed to the retailer. If the terminal is not powered on or
communicating with the central system at the time of broadcast, the central
system will ensure that the terminal receives the message immediately upon
sign on.
W. Large Dollar Transaction Verification. The terminal screen must display a
message for each large dollar transaction that provides an option to the
retailer to stop or take other appropriate action before completing the
transaction. The Lottery will define the default amount of a large dollar
transaction, by game, and must approve the terminal messages.
X. Previous Transaction Listing. The terminal must be able to display and print
the last twenty-five (25) transactions accepted by the System, upon request of
the retailer, in order to compare printed tickets with registered tickets. In
display mode all the past transactions need not appear on the same screen at
once. Display screen will not clear of last transactions due to keyboard or
total key function.
Y. Cancellations. The terminal must support ticket cancellations for those games
that permit it. Cancellations must be governed by a set of parameter-driven
rules as established by the Lottery.
Z. Validation Limits. The terminal must not cash wins in excess of that permitted
by Michigan regulations and set as a parameter by the Lottery. For larger
wins the terminal must return a response as defined by the Lottery, permitting
the win to be claimed.
AA. Branding. As an Invited Option the Bidder may propose a retailer terminal
capable of branding tickets with a programmable message. The
circumstance and messages for branding tickets will be worked out in detail
between the Contractor and the Lottery. For example, when a ticket is
cashed or canceled, the ticket should be read by the terminal and branded


accordingly. Additionally, tickets that are non-winning tickets may be
submitted by players for checking, and these could be branded as non-
winners.
BB. Terminal Case Design for Safety. The terminals design must partition
electronic and electrical components from access by the retailer when
conducting retailer tasks to operate or maintain the terminal (e.g., changing
the paper or cleaning the reader window). Sharp and protruding edges must
be minimized.
CC. Last Transaction Display. The terminal must provide a mechanism for
display of the last transaction of each type, including last wager, last cancel,
last winner validation, last report, etc., as selected by the retailer.
DD. Alternative Media Reader. As an Invited Option, the Lottery will consider an
alternative reader capable of handling smart cards, magnetic stripes, RFID,
or alternative media. Among other functions this may be employed as a pre-
paid gift card reader, but if so the cost and obligation of obtaining or
producing the cards would be negotiable.
EE. Cash Drawer Interface. The retailer terminal must support an RS-232 (or
alternative) interface to a conventional commercial cash drawer.
FF. Terminal Addressing. Each terminal must be addressed from the central
systems using IP-based addressing.
GG. Clerk-Associated Transaction Reporting. The System must provide a
mechanism that associates a specific clerk with a set of transactions
produced by a retailer terminal. The System must produce reports
summarizing activities by specific clerks. The Proposal may employ any of
several methods for clerk identification, including but not limited to, multiple
sign-ons, swiping an ID card, and entry by touchscreen.
3.2.1.3 Retailer On-line Terminal Attachments
A. Player Message Display. At conversion the System must include and support
eight thousand five hundred (8,500) player displays for deployment at retailer
locations. The purpose of this display is to gain the attention of, and inform,
potential players. Any such display must be clearly visible from fifteen (15)
feet by players. Units must have the capability of being "programmed" using a
games management application. As an Invited Option the Bidder may
propose additional displays in groups of 250.
Due to the wide diversity of available space in retailer locations, the player
message display unit must be capable of resting on the counter beside the
terminal, or being mounted on or suspended nearby the terminal. The exact
location of the player message display unit will be decided by the Lottery in
conjunction with the retailer on an individual retailer basis to optimize visibility.


B. Player Transaction Display. The Proposal must include a player transaction
display for each On-line retailer terminal. The player transaction display is a
discreet, individual-oriented display for the player conducting the current
transaction. This display must communicate the amount of the current
transaction, and notify the player that he or she has a winning ticket. In the
event that the ticket is a winning ticket, an appropriate message must be
displayed. When not displaying a transaction, the player display must provide
an advertising or informational message. The Lottery must approve the
display design and message presentation to ensure functionality and player
privacy. The Player Transaction Display must be connected to the retailer
terminal in a manner that is non-detachable by the retailer.
C. Self-Service Ticket Checker. At conversion the System must include and
support an On-line terminal peripheral at eleven thousand (11,000) retailer
locations that allows players to check their own On-line tickets for winners.
These devices will be located either at the play stations or otherwise far
enough away from the retailer terminal to minimize activity or traffic at the
retailer counter. The Bidder must discuss advanced features such as player
self-checking of Instant tickets, or other player assistance features. As an
Invited Option, the Bidder may propose additional ticket checkers in groups
of 250.
D. Flat Panel Advertising Display. As a Specified Option the Proposal must
include an additional display attachment, for the retailer terminal that is
suitable for displaying advertising and game information to players within the
store. Proposal would include 1,000 such devices at start-up. Such a display
would also be ideal for an Amber Alert broadcast. Characteristics that the
Lottery envisions include: flat panel, minimum 15 inch diagonal, flexibility of
placement within the retail establishment, visibility from ten (10) feet or
greater, and sound available through auxiliary speakers or through the
terminal. The terminal must be capable of storing sound, static image files,
and animations of up to one (1) minute. The stored information should be
downloaded in the background over the retailer terminal network, as well as
being loadable at the retailer location.
Response Note: Bidder must describe number of alternating image files
and animations that the will be supported.
E. Cash Drawers. As an Invited Option the Proposal may offer cash drawers, in
groups of 250, that connect to the retailer terminals and are triggered to open
by the retailer terminal.
F. Store Signage. As an Invited Option, the Proposal may offer advertising
signage, in groups of 250, for presentation anywhere in the store, especially
in the front window. The signage must be visible and legible from at least one
hundred (100) feet, bearing a fixed logo and/or advertising message designed
in conjunction with the Lottery. Neon or other internal lighting technologies


may be used, since the sign must be clearly visible for indoor, daytime, and
night-time usage.
G. Wireless Peripherals. As an Invited Option, the Proposal may contain a
mechanism for supporting terminal peripherals around the store on a wireless
basis, in groups of 250. Any proposed wireless capability should operate only
at short range, nominally on the order of up to one hundred fifty (150) feet.
Radio signals must be designed so as not to interrupt or interfere with any
electronic devices operated otherwise in the store or carried by store
customers or employees.
H. Club Game Monitors. The Lottery currently operates a Club Keno game with
drawings every four (4) minutes which requires the use of monitors to display
the winning numbers. At conversion the System must support 6000 color
monitor/receiver TVs with mounting brackets; at a minimum of 25-inch screen
size. The Contractor will be required to supply and install monitors and
mounting brackets as required of equal or greater capability. The location
and number of monitors per retailer location will be determined by the Lottery.
The Contractor should allow enough expansion capability within each retailer
location to connect three (3) additional units. The Contractor will be
responsible for the maintenance of all monitors under the same service level
as stipulated for retailer terminal maintenance. As Invited Option, the
Proposal may contain additional Club Game monitors, in groups of 100. As
an additional Invited Option, the Proposal may offer upgraded monitors,
such as flat-panel monitors, in sizes starting at a minimum of thirty-two (32)
inches. These additional monitors would be added over the life of the
contract if needed. Section amended 05/09/2007
3.2.2 Multiple Terminals per Retailer
The System must permit, and the Contractor must support, more than one terminal
temporarily or permanently installed at a retailers location. Approximately three hundred
Lottery Retailers have more than one terminal. The System must be able to account for
individual and multiple terminals as part of a single retailer account. At times of large
jackpots, or for promotions, the Lottery may require temporary installation of additional
terminals at a single retailer location.
3.2.3 Specialty Retailer Terminals
The Lottery is aware that certain needs might be better served by alternatives to the
conventional retailer terminals.
1. Self-Service Kiosk On-Line Games Terminals. The Lottery requires 200 self-
service kiosk terminals that sell On-line games and validate tickets for
additional play credits up to a Lottery-defined parameter. As an Invited
Option the Bidder may propose additional self-service terminals in groups of
100. Kiosk On-line terminals will meet the requirements of the retailer
terminals in all areas where applicable. These terminals will have a touch-
screen and a bill acceptor.


2. Alternative Retailer Play Devices/Mechanisms. As an Invited Option, the
Lottery may consider terminals, peripherals, or integrated software that
facilitates or permits in-lane play, play-at-the-pump, play-at-the cash-register,
or other opportunities for sales of tickets, with a simplified set of features
compared to the conventional retailer terminal.
3. Privileged Cashing Terminals. The Lottery currently has five regional claims
centers and a claim center located at Lottery Headquarters in Lansing. In
addition to the claim center at Lottery Headquarters, three (3) terminals at
Lottery Headquarters must be furnished for cashing high-end jackpot winners.
In total, seven privileged terminals must be equipped with a Contractor-
supplied hardware and software configuration that supports self service ticket
checkers (Section 3.2.1.3 C).
4. Instant Ticket Vending Machines (ITVMs). As an Invited Option the Bidder
may propose ITVMs in groups of one hundred (100) and five hundred (500).
The Bidder shall propose functionality of the ITVM and provide detailed
specifications on proposed devices, along with photographs, diagrams, and
user guides. These must not be dual-function Instant and On-line selling
machines, but Instant only. Each machine must be implemented with a
continuous data communications connection to the System. Bidder should
describe how connectivity will be utilized in order to ensure optimal
performance of the devices. Any ITVMs proposed must have a minimum of
twenty-four (24) bins and must support tickets of varying dimensions. At a
minimum, ITVM specifications must meet all requirements listed in Appendix
I. Additional functionality may be offered.
5. Combined Self-Service On-line and Instant Terminals. As an Invited Option,
the Bidder may propose kiosks that combine the services of an Instant ticket
vending machine and an On-line self-service terminal. These terminals shall
be network connected to the central system. All On-line games shall be
supported through a touch screen interface. There shall be at least twenty-
four (24) bins for Instant tickets. There must be a bill acceptor that permits all
legal US tender. As a further Invited Option, the combined On-line and
Instant kiosks may provide a wireless connection to the Lotterys network
device, maximizing flexibility of location in the retailer establishment. At a
minimum, these devices must meet specifications listed in Appendix I in
addition to the addition of On-line ticket sales functionality.
3.2.4 Additional Retailer Game Support Items
The Lottery may consider certain other items that enhance customer awareness and
facilitate sales.
3.2.4.1 In-Counter and On-Counter Instant Ticket Dispensers
As an Invited Option, the Proposal may contain examples of dispensers for Instant
tickets. Both in- and on-counter dispenser types are invited. Proposals containing such


a dispenser option must be clear on the physical dimensions and capacities of the
offered items.
3.2.5 Retailer Terminal Security
Retailer terminals must exhibit a high degree of security as a device in a location with
public access. The local operating system and applications must be hardened so that
they cannot be co-opted for other usage besides lottery operations. The case must be
resilient to disassembly except by an authorized service technician.
Response Note: The Bidder must describe the following and all other applicable
security features for all proposed retailer terminal types.
1. Embedded Operating System Security. For retailer terminals utilizing
embedded operating systems, the Proposal must provide information
regarding the security of this component including but not limited to operating
system hardening processes, when and how patches are applied to address
critical security vulnerabilities and identification of other software or controls
utilized to protect the device.
2. Software Authentication. The Bidder must describe how the Retailer terminal
software cannot be compromised.
3. Secure Transmissions. All data communications from the retailer terminal
devices to the central gaming host systems must be encrypted. Protected
information includes but is not limited to plays, validations, security codes,
reports, and downloaded software. Commercially available encryption
mechanisms are required and must be approved by the Lottery and any multi-
jurisdictional associations of which the Lottery may be a member.
4. Compliance with Security Requirements. Terminal communications must be
compliant with all security requirements related to encryption and hardware
authentication accepted as operating principles by the Lottery or promulgated
by any multi-jurisdictional (e.g., Mega Millions) game organization of which
the Lottery may be a member.
5. Protection against Unauthorized Access or Service Disruption. The
Contractor will ensure that terminal operating systems are not vulnerable to
unauthorized access. The Proposal must specify the methods by which these
systems will be protected.
Response Note: The Proposal must provide any additional information on
any other terminal security components and controls that will be
implemented including host-based intrusion protection, terminal log
management, etc. The acceptability of all terminal security controls will be
subject to Lottery approval.


3.3 Communications Networks
As a Specified Option, The Bidder must propose a design for a telecommunications
network to serve the Lottery. If the Specified Option is exercised by the Lottery, the
Contractor is responsible for seeing that the design is implemented and operated in
compliance with RFP specifications, including the responsibility for network
management. If the Specified Option is not exercised by the Lottery, the Contractor
must interface to the edge device provided by the telecommunications network vendor
to support gaming terminals. If the Specified Option is not exercised by the Lottery, the
Contractor must adhere to the specifications in Section 3.3 to the extent possible with
the telecommunications provided by a third-party vendor.
The Lottery places no restrictions on the Bidder contacting AT&T, the current principal
telecommunications carrier, with any network questions.
3.3.1 Network Design and Implementation
The Bidder is provided wide latitude as to the topology and technologies proposed for
the network.
Response Note: If multiple technologies are employed in the design the Bidders
Proposal must make clear the distribution of different technologies across the
retailer population. All Bidder-provided configuration items (that is, those not
within a carrier cloud ) must be identified by manufacturer and model number.
The design must cover at a minimum:
1. Retailer Network. Primarily the design must provide end-to-end connectivity
for On-line retail terminals to the data centers. During the daily sales period,
the retailer terminals must be on-line to the Gaming System. In addition, since
transactions must be processed at both data centers, there must be links
between retailers and both the primary and backup data centers.
2. Inter-Site Connections. Since transactions must be logged at both data
centers on a real-time basis, the Contractor must provide inter-site links for
control and data flow.
3. Games Management Network. The design must also accommodate other
connections for games administration by the Contractor and by the Lottery.
This includes connections from the primary and backup data centers to the
Lottery Headquarters for management terminals and to the ICS.
4. Instant Ticket Warehouse. The Instant ticket warehouse must be capable of
supporting order distribution and inventory management operations through a
connection to the System.


5. Claim Centers. Network must support up to nine (9) separate terminals
located in claim centers around the state. Four (4) terminals are currently
located at Lottery Headquarters, five (5) terminals are located in regional
claim centers.
6. Data Center Local Area Networks. Within the data centers there will be
multiple LAN connections dependent upon the Contractors configuration.
Also, a dedicated connection to the Lottery LAN must be provided. (This
implementation is required as part of the baseline System.)
7. Retailer In-Store Installation. Should the Contractor employ a communications
carrier whose demarcation at the retailer premises is not near the retailers
prescribed location for the lottery terminal, it is the Contractors responsibility
to provide the inside wiring or other telecommunications mechanism to reach
the terminal. This connection must be maintained if the retailer adjusts the in-
store design.
Other network connections may be relevant depending on the Bidders proposed
design.
3.3.2 Network Design Features
Communications facilities must be designed with monitoring, redundancy, diversity, and
security features to reduce the possibility that a disruption could impact the network and
the Gaming System.
1. Fault Tolerance. The Proposal must contain an analysis of the proposed
configuration with regard to single points of failure, major points of failure
afflicting a large proportion of the network, and bottlenecks. (For example,
these could include single telephone company central offices, trunk circuits,
satellites, or satellite ground stations.) The network design must provide
for redundancy and diversity that limits the impact of outages on large
numbers of retailers, aggregations of retailers, or retailers with multiple
terminals.
2. Fault notification. The host processor, front-end processor, retailer terminal,
and/or diagnostic equipment must be able to notify the network monitor or
System monitor of significant transmission failures or outages as soon as
possible after occurrence.
3. Secure External Transmissions. All data communications external to secured
facilities must be encrypted. All data must be encrypted from point of
transmission to point of receipt, including any data transmitted directly from
the gaming central systems to the remote backup system, to Lottery regional
offices and other remote locations. Protected information includes but is not
limited to plays, validations, security codes, reports, claimant information from
prize payment system and downloaded software. Data should be stored
encrypted. Commercially available encryption mechanisms are acceptable if


approved by any multi-jurisdictional associations of which the Lottery may be
a part, and if approved by Lottery.
4. Protocol for Incomplete Transactions. On incomplete or unresolved
transactions between the host systems and the retailer terminals, there must
be mechanisms for reconciliation. These may include retries, logging for
reporting, and error messages to the retailer, System operators, and Lottery.
5. Non-Responding or Failing Terminals. If the central system finds a terminal
that is not responding within a set number of retries or within a reasonable
time window, the terminal shall be logged as not responding. The System
shall make allowance for servicing of all other terminals on the network
between retries of the terminal not responding. Failing terminals shall not
preclude communication with other terminals. Non-responding/failing
terminals shall be apparent to a network monitoring application.
6. Communications Outages: In the event of a communications disruption
between central and any terminal, the System shall continue to attempt to
service the terminal until the problem is resolved or the System is shut down
for end-of-day processing.
7. Commercially Available Communications Protocols. To enhance the open
systems aspect of the System to introducing changes and improvements, it
is required that communications protocols below the applications layer be
widely used, commercially available protocols.
8. Connection to Systems and Networks Not Dedicated/Private. Any connection
made between the System that processes games transactions, and any other
systems or networks that are not private and/or dedicated to Michigan gaming
transaction processing (such as the Lottery administrative system and the
Contractors administrative support system and development/QA system),
must be effected through devices that detect and block or filter out
unnecessary and unauthorized traffic. Traffic must be supported only from
authorized nodes. Software transfers must be secured. The Bidder must
describe how it will ensure that any such connections are not vulnerable to
unauthorized access, malware or denial of service attacks, and similar
security threats.
9. Network Device Access. All systems and users requiring access (for any
purpose) to the network devices utilized in supporting gaming operations
must be approved by the Lottery. Network devices must support controls and
procedures that allow the Lottery to audit related network device access.
10. Principle of Least Privilege. All networks related to gaming operations must
be designed with this principle in mind. Network access controls must be
utilized to allow only the required network services needed by specific hosts
or networks to be routed.


11. Bandwidth. The Lottery anticipates a high bandwidth retailer network that will
support rapid software and data downloads as well as transaction processing.

Response Note: The Bidder must identify the up- and down- bandwidth
provided to retailer terminals by each communications medium proposed
for the System. If there are concentration points for data flows (e.g., a
satellite transceiver, a single backhaul trunk) then the Bidder must estimate
the aggregate bandwidth available to carry the traffic.

12. Protocol. The network must employ IP (Internet Protocol) for communications
between the retailer terminals and the host systems.

13. Strong Security. Network security shall be given a high priority and must
employ stringent security mechanisms. Any remote non-retailer terminal
connection requires Lottery approval. Connections to other remote systems
and terminals must be protected by firewalls, intrusion detection systems,
encryption, secure shell (SSH), router access control lists (ACL), or other
Lottery-approved means.
Response Note: The Proposal must provide any additional information on
the network security components and controls that will be implemented for
the System LANs and the proposed WAN connections including firewall
and Intrusion Detection System protection, network access controls,
network device hardening, login and password controls, network device
log management, etc. The acceptability of all network security controls will
be subject to Lottery approval.
3.3.3 Network Administration Services
As part of the baseline Contract, the Contractor will be responsible for network
monitoring and management. Network administrative services must include:
1. Provisioning. Under the Contract the Lottery will identify new drops along with
any moves or deletes. After the order is placed, further monitoring and
install/de-install actions shall be performed or supervised by the Contractor.
2. Configuration Management. Configuration changes and asset records must
be managed. This includes an inventory of Lottery network resources and
their operating parameters. Change management control procedures and
online storage of network component configuration files are required.
3. Carrier Interface. The Contractor must interface with the communications
carriers, the retailers, and the Lottery to schedule installs and improve service
delivery. The Contractor will be responsible for working communications
problems to resolution through the common carriers/external suppliers.


Response Note: The Proposal must describe this process, including
escalation procedures with the telecommunication carrier(s) and with
the Lottery.
3.3.4 Network Monitoring and Fault Resolution
1. Network Monitoring System. Communications test and monitor capability
must be available at both the primary and remote backup data center sites.
Network monitoring tools must be able to interface and analyze protocols,
view communication transaction data for analysis, and create visual and/or
audible alarms to provide warning of problems. The capability must be
included to determine whether failure has occurred in the equipment at the
central or remote backup site, within the wide area communications network,
or at the retailer terminal level.
2. Network Event Recording. Communications test and monitor equipment must
have recording and recall/reporting capability. The standards for the types of
events recorded and the period of retention will be developed jointly with the
Lottery. The Contractor must provide reports in an agreed upon format to
allow the Lottery to evaluate communications network performance.
3. Network Monitoring Protocols. It is required that network monitoring tools, and
the networked devices provided by the Contractor, employ a standard
protocol to facilitate monitoring all along the communications path. This
capability must be extended to new network devices readily should they be
introduced.
4. Communications Expertise. Communications technicians trained in the use of
test and monitor equipment must be present at the active (retailer terminal-
serving) system site whenever the Lottery Gaming System is operational and
whenever the Lottery requests such support for test purposes.
5. Hotline Monitoring of Retailer Network. Hotline equipment must have a
display of terminal status allowing the hotline operator to see if a terminal is
down, if a retailer is signed on or not, and other relevant diagnostic
information.
6. Service Level Agreement. The Bidder must propose a Service Level
Agreement for retailer network service. Network availability from the retailers
perspective, as measured on a monthly basis, must be a minimum of 99.7%
of games operation hours. The Service Level Agreement may commit to a
higher level of monthly availability, and that is desirable in this RFP. If the
Proposal commits to a higher level of network availability, the Contractor will
be held to that standard for the corresponding Liquidated Damages. See
Appendix C for Liquidated Damages as a result of Communications network
outages.


3.3.5 Advanced Communications Technologies
In addition to the network Specified Option, as an Invited Option, the Bidder may
identify advanced telecommunications options that may further improve the reliability
and/or performance of the network, beyond the baseline design. This option could be
relative to retailer last mile connections, backbone communications, primary-to-backup
site communications, and/or gaming network to Lottery communications. The Bidder is
encouraged to propose a range of technologies that may advance the Lottery network
infrastructure while continuing to provide reliable, cost effective service to Lottery
retailers.
Response Note: The Bidders discussion of any proposed advanced technology
must address key factors such as security, availability of the service, reliability,
maintainability, open system standards, and performance.
3.4 Software Controls and Data Management
Response Note: Any time the Instant ticket product or related functionality is
addressed the Bidder should interpret this to include the Instant product and the
Pull-tab product and related functionality. Any unique requirements regarding
the Pull-tab product should be addressed in the Bidders response.

3.4.1 Gaming Software Security and Control Features and
Functions
In addition to selling and cashing tickets, the System must provide particular features
and functions to meet requirements for secure and efficient operation.
1. Logging. All game processing activities are to be recorded immediately on
electronic media on multiple hosts. Such game processing activities at a
minimum include sales, cancels, cashes, validation attempts and other play-
related transactions, any other retailer terminal commands, error conditions,
operating system entries, job console entries, and any changes using the
games management applications.
Requirements include, but are not limited to:
A. The Gaming System back-up, recovery and redundancy features can be
supported, using log files for re-processing, if necessary.
B. The Gaming System including outages and recovery events can be
audited and checked for appropriate usage and freedom from error. There
must be a strict relationship between tickets printed, tickets registered in
the log files, and ticket transactions forwarded to the ICS.
C. Authorized Lottery personnel shall be able to research transactions and
operations when required. The transaction log will include detailed records
of sales, validations, canceled On-line tickets, rejected validation inquiries,
terminal outages, system events (e.g., takeovers by the backup system),


etc. Reports on transaction log entries must allow standard queries and
sorts. At least seven (7) days transaction detail must be available on-line.
It is desirable that research into transactions up to one (1) year old not
require the loading of archived physical media.
D. The transaction logging process shall include periodic checkpoints
including significant totals (counts and amounts) for all games.
E. The Lottery requires a near real-time feed of the transactions to the
Internal Control System (ICS). The near-real time feed shall include
periodic checkpoints to ensure that the ICS file is complete at that time
and the integrity is verified. In addition, the Contractor must be able to
provide audit files to the Lottery within five (5) minutes following the close
of sales for any game, (except quick draw games), and prior to the
drawing for that game. A final audit file for the day must be available to the
Lottery immediately after close of the Lottery Gaming System each day.
F. The Contractor will provide the Lottery with any software necessary to
interpret or decrypt any proprietary or unique ICS (audit) record formats,
resulting in ASCII format.
2. Unique Transaction Number. The serial number assignment method used by
the Bidder must account for the fact that transactions resulting from
unclaimed winners, from subscription sales, and possible other causes may
reside for extended periods in the System. It is required that the ticket serial
numbers be unique over the term of the Contract.
3. Transactions Protected. The System must ensure that transactions cannot be
tampered with, including but not limited to the log files and validation files.
The Proposal shall evidence the Bidder's methods and procedures that
prevent tampering with the System. The Lottery reserves the right to review
any and/or all System narratives, source program listings and operational
procedures to ensure data and System integrity.
4. Tickets Not Duplicated. Tickets must not be able to be duplicated on terminal
equipment.
5. Liability Levels. The Lottery shall be alerted immediately when sales of a
number in a fixed payout game reach a warning level, and then reach a
specified liability level. The System, through a games management
application, must provide a payoff figure and a payoff liability, whenever
requested by the Lottery. The System shall automatically suspend sales of
any number and notify the Lottery when the liability limit is reached. If
automatic suspension is utilized, the Lottery shall have override capability.
6. Operator Console Records. All operator commands executed by the System
and any System warnings or problem messages shall be placed on a non-
volatile medium (for example, on a write-once medium). This log must be


provided on magnetic media or as an electronically-transmitted file to the
Lottery, which the Lottery may at its option process and review for auditing
purposes.
7. Retailer Spoofing. The System must ensure integrity wherein no action, either
operational or by tampering, can permit duplicate or unauthorized terminal
addresses to be established. In all cases, authorized terminal identification
must be ensured.
8. One-Time Cashing. A winning ticket must not be able to be cashed more than
once. As a desirable feature the Lottery would like the ability to place winning
online tickets on hold which would suspend validation of a winning online
ticket and provide a report of tickets on hold.
9. Software Checksums. Checksums or standard hash algorithms must verify
integrity and authenticity for executable programs on the gaming host
systems, front-end processors, network equipment, administrative systems,
and retailer terminals for auditing purposes. This requirement applies also to
the development and quality assurance systems. Checksum information will
be provided to the Lottery upon request. The Contractor must maintain control
of software distribution such that systems and terminals are not able,
inadvertently, to run inappropriate versions of the software.
10. Transaction Storage Redundancy. Every transaction of the terminals must be
received in at least three (3) systems before authorization to print a ticket,
including the gaming transaction system handling the transaction, a local
backup transaction system capable of recovering for a failure of the system
processing the transaction, and a remote backup transaction processing
system.
11. Game Monitoring. Real-time monitoring of gaming transaction traffic and
system utilization must be provided. The Contractor must maintain these tools
to correspond with the latest Gaming System changes and with industry-
available improvements. The Lottery shall receive immediate notification of
abnormal System operations and their causes, such as validation problems,
communication difficulties, computer downtime, etc.
12. Transaction Simulation. A transaction simulator program shall be supplied by
the Contractor to generate all types of transactions (terminal and System) in
optional percentages for use in testing software quality and performance. The
program must accommodate simulated Instant ticket validations against a
validation file as part of the transaction mix. The program must allow manually
entered transactions, including Instant ticket transactions, to mix with the
program-generated transactions. It is desirable that the simulator can inject
transactions external to the transaction processing hosts, front-end
processors, firewalls, and switches of the System.


13. Secure On-Site and Off-Site Storage. The Contractor must provide secure on-
site and off-site storage of critical files, software, and back-up data, subject to
approval of the Lottery. Stored materials retention shall follow a schedule
negotiated with the Lottery. Media stored in archives must be checked and/or
exercised periodically to ensure physical integrity. At the Lotterys direction,
the Contractor may be directed to restore a backup file to a test system to
ensure viability.
14. Archives of Files and Configuration Data. The Contractor must use
operational practices through report balancing and reconciliation to ensure
that current data files and archived backup copies are valid. This is
particularly important for validation files and future plays files where recovery
by reprocessing large volumes of aged transactions may be impractical. The
Contractor must also maintain configuration management files that allow
System configurations to be restored.
15. Dynamic Pools. For all matrix-type games, the Contractor must maintain
dynamic pools for the current draw, and dollar summaries for all plays for all
future draws on sale. The Contractor must also maintain dynamic pools for
the current draw and future draws for the numbers-type games. The total
dollars played by game, by play type, and bet type must be maintained for all
future draws. The current day's pools must include all current day's sales as
well as advance day sales for that draw.
16. Ticket Stock Tracking. Ticket stock is delivered to retailers in cartons having a
bill of lading. Each roll inside is to have a unique bar code allowing the ticket
stock to be received at the retailer terminal. Ticket stock tracking shall permit
returns, re-issues, and destruction of stock, as appropriate, by authorized
users. Ticket stock activity reports will be required to track erroneous ticket
stock activity. The ticket stock tracking information shall be delivered from the
ticket stock printer directly to Lottery Security, using a method of secure
electronic delivery as prescribed by the Lottery. The Contractors technician,
by virtue of delivering ticket stock as a consumable, will be permitted to know
the carton numbers, but not the contained roll numbers. The Contractor must
provide to Lottery any hardware and software necessary to store, maintain,
inquire of, or interpret this information. There must be a backup for this
capability at the remote backup data center.
17. Dual Security System. The retailer terminal must generate a unique number,
aside from the System-logged transaction serial number, that can be used to
link winning tickets to selling terminals. This "dual security" approach must be
acceptable to any multi-jurisdictional associations of which the Lottery is a
part or becomes a part. This application must be under the physical and
operational control of Lottery Security. The Contractor must provide any
hardware and software necessary for the Lottery to decrypt dual security
numbers. The methodology must avoid retailers having to save sign-on slips
or other materials, and must preclude Contractor staff from decrypting the


dual security number. The use of public key encryption techniques is
required.
18. Anomalous Condition Reporting. The System must be capable of displaying
and reporting anomalous conditions that may indicate operational problems or
attempts at fraud. This capability must include, but is not limited to, the ability
to report a terminal with anomalous and excessive transactions (such as
sales, cancels, and log-in attempts), attempted cashes of stolen tickets,
unusual console log entries, unusual transaction journal entries, and systemic
events such as no sales for a game scheduled to be operational. The
Contractor must provide functionality to track a record of these events by
dedicated printer installed at the Lottery or other method the Bidder may wish
to describe.
19. Incomplete Transaction Protocol. On incomplete or unresolved transactions
between the host systems and the retailer terminals, there must be
mechanisms for reconciliation. These may include retries, logging for
reporting, and error messages to the retailer, System operators, and Lottery.
20. Non-Responding or Failing Terminals. If the central system finds a terminal
that is not responding within a set number of re-tries or within a reasonable
time window, the terminal shall be logged as not responding. The System
shall make allowance for servicing of all other terminals on the network
between re-tries of the terminal not responding. Failing terminals shall not
preclude communication with other terminals. Non-responding/failing
terminals shall be apparent to a network monitoring application.
21. Communications Outages. In the event of a communications disruption
between central and any terminal, the System shall continue to attempt to
communicate with the terminal until the problem is resolved or the System is
shut down for end-of-day processing.
22. Instant Ticket Information Protection. Instant ticket information and validation
data must be protected from unauthorized access during the period beginning
with ticket manufacturing, through the period where tickets are being
distributed, sold and validated, and ending when the game is no longer active
(unavailable to the public).

23. Randomizer Certification. At the outset of the Contract and at least every two
(2) years thereafter, the Contractor must have all the randomizers certified, at
a laboratory selected by the Lottery, and at the Contractors expense.

24. Cancel Control. The system must support the ability to automatically and
manually enable or disable the cancel function based on the retailer
exceeding a number of cancels and percent of cancels based on overall sales
of games with cancel functionality. Retailers are evaluated weekly and
enabled or disabled automatically for a Lottery-prescribed period of time


according to Lottery established parameters. The Lottery must be provided
weekly reports of retailers disabled. Alternative cancellation functionality may
be described which allows the Lottery to closely monitor and disable retailer
cancellation ability. Currently the Lottery only allows cancellations on Daily 3
and Daily 4 tickets.

3.4.2 Application and Database Security
Application security controls are another critical component of the Contractors role in
ensuring the integrity of the System. The following security requirements apply:
1. Authentication, Authorization and Access Controls. The Proposal must clearly
identify controls related to user authentication, authorization and access
controls for applications (including database applications).
2. Audit Trail. All games management application login attempts, whether
successful or not, must be logged. Log entries must reference identifiers such
as the time, date, IP address, and login success status. All transactions
from the management application representing modifications to the
System (such as game control parameters and winning numbers entry),
must be logged and protected by verification steps. The application must
provide display and reporting tools for the Lottery to verify the events
recorded in the audit trail.
3. Principle of Least Privilege. All applications and databases must be designed
to support only the processes and user access required to provide the
intended application functions. Application and database users must be
granted access only to the application and database functions and data
elements needed to perform their job functions.
4. Compliance with Security Requirements. All applications must be compliant
with any application security requirements promulgated by any multi-
jurisdictional (e.g., Mega Millions) game organizations of which the Lottery
may be a member.
5. Protection against Application Compromise or Service Disruption. The
Proposal must provide information on the mechanisms by the Contractor to
validate developed code to ensure applications are not vulnerable to any
malware, denial of service attacks or similar security threats.
6. Other Application Security Controls. The Proposal must provide additional
information on other application and database security controls that will be
implemented including login and password controls (if applications are not
directory-integrated), application and database security log management,
database hardening procedures, etc. The acceptability of all related security
controls will be subject to Lottery approval.


