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					       Enclosed you will find Request For Proposals (RFP) # KL-08-041 for a Web-Based
Payroll and Human Resources Integrated Solution and Related Services on behalf of the
Kentucky Lottery Corporation (KLC).

       To assist you in the completion of the proposal package, the following information is
provided as a summary of what is required to have your response considered valid:

       1.   The deadline to respond to this Solicitation is April 2, 2008, at 2:00 PM ET. Faxed or
            e-mailed proposals are not acceptable.

       2.   Your proposal must contain original signatures. Signature stamps are not acceptable.

       3.   All questions regarding this Solicitation must be addressed only to the Buyer that is
            identified in the Solicitation.

       4.   In signing your proposal, you affirm to the KLC your authority to make an offer on
            behalf of your organization.

       5.   Refer to Part VIII for a summary of all of the proposal completion requirements.


       The KLC encourages competition in all of its procurements and welcomes suggestions on
ways to improve our procurement process. Any suggestions should be addressed to my attention.

       Thank you for your interest in the Kentucky Lottery Corporation.


                                                      Respectfully,

                                                      Darrell E. Wilson
                                                      Darrell E. Wilson, CPPB, C.P.M.
                                                      Director of Purchasing
     KENTUCKY LOTTERY CORPORATION
         REQUEST FOR PROPOSALS
                  (RFP)
Solicitation No.:                               Date Issued:
                     KL-08-041                                 March 7, 2008

Goods or Services:


     Web-Based Payroll and Human Resources Integrated Solution and Related Services
Name of Buyer:                                   Area Code:             Telephone No.:
    Catherine Tomlinson, MCCCM, CPPB                502                    560-1770

PROPOSAL DUE DATE:               TIME:            Area Code:         Fax No.:
                                                     502                   560-1531
     April 2, 2008           2:00 PM ET         E-Mail Address:
                                                catherine.tomlinson@kylottery.com
     ISSUER:

                         KENTUCKY LOTTERY CORPORATION
                              1011 WEST MAIN STREET
                             LOUISVILLE KY 40202-2623
                        ATTENTION: PURCHASING DEPARTMENT
                             WEBSITE: www.kylottery.com
                                                    TABLE OF CONTENTS


PART I - INTRODUCTION ......................................................................................................... 1
     1.1. PURPOSE ....................................................................................................................... 1
     1.2. ISSUING OFFICE & BUYER ....................................................................................... 1
     1.3. SUMMARY OF KEY DATES AND DEADLINES...................................................... 1
PART II - PROPOSAL INSTRUCTIONS AND GENERAL CONDITIONS .............................. 2

PART III - SPECIAL CONDITIONS ............................................................................................ 2
     3.1.    CONTRACT TERM ....................................................................................................... 2
     3.2.    DURATION OF PROPOSAL ........................................................................................ 2
     3.3.    TITLE TO, AND USE OF, INTELLECTUAL PROPERTY RIGHTS ......................... 2
     3.4.    PRIME CONTRACTOR RESPONSIBILITY ............................................................... 3
PART IV - QUALIFICATIONS AND OBLIGATIONS OF OFFERORS.................................... 3
     4.1.    EXPERIENCE AND REFERENCES ............................................................................ 3
     4.2.    ACCOUNTING RECORDS........................................................................................... 3
     4.3.    INDEMNIFICATION..................................................................................................... 3
     4.4.    FINANCIAL SOUNDNESS .......................................................................................... 4
     4.5.    LIQUIDATED DAMAGES ........................................................................................... 4
     4.6.    EQUAL EMPLOYMENT OPPORTUNITY ................................................................. 4
     4.7.    EQUAL BUSINESS OPPORTUNITY PROGRAM...................................................... 4
     4.8.    KLC BUSINESS CODE OF CONDUCT ...................................................................... 5
     4.9.    SUPPLIER PROFILE ..................................................................................................... 5
PART V - EVALUATION OF PROPOSALS ............................................................................... 5
     5.1. EVALUATION COMMITTEE ...................................................................................... 5
     5.2. EVALUATION CRITERIA ........................................................................................... 5
     5.3. INITIAL PASS/FAIL REVIEW ..................................................................................... 7
     5.4. INITIAL TECHNICAL EVALUATION ....................................................................... 7
     5.5. ORAL PRESENTATIONS............................................................................................. 7
     5.6. FINAL TECHNICAL EVALUATION .......................................................................... 7
     5.7. PRICE EVALUATION .................................................................................................. 7
     5.8. COMBINED SCORING ................................................................................................. 7
     5.9. DISCUSSIONS ............................................................................................................... 8
     5.10. RECOMMENDATION FOR AWARD ......................................................................... 8
     5.11. CONTRACT NEGOTIATIONS .................................................................................... 8
     5.12. AWARD OF CONTRACT ............................................................................................. 8
     5.13. NOTICE OF AWARD .................................................................................................... 8
PART VI - STATEMENT OF WORK ........................................................................................... 9
     6.1. BACKGROUND ............................................................................................................ 9
     6.2. STATEMENT OF WORK ........................................................................................... 10
     6.3. MINIMUM SPECIFIC REQUIREMENTS ................................................................. 10
      6.4. COMPLIANCE/EXCEPTIONS ................................................................................... 16
PART VII - PRICING .................................................................................................................. 17
      7.1. PRICING SCHEDULE ................................................................................................. 17
PART VIII - SUBMISSION REQUIREMENTS ......................................................................... 17
      8.1. MANDATORY SUBMISSIONS ................................................................................. 17
PART IX - COMPLETION REQUIREMENTS .......................................................................... 18
      9.1. PROPOSAL CERTIFICATIONS ................................................................................. 18
      9.2. OFFEROR CONTACT INFORMATION .................................................................... 18
      9.3. DELIVERY OF PROPOSALS TO THE KLC ............................................................. 18



ATTACHMENTS:

      A - SOLICITATION INSTRUCTIONS

      B - GENERAL CONDITIONS

      C - SUPPLIER PROFILE; FORM W-9 WITH INSTRUCTIONS

EXHIBITS:

      A – PRICING SCHEDULE

      B – PAYROLL REPORTS

      C – EMPLOYEE BENEFIT SUMMARY
                                                                                           KL-08-041


                                 PART I - INTRODUCTION

1.1.   PURPOSE

       The purpose of this Request for Proposals (RFP) hereafter Solicitation is for the
       Kentucky Lottery Corporation (KLC) to enter into one or more contracts for the
       acquisition of a Web-Based Payroll and Human Resources Integrated Solution and
       Related Services as specified in Part VI (SCOPE OF WORK). For the purposes of this
       Solicitation, any purchase order issued as a result of this Solicitation shall be considered a
       contract.

1.2.   ISSUING OFFICE & BUYER

       This Solicitation is issued by the KENTUCKY LOTTERY CORPORATION, 1011 West
       Main Street, Louisville, Kentucky 40202-2623, Attention: Purchasing Department. Our
       Website is located at: www.kylottery.com. The Buyer and point of contact for all
       questions or requests for additional information is:

                      Catherine C. Tomlinson, MCCCM, CPPB
                      TEL. NO. (502) 560-1770
                      FAX NO. (502) 560-1531
                      EMAIL:      catherine.tomlinson@kylottery.com

       OFFERORS SHALL NOT CONTACT ANY OTHER KLC EMPLOYEE OTHER
       THAN THE BUYER REGARDING THIS Solicitation UNTIL AFTER THE AWARD
       OF A CONTRACT.

1.3.   SUMMARY OF KEY DATES AND DEADLINES

                 03/07/08 - Solicitation issue date
                 03/21/08 - Deadline for final written questions is at 10:00 AM ET
                                (Faxed questions will be accepted; e-mailed questions will not be
                                accepted)
                 03/26/08 - Distribution of written responses to questions (Addendum).
                                (Offerors not receiving an Addendum by the third business day following
                                the date of issuance of the addendum should contact the Buyer identified
                                above)
                 04/02/08 - Deadline for receipt of Proposals is 2:00 PM ET
                                (FAXED OR E-MAILED PROPOSALS WILL NOT BE ACCEPTED)
                 04/14/08 - Oral Presentations tentatively the week of April 14, 2008

       The KLC reserves the right to change any of the dates or times. If changes are made,
       Offerors receiving the original Solicitation by mail shall be notified. Offerors who
       receive the Solicitation via our web site shall be responsible for monitoring the web site
       for changes.



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                                                                                            KL-08-041


        PART II - PROPOSAL INSTRUCTIONS AND GENERAL CONDITIONS

This Solicitation is issued pursuant to Section III.C. of the KLC’s Procurement Procedures. All
Offerors must abide by the KLC’s “Solicitation Instructions” and “General Conditions” dated
March 1, 2002, which are incorporated by reference and are attached as Attachments “A” & “B”.
Offerors should note the date on the documents to determine whether revisions have been made
since the Offeror last responded to a Solicitation.

                              PART III - SPECIAL CONDITIONS

3.1.   CONTRACT TERM

       The initial term of any contract resulting from this Solicitation shall begin on the date set
       forth in the contract and continue for a period of three (3) years. The contract may be
       renewed, at the option of the KLC, on an annual basis for four (4) additional years upon
       terms and conditions mutually agreeable to the parties, for a total contract period not to
       exceed seven (7) years. The KLC reserves the right to negotiate different contract terms,
       provided the total contract period does not exceed the maximum number of years set
       forth above.

3.2.   DURATION OF PROPOSAL

       Unless otherwise agreed, all Proposals shall be binding for 180 calendar days from the
       proposal due date.

