Cactus Communications Contractfinal1 7_24_07

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					                                                                  Revenue/Lottery Division

                                                                              TFA

                                                                         07/000___
                                             CONTRACT                     03-00003
THIS CONTRACT, made this ____ day of ________________ 2007, by and between the State
of Colorado for the use and benefit of the Department of Revenue, State Lottery Division,
212 West 3rd Street, Suite 210, Pueblo, CO 81003, hereinafter referred to as the “State", and
Cactus Communications, Inc., dba Cactus Marketing Communications, a Colorado
corporation, 2128 15th Street, Denver, CO 80202, FEIN Number 84-1183960, hereinafter
referred to as the “Contractor”.

                                         RECITALS
Authority exists in the Law and Funds have been budgeted, appropriated and otherwise made
available and a sufficient uncommitted balance thereof remains available for encumbering and
subsequent payment of this contract; and

Required approval, clearance and coordination has been accomplished from and with
appropriate agencies; and

The State requires advertising services for the Colorado Lottery; and

The Contractor was selected in accordance with State law as a result of the State’s issuance of
Request for Proposal (RFP) #TFA07001/Advertising. A copy of the Contractor’s proposal is
attached as Exhibit A and incorporated herein by reference; and

The Contractor has complied with and passed the security and financial evaluations required by
Colorado law and the State Lottery Division (“Lottery”) and is otherwise qualified; and

Pursuant to State Fiscal Rules, Chapter 3, Rule 3-1, a contract is required to formalize this
agreement; and

NOW, THEREFORE, it is hereby agreed that in consideration of the mutual covenants and
agreements set forth and for other good and valuable consideration, the sufficiency of which is
hereby acknowledged, the State and Contractor agree as follows:

1. PRIORITY OF INTERPRETATION
The provisions of this contract shall be governing over the relationship of the State and the
Contractor. Should conflict in any provisions of this contract and any exhibits be identified, the
priority of interpretation of the contract shall be: first, the Special Provisions incorporated within
the contract, second, the terms and provisions of this contract; third, the Contractor’s Proposal
(Exhibit A).



                                                 Page 1
2. SCOPE OF WORK
The Contractor shall provide the following services to the State in accordance with this contract
and Exhibit A.

A. Advertising Services

When authorized by and under the direction of the State, the Contractor shall implement
components of the Marketing Plan which shall include but not be limited to:

          1. Creation, production and purchase of all advertising materials for print,
              broadcast, Internet and other designated media.
          2. Creation, production, purchase and distribution of point of sale and
              merchandising materials.
          3. Development of media plans as directed by the Lottery and maintenance of
              industry-accepted rating research for basis of plans.
          4. Negotiation, purchase, and instruction for placement of all media time and space.
          5. Distribution to media outlets of all materials necessary to fulfill media
              contracts/orders.
          6. Verification of publication/airing according to contracts and placement
              instructions.
          7. Evaluation of media schedule performance.
          8. Evaluation, recommendation of plans, negotiation of agreements, placement of
              media, development and production of creative materials, and performance of
              tasks necessary to develop and implement sponsorship, consumer promotions,
              and special event programs.
          9. Development of evaluation tools to assess the effectiveness of Lottery marketing
              activities.
          10. In conjunction with the State, development of an annual spending plan for the
              advertising budget that reaches Colorado’s population in an effective and
              appropriate manner, and includes recommendations for maximizing the
              effectiveness of the budget by:
                       o Improving efficiency
                       o Developing added value opportunities where appropriate
                       o Maximizing impact and exposure within the designated budget.
          11. Creation of graphic design elements and collateral layout.
          12. Website creative and design services.
          13. Development of annual marketing plan and campaign marketing plans.
                       o Negotiation for television stations to air the Powerball drawings and
                          any other drawings as determined by the Lottery.
          14. Maintaining an online project management and reporting tool that the State will
              have access to and that will allow the State to track development, approvals,
              production and delivery of projects.

B. Public Relations Services

Public relations services may, at the State’s sole discretion, be required from the Contractor on
an as-needed basis. As requested by the State, as-needed services to be provided by the
Contractor may include, but are not limited to, support for special events such as the Powerball


                                               Page 2
jackpot winner press conference, large product launch campaigns, and occasional media
pitching and media fulfillment.

As requested by the State, the Contractor shall provide support for certain aspects of its public
relations program, including assistance with planning, collateral creation (i.e., annual report,
press kits, brochures, flyers, banners), creation and distribution of Public Service
Announcements (PSAs) for radio and television, assistance in creating and implementing a
public relations plan to support National Problem Gambling Awareness Week, creation of
scripts for on-hold messages, public relations events, and possible distribution of press
materials (i.e., PSAs, releases, etc.) to media outlets.

C. Procurement of Goods and Services

Procurement of any goods and/or services under this contract by the Contractor shall be in
accordance with this section.

All procurements of goods and/or services made by the Contractor must be pre-approved by
the State. The Lottery’s Marketing Manager or designee will serve as the sole authorization for
the procurement of goods/services. When a procurement is authorized, the Marketing Manager
or designee will sign a form prescribed by the State and return it to the Contractor. The signed
form shall be the only authorization for the Contractor to proceed with the purchase.

The Contractor shall coordinate the purchase and payment of goods and/or services
associated with the program areas contained in the Marketing and Sales Departments of the
Lottery. The Contractor shall provide the Lottery with Contractor’s expertise; maintain integrity
of creative executions; provide access to vendors not available through other means; allow
negotiation of promotional partnerships; and assure timeliness and efficiency in these efforts.

Goods and Services to be purchased may include:
1. All forms of advertising media
2. Production services and materials for television and radio commercials
3. Production services and materials for print, “out of home” and Internet advertising materials
4. Consulting services from a subcontractor, i.e. marketing planning, sales planning, sales
   training, or web site development/hosting services
5. Research resources providing information on which vendors have expertise in specific
   areas, such as Internet panels, etc. and services, i.e. methodology development, fieldwork
   (including facilities for group or individual interviews, if appropriate), processing of results,
   data tabulation and analysis
6. Assistance to the Lottery in developing advertising and marketing research projects by
   Contractor staff with expertise in those areas; implementing the Lottery’s research program
   to include recommendations for methodology and research providers and oversight of
   individual projects
7. Sponsorships and goods and services associated with such sponsorships (i.e. partnerships
   with sports teams, festivals, and events including venue signage and promotional
   opportunities)
8. Goods and services (i.e. vehicles and travel packages, associated with promotional
   partnerships such as “trade for mention” in which a partner discounts the price of the
   goods/services in return for inclusion in Lottery-purchased media and promotional
   materials)


                                                Page 3
9. Printed material
10. Merchandising equipment and materials
11. Signage (i.e. permanent or semi-permanent items used to provide visibility, information,
    and/or designation of areas as ticket-selling locations)
12. Specialized services from a subcontractor (i.e. special events, promotions, training)
13. Promotional equipment and materials (i.e., kiosks, banners and other items used to identify
    and conduct promotional activities)
14. Promotional support services (i.e. transportation, storage, assembly and disassembly)
15. Materials needed to sell Lottery tickets at festivals and events in an effective and efficient
    manner
16. Premium items (i.e. clothing, sporting goods and equipment, and other merchandise items
    used in marketing Lottery products)
17. Promotional prizes (i.e. gift certificates, event tickets, travel packages, vehicles, and other
    merchandise items used as prizes for marketing promotions)
18. Blog watch services that help Contractor staff keep the Lottery informed on public opinion,
    etc.
19. The development of copy for materials, web site and ticket messages

Goods and services which are of a similar nature to but not specifically identified above may
also be procured by Contractor at the Lottery’s request and approval.

Any and all purchases shall become the property of the State, excluding any artwork,
photography and/or music that has been previously copyrighted and is provided to the State for
limited use. Contractor labor compensation (to include but not limited to: accounting, account
management, office/travel expenses) to coordinate these purchases and payments shall be
included in the Contractor’s basic compensation fee and shall not be billed separately.

The Contractor shall provide a separate invoice for each project or job for which approval has
been received from the State. The Contractor shall invoice the State for all goods and/or
services purchased net without mark-up and shall pass on to the State any discounts earned in
conjunction with such purchases. If any non-cash incentives or rewards are offered for the
purchase of goods and services, the Contractor shall attempt to negotiate a cash alternative to
be passed on to the State. In no event shall the Contractor accept non-cash incentives or
rewards for its own use or on behalf of the State. Invoices must reference the tracking number
and include the amount of approved budget, vendor name(s) and description of the goods and
services received from each, quantity and unit cost by item if applicable, total cost by item, a
summary total, and amount previously billed, if any.

Under no circumstances shall the Contractor purchase alcoholic beverages; purchase, barter or
negotiate for any coupons, gift certificates, cash equivalents, or services for any purpose,
unless authorized by the Lottery Director and Lottery Controller; or contribute or make
donations to any charities, political action committees or political fundraisers in the name of the
Lottery or on the Lottery’s behalf.

The Contractor is required to follow all rules, guidelines and limitations of the State’s Official
Functions policy and no mark-up will be allowed for these expenses.

Any use of subcontractors for the procurement of goods and/or services shall be in accordance
with Section 8. “PRIME CONTRACTOR AND SUBCONTRACTORS” of this contract.