3.4.3 On-Line Games Drawing Controls
1. Automatic Close. At a specified time before the drawing, the System shall
automatically close a game without operator intervention.
2. Transactions at Close. The System must maintain control of transactions
underway at close time so that all transactions before the draw close
transaction apply to the forthcoming drawing and all transactions after the
draw close transaction apply to the subsequent drawing(s).
3. Drawing Information. At game cut-off for any game the system must display
within the games management application the following information for the
game:
Time of day
Net game pool (sales minus cancels)
Hash total of plays (including cancels)
Pool Status
Draw Identifier.
4. Manual Winning Number Entry. Dual manual entry of drawn winning
numbers, prize and jackpot amounts must be supported. All attempts,
successful or not, must be logged.
5. Suspend Sales After Last Drawing. The System must provide the option to
suspend sales of a game for the remainder of the sales day, after the last
drawing of the day. This feature could for example support a game matrix
change to take place after one days last drawing.
6. Closing, Drawing, and Cashing Time Window. The Lottery considers it
mandatory to minimize the time window between close of the games,
drawings, and the ability to pay winning tickets. The System shall comply with
the time window specifications for closing games, conducting game drawings,
entry of winning numbers, and readiness to pay winning tickets.
7. Roll to Next Day after a Problematic Drawing. The System shall allow the
Lottery to resume ticket sales and operations for retailers and customers for
future sales without necessarily finalizing and declaring official a problematic
drawing.
3.4.4 Games Management Application
The Lottery requires staff access to the Contractors games management applications
for performing functions such as licensing retailers, configuring game settings,
managing retailer terminals, performing retailer accounting functions, sending


messages to retailer terminals and tickets and accessing management and retailer
reports.
3.4.4.1 Games Management Application Access
Access to the games management application will be from various locations including
workstations on the internal LANs at the Lottery Headquarters or remote Lottery offices.
In addition, certain functions may be performed by remote staff with Internet access. A
general description of the Lotterys current typical workstation configuration is provided
in Appendix D.
Lottery workstations will be configured as needed with any required software for
accessing the games management application provided by the Contractor. The Lottery
requires that the games management application be web browser-based, not requiring
the installation of any additional client software.
The number of users requiring access to the games management application will be
determined by the Lottery. Currently, approximately one hundred forty (140) users are
registered for access to the On-line system, with varying authorizations. The Lottery
estimates that at any one time there are fewer than sixty (60) concurrent users.
3.4.4.2 Games Management Application Features and Capabilities
The System shall provide a range of features and capabilities that taken together,
accomplish all tasks to manage and control the On-line and Instant games. The features
and capabilities include, but are not limited to, the following list.
A. Management Reports. The games management application must be capable
of producing at a minimum On-line and off-line management reports similar to
those found in Appendix E. (These samples are for informational purposes
only and are not to be construed as strict content and format specifications.
The Lottery will determine final specifications with the Contractor.)
B. Retailer Terminal Management. Authorized games management application
users must have the ability to enable and/or disable any retailer terminal,
partially or fully. Actions taken toward retailer management must be effective
immediately and must create an audit trail of the changes made, the date of
the change, and the user who made the change to a retailer terminal record.
C. Retailer Accounting Adjustments. Authorized games management application
users must have the ability to make adjusting entries to retailer accounts with
a complete audit trail of adjustment amount, date of adjustment, user who
entered the adjustment, and a description/reason for the adjustment.
D. Retailer Disablement Codes. The games management application must
support a coding scheme for differentiating various retailer "disabling"
reasons. For example, if a retailer is disabled for a collection-related problem,
for EFT sweeps, and for a disciplinary problem, this multiple-cause disabling


must be recorded in the retailer record and clearly displayed upon inquiry.
The coding scheme must be able to accommodate up to twenty (20) total
disablement conditions with up to five (5) concurrently. The application must
be capable of reporting a retailers history of disablement conditions.
E. Dual Entry. The application must provide the ability to enter critical data such
as overriding share values through two (2) different application user sessions
whose results are verified to be the same before allowing the process to
continue. All attempts, whether successful or not, must be logged.
F. Game Control. The games management application must support the ability
(for an authorized user) to shut off and resume sales and validations on each
game independently.
G. Retailer Message Groups. The games management application must support
the ability (for an authorized user) to send On-line messages to a specific
retailer, or to any group of retailers such as, but not limited to, all retailers,
retailers in the same county, zip code, business type, corporate account, or
sales level. In addition to game messages, the Lottery may also utilize this
functionality to send messages such as Amber Alerts to selected groups of
retailer terminals.
Response Note: The Proposal shall describe how the application allows
retailer groups to be designated for message distribution.
H. Message Size. Retailer informational messages up to five hundred twelve
(512) characters shall be supported.
I. Immediate and Deferrable Messages. The games management application
must support the ability (for an authorized user) to define any retailer
message as immediate or deferrable. Immediate messages must be
accessed and acknowledged by the retailer terminal right away. For a
deferrable message, the retailer terminal is notified to take a specified
message within a certain time, but the message can be taken by the retailer
when it is more suitable to player traffic.
J . Player Display Messages. The games management application must support
the ability (for an authorized user) to create and send graphics and messages
to the player display units associated with the retailer terminals.
K. Ticket Messaging. The games management application must support the
ability (for an authorized user) to create and send messages to all or selected
groups of retailer terminals to be printed in banner spaces on the tickets.
These messages would be triggered by situation, for example by the game,
bet type, or price point. One application will be a unique, by game, marketing
message to display on the tickets. The Lottery may also utilize this
functionality to send messages such as Amber Alerts for printing on tickets.


L. Game Monitoring. Authorized games management application users must
have the ability to observe real-time statistics on the operation of the System
by game, retailer, or group of retailers. (For example, up-to-date statistics on
sales by game.)
M. Sales Research and Reporting. The Lottery requires the ability for authorized
games management application users to request, process, and print portions
of the Gaming System's sales history and transaction history. At least seven
(7) days of sales detail must be On-line.
N. Retailer Report Review. The games management application must be able to
generate reports in the same formatting as the retailer terminal reports to
allow Lottery staff to review results with retailers.
O. Retailer Mass Adjustments. Authorized games management application users
must have the ability to make recurring adjusting entries either based upon
parameters within the system and/or a file provided by the Lottery. The
Retailer accounts will maintain a complete audit trail of the adjustment
amount, date of adjustment, how the adjustments were entered, and a
description/reason for the adjustment.
P. Retailer Sales Limiter. The system must support the ability to place daily
sales limits. The system must provide global limits (all retailers), limits by
retailer type, and limits by individual retailer settings. Once the daily limit is
reached, the terminal rejects further ticket sales transactions. Lottery is
notified when parameter is reached, both real time and by daily report.
System will automatically allow sales the next business day, or require Lottery
interaction before sales can be continued, as determined by the Lottery.
3.4.5 Support of Instant Ticket Transactions at Retailers
The System will be required to support Instant games through the retailer terminal and
shall include but not be limited to the features and transactions noted below.
1. Bar Codes. Many Instant ticket transactions depend on bar coded numbers
for unique identification of tickets. The System must accommodate reading at
least three (3) different bar code algorithms. If the Contractor has input into
the Instant ticket identifier and/or bar code encoding scheme, the
identifier design and the algorithm must be secure against
compromising the integrity of the game. The System must accommodate
the Lotterys current bar code practices and new standards, including ticket-
level accounting.
2. Security Grid. Operations on packs and tickets will depend on a rules-based
security grid that defines acceptable status changes. The grids rules shall be
developed jointly with the Lottery. Packs and tickets will reflect statuses and
status changes that are a result of functions performed through the System. A
ticket would reflect the same distribution status as the pack that it came from.


However, individual tickets from the same pack could have a different status
(for example, stolen versus active).
3. District Sales Representative Transactions. The System must support retailer
inventory management transactions and messages for DSRs. Capabilities
must exist for transferring shipments, packs or tickets to the DSRs inventory
for tracking purposes. Each DSR may be allowed a supply of tickets (Trunk
Stock), which will be supplied by direct ticket orders and/or packs returned
from retailers. The DSR may issue packs to retailers, return packs, or transfer
packs to/from another DSR. Additionally, the System must allow for inventory
to be transferred and returned to the Lottery via the DSR when a retailer has
been terminated.
4. Pack Delivery and Returns. Packs delivered to retailers via courier and/or
DSR must be maintained in the System. Packs and tickets may be returned
by the retailer via the courier. Full packs may be allocable for use elsewhere,
or for return to inventory in the warehouse. The System must support receipt
of bulk shipments with one bar code read. The Successful Bidder will be
responsible for all courier charges.
5. Pack Activation. The System must allow a retailer transaction to activate a
pack of tickets for sales and validation. Manual-activation of packs must be
supported. Activating a pack must be accomplished without the need for a
pack activity card.
6. Instant Ticket Validation. Instant game validation transactions at the retailer
terminal will inquire against a validation database, maintained by the System.
The System will respond with a pay/no-pay/claim, etc. transaction sent back
to the retailer. This transaction will verify whether the ticket is a winner and
specify the amount to be paid. During this process the System must confirm
that the ticket is from a pack or partial pack in payable status. Tickets sold
by one retailer must be able to be validated by any other retailer (cross-
validation). Accountability must apply to ranges of tickets within a pack if
necessary, in the case of stolen packs or partially-settled packs. The System
must provide the retailer a receipt for each validated ticket.
7. Keyless Validation. As an Invited Option, the Bidder may describe an
optional mechanism for keyless validation, requiring no more than bar code
reading, for any and all specified prize levels. Any proposed solution shall
address security issues relative to keyless validation.
8. Settlement. The terminal must support settlement of packs that have been
distributed to, and sold by, the retailers. Packs must be able to be manually
settled, and the System must also support automatic settlement based on
Lottery-established parameters such as the time since the pack was
activated, the percentage of low-tier validations, or settling the oldest pack


with a new activation. Settlement parameters may depend on the price-point
of the game. The System must accommodate settlement of a partial pack.
9. Retailer Status and Reporting. The retailer must be able to obtain, through the
terminal, an appropriate collection of reports summarizing Instant ticket status
and transaction activity. These include, but are not limited to, (the retailer's
own) inventory information by pack status, summary of validations, Instant
sales and adjustments, game and pack number, and news messages.
Retailer reports must indicate that they are for information only and not for
sale to avoid confusion. The Gaming System must provide the retailer
with combined business reports incorporating all product results. Refer
to Appendix F for descriptions of retailer-generated reports.
10. Real-Time Accounting for Instant Tickets: As an Invited Option, the Bidder
may propose technologies and/or methods that would result in accounting for
Instant ticket sales as they happen.

3.4.6 Instant Game Support
The proposed System must handle all Instant ticket transactions, as required by the
Lottery, through the retailer terminals. Examples of Instant tickets used in Michigan are
provided on the Lotterys website.
1. Game Volumes. The System must accommodate large game volumes. Based
on current practice, the Lottery may have one hundred eighty (180) Instant
games active at one time, ranging from approximately one million (1,000,000)
to forty million (40,000,000) tickets per game. The Lottery requires that the
System accommodate games of up to fifty million (50,000,000) tickets.
Approximately eighty (80) new games may be introduced annually.
2. Validating Winners. Winning Instant tickets may be validated up to eighteen
(18) months following the initial distribution for sale.
3. Game Identifiers. The System must accommodate up to a four (4) character
game identifier.
4. Pack Identifiers. The System must accommodate up to a six (6) character
pack identifier.
5. Ticket Bar Code Identifier. The system must be able to accommodate the
current eighteen (18) digit bar code: one (1) digit format code, three (3) digit
game number, six (6) digit pack number, three (3) digit ticket number, three
digit (3) validation number, two (2) digit mod 100 check formula. The System
must accommodate any expansion to the current bar code or any new bar
code the Lottery may define for use in the future.


6. Prize Payouts. The System must support prize structures for low, mid, and
high tier levels, with numerous subdivisions. The System must support up to
fifty (50) prize levels, with ten million dollars ($10,000,000) as a top prize limit.
Non-cash prizes must also be supported.
Response Note: The Proposal must identify any limitations the System
may have in prize tiers or payout levels. High tier prize levels will require
the ability to determine if a prize payout involves the file claim process.
7. Prize Types. The System must support ticket validation messages to
announce prize awards and must support prizes that are cash; merchandise;
cash/merchandise; trips; and annuity. Prize messages must allow descriptive
information as well as prize amounts and identify merchandise prize
message(s) before validation.
8. Flexibility in Instant Products. The System must accommodate new Instant
ticket products that may be of different sizes and shapes, bar code qualities,
pack quantities, prize structures, and price points, from those described as
current products.
3.4.7 Instant Ticket Accounting and Management
The Contractor must provide in-state Instant Ticket Accounting Specialists (ITAS). The
ITAS will provide accounting and retailer support for all issues with Instant game
inventory. This includes, but is not limited to, retailer changes of ownership, out of
business situations, and final end-of-game reconciliations. (See Section 3.7.1 where
Bidder should provide detail related to in-state staffing.)
The Instant ticket accounting and management software component of the System will
include, but not be limited to, the following functionality.
3.4.7.1 Instant Ticket Accounting
The System must provide game account record keeping, including for any game, Instant
tickets acquired, stolen, missing, returned, damaged, misprinted, or canceled, as well as
the ending inventory value. Specific obligations include, but are not limited to:
A. Monitor individual pack status at the retailer level for the purpose of initiating
pack settlement.
B. Provide weekly settlement information to retailers and the Lottery conforming
to the weekly accounting cycle.
C. Provide retailer account record-keeping, including retailer Instant ticket
inventory and inventory value.
D. Maintenance of game ticket validation records, to ensure one-time-only
payment of winners.
E. Ability to monitor pack status by various methods to permit settlement.


F. Ability to perform game-end accounting.
G. Ability to load a new game file from the Instant ticket printing vendor, using a
CD or secure file transfer.
3.4.7.2 Inventory Management
The System must allow for stocks of Instant tickets to be received at the warehouse,
entered into inventory, shipped to retailers, returned when necessary, and destroyed.
The user interface for administering Instant ticket inventory must facilitate warehouse
staff efficiency and accuracy.
Response Note: Mechanisms for this must be proposed. No specific technology
is required but the Bidder may propose such mechanisms as bar code controls,
RFID controls, wireless readers, audible cues, color coded screens, and others.
A. Inventory verification of tickets delivered from the Lotterys Instant ticket
manufacturer(s). Providing to the Lottery receiving reports and other
documentation as may be necessary.
B. Maintain and report pack inventory and pack history.
C. Monitor and report pack status at the warehouse, in-transit, and at the retailer
level. Reports must show games and packs by ownership and date range.
D. Transfer or return ticket packs to inventory, including partial pack returns.
E. Process stolen ticket reports, track missing or delayed shipments, and serve
as the initial point of contact concerning damaged, misprinted, or mis-
packaged packs of tickets.
F. Support secure destruction of tickets remaining in the warehouse after the
close of a game. No tickets will be destroyed until the Lottery has accounted
for and reconciled the disposition of all inventory for that game.
3.4.7.3 Instant Game Inventory System Parameters
The system must support Instant inventory parameters using system tools. These tools
must be able to be applied globally or to an individual retailer as needed. The Bidder
must support the ability to set certain limits and apply individual parameters for many
retailers. The ability to set inventory limits for all retailers within a chain is also required.
The following inventory parameters must be supported at a minimum. The Bidder may
offer other methods of preventing excess inventory at retailer locations in addition to the
following.
A. Credit Limit establishes total inventory values. This calculation includes
inventory in all stages of life cycle from being assigned at the warehouse up
to settlement. Once the credit limit is reached the system will not allow orders
to be completed.


B. Nth Pack - establishes how many packs of any one game can be active at
one time before the oldest pack active will settle.
C. Settle on Activations. This tool will settle packs as they are activated.
3.4.7.4 Instant Ticket Inquiries and Features
The System must provide a wide variety of Instant ticket inquiries and features,
including shipped and pending orders, Instant game pack lookup, retailer inventory,
retailer inventory by % validated, game definition, online and Instant ticket research,
sales activity, returned inventory, settled inventory, ended games, full and partial pack
returns, issued packs, DSR inventory, and DSR route listing.
3.4.8 Instant Ticket Order Fulfillment: Telemarketing System
The System must provide an application to support telemarketing and retailer account
service functions and services. Information displays for the telemarketing staff shall
employ bold fonts, highlighting, and other mechanisms to promote efficiency and
accuracy.
Lotterys current vendors Instant Ticket Services (ITS) representatives review all
traditional retailers Instant ticket inventory and orders on a bi-monthly basis.
Approximately 3000 retailers are phoned monthly and their orders are set by ITS.
Approximately 4800 retailers orders are created by ITS and inventory and order levels
are adjusted by Lottery DSRs. Approximately 1300 retailers orders and inventories are
managed directly by Lottery DSRs. Ongoing communication between ITS and DSRs is
required.
A Michigan-based Instant Ticket Inventory Manager will supervise the Telemarketing
group as well as provide ongoing support to Lottery Sales staff in the attainment of
Instant ticket sales goals and objectives. The Lottery State Sales Manager will maintain
oversight, but not direct supervision, of the telemarketing staff. The staff shall be
located in Michigan.

3.4.8.1 Telemarketer Function Support
The System shall provide a solution for telemarketers with a broad range of features,
including, but not limited to, the following.
A. Ability to sort by game number and name, sell priority, price amount,
inventory condition.
B. Ability for the telemarketer to page forward and backward through the
application.
C. Ability to block a game from being ordered by the telemarketer.
D. Ability to put a retailer on a call back list if the retailer is not ready to order
when called initially.


E. Allow telemarketer to make contact, and phone number changes (add or
delete). Actions such as route modifications will be made by Lottery.
F. Ability to dial phone number from the workstation via an interface to the
phone system and call management application.
G. Ability to display the next retailer on a call list after an order has been placed.
H. Allow the telemarketer to get out of the sequential call list to perform ordering
activities on one particular retailer.
I. Special-circumstance orders, such as walk-in orders from retailers must be
supported.
J . The retailer call list shall operate according to a set schedule relative to each
retailer. The set schedule for a retailer will identify a call day (from Monday
through Friday) and also a call frequency (such as one week, two weeks, or
three weeks). This call shall be to confirm proper inventory and point-of-sale
needs at those locations and other needs determined by the Lottery.
K. The telemarketing supervisor must be able to view telemarketers actions by
telemarketer name on deferred calls, orders placed, retailers that did not
order, call-ins (out of cycle), and be able to see telemarketers orders as the
day progresses.
L. The telemarketing system must predict Instant ticket inventory orders by
retailer. These custom orders require ongoing analysis and must factor new
games, space to sales and sales volume in the order creation. The System
must be delivered with a capability for auto-ordering, in other words
generating orders for shipment based on rates of turnover of the inventory at
the retailer locations. Auto-order must be set up to allow usage only on
certain games. Auto-order parameters must be able to be canceled or
adjusted by the telemarketing function.
M. Telemarketing shall review all retailers Instant ticket inventory levels on a two
week basis. They will define order quantities by price points, base games,
on-hand inventories, etc. as determined by historical sales levels of individual
retailers and Lottery standards.
N. Telemarketing shall communicate with Lottery salespeople as needed with
inbound, outbound calls and e-mail.
O. Telemarketing shall work cooperatively with the Lottery in establishing optimal
inventory levels for all groups of retailers and maintain adequate staffing to
perform this function to Lotterys satisfaction.
P. System must provide the functionality to view all Instant inventory on hand at
a retailer location in a user-friendly format. All inventory less than 90%


validated must be displayed, regardless of status of the packs. This will
assist staff in determining what inventory is actually remaining unsold at the
retailer location.
Q. Telemarketing shall manage and report inbound calls from retailers regarding
Instant ticket inventory.
R. Call Recording A recording device must be provided to record all telephone
conversations transacted on the Telemarketing circuits. Recording of
telephone conversations must adhere to all applicable Federal, State and
local laws. The Contractor must provide the recording equipment and
maintain recorded conversations for at least sixty (60) days. Conversation
files must be transferable for Lottery review upon request.
3.4.9 Instant Ticket Order Distribution
The System will provide an application to support warehousing, physical inventory
control, packaging, distribution, returns, and destruction. The System must employ
combinations of auditory, color, and shading cues on the order processing workstations
to help make order distribution efficient and accurate.
The Lottery may utilize several Instant ticket and Pull-tab suppliers and the Contractor
must process all products with an equal level of service.
3.4.9.1 Orders
A. Orders go into an electronic queue from telemarketing and from retailer
terminals and are then dispatched to the packing stations in the order
received as needed.
B. Orders come up on the order packagers screen and will show order
information such as retailer, game and number of packs needed, packs
scanned, orders in queue, which carrier to be used, etc.
C. Order will complete and print labels and manifest upon scanning of last pack
in order.
D. No System pre-assigned packs are permitted. Packing errors must be kept to
a minimum.
E. The System must generate a barcode file for the courier.
F. Delivery to Retailers of packaged ticket orders must be by the end of the next
scheduled delivery day after release for delivery.
G. The System must provide a mechanism for new game orders, that is, bulk
orders prior to sales of a new game. Pre-orders may be separable from the
daily order queue.


H. The System shall provide a mechanism for prioritizing Instant ticket orders for
packing and shipping.
I. The System must protect information regarding the retailer location of specific
packs such that an individual knowledgeable of winners within packs could
not know where those packs were held for sale.
J . Shipment sizes to retailers must be conditioned by their record of sales and
actual inventory on-hand.
3.4.9.2 Returns
Full packs can be returned for re-distribution. Partial pack returns are required and
must be identifiable to the ticket level within inventory. The System must be able to
calculate and credit a retailers account for partial pack returns based on the ticket cost.
The System must have the ability to process partial returns for more than one game in a
single return transaction. The partial pack return batch will be assigned a unique
identifier within the System that can be tracked and reported. Reporting on ticket ranges
within a partial pack return must be supported. The Successful Bidder will be
responsible for all courier charges.

3.4.9.3 Order Fulfillment Reports
The System must generate on schedule and on demand, a series of order fulfillment
reports, including the following: packer statistics; game carton lookup; courier manifest
reports; inventory reports; retailer information; pending and filled order detail; pack
history information; returns information.
3.4.10 Instant Ticket Logistics by the Contractor
The Successful Bidder must provide staff for the Instant ticket warehouse and perform
inventory management, order distribution, pack return processing, arranging for courier
delivery of ticket orders, and all other Instant ticket distribution management activities.
The Contractors System shall support all of these functions, and the Lottery shall have
user access for oversight.
3.4.11 Retailer Accounting
The System will provide an application for accounting of sales commission, validation
commissions, bonuses, and any other forms of compensation received by the retailers.
The Lottery, as well as the Contractor, will be a user of this application.
1. Retailer Accounting. The System must support combined Instant and On-line
product accounting for retailers.
2. Retailer Accounting Period. The normal weekly business period is currently
Tuesday through Monday. In current practice the retailer accounts are swept
weekly, however the System must provide flexibility to allow for daily or other
periods in the event a business need arises for this. The Lottery reserves the
right to change the accounting period during the term of the Contract.


3. Accounting by Retailer Location. Some Michigan retailers have multiple
retailer terminals in one location, and these must be accounted for using one
retailer account. Another accounting obligation is to continue the ability to
identify and report sales for a location even if it has undergone a change of
ownership.
4. Chain Accounting. The System must provide a mechanism for accounting that
accommodates multi-store chains. Chain headquarters must be able to see
individual store accounting as well as chain roll-ups.
5. Retailer Adjustments and Reimbursements. The System must provide an
application for the Lottery to make retailer account adjustments and
reimbursements. Records of such must be fully auditable. Bidders must
propose a retailer adjustment process that provides functionality outlined
below. Adjustments are intended to reimburse retailers for mis-printed On-
line tickets and damaged or defective Instant game tickets.
A. Retailer must be able to indicate on the terminal a request for adjustment
by either a custom-bet slip entry or on-screen entry. This functionality
allows the retailers to request an adjustment without calling the hotline.
B. Adjustment must be date and time-stamped, indicate game type and
game number for Instant games, amount of adjustment, and reason for
request.
C. Adjustment is held pending release for review by the Lottery after receipt
of adjustment form.
D. After Lottery review, the system must allow release and automatic
adjustment on retailer invoice, or rejection of adjustment with no retailer
adjustment.
E. Inquiry, reporting, and letter creation for this process is required.
F. Bidder may propose alternate adjustment process with specific
functionality outlined in order that functions of Bidder and Lottery staff are
clearly described. Adjustment process must be retailer friendly and
minimize back office work for the Lottery.
6. Retailer Bonus Checks or Adjustments. The System must have the ability to
create bonus checks or adjustments and track the bonus for tax purposes.
Retailer bonuses may arise from bonus commissions or other incentives for
the retailers to improve sales.
7. Variable Retailer Commission Rates. The System must support variable
commission rates for retailers. Various rates may be triggered by terms and
conditions of retailer contracts, by retailers meeting sales objectives, or for
other defined conditions.


3.4.12 Claims and Payments
The System must provide a robust mechanism for payments to winners.
1. Validations. The System must be capable of validating winning tickets by
means of a barcode reader and by manual entry.
A. The System must validate winning tickets presented within a validation
period as determined by the Lottery. Currently the schedule is three
hundred sixty-five (365) days after the drawing for On-line games, and
until the posted expiration date of Instant games (i.e., approximately
eighteen (18) months after game introduction).
B. Winning tickets must be validated with a display and/or report stating "pay"
and the amount of payout, or claim should it be determined by the
Lottery that claim instructions be provided. The validation ticket
transaction as logged on the System must be referenced to the original
sell transaction.
C. The Lottery expects retailers to pay winning tickets up to a winning
amount set by the Lottery. An On-line ticket may incorporate one (1) or
more plays under a single unique serial number; multiple winners on the
same ticket still observe the winning amount parameter.
D. When cashing a multiple draw (advance play) ticket prior to the last draw
on the ticket, an exchange ticket for the balance of the plays must be
printed. The exchange ticket must have a distinct serial number from the
original ticket but the System must be capable of relating the two.
E. Retention of Cashed Winners. The System must retain cashed winners
On-line for at least one hundred eighty (180) days, including preserving a
mechanism for accessing, summarizing, and researching cashed winners.
F. Control of Validations. The System must be able to turn off cashing at the
terminal for a specific game and specific draw.
2. Prize Payments. The Bidder must propose a check-writing application for
installation at up to five (5) regional claim centers around the State and at
Lottery Headquarters (four (4) terminals are currently located at Lottery
Headquarters in support of this function). The Contractor shall provide any
associated workstations and printing equipment including MICR printers.
Checks will be printed on Lottery provided check stock.
A. The prize payment application must handle a single check for multiple
wins, annuities, merchandise prizes, non-validation winnings as well as
more ordinary payments.
B. System must support prize cashing limits at three different levels for the
claim center locations (privileged terminals) as established by the Lottery.


C. System must support payment of prize to Lottery clubs in a single check
and identify the claimant as a club for reporting purposes.
D. The System must provide 1042-non-resident alien withholding as well as
U.S. resident withholding.
E. The System must meet the IRS and State of Michigan requirements for
withholding from prizes and recording of name, address, and related
information necessary for reporting of winners of prizes over the reporting
threshold. The System must issue W-2G or 1042 forms to winners at the
time of payment, and support reprints of W-2G and 1042 forms.
F. The System must maintain prize winner information allowing for inquiry
and reporting, or interface to the back office systems. The information
must be transmitted and maintained in an encrypted format.
G. Check-writing system must allow capture of prize offsets for debts due to
the State of Michigan. This may be by manual entry by claim center staff,
or by automated process if allowed by the Michigan Department of
Treasury. At start-up, manual entry of prize offsets is anticipated.
H. The Contractor must propose a check writing system that minimizes the
necessity of mailing paper forms from the claim centers to Lottery
headquarters. This should include electronic capture of claimant
signature, automatic scanning of player completed claim information and
other forms, ability to observe claim payment activity centrally in real time,
and/or other methodology that eliminates the necessity of mailing and
scanning paper forms. Bidder must fully describe technologies and
features of check writing system. Bidder should describe any features
such as the ability to scan and capture drivers license or other
identification information.
3.4.13 Data Management and Reporting
The Contractor must provide reporting capability and reporting tools that enable ad hoc
reports to be generated from the Lottery Back-Office Processing System as well as
Lottery gaming information collected and stored on the Contractors system(s).
1. Database Access. The Lottery requires access to Michigan gaming
information collected by the Contractor, including retailer data, sales records,
terminal maintenance data, and daily transactions, for scheduled and ad hoc
reporting. Queries and reports must be supported within the games
management application.
2. Sales Reporting Tool Set. The Contractor must provide software tools for
accessing, reporting on, and downloading gaming information. The Lottery's
access to data on the active Gaming Systems may be read-only. For
reporting and inquiries the Lottery may employ a separate copy of the data on


a separate host from that of the active Gaming Systems, since the Lottery
does not intend any negative impact on production operations or gaming
response time while obtaining useful reports on retailers and sales.
3. History. The On-line database must contain summarized sales history for the
term of the Contract. Recent detailed transaction history must be on-line, and
older transaction detail must also be available, at least from archives.
The Data Management and Reporting database must include, but is not
limited to:

A. Online inquiry by retailer of all gaming detail including online and
Instant validation detail, book settlements and adjustments for sixty
(60) days.

B. Online inquiry by retailer of weekly invoices for two (2) years.

For Reporting Purposes:

C. Weekly summarized transactions as well as sales by game,
commissions, validations, promotional activity, and net due as well as
Instant inventory information must be available for reporting for up to
three years. It is required that sales and inventory information be
joined together in reports available to the Lottery for up to three (3)
years.

D. Data and reports greater than three (3) years must be maintained and
available, at least from archive. Total history, including archived data,
must be maintained by the Contractor for the life of the contract.
4. Report Export. Reports generated by the System must be exportable to Excel
and other common data formats.
3.4.14 System Interfaces
The System must interface with several applications in the Lotterys environment,
including but not limited to those identified below.
1. Integrated Instant and On-Line Information. It is mandatory that the System
integrate seamlessly between On-line game and Instant game information
when providing data for Lottery accounting and management applications. No
data conversion and merge efforts shall be required for the files and reports
that the Lottery receives.
2. Lottery Access to Data through File Transfers. The Lottery requires various
forms of data provisioning to feed Lottery administrative and gaming support
systems. For some applications, a data file must be supplied of a specified
format and frequency. This may include:


A. General Ledger The Lottery maintains its accounting on the Great
Plains software product. The Gaming System and ICS must be capable of
transferring data to the Lottery in support of general accounting.

3. NASPL and NACS XML Project. The Lottery expects to participate in the
National Association of Convenience Stores (NACS) Extended Markup
Language (XML) pilot project with NASPL lotteries and the Contractor will be
required to support this and any such industry standard project.
3.4.15 Security Information Reporting
The Contractors System must include reporting, but not limited to, the following to
support Lottery Security operation.
1. Retailer fishing" reports (multiple attempts to cash Instant tickets with same
game, pack, transaction number, with numerous failures).
2. Validation of Instant or On-line tickets that are nearing expiration.
3. Attempts to cash missing or stolen tickets.
4. Excessive cancels.
5. Stolen Instant tickets. The Contractor must supply and support a printer at
Lottery Security to provide real time information on attempts to validate
missing or stolen Instant tickets.
6. Reports of unusual Instant ticket validation patterns, such as packs settled
with no validations by the owning retailer.
7. Other Information. The Contractor must provide the Lotterys Security staff
various reports and displays to support investigations, as needed.
3.4.16 On-line Subscription System (Specified Option)
As a Specified Option the Bidder must propose a Subscription System.
Below is a brief list of specifications that the Subscription System should meet, although
these may not be the final schedules and features used for production.
1. Entries. New subscriptions and updates provided through the mail, phone or
internet would be processed by completion of a form by a range of methods,
to be determined.
2. Subscription Length. Subscriptions may be less than, but can extend up to
twelve (12) months.
3. The proposal must describe how matrix and game changes for existing
subscriptions are handled.


4. Merging Subscription Plays. Subscriber plays would be merged with the
ordinary game pools for determination of winners and payouts.
5. Winner Payments. Winners would be paid automatically through the
subscription management system. Within limits determined by the Lottery,
low-tier winners may extend the length of the subscription, while higher
winners may be paid by EFT.
6. Renewal Notices. The system would generate renewal notices automatically
for subscriptions that are nearing the lapse date, to begin with the next
drawing after the original subscription expires.
7. Subscription Account Management. The Lottery, through the games
management application, would provide for all mailings and player services to
subscribers.
3.4.17 Internal Control System
The Contractor must arrange for supplying the Lottery an ICS through a qualified third
party. Costs for all hardware and software elements of the ICS systems, including
maintenance, and including continuing support from the ICS subcontractor, must be
included in the base price for the term of the contract.

The Internal Control System (ICS) will check the System independently by re-
processing both On-line and Instant sales, commissions, validations, inventory status
changes, claims, coupons, cancels, adjustments, promotional tickets, retailer
management and accounting activity allowing for the auditing of the daily transactions,
winner selection/verification, prize payout calculations, sales summaries, and various
inquiry and reconciliation activities. The ICS vendor must meet the requirements of any
multi-state game consortium in which the Lottery participates.

1. Reports. Reports generated by the ICS must be organized and formatted like the
related reports of the Gaming System for efficient review and balancing. The ICS
must provide a daily and weekly process for balancing all system transactions.
There must be an automated balancing process in order to reconcile retailers,
game activity, weekly EFT balances, and to identify any discrepancies.
Reconciliation will occur at intervals specified by the Lottery. Audit reports for
pre-draw balancing and reconciliation of On-line game draw sales must also be
provided. Verification of the number of prize winners and amounts won by
game/draw must also be available at draw time.
2. Interface Files. The ability to export data in various formats such as Excel, PDF,
Word, Comma Delimited, etc., along with ad hoc reports and to make reports
available through e-mail is required. Updated information relating to the retailer
master file, including account statuses, sales and accounting information is also
required. Interface files, as defined by the Lottery, for the purpose of daily
accounting, general ledger and tax reporting must be included in the daily update
file to the Lotterys financial application.


3. Maintenance. The ICS vendor will be responsible for maintaining the ICS
application software. This will primarily consist of updating the application
software whenever the lottery implements a new game or makes changes to a
game that would affect ICS processing. In addition, the Lottery may require
modifications to the application software in order to expedite system balancing.
Written prior approval is required from the Lottery before making any
enhancements or modifications to any software. The Lottery averages 4-5 new
releases per year, some of which may not affect the ICS application. The ICS
vendor will be responsible for the conversion of existing data. The ICS vendor
must be available 24/7, 365 days a year (remote availability is acceptable) to
provide assistance in resolving any issues, which may occur. A 20-minute
response time is required.
The ICS application will be maintained in three separate environments:
production, test and development. Backup/recovery capabilities for current or
previous days transactions must exist to restore and reprocess in the event an
error or out-of-balance situation occurs. The ICS vendor must provide a detailed
recommendation for a backup/recovery system.

4. Documentation. Prior to startup the ICS vendor will provide detailed system
specifications, flow charts, operating and balancing procedures. The ICS vendor
will be responsible for updating all documentation if any changes are made which
affect the ICS system. The ICS vendor will provide detailed documentation for
any enhancements or additions for Lottery approval prior to development. A
current copy of the application software including source code and
documentation must be provided to the Lottery.

5. Suppliers. The ICS application must be supplied by an independent, third-party
software subcontractor subject to Lottery approval. The Proposal must identify
three such alternative subcontractors from which the Lottery can select. The
Lottery reserves the right to obtain documentation verifying the ICS
subcontractors independence from the Bidder and/or any of its affiliates.

Credentials of the ICS subcontractor must indicate that they are experienced and
qualified in providing this type of software.

6. ICS Operations by the Lottery. The Contractor and the selected subcontractor
shall provide operating instructions and training to the Lottery. The Lottery will
conduct all daily operations in support of the ICS systems.

7. Security. The Lottery will manage both logical and physical access to the ICS
environments. Lottery security will conduct background investigations of the
vendor personnel maintaining the ICS system. The ICS vendor must provide
requested information on personnel assigned to the Lotterys account. The ICS
vendor must adhere to the Lotterys IT Security Policies as outlined in Appendix
H.


3.4.18 Websites
The Bidder must propose to supply websites for the Lottery.

1. Retailer website. Content available from the System for the retailer website
shall include, but not be limited to, transactional accounting, sales
information, retailer applications, retailer manuals, retailer training materials,
and retailer historical reports. Corporate retailers must have access to
information on any or all sites within the corporate account, using this retailer
website. Retailers shall also be able to obtain game and terminal
documentation by accessing the retailer website. The retailer website must be
on a separate server from the Gaming System hosts and access from
retailers must be secure. The Gaming System must be protected by firewall
or other approved means from the retailer website server. (See Section
3.4.14.3)

2. As a Specified Option, the Bidder must propose a website that includes
winning numbers, game information, and Lottery information. This site must
be updated at a minimum of twice a day to accommodate winning numbers.
This site should also link to the following site, on a transparent basis, see #3
below.

3. As an Invited Option the Bidder may propose a player VIP site. At a
minimum, the proposal must include: web-based second-chance drawings
entry, points system for player rewards program, internet-enabled games (not
internet wagering), player contests, capture of player email addresses for
broadcast email of winning numbers and other email list functionality to
players requesting notification of lottery programs, lottery on-line surveys, and
on-line coupons.

It is not expected that the Contractor will support the Lotterys public website
www.michigan.gov/lottery but will need to provide file feeds of winning numbers
and maintain an archive of the winning numbers.

3.4.19 Retailer Account Creation and Management
The Lottery currently utilizes various applications for managing the data and
relationships associated with the life-cycle of a lottery retailer. The Lottery would
administer licensing and other retailer account management functions using an
application provided by the Contractor.
Required functionality associated with the retailer management application interface
includes, but is not limited to, processing of licenses, and all other Lottery business
functions relating to the management of retailers:
1. Retailer Data. The System must support a comprehensive retailer database,
central to all other games management functions. Database elements would


include, but not be limited to, bank account information required for EFT
transactions, business and owner applicant information, retailer names,
addresses, days and hours of operation, billing data, products, DSR
assignments, retailer status and history (i.e. active, terminated), retailer
relationships and various codes defining the retailer (SIC, chain codes, geo-
codes, etc.).
2. Retailer Key Personnel. The System must support entry of retailer personnel
including control persons, clerks and associated contact information.
3. Retailer Configuration. The System must support a database of equipment
assigned to the retailer and equipment installation scheduling.
4. Retailer Event and Compliance Tracking. The System must support
application processing, retailer security investigations, credit checks, on-going
contract management, retailer compliance with Lottery rules, and retailer
training status.

