2019 -- H 6266

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LC002933

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2019

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A N   A C T

ENABLING THE STATE LOTTERY DIVISION OF THE DEPARTMENT OF REVENUE TO

CONTRACT WITH IGT GLOBAL SOLUTIONS CORPORATION

     Introduced By: Representatives Mattiello, Shekarchi, Kennedy, Abney, and Edwards

     Date Introduced: June 28, 2019

     Referred To: House Finance

     (Governor)

It is enacted by the General Assembly as follows:

     SECTION 1. Purpose. The purpose of this Act is to authorize the State Lottery Division

of the Department of Revenue (the "Division") to agree to an extension of the Division's

partnership with IGT Global Solutions Corporation, a Delaware corporation ("IGT"), including

the continuance of a significant presence in the State. This Act shall be liberally construed to

effectuate its purposes.

     SECTION 2. Authorization and Empowerment of State Lottery Division.

Notwithstanding any provisions of the general laws of the State or regulations adopted thereunder

to the contrary, including, but not limited to, the provisions of Chapter 2 of Title 37, Chapter 61

of Title 42, Chapter 64 of Title 42 and Chapter 148 of Title 42, the Division is hereby authorized

and empowered to enter into an amendment (the "Master Contract Amendment") to the Master

Contract dated as of May 12, 2003 by and between the Division and IGT, as amended (authorized

pursuant to Chapter 33 of the 2003 Public Laws) (the "Master Contract"), which would extend the

term of the Master Contract by twenty (20) years to June 30, 2043 and would, among other

matters:

     (i) Extend the term of the On Line Gaming Agreement dated as of January 29, 1997

between IGT and the Division, as amended (including, without limitation, by Section 11 of the

Master Contract) (the "On Line Lottery Agreement"), for an additional twenty (20) years to June

30, 2043;

     (ii) Extend the term of the Video Lottery Central Computer System Agreement dated as

of December 20, 2001 between IGT and the Division, as amended (including, without limitation,

by Section 12 of the Master Contract) (the "Video Lottery Agreement"), for an additional twenty

(20) years to June 30, 2043;

     (iii) Extend the term of the Video Lottery Terminal Technology Provider License

Agreement dated as of September 28, 2000 between IGT and the Division, as amended

(including, without limitation, by Section 13 of the Master Contract) (the "VLT Agreement"), for

an additional twenty (20) years to June 30, 2043;

     (iv) Extend the term of the Instant Ticket Vending Machine Agreement dated October 21,

1999 between IGT and the Division and IGT (the "Instant Ticket Vending Machine Agreement"),

as amended (including, without limitation, pursuant to Section 8.2 of the Master Contract), for an

additional twenty (20) years to June 30, 2043;

     (v) Extend the term of the Instant Ticket Agreement dated as of June 30, 2016 between

the Division and IGT (the "Instant Ticket Agreement"), as amended, for twenty (20) years to June

30, 2043;

     (vi) Extend the term of the Website Services Agreement dated as of January 9, 2019

between the Division and IGT (the "Website Services Agreement") for twenty (20) years to June

30, 2043;

     (vii) Provide for the purchase by IGT from the Division for the price of $25,000,000

($12,500,000 of which shall be paid on or before June 30, 2021 and $12,500,000 of which shall

be paid on or before June 30, 2022) the right to be (A) the exclusive provider to the Division of

products and services pertaining to:

     (1) Online lottery systems, on line lottery terminals and related equipment;

     (2) Central communication systems (as defined in Section 42-61.2-1 of the general laws);

     (3) Instant ticket vending machines;

     (4) Instant tickets; and

     (5) The processing of on line, instant ticket and video lottery transactions; and

     (B) The exclusive provider to the Division of the number of video lottery terminals (as

defined in Section 42-61.2-1 of the general laws) currently provided to the Division until the date

which is the later of the date which is two (2) years following the effective date of the Master

Contract Amendment and June 30, 2021;

     (viii) Provide that (A) the rates pursuant to which the Division compensates IGT pursuant

to the On Line Lottery Agreement shall be as follows:

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     Annual Sales Rate

     Sales to $275 million 5.00%

     Sales from above $275 million to $400 million 4.00%

     Sales above $400 million 5.00%

and (B) the rates pursuant to which the Division compensates IGT pursuant to the Video Lottery

Agreement, the VLT Agreement, the Instant Ticket Vending Machine Agreement, the Instant

Ticket Agreement and the Website Services Agreement shall remain unchanged;