                                                Page 4
D. Additional Contractor Responsibilities

All Contractor personnel assigned duties under this contract shall be thoroughly familiar with
the Lottery statutes (CRS 24-35-201, et seq., Part 2), Lottery Commission rules, State Fiscal
Rules, State Procurement Code and Rules, state ethics laws and regulations, the Lottery’s
history, products, marketing plan, and operating procedures as they relate to any services,
products or activities provided by or in conjunction with the Contractor. This includes
knowledge of all aspects of the RFP and the contract including Exhibit A. It is expected that all
such personnel will have been thoroughly oriented and possess this knowledge prior to being
assigned to work on any aspect of this contract.

The Contractor shall demonstrate and maintain current knowledge of the lottery industry,
including games, advertising, marketing, research, public relations and resources, and
demonstrate knowledge of trends in advertising throughout the term of this contract, including
extensions.

The Contractor shall be responsible for completing and delivering materials on or before
deadlines established jointly by the State and the Contractor.

The Contractor shall provide advice to the State regarding game development and ticket
graphics for On-Line and Scratch products.

The Contractor shall prepare and submit, for the State’s approval, all estimates for media and
production expenditure in advance of execution.

The Contractor shall provide timely and accurate billing for all projects and shall maintain
appropriate accounting records. A Colorado Lottery Fiscal representative may conduct a
quarterly audit of the invoices and related charges, during normal business hours.

The Contractor shall commit that the level of service (number and experience of people and
hours) dedicated to the State in the Contractor’s proposal shall be maintained throughout the
term of this contract, including extensions. If personnel changes in key management
representative positions occur during the term of the contract, including extensions, the State
requires pre-approval of that individual’s replacement. Written notification from the Contractor
and approval by the Lottery Director or designee of that individual’s replacement is required.
All additions to staff assigned to this contract must pass a security and background
investigation before being approved to provide work under this contract.

The Contractor shall be responsible for providing reports to be specified jointly by the State and
the Contractor that summarize discussion highlights and action items resulting from meetings
and the status of projects. Summary minutes shall be provided for each meeting between the
State and Contractor. Project status reports shall be provided twice a month. In addition, the
Contractor must maintain an online project management and reporting tool that will allow
Lottery employees to, at a minimum, track development, approvals, production and delivery of
projects.

The Contractor shall be responsible for disclosing to the State receipt of any communication
asserting conflicts of interest.


                                               Page 5
As requested by the Lottery Director or designee, the Contractor shall attend and participate in
Lottery sales, marketing and research meetings, Lottery Commission meetings in Denver
and/or Pueblo, and research/planning meetings to keep informed of Lottery affairs.

The Contractor, including its employees and subcontractors, shall not represent itself to be an
employee of the Lottery in order to take advantage of State benefits or discounts.

The Contractor shall be familiar with the findings of the November 2003 Performance Audit of
the Department of Revenue, Colorado Lottery conducted by the State Auditor’s Office.

3. PRICE/COST
The State shall pay the Contractor a basic fixed compensation fee of $85,120.00 per month for
advertising services, public relations services, and additional Contractor responsibilities as
identified in this contract. This monthly fixed fee is inclusive of all expenses incurred by the
Contractor to perform the obligations of this contract regardless of whether the Contractor, a
joint venture partner, or subcontractor performs the services. The monthly fixed fee shall
include administrative support, supplies, office supplies, photocopies, floppy disks, CDs,
telecommunications (i.e., pagers, cell phones, faxes, Internet access/usage, email, local and
long distance services), parking fees, meals, lodging, rents, mileage, travel expenses,
insurance, overhead, profit, media audience/demographic research, courier services, expedited
shipping costs, postage, presentation costs such as storyboards, equipment, production and
transportation, and costs for all other items consumed/utilized/required by the Contractor’s staff
or subcontractor’s staff. Hardware and software deemed necessary by the Contractor shall
also be included in the basic compensation fee. Items or costs not specifically identified in the
Contractor’s basic compensation fee will be the sole responsibility of the Contractor. The
monthly fixed fee shall exclude any State-approved out-of-state travel pursuant to this section,
and/or procurement of goods and/or services pursuant to this contract.

Transportation, travel and incidental costs for attendance at Lottery meetings, to include State
Lottery Commission meetings, shall be included in the basic compensation fee and shall not be
billed separately to the State.

All in-state travel required by the Contractor to perform the services identified in this contract
shall be included in Contractor’s basic compensation fee. In-state travel expenses incurred by
the Contractor or any subcontractor shall not be reimbursed by the State. Any proposed
exceptions shall be submitted in writing to the State for pre-approval.

All out-of-state travel required by the Contractor to perform the services identified in this
contract shall not be included in Contractor’s basic compensation fee. Out-of-state travel
expenses incurred by the Contractor or any subcontractor require pre-approval from the State.
State-approved out-of-state travel expenses will be reimbursed by the State in accordance with
the State’s travel rates or actual costs, whichever is less.

The Lottery’s marketing budget is appropriated annually by the Colorado General Assembly.
During the term of this contract, including extensions, the State reserves the right to renegotiate
Contractor’s compensation in the event the marketing budget for any year is reduced by more
than $1 million.


                                                Page 6
Price Increases
Except as indicated above, prices shall remain firm for the duration of the Contract, including
any extensions.

4. CONTRACT PERIOD
The time period to be covered by this contract shall begin on September 1, 2007, or the date
the State Controller executes this contract, whichever is later, and shall end on June 30, 2010.

The State, at its sole discretion, may renew the contract for two (2) additional periods of twelve
(12) months for any services at the rates and terms specified in the contract. The State may
exercise the renewal options(s) by written notice of its intent to renew to the Contractor within
sixty (60) days prior to the end of the current contract term. Notice of intent does not commit
the State to a renewal. The renewal shall be in a form substantially equivalent to Attachment A
of this contract (“Option Letter”). The Option Letter shall not be valid until signed by the State
Controller or his designee.

The Contractor understands and agrees that the State shall not be liable for payment of work or
services nor for costs or expenses incurred by the Contractor prior to the proper execution and
State Controller approval of this contract.

5.   COMPENSATION
The maximum amount available for the purchase of goods and services under this contract for
fiscal year 2008 (July 1, 2007 - June 30, 2008), is $7,500,000.00. This amount includes the
fixed monthly fee of $85,120.00 per month X 10 months for a total of $851,200.00 for
Contractor services and a maximum of $6,648,800.00 per fiscal year for the procurement of
goods and services and any pre-approved out-of-state travel expenses.

The maximum amount available for the purchase of goods and services under this contract for
fiscal year 2009 (July 1, 2008 - June 30, 2009), is $8,800,000.00. This amount includes the
fixed fee per fiscal year of $1,021,440.00 for Contractor services and a maximum of
$7,778,560.00 per fiscal year for the procurement of goods and services and any pre-approved
out-of-state travel expenses.

The maximum amount available for the purchase of goods and services under this contract for
fiscal year 2010 (July 1, 2009 - June 30, 2010), is $8,800,000.00. This amount includes the
fixed fee per fiscal year of $1,021,440.00 for Contractor services and a maximum of
$7,778,560.00 per fiscal year for the procurement of goods and services and any pre-approved
out-of-state travel expenses.

Should this contract be renewed, funding be increased/decreased, and/or additional services
be ordered pursuant to Section 4, “Contract Period”, the maximum amount available for
services shall be defined in Attachment A, the Option Letter.

During the term of this contract, including extensions, the State, in its sole discretion, may
increase or decrease the level of goods or services at the prices specified in this contract. That




                                               Page 7
State may exercise this option by providing a fully executed option letter to the Contractor in a
form substantially equivalent to Attachment A (Option Letter).

6.   PAYMENT
Payment of the fixed monthly compensation fee shall be made monthly, in arrears.

In accordance with Section 2C, Procurement of Goods and Services, the Contractor shall
provide timely and accurate billing for all projects and shall maintain appropriate accounting
records.

Costs for media advertising space/time will be billed at the end of the month of performance
and may be billed on estimate prior to Contractor's processing of vendor billing. Costs
associated with advertising media where prior billing is industry standard may be billed in a
manner agreed to by the State.

Costs associated with production assignments will be billed at the end of the month in which
the costs are incurred, and large cash outlays may be billed on estimate prior to Contractor's
processing of vendor billing. Costs associated with production assignments where prior billing
is industry standard may be billed in a manner agreed to by the State.

Costs associated with sponsorships and promotions where prior billing is industry standard may
be billed in a manner agreed to by the State.

Invoices submitted later than the 5th working day of the month may be reimbursed in the
following month's payment to the Contractor.

Unless otherwise provided, and where appropriate, the State shall establish billing procedures
and pay the Contractor the contract price or rate for services performed and accepted and/or
goods delivered and accepted pursuant to the terms of this contract, based upon the
submission of statements on forms and in a manner prescribed by the State Payments
pursuant to this contract shall be made as earned, in whole or in part, from available funds
encumbered for the purchase of the described services and/or goods.

The liability of the State, at any time, for such payments shall be limited to the amount
remaining of such encumbered funds.

Incorrect payments to the Contractor due to omission, error, fraud, or defalcation shall be
recovered from the Contractor by deduction from subsequent payment under this contract or
other contracts between the State and the Contractor, or by the State as a debt due to the
State.

Invoices shall be sent to Colorado Lottery, 720 South Colorado Boulevard, Suite 110A, Denver,
CO 80246, Attention: Advertising Manager.

Payment shall be mailed to Cactus Communications, Inc., 2128 15th Street, Denver, CO
80202, Attn: Accounts Receivable.