3.3.   TITLE TO, AND USE OF, INTELLECTUAL PROPERTY RIGHTS

       To the extent that the Successful Offeror utilizes or relies upon the intellectual property rights
       of a third party in fulfilling its obligations under the contract, the Successful Offeror will
       provide the KLC with whatever assurance the KLC deems necessary that the use of such
       third party intellectual property rights is permissible. The Successful Offeror shall indemnify
       and hold harmless the Commonwealth of Kentucky, the KLC, its officers, directors, and
       employees, 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 Successful Offeror
       under the contract violate the intellectual property rights of a third party.

       While the KLC and the Successful Offeror agree that all intellectual property rights
       associated with any product or service provided by (or developed by) the Successful Offeror
       under the contract are, and will remain, the property of the Successful Offeror, the Successful
       Offeror will agree to grant a license to KLC to make use of any such intellectual property
       rights on a perpetual basis with respect to KLC’s business activities.




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                                                                                          KL-08-041



3.4.   PRIME CONTRACTOR RESPONSIBILITY

       The KLC requires single responsibility for performance of any contract that may result
       from this solicitation. If a subcontractor is used, the contractor shall be the Prime
       Contractor and must accept full responsibility for the subcontractor’s performance.

            PART IV - QUALIFICATIONS AND OBLIGATIONS OF OFFERORS

4.1.   EXPERIENCE AND REFERENCES

       The Successful Offeror(s) must have experience in providing the goods or services
       specified in this Solicitation and must furnish proof of that experience to the satisfaction
       of the KLC. Therefore, all Offerors shall provide the KLC with a minimum of three (3)
       current references for which the Offeror supplied goods or services within the last two (2)
       years similar to those being sought by this Solicitation. For each reference listed, the
       following information must be provided:

       A.   Client Name
       B.   Primary Contact Name
       C.   Secondary Contact Name
       D.   Address
       E.   Telephone & Fax Numbers & e-mail address
       F.   Years of Association with Client
       G.   Description of Goods or Services Provided
       H.   Dates Goods or Services Provided
       I.   Approximate Value of Goods or Services Provided.

4.2.   ACCOUNTING RECORDS

       Accounting records pertaining to any contract awarded pursuant to this Solicitation shall
       be maintained and made available to the KLC, its auditors, and the Auditor of Public
       Accounts for the Commonwealth of Kentucky during the contract period and for three (3)
       years from the expiration date of the contract or final payment, whichever is later.

4.3.   INDEMNIFICATION

       Each Offeror shall indemnify, hold harmless and forever defend the KLC, the Commonwealth
       of Kentucky, their respective officers, directors, agents and employees from losses,
       claims, damages, costs (including fees of attorneys of the KLC’s choice and court costs),
       expenses and all liability of any nature of kind arising out of or relating to its Proposal or
       the Successful Offeror’s performance or failure to perform under any contract which may
       result from this Solicitation. This clause shall survive the cancellation of this Solicitation,
       the award of a contract to the Successful Offeror or a third party, or the termination of
       any subsequent contract.


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                                                                                       KL-08-041


4.4.   FINANCIAL SOUNDNESS

       In order to permit an evaluation of their financial capabilities to comply with any contract
       awarded pursuant to this Solicitation, Successful Offeror’s shall submit current audited
       financial statements or an alterative acceptable to the KLC. During the period prior to
       award of a contract pursuant to this Solicitation and through the end of the contract, the
       Successful Offeror shall immediately notify the KLC in writing of any material change in
       its financial condition or any change of ownership. A material adverse change in the
       Successful Offeror’s financial condition, the failure to submit the information required by
       this section or the making of a material misrepresentation in connection therewith shall
       be sufficient grounds for rejecting the Successful Offeror’s response or terminating any
       Contract awarded pursuant to this Solicitation.

4.5.   LIQUIDATED DAMAGES

       The goods or services to be provided pursuant to this solicitation are specifically
       designed for the KLC and are not readily available on the open market. Therefore, any
       failure to deliver under the terms of the contract with the Successful Offeror will delay
       the KLC’s operations and result in substantial damages. Furthermore, because the KLC’s
       damages in the event of a breach will be difficult to estimate, the Successful Offeror shall
       be required to pay liquidated damages equal to five percent (5%) of the invoice cost for
       any services which are not performed by the date agreed upon by the parties. Such
       amount may be withheld, at the KLC’s sole option, from any sums due the Successful
       Offeror from the KLC.

4.6.   EQUAL EMPLOYMENT OPPORTUNITY

       The Successful Offeror shall comply with all executive orders of the President’s
       Committee on Equal Employment Opportunity and all executive orders of the Governor
       of the Commonwealth of Kentucky regarding Equal Employment Opportunity.

4.7.   EQUAL BUSINESS OPPORTUNITY PROGRAM

       The KLC encourages procurement from minority businesses. As a result, the Successful
       Offeror shall state whether it is a certified minority supplier and provide a current
       certification certificate acceptable to the KLC. If not, the Successful Offeror will be
       expected to make a good faith effort to provide meaningful procurement opportunities to
       minority businesses when providing goods or services to the KLC pursuant to this
       Solicitation. Therefore, prior to award of contract, the Successful Offeror (if not a
       certified minority business) shall state the extent to which minority businesses are to be
       utilized as subcontractors or material suppliers. After award of contract, the Successful
       Offeror must provide periodic reports documenting minority business utilization. For
       information concerning qualified minority businesses or the KLC’s Equal Business
       Opportunity Program, please contact the KLC’s Director of Purchasing at 502.560.1773.



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                                                                                       KL-08-041


4.8.   KLC BUSINESS CODE OF CONDUCT

       For the duration of this procurement process and any subsequent contract period,
       Offerors, their employees and any representatives, designees, agents or any Related
       Entity (as defined by KRS 154A.010) shall refrain from the following practices:

       A. Providing any bribe, commission, kickback, payment, gratuity, gift, favor, meal or
          entertainment for any KLC officer, director, employee, agent or representative of the
          KLC or the spouse, cohabitant, parents, parents-in-law, brothers, sisters, brothers-in-
          law sisters-in-law, or any children thereof; and

       B. Any other action prohibited by any contract which may result from this Solicitation.

4.9.   SUPPLIER PROFILE

       All Offerors must complete the Supplier Profile along with the W-9 form that is attached
       as Attachment “C”. The Profile must be completed in its entirety and returned with the
       Proposal.

                        PART V - EVALUATION OF PROPOSALS

5.1.   EVALUATION COMMITTEE

       The KLC intends to conduct a comprehensive, fair, and impartial evaluation of Proposals
       received in response to this Solicitation. All proposals that are properly submitted will be
       evaluated by a Committee consisting of a team of designated KLC employees that shall
       make recommendations for award to the President of the KLC.

5.2.   EVALUATION CRITERIA

       The criteria and the weights to be used by the Evaluation Committee shall consist of the
       following:

            CRITERIA                                                               POINTS

            A. TECHNICAL (NON-PRICE)

            1. Form & Content of Response                                          PASS/FAIL

               a. Does the proposal meet all the requirements of the
                  Solicitation as summarized in Part VIII?

            2. Experience & Capability                                             25 Points

               a. Does the Offeror have experience in providing comparable
                  goods or services as specified in the Solicitation?
                                                 5
                                                                            KL-08-041



     b. Are the references submitted by the Offeror favorable?

     c. If a past KLC supplier, were goods or services provided in a
        satisfactory manner?

     d. Is the Offeror competent to provide the required goods or
        services as specified in the Solicitation?

     e. Does the Offeror have the financial capability (as
        determined by the KLC) to provide the goods or services
        specified in the Solicitation?

   3. Statement of Work (SOW)                                            45 Points

     a.   Does the SOW meet or exceed the needs of the KLC?

     b.   Does the proposal clearly demonstrate the overall payroll
          process and meet or exceed the needs of the KLC?

     c.   Does the proposal clearly demonstrate a personnel
          reporting solution and meet or exceed the needs of the
          KLC

     d.   Does the proposal clearly demonstrate and meet or exceed
          the level of security the KLC requires?

     e.   Does the proposal identify the initial and on-going training
          and implementation associated with the training?

     f.   Does the proposal include timelines and meet or exceed the
          KLC’s requirements?


   B. PRICE (NON-TECHNICAL)                                              30 Points

     Is the price fair and reasonable to the KLC?


TOTAL POINTS AVAILABLE                                                   100 Points




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                                                                                        KL-08-041



5.3.   INITIAL PASS/FAIL REVIEW

       Each Proposal will be evaluated for general conformity to the submission requirements
       summarized in Section 8.1 on a pass/fail basis. Proposals that are incomplete or otherwise
       do not meet submission requirements may be considered non-responsive and eliminated
       from further consideration.

5.4.   INITIAL TECHNICAL EVALUATION

       Proposals that meet the pass/fail criteria as stated above will be distributed to the
       members of the Evaluation Committee for a technical evaluation using the weighted
       criteria set forth above. PRICING WILL NOT BE A FACTOR IN THE TECHNICAL
       EVALUATION. Proposals that do not receive a minimum technical score of 70% of the
       total technical points available may be disqualified from further consideration. In
       addition, failure to score at least 70% of total points available on any one of the technical
       criteria may result in the disqualification of the Proposal.

5.5.   ORAL PRESENTATIONS

       The KLC may request oral presentations from some or all of the Offerors submitting a
       Proposal in response to this solicitation in order to further clarify the Proposals. The KLC
       reserves the right, in its absolute discretion, to determine whether oral presentations are
       necessary and to determine which Offerors, if any, will be requested to make
       presentations. Offerors must bear all costs and expenses associated with any
       demonstrations or presentations, which may be required by the KLC.Every Offeror’s
       presentation will be separate from the other presentations with no other Offeror present.