     (ix) Obligate IGT to, among other matters:

     (A) Invest or cause to be invested by an Affiliate or an Eligible Third Party in the

aggregate at least $150,000,000 in the State (the "Investment Obligation") in connection with

acquiring interests in real property, improving real property and performing its obligations under

the Master Contract, as amended by the Master Contract Amendment (the "Amended Master

Contract"), including, without limitation, the provision of goods in connection with the business

operations of IGT or any Affiliate in the State (the "Investment Obligation Assets");

     (B) Employ, cause to be employed by an Affiliate or cause to be self-employed in the

State during each calendar year commencing with 2019 at least 1,100 full time equivalent

employees at compensation rates not less than 150% of the minimum wage in effect from time to

time pursuant to Section 28-12-3 of the general laws (the "Employment Obligation");

     (C) Assume responsibility for the lottery related activities performed by lottery sales

representatives currently employed by the Division from the Division and in connection therewith

offer employment to such lottery sales representatives; and

     (D) Grant the Division the option to make proposals to IGT that IGT locate in the State

certain employees not located in the State (the "Employee Location Obligation");

     (x) Grant the Division the right to terminate the Amended Master Contract if (i) IGT fails

to perform the Investment Obligation, (ii) IGT fails to perform the Employment Obligation, or

(iii) IGT fails to perform the Employee Location Obligation in addition to any rights the Division

has to terminate the Video Lottery Agreement, the VLT Agreement, the Instant Ticket Vending

Machine Agreement, the Instant Ticket Agreement and the Website Services Agreement; and

     (xi) Contain such other terms and conditions as the Division and IGT may agree.

     As used in this Section 2:

     (1) "Affiliate" means a Person that directly, or indirectly through one or more

intermediaries, Controls, is Controlled by or is under common Control with IGT.

     (2) "Control" means the possession, directly or indirectly, of the power to direct or cause

the direction of the management and policies of a Person, whether through the ownership of

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voting securities, by contract or otherwise.

     (3) "Eligible Third Party" means any Person which (acting jointly with IGT or at the

direction of IGT) owns, leases or finances any of the Investment Obligation Assets.

     (4) "Person" means a natural person, corporation, limited liability company, partnership

(general or limited), joint venture, estate, trust or unincorporated association, any federal, state,

county, or municipal government or any bureau, department or agency thereof, any fiduciary

acting in such capacity, on behalf of any of the foregoing, or any other legal or business entity or

organization.

     SECTION 3. Section 42-61.2-1(2) of the General Laws in Chapter 42-61.2 entitled

"Video-Lottery Games, Table Games and Sports Wagering" is hereby amended to read as

follows:

     (2) "Central communication system" means a system approved by the lottery division,

linking all video-lottery machines terminals at a licensee licensed, video lottery retailer location

to provide auditing program information and any other information determined by the lottery

division. In addition, the central communications system must provide all computer hardware and

related software necessary for the establishment and implementation of a comprehensive system

as required by the lottery division. The central communications licensee may provide a maximum

of fifty percent (50%) eighty five percent (85%) of the video-lottery terminals.

     SECTION 4. Additional Provisions. The Master Contract Amendment shall also include

provisions that require IGT to regularly update hardware and software; annually replace a

minimum of six percent of video-lottery terminals; maintain a minimum of five percent of video-

lottery terminals as premium or royalty games with games performing at less than one hundred

fifty percent (150%) of floor average for any calendar year subject to review by the Division for

replacement or modification; and abide by enforceable performance standards that require a

reduction of the percent of video-lottery terminals in the event that IGT’s efficiency rating falls

below the contractually obligated level of ninety-seven percent. In addition, all vendor fees shall

be net of twenty percent (20%) promotional points.

     SECTION 5. Inconsistencies. Insofar as the provisions of this Act are inconsistent with

the provisions of any other general or special law of the State, the provisions of this Act shall

control.

     SECTION 6. Agreement. The State and IGT agree that the provisions of this Act are not

intended to modify in any way the relative rights and obligations of the Division and IGT under

the Master Contract Amendment.

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     SECTION 7. Effectiveness. This act shall take effect upon passage.

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LC002933

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

ENABLING THE STATE LOTTERY DIVISION OF THE DEPARTMENT OF REVENUE TO

CONTRACT WITH IGT GLOBAL SOLUTIONS CORPORATION

***

     This act would enable the state lottery division of the department of revenue to enter into

a contract extension with IGT Global Solutions Corporation.

     This act would take effect upon passage.

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LC002933

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