                                               Page 8
The State shall make payment in full within forty-five (45) days of receipt thereof; provided that
the full amount invoiced represents goods and/or services which have been accepted by the
State and the form of the invoice is acceptable to the State and a notice of amount due is
correct, unless otherwise agreed to by contract. Uncontested amounts not paid by the State
within forty-five (45) days are considered delinquent and, unless otherwise agreed to, interest
on the unpaid balance shall be paid beginning with the forty-sixth (46) day at a rate of one
percent (1%) per month until paid in full. A liability shall not arise if a good faith dispute exists
as to the State’s obligation to pay all or a portion of the liability. The Contractor shall invoice
the State separately for interest on delinquent amounts due. The billing shall reference the
delinquent payment, the number of days’ interest to be paid and the applicable interest rate.

7. CHANGE ORDERS
Bilateral changes within the general scope of the contract, as defined in Section 2 above, may
be executed using the change order letter process described in this section and a form
substantially equivalent to the same Change Order letter attached as Attachment B, for any of
the following reasons:

A. Where the agreed changes to the specifications result in an adjustment to the price, delivery
schedule, or time of performance.

B. Where the agreed changes result in no adjustment to the price, delivery schedule, or time of
performance. The change order shall contain a mutual release of claims for adjustment of
price, schedules, or time of performance.

C. Where the changes to the contract are priced based on the unit prices to be paid for the
goods and/or services established in the contract.

D. Where the changes to the contract are based on established catalog generally extended to
the public.

Other bilateral modifications not within the terms of this paragraph must be executed by formal
amendment to the contract approved in accordance with state law.

8. PRIME CONTRACTOR AND SUBCONTRACTORS
The Contractor will assume ALL responsibility for the delivery, installation, and quality of the
goods and/or services provided by this contract, regardless of whether or not the Contractor
uses subcontractors. The Contractor shall be the sole point of contact with the State with
regard to all matters covered by this contract. The State shall not initiate or maintain contact
with any subcontractor unless such contact becomes necessary to mitigate the State's damage
in the event the Contractor is in default or breach of any term or obligation of this contract.

The following procedures shall apply when work under this contract is to be performed by a
subcontractor whose charges will be passed through to the State. Any and all use of
subcontractors must be pre-approved in writing by the State.

A. For acquisitions where competitive pricing can be obtained, the Contractor shall obtain at
least three (3) competitive proposals on all non-media expenditures and select the
subcontractor that is most advantageous to the State with price being a consideration.


                                                Page 9
Acceptable methods are documented quotes (telephone/fax quotes), formal bids, and direct
negotiation. For each such acquisition, records will be kept of the potential subcontractors that
were contacted, name of contact person, date of contact, and pricing offered. These records
shall be made available to the State upon reasonable request and shall be maintained for the
term of the contract, including extensions. Documentation of the bid process and whether
phone or written bids were obtained, must accompany all appropriate invoices.

B. The State recognizes that for many of the acquisitions, selections and commitments, the
selection of subcontractors will be largely determined on the basis of market research, target
audience analyses, single source partners, or some other analytical basis. The State further
recognizes that for some of these acquisitions, there is limited or no opportunity to seek
competitive pricing in order to assure optimal use of contract funding. For procurements where
there is determined to be little or no competition, the Contractor shall submit a written
explanation to the Lottery Marketing Manager with the name of the selected subcontractor(s);
a description of the goods or services to be procured; why there is limited competition; the
reason for the expenditure; and the cost of the goods or services.

C. The Contractor shall perform the selection of subcontractors to provide goods and services
in accordance with this contract in a fair and impartial manner, ensuring no appearance of a
conflict of interest or any other impropriety. Thus, employees of the Contractor, including
subcontractors, shall be prohibited from separately bidding on any goods or services to be
provided during the term of the resulting contract, including any extensions.

D. For certain goods and/or services, the State may direct the Contractor to make purchases
from specific subcontractors for reasons of integrity of creative product, timeliness, substantial
savings, efficiency and/or superior qualifications, provided such subcontractors’ prices are
within the State’s budget. The Contractor may be directed to utilize the production services of
State printing facilities when the State deems appropriate.

E. All sponsorships and partnerships negotiated by the Contractor will require a written
agreement or contract between the Contractor and the sponsor, partner, etc. The State will not
be a signatory on any such agreements. Complete copies of all such contracts and
agreements shall be forwarded to the State upon completion.

F. The Contractor shall include language in all contracts and agreements with subcontractors,
partners and sponsors to “indemnify, save and hold harmless the State, its employees and
agents against any and all claims, damages, liability and court awards including costs,
expenses, and attorney fees incurred as a result of any act or omission by the subcontractor or
its employees, agents, subcontractors, or assignees”.

G. The Contractor shall provide a separate invoice for each subcontractor project or job for
which State approval has been obtained. The Contractor shall invoice the State for all
subcontractor work net without mark-up and shall pass on to the State any discounts earned in
conjunction with the use of the services. If any non-cash incentives or rewards are offered, the
Contractor shall attempt to negotiate a cash alternative to be passed on to the State. In no
event shall the Contractor accept non-cash incentives or rewards for its own use or on behalf of
the State. Invoices must reference the tracking number and include amount of approved
budget, vendor name(s) and description of the goods and services received from each, quantity



                                              Page 10
and unit cost by item if applicable, total cost by item, a summary total, and amount previously
billed, if any.

H. Subcontracts used under the previous advertising and public relations contract with Karsh
and Hagan Communications, Inc. shall be transferred to and maintained by the Contractor.

I. Any subcontractor and its employees performing work under this contract may, at the State’s
discretion, be required to observe the Lottery’s policies, procedures and applicable statutes
regarding background checks for employees, ticket purchases and media contacts. It is the
responsibility of the Contractor to ensure that such policies and procedures are followed.

9.    WARRANTY
The Contractor expressly warrants and guarantees complete performance of the work during
the term of this contract, including any extensions, in a manner acceptable to the State. This
warranty shall be provided as part of the minimum work requirements of the contract, and as
such, will be at no additional cost to the State.

10.   LEGAL AUTHORITY
The Contractor warrants that it possesses the legal authority to enter into this contract and that
it has taken all actions required by its procedures, by-laws, and/or applicable law to exercise
that authority, and to lawfully authorize its undersigned signatory to execute this contract and to
bind the Contractor to its terms. The person(s) executing this contract on behalf of the
Contractor warrant(s) that such person(s) have full authorization to execute this contract.

11.   CONFIDENTIALITY
The Contractor acknowledges that it may come into contact with confidential information
contained in the records of the State. The Contractor shall provide and maintain a secure
environment that ensures confidentiality. The confidentiality of all information will be respected,
and no confidential information shall be distributed or sold to any third party nor used by the
Contractor, its subcontractors or the Contractor’s assignees and/or subcontractors in any way
except as authorized by this contract. Confidential information shall not be retained in any files
or otherwise by the Contractor. Disclosure of such information may be cause for legal action
against the Contractor. Defense of any such action shall be the sole responsibility of the
Contractor.

Unless otherwise expressly pre-approved in writing by the State, all employees, officers, staff,
temporary employees and/or subcontractor(s) of the Contractor involved in the performance of
any aspect of this contract shall execute and be bound by a Statement of Confidentiality, in the
form of Attachment C to this Contract. The signed Statements of Confidentiality shall be
provided to the State upon the State’s request.

12. RIGHTS IN DATA, DOCUMENTS AND COMPUTER SOFTWARE (STATE
OWNERSHIP)
Any software, original written material, research, reports, blueprints, programs, tapes, listings,
artwork, studies, data, photographs, negatives or other documents, drawings or materials
prepared by the Contractor in the performance of its obligations under this contract shall be the
exclusive property of the State and ALL such materials shall be delivered to the State by the


                                               Page 11
Contractor upon completion, termination, or cancellation of this contract. The State will not
retain ownership of any artwork, photography and/or music that has been previously
copyrighted and is provided to the State for limited use. The Contractor shall not use, willingly
allow, or cause to have such materials used for any purpose other than the performance of the
Contractor’s obligations under this contract without the prior written consent of the State. The
ownership rights described herein shall include, but not be limited to, the right to copy, publish,
license, sell, display, transfer, prepare derivative works, or otherwise use the works.

13. INTELLECTUAL PROPERTY INDEMNIFICATION
The Contractor shall indemnify, hold harmless and defend, at Contractor’s expense, the State
and its employees and agents, against any and all loss, cost, expense or liability, including but
not limited to attorney fees, court costs and other legal expenses as well as awarded damages,
arising out of a claim that any Contractor provided software, or its use, infringes a patent,
copyright, trademark, trade secret or any other proprietary right.

The Contractor’s obligation hereunder shall not extend to the combination of the software with
any other product, system or method, unless the software, system or method is (i) provided by
Contractor or Contractor’s subsidiaries or Affiliates, (ii) specified by Contractor to work with the
software, or (iii) reasonably required, in order to use the software in its intended manner, and
the infringement could not have been avoided by substituting another reasonably available
product, system or method capable of performing the same function or if it would be reasonably
expected to use the software in combination with such product, system or method.