5. Assess license fees in automated fashion after retailer is active in the System.

6. Perform changes of ownership with tracking between prior and current retailer
numbers.

7. Provide work flow application through the licensing process to accommodate
security background checks, credit review and ensure all applicant
information is complete.

8. Create form letters based on work flow requirements.

9. Provide ad hoc and pre-formatted reports.

10. Capture business types and classes of retailers.

11. Provide notepad for recording retailer or applicant contacts.

12. Provide retailer statuses including placing retailer on probation, probation
types, and history of probations.

13. Provide for grouping of retailers with like ownership as chains as well as
associated reporting by chain.

14. Apply fees to retailer invoices per evaluation parameters, e.g. low sales fees.

15. Capture all information required for 1099 IRS and State of Michigan tax
reporting.


16. Provide a daily query into accounts receivable system (Great Plains) for
automatic suspension of retailer terminals due to delinquent accounts.

17. Provide an automated upload of new retailer information into accounts
receivable system (Great Plains).

18. Create special bonus or incentive payments or adjustments to retailers (e.g.,
quarterly Instant incentive commissions).
19. Provide scanning and electronic storage of applications and other licensing
documentation. Successful Bidder must provide hardware and software
necessary for this functionality. Bidder should describe any additional or
alternate functionality such as the ability of retailer applicants to enter
information on-line via the internet and interface the data to the Retailer
Management system.
3.4.20 District Sales Representative Automation (Specified Option)
The District Sales Representatives (DSRs) and other staff in the field require access to
comprehensive information about retailers, sales, equipment and ticket inventory and
other information in order to effectively support Lottery retailers. The Contractor shall
provide tablet computers (refreshed every 3-4 years) to the DSRs for this purpose.
For more advanced DSR automation capabilities the Bidder must propose sales force
automation tools.
1. At a minimum, the proposed solution must contain:
A. Redundant server technology to support the proposed application.
B. Secure interfacing to both the Contractor and/or Lottery back office system.
C. An integrated solution that, at a minimum, interfaces with near real-time data
supplied by the On-line Gaming System.
D. Secure VPN access through the States internet VPN gateway.
E. Up to 100 tablets or laptops with software for a wireless connectivity solution.
F. Communications infrastructure to support the wireless tablets/laptops (i.e., 3G
wireless solution).
G. Microsoft Office suite of applications.
2. At a minimum, the proposed Customer Relationship Management (CRM)
application must have the following information on a per retailer basis:
A. Contact information.


B. Location information.
C. Licensing information.
D. In-store inventory listing.
E. Account status.
F. Comparative sales data.
G. Business hours.
H. Instant inventory data, on hand, on order, and historical trends.
I. Ability to enter comment.
J . Space to sales calculations: The process by which Instant game inventory
levels by price point are determined.
K. Chain information.
3. At a minimum, the proposed CRM application must have the following
information on a general basis:
A. Ability to capture market surveys.
B. Ability to store and update forms to be transmitted back to the Lottery
headquarters.
C. Ability to capture signatures on forms, such as a promotional agreement.
D. Ability to provide the Lottery with routing information (i.e., call frequency, data,
and stop number).
E. Ability to create ad-hoc reports
3.5 Games and Marketing
The Contractor must apply its best efforts to support the Lottery in retailer placement
and network planning, game design, and marketing, assisting the Lottery to achieve its
financial and public policy objectives.
3.5.1 Corporate Marketing Support
The Lottery will require new games and features over the term of the Contract. Bidders
must be able to accommodate the Lottery's marketing plans and efforts with corporate
marketing support that includes, but is not limited to:
1. Marketing Strategy Meetings. Quarterly strategy meetings shall be held with
the Lottery for (i) formulating the slate of games, games changes, and


promotions to be introduced in the coming twelve (12) months, and (ii)
monitoring and analyzing progress.
2. Vendor State of the Industry Presentation. The Contractor shall provide an
annual review of the industry, identifying new games, new gaming media,
relevant technologies, sales trends, and public policy developments. The
Contractor shall also identify its own new developments, capabilities, and
directions relevant to supporting the Lottery.
3. Gaming Product Planning. Associated with the meetings and presentations
cited immediately above, the Contractor will be expected to propose product
and promotional releases and changes for consideration by the Lottery.
Response Note: As part of the Proposal, the Bidder must provide a brief
analysis of the Lotterys current slate of products and promotions, and
propose changes, if any, for the next two (2) years.
4. Gaming Concept Design and Development. The availability of new gaming
products and product ideas is critical to the Lottery. The Contractor is
expected to have a continuous program of research and development into
gaming concepts and products.
Response Note: The Proposal must contain a brief description of the
Bidders gaming R&D program.
3.5.2 Games Menu
The Contractor must support the current set of Lottery game offerings and provide
flexibility for growth into new games, game features, and play types.
1. Current Games and Play Types. The Contractor must include all games
currently being offered by the Lottery, at the time the new Lottery Gaming
System is to take over.
2. Additional Games and Play Types from the Contractor. The Lottery reserves
the right to add games, game features, play types, and promotions for start-
up, or at any time later in the contract. Emerging game types must be
available to the Lottery.
Response Note: The Bidders Proposal shall address the depth and
breadth of the games library.
3. Association-Based Games. The Contractor must support games from any
multi-jurisdiction associations with which the Lottery may become affiliated.
4. Third-Party or External Games. The Lottery may identify games or game
concepts not from the Contractors library that the Lottery may determine
could be productive if made available in Michigan. As the Lottery may direct in
such a case, the Contractor is obligated to implement a version or variation of


such a game. Assuming that it could be effectively supported on the
Contractors System, rights and/or software and any other mechanisms on
behalf of the Lottery to put up such a game must be acquired by the
Contractor. Additional licensing or brand costs would be subject to
negotiation.
5. Monitor Games. The Lottery currently supports a rapid-draw keno monitor
game and intends to support such a game under the new Contract. The
Lottery intends to offer additional monitor games. The Contractors System
must allow for the following features: different monitor games at different
retailer locations; alternating monitor games at a single location possibly on a
single monitor. To address responsible gaming, the System must allow for
setting sales limits on monitor games at retailers. The Contractor is obligated
to provide RNG-based drawing machines for the monitor games. Lottery will
provide monitor game animation content. The Contractor must adapt drawing
content on an agreed upon schedule, no less than four (4) changes per year.
3.5.3 Promotional Features
The System must be capable of providing a broad range of promotional features should
the Lottery opt to include them. The System must include a promotions generator
capability. Tracking and reporting of all promotions is required. The Contractor is
responsible for entering and maintaining the promotions according to the Lottery-
provided schedule. The ability to run these promotions must be available at start-up.
Specific promotions required at a minimum are as follows:
1. Multiple Drawings per Day. Multiple drawings for the same game within one
day, including Day/Night feature with the same play for the day and night
drawings of a game.
2. Bonus Draw. Drawing of more than one (1) winning number (set of winning
numbers) at the Lottery's option.
3. Bonus Payoff. A specified increase in the payoff for specified winning plays at
the Lottery's option.
4. Drawing Events. Varying the number of drawings per game per week and/or
the days the drawings are conducted.
5. Regional Marketing. Sale of specified games/products/features (e.g.,
couponing, discounting) through selected retailers, retailer groups, and/or
selected geographical areas.
6. Sampler Ticket. A multi-game quick pick where the System will automatically
generate more plays--possibly one for each game on the market.
7. Variable Commission Rates. For certain On-line and Instant products,
commission rates may be set differently from the default value. For certain


retailers or retailer subsets, commission rates may temporarily or permanently
be set differently from the default.
8. Second Chance Drawing. Under conditions specified by the Lottery, the
retailer terminal may issue a voucher to the customer for a second chance
drawing.
9. Retailer Clerk Incentive. Under conditions specified by the Lottery, a ticket
sale or other action may prompt the retailer terminal to issue a form for a clerk
to enter a drawing, or other clerk incentive.
10. Bonus Prize Structure. Ability to enhance the prize structure for any game to
offer additional ways to win (i.e. front/back pair).
Response Note: If the System has functionality to implement other types of On-
line and Instant promotions, the Bidder should describe the capabilities available.
3.5.4 External Coupons
The Lottery may employ coupons produced by third party sources for sales promotions.
For example, a coupon may permit the bearer to obtain a free ticket from the retailer.
The coupons shall have bar code reading specifications similar to Instant tickets. The
Contractor's application software must permit the use of coupon promotions. As part of
this capability, the System must read coupons with a unique bar code/serial number
(i.e., accounting using a validation file).
3.5.5 System-Generated Coupons
The retailer terminal and System must be capable of generating a coupon used as part
of a cross promotion. System-generated coupons may be generated by a similar
mechanism to that which provides gift cards for customers. The System shall produce
summary reports of such transactions. The reports shall define the outstanding liabilities
and claimed amounts, as appropriate.
3.5.6 Additional Non-Traditional Gaming and Non-Gaming
Capabilities
The System must be able through hardware and software upgrades to support
additional games not currently offered. Specific non-traditional capabilities offered by
the Bidder may be described and/or may appear as Offered Options.
3.6 Contractor Facilities and Disaster Recovery Plan
The Contractor must support a primary data center that is dedicated to use for the
Michigan Lottery, a remote backup data center, and additional service facilities as
needed. All site specifications must be consistent with standards of any multi-
jurisdictional associations in which the Lottery may participate.


3.6.1 Primary Data Center Specifications
The Contractor must provide a primary data center within ten (10) miles of the Lottery
headquarters in Lansing. The primary data center must be ready for acceptance testing
one hundred (100) days prior to production start-up.
Response Note: The Proposal shall contain specifications and a description for
the location and the space planned.
3.6.1.1 Environment and Security at Primary Data Center
The Contractors primary data center must include appropriate safety, security, and
environmental controls equipment for a computer facility, as described below. It must
meet security and lockdown specifications promulgated by Mega Millions (and by any
other multi-jurisdiction affiliations the Lottery may join).
All construction and furnishings must comply with fire, safety, building, and ADA codes.
Any upgrades, servicing, or replacement required to maintain compliance with such
codes shall be the Contractors obligation.
A. Emergency exit doors must be provided and must be equipped with alarms.
B. Locking devices must be installed on all doors or other entry points.
C. An electronic access system shall be installed at entrances to the computer
room(s), media library and other secure areas that include logging of who
accessed the data center facilities and when access occurred. The access list
may be reviewed and/or authorized by the Lottery.
D. The Contractor must install and administer a digital CCTV system with
enough camera capacity to monitor all Gaming Systems, games management
activities, and sensitive facility areas, as approved by Lottery Security.
Cameras must have tilt, pan, and zoom features.
E. The computer room(s) must be protected by an automatic fire extinguishing
system based on FM-200 or another Lottery-approved method. The system
shall be installed and maintained as specified by applicable National Fire
Protection Association (NFPA) guidelines. When triggered, the automatic fire
extinguishing system shall be equipped with alarms that sound locally and at
an off-site security center as well.
F. Construction shall support fire safety as noted in NFPA guidelines. Computer
room(s) with mission critical equipment must be separated from the other
areas by non-combustible materials having at least a one-hour fire resistance
rating, and in addition:


1. Walls must be extended from structural floor to structural floor (or roof)
above.
2. Fire doors must be provided on all entrances into the computer room with
a fire resistance rating at least equal to the wall in which the door is
located.
3. All penetrations through the computer room floor, wall or ceiling must be
tightly sealed with material equivalent to existing floor, wall or ceiling
construction to prevent passage of heat, smoke and water.
4. Fire and smoke dampers must be provided in ducts that pass through the
computer room walls, floor or ceiling.
G. The heating, ventilation and air conditioning system (HVAC) shall have
sufficient capacity to maintain a stable environment within original computer
equipment manufacturer specifications. A HVAC failure detection mechanism
must be provided. The HVAC system(s) must be interlocked to shut down
upon activation of the fire extinguishing system or the automatic system must
compensate for loss of extinguishing agent through operation of the HVAC
systems. The HVAC system must be maintained according to its
manufacturers specifications.
H. The Contractor shall provide power conditioning equipment for the computer
room(s) and shall provide an uninterruptible power system with both battery
backup and electrical generator. Should a utility power failure occur, the UPS
must provide at least one hundred fifty (150) percent of the capacity for full
capacity operation. During the Contract, the batteries, transfer switch, and
generator must be exercised for extended periods on a Lottery-approved
schedule, and the generator must be maintained according to its
manufacturers recommendations.
3.6.1.2 Lottery Offices Co-Located at Primary Data Center
The Bidder must propose a primary data center that will permit certain Lottery office
functions to be co-located. The Contractors primary data center in the Lansing area will
be the Business Continuity Site for the Lotterys business operations. This facility shall
be available upon declaration of a disaster at Lottery headquarters.
Design and build-out of the Lotterys remote space is the Contractors obligation, subject
to Lottery approval. These services include interior finishing, carpeting, plumbing,
lighting, and electrical service.
A. Lottery Services. Office furnishings, building maintenance, utilities, grounds
care, pest control, parking, restroom access, and janitorial services shall be
provided by the Contractor.


B. Lottery Space and Layout. The Lottery will require securable space to
accommodate 15 Lottery employees. This space shall hold a backup
configuration for the Back Office Processing System (BOPS) as described in
Section 3.9.
C. Entry/Exit. The Lotterys area must be separate from the Contractors, with
separate interior access. An external entrance may be shared so long as the
Lotterys access cards will work (or there are separate cards issued to
selected Lottery staff).
D. Parking. There must be sufficient parking for fifteen (15) Lottery vehicles (in
addition to Contractor staff).
E. Secure Space. No portion of the Lottery space can be shared with that of the
Contractor. Access control to the space will be provided and controlled by
Lottery Security. The Contractor must provide any space needed for the
Lottery to install access control hardware devices. Contractor staff shall have
access to this area only with permission of the Lottery.
F. Data System Access. The Contractor shall provide System access through a
Local Area Network in the primary data center for any purpose the Lottery
requires. This includes jacks in the Lotterys space and wiring to the LAN
infrastructure. At least fifteen (15) accesses must be provided.
3.6.2 Backup Data Center
The Contractor must outfit a remote backup data center where gaming transactions are
logged and processed. The retailer network, the primary data center, Lottery games
management workstations, and the Lotterys ICS must connect to this facility.
A. The remote backup data center shall be identified in the Proposal and may be
proposed either for in-state or out-of-state placement, but within North
America, subject to Lottery approval. It is required that the remote backup
data center be separated from the primary data center so as to virtually
preclude simultaneous loss due to the same disaster.
B. The remote backup data center must be operated under the safety and
security requirements of the primary data center. If the remote backup data
center is in a Contractor facility that shares other business operations of the
Contractor, then the Lottery equipment must be physically and logically
separated and secure from all other operations, subject to the written
approval of the Lottery.
C. The remote backup data center need not be attended during all lottery
business hours and may be a lights-out operation. It must however
immediately support a failover in case the primary data center can no longer
support business operations.


3.6.3 Training Facilities
The Contractor shall provide training facilities around the State for start-up. Facilities
may be temporary, such as hotel meeting rooms, and must be approved by the Lottery.
These shall be rented in conjunction with the Lotterys process of scheduling retailers
for training. Retailer training sites shall be within a fifty (50) mile radius of retailer
locations to limit the driving distance for attending a training class. The Contractor may
also provide retailer training at the retailers corporate headquarters or store sites.
3.6.4 Instant Ticket Warehouse
The Contractor shall provide one (1) or more warehouses for Instant ticket and Pull-tab
products, all located within the State of Michigan. The warehouse facilities may be co-
located with another Contractor facility in the State, such as the primary data center.
The warehouse must accommodate enough Instant tickets to support annual Instant
and Pull-tab sales in excess of one billion dollars ($1,000,000,000). The warehouse(s)
may be required to store Lottery retailer point-of-sale (POS) materials occupying up to
500 square feet.
3.6.5 Service Centers and Depots
The Contractor shall provide and operate maintenance centers and depots to fully
support the terminal maintenance and repair program, and consumables warehousing
and distribution.

3.6.6 System Disaster Recovery Plan
The Contractor must provide and semi-annually update a disaster recovery and
contingency plan for the data centers and its other sites used in this Contract. The plan
must be approved by the Lottery and tested semi-annually. The plan must be delivered
by the start-up date.
Such plan shall take into account disasters caused by weather, water, fire,
environmental spills and accidents, malicious destruction, acts of terrorism, cyber attack
response and recovery provisions, and contingencies such as strikes, epidemics, etc.
The plan must ensure continuity of the System and the Lotterys games. Provision shall
also be made for the safe, secure off-site storage of all scheduled backup data and
programs.
The Contractor must provide contact information and detailed System recovery
procedures and documentation and must coordinate with the Lotterys production of its
own disaster plan. Should implementation of any portion of the disaster recovery and
contingency plan become necessary, all costs associated with the plan shall be borne
by the Contractor.
Response Note: The Proposal must contain an outline for, or sample of, such a
disaster recovery plan.


3.6.7 Contractor Capabilities Protection Plan
The Contractor must also produce a disaster plan for its own additional facilities and
capabilities necessary to support the Lottery. For example, the Contractors terminal
manufacturing and central software development and support facilities are critical for the
term of the Contract. This protection plan shall be due at start-up.
Response Note: The Proposal must contain an outline for, or sample of, such a
protection plan.
3.7 Staffing, Services, and Operations Security Plan
The Contractor is required to provide the Lottery with a variety of staff and support
services as described below and throughout the document.
3.7.1 Bidder Personnel
The Bidder must provide information that documents the organizational structure and
staffing with which Lottery operations will be implemented and run. The Bidder must
identify substantial subcontractor staff and consultants by name, where such are
anticipated to be part of the implementation and ongoing operational support efforts.
The Proposal must make clear which proposed individuals are company employees and
which are subcontractors or consultants.
1. Implementation and Conversion Staff. The Bidder shall provide an
organization chart showing names of all management, supervisory, and key
technical personnel who will be active in the implementation and conversion
of the System. There shall be a dedicated technical project manager assigned
to the implementation project who must be on-site during Lottery quality
assurance and conversion. Further, the Bidder must indicate what specific
Contract function(s) staff will perform and how long it is anticipated they will
be engaged. For staff not yet identified, the Proposal shall identify and
quantify them by title, and state what qualifications they can be expected to
have.
2. Ongoing Lottery Operations Staff. The Bidder shall provide brief position
descriptions and an organization chart showing names of all management,
supervisory, and key technical personnel who are expected to be active in the
ongoing operation of the System. For staff not yet identified, the Proposal
shall identify and quantify them by title, and state what qualifications they can
be expected to have.
The Contractor shall provide minimum in-state staffing as outlined below and
other staff as required to fulfill contractual requirements. The Lottery reserves
the right to require additional in-state staffing, based on performance issues
or changes in business requirements, throughout the life of the contract.
Additional staffing needs will be subject to negotiation between the Contractor
and the Lottery. Any requests for additional in-state staffing must be fulfilled


within thirty (30) days of written request. These particular job responsibilities
must be fulfilled by individuals primarily dedicated to functions listed below.
A. Trainers, two (2) (Section 3.7.5)
B. Software support staff, four (4), (Section 3.7.10)
C. Quality assurance specialist, one (1), (Section 3.7.10)
D. Database/report specialist, one (1), (Section 3.7.10)
E. Instant ticket accounting specialists, two (2), (Section 3.4.7)
F. Instant ticket inventory specialist, one (1), (Section 3.4.8)
G. Telemarketers, at a ratio of one (1) per one thousand (1000) retailers,
(Section 3.4.8.1)
H. Security/safety officer, one (1), (Section 3.7.12)
3. Resumes. The Bidder shall provide one-page resumes of all management,
supervisory and key technical personnel planned to be involved in the
installation, implementation, and operation of the System, and shall provide
for each such person:
A. Full name;
B. Most recent five (5)-year employment history;
C. A specific description of experience that person has in connection with
lottery Gaming Systems;
D. Specific indication of the role the individual will have in this project;
E. Any additional helpful information to indicate the individual's ability to
successfully perform the work involved in the Contract.
4. Key Staff Continuity. The Bidder must commit to a good faith effort to retain
proposed key staff for the implementation/conversion phase and the ongoing
operations phase of the project.
3.7.2 Operations Services
The Contractor shall provide operations services for the System and QA systems,
including the operation of two data centers.
1. Data Center Operations Duties. Duties shall include System start-up and
shutdown tasks, monitoring, drawing results entry, report generation, file
backups, and various operational procedures to enable the correct operation
of the System. Recovery from System failures will engage the operations


staff. Operations shall produce reports and files documenting the operations
activities.
The Contractors staff shall continuously monitor the systems and networks,
and must be trained in the Systems monitoring tools for this purpose. Any
System faults must be detected, diagnosed and corrected.
Response Note: The Proposal shall indicate what monitoring tools are
proposed for operators and communications technicians.
2. Secure Operating Principles. The Contractor must operate the System on the
basis of the Principle of Least Privilege, observing need-to-know and
segregation of duties, to limit the ability of staff to misuse the System. The
Contractor must highly restrict superuser capabilities to access and change
System components.
3.7.3 Terminal Provisioning Services: Moves, Adds, Changes,
Removal
The Contractor is responsible for providing terminals and related peripherals at retailer
locations. Besides installing a new retailer (add) it may be necessary to serve an
existing retailer from a new physical location (move), to relocate the retailers terminal
within the premises (inside move), or to de-install a retailer.
The Lottery shall identify the authorization for a retailer change, and then advise the
Contractor in writing that a retailer requires provisioning. This advisory starts the
provisioning clock.
A terminal shall be considered to have completed provisioning and be ready when it has
been installed at the designated location; is in good running and working order; is
communicating with the gaming host systems; is capable of issuing tickets, conducting
validations, and producing reports; and performs all other terminal functions as specified
in this RFP. Provisioning activities must be conducted on a timely schedule.
The Lottery has determined that the following provisioning schedule is the maximum
permitted for completion:
Add a new retailer 10 days
Move a retailer 10 days
Inside move 10 days
Removal 3 days
The Proposal must in this section define the Bidders commitment to a terminal
provisioning schedule and the Contractor will be held to the proposed provisioning
schedule. Shorter provisioning schedules than shown above are desirable.


3.7.4 Support of the Lottery's Partnership with Retailers
The Lottery currently employs its own DSR staff who develop strong retailer
partnerships and are responsible for prospecting new retailer locations; recommending
new retailer locations; responding to retailer concerns, questions or problems relating to
the Lottery program, its games, policies, and procedures; notifying retailers of new
game features, modifications to current games, addition of new games, changes in
Lottery policy, and delivery of retailer point of sale marketing materials.
1. The Bidder must propose mechanisms such as meetings, messaging, and data
interfaces to facilitate DSR services and resolve retailer concerns or problems
with Contractor-provided services such as terminal functions, terminal repair, and
quality, timely delivery of consumables, and retailer concerns involving Instant
game inventory.
2. As an Invited Option the Bidder may propose provision of temporary support
staff for the purpose of assisting the Lottery in specific situations where
unanticipated growth or events impact the Lottery's ability to respond to the
market. The support staff may be responsible for duties such as placement of
point-of-sale materials, retailer training, recruiting new retailers and/or other sales
support functions. The personnel in this category will work under the direction of
the Lottery, consistent with the objectives and standards established by the
Lottery's State Sales Manager. Contractor may be required to provide additional
staffing in the event the Lottery is unable to obtain sufficient headcount to fulfill its
responsibilities under this Contract. At the time such staffing needs arise,
fulfillment of the positions and pricing shall be negotiated with the Contractor.


3.7.5 Retailer Training Programs, Initial and Ongoing
The Contractor shall provide training for retailer staff in the operation of retailer
terminals both for the initial conversion training, on-going new retailer training, and for
major System changes during the Contract. The Contractor must provide two full-time
dedicated trainers after conversion on an on-going basis for current training and re-
training of Retailers.
1. Retailer Instruction. To support the conversion, the Contractor shall provide
initial hands-on group instruction at locations approved by the Lottery and
shall provide training on-site at retailer locations when appropriate. Further
Contractor-supplied training will be required by the Lottery after start-up and
during the Contract period in case of a major System release or games
modification and for training of new retailers.
2. Retailer Training Program Contents. The retailer training program must cover
the retailer terminal and peripherals, and On-line, Instant and pull tab
products. The program must address not only the technical aspects of
operating the terminal and account management (e.g. inventory
management, accounting, settlements (EFT), adjustments), but also
approaches for interacting successfully with players. Contents of the training
program must be approved by the Lottery.
Response Note: The Bidder shall describe the proposed training
program in terms of materials, facilities, sessions, and schedule. The
program description shall address the Bidder's capability of providing
for the specific training needs of top corporate accounts.
3. Training Security. The Bidder must describe the mechanisms for security of
ticket stock and training tickets produced during retailer training sessions, and
the security of the terminals themselves from tampering or theft. Security
must comply with any multi-jurisdictional rules.
4. Training Materials and User Documentation provided by the Contractor.
A. Handouts and/or manuals on the correct use of retailer terminals and
retailer procedures are required and must be approved by the Lottery.
Such documentation must contain, at a minimum, information and
instructions on changing ticket stock, how to conduct each type of
transaction, obtaining and using the reports, hotline procedures, use of
playslips, claims, accounting invoices, payment process, inventory
business rules and guidelines, and retailer adjustments. Such manuals
shall be written at sixth grade reading level and feature a high level of
visuals to achieve greater understanding. Retailer training materials must
be available on the retailer website.
B. Manuals and user documentation must be available in English.


Response Note: The Bidder must include samples of similar such
user (retailer) documentation the Bidder has produced and
distributed.
C. User Documentation Updates. The Contractor shall update the training
materials and any user and player documentation provided to retailers
with each game or procedural change. The format must be approved by
the Lottery. Final version copies shall be supplied to the Lottery and to the
retailers two (2) weeks prior to the start date of any new game or game
change. Training changes shall also appear on the retailer website.
D. Terminal-Based Documentation and Training. It is required that the
Contractor provide supplementary video or graphical training and
documentation directly through the retailer terminal at the point of sale.

3.7.6 Lottery Staff Training
The Contractor must provide training for Lottery staff, at the Lottery offices, or
appropriate venues as approved by the Lottery.
1. Customized Training. Training must be customized to meet the unique needs
of Lottery employees performing specific primary and support activities. At
times during the Contract additional training may be needed as System
features evolve.
2. Training Methods and Tools. Training must incorporate a mix of instructor-led
presentations and discussions, as well as interactive hands-on, computer-
based activities and workshops. The Contractor will provide workbooks and
documentation to support these activities. Training documentation must also
be provided in electronic format.
Response Note: The Bidder shall describe what training will be provided to
Lottery staff regarding concepts of the lottery Gaming System, use of the games
management applications, administrative reports, Contractor-provided services,
security features and controls, and any other relevant aspects of the proposed
package of systems and services.
3.7.7 Retailer Consumables Supply
1. Consumables. The Contractor shall provide and deliver consumables to the
retailers, reminding the retailers during this activity that secure storage of
consumables is a priority. The consumables to be provided include:
A. Play and adjustment slips that can be processed by the terminal reader;
B. Secure ticket stock;
C. Any terminal supplies required to print tickets; and


D. Updated reference manuals automatically required at game change, new
game, and upon Lottery request. There must also be a current version of
documentation available on the retailer website.
Consumables do not include point-of-sale (POS) materials, which are
distributed by Lottery DSRs.
2. Consumables Designs. Consumables designs and wording shall be jointly
developed by the Contractor and the Lottery, and must be approved by the
Lottery prior to production and distribution. The Contractor will be responsible
for consumables production, storage, and delivery.
3. Testing and Training Ticket Stock. The Contractor must ensure that in
addition to production ticket stock, there is stock of the same paper quality
suitable for retailer terminals used at training facilities, and for use by the
Lottery in testing, training, and promotions. Testing and training ticket stock
must be plain and conspicuously distinct from live ticket stock and must
comply with any multi-jurisdictional security rules.
4. Multiple Suppliers. In order to avoid dependence on one (1) supplier, the
Contractor must have more than one (1) source of paper stock and printing
service(s), as well as multiple suppliers for any other consumables.
5. Inventory Management. The Bidder should describe an inventory
management process for consumables and how to ensure retailers receive
what they need when they need it.
3.7.8 Retailer Equipment Maintenance Program
The Proposal shall describe the maintenance plan for the retailer terminals and
associated equipment. The term "retailer terminal" shall include all attachments and
peripherals provided or serviced by the Contractor. The Contractor is obligated to
obtain replacement parts and services that are approved, recommended, or
recognized by the original equipment supplier as effective.
1. Retailer Hotline Services. The Contractor must operate a toll-free hotline to
support the retailers. (See Section 3.7.14)
2. Retailer Terminal Maintenance. As well as to repair or replace the terminal, its
peripherals, or wide area network communications interface, the Contractors
technicians will be required during any service call to routinely check the
mechanical security, safety, and general operation of any mechanisms or
attachments provided or serviced by the Contractor.
3. Terminal Preventive Maintenance Schedule. The Contractor and Lottery shall
agree on a preventive maintenance (PM) schedule for the retailer terminals.
For the Proposal, the Bidder must propose a PM schedule however the
schedule cannot exceed a one hundred eighty (180) day cycle. In no case


shall there be attempts to render preventive maintenance services during
retailers busiest periods.
4. Terminal Parts Supply. The Contractor shall maintain an adequate supply of
parts to sustain the service of terminals that it has supplied and is required to
maintain.
5. Terminal Repair and Maintenance Reporting. At service events a log will be
updated noting the maintenance activities. The log information shall be
entered to a database accessible to the Lottery. The Lottery shall have
access from the games management application to generate reports from the
retailer dispatch and repair data that indicate when services have occurred,
what services have occurred, and on an exception basis, when services have
been untimely.

3.7.9 Other Host, Systems, and Network Equipment Maintenance
The Contractor shall be responsible for maintaining data center components, including
but not limited to host systems, LANs, telecommunications equipment for the central
sites, and infrastructure items (such as power and HVAC). Documentation of
maintenance events must be maintained by the Contractor for Lottery review. The
Contractor is obligated to obtain replacement parts and maintenance services
that are approved, recommended, or recognized by the original equipment
supplier as effective.
3.7.10 Gaming System Engineering Support Services
Timely and committed fulfillment of Lottery requests for System support and changes is
a requirement. The Proposal must identify how systems and software engineering
support services for System management, System error correction, support for changes
to the Lotterys business rules and requirements, and game changes will be delivered to
Michigan, by responding to the following.
1. System Releases. The Contractor must support quarterly releases of
software batches as a minimum. The Contractor must describe a typical
development cycle for release of a new game or modifications to an existing
game. Tardy delivery of releases may result in Liquidated Damages (see
Section 2.26).
2. Software Support. The Contractor must provide software and systems
engineering support for System changes. The Contractor must provide at
least four (4) in-state staff to meet this requirement.
3. Quality Assurance. The Contractor must provide an in-state Quality
Assurance capability and support for the Lotterys acceptance testing. This
individual may not be one of the four noted in item 2 above.


4. Database and Reporting Specialist. The Bidder must propose a Michigan-
based staff member to provide for reports and database management upon
request of the Lottery. They will also be responsible for training Lottery
users in Lottery-selected (and vendor-provided) ad hoc reporting software
such as Crystal reports. This individual may not be one of the four noted in
item 2 above.
5. Shared Records for Change Management. In fulfillment of joint
responsibilities between the Contractor and the Lottery to make System
changes in a timely and correct manner, the Contractor must provide shared
access to change requests and change tracking for the Michigan project.
3.7.11 System Change Control and Configuration Management
The Contractor shall operate under defined change control and configuration
management procedure practices. Configuration Management practices, as described
below, shall apply to all of the following components: documentation, procedures,
specifications, program application source and object code, operating systems,
database platforms, other third-party applications, host systems and network hardware
major hardware components, and any other major System components. Strict
performance according to principles of configuration management is required:
1. Approved Changes Only. The Contractor shall ensure through procedural and
System controls that only Lottery-approved changes, on an approved
schedule, can be made. Reports and/or displays shall be available to the
Lottery to review all related change and configuration management activities.
2. Change Introduction. All changes to host systems, network devices or
applications must first be completed on the related testing systems. All
changes approved and completed for production systems must also be
completed on the associated backup systems.
3. Software Checksums. Checksums are required for software at the time it is
released for Lottery testing, and must be available at any time for testing
applications and for the production systems.
4. Component Identification. System components shall be documented with
version and release numbers, patch versions, or model and serial numbers.
5. Traceability of Components. System components shall be traceable,
identifying the history, use, and location of a component.
6. Change Tracking. The Contractor must track all changes made to System
components, provide reports showing when and by whom a change was
made and for what purpose, and must avoid multiple update conflicts.
Change logs must reference associated planning documents and approvals.


7. Configuration Status and Inventory. The Contractor shall have the ability to
produce a configuration status report identifying the current configuration of
any System component as well as an inventory report including all System
components.
8. Documentation. The Contractor must provide and maintain comprehensive
System documentation for the Lottery including but not limited to: network
diagrams, security standards and processes, multi-jurisdictional security
standards compliance documents, change control processes and procedures,
data dictionaries, third-party licensing documentation, etc.
3.7.12 Operations Security Plan
The Lottery expects its System and operations to be of the highest security and
integrity. This requires both the Lottery and its Contractor to maintain a confidential,
high-level comprehensive approach to information security controls. For example, staff
must be organized, assigned, and operate under procedures and with System controls
that mitigate such threats as insider fraud.
To ensure compliance with Lottery security policies and operations security, the
Contractor is required to staff a Michigan-based security/safety officer. This individual
must be well versed in information and physical security measures to maintain data,
information systems, and IT infrastructure protections (including business continuity and
disaster recovery). CISSP (or other information/audit security) certification is desirable.
The Contractor must present an Operations Security Plan ready for approval by the
Lottery, the submission to be achieved no later than one hundred (100) days prior to
commencement of operations. Approval of this plan is an entry criterion for acceptance
testing.
In addition to meeting the requirements stipulated in Section 2.27 Security Program the
security plan in the Proposal (to be revised after award) must include the following
sections:
1. Business Impact Analysis
2. Risk, Threat, and Vulnerability Analysis
3. Security Strategy
4. Personnel Security Practices
5. Physical Security
6. Data Security
7. Systems Security
8. Telecommunications Operational and Physical Security Systems Network
Security
9. Terminal Security
10. Telecommunications Access Security Applications and Data Security
11. Patch Management
12. Incident Response
13. Protection of Software and Other Copyrighted Materials


14. Plan Evaluation
15. Security Awareness/Training
16. Plan Maintenance
17. Intrusion Detection
18. Log analysis.

There shall be periodic audits for compliance with the security plan; and periodic
meetings with Lottery staff to review security controls. The security plan must follow a
format approved by the Lottery, must be approved by the Lottery, and must comply with
any associated multi-jurisdictional security requirements (e.g. Mega Millions rules).
Response Note: The Bidder must include a sample or outline of an Operations
Security Plan that the Bidder has produced and uses in other operations that are
comparable to specifications in this RFP.
3.7.13 Electronic Media, Computer Room Paper, Supplies
The Contractor shall supply all magnetic tapes, cartridges, disk packs, diskettes, and
other media items, printer paper, and supplies needed to operate the Gaming System,
Lottery testing terminals, ICS, and games management systems.
3.7.14 Trouble Tracking, Dispatch, and Reporting System (Hotline
Support)
The Contractor shall staff a toll-free hotline call center for handling Retailer trouble calls.
The hotline call center is required to be located in the United States. Staff trained for
Michigan Lottery specific tasks must be available during hours this center is receiving
Michigan Lottery Retailer calls. This center shall maintain and manage a database and
reporting system that fulfills the following criteria:
1. The hotline must operate during all games operation hours (currently 6 a.m.
to 2 a.m., but subject to extension). Dispatches shall be limited to an eighteen
(18) hour period from 6 a.m. to midnight assuming the retailer is open during
that period. The hotline operator function may be supported in-State but is not
required to be.
2. Tracking: Tracking and reporting of Retailer terminal, communication line,
network and other Retailer reported problems is required whether or not
actual problem(s) are found. Data must be retained on all terminals including
those held in reserve or returned to a depot for maintenance. The system
must have ability to assign a problem type and resolution code and provide
useful reports for review.
3. Maintenance Information: The Contractor is required to maintain
maintenance data for the Contract term with at least twelve (12) months of
historical data accessible on-line. On-line data must be accessible for Lottery
staff via a secure web-enabled browser.
4. Call System Management:


A. Staffing The Contractor must describe how the Hotline Call Center will
be staffed and managed to ensure timely, professional and accurate
response to Michigan Lottery Retailer calls.
B. Call System - Telephone call management equipment must be capable of
handling all incoming calls on toll-free circuits. If all available Hotline
operators are busy, a prerecorded message must be played and the calls
must be queued for the next available staff member. If a call is queued,
the system must provide call status information to the caller at intervals
including estimates of hold time.
C. Call System Reporting The Lottery must be able to monitor the calls
received by the Hotline Call Center through desktop work stations (or
dedicated devices supplied by the Contractor). The data to be monitored
shall include but not be limited to current date/time, calls received today,
calls holding, average answer time, number of calls waiting, average and
total hold times, and the number of calls abandoned and their average
abandon time. The call management system must provide daily and
weekly statistical summary reports for Lottery and Contractor review.
D. Call Recording A recording device must be provided to record all
telephone conversations transacted on the Hotline Call Center circuits.
Recording of telephone conversations must adhere to all applicable
Federal, State and local laws. The Contractor must provide the recording
equipment and maintain recorded conversations for at least sixty (60)
days. Conversation files must be transferable for Lottery review upon
request.
E. The Contractor must provide a solution to replace the Lotterys current
AVAYA G3i telephone switch and AVAYA Interactive Voice Response
System (AIR). Currently the telephone switch handles 1500 2000 calls
per day from Lottery Retailers. Callers use the menu options in the AIR to
be routed to the Lotterys Retailer Services Unit, the Contractors
Telemarketing group or to the Hotline for repair or questions. The
telephone switch also handles about 25,000 calls per day from players
inquiring on winning Lottery numbers. Players use the keypad on their
telephone to select the game and date for winning numbers over the past
year. Winning numbers are stored on the AIR and are updated
immediately following each drawing. Players using the Public Relations
telephone number can access winning numbers, listen to recorded
messages on current game prizes, promotions, or how to play instructions,
or be transferred to a Public Relations Representative for assistance.
The Contractors solution must provide the equipment ,software and maintenance to
replace all the above mentioned equipment, handle all transfers and connectivity, cover
the costs of the inbound toll-free service and provide equipment and software to record
all calls forwarded to the Lottery Retailer Services.