5.6.   FINAL TECHNICAL EVALUATION

       After the oral presentations, the Evaluation Committee shall conduct a final technical
       evaluation of proposals. Any scores assigned as a result of the initial technical evaluation
       may be modified based upon the oral presentation.

5.7.   PRICE EVALUATION

       Price evaluation will occur after technical scoring and will involve only Proposals that
       receive the minimum technical scores. The Evaluation Committee will award the points
       available for price, using an objective formula that takes into consideration the price of
       the Proposal being evaluated in relation to the lowest cost proposal. Alternate pricing
       schedules may be included but will not be used for evaluation purposes.

5.8.   COMBINED SCORING

       The Evaluation Committee will combine all technical and price points to determine the
       total score for each Proposal, and the Proposals shall be ranked accordingly.
                                                   7
                                                                                       KL-08-041



5.9.   DISCUSSIONS

       The Evaluation Committee may conduct discussions with responsible Offerors who
       submit Proposals determined to be reasonably susceptible of being selected for award of
       contract. The discussions shall be conducted for the purpose of clarification to assure full
       understanding of, and conformance to, the Solicitation requirements, and revisions may
       be permitted after submissions and prior to award for the purpose of obtaining best and
       final offers. Offerors shall be accorded fair and equal treatment with respect to the
       opportunity for discussion and revisions of proposals, except that discussions may be
       held with only the best qualified Offeror.

5.10. RECOMMENDATION FOR AWARD

       After the final ranking of Proposals, the Evaluation Committee shall recommend to the
       KLC President an Apparent Successful Offeror whose Proposal, as determined by the
       Evaluation Committee, is most advantageous to the KLC, taking into account price and
       evaluation factors set forth in this Solicitation.

5.11. CONTRACT NEGOTIATIONS

       Upon approval by the President and, if necessary, the KLC Board of Directors, the KLC
       shall enter into negotiations with the Apparent Successful Offeror. If the conditions and
       price of a contract cannot be successfully negotiated within a reasonable amount of time
       (as determined by the KLC), negotiations will be terminated and negotiations with the
       next highest ranking Offeror will commence. Negotiations shall continue at the sole
       option of the KLC until a contract is signed or all Proposals are rejected and the
       Solicitation is withdrawn.

5.12. AWARD OF CONTRACT

       An award will be made to one (1) or more responsive and responsible Offeror whose
       Proposal is determined to be the most advantageous to the KLC, taking into consideration
       the price and the evaluation factors set forth in this Solicitation. Notice of intent to
       contract, however, does not constitute the award of a contract.

5.13. NOTICE OF AWARD

       All Offerors submitting a response to this Solicitation will be notified in writing of the
       award of a contract, if and when an award is made. If no award is made, all Offerors will
       be notified accordingly.




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                                                                                       KL-08-041



                            PART VI - STATEMENT OF WORK

6.1.   BACKGROUND

       The KLC was created as a “de jure municipal corporation and political subdivision of the
       Commonwealth of Kentucky” pursuant to KRS 154A.010, et. seq. The KLC currently
       employs approximately 207 employees (193 full-time and 14 part-time) with its corporate
       offices and warehouse operations located in Louisville, Kentucky. The KLC also has four
       (4) regional offices located throughout the Commonwealth of Kentucky.

       Employees live in a multitude of cities and counties in Kentucky, with some residing in
       Indiana. The KLC processes non-exempt (hourly) and exempt (salaried) employees
       together in bi-weekly payrolls.

       The KLC maintains the Kentucky Lottery Corporation Money Purchase Retirement Plan
       (MP Plan) for its employees. The MP Plan consists of three (3) different contributions:
       (A) Mandatory Contributions - a pre-tax 6.2% employee contribution to the plan, (B)
       Supplemental Contributions – a 6.2% employer contribution to the plan and (C) Basic
       Contribution – an 8% employer contribution to the plan. Mandatory and Supplemental
       Contributions are subject to the FICA wage limits. The Basic Contribution is not subject
       to wage limits. No overtime, bonus or commission can be used in the applicable wages
       for this plan. Currently, approximately 6% of the KLC’s employees are covered by Social
       Security and only participate in the Basic Contribution. The remaining employees are not
       covered by Social Security and participate in the Mandatory, Supplemental and Basic
       Contributions. The KLC is also required to withhold 1.45% for Medicare taxes from all
       employees.

       The KLC also has employees in its various locations that have a smaller percentage of
       their taxable local wages actually taxed based on the number of retailers that they serve in
       each locality. The KLC has some employees who are subject to ten (10) local
       jurisdictional taxes. The KLC requires bi-weekly, monthly, quarterly and yearly tax
       reports to assist in reconciling taxable wages with the tax actually withheld for each
       employee in each locality.

       The KLC’s current vendor prepares and inserts the KLC’s W-2's at year-end, as well as
       preparing and electronically submitting the KLC’s data to the Federal and State
       governments for year-end tax information. The KLC can re-process W-2's if necessary.

       The KLC has pre-tax deductions for Health, Dental, Vison, and Life insurances as well as
       three (3) deferred compensation plans (457 and 401k, and a 457f plan), a healthcare
       savings account, four (4) AFLAC deductions, and a flexible spending plan.




                                                  9
                                                                                     KL-08-041



6.2.   STATEMENT OF WORK

       All Offerors must submit a written “Statement of Work” prepared in a straight-forward
       manner, describing the Offeror’s ability to meet the requirements of this solicitation, as
       part of their proposals.

6.3.   MINIMUM SPECIFIC REQUIREMENTS

       THE FOLLOWING SPECIFICATIONS ONLY ESTABLISH THE MINIMUM
       STANDARDS WITH WHICH EACH OFFEROR MUST COMPLY. OFFERORS ARE
       EXPECTED AND ENCOURAGED TO PROPOSE PRODUCTS OR SERVICES THAT
       EXCEED THE MINIMUM SPECIFICATIONS. INNOVATIVE PRODUCTS OR
       SERVICES MAY BE PROPOSED AS AN OPTION TO THE KLC.

       A. GENERAL SOLUTION REQUIREMENTS:

           1.   Offeror must be capable of providing a web-based Payroll/Human Resource
                solution that is completely hosted by the Offeror. This solution must be able to
                feed the KLC’s general ledger system with data by employee, department, and
                account. This solution must also have a user-friendly standard and ad-hoc report
                generating system.

           2.   The proposed solution must allow KLC employee “Self-Service” (Earnings,
                Registration, Benefit Application, Time Reporting, Work Flow, etc.).

           3.   Ability to send email messages/notifications

           4.   User-friendly exporting capabilities

           5.   Offerors must describe in detail the workflow process that is incorporated in the
                solution.

           6.   Export capabilities to Microsoft Excel or another report tool to allow data
                manipulation and analysis.

       B. REQUIRED PAYROLL FEATURES:

           1.   Y-T-D Benefit accrual tracking for all functions (Vacation, Personal, Holiday,
                Floater, Flex Spending, HSA, etc.).

           2.   Must be able to purge terminated employees from the KLC’s records.

           3.   Must have a time reporting solution which allows electronic management
                approval. Please describe how this feature works.



                                                 10
                                                                            KL-08-041


4.   Supply PC software with download capabilities for use in processing KLC’s bi-
     weekly payroll. KLC must be able to update payroll information and transmit to
     the Successful Offeror for further processing.

5.   After processing payroll, the proposed solution must create and submit to bank
     for direct deposit payments. Solution must also be able to handle stop-pays and
     have a preview status for payroll.

6.   Send, by courier, vouchers, checks and payroll reports to the KLC the day after
     payroll is submitted.

7.   Tracking and Reporting of Pension Wages and Deductions- The Successful
     Offeror must track and report on pension wages and deductions, as well as
     Social Security deductions. KLC must have the ability to temporarily upgrade
     the regular wages at anytime. Additionally, the solution should automatically
     update any tax/law changes for Payroll & Human Resources. **Please list any
     additional costs for this feature.**

8.   Codes for Tracking Payroll Information- Successful Offeror must designate the
     number of deduction codes, earnings codes, taxing codes, and accumulator
     codes available to track information for each payroll and cumulatively.
     Successful Offeror must allow a variety of accumulator codes to be cleared on a
     bi-weekly, monthly, quarterly, and annual basis.

9.   Manual Check Worksheet- Successful Offeror solution must include some
     capability for a manual check worksheet with "what if?" calculations. This
     function must be able to handle pre-tax deductions and variable taxing
     situations. The ability to transmit these manual checks to the KLC’s payroll
     vendor is required.

10. Tax Filing and Reporting- Successful Offeror must process, report, and
    reconcile multiple city, county, state, and federal taxes. A report reconciling
    taxable wages with the taxes withheld must be provided by the Successful
    Offeror at least bi-weekly, monthly, quarterly, and at year-end.

     a.   Accommodate KLC's FUTA and FICA-exempt status, withholding
          Medicare taxes on all employees, social security taxes on temporary and
          part-time employees, as well as designated full-time employees, and no
          social security taxes on the remaining, full-time, permanent employees.

     b.   Advise if tax filing by the Successful Offeror for KLC is possible.

     c.   The Successful Offeror software must allow employees in our various
          locations to have a smaller percentage of taxable wages actually be taxed
          based on the number of retailers served in each locality. The KLC has some
          employees who are subject to ten (10) local jurisdictional taxes; however an
          employee may be subject to more.

