KRS 154A.600: Purchase, lease, or lease -purchase of goods or services -- Investigation of

prospective contractees -- Disclosure requirements -- Prohibited contracts,

exceptions -- Vendor's performance bond, letter of credit or deposit of security

-- Liquidated damages -- Laws governing contracts.

(1) The corporation may purchase, lease, or lease -purchase such goods or services as

are necessary for effectuating the purposes of this chapter. Applicable leases,

purchases, and lease -purchases shall be reported to the c apital projects and bond

oversight committee for its review and determination in accordance with the

provisions of KRS 45.750 to 45.810. The corporation shall not contract with any

person or entity for the total operation and administration of the state lo ttery, but

may make procurements which integrate functions such as lottery game design,

lottery ticket distribution to retailers, supply of goods and services, and advertising.

In all procurement decisions, the corporation shall take into account the parti cularly

sensitive nature of the state lottery and shall act to promote and ensure security,

honesty, fairness and integrity in the operation and administration of the lottery and

the objectives of raising net proceeds for the benefit of the public purpose described

in this chapter.

(2) The corporation shall investigate the financial responsibility, security, and integrity

of any person who submits a bid, proposal or offer as part of a major procurement.

At the time of submitting such bid, proposal, or offer to the corporation, the

corporation may require the following items:

(a) A disclosure of the vendor's name and address and, as applicable, the name

and address of the following:

1. If the vendor is a corporation, the officers, directors, and each

stockholder in such corporation; except that, in the case of owners of

equity securities of a publicly traded corporation, only the names and

addresses of those known to the corporation to own beneficially five

percent (5%) or more of such securities need be disclosed;

2. If the vendor is a trust, the trustee and all persons entitled to receive

income or benefit from the trust;

3. If the vendor is an association, the members, officers, and directors; and

4. If the vendor is a partnership or joint venture, all of th e general partners,

limited partners, or joint venturers.

(b) A disclosure of all the states and jurisdictions in which the vendor does

business, and the nature of the business for each such state or jurisdiction.

(c) A disclosure of all the states and jur isdictions in which the vendor has

contracts to supply gaming goods or services, including, but not limited to,

lottery goods and services, and the nature of the goods or services involved for

each such state or jurisdiction.

(d) A disclosure of all the states and jurisdictions in which the vendor has applied

for, has sought renewal of, has received, has been denied, has pending, or has

had revoked a gaming license of any kind, and the disposition of such in each

such state or jurisdiction. If any gaming li cense has been revoked or has not

been renewed or any gaming license application has been either denied or is

pending and has remained pending for more than six (6) months, all of the

facts and circumstances underlying the failure to receive such a license shall

be disclosed.

(e) A disclosure of the details of any finding of guilt, in a state or federal court,

against the vendor for any felony or any other criminal offense other than a

traffic violation.

(f) A disclosure of the details of any bankruptcy, in solvency, reorganization, or

any pending litigation of the vendor.

(g) Such additional disclosures and information as the corporation may determine

to be appropriate for the procurement involved. If the vendor subcontracts any

substantial portion of the wo rk to be performed under the contract to a

subcontractor, the vendor shall disclose all of the information required by this

subsection for the subcontractor as if the subcontractor were itself a vendor.

(3) A contract for a procurement with any vendor subj ect to subsection (2) of this

section who has not complied with the disclosure requirements described in

subsection (2) of this section shall not be entered into, and any contract with such a

vendor is unenforceable. Any contract with a vendor who does not comply with

such requirements for periodically updating such disclosures during the tenure of

contract as may be specified in such contract shall be terminated by the corporation.

This subsection and subsection (2) of this section shall be construed broad ly and

liberally to achieve the ends of full disclosure of all information necessary to allow

for a full and complete evaluation by the corporation of the competence, integrity,

background and character of vendors for major procurements.

(4) A contract shall not be entered into with any vendor who has been found guilty of a

felony committed within the preceding ten (10) years, unless the corporation

determines that:

(a) The vendor has been pardoned or the vendor's civil rights have been restored;

and

(b) Subsequent to such findings of guilt the vendor has engaged in the kind of

law-abiding commerce and good citizenship that would reflect well upon the

integrity of the lottery; or

(c) If the vendor is a firm, association, partnership, trust, corporation or ot her

entity, the vendor has terminated its relationship with the individual whose

actions directly contributed to the vendor's guilt.

(5) Each vendor shall, at the execution of the contract with the corporation, post a

performance bond or letter of credit from a bank acceptable to the corporation, in an

amount equal to the full amount estimated to be paid annually to the vendor under

the contract. In lieu of the bond, a vendor may, to assure the faithful performance of

its obligations, deposit and maintain w ith the State Treasurer securities that are

interest bearing or accruing and that, with the exception of those specified in

paragraph (a) or (b) of this subsection, are rated in one (1) of the three (3) highest

classifications by an established nationally recognized investment rating service.

Securities eligible under this subsection are limited to:

(a) Certificates of deposit issued by solvent banks or savings associations

organized and existing under the laws of this state or under the laws of the

United States and having their principal place of business in this state;

(b) United States bonds, notes, and bills for which the full faith and credit of the

government of the United States is pledged for the payment of principal and

interest;

(c) General obligation bonds and notes of any political subdivision of the state; or

(d) Corporate bonds of any corporation that is not an affiliate or subsidiary of the

depositor. Such securities shall be held in trust and shall have at all times a

market value at least eq ual to the full amount estimated to be paid annually to

the lottery vendor under contract.

(6) Every contract entered into by the corporation pursuant to this section shall contain

a provision for payment of liquidated damages to the corporation for any br each of

contract by the vendor.

(7) Each vendor shall be qualified to do business in this state and shall file appropriate

tax returns as provided by the laws of this state. All contracts under this section

shall be governed by the laws of this state.