3.8 Gaming System Implementation
The implementation process requires that all of the new software, hardware, and
service elements of the new System be delivered, installed, tested, and put into
production operation.

A significant amount of pre-existing information and processes must be integrated into
the new System. The new System must process tickets from the old system which are
still in the field at the time of implementation of the new System. The System will be
expected to process validations, full and partial pack returns, stolen ticket reporting,
distribution, shipment confirmation, activation and settlement. As well, On-line wagers
for future games must be converted from the old system to the new System at cut-over.
Validations must be supported on all games, including past unvalidated winners. The
integration of existing elements into the new System environment must be performed
seamlessly.

3.8.1 Conversion Strategy
The Bidder is at liberty to propose alternative conversion strategies that would support
the Lotterys implementation best. The Bidder shall describe the pros and cons of the
approach proposed.
Response Note: At a minimum, the following Lottery goals must be addressed in
the Proposal description:
1. Minimizing conversion limitations (such as coming up late on the start-
up day, or without the full complement of retailers).
2. Avoiding start-up System failures and outages.
3. Maintaining good retailer relations and addressing retailer issues during
conversion (such as inconvenient training opportunities, getting all
retailers trained, and demand for counter space when installing a new
terminal).
4. Minimal disruption to selling tickets and paying winners.
3.8.2 Formal Implementation Plan
The Proposal must contain a detailed implementation plan and time chart (Gantt, PERT,
or similar) identifying the major milestones to be accomplished for the business
requirements definition, construction, equipment delivery, software programming,
installation, testing, and file conversion. The plan must make clear which items are on
the critical path for timely implementation. The Lottery will approve the final
implementation plan of the Contractor.
Response Note: Responsibilities of the Contractors implementation team, of the
Lotterys implementation team, and of any of the Lotterys other providers (e.g.,
Instant ticket supplier), must be identified. Retailer roles and responsibilities
during conversion must be addressed.


3.8.3 Interim Facilities and Processes
If the conversion involves interim configurations, facilities, staffing, or business
procedures, the Proposal must explicitly describe them and note their development and
use within the schedule. Costs associated with interim facilities are strictly the
Contractors responsibility.
3.8.4 Installation and Lottery Quality Assurance/Acceptance
Testing
The Lottery will conduct a series of acceptance tests, which the Contractor is obliged to
support. Lottery acceptance testing will be conducted from the testing facility equipped
by the Contractor at Lottery Headquarters.
1. Schedule for Lottery Acceptance Testing. To support acceptance testing, the
Contractor must have the data center facilities, systems and network
hardware and software, and at least eight (8) test terminals installed,
configured, and operational one hundred (100) days prior to the scheduled
conversion of the first terminal.
2. Documentation and Support. Training and written procedure manuals specific
to the Michigan Lottery must be delivered to the Lottery upon availability of
the System for Lottery acceptance testing. During the testing period, the
Contractor must provide technical staff on-site as a resource to collaborate
and support the Lotterys acceptance testing.
3. Ticket Stock Testing. A sample of the production ticket stock must be
provided for ticket testing to ensure that it is manufactured in accordance with
all RFP requirements and Proposal specifications. The ticket stock sample is
due on or before the start of the Lottery acceptance testing period. The
Contractor will be responsible for the cost of third-party testing of the ticket
stock by a Lottery-selected laboratory.
4. Randomizer Testing. Samples from the Contractors randomizer software in
the retailer terminals and from the automated drawing software application
must be submitted for quality testing. The randomizer samples and
certification are due on or before the start of the Lottery testing period. The
Contractor will be responsible for the cost of third-party testing and
certification of the randomizers by a Lottery-selected laboratory.
5. Release Notes. Each release of the software for testing by the Lottery must
be accompanied by release notes. The release notes must evidence good
configuration management practices, namely each release must be identified
by a version number and the changes must be succinctly defined. This
requirement shall extend throughout the Contract.
6. Entry and Exit Criteria. The Lottery will consider the System ready for
acceptance testing once all hardware and software items are installed and
configured to operate in the Lotterys environment and in accordance with the


Lotterys standards. The Lottery will have successfully completed testing
when all components of the System have been tested and all significant
issues identified during testing are resolved by the Contractor and validated
by the Lottery. The Contractor and the Lottery shall develop and agree upon
detailed criteria that must be met prior to the System being put into
production.
Response Note: The Bidder shall agree to comply with the Lotterys
reasonable statements of entry and exit criteria for Lottery quality
assurance/acceptance testing and identify any issue that may concern
the Bidder regarding effective and timely testing.
3.8.5 Project Reporting and Monitoring
The Proposal must provide a dedicated on-site technical project manager for the
implementation. The Bidder must propose a project team structure, process, and tools
that facilitate Lottery oversight of the implementation. Regular reporting, walkthroughs,
and project status meetings are required.
The Contractor shall provide suitable access to project records to enable Lottery staff to
monitor project management tasks, schedules, and issues. This requirement begins
with conversion and continues throughout the Contract.
3.8.6 Validation After Conversion
The Contractor must accommodate validation of winning On-line tickets that have been
sold prior to the conversion, either by reading the bar code or by accepting manual entry
of the "old" winning ticket's serial number. The Contractor must also convert the Instant
ticket validation files to permit validation by bar code read (and manual entry). The goal,
both during conversion and after, is to minimize confusion and effort for the players and
retailers. A winning ticket must not be able to be cashed more than once.
3.8.7 Historical Data
The Contractor must convert a minimum of thirty six (36) months of pre-existing sales
and operating data so that the Lottery and the retailers will see a continuity of data in
displays and reports from before, during, and after the start-up day. A conversion
process for historical Lottery data will need to be developed by the Contractor in
conjunction with the Lottery.

3.8.8 Removal of Previous Retailer Terminals
The Contractor must remove and dispose of the existing complement of retailer
terminals and peripherals if these items have not been removed as a consequence of
the past Gaming System contract. Old terminals will all be replaced as a result of the
new Contract.


3.9 Back-Office Processing System (BOPS) Environment
A description of the current back-office environment can be found in Appendix D
Existing Lottery Back-Office Environment.

3.9.1 Overview of Requirements

The Contractor must provide hardware, operating system and database software, and
report-generating software for all back-office functionality. The functionality outlined in
Appendix D must be supported. Some of the functions in Appendix D will be performed
by the ICS vendor, some may be provided by the Contractors base system, others
proposed by the vendor as Invited Options, and others will be performed by the Lottery
IT staff. Since the Lottery is not precisely aware of what Bidders are currently providing
in their base systems and what Bidders may propose to offer as invited options, the final
configuration of the back-office systems will be determined during contract negotiations.
The Lottery wishes to minimize duplication of processing, hardware and development
effort on systems for the back-office where the Bidders or ICS vendors systems may
already provide the needed functionality.
Bidders may propose Invited Options for the functions outlined in Appendix G.
Bidders should clearly indicate what functionality would be provided at no additional
charge as a part of the baseline system as indicated in Section 1.15 (J ). Additional
functionality and costs may be proposed as Invited Options for each item listed in
Appendix G. Bidders may propose to offer some of the functionality, but not all
individual elements as specified in the proposal. The Lottery will determine what
functions are best provided by the Contractor and which are best provided by dedicated
Lottery staff.
.
3.9.2 Lottery Information Management (IM) Support
The Lottery IM unit has the day-to-day responsibility for general service, including
computer operations, office automation, database management systems, ad hoc
reporting, helpdesk support, telephone support, internet design and support, networked
communications, software development/maintenance, and general technology support
to all users at Lottery Headquarters and the regional district offices. Some of these roles
may be fulfilled by the Contractor after evaluation of the Contractors base system and
acceptance of Specified Options.

The Contractor will coordinate changes in situations where the Gaming System
interfaces to the back-office, work with Lottery IT staff, and ensure the required
functionality is provided.
Response Note: Bidder should describe additional functionality offered that may
improve the reliability and/or performance of the back-office.


3.9.3 Hardware and Software Requirements
The BOPS shall provide for ample growth beyond the initial capacity sizing at startup.
The BOPS must be fault tolerant and provide for disaster recovery and backup
capability at the business continuity site (RFP Section 3.6.1.2).
The BOPS shall consist of a Local Area Network (LAN) at the Lottery Headquarters in
Lansing, with end-user workstations (Lottery provided) and host/server systems.
Networking equipment at the Lottery Headquarters (e.g., firewalls, switches, hubs,
routers, IDS, LAN wiring) shall be furnished and maintained by the Lottery.
1. Standards. Any hardware or software provided by the Contractor must adhere to
the following standards:
A. Authentication. The State currently uses two-factor authentication with
security software for field and office staff to remotely access Lottery
central systems. Any remote access solution proposed by the Contractor
must adhere to State standards.
B. Server Capacity. Each server must be capable of 100% expandability in
CPU processor power, main memory, and disk storage without extended
downtime that would disrupt ongoing operations. All servers shall be rack
mounted, have redundant power supplies, have hot-pluggable hard drives,
have an internal DVD drive and select servers should also have a floppy
drive.
C. Disk Storage. The server disk storage must provide either fault tolerant
redundancy in hardware components, or be part of a Storage Area
Network (SAN) to provide storage scalability, individual component
redundancy, and fault tolerance.
D. Current Design. The use of off-the-shelf, commercially and generally
available hardware and software is mandatory for the BOPS platform. All
hardware and software must be new, unused, and of the most current
design and manufacture. Equipment must be compliant with current
electronic technology manufacturing standards and be of current
manufacture by the Contractor or its suppliers. All hardware models and
software versions installed must represent the then-current equivalent or
better equipment in case a proposed device is phased out or replaced.

2. Minimum Equipment Requirements. At a minimum, the Contractor must provide
the following equipment to replace current vendor-supplied hardware. The
following server systems must be delivered on or before one hundred (100) days
prior to Lottery acceptance testing. All production, quality assurance
(QA)/acceptance test, and development, and test systems must be installed with
the most current server operating system and database software necessary to
run back-office processes as described herein. Server, database software, and
report generating software requirements will be reviewed during contract


negotiations. Any server/system requirements revisions may be renegotiated to
provide compensating or alternative services and/or equipment to the Lottery.

12 Servers at Lottery:
Qty. Type
5 Production Servers
2 Quality Assurance/Acceptance Test Servers
2 Development Servers
1 Production Database Server
1 Quality Assurance/Acceptance Test Database Server
1 Development Database Server

3 Servers at Business Continuity Site with identical production
configuration (see Section 3.6.1.2).
2 Production Servers
1 Production Database Server

3. Hardware Configuration. Configurations of the twelve (12) servers listed above
(i.e. production, QA, and development) are dependent upon the Contractors
solution. The Contractor must propose back-office environment (hardware,
operating system, and related software) to support functionality outlined in
Appendix D, which will be replaced by a combination of both Lottery and vendor
software. The final hardware configuration (e.g., equipment, operating system,
database platform, etc.) will be determined during contract negotiations. For
purposes of pricing for this RFP bidder may assume Microsoft SQL Server or
equivalent database will meet the requirements of the back office.

4. Minimum Configuration. The following are minimum hardware configuration
requirements:
3.0 GHz processor
2 GB RAM
160 GB Disk Storage, RAID 5
10/100 NIC
1.44 MB Diskette Drive
16 X DVD +RW/R Drive

5. Business Continuity. Servers with identical configuration for the two (2)
production servers listed above must be provided at the Contractors primary
data center location as the Lottery Business Continuity system.

6. Network. Routers and network minimally must connect to the Contractors online
gaming environment, to the regional offices and to the business continuity site
(RFP Section 3.6.1.2).
7. Wiring. Wiring and switches in service closets are in place at the Lottery
Headquarters and further wiring is not anticipated over the course of the


Contract. Wiring and switch infrastructure will be needed at the business
continuity site, which the Contractor must provide.
8. Backup. The Contractors backup solution must provide a high-speed nightly
backup of the BOPS data. The Contractor shall provide pickup and off-site
storage of backup media.
9. Additional Hardware. The Contractor may also be required to provide additional
hardware, software, and services to support other BOPS functions on a pass-
through basis without markup.
10. Software Standards. The software used to support BOPS gaming functions must
use off-the-shelf, commercially and generally available software or software
developed using industry standards such as Open Standards, IEEE, ISO, etc.
The Contractor must provide and maintain the most current version of the
software and provide a means for the IM staff to query software license numbers
and versions.
11. Compatibility. The Lottery has developed a comprehensive suite of software for
the existing BOPS. These converted applications, or applications that replace
them with the advent of the new Gaming System, must run effectively on the new
BOPS configuration and the Gaming System provided by the Contractor.

Note: For reference, Appendix D lists the current BOPS functionality at the Lottery
headquarters and the regional offices. Appendix G outlines specific functionality for the
Invited Options. Bidders should propose any additional functionality as offered options.

3.9.4 BOPS Communications
Although the Lottery Headquarters is wired for an Ethernet network, the Contractor shall
be responsible for Lottery central office WAN connectivity to the Lottery regional
(District) offices, the Contractors network, and the Lotterys business continuity site.

Further, the Contractor is responsible for all networking needs at the Lottery BOPS
business continuity site as outlined in RFP Section 3.6.1.2. The Contractor shall provide
the network routers, configuration and circuits and will be responsible for maintenance
and upkeep of the business continuity site network.

The Lottery uses a State-provided router which connects the Michigan Lottery to the
State of Michigan enterprise network. The Lottery users' Internet access, WAN e-mail
and any access to applications will pass through this enterprise router. Although the
Contractor is not responsible for this part of the WAN, its network design must consider
any impact to the enterprise, to ensure secure and efficient co-existence.

3.9.5 BOPS Site Preparation
Any network infrastructure or building improvements in the Lottery / State offices shall
be the responsibility of the Lottery.


The Lottery currently provides HVAC, a backup generator, UPS backup, LAN wiring and
raised flooring for the existing Lottery central computer environment. The Lottery will
continue to provide adequate UPS, HVAC and generator backup for all installed
systems and components in the central Lottery office. An equivalent capability must be
provided by the Contractor, at the business continuity site (3.6.1.2).

3.9.6 BOPS Ongoing Maintenance and System Support
The Contractor shall be responsible for license and maintenance agreements for
hardware and software provided under this contract. The Contractor will provide a
single point of contact for all routine system upgrades, repairs and maintenance; and for
all system failures.

Version upgrades, patches, fixes and security enhancements, and support must be
maintained and provided by the Contractor throughout the duration of the initial and all
extension contract terms. Refer to Section 2.16.1 for further requirements. The
Contractor must provide all system documentation for products supplied to the Lottery.
This includes:

1. End User Manuals (on CD or built-in with online help files)
2. Technical/Systems Documentation (on CD)
3. Operations and Systems Administration Manuals (on CD)

3.9.7 BOPS Training
The Contractor must describe any training provided for Lottery staff to ensure proper
operations and usage of the proposed back-office system.

3.9.8 BOPS Implementation Plan
The Proposal must provide an implementation plan (i.e., schedule, milestones,
resources) that will outline the proposed BOPS system tasks:

1. Installation
2. Remote LAN/WAN communications
3. Testing of the operating software and software tools/products
4. Training

The implementation plan must specify the activities to be performed in each task, and
include the number of the Contractors staff assigned to the project and the amount of
time and scope of effort that the Contractor anticipates these people to be available.

The implementation plan must also specify work efforts expected of Lottery staff to
support the BOPS implementation.

3.9.9 BOPS Recovery
The Contractor must specify a BOPS recovery plan which will describe the procedures
to be followed in order to:


1. Recognize and alert in the event of system failures
2. Avoid data corruption, loss, and unauthorized disclosure
3. Perform routine daily backup procedures
4. Perform restoration procedures

The recovery plan must also address disaster recovery for the BOPS. This plan must
include the method for Lottery to authorize and switch control of the database and files
running at Lottery Headquarters to the Business Continuity Site referenced in Section
3.6.1.2 of this RFP.

Response Note: The BOPS recovery plan will be due from the Contractor at the
beginning of acceptance testing by the Lottery.


3.9.10 BOPS Acceptance Testing
The Contractor must ensure that the hardware configuration and software is provided,
installed, configured, tested and run in a parallel mode prior to start of the contract. The
back-office functionality must be ready for acceptance testing one hundred (100) days
prior to production start-up.

The Contractor must support a comprehensive acceptance test of the entire BOPS
environment. This test, and demonstration to Lottery, must include, at a minimum, the
BOPS LAN/WAN operating environment; all office automation features, application
functionality and back-up system viability.

The Contractor must prepare an acceptance test script and plan for Lottery approval
prior to execution of the acceptance test sessions. The Lottery will conduct or oversee
the acceptance test.

3.9.11 BOPS Project Management
The Contractor must designate a Project Manager to assume total project responsibility
and serve as the primary point of contact for the BOPS configuration, installation,
migration and testing phases. It is mandatory that the proposed Project Manager have
experience managing a project of comparable size and scope.
The Contractor Project Manager shall meet on a biweekly basis, at a minimum, with the
Lotterys IM Manager. These meetings will be held for the purpose of reviewing the
progress of the project and clarifying issues. The Contractor Project Manager must
provide standard management and status reports including:

1. List of tasks and deliverables with target completion dates;
2. Accounting of staff resources and time; and
3. Problems encountered and proposed solutions.

Any problems that are encountered must be reported to Lotterys IM Manager upon
discovery to avoid project delays.

3.10 Bidder Corporate Capability
The Bidder is required to demonstrate corporate experience, technical capability,
integrity, and financial means to support the Contract.
3.10.1 Corporate Background Review
The Bidder shall provide the following information:
1. Name and address of the business entity making the Proposal
2. Type of business entity (e.g., corporation, partnership, etc.)
3. Place of incorporation, or other form of organization, if applicable


4. Name and location of major offices, plants and other facilities that relate to
performance under the terms of this RFP
5. Name, address, and function of substantial subcontractors, associated
companies, or consultants that will be involved in any phase of this project
3.10.2 Gaming Systems Experience
It is required as a minimum that the Bidder has one or more current U.S. clients to
which it has supplied a Lottery Gaming System comparable to the functional
specifications of this RFP.
Response Note: The Bidder shall describe, in detail, the current and historical
experience of the Bidder with Lottery Gaming Systems; that is, descriptions and
references for all gaming industry engagements of comparable complexity and
sensitivity that have been conducted by the Bidder over the past five (5) years.
Each experience statement shall include the following details:
Name of lottery or gaming enterprise(s)
Estimated contract value
Number of retailer terminals delivered to the customer
The term of the contract including effective dates
Reason for contract end, if the contract is no longer in effect
Whether the implementation was a new state installation, or a conversion
from another lottery Gaming System. If a conversion, then whether the
conversion was from the Bidders previous system, or from a system supplied
by a different company.
Types of services directly provided by the Bidder under the contract and
whether the Bidder was a prime contractor or subcontractor
The descriptions must include names, titles, addresses and telephone numbers that
may be contacted to verify qualifying experience.
Response Note: If the experience is provided by a teaming partner or a
subcontractor that will provide a major part of the products and services, then
experience information for that entity must be included.
3.10.3 Contract Performance
The Bidder must be a business in good standing with its customers and the business
community, evidencing good delivery on the obligations of its contracts. The Bidder
shall state whether any of the following have occurred:


1. Implementation Delays. During the last five (5) years, the Bidder has had a
new System installation delayed beyond the intended start-up date. Similarly,
if during a contract, whether any major game or promotion rollouts have been
delayed beyond their intended starting dates. The Bidder should describe the
circumstances of the delay. If for example delays have been caused by a
force majeure incident, or by the jurisdiction opting to delay, or directly
causing the delay, then the Bidder should cite any such mitigating
circumstances.
2. Terminations. During the last five (5) years, the Bidder has had a contract
terminated for default or cause. If so, the Bidder shall submit full details for
contacting the jurisdiction affected.
3. Suspensions. During the last five (5) years, the Bidder, a subsidiary or
intermediate company, parent company or holding company was the subject
of any order, judgment or decree of any federal or state authority barring,
suspending or otherwise limiting the right of the Bidder to engage in any
business, practice or activity, or if trading in the stock of the company has
ever been suspended, with date(s) and explanation(s).
4. Liquidated Damages and Settlements. The Bidder shall list incidents of
Liquidated Damages and settlements for the past five (5) years where such
resulted in an extraordinary payment to any jurisdiction of one hundred
thousand dollars ($100,000) or greater in a twelve month period. The format
shall indicate the jurisdiction, date, amount, and brief description (e.g., late
delivery of software; central system downtime; untimely terminal service,
unauthorized facilities access).
Response Note: If the experience is provided by a teaming partner or a
subcontractor that will provide a major part of the products and services, then the
same performance information as above must be included for that entity.
3.10.4 Manufacturing Capabilities for Terminals
Capacity to provide the gaming terminals is critical to the project.
1. Manufacturing Plans. The Bidder shall describe its resources, capability,
capacity, and plans for producing (through current inventory, manufacturing,
purchasing, etc.) the terminals proposed to meet the requirements of the
RFP. The availability of additional plants and secondary sources must be
addressed.
2. Manufacturing Quality. The Bidder's Proposal must address manufacturing
quality practices, and in particular whether the Bidder is certified under the
ISO 9000 series or other recognized quality practices standards. Such
practices and certification are desirable.


3.10.5 Software Development and Support Capabilities
Capacity to provide the software and systems support is critical to the project.
1. Software Development Plans. The Bidder shall describe its staff skill levels,
headcounts, and locations pertinent to developing and maintaining software
for the Lottery Contract.
2. Software Quality. The Bidder must address software engineering quality
practices, and in particular whether the Bidder is certified under the ISO 9000
series, SEI CMMI, or other recognized quality practices standards. Such
3.10.6 Project Management Capabilities
Capacity to conduct the implementation and additional evolutionary System changes is
critical to the project.
1. Project Management Approach. The Bidder shall describe its corporate
organization and tools pertinent to managing a large project for this Contract.
2. Project Management Quality. The Proposal must address project
management quality practices, and in particular whether members of the
proposed staff are certified under the Project Management Institute PMP
program or other recognized project management practices standards. Such
3.10.7 Security Management Capabilities
The Bidder must demonstrate a capacity to develop and implement a comprehensive
plan for maintaining effective security controls and practices is critical to ensuring the
integrity of Lottery operations.
1. Security Management Approach. The Bidder shall describe its corporate
organization and tools pertinent to managing all aspects of information
security pertaining to Gaming System development and operations.
2. Security Standards. The Bidder must address security standards and
practices, and in particular whether the Bidders gaming solutions and
practices are compliant with ISO 17799, NIST, COBIT or other recognized
information security, control, and audit standards. Such practices and
certification are desirable.
3.10.8 Research and Development Program
The success of the Lottery depends on the availability of new products, gaming
features, software innovations, and service enhancements. The Contractor must be
capable of supporting the Lottery in its mission.


The Bidder shall describe its resources, capability, capacity and plans for maintaining a
research and development effort in such areas as retailer terminal design, software
developments, telecommunications, network monitoring, games and promotional
content, and sales/operational data mining.
3.10.9 Financial Viability
In order to ensure the Bidder's financial ability to perform under the contract, the Lottery
requires the following financial information.
Response Note: An original and two (2) copies of this information must be
provided and should be submitted with the original Proposal (not bound with all
copies). All submissions must employ US currency or include a US currency
conversion formula.
1. Submission of Financial Statements. All Bidders and substantial
subcontractors must submit certified financial statements, or federal income
tax returns if the Bidder or substantial subcontractor does not have certified
financial statements prepared for the last two (2) fiscal years. Certified
financial statements must be the result of an audit of the entitys records,
prepared in accordance with Generally Accepted Auditing Standards (GAAS)
by a certified public accountant. The certified financial statements shall be
prepared in accordance with Generally Accepted Accounting Principles
(GAAP), and must include balance sheets, income statements, statements of
cash flows, statements of retained earnings, notes to the financial statements
for both years, and any management letters that have been received for those
years. The proposal must include the most recent 10-K and 10-Q statements
(where the 10-K statement does not cover) for two (2) years (or the
international equivalents to the extent available). Bidders may be required to
submit SAS 70 audit reports for Lottery-selected sites.
2. Subsidiaries. If a Bidder or substantial subcontractor is a subsidiary of a
parent entity and the Bidder or substantial subcontractor does not have its
own, separate financial statements, the Bidder or substantial subcontractor
may satisfy its financial responsibility submission requirements by submitting
the consolidated financial statements of its parent entity if the consolidated
financial statements include the activity of the Bidder or substantial
subcontractor. If a Bidder or substantial subcontractor submits the
consolidated financial statements of its parent, the parent must serve as
financial guarantor of the Bidder or substantial subcontractor.
3. Parent Corporation Resources. If the Bidder is a subsidiary and will rely on
the financial resources of the parent to perform this contract, the parent must
certify, in writing in a form acceptable to the Lottery, the availability of its
resources to the Bidder. Parent entities that serve as financial guarantors of
subsidiary firms shall be held accountable for all terms and conditions of the
RFP and the resulting contract and shall execute the Contract as guarantor.


4. External Borrowing. The Bidder must provide a letter of commitment in a form
acceptable to the Lottery from a creditor acceptable to the Lottery, if outside
borrowing will provide any or all of the funding for this project.


PART 4 - PRICING
4.0 Introduction
This section describes the manner in which Bidders will submit pricing for the Lottery's
consideration.
4.1 Separately Sealed Price Proposal
The Bidder is required to provide pricing in a separately sealed envelope marked
Volume II, Price Proposal. The Price Proposal must include a submittal letter signed by
an individual authorized to obligate the company to the Proposal.
4.2 Form of the Price Submission
The Bidder must submit pricing per the Price Quotation Sheet below in the following
format. The Bidder shall assume a five (5) year Contract base period for the pricing.
1. Pricing as a percentage of total net sales. This includes all fees. No other
payments will be made to the Contractor except as a result of negotiated
options and enhancements.
2. Pricing for Specified Options.
3. Pricing for Invited Options.
4. Pricing for Offered Options.
For comparison and evaluation of options, the Lottery has designated the pricing format
and terms. The Lottery may or may not order as such, and this in no way obligates the
Lottery to acquire the options according to the stated format and terms. If the Lottery
should order the options under different terms, the details will be negotiated with the
Contractor.
Response Note: Among the options, any item for which there is no additional fee
can be shown as No Charge (N/C). To Be Determined (TBD) pricing is permitted
only for Offered Options and TBD will not be interpreted by the Evaluation
Committee as N/C.
4.3 Pricing and Scoring of Options
The Bidder is encouraged to propose options demonstrating innovative functions,
features, services, and solutions. Whether options are No Charge or separately
charged shall be clearly noted in the Technical Proposal. Separately charged
items shall have their corresponding prices listed in the Price Proposal as
separate line items. (Otherwise they will be considered part of the baseline.)
To make the evaluation tractable, the Evaluation Committee intends to score only
1. Included baseline features and services.


2. Specified Options at the quantities and terms shown in the Price Quotation
Sheet below.
3. Invited and Offered Options included in the base price.
Not scored: Invited or Offered Options that are separately chargedand designated as
such in the Technical Proposal and in the Price Proposal. These may be considered at
Contract negotiation time or later. Such options included within the base price may or
may not favorably influence the Proposal score in the relevant technical section.


Lottery RFP
for Gaming Systems and Services
PRICE QUOTATION SHEET
All deliverables in base system and any accepted options include delivery,
installation, maintenance and support and are scheduled at start up unless
otherwise noted.
I. Base System Pricing.
Bidders are required to quote the following item as a percentage of total net sales
for the five (5) year contract base period.
Response Note: TBD pricing is not allowed.
Total net sales percentage ______________%
II. Lottery-Specified Options.
Bidders are required to submit specifications and pricing for Specified Options.
Conditions of delivery are provided for bidding purposes, although other delivery
conditions may apply and would be subject to negotiations.
A. Flat panel display attachments for advertising and game information, 1000
provided at startup (Section 3.2.1.3.D)
Monthly charge $ ________________
B. Communications Network Design, Delivery, and Support; start up of 11,000
retailers (Section 3.3).
Monthly charge per retailer $ ________________
C. Subscription system; Anticipated for delivery at year two (2) of the Contract
(Section 3.4.16)
Monthly charge $ ________________
D. Winning numbers, game and Lottery information website (Section 3.4.18.2)
Monthly charge $ ________________
E. District Sales Representative automation (Section 3.4.20)
Monthly charge $ ________________


III. Lottery-Invited Options.
Bidders are not required to submit specifications and pricing for Invited Options.
Conditions of delivery are provided for bidding purposes, although other delivery
conditions may apply and would be subject to negotiations. Bidders should note
requirement of Section 1.15(J ) in that each Invited or Offered Option to be
provided at no additional charge be indicated on a list that clearly indicates which
options are to be provided at no additional charge.
A. Additional On-line retailer terminals in groups of 100 (Section 3.2.1)
Monthly charge for 100 $ ________________
B. Branding tickets with a programmable message (Section 3.2.1.2.AA)
One time charge total $ ________________
C. Alternative Media Reader (Section 3.2.1.2.DD). All terminals included from
start-up.
D. Additional message displays in groups of 250 (Section 3.2.1.3.A)
E. Additional self-service ticket checkers in groups of 250 (Section 3.2.1.3.C)
F. Cash Drawer (Section 3.2.1.3.E). Supplied in groups of 250.
G. Store Signage (Section 3.2.1.3.F). Supplied in groups of 250.
H. In-store Wireless Peripherals (Section 3.2.1.3.G). Supplied in groups of 250.
I. Upgraded Club Game monitors, Flat panel monitors (Section 3.2.1.3.H)
One-time charge total $ ________________


J . Additional Club Game monitors, in groups of 100 (Section 3.2.1.3.H). Bidder
should indicate size(s) and type(s) (more than one price may be quoted for
different monitors).
K. Additional Self-Service kiosk terminals to sell and validate On-line game
tickets, in groups of 100 (Section 3.2.3.1)
L. Alternative Retailer Play Device (Section 3.2.3.2). Bidder may propose
number of units and type of device.*
Monthly charge for *____ $ ________________
M. ITVMs in groups of one hundred (100) and five hundred (500). (Section
3.2.3.4)
N. Combined self-service On-line and Instant terminals in groups of one hundred
(100); (Section 3.2.3.5)
Monthly charge for 100 (maximum of 60 months) $ ________________

O. In-counter and on-counter Instant ticket dispensers. The Bidder may propose
prices for different quantities and sizes.
P. Advanced Communications Features (Section 3.3.5). The price may be
quoted as a one-time charge and a monthly fee relative to the numbers of
retailers benefiting from the design proposed.
Monthly charge $ ________________
Q. Keyless Validation (Section 3.4.5.7).
Monthly charge $ ________________
R. Automated tracking of Instant ticket sales in real-time (Section 3.4.5.10)


Monthly charge $ ________________
S. Player VIP website (Section 3.4.18.3)
Monthly charge $ ________________
T. Provision of temporary support staff. Travel and subsistence charges may be
charged separately at the State Travel Reimbursement rates in effect at the
time utilized (Section 3.7.4.2)
Per hour charge per employee $ ________________
U. Provide Back-Office Functionality as outlined in Appendix G. Bidder should
provide listing of costs associated with each function provided (Section 3.9).
Bidder may propose pricing scenario except for TBD.
i.e. Appendix G (1. A. etc) $_________________

IV. Offered Options.
The Bidder shall attach sheets for any Bidder-offered optional items. Clearly identify the
items offered and the terms under which they are offered. Bidders are not required to
submit any Offered Options.
Response Note: TBD pricing is permitted but such will not be interpreted for
evaluation purposes as N/C.