                                       11
                                                                             KL-08-041



       d.   The Successful Offeror must process a variety of pre-tax deductions - some
            are pre-tax for Federal and State, others are pre-tax for Federal, State and
            Local taxes - and have the ability to block tax calculations for individuals
            and allow the KLC to manually input the amount to be withheld on a
            temporary or permanent basis.

       e.   Prepare and insert KLC's W-2's at year-end.

       f.   Prepare and submit KLC’s required data to the Federal and State
            governments with year-end tax information.

       g.   Have software which will allow for re-processing of W-2's, if necessary.

       h.   Provide year-end reconciliation and detail reports with the W-2's.

       i.   Have software that contains a feature for flexible user-designed reporting,
            which must be easily downloaded into Microsoft Excel for further
            manipulation.

       j.   Provide a benefit summary report, by employee and department, for
            allowed, taken, and remaining vacation, personal, floater, and holiday
            hours, or make accessible through the user-designed reporting. Remaining
            vacation and floater hours must appear on employee pay stubs.

C. REQUIRED HUMAN RESOURCE FEATURES:

  1.   Seamless integration with the needs of the Human Resources department, e.g.:

       a.   Life, Dental, Health, Vision, Insurance

       b.   Performance Appraisals (available for completion and review)

       c.   Recruitment Tracking

       d.   Personnel Information (Address, Pay, Withholdings, etc.)

       e.   HR Report Generation – Ability to retrieve all data in the system, both on a
            historical/point-in-time and trend basis.

       f.   Export capabilities to Microsoft Excel or another report tool to allow data
            manipulation and analysis.

       g.   Rules Based Benefit Eligibility Customization

       h.   Tuition Reimbursement Management capabilities


                                         12
                                                                             KL-08-041


       i.   Ability to Store Employee Personnel files for online access

       j.   Total Rewards Statement available per employee on an ad hoc and quarterly
            basis

       k.   Managerial Access to Employee information

       l.   Y-T-D Benefit accrual tracking for all functions (Vacation, Personal,
            Holiday, Floater, Flex Spending, HSA, etc.)

       m. Ability to send email messages/notifications

       n.   User-friendly exporting capabilities

       o.   Have a time reporting solution which allows management approval
            electronically. Please describe how this feature works.

  2.   Personnel Reporting

       a.   All Offerors must provide a solution that contains an integrated Human
            Resources solution, for tracking personnel information in addition to all
            required Payroll functionality.   Please describe the features of such a
            solution.

       b.   Can security access be established for users outside of Payroll? If so, how?

       c.   Solution should allow employee “Self-Service” (Earnings, Registration,
            Benefit Application, Time Reporting, Work Flow, etc.). Please describe the
            workflow process that is incorporated in the solution.

       d.   Y-T-D Benefit accrual tracking for all functions (Vacation, Personal,
            Holiday, Floater, Flex Spending, HSA, etc.)

D. SECURITY

  1.   (KLC) places great emphasis on establishing and maintaining adequate security
       controls to support the integrity, confidentiality, and availability of KLC
       products, data, and systems. To the same extent, the KLC expects the Offeror to
       include in their proposal a detailed explanation of the security measures and
       tools to be used to adequately secure the resources sought under this
       Solicitation. This explanation should include, at a minimum, the following:
       a. Physical Security describing methods used to protect the building, Data
            Center, and Servers from unauthorized access.

       b.   Server/Router/Firewall: including, but not limited to; monitoring,
            hardening, patching. Upgrading, and testing.


                                         13
                                                                            KL-08-041


     c.   Methods used to perform logging at the application, Operating System and
          network layers.

     d.   Intrusion Detection methods or solutions

     e.   Incident Response Policy and procedures.

     f.   User Authentication and Authorization methods. Access Control (including
          device and application access)

     g.   List encryption standards used and how frequent keys are changed.

     h.   Change Control Processes and Procedures

     i.   Software development project Methodology.

     j.   Anti-Virus and spyware solutions.

     k.   Data protection methods and Data leakage countermeasures.

     l.   Business Continuity and Disaster Recovery to protect against natural and
          manmade disasters.

     m. List what types of audits and Penetration testing are currently being
        performed.

     n.   Offerors must identify and describe the levels of security in their software
          that prevents unauthorized entry, and identify all security that is user-
          maintained.

     o.   Offerors must identify and describe any “audit" reports that are produced,
          showing changes to the database and the identity of the user. Offerors must
          identify and describe any "back doors" to the software.

     p.   Offerors must identify and describe the length of time that the KLC’s data
          will be stored by the Successful Offeror, the type of data that is stored, and
          the method of storage.

2.   The product and/or service offered will determine the content of the security
     discussion.

3.   If an Offeror proposes hosting applications on its servers, the KLC shall by
     contract have the right to perform its own security review. KLC will require a
     SAS 70 audit annually. The Statement on Auditing Standards (SAS) No. 70,
     Service Organizations, is an internationally recognized auditing standard
     developed by the American Institute of Certified Public Accountants (AICPA).
     ASAS 70 audit is widely recognized because it represents that a service
     organization has been through an in-depth audit of their control activities, which
                                       14
                                                                                KL-08-041


          generally includes controls over information technology and related processes.
          Offeror shall provide the KLC with reports from recent security reviews and/or
          audits being provided to its current customers.

     4.   The KLC’s Information Security Department, along with Technical Services
          consultation, will have final approval on the security methods and tools to be
          implemented. The proposed security solution must conform to the KLC’s
          internal Information Security policies and model, which are based on British
          Standard 7799, and with Technical Services standards model and practices.

E. SUCCESSFUL OFFEROR BUSINESS CONTINUITY PLAN

     1.   In the event that KLC staff cannot access the solution from corporate
          headquarters, the Successful Offeror must:

          a.   Provide a method by which the KLC can load/change/transmit its payroll
               data to the Successful Offeror’s processing center. Please provide a detailed
               description of this process.

          b.   Have the KLC’s most recent payroll data available for processing payroll
               for the KLC via notification by telephone or to be able to re-run the KLC’s
               last payroll.

          c.   The Successful Offeror must disclose to the KLC its backup plan(s) in the
               event of failure of the solution or the inability to process payroll at the
               Successful Offeror’s primary location.

F.   IMPLEMENTATION

     The Successful Offeror must provide on-site assistance with the conversion of
     payroll data and the implementation of the new solution. Offerors must describe in
     detail the type and quantity of assistance that will be provided, along with any
     associated costs. Provide a sample implementation plan and timeline.


G. TRAINING AND SUPPORT

     1.   Offerors must state availability of customer service telephone support, as well as
          general expertise of customer service representatives.

     2.   The Successful Offeror must provide initial training to the KLC in the
          Louisville, KY area. On-going training must also be available as needed. The
          Offerors must describe, in detail, the training opportunities currently available
          and the location and cost of such training.




                                           15
                                                                                      KL-08-041


       H. OPTIONAL FEATURES


            1.   Flex Spending Administration

                 a.   Please describe, if any, the flex spending administration system that your
                      solution provides. This feature MUST be separately priced and will NOT
                      be included in the proposal evaluation, as it is an optional feature.


       I.   SUBMISSION OF SAMPLE MATERIALS-


            1.   All Offerors must submit samples of the following materials:

                 a.   Pay vouchers, checks and stubs;

                 b.   Payroll registers & Summaries for current period, Master reports for
                      cumulative employee data;

                 c.   Monthly, Quarterly and year-end tax reporting, W-2's;

                 d.   Deduction reports, benefit reports, personnel reports, sample user-designed
                      "report-writer" reports;

                 e.   Sample of user training/reference tools;

       J.   SUBMISSION OF TIMELINES

            1.   Sample payroll processing timeline;

            2.   Data migration plan from current system to proposed solution;

            3.   Sample implementation plan & timeline.

6.4.   COMPLIANCE/EXCEPTIONS

       Offerors are expected to comply with the terms and conditions of this Solicitation,
       including the Minimum Specific Requirements set forth above. Therefore, each Offeror
       must specifically agree to comply with the terms and conditions of this Solicitation unless
       an exception is taken to any particular term or condition. IF AN OFFEROR AGREES TO
       THE TERMS AND CONDITIONS, THE OFFEROR MUST STATE IN ITS
       PROPOSAL THAT “WE UNDERSTAND AND WILL COMPLY WITH ALL
       SECTIONS OF THIS Solicitation.” IF AN EXCEPTION IS TAKEN TO ANY
       SECTION, THE OFFEROR MUST IDENTIFY THE SECTION AND PROVIDE A
       DETAILED EXPLANATION AS TO WHY THE EXCEPTION WAS TAKEN. ANY
       EXCEPTION MAY BE GROUNDS FOR DISQUALIFICATION.

                                                   16
                                                                                      KL-08-041



                                    PART VII - PRICING

7.1.   PRICING SCHEDULE

       A. Offerors must complete the pricing schedule that is attached as Exhibit “A”. All
          prices proposed herein shall be firm through the initial term of the contract and shall
          include all costs including, but not limited to, cost of labor, materials and any fees,
          i.e. start-up. Pricing information must be submitted in a SEPARATE, SEALED
          ENVELOPE (without copies) and clearly marked as such. Pricing shall NOT be
          included at any other place within the Proposal.

       B. Offerors should indicate whether or not they have an existing state or federal price
          contract for the products or services solicited and should price their proposals
          accordingly.

