• Adoption of Rules to be Final June 7th
• Three Manufactures Approved in SD
• Is Gambling A Concern?
• Video Lottery Statistics
• Lingle Named New Lottery Director

STATE OF SOUTH DAKOTA

DEPARTMENT OF REVENUE AND REGULATION

IN THE MATTER OF THE PETITION FOR )

A DECLARATORY RULING BY IGT,                      )  STIPULATION

5301 SOUTH HIGHWAY 16                                     )

RAPID CITY, SOUTH DAKOTA                              )

                                                                                    )

BEFORE THE                                                             )

SOUTH DAKOTA LOTTERY COMMISSION         )

                        COME NOW,  the Petitioner in the above matter and the Intervening Parties and hereby request that the Lottery Commission by Order approve and adopt in toto the terms and conditions of this Stipulation filed by the parties which provide as follows:

1. VLC/IGT will continue to supply and burn the current approved chipsets for South Dakota until such time that the IGT/VLC approved raw parts used to burn the current approved chipsets on the Associated Equipment List as specified in ARSD 48:02:08:01.01 can no longer be obtained.

Currently approved:

111141137B1 VLC Main Logic SDL

131412137B1 VLC Game Program SDL 137

101428137B1 VLC Character Program SCL 137

131212107 VLC Security Pal SDL

111141137A VLC Main Logic SDL

131412137A VLC Game Program SDL 137

101428004DVLC Character Program for the 137A

2. VLC/IGT will continue to provide support to install the above mentioned chipsets in the VLC 8700 Logic boards and set them to Zero. At such time that VLC/IGT or South

Dakota licensed operators are no longer able to supply the chipsets on the Associated Equipment List as specified in ARSD 48:02:08:01.01, VLC/IGT’s obligation hereunder shall cease.

3. The parties hereto will jointly request that the South Dakota Lottery Commission

release VLC/IGT from liability as to the safety and integrity of the games if VLC/IGT

parts are purchased from any third party and utilized in the VLC 8700. This applies to previously built, assembled or programmed parts and not newly manufactured proprietary parts purchased directly from VLC/IGT. VLC/IGT will be under no obligation to release proprietary information such as files for burning chipsets or manufacturing new boards.

4. VLC/ IGT agrees that any third party distributors  may provide critical and

proprietary VLC 8700 components, parts, services and support once such distributor is approved by the South Dakota Lottery Commission. Such components and parts must have been previously built, assembled or programmed by VLC or IGT and may not be

newly manufactured proprietary components or parts manufactured by anyone

other than VLC or IGT.

5. VLC/IGT will release any exclusivity sales requirements otherwise imposed by it upon

manufacturers or third party suppliers or vendors as to the VLC 8700 machine.

6. Notwithstanding the provisions of ARSD 48:02:07:11, VLC/IGT will be obligated to

provide support for the VLC 8700 as required under ARSD 48:02:05:02(3) and

(4), but only to the extent of the terms and conditions as set forth herein.

7.  The parties agree that this agreement is only effective and they are bound by its terms and conditions, only upon the effective declaration by the Lottery Commission that the VLC 8700 is obsolete, with such obsolescence dependent upon and only effective with the simultaneous binding adoption of the conditions and authorities expressed herein.

8. Based upon the foregoing agreements, the parties hereto shall jointly ask the Lottery Commission to grant VLC/IGT’s request for obsolescence of the VLC 8700.

The parties further agree that this Stipulation can be executed in counterpart and that a faxed copy reflecting the signature of each party can be filed with each party agreeing to replace that faxed copy with the original.

Three Manufactures Approved in SD

It has been a long wait but progress is being made on the approval of IGT's newest machine for South Dakota, the Game King.

According to Randy Nelson, Account Executive for IGT, the first hurdle has been passed. The SD Lottery has completed preliminary testing and the games are now on their way to Gaming Laboratory International (GLI) for further testing.

Randy is looking forward to presenting the new machine in early June, baring any difficulties with testing at GLI. The Game King has 10 games with 6 poker and 4 keno games. The machine will be available in both the slant top and upright models. Watch for a viewing of the machine in Rapid City towards the end of April.