PART 5 PROPOSAL EVALUATION
5.0 Introduction
This section describes the evaluation process that will be used to determine which
Proposal provides the greatest overall benefits to the Lottery. The ability of the Lottery
to evaluate a Proposal is dependent upon the completeness and proper submission of
the Proposal. The failure of a Bidder to provide information requested by this RFP, to
submit according to the required format, or to respond appropriately to a clarification
request or demonstration request, may result in rejection of the Proposal or reduction in
scoring during the evaluation.
5.1 Evaluation Committee and Lottery Commissioner
The Lottery intends to conduct a comprehensive, fair, and impartial evaluation of
Proposals received in response to this RFP. In making this determination, the Lottery
will be represented by an Evaluation Committee. The Committee will evaluate each
responsive Proposal that is properly submitted by a responsible Bidder and develop
consensus findings.
The Lottery has obtained the services of an independent and non-for-profit consultant,
Battelle Memorial Institute, to facilitate this evaluation effort. Battelle shall not score the
Proposals nor provide an opinion or recommendation as to which Proposal meets the
Lotterys needs best.
The Evaluation Committee will provide its findings to the Lottery Commissioner. The
Lottery Commissioner, if in concurrence with the process and its results, will issue a
notice of award and begin contract negotiations. Upon completion of contract
negotiations, the proposed contract will be submitted to the State Administrative Board
for approval. The contract will not be valid until the State Administrative Board approval
has been received.
5.2 Evaluation Steps
The evaluation and award process will be comprised of all of the following:
1. Review of Proposals to assess compliance with Proposal submission
requirements, including responsiveness to terms, conditions and
requirements;
2. Detailed evaluation of proposed functions, features, services, and references,
using requirements and criteria defined in this RFP;
3. Proposal clarifications, site visits and demonstrations (as determined
necessary by the Evaluation Committee);
4. Scoring of Technical Proposals;
5. Assessment of Price Proposals;


6. Best and Final Offers (BAFOs) tendered upon Lottery request;
7. Compilation of technical scores and price scores into a summary score sheet;
8. Review by the Lottery Commissioner and posting of a notice of award;
9. Contract negotiations;
10. State Administrative Board approval;
11. Signing of the Contract.
5.3 Information from Other Sources
The Lottery reserves the right to obtain, from sources other than the Bidder, information
concerning a Bidder, the Bidder's offerings, capabilities, and past performance, that the
Lottery deems pertinent to this RFP and to consider such information in evaluating the
Proposal. This may include, but is not limited to, the Chairperson of the Evaluation
Committee engaging consultants and additional experts from outside the Evaluation
Team to better inform the Evaluation Teams findings.
References will be checked regarding the Bidders past experience. The Evaluation
Committee will select clients for each Bidder from the information provided in response
to Section 3.10. The Lottery will contact as many references as necessary, as many
times as necessary, to support its understanding of the Bidders Gaming System
performance and experience.
5.4 Technical Proposal Scoring
Each of the technical (non-price) factors in Part 3 will be graded by the Evaluation
Committee based on its best professional judgment, considering all Proposal text,
clarifications, reference checks, and any site visits, interviews, demonstrations, and
qualified sources of information. An additive weighting scoring system will be used.
The weighted scoring system will provide numerical scores that represent the
Committee's assessments of the relative technical merits of the Proposals. The scores
will be used to develop a preference ranking based on non-price factors.
The scoring approach will involve grading ten technical and management criteria,
multiplying the grades by the point weights available for each, then summing up.
5.4.1 Criteria and Weights (Available Points)
The weights (available points) for each of the evaluation criteria are:
TECHNICAL EVALUATION CRITERIA
Section 3.1 Central Configuration 100
Section 3.2 Terminals 120
Section 3.3 Communications Network 100


Section 3.4 Software Controls and Data Management 160
Section 3.5 Games and Marketing 80
Section 3.6 Facilities and Disaster Recovery Plan 40
Section 3.7 Staffing, Services and Operations Security Plan 100
Section 3.8 Implementation 100
Section 3.9 Back-Office Processing System 100
Section 3.10 Corporate Capability 100
1000
Although the Proposal response to the individual criteria will be scored using larger and
smaller weights, the Bidder is cautioned that every criterion reflects requirements that
must be met regardless of a criterion's weight; and that a poor response to a lesser-
weighted criterion still can have a significant impact on the Bidder's final technical score
as compared with other Bidders scores.
5.4.2 Award Scale for Evaluation
Points in this system are "earned" based on the Evaluation Committee's consensus
judgment using the following award scale:
Percent Description
90-100 The Proposal was outstanding for this criterion and the
Committee could not determine any significant limitations.
80-89 The Proposal was good for this criterion, with no more than
one notable limitation or concern.
70-79 The Proposal was fair for this criterion, with the Committee
identifying a few notable limitations or concerns, and
perhaps some minor items.
60-69 The Proposal was poor for this criterion, and there were
several serious flaws and concerns with the approach or
capability.
Less than 60 The Proposal was found to be so severely flawed for this
criterion as to render an essential element of the solution
unworkable and therefore the entire Proposal will be
rejected.
Thus, for each of the ten criteria, the Proposal will receive a score as a result of
multiplying the points available times the award percentage. All ten scores will be
combined for the Proposal's total technical score.


5.4.2.1 Minimum Qualifying Scores
A technical score of less than 60% on any of the ten criteria, or a total technical score
below 75% (i.e., less than 750 of available 1000 points) will render the Proposal
ineligible for further consideration.
5.4.3 Scoring of Desirable Items
Numerous technical requirements in the RFP are accompanied with the description of a
property that is indicated as desirable. The Proposal is not obligated to contain or
respond to these items, but the Evaluation Committee will review Proposals with
reference to them. While no specific weight factors or bonus points are pre-determined
for desirable items in this RFP, the appearance of strong solutions for these items may
favorably impact the scoring.
The following RFP items are noted as desirable:
Section 3.1.5.5 Faster single play ticket response time
Section 3.1.5.6 Faster multiple play ticket response time
Section 3.1.5.7 Faster report and other transactions response time
Section 3.1.5.8 Faster primary site failover time
Section 3.1.5.9 Faster secondary/remote site recovery time
Section 3.2.1.2.D.5 Thermal ticket stock back-coated
Section 3.2.1.2.L.4 Movable/removable bar code reader
Section 3.2.1.2.N Remote diagnostics on retailer terminal
Section 3.3.4.6 Service Level Agreement for WAN network availability
exceeds minimum requirements
Section 3.4.1.1.C Research into past transactions up to one year without
loading archived media
Section 3.4.1.8 Place winning online tickets on hold to suspend validation
Section 3.4.1.12 Simulator can inject transactions external to the transaction
processing hosts, front-end processors, firewalls, and
switches of the System.
Section 3.7.3 Terminal provisioning schedules shorter than maximums
permitted by the RFP
Section 3.7.12 Michigan-based security/safety officer is CISSP (or other
information/audit security) certified.


Section 3.10.4.2 Certification for manufacturing quality
Section 3.10.5.2 Certification for software quality
Section 3.10.6.2 Certification for project management training
Section 3.10.7.2 Certification for security standards
5.4.4 Scoring of Options
The Bidder is encouraged to propose optional functions, features, services, and
solutions. Specified Options will be scored as included in the baseline proposal.
However, only the Invited or Offered Options included at no additional charge in the
quoted baseline price will be scored individually.
The Bidders ability to deliver options, even at additional cost, may be considered as a
corporate capability factor.
5.5 Site Visits for Discussions and Demonstrations
Prior to completion of the evaluation process, Bidders may be required to discuss and
demonstrate the proposed System and explain how its components would meet the
specifications described in this RFP. Refer to Appendix B for the types of
demonstrations the Lottery may request.
It is expected that these demonstrations and discussions may occur in Bidder facilities;
at an existing lottery, including its retailer sites; at the Lottery Headquarters; or some
other appropriate venue.
The purpose of this phase is to provide substantiating information and demonstrated
performance to support Proposal content. No part of the demonstrations will serve to
relieve the Bidder of any Lottery quality assurance or operational performance
obligations required under the Contract. No enhancements to the offering may be
tendered.
It is the Lottery's intent to conduct site visits as needed with Bidders whose Proposals
are correctly submitted, meet all mandatory requirements, and otherwise are
competitive. The determination as to need for site visits to specific Bidders, and the
order and schedule of site visits, are at the sole discretion of the Lottery.
The Lottery will provide for all expenses of the Evaluation Committee during site visits.
In the event that State travel restrictions prohibit the ability of the Evaluation Committee
to complete site visits, the Bidder will be responsible for providing for all expenses at the
State travel reimbursement rates.
5.6 Price Evaluation
Price evaluation will occur after technical scoring, and will involve only Proposals that
are acceptable based on:


1. Determination of Bidder as responsible.
2. Meeting proposal submission requirements and compliance with mandatory
technical requirements (responsive).
3. Achieving a total technical score of at least 75% of available points.
4. Achieving a technical score of at least 60% of available points on each of the
technical evaluation criteria.
For each Proposal, the Lottery price evaluation will be based on the proposed price, as
prescribed in Part 4 of this RFP.
Before Lottery discloses the rankings and any point totals, the Evaluation Committee at
its sole discretion may, but is not required to, request a Best and Final Offer for Price
Proposal (BAFO) from each Bidder. If the Evaluation Committee requests BAFOs, it will
publicly disclose all Price Proposals from Bidders who satisfy, and who have submitted
Technical Proposals that satisfy, subsections 1 through 4 of section 5.6 and will notify
the affected Bidders of the deadline for submitting a BAFO. Bidders shall submit their
BAFO to the Issuing Officer in the same form and format as the original Price Proposal.
If a Bidder does not submit a BAFO within the required timeframe, Lottery will consider
that Bidders original Price Proposal as the Bidders BAFO. Bidders shall not mark either
their Price Proposal or BAFO as Confidential.

After the deadline for BAFO submission, the Evaluation Committee will recalculate the
pricing points and total points using the BAFO in place of the original Price Proposal
from each Bidder. The Evaluation Committee, using the post-BAFO total points, shall
rank the Proposals from highest total points to lowest total points.
The Evaluation Committee will then award up to six hundred (600) points for price,
based on a ratio of the Proposal being evaluated versus the lowest-cost acceptable
Proposal. The formula for any particular proposal being evaluated is:
PRICE POINTS = 600 x (LOWEST COST / PROPOSAL COST)
Under this formula, the lowest cost acceptable Proposal receives all six hundred (600)
available price points. A Proposal twice as expensive as the lowest cost acceptable
Proposal earns half as many, or three hundred (300) price points.
5.7 Technical Scoring and Pricing Combined
The Lottery will combine the points for technical and price to determine the total score
for each eligible Proposal, the highest of which will be the apparent overall preferred
Proposal.
TOTAL POINTS = TECHNICAL POINTS + PRICING POINTS
The available one thousand (1,000) technical points and six hundred (600) price points
provide a maximum of one thousand six hundred (1,600) points.


Upon completion of the evaluation and scoring, the Evaluation Committee, using total
scores, shall rank the Proposals regarding the apparent preference to provide the
requested System and services to the Lottery.
In the case of a close finish in the scores, the highest total point-earning Proposal will
be shown preference, regardless of how slim the margin. In the case of an exact tie in
the ranking based on points (including decimals), the tie will be resolved in favor of the
Proposal scoring the most technical points per million dollars of contract value.
5.8 Notice of Award and Contract Signing
The final ranking and the findings of the Evaluation Committee will then be presented to
the Lottery Commissioner, for the Commissioners consideration.
The Lottery Commissioner, if in concurrence with the process and its results, will issue a
notice of award and begin contract negotiations. Upon completion of contract
negotiations, the proposed contract will be submitted to the State Administrative Board
for approval. The contract will not be valid until the State Administrative Board approval
has been received.
Contract negotiations shall not address material changes to terms and
conditions, offered services, products, or pricing for performance of the Contract,
but may address options, option delivery schedules, and other variations for the
benefit of the Lottery.
Should the Lottery be unable to reach agreement with the preferred Bidder, the Lottery
shall issue a notice of award and then undertake negotiations with the second most
preferred Bidder, and so on. This process shall continue at the sole option of the Lottery
until an agreement is reached or all Proposals are rejected.


APPENDIX A:
GLOSSARY
Baseline: The System including all features and capabilities for an offered price,
without additional pricing for options.
Bidder: Vendor that submits a proposal in response to the RFP.
Bond: A bond, cashiers check, or alternative security in form and substance and
issued by a company acceptable to the Lottery.
BOPS: Back-Office Processing System, the environment used by the Lottery for internal
administrative and Gaming System support applications.
Business Day: A working day occurring Monday through Friday except legal holidays
observed by the State of Michigan.
Business Week: The period beginning on Tuesday and running through the end of the
day the following Monday. This is also known as the accounting week.
Capability: A feature or capacity of the System as offered for delivery within the System
baseline, not to include items that are theoretical or available following a future separate
development or purchase effort. Also referred to in the RFP in terms such as ability,
able to, and capacity.
Checksum: An algorithm-based method of determining the integrity and authenticity of
a digital data object. Used to check whether errors or alterations have occurred during
the transmission or storage of a data object.
CISSP: Certified Information Systems Security Professional is a vendor-neutral
certification governed by the International Information Systems Security Certification
Consortium (ISC)
2
and operates in conformance with the requirements of the
International Organization for Standardization (ISO) standard ISO 17024:2003 for
certifying individuals.
CMMI: The Capability Maturity Model Integrated is a process improvement best
practices model for product and service development and maintenance.
COBIT: The Control Objectives for Information and related Technology is a set of best
practices (framework) for information management created by the Information Systems
Audit and Control Association (ISACA), and the IT Governance Institute (ITGI).
Consumables: Playslips, ticket stock, printer paper, toner, and/or any other operational
supplies required by retailers to operate their terminals. The term "Consumables" does
not include point of sale promotional items or Instant tickets.


Contract: The written agreement resulting from the successful proposal and
subsequent negotiations, which shall incorporate, among other things, this RFP and the
Contractors Proposal, and all modifications hereto and thereto, and in addition shall
contain such other terms and conditions as may be required by the Lottery.
Contractor: The Vendor with whom the Lottery executes the Contract pursuant to this
RFP.
Contract Manager: A member of the Lotterys technical management staff, designated
by the Lottery Commissioner, who will provide oversight for the deliverables and
performance of the Contract on a day-to-day basis.
Conversion: The phase of the implementation project during which the existing System
used by the Lottery for games sales and management is replaced. During the
conversion, data and files from the existing System must be transferred, for continuity,
to the new System.
Corporate Account: Lottery retailer accounts that have multiple distinct retail locations
that sell tickets.
CSV File: A file with records whose data fields are delimited by commas (Comma-
Separated Values), and each record is a separate input line.
Day: A calendar day unless otherwise stated as a business day.
Deliverable: A defined product or feature required by the RFP and/or proposed by the
Contractor.
District Sales Representative (DSR): Marketing/Sales Representative of the Lottery,
an individual that supports retailer through direct interaction and retailer-site visits.
EFT: Electronic Funds Transfer through a bank employing the Automated Clearing
House (ACH) network.
Facilities: The facilities required to provide and support the retail network, including
data centers, warehouses, repair depots, and any other such locations.
File: A related collection of records containing a consistent set of data fields that
describe an entity. A file can be processed by software representing an authorized user
to add, modify, or delete records, or to generate a report or display of useful information.
A file can be operated on as an object itself, for example to move it from one location to
another, or to delete it.
First Read Rate: A measure of reader performance, especially bar code reader
performance. The measure indicates what proportion of times the reader returns a
successful read of a legitimate code on the first try. The "first read" event is defined as
the initial effort of an experienced user to read a code, occurring within approximately a
three (3) second time window.


Instant Games: Games sold on pre-printed tickets containing play and validation data
under a latex coating or such other coating as may be approved by the Lottery. Instant
games will be administered through the terminals and workstations provided by the
Contractor.
Intellectual Property Rights: Any rights with respect to inventions, discoveries, or
improvements, including patents, patent applications and certificates of invention; trade
secrets, know-how, or similar rights; the protection of works of authorship or expression,
including copyrights and future copyrights; and trademarks, service marks, logos, and
trade dress; and similar rights under any laws or international conventions throughout
the world, including the right to apply for registrations, certificates, or renewals with
respect thereto, and the rights to prosecute, enforce and obtain damages.
ISO: The International Organization for Standardization (ISO) is an international
standard-setting body composed of representatives from over 150 countries. ISO is a
non-governmental organization (NGO) that acts as a consortium with strong links to
governments but also bridges to the private sector.
Liquidated Damages: Payment made to the Lottery by the Contractor for failure to
perform Contract obligations as specified in the Contract.
Lottery: The Michigan Bureau of State Lottery.
Lottery Commissioner: The chief executive of the Lottery, or an employee authorized
to act on behalf of the chief executive of the Lottery. There are also Deputy
Commissioners of the Lottery.
Lottery LAN: A local area network (LAN) serving the offices of the Lottery.
Lottery Quality Assurance/Acceptance Testing: The process by which the Lottery
separately tests any hardware or software changes to the Gaming System. Lottery QA
employs a testing environment consisting of test terminals (includes all terminal devices
mentioned in Section 3.2), communications, gaming host systems, and management
workstations that run the games management applications. Lottery QA represents the
acceptance testing of the Contractors products and is distinct from the Contractors own
quality assurance efforts.
Malware: Generic term for (MALicious softWARE) that is designed to destroy, wreak
havoc, hide potentially incriminating information, and/or disrupt and damage computer
systems. It includes, but is not limited to: viruses, worms, Trojan Horse programs,
spyware, root kits, logic bombs, phishing threats, etc.
MICR Printer: Magnetic Ink Character Recognition printers have the capability to print
the special numbers and symbols on the bottom of checks. These printers use a
special magnetic ink that allows check readers in the banking system to read checks as
they are processed.


Near Real Time: For Lottery purposes, near-real-time means that the transaction or
data is available for use with no significant delay after accounting for processing time.

Net Instant Sales: Gross sales minus free tickets, returns, and adjustments for Instant
and Pull-tab games.
Net On-line Sales: Gross sales minus cancellations, promotional free tickets and
adjustments for On-line games.
Net Total Sales: Total of net Instant sales plus net On-line sales.
NIST: National Institute of Standards and Technology is a federal technology agency
that develops and promotes measurement, standards, and technology.
On-line Games: Games sold through a computer network at retailer locations. The
tickets are generated on demand of the customer.
Option(s): A system feature or capability for which the Lottery makes no schedule or
quantity commitments, but which may, at the Lottery's sole discretion, be included in or
added to the System. Specified Options are required to be proposed, although the
Lottery may opt not to take them. Invited Options are identified by the Lottery as of
interest, but may be proposed at the discretion of the Bidder. Offered Options may be
proposed at the discretion of the Bidder. Options may have additional cost quoted or
may be included in the baseline price.
Pack: A grouping of Instant game tickets, with individual tickets uniquely and
sequentially numbered by virtue of game/pack/ticket identifiers. Packs contain varying
numbers of tickets, depending on the game. Michigan previously referred to pack as
book.
Person: An individual, a partnership, a joint venture, a registered limited liability
partnership, an association, a corporation, a limited liability company, a trust, an
unincorporated organization or any other entity, business or enterprise, authorized to do
business in the State of Michigan.
Play: A single set of numbers for a Lottery drawing. A ticket may contain multiple plays,
depending on the game.
Principle of Least Privilege: A design concept describing a system environment in
which all services and personnel given access are granted only the privileges necessary
to perform their functions.
Proposal: All materials submitted by a Bidder in response to this RFP, together with all
addenda, clarifications, and demonstrations.
Pull-tabs: Games sold on pre-printed tickets containing play and validation data under
a flap removed by the player. Pull tab games will be administered through the terminals
and workstations provided by the Contractor.


Report: Information produced by the System that is viewed via display, printed, or
saved to a file depending on the needs of the Lottery.
Responsible Bidder: A Bidder judged by the Lottery to have the capability in all
respects to perform fully the Contract requirements and to have the integrity, security,
reliability, and financial condition that will ensure good faith performance.
Responsive Proposal: Timely and conforming in all material aspects to stipulations of
the RFP.
Retailer: A business under contract with the Lottery to sell tickets.
Retailer Master File: The authority file containing the official list and data defining
retailers.
RFID: Radio Frequency Identification, a unique tagging technology to identify objects, in
which the object responds to an inquiry radio signal from a reader by broadcasting its
identification tag value.
RNG: Random Number Generator, a software application that uses a math algorithm to
produce a pseudo-random numerical output.
RNG Seed: A random value used to begin the processing of an RNG.
Sales Day: The period of time the Lottery's Gaming Systems support transactions from
terminals at retailer locations, subject to future modifications.
State: The State of Michigan and its departments, boards, officers and employees.
Subcontractor: For purposes of this RFP, where creating obligations or bearing
restrictions, the term "subcontractor" refers to a firm retained by the Contractor to
provide a contribution to the completion of the project.
Substantial Subcontractor: A subcontractor performing major and critical activities
specific and customized for the Contract, including hardware development, production
or support, software development, production, or support, ticket stock printing and
retailer servicing. This does not include purchase of consumer-tariffed communication
services, suppliers of off the shelf (available to the general public) hardware, or
suppliers of off the shelf software when those firms perform only these roles under the
Contract. This does not include routine service providers such as landscapers or
janitorial firms.
Successful Bidder: Bidder whose Proposal has been accepted, and with whom the
Lottery intends to execute a Contract.
System: A set of hardware, software, facilities, and procedural elements that provides
useful services and which produces useful outputs. In this RFP there are numerous
references to systems, inclusive of subsystems of other referenced systems. The


immediate context and adjectives or labels define which system is being discussed.
When used without other qualification, "System" refers to the comprehensive Gaming
System (Instant ticket and online system) proposed by the Bidder.
Terminal: Any ticket dispensing device and all attachments and peripherals installed by
the Contractor at a retail location that is connected to the central Gaming System (as
defined in Section 3.2).
Traditional Lottery Gaming System: The System depicted in this RFP, the software,
hardware, and service elements that support the On-line and Instant ticket gaming
environment in Michigan.
Validation: Process by which winning tickets are checked against computer files, to
ensure that the ticket presented is valid, and that it has not been redeemed previously.
Validations apply to both On-line and Instant tickets.
Validation Code: A security feature of Instant tickets printed under the latex (or other
coating). Also known as a VIRN (Void If Removed Number).
Vendor: Generic reference to a firm.
VPN: A Virtual Private Network (VPN) is a private data network that makes use of the
public telecommunication infrastructure (e.g., Internet) or other unsecured network. The
VPN maintains privacy through the use of a tunneling protocol and security procedures
(e.g., encryption) for confidentiality and integrity of the data in transit.
Wager: A play transaction that represents a group of numbers registered on the
Gaming System (i.e., bet).


APPENDIX B:
DEMONSTRABILITY OF SYSTEM
The proposed System must be available for demonstrations and inspections during
Proposal evaluation. The demonstrations and inspections will occur at a production
lottery location, at the Bidder's research and development facilities, or at some other
appropriate venue, as requested by the Lottery during the evaluation process. The term
System in this case includes capabilities of the retailer network and other network
features and deliverables.
The Bidders demonstration must show the Bidders general ability to meet the
requirements of the RFP.
Demonstrability may include several tests from each of the following categories, as
requested by the Lottery:
1. Inspection Tests
2. Functional Tests (with observation of Usability)
3. Performance Tests
4. Failure, Recovery and Security Tests.
Various tests from the selection to follow could be considered. The following items
listed are not all inclusive.
Inspection Tests
Inspection tests provide evidence that the Bidder has the facilities, resources, systems,
and capabilities expressed in the Proposal.
1. Proposed Equipment
Has the proposed System been shown and demonstrated? Inspect for the particular
models of equipment proposed. Are parts of the proposed configuration not part of the
demonstration? Has the proposed retailer communications mechanism been
demonstrated?
2. Fielded Products
Determine whether the systems and products demonstrated are prototypes or whether
they have been manufactured in quantity or are ready for manufacture. For the
demonstrated terminals, are they mockups, hand-built unique items, part of a
preliminary manufacturing run?


3. Materials and Construction Quality
Inspect the retailer terminals for robustness, manufacturing integrity, and appearance.
4. Manufacturing and Development Facilities
Does the manufacturing facility appear to be capable of producing the quantities of
devices needed?
5. Process Quality
Does the Bidder have a quality-oriented manufacturing system? Are there quality
hardware and software engineering practices in place, such as SEI CMMI and/or ISO
9001?
6. Other Tests Specific to Bidder
Functional Tests
Functional tests provide evidence that the proposed System can perform common
lottery tasks, and that the System is in a position to be adapted to the Lottery's
requirements. Possible functional tests follow.
1. Retailer Functions
Can simulated operations be run to demonstrate the major gaming operations as seen
by the retailer? (Logging on/off, selling, validating, canceling, taking retailer reports, and
receiving messages.) Is the user interface straightforward?
2. System Operator Functions
by the data center operations staff? (Bringing the System up and down, and monitoring
operations.)
3. Instant Ticket Management Functions
Can the System demonstrate taking tickets into inventory, telemarketing, settlements,
returns, and order fulfillment?
4. Lottery Games Administration Functions
by the Lottery? (e.g., Drawings, monitoring sales levels, creating new retailers,
enabling/disabling retailers, receiving administrative reports, entering winning numbers,
and sending retailer messages.)


5. Maintenance and Inventory
Can simulated operations be run to demonstrate functions such as Hotline and trouble
reporting? Inventory control of consumables and terminals?
Performance Tests
Performance tests provide evidence that the Bidder's System is capable of supporting
the business volume and response times required by the Lottery for excellent player
service. Possible performance tests follow.
1. Response Time, Single and Multiple Plays
Can it be shown that single play tickets and multiple play tickets are delivered within
specs? Measure both discrete transactions and average transactions per unit time
through repeats (bulk buy). Typically these tests require that the host system be loaded
by a simulator.
2. Heavy Volume Throughput: Ticket Sales
If possible, conduct several simulation runs with heavy simulated volume. Runs shall
include duplex operation to confirm hot backup feeds. Conduct manual transactions
simultaneously to demonstrate full functioning. Employ a software monitor utility to
assess CPU, disk, and memory consumption during the simulation.
Failover, Recovery and Security
Failover and recovery tests provide evidence that the Bidder's terminals and System
can maintain operations, data integrity, and security during periods of equipment and
software failure. The entire proposed configuration will not be in place at Proposal time,
so a complete path test for failover cannot normally be conducted. Possible failover and
recovery tests follow.
1. Terminal Paper Low and Out
Check paper sensor, check buffering of last transactions when paper low. Remove the
paper or use an almost empty roll. Determine how easy it is to replace the paper.
2. System Fault Tolerance
If possible, bring down the primary system (for example by network disconnect, or
equivalent). Failover shall occur with only a brief outage (the RFP specification is two
minutes). Return primary to service and time re-synchronization.


3. Terminal Loss of Connection
Disconnect a test retailer terminal from the communications mechanism linking it to the
central system, then restore the connection. Determine if the return to service
compromises any transactions or reporting. Determine if the disconnection is detectible
by the central system of network monitoring application.


APPENDIX C: SERVICE LEVELS AND LIQUIDATED
DAMAGES
All monetary values referenced are in US dollars. Liquidated damages begin after
grace periods noted.

1. Gaming System Installation

The Contractor shall meet the readiness
for Lottery Acceptance Testing milestone
one hundred (100) days prior to the
Contract-agreed production start-up date.

The Lottery may impose Liquidated
Damages of five thousand dollars
($5,000.00) for each day of delay.

The Contractor shall meet the Lottery
Acceptance Testing milestone ten (10)
days prior to the Contract-agreed
production start-up date.

Damages of ten thousand dollars
($10,000.00) for each day of delay, if
such delay is caused by unresolved
errors and issues encountered in the
Lottery Acceptance Testing.

The Contractor shall meet the Scheduled
Conversion milestone beginning with the
Contract-agreed production start-up date.

Damages of one hundred thousand
dollars ($100,000.00) for each day of
delay.

The Contractor shall deliver all
Deliverables in accordance with the
delivery schedule, shall meet all
requirements set forth in the Contract and
shall resolve Lottery Acceptance Testing
problems for upgrades and changes to the
System prior to and after Conversion
pursuant to each defined project schedule.

Damages of five hundred dollars
($500.00) for each day of delay for each
Deliverable that the Contractor fails to
deliver in accordance with the delivery
schedule or for each day of delay for
requirements set forth in the Contract.
After Conversion is complete, the Lottery
may impose the above mentioned
Liquidated Damages amount for each day
of delay that the Contractor does not
resolve a Lottery Acceptance Testing
problem pursuant for upgrades and
changes to the System for each defined
project schedule.


2. Terminal and Peripheral Provisioning During Conversion and Ongoing: Moves,
Adds, Deletions, Removals, Changes

The Contractor shall install a new terminal,
delete or remove a terminal, move a
retailer terminal to new premises, or
conduct an inside move for a retailer
(including in each case associated the
Contractor-supplied peripherals) in
accordance with the provisioning schedule
set forth in the Contract-agreed production
start-up date for the conversion period and
ongoing during the life of the contract and
any extension periods.

Damages of three hundred dollars ($300)
per day for each terminal that the
Contractor fails to install, delete, remove,
or move in accordance with the
provisioning schedule until provisioning is
complete. The Lottery may impose
Liquidated Damages of three hundred
dollars ($300) per day for each terminal
that the Contractor fails to install, delete,
remove, or move during the life of the
contract including any extension periods
per the provisioning schedule described
in Section 3.7.3.

3. Gaming Host Systems Down

host systems are not down for more than
three (3) minutes during the operational
hours for sales or validation on any day.
Gaming host systems are considered
down if gaming tickets cannot be sold,
gaming tickets cannot be canceled
(pursuant to permitted conditions), or
winning gaming tickets cannot be validated
during the operational sales period each
day.

Damages in an amount of five thousand
dollars ($5,000.00) may be assessed for
each one (1) minute of system downtime,
or fraction thereof, which is greater than
three (3) minutes in duration during the
operational hours for sales or validation
on any day. The total time during which
the gaming host systems are down during
the day will be calculated as the sum of
all time during such daily operational
sales period when the systems are down.
For example, three (3) one-minute long
instances of down time in one day
constitute three (3) minutes of daily down
time. To address chronic problems, in
the event that two (2) downtime events of
any length have already occurred in a
business week, the grace period of three
(3) minutes shall be rescinded, and
Liquidated Damages shall begin
immediately with any subsequent outage
in that week.


4. Gaming Host Systems Degraded Performance

host systems do not evidence degraded
performance for more than ten (10)
minutes during the operational hours of
sales or validation on any day. The gaming
host systems shall be considered as
having degraded performance if:
i. Retailer terminals on average exceed the
response time requirements, or the
System is incapable of meeting the
throughput specifications set forth in the
Contract;
ii. The System processes transactions
from less than 95% of the installed and
operational terminals;
iii. The System processes transactions
from all terminals, but not for all gaming
products and retailer-related activities
(degraded performance exists if the
gaming host systems do not allow sales,
cashes, or cancellations for On-line
games, or do not support activations,
disabling, or settlements for Instant
tickets);
iv. transactions do not log to at least two
(2) Local systems, one (1) remote system,
and to the Lotterys ICS;
v. Critical functions of System
management and administration cannot be
conducted by the management
workstations (e.g., file transfers to Lottery)
vi. Instant ticket inventory management is
compromised (e.g., the ability to receive,
order, pack, and ship Instant tickets in a
manner concordant with production
schedules); or
vii. During a defined promotion period the
System cannot issue tickets or conduct
transactions to support an intended
promotion.

Damages in the amount of one-thousand
five hundred dollars ($1500.00) for each
minute of degraded time, or fraction
thereof, which is greater than ten (10)
minutes in duration during the operational
sales period on any day. The total time
during which the gaming host systems
are degraded during the day will be
calculated as the sum of all time during
the daily operational sales period when
the systems are operating at a degraded
performance level.
For example, ten (10) one-minute long
Instances of degraded performance in
one day constitute ten (10) minutes of
daily degraded performance time. To
address chronic problems, in the event
that two (2) degraded performance
events of more than ten (10) minutes in
length have already occurred in a
business week, the grace period of ten
immediately with any subsequent
degraded performance event in that
business week.


5. Timely and Accurate Reports

The Contractor shall produce and deliver
timely, sufficient, and accurate
Management reports within the time
frames specified by the Lottery as set forth
in the Contract (reports will be categorized
into groups A and B according to time
criticality and importance).

Damages of one thousand dollars
($1,000.00) per day, or fraction thereof,
for each late, insufficient, or inaccurate
Management report in Group A (once any
approved grace period set forth in the
Contract has passed), until such report is
provided, made sufficient or corrected (as
the case may be).
Damages of one hundred dollars
($100.00) per day, or fraction thereof, for
each late, insufficient, or inaccurate
management report in Group B (once any
approved grace period set forth in the
Contract has passed), until such report is
provided, made sufficient or corrected (as
the case may be).

6. Timely and Accurate Files

The Contractor shall produce and deliver
timely, sufficient, and accurate files within
the time frames specified by the Lottery as
set forth in the Contract (files will be
categorized into Groups A and B
according to time criticality and
importance).

Damages of five thousand dollars
($5,000.00) per hour, or fraction thereof,
for each late, insufficient, or inaccurate
file in Group A (once any approved grace
period as may be set forth in the Contract
has passed), until such file is provided,
made sufficient, or corrected (as the case
may be). The Lottery may impose
Liquidated Damages of five hundred
dollars ($500.00) per hour, or fraction
thereof, for each late, insufficient, or
inaccurate file in Group B (once any
approved grace period as may be set
forth in the Contract has passed), until
such file is provided, made sufficient, or
corrected (as the case may be).


7. Terminal and Peripherals Repair

The Contractor shall ensure that non-
operational terminals are repaired or
replaced and operational within two (2)
hours of terminal problem notification from
the retailer or from a network monitoring
process. A retailer terminal is considered
non-operational if tickets cannot be sold or
canceled (under permitted conditions) or
validations cannot be performed, or if the
reader and/or scanner cannot process
wagers or playslips. Terminal includes
the retailer terminal, all associated
peripherals, and check writing equipment
provided by the Contractor.
Critical failures are any failures that involve
readers, scanners, retailer display
screens, or printers or any other items
required to sell or validate Lottery
products.
For less critical failures that do not render
the terminal non-operational as defined
above (for example, the terminals jackpot
display is out of service), the Contractor
shall complete such repair within twenty-
four (24) hours from the time of notice by
the retailer.

For critical failures, The Lottery may
impose Liquidated Damages of one-
hundred dollars ($100.00) per non-
operational terminal per hour (excluding
Gaming System non-operating hours), or
fraction thereof, until a repair has been
completed.
For less critical failures, the Lottery may
impose Liquidated Damages of one-
hundred dollars ($100.00) per non-
operational terminal per day, or fraction
thereof, until a repair has been
completed.
If an individual retailer has a terminal (or
associated peripheral device) that has
failed and required a dispatch and repair
three (3) times in any one (1) month
(including terminal replacements), the
Lottery may impose Liquidated Damages
of five hundred dollars ($500). Chronic
failure does not apply under situations of
Force Majeure or tampering or abuse by
the retailer or its customers.

8. Terminal Preventive Maintenance

The Contractor shall perform scheduled
preventive maintenance for all retailer
terminals and check writing equipment as
set forth in the Contract-agreed production
start-up date.

If there is a delay in scheduled preventive
maintenance for any retailer terminal
beyond the first day of the month
following the scheduled service cycle, the
of one hundred dollars ($100.00) per
retailer terminal per day, or fraction
thereof, until the condition is rectified.


9. Failure to Modify Existing On-Line Games or to Install Additional Games

The Contractor shall modify existing
games or install additional games and their
supporting controls within one hundred
twenty (120) days from delivery of the
Lotterys written approval for a set of game
specifications (unless an extension is
authorized in writing by the Lottery or a
schedule is otherwise established
following written request of the Lottery for
modification or installation of games). The
Contractor shall also complete a Lottery
quality assurance test and receive the
Lotterys written approval of such modified
or additional game within the one hundred
twenty (120) day time period.

($10,000.00) for each day, or fraction
thereof, of delay that the modified or
additional game is not installed.
The Contractor is not obligated to pay
Liquidated Damages if the Lottery opts to
release the change at a later time than
the original agreed-upon schedule.

10. Failure to Produce an Administrative Software Change

The Contractor shall modify or add
software to the System to produce reports,
screen displays, inquiries, or other
administrative applications as may be
specified in the Contract within sixty (60)
days from delivery of written approval by
the Lottery of a set of change
specifications (unless an extension is
authorized in writing by the Lottery or a
schedule is otherwise established
following written request of the Lottery for
changes). The Contractor shall also
complete a Lottery Acceptance Test and
receive the Lotterys written approval of
such modified or additional software within
the sixty (60) day time period.

Damages of five hundred dollars
($500.00) per day, or fraction thereof, that
the modified or additional software is not
installed.

11. Failure to Support an Instant Ticket Game

The Contractor shall ensure that the
System handles Instant ticket transactions
and produces reports for all games

($10,000.00) per day, or fraction thereof,


ordered by the Lottery from its Instant
ticket supplier(s).

for any Instant games for which the
Contractor does not provide timely and/or
correct Instant ticket transaction handling
and reporting.

12. Unauthorized Software/Hardware Modifications

The Contractor shall not modify any
software or hardware without the prior
written consent of the Lottery and the
Contractor shall design Configuration
Management practices to obviate this
possible problem. Modification does not
include replacement of a System
component with an essentially similar
working component in the event of
necessary maintenance.

If The Contractor modifies any software
or hardware without the prior written
approval of the Lottery, the Lottery may
issue a written order that the modification
be removed and the System restored to
its previous operating state at the
Contractors expense. Further, the Lottery
may impose Liquidated Damages of ten
thousand dollars ($10,000.00) per
violation in addition to any other damages
that may occur as a result of such
unauthorized modification.