                       PART VIII - SUBMISSION REQUIREMENTS

8.1.   MANDATORY SUBMISSIONS

       Offeror’s Proposals shall be loosely bound and indexed according to the Solicitation
       outline. Each Offeror responding to this Solicitation must submit the following:

       A.   List of References as required by Section 4.1
       B.   Financial Soundness as required by Section 4.4
       C.   Completed Supplier Profile as required by Section 4.12
       D.   Statement of Work as required by Section 6.2
       E.   Minimum Specific Requirements as required by Section 6.3
            1. Description of the workflow process incorporated in the solution per section 6.3,
                 A, 5;
            2. Description of a time reporting solution which allows electronic management
                 approval per section 6.3, B, 3;
            3. Additional costs for automatically updating any tax/law changes for Payroll and
                 Human Resources per section 6.3, B, 7;
            4. Describe the features of a solution for tracking personnel information in addition
                 to all required Payroll functionality per section 6.3, C, 2, a;
            5. Describe the workflow process that is incorporated in the solution per section
                 6.3, C, 2, c;
            6. List of Security documentation as required by Section 6.3, D, 1;
            7. Provide a detailed description by which the KLC can load/change/transmit its
                 payroll data to the Successful Offeror’s processing center per section 6.3, E, 1,
                 a;
            8. Provide Sample Material as required by Section 6.3, I;
            9. Provide Time Line as required by Section 6.3, J.



                                                 17
                                                                                       KL-08-041


       F. List of any exceptions to Solicitation as required by Section 6.9
       G. Completed Pricing Schedule as required by Section 7.1
       H. Completed and signed Proposal Certification from as required by Section 9.1

                       PART IX - COMPLETION REQUIREMENTS

9.1.   PROPOSAL CERTIFICATIONS

       By submitting a Proposal in response to this Solicitation and signing below, the Offeror
       hereby certifies as follows:

       A.    The person signing has authority to sign on behalf of the Offeror.

       B.     The Offeror agrees to be bound by all the terms and conditions of this Solicitation
              (including the Solicitation Instructions and the General Conditions in Attachments
              A & B), except for any terms and conditions for which an exception was taken
              and identified in the Proposal pursuant to Section 6.5.

       Offeror Name____________________________________________________________

       By ____________________________________________________________________
                                (Signature)                            (Date)
       Title of person signing:____________________________________________________

       (If Offeror is a Corporation, the President or a Vice President must sign. If Offeror is a
       partnership, a general partner must sign. If Offeror is a limited liability corporation, the
       manager or the owner of a beneficial interest must sign.)

9.2.   OFFEROR CONTACT INFORMATION

       Primary Contact Person:

       Secondary Contact Person:

       Address:

       Telephone Number:                                   Fax Number:

       Cellular Telephone Number:

       E-Mail Address:

9.3.   DELIVERY OF PROPOSALS TO THE KLC

       The Offeror’s original Proposal including one (1) electronic copy with SEPARATELY
       SEALED PRICING, and nine (9) copies (without pricing), must be placed in a sealed
                                                  18
                                                                            KL-08-041


envelope. The original cost proposal (without copies) shall be clearly labeled and
placed in a separate, sealed envelope inside the envelope containing the original
proposal. All Proposals must be labeled as follows:
                     “CONFIDENTIAL SEALED BID DO NOT OPEN”
                  From:
                  Solicitation #:
                  Closing Date & Time:
Addressed to:     Purchasing Department
                  Kentucky Lottery Corporation
                  ATTN: Catherine Tomlinson
                  1011 W Main Street
                  Louisville, KY 40202-2623

(If an overnight courier is used, the name of the Offeror and the Solicitation number
should also be placed on the outside of the overnight courier envelope.) Proposals must
be mailed or hand-delivered to the above address by the deadline stated in Section 1.3.
FAXED OR E-MAILED PROPOSALS WILL NOT BE ACCEPTED.