The State will notify the Contractor within a reasonable time frame after receiving notice of a
claim. Provided that Contractor promptly and reasonably investigates and defends any such
claim, Contractor shall have control over the defense and settlement thereof. The State will
furnish, at Contractor’s reasonable request and expense, information and assistance necessary
for such defense. In the event the Contractor fails to vigorously pursue the defense and/or
settlement of such claim, the State may assume the defense and settlement thereof and the
Contractor shall be liable for all costs and expenses incurred by the State in the pursuit thereof.

In the event of such a claim, and if (1) the software is held to be infringing, (2) Contractor
reasonably believes the software will be held to infringe, or (3) where the State or Contractor’s
use is restricted as a result of a claim of infringement, Contractor shall, at its sole expense,
either obtain the right for the State to continue using the software or replace or modify it to be
non-infringing and of equivalent functionality. If neither of the alternatives is reasonably
possible, Contractor shall refund a pro-rata portion of the amounts paid hereunder, based on
the expected life of the software, and reimburse the State for all reasonable expenses for
removal and replacement of the software.

14. INSPECTION AND ACCEPTANCE
The State reserves the right to inspect products and services provided under this contract at all
reasonable times and places during the term of the contract, including any extensions.
“Services” as used in this clause includes services performed or tangible material produced or
delivered in the performance of services. If any of the services and/or goods do not conform to
contract requirements, the State may require the Contractor to perform the services again in
conformity with contract requirements, with no additional payment. When defects in the quality
or quantity of services and/or goods cannot be corrected by re-performance, the State may (1)


                                               Page 12
require the Contractor to take necessary action to ensure that the future performance conforms
to the contract requirements and (2) equitably reduce the payment due the Contractor to reflect
the reduced value of the services and/or goods provided. These remedies in no way limit the
remedies available to the State in the termination provisions of this contract, or remedies
otherwise available at law.

The State retains the right to inspect any phase of the Contractor's operations either on a
continuing or spot-check basis.

15. REMEDIES
In addition to any other remedies provided for in this contract, and without limiting its remedies
otherwise available at law, the State may exercise the following remedial actions if the
Contractor substantially fails to satisfy or perform the duties and obligations in this contract.
Substantial failure to satisfy the duties and obligations shall be defined to mean significant
insufficient, incorrect or improper performance, activities, or inaction by the Contractor. These
remedial actions are as follows:

A. Suspend the Contractor's performance pending necessary corrective action as specified by
the State without the Contractor’s entitlement to adjustment in price/cost or schedule; and/or

B. Withhold payment to the Contractor until the necessary services or corrections in
performance are satisfactorily completed; and/or

C. Request the removal from work on the contract of employees or agents of the Contractor
whom the State justifies as being incompetent, careless, insubordinate, unsuitable, or
otherwise unacceptable, or whose continued employment on the contract the State deems to
be contrary to the public interest or not in the best interest of the State; and/or

D. Deny payment for those services or obligations which have not been performed and which
due to circumstances caused by the Contractor cannot be performed, or if performed would be
of no value to the State. Denial of the amount of payment must be reasonably related to the
value of work or performance lost to the State; and/or

E. Terminate the contract for default.

The above remedies are cumulative and the State, in its sole discretion, may exercise any or all
of them individually or simultaneously.

16. TERMINATION FOR CONVENIENCE
Termination
The State may, when the interests of the State so require, terminate this contract in whole or in
part, for the convenience of the State. The State shall give written notice of the termination to
the Contractor specifying the part(s) of the contract terminated and the effective date of
termination. Exercise by the State of the Termination of Convenience Clause in no way implies
that the State has breached the contract.

Contractor’s Obligations
The Contractor shall incur no further obligations in connection with the terminated work and on
the date specified in the notice of termination the Contractor shall stop work to the extent


                                              Page 13
specified. The Contractor shall also terminate outstanding orders and subcontracts as they
relate to the terminated work. The Contractor shall settle the liabilities and claims arising out of
the termination of subcontracts and orders connected with the terminated work. All finished
and unfinished documents, data, studies, surveys, drawings, maps, models, photographs and
reports or other material prepared by the Contractor under this contract shall, at the option of
the State, be delivered by the Contractor to the State and shall become the State’s property.
The State may direct the Contractor to assign the Contractor’s right, title, and interest under
terminated orders or subcontracts to the State. The Contractor shall still complete and deliver
to the State the work not terminated by the Notice of Termination and may incur obligations as
are necessary to do so.

Compensation
A. The Contractor shall submit a termination claim specifying the amounts due because of the
termination for convenience together with the cost or pricing data bearing on such claim. If the
Contractor fails to file a termination claim within 90 days from the effective date of termination,
the State may pay the Contractor, if at all, an amount set in accordance with subparagraph 3 of
this Section.

B. The State and the Contractor may agree to a settlement provided the Contractor has filed a
termination claim supported by cost or pricing data and that the settlement does not exceed the
total contract price plus settlement costs, reduced by payments previously made by the State,
the proceeds of any sales of supplies and manufactured materials made under agreement of
the parties, and the contract price of the work not terminated.

C. Absent complete agreement, under subparagraph B of this Section, the State shall pay the
Contractor the following amounts, provided the payments agreed to under subparagraph B
shall not duplicate payments under this subparagraph:

   1.      Contract prices for supplies or services accepted under the contract.

   2.     Reasonable costs incurred in preparing to perform the terminated portion of the work
   plus a fair and reasonable profit on such portion of the work (such profit shall not include
   anticipatory profit or consequential damages) less amounts paid to or to be paid for
   accepted supplies or services; provided, however, that if it appears that the Contractor
   would have sustained a loss if the entire contract would have been completed, no profit
   shall be allowed or included and the amount of compensation shall be reduced to reflect the
   anticipated rate of loss.

   3.    Reasonable costs of settling and paying claims arising out of the termination of
   subcontracts or orders pursuant to the Contractor’s obligations paragraph of this clause.
   These costs shall not include costs paid in accordance with subparagraph B of this Section.

   4.      The reasonable settlement costs of the Contractor including accounting, legal,
   clerical, and other expenses reasonably necessary for the preparation of settlement claims
   and supporting data with respect to the terminated portion of the contract and for the
   termination and settlement of subcontracts thereunder, together with reasonable storage,
   transportation, and other costs incurred in connection with the terminated portion of this
   contract.


                                               Page 14
   5.     The total sum to be paid the Contractor under this subparagraph C shall not exceed
   the total contract price plus settlement costs payable pursuant to subparagraph C(4),
   reduced by the amount of payments otherwise made, the proceeds of any sales of supplies
   and manufacturing materials under subparagraph B, and the contract price of work not
   terminated.

D. Costs claimed or agreed to under this section shall be in accordance with the applicable
sections of the Colorado State Procurement Code, C.R.S., 24-101-101, et seq.

17. TERMINATION FOR DEFAULT/CAUSE
Termination by the Contractor
If the State fails to pay the amount due to the Contractor pursuant to this contract within sixty
(60) days from the date of the invoice, the Contractor may, by written notice to the State,
indicate that the State is in default and the Contractor’s intent to terminate the contract. The
State shall have ten (10) days’ opportunity, or such time as mutually agreed, to cure the default
or show reasonable cause why termination is otherwise not appropriate.

Non-payment by the State pursuant to the “Remedies” section of this contract shall not be
cause for the Contractor to terminate this contract for default.

Termination by The State
If the Contractor refuses or fails to perform any of the provisions of this contract, with such
diligence as will ensure its completion within the time specified in this contract, the State may
notify the Contractor in writing of the non-performance, and if not promptly corrected within the
time specified, the State may terminate the Contractor’s right to proceed with the contract or
such part of the contract as to which there has been delay or a failure to properly perform. In
the event of termination, all finished or unfinished documents, data, studies, surveys, reports or
other materials prepared by the Contractor under this contract shall, at the option of the State,
become the State’s property and, if in the possession of the Contractor, shall immediately be
returned to the State. The Contractor shall continue performance of the contract to the extent it
is not terminated and shall be liable for excess costs incurred by the State in procuring similar
goods or services elsewhere.

Notwithstanding the above, the Contractor shall not be relieved of liability to the State for any
damages sustained by the State by virtue of any breach of the contract by the Contractor, and
the State may withhold any payment to the Contractor for the purpose of mitigating the State’s
damages until such time as the exact amount of damages due to the State from the Contractor
is determined.

Notwithstanding termination of the contract and subject to any directions from the State, the
Contractor shall take timely, reasonable and necessary action to protect and preserve property
in the possession of the Contractor in which the State has an interest.

Compensation
Payment for completed supplies delivered and accepted by the State shall be at the contract
price. The State may withhold amounts due to the Contractor as the State deems to be


                                              Page 15
necessary to protect the State against loss because of outstanding liens or claims of former lien
holders and to reimburse the State for the excess costs incurred in procuring similar goods and
services.

Excuse for Non-performance or Delayed Performance
The Contractor shall not be in default by reason of any failure in performance of this contract in
accordance with its terms if such failure arises as a result of “force majeure,” as set forth in the
“Force Majeure” section of this contract. Upon request of the Contractor, the State shall
ascertain the facts and extent of such failure, and, if the State determines that any failure to
perform was a result of force majeure, and that, but for the force majeure, the Contractor’s
progress and performance would have met the terms of the contract, the delivery schedule
shall be revised accordingly, subject to the rights of the State.

Erroneous Termination for Default
If after notice of termination of the Contractor’s right to proceed under the provisions of this
clause, it is determined for any reason that the Contractor was not in default under the
provisions of this clause, or that the delay was excusable, the rights and obligations of the
parties shall be the same as if the notice of termination had been issued pursuant to the
termination for convenience clause.