13. Unauthorized Access or Compromise

The Contractor shall preclude personnel
not authorized by the Lottery from
accessing, modifying, or otherwise
interfering with the Lottery Gaming
Systems or any Lottery Gaming System
data or software.

($10,000.00) per person per Incident in
addition to any other damages that may
occur as a result of such unauthorized
access or compromise. An Incident is
each act of access, modification, or
interference with the Lottery Gaming
Systems or any Lottery Gaming System
data or software by an unauthorized
person.

14. Supply Shortage

The Contractor shall furnish all essential
supplies and consumables for all games
(not including Instant tickets or point-of-
sale advertising materials).

If a retailer is unable to sell or validate a
ticket because of the Contractors failure
to provide adequate operating supplies,
the Lottery may impose Liquidated
damages of three hundred dollars
($300.00) per retailer per day of
downtime, or fraction thereof.


15. Failure to Report Incidents

The Contractor shall immediately report all
significant incidents related to the
operation of the Gaming System, either
personally or by telephone within one (1)
hour of the discovery of the incident,
followed by a letter addressed to the
Lotterys Contract Manager within twenty-
four (24) hours of the incident. The
Contractor shall send all written reports
and notifications by courier and fax. At a
minimum, the Contractor shall provide a
written report for each of the following
types of events:
(i) System takeovers;
(ii) Major communications failures;
(iii) Significant operator errors;
(iv) Out of balance conditions;
(v) Emergency software or hardware
changes;
(vi) Security violations;
(vii) Other conditions as defined by a
memorandum of understanding;
or
(viii) Any situation which may cause the
general public to become alarmed and/or
which may damage the integrity or public
image of the Lottery.

If the Contractor fails to report any
incidents as required, the Lottery may
impose Liquidated Damages of one
thousand dollars ($1,000.00) per day or
fraction thereof, until an incident is
correctly reported.

16. Failure to Comply

The Contractor shall comply with all
commitments contained in the RFP, the
Proposal, and the Contract, and all
clarifications and amendments to these
documents. The Contractor shall provide
all products, services, data, and
documents as obligated under the RFP,
the Proposal, and the Contract.

To the extent not specified elsewhere in
this Appendix, if the Contractor fails to
provide an obligated product, service,
data, or document, where not otherwise
addressed by other Liquidated Damage
provisions in this Appendix, the Lottery
may impose Liquidated Damages of five
hundred dollars ($500.00) per day or per
incident (at the Lotterys discretion) until
the condition is rectified.


17. Data Center (Inter-site) WAN Outages

The Contractor shall ensure that the WAN
connections are not lost or operating at a
degraded level of performance.
Connection points include the primary data
center, backup data center, the Lottery
data center, and the Lottery backup
communications center. An outage occurs
if a connection is lost due to the failure of
the Contractor to correctly carry out
established duties in supporting or
administering the network, or by failure of
a the Contractor-specified protectively
redundant network element to support a
failover. This service level shall apply only
if the Lottery elects to use the specified
option of the Contractor-provided Data
Center WAN.

In the event that a Contractor-provided
WAN connection is lost, the Lottery may
impose Liquidated Damages according to
the following schedule: Five hundred
dollars ($500.00) for each minute of
network outage, or fraction thereof, per
connection. Total time of network outage
each day shall be calculated as each
minute during the operational hours of
sales or validation of each day that a
WAN connection is down after a thirty
(30) minute grace period. If two (2)
downtime events of any length occur in a
business week, the grace period of thirty
immediately with any subsequent outage
in that week.
Liquidated Damages for any WAN failure
condition that renders the
System down shall be determined under
Item 3 of this Appendix (Gaming Host
Systems Down).

18. Failure to Comply with Required Standards or to Remedy Audit
Recommendations

The Contractor shall correct or address, to
the Lotterys satisfaction, all
recommendations made to the Contractor
as a result of a system audit.

If audit recommendations are not
corrected, or addressed to the Lotterys
satisfaction, within sixty (60) calendar
days of notification, unless specifically
exempted by the Commissioner, the
of five thousand dollars ($5,000.00) at the
end of the initial 60-day period and an
additional five thousand dollars
($5,000.00) for each subsequent thirty-
(30) day period or any portion thereof, for
which the Contractor audit
recommendation has not been corrected
or addressed to the Lotterys satisfaction.


The Contractor shall comply with all
required Lottery and/or multi-jurisdictional
standards.

If The Contractor fails to comply with any
required the Lottery or multi-jurisdictional
association standard, the Lottery may
impose Liquidated Damages of five
thousand dollars ($5,000.00) for each
instance of non-compliance. In addition,
the Lottery may impose an additional five
thousand dollars ($5,000.00) for each
subsequent seven- (7) day period, or
portion thereof, for each instance for
which compliance has not been achieved.

19. Failure to Provide Software Testing and Quality Software Turnovers

The Contractor shall provide the Lottery
with quality tested software.

If untested software is turned over for
Lottery Acceptance Testing or the
software does not meet the specification
standards established by the Lottery, the
of ten thousand dollars ($10,000.00) for
the first violation (return or retraction of
the software) and twenty thousand dollars
($20,000.00) for each subsequent
violation.

20. Failure to provide new employee documentation and obtain security clearance
prior to employment

The Contractor shall provide the Lottery
with all required employee documentation
for completion of background and security
checks prior to employment.

If an employee is hired by the Contractor
before the employee has been approved
by the Lottery, the Lottery may impose
Liquidated Damages of two hundred
dollars ($200.00) for each violation.

21. Failure to comply with agreed Telemarketing call frequency

The Contractor shall complete the service
level agreement (SLA) of Telemarketing
calls to retailers per the Contract.

If the Contractor fails to fulfill service level
agreement of Telemarketing calls the
retailer for each violation.


22. Failure to print good legible wagers (misprints)

The Contractors terminals shall print
legible, high-quality tickets.

If the Contractors terminal fails to
produce a legible, high-quality wager
(misprint), the Lottery may impose
Liquidated Damages of two dollars
($2.00) per ticket authorized by the
Lottery for credit to the retailer.

23. Failure to pack Instant game orders correctly

The Contractor shall pack Instant ticket
orders using the correct pack numbers and
games for the retailer order selected.

If the Contractor fails to select the correct
Instant game packs for an order, the
order that does not contain the correct
item(s).

24. Hotline and Telemarketing Communication Outages and Hold Times

The Contractor shall maintain a reliable
communications service for retailers to
reach the Hotline for service or the
Telemarketing group to discuss and/or
place an Instant ticket order. Caller hold
times should be reasonable.

Service Level Requirements for inbound
retailer calls are:
a. 85% of inbound calls to be
answered within 60 seconds
b. 99% of all calls without a busy
signal
c. Abandoned call rate not to exceed
2%
d. Average hold time not to exceed
two minutes

If the Contractor fails to maintain a
reliable communications service for
retailers to use to reach the Hotline for
service or the Telemarketing group for
Instant ticket issues, the Lottery may
impose Liquidated Damages of one
thousand dollars ($1,000.00) per hour
(after a ten (10) minute grace period) that
the service is interrupted. The Lottery
may impose Liquidated Damages of fifty
dollars ($50.00) per call that does not
meet Hotline and Telemarketing
Communication Service Level
Requirements.


25. Contractor Provided Retailer Terminal Communications Network (if Lottery
exercises this option)

The Contractor shall provide a highly
reliable retailer sales terminal
communications network (if the Lottery
exercises this option).

If the Contractor provided retailer terminal
communications network causes a
retailer sales terminal to be down, the
of one-hundred dollars ($100.00) per non-
operational terminal per hour (excluding
Gaming System non-operating hours and
after a two (2) hour grace period per
month; (approximately 99.7% service
level or higher level agreed to), until
service has been restored.
Damages of one-hundred dollars
($100.00) per retailer terminal per day, or
fraction thereof, when communications
service is impaired or falls below the
Contract-agreed SLA.

26. Instant Ticket Vending Machines (ITVM) (if Lottery exercises this option)

The Contractor shall deliver and install an
ITVM in accordance with the Contract-
agreed schedule.

Damages of one hundred dollars
($100.00) per day for each ITVM not
installed per the Contract agreed
installation date. Liquidated Damages of
two hundred dollars ($200.00) may be
imposed per day for each unit that is 15
days past the scheduled install date.

The Contractor shall repair or replace an
ITVM according to the terms of the
Contract.

Damages of two hundred dollars
($200.00) per day for each ITVM that is
not returned to fully operable service
within 48 hours after report of trouble
(See Appendix I, #17).


The Contractor shall perform routine
preventative maintenance (PM) on each
ITVM per the Contract-agreed schedule.

Damages of fifty dollars ($50.00) per
occurrence for each ITVM that has not
had PM performed within 14 days of the
scheduled maintenance date. Liquidated
Damages of fifty dollars ($50.00) may be
imposed per day for each ITVM more
than 14 days past the scheduled due date
for PM to be completed.

The Contractor shall provide
comprehensive training on the operation of
the ITVM for all retailers that receive these
units within two days of delivery/installation
of the unit per the specifications in the
Contract.

Damages of two hundred dollars
($200.00) per occurrence for each retailer
location that has not received ITVM
training within two days following the
delivery/installation of the unit.

The Contractor shall remove ITVM at end
of contract period per the terms of the
Contract.

The Lottery may withhold the last
payment under terms of Contract pending
proper notification that all ITVM
equipment has been properly removed. If
the Contractor fails to remove the ITVM
and the Lottery is required to provide this
service, the costs to the Lottery for the
removal and disposal of the equipment
shall be withheld from the final
payment(s) to the Contractor.

The ITVM provided by the Contractor shall
dispense tickets in a manner that does not
distort, damage, or burst tickets improperly
such that the playability or ticket
appearance is compromised.

Damages of the face value of any
ticket(s) distorted, damaged or burst
improperly due to a dispensing problem
with the ITVM.

The ITVM provided by the Contractor shall
be designed to mechanically prevent any
extra tickets from being dispensed without
payment.

Damages of the face value of any extra
ticket(s) dispensed from the ITVM without
actual monetary payment.


The currency acceptors in the ITVM must
accept all U. S. Treasury currency. The
Contractor is responsible for updating any
currency acceptors to accommodate any
changes in currency made by the U. S.
Treasury for any new currency releases.
.

Damages in the amount of two hundred
dollars ($200.00) per day, per ITVM, plus
any retailer shortages for currency
acceptors that have not been updated for
a U S currency change and are unable to
properly read currency.

27. Specialty Retailer Terminals

The Specialty Retailer Terminal provided
by the Contractor shall be designed to
mechanically prevent any extra tickets
from being dispensed without payment.

Damages of the face value of any extra
ticket(s) dispensed from the specialty
terminal without actual monetary payment.

The currency acceptors in the Specialty
Retailer Terminal must accept all U. S.
Treasury currency. The Contractor is
responsible for updating any currency
acceptors to accommodate any changes in
currency made by the U. S. Treasury for
any new currency releases.

Damages in the amount of two hundred
dollars ($200.00) per day plus any retailer
shortages for currency acceptors that have
not been updated for a U S currency
change and are unable to properly read
currency.


APPENDIX D:
EXISTING LOTTERY BACK-OFFICE ENVIRONMENT
(For informational purposes only)
Servers:
Dell Optiplex GX240, P4 running Windows 2003 (1), Linux (1) 2
Compaq Alpha 4100 servers running Tru64 Unix with Oracle database software 3
HP / AMD server running Linux (disk-to-disk backup) 1
Dell PowerEdge 1650 (1 running ADS software, 4 Windows for applications/test 5
Dell PowerEdge 1850 (Linux) 3
Dell PowerEdge 2650 (3 Windows for applications, 3 Netware file/print) 6
Dell PowerEdge 6650 (Windows; runs Oracle for Visiflow database) 1
Unix AT&T Definity (voice response system) 1
Sun Sunfire VZ40 server (Voice Response system) 1

Other:
Compaq 9 track tape drive on Unix server 1
Compaq DS-TZ89N-VW tape drive on Unix server - 4
Compaq DS-TKZ60-EA tape drive on Unix server 4
Dell PowerVault 132T tape library - 1
Dell DLT7000 35/70 Tape backup on Unix server 1
SAN Dell FC4500 - 1
Peripheral equipment (e.g., mouse, keyboard, speakers, racks, disk/zip drives, nic
cards, power supply)
Docking stations 35
Monitors 181

Desktop Computers (running Windows XP SP2):
Dell Intel Pentium 4 processor 650, 3.4 GHz, 80 GB hard drive with 17 monitor 128
Dell Intel Pentium 4 processor 650, 3.4 GHz, 80 GB hard drive with 20 monitor 42
Dell PIII 866 GX110/M desktop workstations 12
Dell PIII 1 GHz GX110 desktop workstations 2
Dell p6333/GXa/M+workstations for miscellaneous functions (e.g., scanner, cd
burner, video monitoring) - 3

Laptops (running Windows 2000):
Dell Latitude C800, 850MHz - 3
Dell Latitude C810, 1.13MHz 15
Dell Latitude C840, 1.4MHz - 5
Dell Latitude C840, 1.8MHz 2
Dell Latitude D600 1.4 GHz 24
Dell Latitude D610 1.86 GHz 76
Dell Latitude XPi 75 1


Agent (Retailer) Licensing and Sales Reporting Systems

Application Subsystem: processes information required for new retailers, changes of
ownership, and corporate ownership changes
1. Processes initial application data (currently paper, may offer web based)
2. Processes ownership information (Tax IDs, SSNs, owner information)
3. Provides for the generation of letters requesting additional demographic and
business information
4. Provides notification to the Security and Accounting Departments if security
and credit evaluations are required (and provides for input of this information)
5. Provides a multiple generic application search function
6. Provides for query information of the application process
7. Processes sales information used by the Marketing and Retailer Services
departments to offer new On-line terminals to retailers that sell Instant Only
8. Provides for the approval/denial and licensing of applicants
9. Generates application fees due for the Financial System

Maintenance Subsystem: processes changes to existing retailers
1. Provides for status and demographic changes
2. Provides for status changes
3. Provide for addition/changes/removal of device information
4. Provides an On-line status of device installation information
5. Provide for Instant Ticket Vending Machine(ITVM ) control
6. Provides for recording/tracking of retailer note/memo information for internal
Retailer Services information
7. Provide for chain Information changes
8. Provides for marketing information criteria changes
9. Provides for retailer financial information changes (Tax ID and financial
account information) used in the Financial System
10. Provides for owner and ownership information changes
11. Generate telecommunications fees due for the Financial System
12. Provides for identification/tracking of retailers with low sales and generates a
weekly low sales fee file for the Financial System
13. Provides for On-line sales information inquiries
14. Provides a multiple generic retailer search functions

Reporting Subsystem: Generates various periodic (daily, weekly, monthly, yearly) and
ad hoc reports

Low Sales Fee Subsystem: process information required to recoup MSL Terminal
costs
1. Identifies retailers that meet requirements for low sales fee
2. Generates letters informing retailers of potential low sales fee penalties
3. Generates an adjustment file for Financial System


FINANCIAL SYSTEM

Winner Payment Sub-System: Process file (daily) from vendor containing checks
written at Lottery regional offices. This file consists of miscellaneous and winner
payment records.

1. Produce a check register report, by regional office for Instant and online
activity. Update Oracle database with check-writing application records.
2. Provides for W-2G reporting to the IRS and prize winners.
3. Allow for reprint of winner W-2Gs, as needed.
4. Produce a Winner Payment Summary Report. This report is made of prize
installments, bank payments and manually entered records.
5. Produce a Payment Summary Report. This is a summary of all daily
payments that interface to the State of Michigan including bank payment
taxes.
6. Produce reports reflecting an audit trail of changes made to any of the
following fields: winner name and address, ticket information, check
information, and voided checks.
7. Provide inquiry, update (add/change/delete), and reporting capabilities for all
information in the Financial System (winner name/address/ticket information,
winner payments, voiding of checks, all financial data)
information relating to Lottery clubs, club members, and payments made to
club members.

Ticket Adjustment Request Sub-System:
1. Print and report on all tickets adjustment requests that were scanned through
the terminal. The file is sent to the Lottery from the vendor.
adjustment data.
3. Allow for approval of adjustment transaction; create a mass adjustment file for
applying the adjustment to the retailer account; produce required report and
letters.

Prize Installment Sub-System:
1. Provide inquiry, update (add/change/delete) and reporting capabilities for all
prize installment winners (winners receiving partial payment on a yearly
basis).

Pending Claims Sub-System:
pending claims (claims received by the Lottery, for which payment may or
may not be made).

Retailer 1099 Sub-System:
1. Maintain Oracle database of retailer commissions, updated weekly.


2. Maintain Oracle database of retailer information for IRS 1099 reporting.
Provide for 1099 reporting by retailer, chain, and district. Provide various
1099 letters and reports, as required by IRS.
retailer commission/1099 information.
4. Allow for reprints of retailer 1099 forms, as needed.

Weekly EFT Sub-System:
1. Summarize all financial information (sales, cancels, Instant game settlements
and returns, and adjustments) for weekly EFT processing.
2. Produce weekly sales reports
3. Create chain reports
4. Create credit and debit files for transmission to bank.
5. Produce EFT file information and control report.
6. Create commission file.
7. Allow for update (add/change/delete) of retailer EFT file.

Main Interface Sub-System:
1. Edit Great Plains (accounting package) file and produce error report.
2. Produce Great Plains report by distribution code.
3. Update prize installment interface payment history.
4. Update financial tables with prize installment records.
5. Create interface files to the State of Michigan from Financial System, Great
Plains, and Prize Installment System.

$2 Million Drawing Sub-System:
1. Reconcile Instant game promotion for Instant game validations to Financial
System.
2. Reconcile financial records to Instant game validations
3. Create Instant game promotion file and report.

ONLINE GAMES SYSTEM

1. Process financial transactions (load to Oracle database); approximately 2.5
million records daily consisting of wagers, redeems, reissues, and cancels
from approximately 12,000 retailers, Lottery regional offices, and Lottery
Headquarters.
2. Process adjustments
3. Process wager reissues (wager is validated, and a new wager is reissued for
the remaining drawings)
4. Process cancelled wagers
5. Provide daily reporting of sales, promotions, coupons, cancels, reissues, and
validations counts for verification and balancing to vendor totals.
6. Provide winning numbers, by game, to the public via web feeds, press
releases, and hard copying reporting.


7. Provide both retailer and winning wager information, in various formats, to
Lottery Security staff for investigational/research purposes.
8. Monitor and notify retailers that have unusually high cancel ticket activity.
9. Provide information, as needed, to satisfy various FOIA requests.
10. Maintain winning number history for all games.
11. Continually purge non-winning wagers and tickets that are at least 8 days old,
from Oracle database.
12. Report monthly on unplayed wagers, unclaimed wagers, and wagers cashed
within 30 days of expiration.
13. Track bonus commission and game promotions, by day and retailer, for each
game.
14. Perform winner determination for each of the current 12 On-line games.
Verify winner totals with vendor totals.
15. Provide reporting, by city and county, of sales and winner counts for fiscal
and calendar years.
16. Archive and purge wagers and tickets from Oracle database, after 13 months
from wager date.

INSTANT GAME SYSTEM
Game Maintenance Sub-System:
1. Add, change, and delete base game information for individual Instant Games.
2. Add, change, and delete prize information for individual Instant Games.
3. Provide inquiry access to base game and prize data.

IPS Inventory Tracking Sub-System:
1. Interface with the Instant game distribution vendor to receive inventory data
each business day (current transaction volume: 10,000-15,000 records/day).
2. Capture inventory transactions (activations, settlements and returns) which
have a financial impact to the Lottery.
3. Provide periodic and ad hoc reporting of financial inventory transactions.
4. Facilitate balancing and reconciliation of the Lottery Back-Office System to
that of the Instant game distribution vendor.
5. Interface with the Instant game distribution vendor at the end of distribution to
receive data concerning all ticket stock voided during the course of
distribution (i.e., unsold books, damaged stock, ticket returns).
6. Provide reporting and facilitate oversight of financial liability connected with
Instant games
7. Facilitate reconciliation of physical inventory and any outstanding validation
liability.
8. Interface with Instant game ticket printer(s) to receive inventory data for new
games.


Instant Promotions Sub-System:
1. Provide the ability to issue promotional discount coupons to players.
2. Establish quarterly Instant sales goals for qualified retailers, using target
parameters provided by Lottery. Retailers who successfully achieve their
sales goals receive additional commission on their Instant game sales for the
quarter.
3. Provide reporting and facilitate oversight of quarterly Instant game retailer
incentive promotion.
4. Compare end-of-quarter sales totals with pre-established sales goals to
determine commission awards for successful retailers.
5. Interface with the Lottery games vendor to transfer award adjustments for
inclusion on the vendors combined retailer invoice.

Instant Validations Sub-System:
1. Interface with the primary Lottery vendor to receive validation data for each
business day (current transaction volume: 100,000-300,000 records per day).
2. Interface with the Instant game distribution vendor to receive daily reporting
on validation activity to aid in balancing with Lotterys Back-Office System.
3. Facilitate reconciliation of outstanding validation liability.
4. Provide periodic and ad hoc reporting of validation activity.
5. Provide unclaimed top prize data for the general public to access via Lotterys
official website.
6. Provide inquiry access to historical validation data.
7. Interface with Instant game ticket printer(s) to receive validation data for new
games.
8. Interface with Instant game ticket printer(s) to receive validation data for void
winning tickets damaged, returned or otherwise unsold during distribution of a
game.
9. Provide for the loading, maintenance, archiving and deletion of Instant game
validation data (volume: over 100 active games with an average of 1.8 million
validation records per game).
10. Provide the ability to extend an Instant game by adding new validation
records for newly printed game stock.


PULL-TAB SYSTEM
Mass Adjustments Sub-System:
1. Interface with the Lottery games vendor to transfer pull tab invoice data for
inclusion on the vendors combined retailer invoice.

Game Maintenance Sub-System:
1. Add, change, and delete base information for individual Pull-tab games.
2. Provide inquiry capability for Pull-tab game data.

Invoicing Sub-System:
1. Interface with the Pull-tab distribution vendor to receive daily invoice data.
2. Interface with the Pull-tab distribution vendor to receive periodic and ad hoc
reporting of Pull-tab invoice activity.
3. Provide capability to inquire on Pull-tab invoices.
4. Provide periodic and ad hoc invoice reporting to Lottery users.

LOTTERY REPRESENTATIVE SYSTEM

Contact Log Adjustments Sub-System:
1. Provide the ability to add and logically delete visit transactions to
compensate for equipment failures, power outages and retailers without a
compatible terminal device.

Contact Logging Sub-System:
1. Interface with the On-line network vendor to capture log transactions of field
staff visits in real time.
2. Provide inquiry capabilities to logged visit activity using lottery representative
number, retailer number and visit type.
3. Provide the ability to inquire on log error transactions.

Lottery Representative Management Sub-System:
1. Add new Lottery representatives to the system.
2. Change certain data elements for an individual Lottery representative.
3. Perform inquiries on general Lottery representatives information.
4. Periodic reporting of Lottery representatives visit activity logged at the retailer
locations.

Lottery Representative Reporting Sub-System:
1. Ad hoc reporting of Lottery representative visit activity logged at the retailer
locations.


Sales Force Incentive Sub-System:
1. Establish quarterly sales goals for Instant and club games, using target
parameters provided by Lottery.
2. Generate reporting to clearly communicate sales goals and projected award
amounts to both Lottery management and field staff personnel participating in
the incentive.
3. Provide periodic and ad hoc reporting showing Instant and club game sales
activity to clearly communicate participant progress throughout the course of
the incentive.
4. Compare end-of-quarter sales totals with pre-established sales goals to
determine expected cash award levels

AGENT SYSTEM

Automated License Fee Sub-System:
1. Identify retailers who have been newly licensed and still need to pay the one-
time fee for their retailer license.
2. Identify retailers who have had a new online retailer terminal delivered to their
location and are required to pay the telecommunications fee associated with
the leased line installation.
3. Based on Lottery rules and directives, automatically create adjustment
records which will charge license and/or telecommunications fees to owing
retailers.
4. Interface with the On-line network vendor and transmit weekly license fee
adjustments. All license fees and telecommunications fees must appear on
the weekly retailer invoices.
5. Maintain a record of all pending license fees, giving Lottery the ability to
change or delete certain items of data prior to their release (e.g., lower fee
amounts, change EFT release dates, etc.).
6. Generate audit and periodic reporting to facilitate oversight of the license fee
process.

Agent Sales Sub-System:
1. Capture gross sales, cancels and associated sales adjustments for all online
games.
2. Capture gross sales, returns and associated sale and stolen ticket
adjustments for all Instant games and Pull-tab games.
3. Capture redemption data for all Lottery games excluding Pull-tabs.
4. Capture retailer commission data resulting from all Lottery game activity.
5. Produce periodic and ad hoc sales reporting to support ongoing Lottery ticket
sales.
6. Provide inquiry and query capabilities to historic sales data.

Note: Most of the systems noted above are programmed with XGEN and Cobol


MISCELLANEOUS SYSTEMS
Online Game Coupons Subsystem:
1. Interface with the On-line network vendor to establish control number files
which can be issued as promotional coupons to players of On-line games
2. Interface with the coupon printing vendor to generate unique coupons using
data from the control number file issued by the On-line network vendor

SalesLogix Subsystem: processes data needed to support the SalesLogix software
and supports the DSRs
1. Provides transfer of retailer business information
2. Provides for transfer of sales information.


APPENDIX E:
MANAGEMENT AND ADMINISTRATIVE REPORTS
Management reports must be available upon demand at management workstations and
be able to support the business activities listed below. Actual report formats are to be
resolved with the Lottery. Specific wording in the following report descriptions simply
represents the meaning that is to be conveyed.
This list of reports is not intended to represent an all-inclusive list of the reports required
by the Lottery.
1. Game Control such as Draw Close, Winning Numbers, Game in Pay
Status. The System must automatically produce two printed copies of all
game control reports.
2. Total Daily Activity Total sales activity for the day
3. Daily Activity/Game Reflecting the current day's activity for all On-line
games, showing the total pool amount and play type and date. All pools for
which play is being accepted are to be shown. Also indicates the number of
quick pick plays and percent of total.
4. Previous Activity/Game Reflecting the previous activity and showing the
total pool amount by play type and date. This report shall show play activity
prior to the current day on all pools for which sales are being accepted.
5. Combined Activity Reflecting the total pool amount combined from current
and previous activity reports.
6. Prize Reports Showing the winning numbers for the most recent drawing,
last control number, the number of winning plays by play type and tier, the
prize payout liability and the total pool amount.
7. Top Played Numbers Showing the fifteen (15) most popular numbers
being played on the current day and all advance pools, the total prize liability
of all play combinations on each number in dollars and cents.
8. Retailer Transaction History/Look-up Any and all retailer transaction
history for the day.
9. Retailer Sales History Sales history for all games for the requested
retailer(s).
10. On-Line Terminal Sales Over/Under Report A report of selected Retailers
over a specified sales amount and under a specified sales amount showing
Retailer number, line and network address, and actual net sales amount for


all games. Report to be applied to all games or a selected game for the
current day or week to date.
11. Games Net Sales Tickets selling per second statewide for all On-line
games.
12. Daily Terminal Availability Reflecting the date and time of inquiry and
showing those terminals not operable at that time on that day as well as the
period of time that the terminals were inoperable.
13. Week to Date Retailer Balance Showing the cumulative position (week to
date) of all Retailers, sales dollar amount less cancels, retailer commission on
tickets sold, number of units canceled, cash paid to winners, number of "file
claim" tickets issued, number of tickets cashed, Retailer net balance, Retailer
number and cash advances, if any.
14. System Totals Showing tickets sold and cash received for each type of
play broken out by today's and the previous week's business with grand
totals.
15. Terminal Sales Activity Showing, by terminal, the number of tickets
canceled, net sales, commissions, number of winners validated, and amount
paid. An identifying symbol is to be printed next to the Retailer number
whenever cancels exceed a designated variable percentage of sales and
another symbol list to be printed if the Retailer has a negative balance.
16. Game Status A report showing the status of the current open games
(where plays are currently being accumulated to) and past games for 365
days. On all past games, indicates the winning numbers that were drawn, the
play amount, and the liability amount (and percentage of play amount).
17. Weekly Invoice/EFT A report summarizing the retailer invoices, reflecting
amounts that will be swept from their bank accounts with subtotals available
by corporate account and district.
18. Total Daily Activity All activity for all On-line games for the day.
19. Combined Sales Combined report of Instant and online sales for the day.
20. Forced Settlement Weekly report of retailers and Instant inventory that
was automatically settled by the system per Lottery-defined parameters.
21. Instant Sales Counts and amounts for all Instant game activity.
22. Partial Pack Status Changes All partial pack settlements for the day or the
period requested.


23. Stolen Pack Status Changes All packs placed into a stolen status for the
day or the period requested.
24. Instant Games Inventory Balancing All Instant game inventory
information (active, settled, etc.).
25. Instant Game Aging All packs in a selected status for a selected number
of days.
26. Sales by Price Point Ability to report sales by individual ticket price points.
27. End of Instant Game Liability Report
28. Activations and Settles Date driven Instant Activations and Settles by
game pack and amount for requested retailer or chain.

29. Filled/Cancelled orders Date driven Instant filled or cancelled orders for all
order types including order number, date shipped, date received, filled by for
requested retailer or chain.

30. Packs in Transit Instant status of packs in transit report shows game, pack
value, warehouse transit date and order number sorted by order number or
transit date for requested retailer or chain.

31. Retailer Pack Inventory Instant game retailer pack inventory with game,
pack, pack status, total packs, tickets per pack, ticket cost, value active date,
number of days, number of cashes, and maximum ticket sorted by activation
date, game number or pack status. Requested for retailer or chain.

32. Activity Sales Detail Date driven combined online and Instant gross sales,
discount, cancels/Instant return, promos, net sales, cashes, sales
commissions, cashing commission, adjustments, net cash flow, for requested
retailer or chain.

33. Activity Games Detail Date driven (by specific game) of online or Instant
game for requested retailer or chain showing gross sales, discount, cancels,
promos, net sales, cashes, sales commissions, cashing commissions and net
cash flow.

34. Retailer Daily Activity Date driven combined online and Instant daily
activity by game for cashes, sales commissions, cashing commission,
promos, adjustments, requested for retailers or chain.

35. Retailer List retailer listing showing retailer, name, business/contact, phone
number, business address, mailing address: requested for retailers or chain.


36. Retailer Ranking Date driven combined daily average, Instant daily
average, online daily average, by retailer status, rank, net Instant sales
amount, net online sales amount, total sales amount, and number of sale
days - for retailer or chain.

37. Retailer Commissions Date driven report for retailer or chain, showing
retailer, name, owner name, address, On-line sales, Instant sales, On-line
sales commissions, Instant sales commissions, On-line cashing commissions,
Instant cashing commissions, incentive checks, adjustments and 1099 total.

38. Sales Comparisons Report showing combined Instant or online sales, date
range comparison current versus prior, requested for retailer or chain.

39. Zero Sales Date driven report showing DSR, status, city, phone, point of
contact requested for retailer or chain.

40. Corporate Reporting The chain headquarters receive special reports that
detail the activity for each store and summarize the activity for all stores.
In addition to the named reports, the Lottery anticipates that various other types of
sales, marketing, accounting and security reports may be needed, with the data to be
displayed and format to be determined by the Lottery.


APPENDIX F:
RETAILER TERMINAL REPORTS
Below is a generic list of the reports required from the retailer terminals. Actual report
formats are to be resolved with the Lottery. Specific wording in the following reports
simply represents the meaning that is to be conveyed.
This list of reports is not intended to represent an all-inclusive list of the reports required
by the Lottery.
On-Line Games
1. Daily sales Combined online daily sales, cancels, pays, claims, credits and
commissions by game for requested retailer
2. Weekly Sales Combined online weekly sales, cancels, pays, claims, credits
and commissions by game for requested retailer
3. Winning Numbers and Payouts Winning numbers and payouts for last
completed draw of all online game for a specified date (default is most current
draw and all games)
4. By game winning cities/prizes City/cities, prize amounts and winning
numbers by game
5. Weekly adjustments Online and Instant adjustments to the retailer for the
week requested
6. By game Current/Previous Week Sales Current week and previous week
sales by game for requested retailer
7. Test Ticket Prints a test ticket where the wording DEMO NOT FOR
SALE must be prominently displayed in the middle of the ticket.
Instant Games
1. Daily Activity Instant inventory activity and sales activity for the day for
requested retailer.
2. Weekly Activity Instant inventory activity and sales activity for week-to-
date for requested retailer.
3. Inventory Summary Summary of Instant ticket inventory by game.
4. Inventory Detail Detailed Instant ticket inventory by game.
5. Inventory History History of Instant inventory for a retailer for a
particular time frame.


6. Weekly Pays Detail Weekly Instant ticket payment detail.
7. Weekly Pack Settle Detail Instant packs settled by game, number, date
and amount.
8. Game Information Game status listing for active and closed games for
all games currently on the system.
9. Active Packs Details of active packs in retailers inventory.
10. Orderable Games Instant games that are currently available for order,
descending by sales.
11. Top Prize Remaining Games that currently have no top prizes
remaining to be sold
12. Sales by Price Point Ability to report sales by individual ticket price
point.
General
1. Sign-on Information about the terminal at the time the retailer signs-on to
the system.
2. Settlement Combined online and Instant settlement amounts for requested
week (can be requested for up to 25 past settlement weeks).
3. Customer Display message Update for the customer display message.
4. Broadcast Messages Informational broadcast messages to be sent to all
retailers or to a specific retailer.
5. History Shows retailer the history of transactions for current sign-on


APPENDIX G:
BOPS SOFTWARE APPLICATIONS
1. Claims Information System

A. Maintain a data base of winner claims information received from check-writing
application payments to winners
B. Create interfaces in State Accounting System formats for all check-writing
application payments, federal taxes and debt offsets
C. Create W-2G and 1042 electronic reporting to the IRS and State of Michigan
D. Allow for post-claim processing of Lottery club member information for claims
made in the name of a Lottery club
E. Allow for maintenance, inquiry and reporting of winner and tax information
F. Provide for processing and tracking of mail-in claims
G. Provide for 2
nd
chance drawing pools based on claim information for various
marketing requirements

2. Retailer Sales Information Management

A. Maintain a data base of retailer sales, commissions and adjustments that
properly reflect total sales and commissions on an annual tax reporting basis for
IRS and State of Michigan 1099 reporting
B. Create annual 1099s and electronic reporting to the IRS and State of Michigan
C. Provide ad hoc and pre-formatted reports as required by the Lottery, Refer to
Appendix E for list of required reports.

3. Annuity Payments System

A. Provide annual payments made on a monthly basis and tracking of prizes and
prize recipients of large jackpot prizes paid in annual installments.
B. Provide payment interface to state systems for state warrant creation.
C. Allow assignment of prizes to beneficiaries or by court order, allowing tracking to
original prize winner.
D. Provide for inquiry, form letters, and reporting
E. Capture payment information and provide for W-2G printing and reporting
purposes.
F. Allow capture of historical data to time of original prize award and accommodate
payments of up to a 30-year payment stream.


APPENDIX H:
IT SECURITY POLICIES
1. Every user that supports Lottery business functions shall have a user-ID that
uniquely identifies that user. The unique user-ID shall be used as the users
identifier in every Lottery information system accessed.

2. Lottery user identifications must be used only by the assigned user.

3. All information processing and transmittal actions shall be traceable to an individual
and unique user-ID.

4. Appropriate use of any approved authentication mechanism is required. Creating
unauthorized links to other systems, bypassing authentication mechanisms,
circumventing data access control procedures or otherwise jeopardizing the security
of any component within the Lottery or State of Michigan networks is prohibited.

5. Privacy of any authentication mechanism, method, or procedure shall be maintained.
Any personal identification number (PIN), password, or other secret identifier that is
used for authentication shall not be shared with any other user (except initial or reset
passwords), posted on any machine or hardware token, or made obvious to any
other person.

6. The Contractor shall comply with Lottery password complexity rules.

7. Login to any Lottery information system requires the user to authenticate via
approved authentication method (e.g., strong password, biometric authentication).