                                        19
                                                                        ATTACHMENT A
                                                                                  SOLICITATION INSTRUCTIONS
1.     DEFINITIONS                                                                6.     MODIFICATION OR WITHDRAWAL OF OFFERS
        (a)     As used herein, the term "Solicitation" means Invitation for              (a)      Offers may be modified or withdrawn by written or faxed
Bids (IFB) if a contract is to be awarded by competitive sealed Bids, or          notice received prior to the exact hour and date specified for receipt of
Request for Proposals (Solicitation) if a contract is to be awarded by            Offers. An Offer also may be withdrawn in person by an Offeror or its
competitive negotiation.                                                          authorized representative, provided his or her identity is made known and
        (b)     The term "Offer" means bid if a contract is to be awarded by      he or she signs a receipt for the Offer, but only if the withdrawal is made
competitive sealed bidding, or proposal if the contract is to be awarded by       prior to the exact hour and date set for receipt of Offers.
competitive negotiation.                                                                  (b)      If a modification relates to the price quoted in the Offer,
2. PREPARATION OF OFFERS                                                          actual dollar amounts shall not be stated. Instead, Offeror must state the
        (a)     Offerors shall examine and adhere to any drawings,                increase or decrease in price in terms of percentages or change in the
specifications, schedules, and instructions contained in the Solicitation.        dollar amount (e.g., increase/decease price by 10% or increase/decease
Failure to do so shall be at the Offeror’s risk.                                  unit price by $1.00).
        (b)     Offerors shall set forth full, accurate and complete              7. LATE OFFERS, MODIFICATIONS, OR WITHDRAWALS
information as required by the Solicitation. Offers which contain an                     Offers, modifications or withdrawals thereof received by the KLC
Offeror’s own special terms and conditions in conflict with the terms and         after the exact hour and date specified for receipt shall not be considered
conditions of the Solicitation may be rejected.                                   unless consideration would not be prejudicial to competition as
        (c)     Each Offeror shall sign and date the Solicitation in ink and      determined by the KLC in it’s sole discretion.
shall print or type his or her name, business, address, telephone number,         8. MULTIPLE AND ALTERNATE OFFERS
and fax number. Erasures or other changes must be initialed in ink by the                Offeror shall submit only one Offer in response to the solicitation
person signing the Offer.                                                         and shall not propose more than one price, model, or brand for each item.
        (d)     Cash discounts shall not be considered in making the award        Multiple or alternate Offers shall be rejected unless specifically requested
of a contract.                                                                    in the solicitation.
        (e)     Discounts for early payment may be considered if deemed           9. AWARD OF CONTRACT
to be in the best interest of the KLC.                                            (a) The contract shall be awarded to the responsible and responsive
        (f)     All products quoted shall be new (latest model) and unused        Offeror whose Offer meets the requirements and criteria set forth in the
unless otherwise specified.                                                       solicitation and offers the Best Value to the KLC.
        (g)     Offers for goods or services other than those specified shall     (b) Unless otherwise specified, the KLC reserves the right to award a
not be considered unless authorized by the Solicitation.                          contract based upon a low total, low subtotal, or low item basis. In
        (h)     Offerors shall state a definite time for delivery of goods or     addition, the KLC reserves the right to reject any or all offers and to waive
for performance of services unless otherwise specified.                           informalities and minor irregularities in offers received if not prejudicial to
        (i)     Unless otherwise stated, time, if stated as a number of days,     competition as determined by the KLC in its sole discretion.
shall include Saturdays, Sundays and holidays.                                    (c) A written award (or Acceptance of Offer) mailed or otherwise
        (j)     Offerors shall bear all costs associated with their Offers,       furnished to the Successful Offeror within the time for acceptance
including but not limited to, preparation, copying, postage, and delivery         specified in the Solicitation may, in the sole discretion of the KLC, be
fees.                                                                             deemed to result in a binding contract without further action by either
3. INQUIRIES                                                                      party.
        (a)     Any inquiries regarding the Solicitation must be made in          10. DISCLOSURE AND OFFER CONFIDENTIALITY
writing by the deadline for written questions stated in the Solicitation or, if          The contents of each Offer shall be made available for public
no deadline is specified, within sufficient time for a reply to reach the         inspection after the execution of a contract, except for proprietary
Offeror before the submission deadline stated in the Solicitation. Inquiries      information. Proprietary information must be submitted separately in a
must not include cost data.                                                       sealed envelope which clearly indicates that the envelope contains
        (b)     Oral explanations or instructions given before the award of       proprietary materials. Data which may be designated as proprietary is
the contract shall not be binding on the KLC.                                     defined in KRS 154A.040 and KRS 61.870 to 61.884. Materials
        (c)     Any information given to a prospective Offeror concerning a       designated in this manner and determined by the KLC to be proprietary
Solicitation shall be furnished to all prospective Offerors as an addendum        shall not be disclosed except under a court order, pursuant to an Attorney
or an amendment to the Solicitation, if they would be prejudiced by not           General's opinion or as provided in the contract which results from the
having the information. The specific Offeror making the inquiry shall not be      Solicitation.
identified.                                                                       11. RESERVATIONS OF RIGHT
4. ACKNOWLEDGMENT OF ADDENDA AND AMENDMENTS TO                                           The KLC reserves the right to accept Offers in whole or in part, to
        SOLICITATIONS                                                             negotiate with any Offeror in any manner necessary to serve the best
       Receipt of an addendum or amendment to a Solicitation shall be             interests of the KLC, and to reduce the scope of goods or services
acknowledged in writing by all Offerors. Unless otherwise specified, the          required after selection of the Successful Offeror. The KLC also reserves
acknowledgment shall be submitted with the Offer.                                 the right to withdraw or cancel any Solicitation at its discretion, to waive
5. SUBMISSION OF OFFERS                                                           technicalities or minor irregularities, and to obtain any information from
        (a)     Offers shall be enclosed in sealed envelopes and received         any lawful source regarding past business history and practices of an
by the KLC Purchasing Department prior to the deadline specified in the           Offeror. Such information, including past business dealings with the KLC,
Solicitation. The bidder shall insert its name, address and the Solicitation      other governmental entities of the Commonwealth, and other Lotteries,
number on the face of the sealed envelope. The official date and time of          may be taken into consideration in evaluating any Offers.
receipt of the Offer shall be determined by the KLC’s date and time stamp.
        (b)     Faxed Offers will not be considered unless expressly
authorized by the Solicitation.
        (c)     Any samples required by the Solicitation must be submitted
within the time specified and, unless otherwise specified, at the Offeror’s
expense. Unless otherwise stated in the Solicitation, samples shall
become the property of the KLC.
                                                                              ATTACHMENT B
                                                                                       GENERAL CONDITIONS
1.    KENTUCKY SALES/USE TAX                                                           CONDITIONS
                                                                                       contract, and evidence     of expenses paid or incurred in performance of the
      Sales of tangible personal property or services to the KLC are not subject       contract from the date of award through the date of termination.
to state sales or use taxes.                                                           8. FILING OF PROTEST
2. GOVERNING LAW, VENUE & ASSOCIATED COSTS                                                   Any actual or prospective Offeror or contractor who is aggrieved in
      Any contracts and or orders placed as a result of the Solicitation shall be      connection with the solicitation or award of a contract may file a protest with the
deemed to have been made and accepted in Jefferson County, Kentucky and                President of the KLC. A protest must be in writing and must be filed within
shall be governed by laws of the Commonwealth of Kentucky. Furthermore,                fourteen (14) calendar days after such aggrieved person knows or should have
any litigation shall be commenced and prosecuted in the Courts of Jefferson            known of the facts giving rise to the protest.
County, Kentucky. If litigation is commenced and the KLC is the prevailing             9. WARRANTIES
party, the KLC shall be entitled to all costs, including court costs and attorney’s          Unless otherwise specified in the Solicitation, the manufacturer’s most
fees.                                                                                  favorable warranty offered to preferred customers shall apply to all goods or
3. CONTRACT MODIFICATIONS                                                              services specified in the Solicitation. A copy of the warranty shall be furnished to
      During the contract period, no change will be permitted in any contract          the KLC upon delivery of the goods or services
conditions or specifications unless the Contractor receives express written            10. DELIVERIES
approval from the KLC. The Contractor shall promptly report any necessary                    Unless otherwise specified in the Solicitation, all Offers in response to the
modifications to the Director of Purchasing for consideration and decision.            Solicitation shall include shipping, F.O.B, destination. Deliveries shall be made
4. INVOICING                                                                           from 8:00 am to 4::00 pm, eastern time, Monday through Friday, excluding
      All invoices shall be made on the Contractor’s invoice form and submitted        holidays.
after the goods or services have been received. Invoices must be itemized in           11. FIRM PRICING
accordance with the contract and shall include, at a minimum, the Solicitation               Except as otherwise provided, prices offered must be firm for the initial term
number, the purchase order number provided by the KLC, a description of                of the contract. Offers with prices which are subject to qualifications or change
supplies or services, and any applicable item numbers, sizes, quantities, unit         may be rejected.
prices or extended prices. Failure to submit a properly completed invoice shall        12. INSPECTION
be cause for delay in payment because incomplete invoices shall be returned                  All goods shall be subject to inspection or tests by the KLC prior to
to the Contractor.                                                                     acceptance. If goods are defective in material or workmanship or otherwise not in
5. ORDER OF PRECEDENCE                                                                 conformity with specified requirements, the KLC shall have the right to reject them
      Any inconsistencies between the terms and conditions of the Solicitation,        or require acceptable correction at the Contractor’s expense.
the Offer or the Contract shall be resolved in the following order: (a) Contract,      13. NON-EXCLUSIVE RIGHTS
(b) Special Conditions of the Solicitation, (c) Specifications of the Solicitation,          Unless otherwise stated, no contract resulting from the Solicitation shall
(d) General Conditions of the Solicitation, (e) Offer Instructions of the              grant to the Contractor exclusive rights. If the KLC determines that different or
Solicitation, and (f) Offer, unless any provision of the Offer exceeds the             additional goods or services are required, the KLC reserves the right to purchase
requirements of the Solicitation, in which case the provisions of the Offer shall      the goods or services from any supplier the KLC deems appropriate.
apply.                                                                                 14. FINAL CONTRACT
6. TERMINATION FOR CAUSE AND OTHER REMEDIES                                                  The award of any contract pursuant to a Solicitation may be subject to the
      (a) In the event of default under the contract, the KLC shall be entitled to     negotiation and execution of a definitive contract between the Successful Offeror
seek all remedies available to it at law or in equity. Election of any one remedy      (s) and the KLC, which contract(s) shall incorporate the Solicitation and the Offer
by KLC shall not foreclose KLC from seeking any other remedy available to it           by reference. The contract(s) shall be acceptable to the KLC in form and
hereunder. The waiver by KLC of any breach of any provision of the contract            substance and may include terms and conditions in addition to those summarized
shall not operate or be construed as a waiver of any subsequent breach.                in the Solicitation.
      (b) In addition to all other remedies available to the KLC in the contract, at   15. COVENANT AGAINST CONTINGENT FEES
law or in equity, the KLC may terminate a contract for failure in whole or in part           By submitting an Offer in response to the Solicitation, the Offeror warrants
to perform the contract according to its terms and conditions or whenever the          that no person or selling agency has been employed or retained to solicit or
contractor has obtained the contract by fraud, collusion, conspiracy, or other         secure an agreement pursuant to the Solicitation upon an agreement or
unlawful means. In the event of default, the KLC may purchase the products or          understanding for a commission, percentage, brokerage or contingent fee, except
services on the open market, with any excess of the contract price to be paid          bona fide employees or bona fide established commercial or selling agencies
by the Contractor.                                                                     maintained by the Offeror for the purpose of securing business. For breach of this
      (c) In addition to the remedy of contract termination, the KLC may in its        warranty, the KLC shall have the right to terminate any contract and, in its sole
sole discretion accept partial, incomplete or otherwise non-complying                  discretion, to deduct or recover from any contract the full amount of such
performance, and may deduct from the price to be paid a sum which                      commission, percentage, brokerage or contingent fees.
reasonably reflects the difference in value between the contract as it was to          16. FORCE MAJEURE
have been performed and as it was actually performed.                                        Neither the KLC nor the Successful Offeror shall be liable for delays or
7. TERMINATION FOR CONVENIENCE                                                         performance failures caused by acts beyond the control of the party. Such acts
      (a) The KLC may terminate, for its own convenience, all contracts for the        shall include, but not be limited to, acts of God, acts of war, epidemics, acts of
procurement of goods and/or services when the KLC, in its sole discretion, has         Federal or State agencies or other disasters or events. However, any such delay
determined that termination is in the KLC’s best interests, and the President of       must be beyond the control of and without the fault or negligence of the non-
the KLC or his or her designee shall be authorized to negotiate a settlement           performing party.
with the contractor according to terms deemed just and equitable by the KLC.           17. OWNERSHIP
      (b) Compensation to a contractor for lost profits on a contract terminated             All Offers shall become the property of the KLC upon receipt and shall not
for convenience of the KLC shall not exceed the amount set forth in the                be returned to the Offerors. The KLC shall have the right to use or to adopt all
contract or, if no amount is set in the contract, an amount proportionate to the       ideas contained in any Offer submitted in response to the Solicitation without
sum that the contractor’s total expected margin of profit on the contract bore to      compensation. Except where otherwise agreed in writing by the KLC, all
the contract price, based on the total out of pocket expense incurred by the           materials, processes, and works developed and submitted in fulfilling any contract
contractor as of the date of termination of the contract. No payments will be          will become the exclusive property of the KLC.
made for finished work, work in progress, or raw materials acquired                    18. ASSIGNMENT
unnecessarily in advance or in excess of the KLC’s requirements.                             The Successor Offeror’s obligations under any contract shall not be
      (c) When a contract is terminated for the convenience of the KLC, the            assigned or transferred to any other person, firm, corporation, or entity without the
contractor shall have the burden of establishing the amount of compensation to         prior written consent of the KLC.
which it believes itself to be entitled by the submission of complete and
accurate cost data employed in submitting the Offer or proposal for the
                                                         ATTACHMENT C
                                                                                                      Supplier ID No.
                                                                                                _____________________

                                                                                                  (TO BE ASSIGNED BY KLC)
RETURN TO:
KENTUCKY LOTTERY CORPORATION
PURCHASING DEPARTMENT
1011 WEST MAIN STREET
LOUISVILLE, KY 40202-2623
                                               SUPPLIER PROFILE
1.   Applicant’s Firm Name and Address                                 2.   Contact Person: ________________________
     ______________________________________                                 Telephone No: ________________________
     ______________________________________                                 Fax No:          ________________________
     ______________________________________                                 E-mail Address: ________________________

3.   Remit to Address:                                                 4.   Kind of Ownership: (Check One)
     ______________________________________                                Individual/Sole Proprietor
     ______________________________________                                Partnership
     ______________________________________                                Corporation

5.   Does your firm maintain a bona fide place of business in Kentucky         Yes               No
6.   List all the following tax account numbers your company holds with the Kentucky Revenue Cabinet:
                  Sales & Use Tax
                  Employer’s Withholding Tax
                  Corporation Tax
                  Coal Tax
                  SSN
     If assistance is needed, please contact the Taxpayer Registration Section, Kentucky Revenue Cabinet, P.O. Box 299 Frankfort,
     Kentucky, 40602, Phone number (502) 564-3306
7.   Minority Owned             Yes         No            8.   Female Owned          Yes          No

      Minority Owned is a firm where 51% or more is       Female Owned is a firm where 51% or more is female ownership.
      owned by person(s) of minority races or female.     Must include copy of current certification.
      Must include copy of current certification
9.   Applicant’s Federal Employer’s ID No: _________________________________
                 Corporate Federal ID:________________________
                 Partnership:         ________________________
                   Individual SSN:      ________________________
     Applicant certification (Must be signed in Ink)
     I hereby certify that I am duly authorized to submit and certify this application and to the best of my knowledge all information
     provided herein is true and accurate as of this date.