18. INSURANCE
A. The Contractor shall obtain, and maintain at all times during the term of this contract,
including any extensions, insurance in the following kinds and amounts:

   1) Workers’ Compensation Insurance as required by Colorado statute, and Employer’s
   Liability Insurance, covering all of Contractor’s employees acting within the course and
   scope of their employment.

   2) Commercial General Liability Insurance written on an ISO occurrence form CG 00 01
   10/93 or equivalent, covering premises operations, fire damage, independent contractors,
   products and completed operations, blanket contractual liability, personal injury and
   advertising liability with minimum limits as follows:

   a) $1,000,000 each occurrence;

   b) $1,000,000 general aggregate;

   c) $1,000,000 products and completed operations aggregate; and

   d) $50,000 any one fire

   If any aggregate limit is reduced below $1,000,000 because of claims made or paid during
   the required policy period, the Contractor shall immediately obtain additional insurance to
   restore the full aggregate limit and furnish to the State a certificate or other document
   satisfactory to the State showing compliance with this provision.

   3) Automobile Liability Insurance covering any auto (including owned, hired and non-owned
   autos) with a minimum limit of $1,000,000 each accident combined single limit.

B. The State of Colorado shall be named as additional insured on the Commercial General


                                               Page 16
Liability and Automobile Liability Insurance policies. Coverage required under the contract will
be primary over any insurance or self-insurance program carried by the State.

C. The insurance shall include provisions preventing cancellation or non-renewal without at
least 45 days prior written notice to the State by certified mail.

D. The Contractor will require all insurance policies in any way related to the contract and
secured and maintained by the Contractor to include clauses stating that each carrier will waive
all rights of recovery, under subrogation or otherwise against the State of Colorado, it’s
agencies, institutions, organizations, officers, employees and volunteers.

E. All policies evidencing the insurance coverage required hereunder shall be issued by
insurance companies satisfactory to the State.

F. The Contractor shall provide certificates showing insurance coverage required by this
contract to the State within 7 business days of the effective date of the contract, but in no event
later than the commencement of the services or delivery of the goods under the contract. No
later than 15 days prior to the expiration date of any such coverage, the Contractor shall deliver
to the State, certificates of insurance evidencing renewals thereof. At any time during the term
of this contract, the State may request, in writing, evidence satisfactory to the State of
compliance with the provisions of this section, which the Contractor shall supply to the State
within 10 days of the date of the request.

G. Notwithstanding subsection A of this section, if the Contractor is a "public entity" within the
meaning of the Colorado Governmental Immunity Act, C.R.S. 24-10-101, et seq., as amended
("Act"), the Contractor shall at all times during the term of this contract maintain only such
liability insurance, by commercial policy or self-insurance, as is necessary to meet its liabilities
under the Act. Upon request by the State, the Contractor shall show proof of such insurance
satisfactory to the State.

19. BOND REQUIREMENTS
In order to ensure Contractor performance and payment of subcontractors during the contract
term and any extensions, the Contractor shall provide to the State: 1) a performance bond in
the amount of five hundred thousand dollars ($500,000); and, 2) a payment bond in the amount
of five hundred thousand dollars ($500,000). These bonds shall be maintained in full force
through the term of the contract, including any extensions. Such bonds shall inure to the
benefit of the State. Certificates evidencing coverage shall be delivered to the State no later
than upon execution by the Contractor of the contract, and prior to any subsequent extension of
this contract. The bond agreements shall contain a provision that indicates that any
modifications or cancellation of such bonds can occur only sixty (60) days after written notice to
the State. The bonds shall be issued by a bonding company authorized to do business in
Colorado.

20. NOTICES AND REPRESENTATIVES
For the purpose of this contract, the individuals identified below are hereby designated
representatives of the respective parties. Any notice required or permitted by this contract shall
be delivered in person or sent by registered or certified mail, email, or fax, to the party at the
address as hereinafter provided. Either party may, from time to time, designate in writing a new
or substitute representative or address.



                                               Page 17
For the Contractor:                                  For the State:

Joseph Conrad, President                             Tom Cargal
Cactus Marketing Communications, Inc.                Marketing Manager
2128 15th Street                                     Colorado Lottery
Denver, CO 80202                                     720 S. Colorado Blvd., Suite 110A
Phone: 303-455-7545                                  Denver, CO 80246
Email: Joe@sharpideas.com                            Phone: (303) 759-6826
                                                     tom.cargal @lottery.state.co.us

For notices sent to the State, an additional copy shall be sent first class mail, postage prepaid
to:

Kathy Heese
Contract Administrator
Colorado Department of Revenue
428 Capitol Annex
1375 Sherman Street
Denver, CO 80203
(303) 866-2697
email address: kheese@spike.dor.state.co.us

21. ASSIGNMENT AND SUCCESSORS
The Contractor agrees not to assign rights or delegate duties under this contract without the
express, written consent of the State, which consent shall not be unreasonably withheld. Such
consent may include, at the State’s sole discretion: 1) the execution by the State, the
Contractor and the Assignee of a Novation Agreement in a form prescribed by the State, which
Novation Agreement will become effective upon State approval, or 2) verification by the State of
the assignation. Except as herein otherwise provided, this contract shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and assigns. This
provision shall not be construed to prohibit assignments of the right to payment to the extent
permitted by section 4-9-318, C.R.S., provided that written notice of assignment is adequate to
identify the rights assigned is received by the controller for the department executing this
contract. Such assignment of the right to payment shall not be deemed valid until delivered in
person or sent by registered or certified mail, return receipt requested, to the party at the
address as hereinafter provided below. The Contractor assumes the risk that such written
notice of assignment is received by the controller for the department as specified below.

State of Colorado
Department of Revenue
Accounting and Financial Services
443 Capitol Annex
1375 Sherman Street
Denver, CO 80261
ATTN: Brent Voge, Controller




                                              Page 18
An additional copy shall be sent first class mail, postage prepaid to: State of Colorado,
Department of Revenue, 428 Capitol Annex, 1375 Sherman Street, Denver, CO 80203, ATTN:
Kathy Heese, Contract Administrator.

22. FORCE MAJEURE
Neither the Contractor nor the State shall be liable to the other for any delay in, or failure of
performance of, any covenant or promise contained in this contract, nor shall any delay or
failure constitute default or give rise to any liability for damages if, and only to the extent that,
such delay or failure is caused by “Force Majeure”. As used in this contract, “force majeure”
means acts of God, acts of the public enemy, acts of the State and any governmental entity in
its sovereign or contractual capacity, fires, floods, epidemics, quarantine restrictions, strikes or
other labor disputes, freight embargoes, or unusually severe weather.

23. THIRD PARTY BENEFICIARIES
It is expressly understood and agreed that the enforcement of the terms and conditions of this
contract and all rights of action relating to such enforcement shall be strictly reserved to the
State and the Contractor. Nothing contained in this contract shall give or allow any claim or
right of action whatsoever by any other third person. It is the express intention of the State and
the Contractor that any such person or entity, other than the State or the Contractor, receiving
services or benefits under this contract shall be deemed an incidental beneficiary only.

24. GOVERNMENTAL IMMUNITY/LIMITATION OF LIABILITY
Notwithstanding anything herein to the contrary, no term or condition of this contract shall be
construed or interpreted as a waiver, express or implied, of any provision of the “Colorado
Governmental Immunity Act”, 24-10-101, et seq., C.R.S., as now or hereafter amended
(“Immunity Act”), nor of the Risk Management self-insurance statutes at 24-30-1501, et seq.,
C.R.S., as now or hereafter amended (“Risk Management Act”). The parties understand and
agree that the liability of the State of Colorado for claims or injuries to persons or property
arising out of negligence of the State of Colorado, its departments, institutions, agencies,
boards, officials and employees is controlled and limited by the provisions of the Immunity Act
and the Risk Management Act. Any liability of the State created under any provision of this
contract, whether or not incorporated herein by reference, shall be controlled, limited, and
otherwise modified so as to conform with the above-cited laws.

25. SEVERABILITY
To the extent that this contract may be executed and performance of the obligations of the
parties may be accomplished within the intent of the contract, the terms of this contract are
severable, and should any term or provision hereof be declared invalid or become inoperative
for any reason, such invalidity or failure shall not affect the validity of any other term or
provision hereof.

26.   WAIVER
The waiver of any breach of a term, provision, or requirement of this contract shall not be
construed or deemed as waiver of any subsequent breach of such term, provision, or
requirement, or of any other term, provision, or requirement.




                                                Page 19
27.   INTEGRATION OF UNDERSTANDING
This contract is intended as the complete integration of all understandings between the parties.
No prior or contemporaneous addition, deletion, or other amendment hereto shall have any
force or effect unless embodied herein in writing. No subsequent novation, renewal, addition,
deletion, or other amendment hereto shall have any force or effect unless embodied in a written
contract executed and approved pursuant to State Fiscal Rules.

28.   SURVIVAL OF CERTAIN CONTRACT TERMS
Notwithstanding anything herein to the contrary, the parties understand and agree that all terms
and conditions of this contract and the exhibits and/or attachments hereto which may require
continued performance, compliance, or effect beyond the termination or expiration date of the
contract shall survive such termination or expiration date and shall be enforceable by the State
as provided herein in the event of such failure to perform or to comply by the Contractor.