8. All user-level and system-level passwords for Lottery systems shall be changed at
least every ninety (90) days. For critical or sensitive resources, the change interval
shall be at least every sixty (60) days.

9. Default credentials (usernames and passwords) in network equipment (e.g., routers,
switches, appliances) shall be changed prior to implementation into the Lottery
network. Passwords must comply with Lottery password complexity rules.

10. Passwords shall be maintained in unreadable format (e.g., encrypted, hash function)
when held in electronic storage for any significant period of time.

11. Application passwords shall not be stored in clear text or any reversible form within
the application code.

12. Passwords for Lottery systems that are assigned to Contractor users must be
distributed in a discreet manner. The user shall change an initial or reset password
upon first login to a Lottery computer system.


13. Data owned, used, created, or maintained for the Bureau of State Lottery shall be
classified into one of the following three (3) categories:
a. Public - applies to information that is available to the general public and may be
intended for distribution outside the Bureau of State Lottery.
b. Official Use Only applies to sensitive information that must be guarded due to
proprietary, ethical, or privacy considerations. Official Use Only data is
information that is intended for internal use to Lottery employees or business
partners who have a legitimate purpose for accessing such data.
c. Confidential applies to information that is protected by statutes, regulations,
Lottery policies or contractual language.

14. Data that falls under the categories of: accounting information, social security
numbers, credit card numbers, Federal Employer Identification Numbers, bank
account information, player/winner identifying or personal information, security
vulnerabilities, passwords/PINs, ticket control numbers, and ticket validation
information shall default to a Confidential classification.

15. Each sensitivity classification shall have separate handling requirements and
procedures for how that data is accessed, used, and destroyed.

16. Information shall be consistently protected according to its classification throughout
its life cycle, from its origination to its destruction.

17. Information shall be protected in a manner commensurate with its sensitivity,
regardless of where it resides, what form it takes, what technology is used to handle
it, or what purpose(s) it serves. Appropriate access control measures shall be used
to protect and keep private any confidential or personal identifying information.

18. The Contractor is responsible for the security of any computer account set up to
access Lottery information and shall be held accountable for any activity that takes
place in these accounts. Any discovered violation or attempted violation of system
security must be reported immediately to the Lottery IT Security Officer.

19. Lottery information that has been designated as Confidential shall not be removed or
transmitted from the Contractor work premises without written permission from the
Lottery IT Security Officer.

20. All Contractor users that have Lottery information on any mobile device (e.g., laptop,
PDA) are required to protect IT equipment in their possession from theft or
information disclosure.

21. Any person connected to the Lottery computer system shall not leave their computer
(PC), workstation, or terminal unattended without first logging-out or locking the
workstation. Lottery computer systems shall not be unattended without activated
access controls.


22. Access granted to Lottery information systems shall be subject to verification of a
person, machine, or software identity credentials.

23. Users of the Contractor shall not attempt to obtain access to Lottery systems for
which proper authorization has not been granted.

24. The computer and data communications system privileges of all Contractor users,
system services, and programs that support the Lottery shall be restricted based on
the least privileged security principle that grants access to systems based on only
those rights necessary to perform Lottery work assignments and job functions

25. Review and revision of authorizations shall occur whenever personnel, position
description, or business responsibility changes take place and an audit trail shall be
produced. Access to Lottery information or information resources shall be managed,
controlled, and periodically reviewed and audited to ensure only authorized users or
systems gain access based on the specific privileges granted.

26. Privileges shall be established such that system users are not able to modify
production data or business processes in an unrestricted manner. Modifications to
production data or business processes require a controlled process approved by
Lottery management.

27. Lotterys management reserves the right to revoke the privileges of any Contractor
user at any time if conduct interferes with the normal and proper operation of
Lotterys information systems.

28. Access to Lottery information or information resources shall be protected through
appropriate access controls commensurate with the criticality or confidentiality
associated with that resource.

29. All Lottery information system privileges shall be promptly terminated, not to exceed
12 hours, from the time that a worker ceases to provide services to the Lottery.
Contractor users that have privileged access (e.g., administrators) shall be
immediately terminated at the time that a worker ceases to provide services to the
Lottery.

30. Lottery information systems shall be sufficiently secured and configured to prevent
unauthorized access to information, applications, utilities, operating system files, or
any other information resource.

31. All server resident files and databases for the Lottery computer information systems
shall be backed up according to an approved and documented backup and file
retention schedule.

32. Backup files shall be tested periodically to ensure reliability and functionality.


33. File and database back-ups shall be rotated to a secure off-site location on a
scheduled basis.

34. A disaster recovery plan shall be developed and maintained that ensures that the
computing infrastructure which supports critical business activities will be restored in
accordance with the requirements of Lottery business functions and legal mandates.

35. Disaster recovery plans shall be analyzed on an ongoing basis to ensure alignment
with Lotterys current business objectives and requirements.

36. Disaster recovery plans shall be tested at least semi-annually. Testing standards
and objectives shall be developed for testing the disaster recovery plans. The test
results shall be documented and provided to the Lottery. The disaster recovery plan
shall be updated as needed.

37. Lottery data that is designated as confidential (e.g., SSN, FEIN, credit card
numbers, etc.) shall be sent in encrypted format and digitally signed when
transmitted across public network (e.g., Internet) or via wireless transmission (e.g.,
VSAT).

38. Lottery data that is designated as confidential shall be stored in encrypted format
when it resides on a laptop computer or any mobile device.

39. The strength of the encryption method used shall be correlated to the sensitivity of
the data being encrypted.

40. Encryption keys that are used to encrypt other keys shall not be used to encrypt
data. Data encryption keys and key encryption keys shall be kept separate and both
shall be stored in encrypted form. The encryption of keys shall be performed with a
stronger algorithm than is used to encrypt other sensitive data protected by
encryption.

41. Proven, standard algorithms shall be used as the basis for encryption technologies
and proven, standard message digest hash algorithms shall be used as the basis for
creating and verifying a digital signature or file integrity.

42. Encryption key lengths must be approved by Lottery and will be reviewed annually
and upgraded as technology allows.

43. IT security functionality shall be developed in conjunction with all other system
functionality. Security requirements must be considered and addressed in all
phases of development (including system modification) or acquisition of new
information processing systems.


44. The identification of vulnerabilities and the selection and implementation of
safeguards shall continue as a Lottery system progresses through the phases of the
life cycle, including after the system has been released into production. If changes
are made to a Lottery application or system that affects the types of security controls
that are needed, then the security controls shall be updated to mitigate any risks
identified.

45. Effective and appropriate change management controls (e.g., SEI CMMI) shall be
used through all phases of the development life cycle.

46. Risk assessments of gaming and Lottery IT systems (e.g., hardware, software,
firmware) must be conducted annually to identify potential security threats to those
resources and appropriate safeguards must be put in place to protect those
resources.

47. At a minimum the risk assessments shall produce:
a. Comprehensive list of possible and significant threats.
b. Estimate of loss potential if the threat is exercised on a vulnerability.
c. Probability or likelihood of the threat(s) being exercised on a vulnerability.
d. Recommended list of safeguards, countermeasures, and/or actions to
mitigate the risk(s).


APPENDIX I:
INSTANT TICKET VENDING MACHINE (ITVM)
SPECIFICATIONS
(If Lottery exercises this option)

1. Contractor must adhere to the requirements outlined in Section 3.2.3.4

2. Contractor shall provide ITVMs, all related supplies, and services that meet the
minimum service level requirements outlined in Appendix C, #26. Contractor
shall provide all necessary reports to the Lottery in order to monitor service level
performance on a monthly, or more frequent basis.

3. ITVMs must have 24 bins and support tickets of various dimensions.

4. Locking system, at a minimum, should provide separately keyed lock and
separate vault for the bill acceptor drawer for optimal security. Access to the bill
acceptor shall be inside the main door of the machine, not from the outside.

5. The ticket shall be dispensed by pressing on back-lighted display window, which
shall be made of unbreakable glass or durable plastic resistant to compromise.

6. The color and graphics for the ITVMs shall be approved by the Lottery.
Appropriate labeling addressing under-age usage and alerting the customer that
no change is dispensed shall be provided.

7. ITVM shall be constructed in a manner that prevents accidental tipping and
makes even purposeful tipping very unlikely.

8. Bursting shall be such to prevent distortion of tickets, and the appearance and
playability of the ticket is protected.

9. Dispensers shall be capable of dispensing various prices of lottery tickets, values
between one dollar ($1.00) and ninety-nine dollars ($99.00).

10. Currency acceptors shall be capable of accepting $1.00, $5.00, $10.00 and
$20.00 denomination bills at a minimum.

11. The currency acceptor shall meet current industry standards for rejecting
counterfeit currency.

12. Each ITVM shall be equipped with audible alarm system to alert the retailer of
unauthorized entry, loss of power, or tilting. Alarm shall be easily heard above
normal store noises at a minimum distance of fifty (50) feet.


13. Each ITVM shall be equipped with wireless remote control deactivation device
capable of shutting down the ITVM within 100 feet.

14. Locks shall be keyed and number coded separately and clearly marked do not
duplicate. Two sets of keys shall be provided for each retailer per ITVM. The
money acceptor drawer shall be keyed separately from the rest of the locks.

15. Contractor shall provide retailer reports as well as reports for the Lottery as
requested by the Lottery.

16. Contractor shall be responsible for all Lottery initiated ITVM installation/removal
and other moving expenses during the life of the contract. Contractor may be
reimbursed for Retailer initiated moves at an agreed upon schedule.

17. Contractor shall provide preventative maintenance on each ITVM every six (6)
months. This maintenance shall maintain the operation as well as the
appearance of the ITVM.

18. An ITVM shall be made operable within 48 hours of a retailers call for service.
An ITVM shall be considered operable when capable of appropriately accepting
cash and dispensing tickets from all bins.

19. Contractor shall provide training to the Retailer and Lottery staff within two days
of delivery/installation of the ITVM. Contractor shall be responsible for
coordinating training with the retailer and Lottery staff. Quick reference cards
and users manuals shall be provided for each ITVM.

20. Reference Section 3.2.3.4

Updated OJ--02-201 0 Ad Board Date:
APPROVED
04/06/2010
State)
Administrative Board
MICHIGAN DEPARTMENT OF TECHNOLOGY, MANAGEMENT AND BUDGE 1
PURCHASING OPERA110NS
AGENCYSUBMIIIAL !Zi
MDIMB PURCHASING SUBMITIAL 0
CONTRACT DESCRIPTION: Contract# MSL 07-001 Modification requested for Commodities
CONTRACTOR:
GIECH Corporation, Providence, RI
MICHIGAN
BUSINESS
0
INCREASE
$3,858,000.00
0 For Services Only, Signed OSE Form DMB-1497-0SE r-eceived (Exemption fi"om ED2009-3)
Date Approved by OSE:
Attach OSE--approved 1497 to all services purchases other than those classified as
Nonjurisdictional (NJ)
0 Check if request is to exercise Contr"&ct option(s) ..
0 Check if request is to extend Contract (no option in base).
I ime period of extension:
0 Check if extension is beyond Contract option year"(s).
D Check if MiDEAL contract.
ORIGINAL CONIRACI: Term: 04/0 l/08 - 1/19115 Value: $285;600,000 00
#of Base Years: 6 +implementation period
CURRENI CONTRACJ VALUE: $302,718,614.00
NEW IOIAL CONTRACT VALUE: $306,576,614.00
APPROVED
04/06/2010
Michigan State
SAB Aan
rmstranve BOail
PERIOD {Option/Extension staTt date - APPROVAL
I
end date and state length in years) DATE $Value
0 Option I CN #
0 Option 2 CN #
; 0 Option3 CN# j
/ D Extension CN #
i
I Total 0
PREVIOUS CHANGES NOT LISTED ABOVE IN I HE OPTIONS/EXTENSIONS TABLE:
r
SAB APPROVAL
DATE VALUE OF
TYPE OF CHANGE: _{if aj)JJlicable) CHANGE:
First CN Amendment # 1 Merchandising Program 08105108 $1,200,000.00
Last CN Amendment #4 Additional Equipment $0.00
I otaJ number of processed changes to time, scope, and/or dollars: 4
FUNDING SOURCE: PERCENTAGE COMMENTS
]00% Lottery Restricted Fund
ESifMA TED INCREASE DEI AILED BY FISCAL YEAR(S):
FY Dollar Amount
10 $514.400.00
11/12/13/14 $3,086,400.00
15 $275,200.00
PURCHASE JUST IF'lCA TION:
APPROVED
04/06/2010
Michigan State
D
t f p d tiS M d.fi R d d p E
1
P..dmir;istrativ.e Board
escnp 100 o ro uc erv1ce o 1 1cation equeste an rocess xp anation: rne
Michigan Lotte1y is requesting to exercise an amendment to their competively bid gaming system
conn act (cunently held by GTECH) to procure additional retailer on-line gaming signage accepting
Invited Option G. Autho1ity to bid a gaming system is afforded to the Lottery through Statute (Act
239 of.l972, Sec. 432 .9) This Amendment will allow the vendor to provide necessary electronic
signage at retail outlets to promote Mega Millions and the new Powerball on-line games for the
Lottery
Purpose/Business Case of Amendment or Extension, and Expected Outcomes: In order to
increase Lottery revenues and support the School Aid Fund, the Lottery intends to install new
electronic signage at retailer outlets to promote and advertise Lottery's participation in both Mega
Millions and Powerball games Signage will promote both jackpot games providing customers with
the latest announced jackpots. Jackpot awareness is the number one sales draw for high jackpot
games.
Risk Assessment: Failure to promote and advertise these new games may result in a loss of
revenues due to a lack of customer participation.
PRICE CLAUSE: Fixed price based upon vendor negotiations.
CS-138 #: N/A Majo1ity of contract remains to be commodities
COST REDUCIION/SA VINGS CONSIDERA lIONS:
0 Check if> $500,000 for software development, computer hardware acquisition or quality
assurance?
RECOVERY ACT FUNDS
[ Penent of Total I N/ A% I Amount
Is
APPROVED
04/06/2010

,..... /"'\UIJ1i11i:>u a1.ive OUGIIjU
Retum Information:
ID Mail: Lottery Building- Lansing Run
Phone No: S 17-335-5687
e-Mail: hauserd@michigan gov
Buyer Signature
Division Director Signature
Manager Signature
Sergio Paneque
MDTMB Business Services Administration
AMENDMENT #5 TO CONTRACT MSL07 -001
RECEIVED
MAR 10 2010
ADMI:N.I.STRATlON
This Amendment #5 to Contract MSL07-001 ("Amendment") is entered into by and
date of approval of this Amendment by the Michigan State Administrative Board.
The purpose of this Amendment is to exercise Invited Option G, which is to provide and
maintain in-store signage at Lottery retailer locations.
and instant lottery gaming system and related services. The RFP requested proposals
on providing in store signage under lottery invited Option G, provision of in store
signage, which GTECH responded to when submitting its proposal.
The Lottery and GTECH entered into Contract No. MSL07 -001 on April 1, 2008, with
respect to an online and instant gaming system and related services including Section
12, other Options which states, "The (Lottery) may, from time to time during the term of
this contract, request GTECH to submit a proposal for the provision of goods or services
which are .... outside the scope of the goods or services agreed to by the parties to be a
part of the base System requirements. With respect to such additional goods or
services, the parties agree to negotiate the terms and conditions, including price, for the
delivery of such additional goods or services."
Providing in store signage was contemplated in the RFP and the Lottery wishes to
exercise Invited Option G, provision of in store signage. By this Amendment GTECH
has agreed to provide Lottery with in store sign age under the following terms and
conditions :
1. Provision of Additional Equipment
GTECH agrees to provide to the Lottery the following equipment:
Five thousand Carmanah Dual Jackpot Signs to be installed by GTECH at
various retailer locations. A separate memorandum of understanding will
address the installation cycle and is incorporated here by its reference.
2. Provision of Additional Maintenance
GTECH agrees to provide to the Lottery the following maintenance:
Maintenance for five thousand Carmanah Dual Jackpot Signs installed at various
retailer locations. In addition, the agreed upon maintenance shall include
personnel resources, management and full Call Center support and
response services.
3. Provision of Cost
The Lottery agrees to compensate GTECH $12.86 per month for each sign installed at
various retailer locations. This cost includes the lease of the equipment as well as
installation and associated maintenance.
Additionally this cost reflects a $.99 per unit per month price reduction as full
satisfaction of an outstanding Liquidated Damage balance in the amount of $268,184.89
as found in Liquidated Damages reports from January 20, 2009 through January 24,
2010.
Overall costs for this Amendment are $3,858,000.00. See attached spreadsheet for
cost details.
4. Provision for Lease and Maintenance Coverage Dates
The lease and maintenance coverage dates are for a period of sixty (60) months.
GTECH will begin billing for 2,500 Carmanah Dual Jackpot signs thirty (30) days from
delivery of the first allotment by Carmanah. GTECH will bill for an additional 2,500
Carmanah Dual Jackpot signs sixty (60) days from the delivery of the first allotment by
Carmanah. At the end of the sixty (60) month period, if Lottery wishes to continue to
use the Carmanah Dual Jackpot signs, GTECH will, in good faith, negotiate with Lottery
a fee to maintain the signs.
5. Full Force and Effect
Unless specifically amended herein, all other provisions, terms, and conditions set forth
in the Contract remain in full force and effect.
6. Effective Date
This Amendment is effective after the State Administrative Board has given its approval.
IN WITNESS WHEREOF, the Michigan Lottery and GTECH agree to the terms and
conditions of this Amendment.
For
By:_v--- _________ _
Title: S 1.P. -liJte-ll}rP-164
Date: 3 .tf.201l1
Updatec111/3/11 Ad Board Date:
StATE Al>l\flNISTRATJVE BOARD
DEPARTMf./r()F TECHNOLOGY. MANA(lEMENTAND BUDGI!T
. .. . . .. PROCUREMENT .
AGENCYSUBMlTTAL
DTMBPURCHASING SUBMITTAL D
APPROVED
January
(ver. l"T)
Michigan State
CONTRACT DES.CR.IPTION: Contract fl. MSL 07,.0\il Modi.ficati<,m requested (or Commodities
Michigan Bureau {)f Lottery
CUANGE NOTICE NUMBER: Amendments# 6, 1, and 8
CONTRACTOR:
GTECH Corppration, RI
Ochee.l( i( request is to nercl$e Contnct optfon(s).
time period:
0 Check if' request is ttl eltend Contract (llD option in .. se).
TIJe period of extension:
:0 Cheal< is beyond :Contract option year(&l
Tim.e period of extension!
0 Ch"k irMIDEAL contraet.
MICHIGAN
BUSINESS
0
INCREASE
$12,950,000.00
ORIGINAL CONTRACT: 04/0li08-01/1W1S Value: 2$5,()0();{)()0.00
# of Base Yean: 6 + implementation pen()d
CtJltlUtNT CONTRACI' VALUEt
Amendment It 6 -
Amendtnent# 7 - $7,I00j000;00
Amentfu:lent # 8 ;, S3,280lOOO.OO
APPROVED
Jartuary 17; 2012
SAJJ
IVIIcmgan i:>U
PERIOD (Option/Extensionstart date APPRO VAt\<
ministrative E
date state length in DATE $Value
D Option 1 CN #
Option2 CN #
3 CN #
EX4msion CN #
Total 0
PREVIOUS CHANGES NOT LISTED ABOVE lN THE OPTIONS/XTNSlONS
SA.B APPROVAL
llATE
TYPE OF CHANGJ!1:
,{if anolicabJe)
FirsfCN Amendment# 1 Merchandisin2 Program 08'/05/0i
X..stCN Amendment fl. 5 On..:Une Gaminp; SiJma:ge
. . . . . ' . . . . .
,,{}4/06/lO
TotaJnqJ:nber of processed changes to time, scope, and/or dollars: S
FUNDING.SOURCE:
Lot:fetoyR.estrieted
Fund',
PERCENTAGE COMMENTS
100%
VALUE OF
CHANGE:
$1,200 00(),00
$3 858,000.00
te
oard
''
APPROVED
January 17. 2012
Description of Product/Service Modification Requested and Process Explanation: Michigan State
The of State Lottery is requesting to exercise three amendments to their competitively bid
gaming system contract currently held by GTBCH. Authority to bid a gamjng system is afforded to
the Lottery through Statute (Act 239 of 1972, Sec. 432.9)andprovision for these services were
under the RFP developed by the Lottery and responded to the bid proposal
submitted by the vendor. The following is a description of the three amendments:
Amendment #6 will result in a player card loyalty program and a subscription service. GTECH will
design d develop and/or will procure the design and development of th,e $oftware to add Lottery
related features, to a financial institution..:issued prepaid card to be offered to players.
Amendment #7 wiH result in the provision to the Lottery of certain interactive marketing and
product initiatives utilizing digital media channels such as web, mobile, and social platforms.
Amendment #8 will provide the tottery with additional Point-of .. Sale equipment allowing for an
expansion of the retailer
Purpose/Business Case of Amendment orExtenslon, and The Lottery is
contjnuouS)y working on new ways to attract players and expandits retailer netWork. All of the
amendments are being executed with the intention of increaSing both sales andthe contribution to
the School Aid Fund. Overall. sates are expected to increase by$402,819.000, resulting in an
increase to the School Aid Fund of $1 07 over the term of the Contract.
The following is a breakdown ofthe revenue anticipated for each amendment over the tenn of the
Contract:
Amendment #6: Estimated sales increase of$18,000,QOQ,resul1in.g in an tQ the School Aid
Fund of $S .S80,000. .
Amendment #7; Estimated sales of $288,00QJOOO, n::suhlng in an increase to the School
Aid Fund of$72,000,000.
Amendt1le"'t #8: Estimated sales increase of$96,819.000, resulting in an increase to the School Aid
Fund of$29,493,990.
Risk Failure to implement these initiatives. may result in less net revenue to the School
Aid Fund.
PRICE CLAUSE:
Amendment 16-Percentage based on prizes redeemed on card.
Amendment #7-Fixed price based ort vendor negotiatiOJ'ls.
Amendment #8,.Perccntage based on Lottery sales.
CS-138 #: N!A Majority of Contract Remains To Be Commodities
APPROVED
J ~ n u a r y 17, 2012
COST REDUCTION/SAVINGS CONSIDERATIONS: Michigan State
0Cbeckif>SSOO,OOOtorsoftware development, computerh3rdware acqnisition or quality
asstaranee?
RECOVERY ACT FUNDS
[ Percent of Total I NIA j Amount
js
I
APPROVED
January 17, 2012
AGENCY APPROVALS
u . C'"'"'te
f)q+he,r; .. <e:,
... n
Q, Q[,v,i-bn
Authorized Agency J{epl'eselltati:ve (printed)
.
&h.