     ____________________________________                                   __________________________________
     Typed Name                                                             Title

     ____________________________________                 _________________________________
     Signature                                            Date
                              OFFICIAL USE ONLY – DO NOT WRITE BELOW THIS LINE
     Application Reviewed By:                                       Date:
     _____________________________________                          __________________________
     Application           Yes       No
     Accepted:
                                         ATTACHMENT C
 THE FOLLOWING IS A LIST OF CURRENT KENTUCKY LOTTERY COMMODITY CODES. PLEASE CHECK UP TO FOUR THAT
 APPLY. IF “OTHER” IS CHECKED, PLEASE DESCRIBE IN DETAIL

 CODE                      DESCRIPTION                   CODE                    DESCRIPTION


ACC         ACCOUNTING & AUDITING SERVICES             LOT            LOTTERY RELATED EQUIPMENT
ADS         AD SPECIALTIES                             MAL            MAIL SERVICES
                                                                      MATERIAL HANDLING
ADY         ADVERTING SERVICES                         MAT
                                                                      EQUIPMENT
AUD         AUDIO VISUAL                               MFG            MANUFACTURING
ART         ART SUPPLIES                               MKT            MARKETING SERVICES
AWA         AWARDS                                     MLE            MAILROOM EQUIPMENT
BEN         BENEFITS ADMINISTRATION                    MOV            MOVING (SERVICES)
BIL         BILL ACCEPTOR PARTS                        MTL            METAL FABRICATIONS
BOX         BOXES                                      OFE            OFFICE EQUIPMENT
                                                                      OFFICE SUPPLIES (PENS,
COF         COFFEE SERVICES                            OFS
                                                                      PENCILS, ETC.)
COP         COPIERS                                    PAG            PAGERS
JNS         JANITORIAL SUPPLIES                        PAI            PAINTING SERVICES
LCS         LANDSCAPING, INERIOR, EXTERIOR             PAP            PAPER
            COMPUTER SUPPLIERS (RIBBONS,
COS                                                    PRT            PRINTING
            CLEANING UNITS, LABELS)
COU         COURIER SERVICES                           PUB            PUBLISHER
CRE         CREDIT REPORTING SERVICES                  RUB            RUBBERS & PLASTICS
CAM         CAMERAS & SUPPLIES                         SAF            SAFETY PRODUCTS
            CONSULTING – COMPUTING (HARDWARE
CS1                                                    SLF            OFFSET PRINTERS
            & SOFTWARE)
CS2         CONSULTING – MANAGEMENT                    STA            STAMPS (RUBBER)
CS3         CONSULTING – MARKETING                     TAL            TALENT
                                                                      TELECOMMUNICATIONS
DIS         DISPENSERS (TICKET)                        TEL
                                                                      EQUIPMENT
EDU         EDUCATION                                  TKT            TICKETS – INSTANT, PULLL-TAB
ELE         ELECTRICAL SERVICES                        TLS            TELEPHONE SERVICES
EMP         EMPLOYMENT RELATED SERVICES                TRA            TRAVEL AGENCIES
ENV         ENVELOPES                                  TRN            TRANSPORTATION
                                                                      TELECOMMUNICATIONS
FEN         FENCING                                    TSV
                                                                      SERVICES
FOR         FORMS-BUSINESS                             TVB            TELEVISION BROADCASTING
FRM         FRAMNG (PICTURES, DOCUMENTS, ETC)          TYP            TYPESETTERS
FST         FIRST AID SERVICES                         UNI            UNIFORMS
FUR         FURNITURE (OFFICE)                         VED            VENDING MACHINES – TICKET
GRA         GRAPHICS                                   VEH            VEHICLES
                                                                      VENDING SERVICES – FOOD &
HDW         HARDWARE SUPPLIES (TOOLS, ETC)             VEN
                                                                      BEVERAGES
IND         INDUSTRIAL SUPPLIES                        VER            VEHICLE (SUPPLIES & SERVICES)
            INFORMATION MANAGEMENT (OPTICAL
INF                                                    VID            VIDEO ( SUPPLIES & SERVICES)
            DISK, ETC)
INS         INSURANCE                                  WAS            WASTE DISPOSAL
INT         INTERIOR DESIGNS                           WAT            WATER-BOTTLED
JAN         JANITORIAL SERVICES                        WHS            WAREHOUSE EQUIPMENT
LGL         LEGAL/ATTORNEY SERVICES
LOC         LOCK SERVICES
ATTACHMENT C
ATTACHMENT C
                                                EXHIBIT A                               KL-08-041


                                         PRICING SCHEDULE

All Offerors must complete this Pricing Schedule for Web-Based Payroll and Human Resources
Integrated Solution and Related Services. Offerors must state all fees to be charged to the KLC for
processing payroll, preparing checks and W-2's, providing the requested tax reporting and any other
costs associated with the products and services required herein. No other costs will be allowed.
Offerors must state whether fees are charged based on number of employees processed, a flat rate, or
other computation.

Company Name:

1.   Fee for processing bi-weekly payroll and reports:        Charge      Fee Frequency

     A. Per number of employees                              _______      _______

     B. Per service (payroll, vouchers, etc.)                _______      _______

     C. Per other basis (specify)                            _______      _______

     D. Additional fees for custom reports                   _______      _______

     E. Other                                                _______      _______

2.   Fee for year-end processing:

     A. Per number of employees                              _______      _______

     B. Per service                                          _______      _______

     C. Per other basis (specify)                            _______      _______

3.   Fee for tax reporting and filing:

     A. Per number of employees                              _______      _______

     B. Per service                                          _______      _______

     C. Per other basis (specify)                            _______      _______

4.   Fee for Implementation/Initial Training:

     A. Per number of employees                              _______      _______

     B. Per class                                            _______      _______

     C. Per other basis (specify)                            _______      _______
                                             EXHIBIT A                                    KL-08-041



                                             (Continued)

                                                                        Charge        Fee Frequency
5.   Fee for Human Resources/Benefits Module:

     A. Per number of employees                                         _______       _______

     B. Per service (specify)                                           _______       _______

     C. Per other basis (specify)                                       _______       _______

     D. Additional fees for custom reports/options                      _______       _______

6.   Other Required Fees/Costs Not Previously Listed:
     Please state and describe any other fees/costs not previously listed herein. Please add additional
     letters below or use additional sheet(s) of paper, if necessary.

     A. _______________________________                                 _______       _______

     B. _______________________________                                 _______       _______

     C. _______________________________                                 _______       _______

     D. _______________________________                                 _______       _______

     E. _______________________________                                 _______       _______

                                   OPTIONAL FEATURES
                     (WILL NOT BE FACTORED IN FOR PROPOSAL SCORING)

7.   Fees/Costs Associated with Flex Spending Administration:


     A. Per number of employees                                         _______       _______

     B. Per service (specify)                                           _______       _______

     C. Per other basis (specify)                                       _______       _______

     D. Additional fees for custom reports/options                      _______       _______
                                        EXHIBIT A                  KL-08-041


                                        (Continued)


8.   Fee for On-Going Consulting/Training:            Charge    Fee Frequency

     A. Per number of employees                       _______   _______

     B. Per event                                     _______   _______

     C. Per other basis (specify)                     _______   _______
                                            EXHIBIT B                                       KL-08-041


                                       PAYROLL REPORTS

Payroll reports that we currently receive:

    A. Master Control

         The report is a list of all employees received with each payroll that is processed.

         This report is used for reference purposes. It contains:

         1.   Cumulative earnings & deductions
         2.   Pay data and current gross
         3.   Deduction codes and amounts
         4.   Personnel data – name, address, last four digits of social security number, dept.
              number, title, file number, sex, hire date, birth date, termination date, work status,
              qualified pension, period ending date, pay date, marital status, and direct deposit
              information
         5.   Tax data codes – federal, state, local, social security, Medicare, tax blocks, exemptions,
              and group term life coverage
         6.   Quarter and year-to-date information
         7.   Miscellaneous information

    B. Payroll Register-

         The payroll register is a DETAILED list of each employee’s pay. It is in alphabetical order
         by employee name within assigned home departments with totals for each category at the
         end of each department.

    C. Labor Distribution-

         A detailed list of employees pay categorized by the department that employee worked in
         that pay period

    D. Payroll Audit Report-

         1.   Employee reconciliation – current number of employees, plus or minus new-hires,
              rehires, terminated, and LOA employees
         2.   Pay distribution – number of active employees paid, active employees not paid, and
              number of terminated/LOA paid, and number of pays in excess of one.
         3.   Control totals – regular hours, overtime hours, company totals of rate 1, rate 2, rate 3,
              and salaried totals
         4.   Number of pays by range of gross earnings and gender

    E.   Management Payroll Summary-

         1.   A recap of the payroll register that shows total hours, earnings, gross, statutory
              deduction, voluntary deductions, and net pay per department
         2.   Grand total of all hours, earnings, and deductions.


                                                      1
                                       EXHIBIT B                                     KL-08-041


                                        (Continued)

     Analysis – All taxes, including Federal Deposit Liability, Unemployment Liabilities, State
     Taxable, Employer Unemployment Liability, etc.

F.   Unused Deduction Report-

     A list of all employees whose earnings for the current payroll are insufficient to cover the
     statutory and voluntary deduction amounts

G. Annual Control Schedule-

     Dates – for each pay there is a listing of transmission date delivery date, pay date, period
     ending date, scheduled events, and scheduled deductions per pay

H. Personnel Change Report-

     Changes to Master File – new hires, name and address changes, rate, deductions, etc.