29.   MODIFICATION AND AMENDMENT
This contract is subject to such modifications as may be required by changes in Federal or
State law, or their implementing regulations. Any such required modification shall automatically
be incorporated into and be part of this contract on the effective date of such change as if fully
set forth herein. Except as provided above, no modification of this contract shall be effective
unless agreed to in writing by both parties in an amendment to this contract that is properly
executed and approved in accordance with applicable law.

30. COOPERATION OF THE PARTIES
The Contractor and the State agree to cooperate fully, to work in good faith, and to assist each
other in the performance of this contract. In connection herewith, the parties shall meet to
resolve problems associated with this contract. Neither party will unreasonably withhold its
approval of any act or request of the other to which its approval is necessary or desirable.
Disputes arising under this contract that cannot be settled through informal meeting may be
resolved through the procedures set forth in the Colorado Procurement Code.

31. TAX EXEMPT STATUS
It is hereby recognized and acknowledged by the Contractor that the State of Colorado is not
liable for any sales, use, excise, property or other taxes imposed by any federal, state or local
government tax authority. The State’s Federal Identification Number (FEIN) is 86-0644739.
The State’s tax exemption number is 98-02565. The State is also not liable for any taxes of the
Contractor for franchise or related to the income of the Contractor. No taxes of any kind shall
be charged to the State.

32.   VENUE AND CHOICE OF LAW
This contract is made in the State of Colorado. Contractor agrees that exclusive venue for any
action between the parties for claims concerning this contract shall be in the City and County of
Denver, Colorado. In accordance with Special Provision 6, “Choice of Law”, below, the laws of
the State shall control.




                                              Page 20
33.   COMPLIANCE WITH LAW
The Contractor agrees to comply with all applicable Federal, State and Local laws, statutes,
regulations, and executive orders; to include all labor related laws and regulations, in its
performance hereunder.

34. LICENSES, PERMITS AND RESPONSIBILITIES
The Contractor certifies that, at the time of entering into this contract, it has currently in effect all
necessary licenses, certifications, approvals, insurance, permits, etc. required to properly
perform the services covered by this contract. The Contractor warrants that it will maintain all
necessary licenses, certifications, approvals, insurance, permits, etc. required to properly
perform this contract, without reimbursement by the State or other adjustment in contract price.
Additionally, all employees of the Contractor performing services under this contract shall hold
the required licenses or certification, if any, to perform their responsibilities. The Contractor
further certifies that, if it is a foreign corporation or other entity, it currently has obtained and
shall maintain any applicable certificate of authority to do business in the State of Colorado and
has designated a registered agent in Colorado to accept service of process. Any revocation,
withdrawal or non-renewal of necessary licenses, certifications, approvals, insurance, permits,
etc. required for the Contractor to properly perform this contract, shall be grounds for
termination of this contract by the State for default.

35. CONFLICT OF INTEREST
Should the State, in its sole discretion, determine that any accounts/contracts held by the
Contractor are in conflict with the best interests of the State, the Contractor agrees to resign
those accounts. Examples of such conflicts would be accounts that become matters of public
controversy that could reflect negatively on the State or accounts that are in direct competition
with the State Lottery’s business. Furthermore, during the term of the contract, including any
extensions, the Contractor shall agree not to accept the account of any other client having a
conflicting product/service (such as another legal gaming entity) as determined by the State
without the prior written consent of the State. Consent will not be unreasonably withheld.

For the purposes of the contract, “Conflict of Interest” is defined as a situation where the
Contractor may have a duty to more than one (1) person or organization, including the State,
and which duty may conflict with the interests of the State pursuant to the requirements set
forth in this contract.

All employees of the Contractor and/or its subcontractors shall be prohibited from separately
bidding for any goods and/or services involved in the performance of this contract.

Unless otherwise expressly pre-approved in writing by the Executive Director of the Colorado
Department of Revenue, all employees, officers, staff or temporary employees of the
Contractor involved in the performance of any aspect of this contract shall execute and be
bound by an “Affidavit of Non-Conflict of Interest”, attached hereto as Attachment D. This is a
continuing requirement through the term of the contract, including any extensions. Within ten
(10) business days upon notification of the awarded contract, the signed Affidavits shall be
timely sent to the State in accordance with Section 20, “Notices and Representatives”, of this
contract.




                                                  Page 21
36. LITIGATION REPORTING
The Contractor shall promptly notify the State in the event the Contractor learns of any actual
litigation in which it is a party defendant. The Contractor, within ten (10) days after being
served with a summons, complaint, or other pleading in a case which involves services
provided under this contract and which has been filed in any Federal or State court or
administrative agency, shall deliver copies of such document to the representative(s)
designated in the “Notices and Representatives” section of this contract. Notification
requirements pursuant to this section also apply to any current and/or pending litigation.

37.   LOTTERY EMPLOYEES
The Contractor will not offer compensation or employment to any State Lottery employee for a
period of one (1) year after the employee or the State terminates employment with the State
Lottery.

38.   GIFTS/GRATUITIES
The Contractor shall not, by itself or through any officer, director, employee, agent, partner,
subcontractor or other representative, offer, give, grant, or otherwise deliver any gift, gratuity, or
anything of monetary or non-monetary value to any member of the Colorado Lottery
Commission or any employee of the Colorado Lottery or to any member of his/her immediate
family or anyone living in his/her household. This requirement is continuing and is in
accordance with Section 24-35-209, C.R.S., and Lottery Commission Rule 11, as they
presently exist or as they may hereafter be revised or amended. Failure by the Contractor to
ensure compliance with this provision may result, in the State’s sole discretion, in immediate
termination of the contract.

Pursuant to Section 24-35-215(3), “. . . any person violating any of the provisions of Section 24-
35-209, commits a Class 3 felony and shall be punished as provided in Section 18-1.3-401,
C.R.S.”

39.   TICKET PURCHASE AND PRIZE PAYMENT RESTRICTIONS
No officer, director or employee of the Contractor or a subcontractor involved in the provision of
services pursuant to this contract, nor any spouse, child, brother, sister or parent residing in the
household of any such person shall purchase a Colorado Lottery ticket of any type (e.g.
Scratch or On-Line, including multi-state game tickets sold in other states which are the same
game(s) as offered in Colorado, for example, Powerball) or be paid a prize by the State Lottery,
during the term of this contract, including any extensions.

40.   PRESS/MEDIA CONTACT AND NEWS RELEASES
The Contractor shall not initiate nor respond to any press and/or media contact or issue news
releases regarding matters concerning the State without the prior written approval of the State
Lottery Director.

41.   KEY PERSONNEL
Contractor shall provide all Contractor staff positions as set forth in Exhibit A. The persons
occupying the following Contractor positions are deemed to be key individuals:



                                                Page 22
                  Joe Conrad, Strategic Director
                  Ainslie Fortune, Account Director
                  Norm Shearer, Creative Director
                  Lisa Van Someren, Production Director
                  Jamie Poston, Media Director

If any of these persons cease to provide the State with the work specified in this Contract, the
State may terminate the contract, unless the State and Contractor agree, in writing, to the
replacement.

Contractor shall provide an equivalent of three (3) full-time staff members to manage the
Lottery account. The Contractor Account Director shall provide the supervision and leadership
for Contractor’s staff.

Replacement of the Contractor Account Director identified in Exhibit A requires prior written
State approval. The State shall require equivalent documented evidence and references for
the Contractor Account Director who Contractor recommends as the replacement. The
replacement Account Director, whether temporarily or permanently appointed, assigned,
designated, substituted, or employed by Contractor, must be approved expressly, in writing, by
the State.

Staff Qualifications
Requirements in this section apply to all staff assigned to this contract, whether working directly
for Contractor, Contractor’s partner, Contractor’s supplier, or a subcontractor.

All positions, whether temporarily or permanently appointed, assigned, designated, substituted,
or employed by Contractor, must be approved expressly, in writing, by the State.

Contractor shall provide evidence (documentation and references, upon request by the State),
that all Contractor personnel working on this contract shall possess the necessary training,
experience and skills and shall have worked on a previous project similar in size, scope, and
technical arena.

The Contractor shall provide the State with a quarterly update listing all personnel assigned to
this contract along with the percentage of time dedicated to the contract.

42.   CHANGE IN OWNERSHIP

Pursuant to Colorado Lottery Statute, C.R.S. 24-35-205, if the Contractor changes ownership
or if changes in management occur, the Contractor shall report said changes in writing to the
State Lottery Director and to the State Lottery Security Director within thirty (30) days of the
date of such change. This includes any addition to or deletion from the information submitted in
Exhibit A, prior to the change taking place or becoming effective. The State may, in its sole
discretion, terminate the contract if changes detailed in the report would have prevented the
initial awarding of the contract to the Contractor. This ownership change applies to any
individual or entity.




                                               Page 23
In the event a change in ownership is approved by the State for the purpose of this contract,
the new owners shall be subject to the same disclosure requirements and security/financial
investigation as the previous owners. As with the previous owners, the costs of any
security/financial investigations must be borne by the new owners.

Ownership changes that result in a change in the Contractor’s Federal Employee Identification
Number require execution by the parties of a State approved Novation Agreement. Said
Novation Agreement shall be deemed valid upon its execution by the State Controller or his
designee.

43. NON-EXCLUSIVE RIGHTS
It is understood and agreed by the Contractor that the State does not grant the Contractor
exclusive rights to provide the products and/or services under this contract. The State reserves
the right to contract with and purchase products and services from persons and entities other
than the Contractor, as may be in the best interest of the State. This contract shall remain in
full force and effect should the State enter into other contracts for the same or similar goods
and services as provided under this contract.