Authorized Agency .Representative Signature
............ ..... ' ""''"'
Administrative E aard
Return Infonntion:
to Mail: Lottery Bldg. - Lansing
PhoneNo.: 335-5687
e-Mail: hauserd@michigan.g()v
Division Divisicm Ditettor Signature Jeff Brownlee
Chief Ptocurellle:nt Officer
DTMB-PtoeuteiJlerit
This Amendment #6 (the "Amendment #6") to Contract MSL07-001 (the "Current
Contract") is entered into by and between the State of Michigan, Michigan Bureau of State
Lottery (the "Lottery") having offices at 101 East Hillsdale, Lansing, Michigan 48909, and
GTECH Corporation ("GTECH") having offices at 10 Memorial Boulevard, Providence,
Rhode Island 02903. This Amendment #6 is effective as ofthe date of its formal approval by of
the Michigan State Administrative Board (the "Effective Date"). Amendment #6 establishes
certain goods and services to be provided to Lottery under Offered Options- Option M: Non-
Traditional Games and under Specified Options - Option C: Subscription Service in accordance
with RFP Number MSL007-001 dated April10, 2007 (the "RFP") as responded to by GTECH
and incorporated into the Current Contract. Amendment #6 will result in a player card loyalty
program and a subscription service as described in detail below. The Lottery and GTECH are
sometimes referred to herein separately as a "Party" and collectively as the "Parties."
Recitals
The Lottery and GTECH entered into the Current Contract effective April 1, 2008, with
respect to an online and instant lottery gaming system and related services. Capitalized terms
used but not defined herein shall have the meanings ascribed to such terms as used in the
Current Contract.
GTECH has proposed and the Lottery has agreed to have GTECH implement Offered
Option M and Specified Option C through the creation and operation of a player loyalty card
program (the "Renaissance Program"), with the functionality described in this Amendment
#6.
Section 2.2 of the RFP provides that the Parties may amend the Current Contract in a
writing executed by both Parties.
The Parties have negotiated this Amendment #6 to set forth the terms and conditions
relating to the successful creation and operation of the Renaissance Program in the State of
Michigan.
In consideration of the mutual promises given one to the other and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties,
intending to be legally bound, do hereby agree to the following:
Section 1. Amendment Approval. Promptly following Amendment #6 being executed by the
Parties, the Lottery will present Amendment #6 to the Michigan State Administrative Board for
- - - - - ~ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
its approval, and to the Michigan Department of Treasury for Section 4 PCI compliance
approval. In the event (i) the Michigan State Administrative Board fails to approve this
Amendment #6 within eight (8) weeks following presentation to it for its approval or (ii) the
Michigan Department of Treasury fails to approve the Section 4 PCI Compliance prior to
Launch (as defined below), this Amendment #6 shall become null and void and of no further
force and effect. Following Michigan State Administrative Board approval, the Parties will
work together in good faith to develop jointly a detailed time schedule (the "Time Schedule")
for the creation of the Renaissance Program (the "Project"). The Time Schedule will set forth
milestones for completion of the major activities required in order to achieve Launch (as
defmed herein) of the Renaissance Program no later than fifteen months from the Effective
Date. The Time Schedule may be amended by mutual written consent. "Launch" means the
issuance of the first registered Card to a Cardholder (each, as defined below), not including
Cards which may be issued as part of testing the operation of the Renaissance Program. In no
case will Launch take place unless, prior thereto, the Michigan Department of Treasury has
approved this Amendment #6 for Section 4 PCI Compliance.
Section 2. Renaissance Program Overview.
(A) In accordance with the Time Schedule, GTECH will prepare and the Parties will agree upon
the Software Scope Document ("SSD") for the Project, setting forth major technical
requirements for the Renaissance Program. Under Amendment #6, GTECH will design and
develop and/or will procure the design and development of the software to add the Lottery-
related features and functionality described in the SSD to a financial institution-issued prepaid
card (the "Card") to be offered to players who agree to participate in the Renaissance Program
("Cardholders"). The Parties intend the Renaissance Program to include the following features
and functionality:
(i) "Closed Loop Transaction" capability, which means a transaction that is
effected using a Lottery terminal (a) for the load and/or reload of funds onto a Card by a Lottery
retailer on behalf of a Cardholder ("Top-ups") or (b) by a Lottery retailer to effect Lottery
purchases over the retailer operated Lottery terminal or (c) by a Cardholder to purchase Lottery
products using a self-service ticket machine connected to the System ("Self-Service
Terminals");
(ii) a Lottery-funded loyalty-based Cardholder rewards program, to be described
as agreed by the Parties in the Marketing Plan referred to in Section 3 below (which program
will allow registered Cardholders to collect and redeem player loyalty points);
(iii) a Cardholder Website (the "Cardholder Website") that will be linked from
. the Lottery's Website, currently MichiganLottery.com, and that: (a) will allow registered
2
',
j!
Cardholders to view their account activity and to manage their accounts online; (b) will, in
accordance with the Time Schedule and applicable laws, provide a platform for configurable
responsible gaming parameters, as well as provide other features such as saving favorite numbers
to enable convenient and faster retail Lottery transactions; (c) upon agreement of the Parties to
the terms and conditions therefor, will offer registered Cardholders the opportunity to play games
for fun; (d) will provide an interface for subscription services and for tax reporting purposes to
be mutually defined; (e) will include functionality designed specifically to verify that the
subscriber's IP address or geo-location is in Michigan; (f) will include functionality designed
specifically for identity and age verification; (g) will include an optimized version of the
Cardholder Website that provides account access from mobile browsers; and (h) the subscription
service shall enable persons (including Cardholders) to purchase lottery subscriptions using the
Card, as well as through other means (which could include other branded debit or credit cards).
(iv) provide (a) automatic credit to the Card for lottery ticket validations of $600
and less when terminal-generated tickets are purchased with the Card; (b) credit to a Card for a
lottery ticket validation of $600 and less for a ticket not purchased with the Card; and (c)
automatic credit to the Card for validations of $600 or less for Card subscription wagers.
(v) "Open Loop Transaction" capability, which means using a Card to effect a
transaction that passes through the payment network operated by a national company selected by
GTECH (such as Visa or MasterCard) whose trademark appears on the Cards (the "Payment
Network"), including use of the Card to effect any of the following: (a) to make a purchase of
goods or services other than lottery products; (b) to obtain a credit for a previous purchase; (c) to
obtain cash from an automated teller machine (" ATM"); (d) to make a bill payment or other
payment to a third party; (e) to transfer value to another card or account; (f) to initially load or
add funds (i.e., "reload") to a Card via an ATM, but the foregoing shall not include Closed Loop
Transactions as defined above in clause (i) of this Section. Direct payroll deduction will not be
a part of the Renaissance Program unless and until agreed upon by the Parties in writing.
(B) (i) The product solution platform for the Renaissance Program will be managed as part of a
regular product roadmap release cycle consistent with GTECH's software batch release process
(including formal installation approval from both the Lottery and GTECH), and updates and
other changes so released will be integrated into the Renaissance Program at no charge to the
Lottery. GTECH will allow up to 500 hours annually for customized development of the
Cardholder Website for use in connection with the Renaissance Program, at no charge to the
Lottery. In addition, there will be no charge to the Lottery for hours for modification of the
Lottery's Back Office Processing System required either as a result of initial implementation of
the Renaissance Program or to address defects and bug fixes relating to the initial scppe of the
SSD for the Renaissance Program.
3
(ii) If, at any time during the Term, the Lottery wants in excess of five hundred (500) hours
annually for the customized development of the Cardholder Website or otherwise wishes to
modify the software features and/or functionality of the Renaissance Program as described in the
mutually agreed SSD and such modification is outside of the regular product roadmap release
cycle, the Lottery will advise GTECH of this request in writing (a "Request for Change"), and
GTECH will promptly evaluate and advise the Lottery on the feasibility of the proposed changes,
including without limitation GTECH's conclusions as to the technical feasibility, its assessment
of any impact on the terms ofthe Renaissance Program and GTECH's estimate ofthe number of
hours needed to implement the proposed changes. Assuming (a) GTECH has determined that the
proposed changes are feasible and (b) the Parties are able to reach agreement on the scope, the
timetable for development, testing and implementation of the Request for Change, the man-hours
necessary to cause the changes and other customary terms and conditions relating to the
proposed changes, the Parties will execute a change order (each, a "Change Order"), setting
forth those agreed terms and conditions. Such Change Order will reflect GTECH's good faith
estimate of the total man-hours necessary to carry out such Change Order. Any variance in the
estimate prior to completion of the Change Order must be given to Lottery immediately for
review and approval as it relates to cost or savings to implement the Change Order. Any agreed-
upon man-hours for Change Orders that exceed the 500 hours annually referred to in subsection
(i) of this Section 2(B) will be charged to the Lottery at the rate of one hundred seventy five
dollars ($175.00) per hour; this does not include defects and bug fixes relating to such Change
Orders which will be fixed-free of charge. The man-hours required to implement a Change
Order will encompass the full software delivery life cycle and include the following: software
project management, business analysis/requirements management, systems engineering,
integration engineering, software design/development and quality assurance. GTECH will
provide an update of its prior estimate of the number of man-hours needed to implement the
Change Order within thirty (30) days after the specifications for the Change Order have been
agreed to by the Parties. Once the Lottery accepts the Change Order as successfully
implemented, the Parties agree that the SSD will be amended to reflect the changes implemented,
whereupon such changes will automatically become part of the software comprising the
Renaissance Program and all of the terms and conditions under the Current Contract with respect
to GTECH's software maintenance and support obligations will apply to such changes.
Section 3. Marketing Plan and Budget. Following the Effective Date, the Parties will jointly
design a multi-year marketing, advertising and promotions plan (the "Marketing Plan") for the
Renaissance Program. Subject to the second to last sentence of this Section 3, this Marketing
Plan will be funded exclusively by the Lottery during the duration of the Renaissance Program.
The Marketing Plan will include but not be limited to performance goals for the Renaissance
Program, which goals the Parties will agree to review and adjust as necessary. In connection with
the Launch, GTECH shall make a contribution to the Marketing Plan, such contribution to be
made prior to, and up to six (6) months following, the Launch, and shall be limited to Two
4
Hundred Fifty Thousand Dollars ($250,000). The specific timing and use of
in connection with the Launch shall be mutually agreed to by the Parties in accordance\& the
Marketing Plan.
Section 4. GTECH's Responsibilities. Following the Effective Date, GTECH will, afits sole
cost, undertake to carry out the following responsibilities with regard to the Project:
(i) develop, acquire, and test (in accordance with the Current Contract's
acceptance testing provisions) the software, hardware and ancillary equipment needed to operate
the Renaissance Program in accordance with the SSD;
(ii) co-locate at GTECH's Data Center of the Americas (the "Data Center") the
hardware and other equipment necessary to operate and support the Renaissance Program;
(iii) staff the Data Center with GTECH personnel who will provide maintenance
and support services for the Renaissance Program, such personnel to include: (a) one (1)
designated GTECH person to assist Lottery with any Renaissance Program technical issues, as
well as development and planning; and (b) one (1) designated GTECH person to develop a
retailer training program and act as retailer training liaison sixty (60) days prior to Launch and
six ( 6) months post Launch;
(iv) provide three (3) additional people who will provide phone and email
customer service to Cardholders (the service to include an interactive voice response service and
email support through the Cardholder Website), with the number of customer service personnel
to adjust as reasonably necessary by the Parties to support the Renaissance Program;
(v) contract with third parties to carry out the commercial functionality of the
Cards beyond the lottery-related features and administration of and record-keeping for all of the
Card features and functionality, including third party customer support;
(vi) customize the software provided under the Current Contract that operates the
System to enable communication with the Data Center's hardware and software relating to the
Renaissance Program (this includes but is not limited to retailer global and retailer specific
parameters, development of host and business intelligent reports as needed, coordination with
ICS vendor Elsym for changes on existing daily and weekly host reports);
(vii) create, host and operate the Cardholder Website and implement any data
integrations deemed necessary by the Lottery in order to achieve single sign-on for Cardholders;
5
(viii) train retailers to familiarize them with the Renaissance Program's features
and to enable the retailers to use the expanded functionality of the lottery terminals and any other
hardware to be installed and operated as part of the Renaissance Program and assisting the
Lottery in the design of any loyalty and incentive programs that it wishes to offer to retailers for
supporting the Renaissance Program;
(ix) integrate the Renaissance Program's loyalty-based awards program with the
Lottery's interactive marketing platforms, as of a mutually agreed upon integration schedule;
(x) train Lottery personnel on Card features and functionality;
(xi) procure and supply the Cards to Lottery retailers for their issuance to
Cardholders and issuing Cards online through the Cardholder Website. Personalized cards will
be sent to registered accounts when: (a) a Cardholder registers his or her account directly on the
Website without a non-personalized Card, or (b) a Cardholder uses his or her non-personalized
Card eight or more times in a month at a retailer terminal or a self-service terminal, or three or
more times in a month for Open Loop Transactions, or (c) an anonymous Cardholder pays $2.50
when he or she registers online to immediately receive a personalized Card, or (d) when a Card is
replaced as a result of being reported lost or stolen or (e) when a registered account with a non-
personalized Card is two years old and active;
(xii) enter into and perform its obligations under agreements with Cardholders
(the "Cardholder Agreement") in accordance with the terms and conditions for Card issuance
and use set forth in the Cardholder Agreement, as well as ensure the performance of those
obligations under the Cardholder Agreement of the fmancial institution issuing the Cards;
(xiii) obtain and maintain all permits, licenses and other authorizations that may
be necessary for GTECH to carry out its responsibilities; GTECH agrees to carry out the
responsibilities in this Section in accordance with applicable laws, rules, regulations, and with
Lottery directives that do not conflict with applicable laws, rules or regulations and that do not
adversely affect the Renaissance Program and/or materially increase the obligations or costs to
GTECH in the operation of the Renaissance Program;
(xiv) require, to the extent applicable, that all third parties, including without
limitation Wave Crest Payment Services of America, Inc. ("Wave Crest"), the issuing financial
institution and credit card processors, each of which is engaged to carry out the Renaissance
Program (the "Third Party Vendors") and will have access to credit/debit card nonpublic
Cardholder data, will adhere to the Payment Card Industry (PCI) Data Security requirements and
6
pursuant to their agreements with GTECH and/or Wave Crest, will have agreed to the followiKg:
(1) that they are responsible for security of Cardholder data in their possession; (2) that such
nonpublic Cardholder data can ONLY be used for assisting the Lottery in completing a
transaction, supporting a loyalty program, supporting the State, providing fraud control services,
or for other uses specifically allowed by law; (3) that they will provide business continuity in the
event of a major disruption, disaster, or failure; (4) that they must contact the Lottery in
accordance with Michigan's Identity Theft Protection Act, Mich. Comp. Laws 445.61 et seq.
(the "ID Theft Protection Act"), to advise it of any breaches in data security where a
Cardholder's "personal information" or "PI" (as such term is defined in the ID Theft Protectiqn
Act) has been compromised; (5) that in the event of a security intrusion, the Payment Card
Industry representative, or a Payment Card Industry approved third party, must be provided with
full cooperation and access to conduct a thorough security review and the review must validate
compliance with the Payment Card Industry Data Security Standard for protecting Cardholder
data; (6) that they will properly dispose of nonpublic Cardholder data when no longer needed;
(7) that they will continue to treat nonpublic Cardholder data as confidential upon termination of
the Renaissance Program; and (8) that each Third Party Vendor will provide the Lottery with
documentation verifying PCI Data Security certification has been achieved and must advise the
Lottery of all failures to comply with the PCI Data Security Requirements (which failures
include, but are not limited to system scans and self-assessment questionnaires), and must
provide a time line for corrective action; provided that, if the Third Party Vendors are listed on
the Validated Service Provider list, the Lottery will not require any other certification, and if the
Third Party Vendor is not listed on the Validated Service Provider list, the Lottery will receive a
copy of such Third Party Vendor's Attestation of Compliance and its most recent scan
(performed by a qualified scan vendor), which documents will be provided annually with proof
of quarterly scans from such Third Party Vendors for Michigan Department of Treasury
approval;
(xv) obtain agreements from the Third Party Vendors to allow annual Type IISAS
70, SSAE16 or equivalent audits of them at no cost to the Lottery and to provide the results of
these annual audits to the Lottery as well as proof of correction for any material findings as well
as correction plans with timelines for other audit findings;
(xvi) remit the following to the Lottery on a monthly basis in compliance with
applicable laws: (1) an amount to be negotiated by the Parties before there is a viable gift card
program implemented through the Renaissance Program; and (2) the greater of $.50 or 25% of
any monthly account maintenance fee paid by Cardholders when the Card is not used for
Lottery-related activity in a 30 day period;
7
(xvii) subject to Section 5(iii), bear the responsibility to collect the Top-ups after
the Lottery's efforts to collect such funds fail and to bear the loss for any uncollected Top-ups
after the Lottery's efforts to collect such Top-ups fail;
(xviii) to the extent permitted by applicable law or regulation, enable Closed Loop
Transactions to be processed by scanning a unique barcode located on each Card and ensure that
such Closed Loop Transactions will not require Cardholder signature, verification of state-issued
photo identification, or the entry of a Personal Identification Number in order to authorize a
purchase; and
(xix) if an incorrect file is sent and/or processed that creates a financial obligation
to the Lottery that cannot be recovered, then GTECH after receiving approval from Lottery, is
responsible for initiating corrective action to return the funds to Lottery. If the funds are not
recovered by GTECH, GTECH must bear the loss for the improper file processing.
Section 5. Lottery's Responsibilities. Following the Effective Date, the Lottery will, at its sole
cost, undertake to carry out the following responsibilities with regard to the Project:
(i) obtain and maintain all permits, licenses and other authorizations that may be
necessary for Lottery to carry out its responsibilities under this Amendment #6, and otherwise
carry out its responsibilities in this Amendment #6 in accordance with applicable laws, rules, and
regulations;
(ii) collect and remit to GTECH, in accordance with the Cash Flow Schedule
attached hereto as Schedule I, Top-ups generated from Closed Loop Transactions at retailer
locations through Card use on Lottery terminals, provided however that ( 1) the Lottery shall be
entitled to withhold from each weekly remission of Top-ups to GTECH a percentage of all Top-
ups received from retailers during the preceding week in the amounts set forth at the end of
subsection 5(vii), as a reserve to be available to satisfy any liability to the Lottery resulting from
a shortfall in the amount of Top-ups received from retailers as part of the weekly sweep despite
the Lottery's efforts to collect such Top-ups; (2) the Lottery shall remit to GTECH the
following week those Top-ups withheld in reserve the prior week and not used to satisfy a
liability to the Lottery, plus any previously uncollected Top-ups that were received from
retailers during the prior week; and (3) within ten (1 0) days following the earlier to occur of (i)
the expiration or termination of the Term or (ii) the expiration or termination of the Renaissance
Program, the Lottery shall remit to GTECH the amount, if any, then held in reserve as of the
date of such expiration, and thereafter, the Lottery shall remit to GTECH weekly any previously
uncollected Top-ups that the Lottery received during the prior week;
8
(iii) if a retailer fails to transfer an amount as part of the weekly sweep or as
otherwise required by the Lottery to satisfy the amount of Top-ups owing despite the Lottery's
efforts to collect such Top-ups, the Lottery shall be entitled to draw from the reserve amounts
established under Section 5(vii), and GTECH shall further pay to the Lottery any additional
liability not satisfied by such reserve amounts; provided further, that the Lottery shall give
GTECH, upon written request by GTECH to the Lottery, authorization to collect from retailers
any delinquent Top-ups from a retailer, it being agreed that the Lottery will prior to Launch
assure that retailers consent to and understand that GTECH will be authorized to collect Top-ups
that are not collected by Lottery;
(iv) give GTECH personnel access to the Lottery's facilities, software systems
and personnel to the extent the Parties agree that such access may be necessary to enable
integration of the System with the operating system for the Project, including without limitation
access to enable GTECH to carry out the software customizations to enable the System to
communicate with and have access to the Cardholder Website to integrate the Lottery's
interactive platforms with the Renaissance Program's loyalty-based awards program (GTECH
shall work in good faith with the Lottery to gain permission to modify third party software, to the
extent such modifications are necessary to carry out such integration efforts);
(v) under a royalty-free license granted to GTECH, to permit GTECH and its
Third Party Vendors for the Renaissance Program to use the Lottery's trademark(s) and logo(s)
in accordance with the Marketing Plan or other materials ancillary to Renaissance Program
management of Cardholder Agreements and Website materials, provided that, prior to use
thereof, GTECH will submit such materials to the Lottery, and the Lottery will provide revisions,
or accept or reject the proposed use(s) in a timely manner;
(vi) compensate GTECH for providing the Renaissance Program. GTECH's
compensation will begin at a two percent (2%) commission (as set forth in the Compensation
Matrix (Schedule II)) for the Closed Loop portion of validations of $600 or less that are
automatically credited to the Card during the preceding week ("Qualified Validations"). This
commission will be paid to GTECH on GTECH's weekly commission invoice. The Parties agree
that, after the Effective Date, they may agree to add new lottery-type products to the Renaissance
Program that differ from the products traditionally offered to Michigan Lottery players. The
Parties will, in the course of determining the desirability of adding such products, determine the
cost, technical feasibility and GTECH' s compensation, if any, with regard to these products. The
Lottery agrees to carry out the foregoing responsibilities in this Section 5 in accordance with
applicable laws, rules and regulations. For clarification purposes, the compensation to GTECH
based upon Qualified Validations does not in any way affect GTECH's existing compensation
under the Current Contract; and
9
(vii) Initial Holdbacks from Top-Ups:
Time Period Percentage Withheld by Lottery from Weekly
Remission of Top-ups to GTECH
First Month of Retailer Top-up Collections 15%
Second Month of Retailer Top-up Collections 7%
Third Month of Retailer Top-up Collections 5%
Fourth Month of Retailer Top-up Collections 4%
Fifth Month of Retailer Top-up Collections 3%
Sixth Month of Retailer Top-up Collections 2%
Following the third month of Retailer Top-up collections, the Parties agree to evaluate the
holdback amounts based on actual collection amounts during the first three months and adjust, if
necessary, the holdback amounts for the remainder of the Term. After the sixth month period,
the Parties agree that the revised holdback amounts shall be based on actual collection
experience.
Section 6. Specific Agreements relating to Card Usage. Through a financial institution selected
by GTECH, Cards will be provided to players in the Renaissance Program. The financial
institution will provide Cardholders with the customary features and functionality of bank-issued
prepaid cards using a Payment Network such as Visa or Master Card. Cardholders may incur
fees customarily charged to users of prepaid cards, which charges will comply with applicable
federal and State of Michigan laws and regulations. GTECH will provide the Lottery with a
copy of these fees prior to the Effective Date. Subsequent changes to fees must be disclosed to
the Lottery in writing at least thirty (30) days prior to the effective date. Unless and until the
Parties agree otherwise, the Lottery will not, and will not permit retailers to, charge the
Cardholder in connection with the issuance, maintenance or use of the Card for Closed Loop
Transactions except as otherwise provided in this Agreement. The Lottery is not assuming
liability to GTECH for any unauthorized charges levied by retailers. Card issuance and use will
be subject to and governed by federal and state law, the rules of the applicable Payment Network
provider (i.e., Visa or Master Card), as well as the terms and conditions of the Cardholder
Agreement which will contain both an agreement between (i) the financial institution that issues
the Cards and the Cardholder and (ii) GTECH and the Cardholder. All Cardholder fees will be
disclosed to the Cardholders in the Cardholder Agreement. GTECH will provide the Cardholder
10
Agreement to the Lottery and obtain Lottery's approval of the Cardholder Agreement prior to
distributing it to Cardholders. The Cardholder Agreement will be available for players prior to
issuing their Cards. The Parties acknowledge that control over the Cardholder relationship will
be limited to the contractual agreement between the issuing financial institution and the
Cardholder and GTECH and then, only to the extent that there is no conflict with applicable
federal or state law and/or the terms and rules set by the Payment Network provider and the
issuing fmancial institution. There will be no fees or charges to the retailers for Closed Loop
transactions.
Section 7. Renaissance Program Termination. Either Party may terminate the Renaissance
Program prior to expiration of the Term of the Current Contract, by giving written notice of
termination to the other Party:
(1) at any time after the first twelve (12) months following Launch, if the Renaissance
Program's performance does not meet any of the following goals, as set forth in the
Marketing Plan:
(i) the Parties' agreed-upon goals regarding Card usage; or
(ii) projected compensation for GTECH based upon such agreed-upon goals; or
(iii) agreed upon projected sales increases for the Lottery through use of the Cards; or
(2) upon breach by the other Party of any of the material terms of this Amendment #6 that is not
cured by the Party in breach within thirty (30) days after it receives written notice of such breach
or, with respect to breaches that cannot reasonably be cured within thirty (30) days, the Party in
breach fails to undertake within such thirty (30) day period material steps to cure such breach or
having taken such steps, thereafter fails to pursue diligently the additional steps necessary to cure
such breach; or
(3) in the event that applicable laws, rules or regulations either prevent a Party from, or
substantially increase the potential or actual liability or expense of a Party in, carrying out in any
material respect its responsibilities under this Amendment #6; or
(4) the Lottery acknowledges and agrees that GTECH has a contractual relationship with Wave
Crest and Wave Crest has a contractual relationship with the selected financial institution for the
provision of various aspects of the Renaissance Program and that, in the event that the Lottery
requests changes to the SSD and/or the Renaissance Program and if such requested changes
would, separately or cumulatively, adversely affect the financial performance (or can be
reasonably expected to adversely affect the forecasted fmancial performance) of any of such
third party or if one or more of such third parties exercises its contractual right not to accept the
11
changes, GTECH will use commercially reasonable efforts to find an alternate way to provide
for the Lottery's requested change without materially adversely affecting GTECH, Lottery, or
such third party. If GTECH is not successful in such effort to meet the Lottery's requested
change, either Party may terminate this Amendment #6.
Following receipt of notice of early termination by a Party, the Parties shall cease offering Cards
and shall collaborate in winding down the Renaissance Program as quickly as possible m
accordance with applicable law.
Nothing herein is intended to restrict GTECH' s ability to continue offering a prepaid card
program in Michigan without the Lottery-related features following Renaissance Program
termination. "Without Lottery related features," by way of example, shall mean but is not
limited to a new prepaid card program that will not include any Lottery branded prepaid cards,
will not include Lottery collection of Top-ups, will not be connected to the System, and will
further require that all existing Lottery branded prepaid cards be destroyed and/or replaced with
prepaid cards which are not Lottery branded within thirty (30) days of program termination.
Nothing herein will restrict Lottery from offering a player loyalty card program, service, or
program following Renaissance Program termination.
In the event that either Party terminates the Renaissance Program, the Lottery shall have the
option to continue utilizing the software previously developed hereunder to process transactions
for a new rewards card program without debit-card functionality, to track player purchases and
award reward points for those purchases. Any expense associated with distributing new cards to
players shall be the sole obligation of the Lottery.
Section 8. Service Levels. GTECH intends to design the Renaissance Program to operate
independently of the System and the day-to-day operations of the Lottery business so as to avoid
a material adverse effect thereon as a result of a delay in or failure of the functionality of any
aspect of the Renaissance Program. The Current Contract's liquidated damages provisions will
apply to the Renaissance Program if its operation triggers an event for which liquidated damages
under the Current Contract are assessable. In addition, GTECH has advised the Lottery that,
since the Renaissance Program requires the implementation of a "terminal session," the amount
of time for a "send to cut" transaction using the Card becomes a "send to print" transaction and
furthermore, because the final transaction within a session includes a debit transaction, there will
be a nominal increase in the total time of a "send to print" transaction using the Card. The
Parties anticipate that any time increase that results from this nominal increase in time will likely
be offset by other Card features, such as the ability to save and reuse favorite numbers. The
Parties agree that any such nominal time increase will not be deemed a breach of GTECH's
"send to cut" transaction time requirements under the Current Contract. Notwithstanding the
12
foregoing, the Parties will establish an appropriate service level and liquidated damages for
breach thereof specifically relating to the Renaissance Program which will be attached hereto as
Schedule III.
Section 9. Exclusivity; Future Collaboration. The Parties agree that, during the Term, GTECH
shall be the exclusive supplier of goods and services for the Renaissance Program. If additional
functionality for the Renaissance Program is desired, the Parties shall negotiate in good faith the
terms and conditions pursuant to which GTECH shall develop and provide such additional
functionality.
Section 10. Return of Confidential Information Following Termination. Upon termination ofthe
Renaissance Program in accordance with this Amendment #6, each Party will immediately return
to the other Party all copies of any documents or other media containing Confidential
Information received from or pertaining to the other Party and will cease any further use thereof.
Section 11. Cardholder Data. GTECH acknowledges that, as the owner and/or the Party in
possession of non-public financial and personal information relating to Cardholders and their
usage of the Cards, GTECH (directly and through its Third Party Vendors) will be responsible
for the Renaissance Program's compliance with applicable federal and state laws, rules and
regulations governing the use, protection and secrecy of such information ("Privacy Laws"). To
the extent the Lottery receives such information, the Lottery agrees to comply with these Privacy
Laws. In addition, the Parties agree to negotiate in good faith any changes to this Amendment
#6 that may be required as a result of any changes in these Privacy Laws in order to permit the
Parties' compliance therewith.
Section 12. General. This Amendment #6 and its Schedules sets forth the entire
understanding between the Parties with respect to the matters set forth herein and supersedes all
prior representations, understandings or agreements, whether written or oral, express or implied,
with respect to the matters set forth herein. Any amendments to the Amendment #6 pertaining to
the Renaissance Program shall be in writing, signed by the Parties. In the event any provision of
this Amendment #6 conflicts with a provision in the Current Contract, the provision of
Amendment #6 will control as it relates to the Renaissance Program.
ACKNOWLEDGED AND AGREED as of day , 2011.

Name: /1. Name:ALA.rJ b!..AtJP
t
.
Title: C,O. (), - (,;;-C?c.,..l..\
(V!;';f=rf'.\
13
SCHEDULE I TO AMENDMENT# 6
BY AND BETWEEN MICHIGAN BUREAU OF STATE LOTTERY
AND GTECH CORPORATION
14
(Plus)
Net
reconciliation
with GTECH
account
(Minus)
Lottery attempts
to manually
collect for NSF,
calculates net
collected, and
EfT's GTECH on
the following EFT
cycle Top-ups less
%to be held in
reserve for
delinquencies as
per Section S(vii)
plus prior week's
reserve and
collections
Normal
Lottery EFT
process
(weekly,
Tuesday)
SCHEDULE II TO AMENDMENT #6
Compensation Matrix
Annual Tiers
< 6,000,000 2.00%
6,000,000-7,000,000 1.00% $ 500,000
7, 000,000-8,000,000 0.80% $ 600,000
8,000,000-9,000,000 0.60% $ 700,000
>9 0.40% $ 000
Once the Annual Payment during the year reaches $6.0M the rate will
decrease for payments above $6.0M during the remainder of that year as
shown in the table above.
15
SCHEDULE III TO AMENDMENT #6
Service Levels
The following Liquidated Damages are in addition to Appendix C: Service Levels and Liquidated
Damages and Amendment #4 of Contract MSL07 -001.
1. Renaissance Program System Installation
GTECH shall Launch the Renaissance The Lottery may impose Liquidated
Program in accordance with the Time Damages of five thousand dollars
Schedule. ($5,000.00) for each day, or fraction
thereof, of delay.
2. Player Portal Website Availability
Service Levels:
GTECH will ensure that the player portal is not
"Down" for more than ten (10) minutes per
month. The Player Portal is considered Down
if any pages within the GTECH Player Portal
Website are inaccessible from an internet-
enabled device outside of maintenance
periods that are pre-approved by the Lottery
and the effect of such page or pages being
inaccessible have an adverse effect on the
ability to consummate subscription sales. For
purposes of clarification, the Player Portal
shall not be considered Down if the Lottery's
Website is inaccessible, for any reason (i.e.,
user error, inaccessibility resulting from user's
internet-enabled device, ISP failure, etc.) and
such inaccessibility is not caused by the
actions or omissions of GTECH or third parties
under its direction and control; or
GTECH will ensure that the availability of any
single sign-on services is not unavailable for
more than ten (1 0) minutes of consecutive
failed log-in attempts per month. Availability
for a player to register or log-in within the
Player Portal Website, or any integrated portal
offered as an extension of Renaissance
Program membership, should be available
outside of any maintenance periods that are
pre-approved by the Lottery.
Liquidated Damages
If the Player Portal Website is Down for more
than ten (10) minutes per month, or single
sign-on services are not available for more
than ten (10) consecutive minutes per month,
the Lottery may assess damages in an amount
equal to the greater of forty-one and 50/1 00
dollars ($41.50) per minute of Down time (after
a ten (10) minute grace period has elapsed) or
Estimated Lost Subscription Net Revenue.
For purposes of this section, the following
terms have the following meanings:
"Actual Subscription Sales" means the
aggregate subscription sales through the
Player Portal Website during the Applicable
Period. For purposes of clarification, actual
Subscription Sales are consummated at time
the Player purchases the subscription, not
when the draws related to such subscriptions
occur.
"Average Comparison Subscription Sales"
means the average weekly Actual Subscription
Sales through the Player Portal Website for
the Applicable Period during the thirteen (13)
operating weeks preceding the week in which
the Player Portal Website was Down (or if
there are less than thirteen (13) operating
weeks at the time such Player Portal is Down,
then such less amount of operating weeks).
"Applicable Period" means the period of time
which the Player Portal Website is Down
16
3. Security Breach
Service Levels:
In connection with the Renaissance Program,
GTECH shall comply with the breach
notification laws contained in the I D Theft
Protection Act with respect to an exposure of
Pl.
17
expressed as a time of operating day arid a
day of the week for the beginning and fh'e
ending of the Applicable Period.
"Duration" means the duration of the
Applicable Period in operating minutes.
"Estimated Lost Subscription Net Revenue"
means the greater of (a) the product of (i) the
ratio of (A) the Average Comparison
Subscription Sales minus the Actual
Subscription Sales to (B) the Duration, (ii) the
Net Duration and (iii) thirty-six percent (36%)
and (b) zero.
For purposes of illustration, if Average
Comparison Subscription Sales are $3,000 per
hour, the Player Portal is Down for one hour
and Actual Subscription Sales are zero, then
Estimated Lost Subscription Net Revenue
shall equal $900 [(3000-0)/60*50*36%]
"Net Duration" means the Duration minus ten
(1 0) minutes.
Liquidated Damages
In the event that there is a data security
breach of PI (as such breach is identified in
the ID Theft Protection Act), GTECH shall pay
any fines associated with such act for each
incident in which GTECH knowingly fails to
provide notice of such breach in accordance
with the breach notification requirements set
forth in the ID Theft Protection Act.
For reference, and subject to the provisions of
the ID Theft Protection Act, GTECH shall
provide breach notification notice without
unreasonable delay, and GTECH shall make
such notification by way of:
a. An email sent to each Cardholder
affected, and
b. A postage paid letter, in a sealed
envelope, sent to each Cardholder
affected
Such notice shall be written in a clear and
conspicuous manner and contain the
following content:
4. Timely and Accurate Files
Service Levels:
GTECH shall produce and deliver timely,
sufficient, and accurate files within the time
frames set forth below:
Group A files:
i. Required delivery time of 4:00 am, with
thirty (30) minute grace period (i.e.,
Liquidated Damages would start to be
calculated at 4:30 am):
a. Cardholder transaction file(s) to 3rd
party vendors
ii. Required delivery time of ten ( 1 0) minutes,
with a twenty (20) minute grace period
(i.e., Liquidated Damages would start to be
calculated thirty (30) minutes) after any
drawings occur:
a. Cardholder prize triggered notifications
- text messages, emails, etc. sent to
Cardholders
b. Cardholder card automatic validation
for prizes of $600.00 or less
18
Description of the security breach in
general terms
Description of the type of personal
information that is subject of the
unauthorized access or use
If applicable, general description
what GTECH has done to protect the
data from further security breaches
Include a telephone number where a
notice recipient may obtain
assistance or additional information
A reminder to notice recipients of the
need to remain vigilant for incidents
of fraud and identity theft.
Any legal, copywriting, design, printing,
postage or other cost associated with the
production and delivery of such notices shall
be incurred by GTECH.
Liquidated Damages
The Lottery may impose Liquidated Damages
of two thousand five hundred dollars
($2,500.00) per hour, or fraction thereof, for
each late, insufficient, or inaccurate file in
Group A, following the expiration of applicable
grace periods, until such file is provided, made
sufficient, or corrected (as the case may be).
of five hundred dollars ($500.00) per hour, or
fraction thereof, for each late, insufficient, or
inaccurate file in Group B (once any approved
grace period has passed), until such file is
provided, made sufficient, or corrected (as the
case may be).
Group 8 files :
Currently there are no files that fall into this
group that are related to the Renaissance
Program.
Any additional Group A or Group B files shall
be discussed and mutually agreed to by the
Parties.
5. Accurate File Processing and Rendering
Service Levels:
GTECH shall process and render output files
accurately in all material respects. Rendering
of processed files may take shape in the form
of an email, SMS message, web page display,
or other communications initiated from
GTECH-provided technology and services.
6. Customer Service
Service Levels:
GTECH shall maintain a reliable
communication service for Cardholders to
reach the Customer Service Unit for Player
Card inquiries.
Monthly Service Level Requirements for
inbound Cardholder inquiries are:
a. 85% of inbound calls to be answered
within one hundred and twenty (120)
seconds
b. 99% of all calls without a busy signal
c. Average hold time not to exceed two
(2) minutes
d. Respond to 85% of all email inquiries
within three (3) business days
e. Call center with human operators is
available from 8:00 am to 8:00 pm EST
per day, five (5) days per week. In
addition, an automated prompt system
that offers balance inquiries and
support for lost or stolen cards shall be
available twenty-four (24) hours per
day, seven (7) days per week.
19
Liquidated Damages
offive thousand dollars ($5,000) per file for
any output file that is not processed and
rendered in an accurate manner.
Liquidated Damages
of five thousand ($5,000.00) dollars per month
in the event that any Service Level associated
with Customer Service is not satisfied during a
month.
Notwithstanding the foregoing, aggregated Liquidated Damages, in any month, contemplated in
this Schedule Ill to Amendment #6 shall in no event exceed a dollar amount equal to five
percent (5%) of the monthly compensation earned by GTECH, as contemplated by Section 5(vi)
and Schedule II hereto.
Following the twelve (12) month anniversary of the Launch, the Parties agree to compare the
service level requirements and liquidated damages against actual performance of the
Renaissance Program, with a view towards determining whether the established service levels
and liquidated damages require adjustment, for the remainder of the Term.
20
This Amendment #7 to Contract MSL07-001 is entered into by and between the State of
Michigan, Michigan Bureau of State Lottery (the "Lottery") having offices at 101 East
Hillsdale, Lansing, Michigan 48909, and GTECH Corporation ("GTECH") having offices at 10
Memorial Boulevard, Providence, Rhode Island 02903. This Amendment #7 is effective as of
the date of its formal approval by ofthe Michigan State Administrative (the "Effective Date").
The purpose of Amendment #7 is to provide for goods and services not contemplated in the
Current Contract (as defined below) and in accordance with RFP Number MSL007-001 dated
April 10, 2007 as responded to by GTECH and incorporated into the Current Contract. The
provisions of such goods and services shall be accomplished through (i) the Lottery Growth
Fund, in accordance with and subject to the conditions and limitations set forth in Section 17 of
the Current Contract, and (ii) the Other Options provision of the Current Contract, in
accordance with and subject to the conditions and limitations set forth in Section 12 of the
Current Contract.
The Lottery and GTECH entered into Contract No. MSL07-001 on April I, 2008 (the "Current
Contract"), with respect to an online and instant gaming system, growth initiatives, and related
services. Section 17 provides in relevant part that "... during the term of the Contract, the
Lottery shall consult with the Contractor to develop an annual plan and budget, with such
budget to be monitored quarterly. The plan and budget will set forth growth initiatives,
including marketing strategies and dedicated personnel, each of which are designed to enhance
the Lottery's revenues and result in net transfers to the State of Michigan." Section 12 provides
in relevant part that "The (Lottery) may, from time to time during the term of this Contract,
request GTECH to submit a proposal for the provision of goods and services which
are .... outside the scope of the goods or services agreed to by the parties to be a part of the base
System requirements. With respect to such additional goods or services, the parties agree to
negotiate the terms and conditions, including price, for the delivery of such additional goods
and services."
Amendment #7 will result in the provision to the Lottery of certain interactive marketing and
product initiatives as summarized in the attached Statement of Work. Through this Amendment
#7, Section 17 and Section 12 of the Current Contract, GTECH has agreed to provide the
Lottery with funds to support certain growth initiatives, including but not limited to interactive
marketing and product initiatives to be provided by third party vendors. These third party
vendors shall directly contract with the Lottery. The Lottery shall submit to GTECH approved
invoices related to the services performed or to be performed by such third party vendors. Upon
receipt of such approved invoices, GTECH shall pay the third party vendors the amount set
forth on such invoices and shall debit such payment from the amount available under the
Lottery Growth Fund for such fiscal year. If there are no funds remaining available under the
Lottery Growth Fund, then upon receipt of the approved invoice, GTECH will include such
amounts on GTECH's next weekly commission invoice and the Lottery will reimburse GTECH
for such invoiced amounts. Upon receipt of such reimbursed funds, GTECH shall pay the
designated third party vendors the amounts set forth on such approved invoices.
The parties agree that on at least an annual basis, in coordination with Section 17 and 12 of the
Current Contract, the Lottery will provide GTECH with a list of proposed third party vendors
and proposed interactive marketing services and/or product initiatives, and GTECH will be given
the opportunity to raise any concerns surrounding such proposed engagements and/or the
proposed interactive marketing services and/or product initiatives. GTECH's failure to respond
within three (3) business days from its receipt of such list shall be construed as GTECH's
acceptance of such third party vendor(s) and/or proposed interactive marketing services and/or
product initiatives. To the extent that the parties cannot reach agreement on the proposed vendor
and/or proposed interactive marketing services and/or product initiatives, the Lottery retains the
ultimate right to engage such third party and/or use such interactive marketing services and/or
product initiatives, but such engagement would only be paid for by GTECH if the funds come
from the Lottery Growth Fund, if any are available, and will not be subject to the reimbursement
provisions ofthis Amendment #7. To the extent that during the course of any year the Lottery
intends to enter into engagements that are substantively different from the annual list previously
provided by the Lottery, the parties agree to subject such additional engagements and/or
proposed interactive marketing services and/or product initiatives to the provisions of this
paragraph.
Unless specifically amended herein, all other provisions, terms, and conditions set forth in the
Current Contract remain in full force and effect.
IN WI1NESS WHEROF, the parties have executed this Amendment.

Name: ffi. \?Jov.)Qn
Title: C.orvvn 1 S5 c;:,ner-
Date: I} -;5- I (

Name: A 1/ir-. [jt\,,A
Title:S.V .P .. ,.. -biDC44 r/tJ{l:rrJ ArA(P.U
Date: 11..!- ' <!f 2-0i
1
Statement of Work
Michigan Lottery Interactive Operations
Business Objectives:
Michigan Lottery Interactive Operations ("ML Interactive") will focus on the following
business objectives:

Communicate Lottery products and promotions to consumers, or Lottery retailers,
through digital media channels such as web, mobile and social platforms.
Maximize customer retention through digital marketing programs including player
rewards programs and direct one-to-one consumer communications such as email and
text messages.
Enhance retail revenues through digital extensions of Lottery products being sold at
retail.
Obtain new revenues through the direct distribution of Lottery products through digital
outlets.
Strategies:
ML Interactive will utilize a variety of tactics in order to drive results that align with the
business objectives outlined earlier. These tactics are expected to evolve rapidly as new
technology and platforms emerge in the marketplace.
Near-term initiatives:
Media portal optimization for digital channels including web, mobile, social and tablet
PC.
o Media portals, such as the MichiganLottery.com website, deliver a broad reach
into our consumer base and hold organic (free) media value that is on scale with
some of the largest media outlets in Michigan. By owning the media portal the
Lottery is in position to monetize channels through immediate cross-promotional
efforts aimed at the retail distribution channel or future efforts aimed at direct
digital distribution.
Mid-term initiatives:
The introduction of more Bridge Games (e.g. Club Keno "To Go") which are purchased
at retail and viewed through a digital media channel.
o There is currently only one game, Club Keno "To Go", in the current Bridge
Game portfolio of the Michigan Lottery. It is a high growth product and in recent
player research there appears to be more demand for a variety of Bridge Games.
Unlike direct digital distribution, Bridge Games can offer immediate profits as a
result of the mature retail distribution network that supports the sale of the games.
Integration of a player card into the internet player rewards program.
o A player card marketed at retail would drive significant traffic to digital media
portals while also giving the Lottery measurable data to track the return on
investment from other interactive marketing initiatives. Incentive programs have
been proven effective to increase sales.
Long-term initiatives:
Development of digital subscription services to existing Lottery draw games. This will
be supported with the implementation of a digital gaming platform that provides the
infrastructure necessary to support a digital distribution model.
o Based on the current portfolio of draw games available, along with industry
comparable data, the Lottery could drive $15 to $25 million in annual sales during
the first full year of operation.
Cost Analysis:
After exhausting Section 17 Lottery Growth Funds, GTECH will be reimbursed for
Lottery approved expenses associated with ML Interactive. ML Interactive costs will
fluctuate based on each initiative and due to long implementation timetables it may also
be necessary to invest several years prior to a target launch date. The initial budget
projections have been established to support ML Interactive initiatives for the next three
(3) years and potentially beyond:
Fiscal Year 2012
0 $1,000,000
Ongoing maintenance costs associated with previous fiscal year initiatives
Expansion of rewards program
Media portal optimization for digital channels
Player marketing database costs
Email and SMS platform and delivery fees
Bridge Game prototype development
Fiscal Year 20 13
0 $2,600,000

Bridge Game implementation(s) and marketplace introduction(s)
Infrastructure and software development costs to support digital
distribution of Lottery products
Call center operations to support digital distribution model
Subscription portal developed for web
Subscription portal development for mobile
Group-play overlay for subscription portals (social integration)
Fiscal Year 2014
0 $3,500,000
Bridge Game implementation(s) and marketplace introduction(s)
Portal development for key digital channels
Game development to create product portfolio within portals
Player acquisition and retention costs (media, promotions, rewards, etc.)
AMENDMENT #8 TO CONTRACT MSL07 -001
This Amendment #8 to Contract MSL07 -001 ("Amendment") is entered into by and
date of approval of this Amendment by the Michigan State Administrative Board.
The purpose of this Amendment is to provide the Lottery additional equipment.
The Lottery issued a Request for Proposal (the "RFP") on April 10, 2007 for an o n l ~ n e
and instant lottery gaming system and related services. The Lottery and GTECH
entered into Contract No. MSL07-001 on April 1, 2008 (the "Contract"), with respect to
an online and instant gaming system and related services. The Lottery has
subsequently identified a need to increase the number of terminals and other equipment
included in Sections 3 and 4 of the Contract.
By this Amendment GTECH has agreed to provide the Lottery with additional equipment
under the following terms and conditions:
1. Provision of Additional Equipment
GTECH agrees to provide to the Lottery the following equipment:
Three hundred (300) Altura terminals, configured identically to the Altura
terminals previously delivered to the Lottery under the Contract, as described in
Section 3.2.1 of GTECH's Proposal (the "Proposal") in response to the RFP,
such Proposal incorporated by reference into the Contract; and
Three hundred (300) Self-Service Ticket Checkers, configured identically to the
Self-Service Ticket Checkers previously delivered to the Lottery under the
Contract, as described in Section 3.2.1.3.C of the Proposal; and
Six hundred (600) 27" Club Game Monitors, configured identically to the Club
Game Monitors previously delivered to the Lottery under the Contract, as
described in Section 3.2.1.3.H of the Proposal; ~ n d
. One hundred (1 00) Instant Showcases, configured identically to the Instant
Showcases previously delivered to the Lottery under the Contract, as described
in Section 3.2.4.1 of the Proposal.
2. Provision of Cost
The Lottery agrees to compensate GTECH on GTECH's weekly commission invoice
based on the following prices. Prices are indicated as a percentage of Net Total Sales
as defined in Appendix A of the RFP. Such prices are incremental (in addition to) the
current compensation payable by the Lottery to GTECH under the Contract.
Per 100 Altura Terminals 0.007400%
Per 100 Self-Service Ticket Checkers 0.001030%
Per 100 Club Game Monitors 0.001880%
Per 100 Instant Showcases 0.013600%
This lease price is based on a 30 month period, beginning with delivery by August 1,
2012 and going through the term of the Contract.
The estimated overall costs for this Amendment are $3,280,000. The expected return
to the School Aid Fund is estimated at $28,402,200 from full deployment of the
terminals, ticket checkers, and monitors; and $1,900,000 from the -Instant Showcases.
3. Full Force and Effect
Unless specifically amended herein, all other provisions, terms, and conditions set forth
in the Contract remain in full force and effect.
4. Effective Date
This Amendment is effective after the State Administrative Board has given its approval.
IN WITNESS WHEREOF, the Michigan Lottery and GTECH agree to the terms and
conditions of this Amendment.
For GTECfi,k,orpo?!: Q ..
By. ()
Title: -biftM. rfi>UN /MrJ..-f .. A
Date: )z __ , '1- 2.0i\
For the /
By:
__
Date: /2 - IS" - I I

State Contractors - MiLottery Response To LSJ FOIA

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