I.   Local Taxable Wages-

     A list of employees for each tax jurisdiction with gross earnings, city 1 taxable wages, city
     2 taxable wages, ALL city taxes, cafeteria plans, and other pre-taxed items

J.   Benefit Hours-

     1.   Available Hours – name, department number, hire date, and a balance of sick, vacation,
          and holiday
     2.   Taken Hours – jury, funeral, relocation, and military hours year-to-date, personal,
          vacation, floater, and holiday

K. Quarterly Tax Reports-

     Wages quarter-to-date on all taxes with any exclusions

L.   Year End Reports-

     Totals of all taxes and wages for entire year for each employee and in total for company




                                                2
                                            EXHIBIT C                                         KL-08-041


                               EMPLOYEE BENEFIT SUMMARY

The Kentucky Lottery Corporation provides 12 paid holidays per year. The schedule for
holidays is updated and published each year, and it indicates how many days the offices will be
closed and how many days will be observed as floating holidays. Floating holidays can be taken
on any workday of the year if approved by supervision. New employees receive allowance for
all floating holidays occurring on or after their date of employment.

                    Regular Holidays                            Floating Holidays
                    (Offices Closed)                            (Offices Open)

                    New Year’s Day                              President’s Day
                                                                (Third Monday in February)

                    Martin Luther King, Jr Birthday             Good Friday

                    Memorial Day                                Columbus Day
                                                                (October)

                    Independence Day                            Veterans Day
                                                                (November)
                    Labor Day

                    Thanksgiving Day                            Christmas Eve*

                    Christmas Day

    *    KLC may close offices on Christmas Eve, or it may be taken as a floating holiday, depending on what
    day of the week it falls on. KLC will announce whether offices will be closed or whether the day will be
    observed as a floating holiday at the beginning of each year.

    Eligibility

    All regular full-time employees are eligible for holiday pay. Regular part-time employees
    are not eligible for floating holidays and are only eligible for regular holidays that fall on a
    day they are normally scheduled to work, in which case they will be paid for normally
    scheduled hours.

    Holiday Pay

    An employee will receive his or her regular base pay for hours normally worked. Holiday
    pay excludes any form of extra pay such as bonuses, commissions, incentives, cash awards,
    etc.




                                                       1
                                   EXHIBIT C                                    KL-08-041


                                    (Continued)

Interaction with Vacation and Other Paid Absences

An employee who is absent with pay for reason of vacation or death in the immediate family
will be permitted to interrupt such absence and receive holiday pay. Therefore, the time
paid will not be charged to the vacation or death in the immediate family allowance.

Ineligibility While Absent Without Pay

An employee who is absent without pay for any reason is not eligible for holiday pay and
must return to work before resuming eligibility.

Unused Floating Holidays

Floating holidays cannot be accumulated and therefore, there will be no carry over from year
to year.

Regular Holidays That Fall On A Weekend

Normally, when a regular holiday falls on Saturday, KLC will close on the preceding Friday.
Normally, when a regular holiday falls on a Sunday, KLC will close the following Monday.

Pay For Employees Required To Work on a Company-Designated Holiday

Non-exempt employees who are required to work by their supervisor or manager on a
company-designated holiday (offices closed) will receive premium pay at time and one-half
their regular base rate of pay for all hours worked in addition to their holiday pay.

Exempt employees in salary grade 15 and below who are required to work by their
supervisor or manager on a company-designated holiday (offices closed) will receive their
regular hourly base pay for all hours worked in addition to their holiday pay.

Non-Exempt Employees Who Work on an Unscheduled Day During a Week With a Holiday

When a non-exempt employee is required to work on an unscheduled day during the
workweek of a company-observed holiday, the holiday hours will count as hours worked for
the calculation of overtime.

Pay For Full-Time Alternate Schedule Employees

Full-time employees who work an alternate schedule, for example 12 hours per day, will
receive holiday pay according to their normally scheduled hours. This applies for both
company-observed holidays and floating holidays. If an alternate schedule employee is
required to work on a company-observed holiday, the same procedures apply as for other
employees who are required to work on a company-observed holiday. In the case where the


                                             2
                                        EXHIBIT C                                   KL-08-041


                                        (Continued)

    holiday falls on a weekend, and is observed by the company on a weekday, alternate
    schedule employees will be considered to have worked on the holiday if they work on the
    actual holiday or on the weekday that the company closes, but not both.

                                VACATION ALLOWANCE

This policy provides an annual paid vacation for regular part-time and regular full-time
employees for the purpose of rest and relaxation intended to benefit employees' health and
efficiency. Eligible employees will be entitled to vacation according to the following schedule:

Employees in salary grades 1 - 14:

       During the first two calendar years
       Based on Hire Date                                 Vacation Allowance

       Hired between January 1 and June 30…… One week after six months service, two weeks
                                             January 1 of the second calendar year

       Hired after June 30……………………....No vacation in the first calendar year, two
                                      weeks in the second calendar year after nine
                                      months of total service

       Subsequent years based on:

           Credited Company Service                       Vacation Allowance

       One year, but less than five………………………..two weeks
       Five years, but less than ten years…………………three weeks
       Ten or more years …………………………….......four weeks

Employees in salary grades 15 and above:

       During the first two calendar years
       Based on Hire Date                             Vacation Allowance

       Hired between January 1 and June 30 …         Two weeks after six months service, three
                                                     weeks January 1 of the second calendar
                                                     year.

       Hired after June 30 ………………………..No vacation in the first calendar year, three
                                      weeks in the second calendar year after nine
                                      months of total service

       Subsequent years based on


                                                 3
                                   EXHIBIT C                                   KL-08-041


                                    (Continued)

  Credited Company Service                      Vacation Allowance

  One year, but less than five …………………..three weeks
  Five or more years ……………………………four weeks

Employees with one or more years of credited company service will be entitled to their
annual vacation as of January 1 of each year. Employees are eligible for their third and
fourth weeks of vacation in the year in which they complete the credited company service
required for those allowances, and they can take the additional week anytime during that
year. However, the additional week of vacation is not considered “earned” until their
service anniversary in that year. If an employee uses the additional week, but terminates
employment before reaching the service anniversary, the final pay will be docked for the
“unearned” week.

Regular Part-Time Employees

Vacation allowance for regular part-time employees is determined according to the same
schedule as regular full-time employees except it is prorated according to the employee’s
normally scheduled hours. For example, a part-time employee at pay grade 4 who has three
years of service and who is normally scheduled for 28 hours per week, would be eligible for
two weeks vacation at 28 hours per week.

Alternate Schedule Employees

Employees who work alternate schedules, for example 12 hours per day, will receive their
vacation allotment according to the same schedule as other employees except it will be
measured in hours. For example, if the employee’s service and pay grade would make the
employee eligible for two weeks of vacation, the employee will be eligible for 80 hours of
vacation allowance.

Vacation Pay

Regular base pay will be used for determining an employee's vacation pay. Regular base
pay excludes all extra pay such as overtime, bonuses, incentives, commissions or any other
allowances.

Disability Occurring During Vacation

See the Short-Term Disability policy.

Company Holiday During Vacation




                                            4
                                    EXHIBIT C                                     KL-08-041


                                     (Continued)

If a Company-observed holiday occurs during any vacation period, the absence for that day
will be considered a holiday absence and will not be charged against the employee's
vacation allowance.

Compulsory Court Duty or Death in Immediate Family During Vacation

An employee who is called for compulsory court duty or who experiences a death in the
immediate family while on vacation shall be permitted the appropriate time-off allowances
in accordance with the Company's plans covering such occurrences. Any such period of
absence will not be charged to the employee's vacation allowance so long as compulsory
court duty or death in the immediate family allowances are continued.

Pay in Lieu of Vacation

Pay in lieu of vacation will be granted only upon separation from the Company.

Extended Military Leaves of Absence

Employees on extended military leaves of absence earn no vacation allowance while on
leave. Upon return from such leave, an employee will be entitled to the following vacation
allowance if his or her reinstatement to active employment is in a calendar year subsequent
to the year in which the leave began:

   Reinstatement on or before June 30 - Full annual vacation allowance to which he or she
    would otherwise be entitled based on total length of Company service.

   Reinstatement on or after July 1 - One-half the annual vacation allowance to which he
    or she would otherwise be entitled based on total length of Company service.

Movement Between Vacation Schedules (grades 1 - 14 and grades 15 and above).

Employees transferred between vacation schedules will receive the vacation allowance set
forth in the schedule which becomes applicable at the time of transfer.

Vacation Scheduling

At least one week per year must be taken in consecutive days (the intent of this provision is
that employees take one week of consecutive days off per year. In keeping with this intent,
it is acceptable if employee takes one week off but uses regular or floating holidays for part
or all of the week.).

Employees may schedule vacation in increments of half days with their supervisor's
approval.



                                              5
                                   EXHIBIT C                                    KL-08-041


                                    (Continued)

In scheduling vacation, employees are reminded that their first responsibility is to the
Company and to the department. Therefore, to ensure a smooth work flow and normal
continuity of business operations, it may not be possible for employees to take vacation at
the time desired. Every effort should be made to accommodate the employee's preference,
however, the Company retains the right to schedule vacation according to operational needs,
and to delay approval of scheduling until operational needs are determined.
A request for vacation in excess of three (3) days must be submitted to the Department Head
for approval at least 30 days in advance.

Accumulation of Vacation

Employees will be allowed to accumulate vacation days, subject to the following limitations:

Employees may accumulate the equivalent of vacation entitlement for the previous two
years and are allowed to carry over this amount into the next calendar year. Vacation in
excess of that amount will be forfeited if not used by the end of the third calendar year.




                                             6

				
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