44.   ACCOUNTING RECORDS
The Contractor is required to maintain financial and accounting records in accordance with
generally accepted accounting principles, and any other evidence, records and other
procedures pertaining to the contract as specified by the State. All of the Contractor’s books,
records, and supporting documentation including, but not limited to, financial, accounting,
security and personnel records, shall be available for inspection by any representative of the
State Lottery, Department of Revenue, State Auditor’s Office and Office of the Attorney
General, during normal business hours. A State Lottery Fiscal representative may conduct a
quarterly audit of the accounting records and related procedures. The scope of the audit may
include, but is not limited to, examining major sub-contracts, one selected month (per quarter)
of invoices for propriety and accuracy, and requesting of additional information from the
Contractor’s vendors, i.e. subcontractors. Selected vendors may be requested to provide
additional detail to support billings, confirmation of goods and/or services provided, the amount
billed and any related discounts. The Contractor shall keep and maintain said records during
the contract period, including any extensions, and for a period of three (3) years after the date
of the final payment on the contract, including any extensions.

The Contractor is required to submit its quarterly and annual financial statements and reports to
the State during the term of this contract, including any extensions. Required submittals are its
audited annual financial statements, 10K and 10Q reports (if applicable). The due date for
submission of annual financial statements is six (6) months after the Contractor’s financial year-
end, and for quarterly 10K’s and 10Q’s, by the end of each succeeding quarter. All financial
information must be submitted to the State Lottery Security Director.

45. INFORMATION UPDATES
Any change in, addition to, or deletion from the information disclosed to the State under the
provisions of sections 24-35-205(1), (2), or (7), CRS, as amended, shall be reported to the
State by the Contractor. The report shall be in the form of a letter, addressed to the State
Lottery Director and shall be mailed or delivered to the State within thirty (30) days of the date



                                              Page 24
the change, addition or deletion takes place or becomes effective. The Contractor shall pay,
without reimbursement, the cost of background investigation for any person identified in the
report and of any investigation required by any other information contained in the report. The
Contractor shall remit such costs within thirty (30) calendar days of billing by the State, unless
the State has offset the cost against any amounts owed the Contractor by the State.

On or before June 30 and December 31 of each year during the term of this contract, including
any extensions, the Contractor shall report the name, address, social security number and date
of birth of each officer, director and partner. In addition, the same information shall be provided
for all employees involved with the contract and for each officer, director, partner and employee
of any subcontractors, if requested by the State Lottery Security Director. The report shall be in
the form of a letter addressed to the State Lottery Director.

The State shall not release any individual or background information provided by the Contractor
or its officers, directors or employees, except as may be required by the Colorado Open
Records Act, Section 24-72-201, C.R.S. et. seq.

46. HOLDOVER
In the event that the State desires to continue the goods/services provided by this contract, and
a new contract has not been fully executed by the term date of this contract, this contract may
be extended unilaterally by the State for a period of up to two (2) months upon written notice to
the Contractor and under the same terms and conditions of the contract including, but not
limited to prices, rates and service delivery requirements. However, this extension terminates
when the new contract is executed by the State Controller or his delegate.

47.   SECTION HEADINGS
The section headings or titles are for convenience only and shall have no substantive effect in
the interpretation of the contract.

48.   SPECIAL PROVISIONS
The Special Provisions on the following page are hereby incorporated within this contract.




                                               Page 25
                                                  SPECIAL PROVISIONS
                                                The Special Provisions apply to all contracts except where noted in italics.

1. CONTROLLER'S APPROVAL. CRS 24-30-202 (1). This contract shall not be deemed valid until it has been approved by the Colorado State Controller or
designee.
2. FUND AVAILABILITY. CRS 24-30-202(5.5). Financial obligations of the State payable after the current fiscal year are contingent upon funds for that purpose
being appropriated, budgeted, and otherwise made available.
3. INDEMNIFICATION. Contractor shall indemnify, save, and hold harmless the State, its employees and agents, against any and all claims, damages, liability
and court awards including costs, expenses, and attorney fees and related costs, incurred as a result of any act or omission by Contractor, or its employees, agents,
subcontractors, or assignees pursuant to the terms of this contract.
[Applicable Only to Intergovernmental Contracts] No term or condition of this contract shall be construed or interpreted as a waiver, express or implied, of any of the
immunities, rights, benefits, protection, or other provisions, of the Colorado Governmental Immunity Act, CRS 24-10-101 et seq., or the Federal Tort Claims Act, 28
U.S.C. 2671 et seq., as applicable, as now or hereafter amended.
4. INDEPENDENT CONTRACTOR. 4 CCR 801-2. Contractor shall perform its duties hereunder as an independent contractor and not as an employee. Neither
contractor nor any agent or employee of contractor shall be or shall be deemed to be an agent or employee of the state. Contractor shall pay when due all required
employment taxes and income taxes and local head taxes on any monies paid by the state pursuant to this contract. Contractor acknowledges that contractor and its
employees are not entitled to unemployment insurance benefits unless contractor or a third party provides such coverage and that the state does not pay for or otherwise
provide such coverage. Contractor shall have no authorization, express or implied, to bind the state to any agreement, liability or understanding, except as expressly set
forth herein. Contractor shall provide and keep in force workers' compensation (and provide proof of such insurance when requested by the state) and unemployment
compensation insurance in the amounts required by law and shall be solely responsible for its acts and those of its employees and agents.
5. NON-DISCRIMINATION. Contractor agrees to comply with the letter and the spirit of all applicable State and federal laws respecting discrimination and unfair
employment practices.
6. CHOICE OF LAW. The laws of the State of Colorado, and rules and regulations issued pursuant thereto, shall be applied in the interpretation, execution, and
enforcement of this contract. Any provision of this contract, whether or not incorporated herein by reference, which provides for arbitration by any extra-judicial body
or person or which is otherwise in conflict with said laws, rules, and regulations shall be considered null and void. Nothing contained in any provision incorporated
herein by reference which purports to negate this or any other special provision in whole or in part shall be valid or enforceable or available in any action at law,
whether by way of complaint, defense, or otherwise. Any provision rendered null and void by the operation of this provision will not invalidate the remainder of this
contract, to the extent that this contract is capable of execution. At all times during the performance of this contract, Contractor shall strictly adhere to all applicable
federal and State laws, rules, and regulations that have been or may hereafter be established.
7. [Not Applicable to Intergovernmental Contracts] VENDOR OFFSET. CRS 24-30-202 (1) and 24-30-202.4. The State Controller may withhold payment of
certain debts owed to State agencies under the vendor offset intercept system for: (a) unpaid child support debt or child support arrearages; (b) unpaid balances of tax,
accrued interest, or other charges specified in Article 21, Title 39, CRS; (c) unpaid loans due to the Student Loan Division of the Department of Higher Education; (d)
amounts required to be paid to the Unemployment Compensation Fund; and (e) other unpaid debts owing to the State or its agencies, as a result of final agency
determination or reduced to judgment, as certified by the State Controller.
8. SOFTWARE PIRACY PROHIBITION. Governor's Executive Order D 002 00. No State or other public funds payable under this contract shall be used for
the acquisition, operation, or maintenance of computer software in violation of federal copyright laws or applicable licensing restrictions. Contractor hereby certifies
that, for the term of this contract and any extensions, Contractor has in place appropriate systems and controls to prevent such improper use of public funds. If the State
determines that Contractor is in violation of this paragraph, the State may exercise any remedy available at law or equity or under this contract, including, without
limitation, immediate termination of this contract and any remedy consistent with federal copyright laws or applicable licensing restrictions.
9. EMPLOYEE FINANCIAL INTEREST. CRS 24-18-201 and 24-50-507. The signatories aver that to their knowledge, no employee of the State has any personal
or beneficial interest whatsoever in the service or property described in this contract.
10. [Not Applicable to Intergovernmental Contracts]. ILLEGAL ALIENS – PUBLIC CONTRACTS FOR SERVICES AND RESTRICTIONS ON PUBLIC
BENEFITS. CRS 8-17.5-101 and 24-76.5-101. Contractor certifies that it shall comply with the provisions of CRS 8-17.5-101 et seq. Contractor shall not knowingly
employ or contract with an illegal alien to perform work under this contract or enter into a contract with a subcontractor that fails to certify to Contractor that the
subcontractor shall not knowingly employ or contract with an illegal alien to perform work under this contract. Contractor represents, warrants, and agrees that it (i) has
verified that it does not employ any illegal aliens, through participation in the Basic Pilot Employment Verification Program administered by the Social Security
Administration and Department of Homeland Security, and (ii) otherwise shall comply with the requirements of CRS 8-17.5-102(2)(b). Contractor shall comply with
all reasonable requests made in the course of an investigation under CRS 8-17.5-102 by the Colorado Department of Labor and Employment. Failure to comply with
any requirement of this provision or CRS 8-17.5-101 et seq., shall be cause for termination for breach and Contractor shall be liable for actual and consequential
damages.

Contractor, if a natural person eighteen (18) years of age or older, hereby swears or affirms under penalty of perjury that he or she (i) is a citizen or otherwise lawfully
present in the United States pursuant to federal law, (ii) shall comply with the provisions of CRS 24-76.5-101 et seq., and (iii) shall produce one form of identification
required by CRS 24-76.5-103 prior to the effective date of this contract.

Revised October 25, 2006                                                                                      Effective Date of Special Provisions: August 7, 2006




                                                                                 Page 26
                                             SPECIAL PROVISIONS

                                         THE PARTIES HERETO HAVE EXECUTED THIS CONTRACT


CONTRACTOR:                                                                STATE OF COLORADO:
                                                                           BILL RITTER, JR. GOVERNOR


By:_Cactus Communications, Inc. dba Cactus                                 By: _______________________________
Marketing Communications_______________                                    For the Executive Director
Legal Name of Contracting Entity
                                                                           Department of Revenue

___84-1183960_______________________
Social Security Number or FEIN
                                                                           LEGAL REVIEW:
                                                                           John W. Suthers, Attorney General
___________________________________
Signature of Authorized Officer

                                                                           By: _______________________________
___________________________________
Print Name & Title of Authorized Officer



CORPORATIONS:
(A corporate attestation is required.)


Attest (Seal)

                                                                           (Place corporate seal here, if available.)
By:________________________________
(Corporate Secretary or Equivalent, or Town/City/County Clerk)
       ALL CONTRACTS MUST BE APPROVED BY THE STATE CONTROLLER
        CRS 24-30-202 requires that the State Controller approve all state contracts. This contract is not valid until the State
        Controller, or such assistant as he may delegate, has signed it. The Contractor is not authorized to begin performance
        until the contract is signed and dated below. If performance begins prior to the date below, the State of Colorado may
        not be obligated to pay for the goods and/or services provided.

                                                                 STATE CONTROLLER:
                                                                   Leslie M. Shenefelt

                                                  By     ___________________________________


                                                  Date: ___________________________________




                                                                      Page 27
                                                                ATTACHMENT A
                                                              OPTION LETTER
(Date) ______, Option Letter # ___, Fiscal Year (“FY”)__
SUBJECT:          (Please indicate purpose by choosing one of the following)

1.        Option to renew only (for an additional term)
2.        Change in the amount of goods within current term
3.        Change in amount of goods in conjunction with renewal for additional term
4.        Level of service change within current term
5.        Level of service change in conjunction with renewal for additional term

In accordance with Section ____ of the Contract dated ________ (Contract Routing No. TAA ___________),
between the State of Colorado, Department of Revenue, and ______________ (Contractor’s Name), the State
hereby exercises the option for an additional _____ year’s performance period from __________ __, 20__
through __________ __, 20__ at a total cost of $____________. (And/or: In accordance with Section ____ of
the Contract dated _________ (Contract Routing No. TAA ________________), between the State of
Colorado, Department of Revenue, and _________________ (Contractor’s Name), the State hereby exercises
the option of an (increase/decrease) in the amount of goods/services at the same rate(s) as specified in Section
_____ of the Contract. This is the ____ of ____ optional renewal periods allowed under the Contract.

The amount of funds available and encumbered in the Contract is (increased/decreased) by $___________ for FY___ (period in
current FY to be covered as well as next fiscal year, if applicable) to satisfy service/goods ordered under the Contract for FY___
(and FY___ if applicable). Section ____ of the Contract (or Contract Amendment #__) is hereby modified accordingly. The
total contract value to include all previous amendments, option letters, etc. is ___________.

APPROVALS:
State of Colorado:
Bill Ritter, Jr. Governor

By: _____________________
Date: __________________
For the Executive Director
Colorado Department of Revenue

                      ALL CONTRACTS MUST BE APPROVED BY THE STATE CONTROLLER
CRS 24-30-202 requires that the State Controller approve all state contracts. This contract is not valid until the State Controller, or such assistant as
he may delegate, has signed it. The contractor is not authorized to begin performance until the contract is signed and dated below. If performance
begins prior to the date below, the State of Colorado may not be obligated to pay for goods and/or services provided.

                                                                State Controller
                                                               Leslie M. Shenefelt
                                                   By: _____________________

                                                   Date: ____________________




                                                                        Page 28
                                                       ATTACHMENT B
                                         BILATERAL CHANGE ORDER LETTER No. ___
Date: ________________        State Fiscal Year: __________
In accordance with Section ___ of the Contract dated _______ (Contract Routing No. __________) between the State of Colorado,
Department of Revenue, (Division), and (Contractor’s Name), covering the period of __________ through _________, the
undersigned agree that the (supplies/services) affected by this change order letter are modified as follows:
Choice #1: Services/Supplies Schedule

Section ____, “(title of section)” is amended by (adding/deleting or increasing/decreasing) the level of services. The term of this
contract is modified by (increasing/decreasing) the contract term date to _____ __, 20__ as appropriate to the change made above.


  CHOICE #2: PRICE/COST

The maximum amount payable by the State for (supplies/services) in Section ____ is (increased/decreased) by ($ amount of change)
to a new total of ($       ) based on the unit pricing schedule in Section ___. The ____ sentence in paragraph ___ of Section ____
is hereby modified accordingly. The maximum amount of funds available for Fiscal Year 20__, which ends June 30, 20__, is
$____________.
The total contract value to include all previous amendments, change orders, etc., is $ ______________.


      CHOICE #3: NO COST CHANGES

The parties agree that the changes made herein are at "no cost" and shall not be the basis for claims for adjustment to (price, cost
ceiling, delivery schedule) or other terms or conditions of the contract. The parties waive and release each other from any claims or
demands for adjustment to the Contract, including but not limited to price, cost, and schedule, whether based on costs of changed
work or direct or indirect impacts on unchanged work.
This change to the Contract is intended to be effective as of __________ __, 20__, or on approval by the State Controller, whichever
is later.
                                                            APPROVALS:
Contractor:                                                        State of Colorado:
                                                                   Bill Ritter, Jr. Governor
By:      _________________________                                 By:   ________________________
Name: _________________________                                    Date: ________________________
                                                                   For the Executive Director
Title:   _________________________                                 Colorado Department of Revenue

                    ALL CONTRACTS MUST BE APPROVED BY THE STATE CONTROLLER
          CRS 24-30-202 requires that the State Controller approve all state contracts. This contract is not valid until the State
          Controller, or such assistant as he may delegate, has signed it. The contractor is not authorized to begin performance until the
          contract is signed and dated below. If performance begins prior to the date below, the State of Colorado may not be obligated
          to pay for goods and/or services provided.



                                     State Controller, Leslie M. Shenefelt
                                     By: ___________________________________
                                     Date:________________________________



                                                                Page 29
        ATTACHMENT C – STATEMENT OF CONFIDENTIALITY

                         STATE OF COLORADO
                       DEPARTMENT OF REVENUE
                      COLORADO LOTTERY DIVISION

As an employee, officer, staff member, temporary employee or subcontractor of
_____________________________, you may have access to State of Colorado,
Department of Revenue, Colorado Lottery information and/or records. The
confidentiality of the information contained within these records shall be maintained at
all times. Records information shall not be distributed, sold or shared with any third
party nor used by you in any way except as expressly authorized by the State.
Disclosure of such information may be cause for legal action against you, the
Contractor, and any involved third party. The State shall not be in any way responsible
for defense of any such action and/or any costs associated therewith.

I hereby acknowledge that I am and shall remain in compliance with all State and
Federal laws and the contractual terms and conditions between the Contractor and the
State pertaining to the security and confidentiality of the Lottery’s information and/or
records.


__________________________________          ________________________
Signature                                   Date


Print Name


Title


Company Name




                                      Page 30
                                             ATTACHMENT D

                          AFFIDAVIT OF NON-CONFLICT OF INTEREST
As an employee, officer, staff member or sub-contractor of ____________________________, I hereby certify
that I will perform and conduct advertising services under the guidelines, procedures, policies and
requirements of the State of Colorado or the Department of Revenue, State Lottery Division and this contract
as a fair and impartial participant.
I hereby certify that I have no conflicts of interest. Further, I represent as follows:
1. I promise to conduct the services in this contract in an independent, impartial and responsive manner.
2. I will disclose the nature and extent of any financial interests (direct or indirect) to the State for its
   evaluation of the significance of the financial interest on participation in this contract. Except as I shall
   disclose in detail, I neither have nor shall I during the advertising contract, including any extensions,
   acquire any financial interest that would conflict in any manner or degree with my contract responsibilities.
3. As an employee of the Contractor and/or its subcontractors, I shall be prohibited from separately bidding
   for any goods or services required by this Contract.
4. As an employee of the Contractor and/or its subcontractors, I shall be responsible for disclosing to the
   State receipt of any communication asserting any conflict of interest.
5. I agree to resign any marketing or advertising accounts if the State, within its sole discretion, determines
   that such accounts are in conflict with the best interests of the State. Examples of such conflicts would be
   accounts that become matters of public controversy that could reflect negatively on the State or accounts
   that are in direct competition with the State Lottery’s business. Furthermore, during the term of the
   contract, including any extensions, I agree that I will not accept the account of any other client having a
   conflicting product or service (such as another legal gaming entity) as determined by the State, without the
   prior written consent of the State. Consent will not be unreasonably withheld.

If I should become aware of any situation that may arise, that could alter any of the representations
above, or that might otherwise create the appearance of a conflict or other impropriety, I shall notify
the State immediately. Such notification shall be made to the Lottery Security Director, at (719) 546-
5212.


__________________________________ ________________________
Signature                                Date

__________________________________
Print Name

__________________________________
Title




                                                       Page 31

				
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