Randy Nelson is IGT's representative for the South Dakota area. A native of South Dakota, Randy grew up in Winner and Deadwood and attended Northern State College in Aberdeen and currently lives in Deadwood. He has been in the gaming industry for over 14 years and looks forward to visiting with each of you during the upcoming year.

Randy can be reached in the Rapid City office at 1-800-711-7322 or Randy.Nelson@sodak.igt.com.

Spielo, a GTECH Company, Submits Application to South Dakota Lottery

A third manufacturer may be entering the South Dakota market. Spielo, a GTECH company, is a leading provider of video lottery terminals and related products and services to the global gaming industry. They are located in New Brunswick, Canada, with 26,000 machines throughout North America and Europe.

Spielo has applied for a license to manufacture and distribute the new PowerStation 5™, with a multi-game, multi-denomination combination of keno and poker. These games have excellent player appeal and have been proven in many markets.

"We welcome the opportunity to provide South Dakota with our most advanced PowerStation 5 terminal," said Blaine Bowman, Sales Manager for Spielo. Blaine who has been working in the South Dakota market for several years is looking forward to visiting with many of his friends across the state. To contact Blaine call toll free
1-866-652-7748 or drop him a hello at blaine.bowman@gtech.com. Information on Spielo and its products can be found at www.GTECH.com.

Summit Offers New Games

In the beginning Summit said they would work hard to keep the games fresh and exciting. In keeping with that promise Summit will be submitting an update for their games to the Lottery office.

Dana Waggener, Vice President of Sales, said "An additional 4 games will be offered for the Royal Touch machine. Two new poker games and two new keno games will be released sometime later this spring."

One of the new keno games holds a celebrity endorsement from the wonderful world of golf. More from this novel promotion as information is released.

If you have questions about the current Royal Touch machine or the new games coming out contact Dana Waggener on his cell phone at 1-406-671-0567.

Is Gambling A Concern? Call the Folks That Can Help!

• Avera McKennan Hospital - Steve Lindquist 605-322-4079 Sioux Falls
• Avera St. Lukes (Worthmore/NADRIC) - Jan Patterson605-622-5800 Aberdeen
• Behavior Management Systems - Sandy Diegel 605-343-7262 Rapid City
• Capital Area Counceling - Dennis Pfrimmer 605-224-5811 Pierre
• Choices Recovery - Karen Johnson 605-996-1647 Mitchell
• Community Counseling - Galen Grove 605-352-8596 Huron
• East Central - Jack Thomson 605-697-2850 Brookings
• Human Service Agency - Chuck Sherman 605-886-0123 Watertown
• Keystone Treatment Center - Carol Regier 605-987-2751 Canton

Video Lottery Statistics

December 8th, 2007 Statistics
Video Lottery Terminals 8978
Video Lottery Establishments 1477
Average Terminal Income $456.45

June 26, 2004 Year End
Income States Share 2006 $109.8 million
Income States Share 2005 $112.4 million
Income States Share 2004 $107.8 million

Lingle Named New Lottery Director

Gov. Mike Rounds has appointed Norm Lingle of Pierre as the new executive director for the South Dakota Lottery. State Revenue Secretary Gary Viken made the announcement Tuesday morning.

Lingle, 40, inherits an operation that has been on a winning track and is the second-largest generator of state general fund revenue, after the state sales tax. State lottery sales produced a record $115.5 million of state revenue in 2004, a 3.3 percent increase.

That included profits of $4.82 million from lotto game sales such as Powerball, $3.4 million from scratch tickets and $107.3 million from video gambling. All three groups were up from 2003.

"We did a careful and extensive interview process to find the right manager for the lottery," Viken said in making the announcement. "Norm is an effective manager with the right skill set."

Lingle becomes only the fourth executive director of the state lottery since its 1987 start. He replaces Clint Harris, who resigned last fall to take a similar position as head of the Minnesota state lottery. Harris had served in the South Dakota post since 2000 following the resignation of Rodger Leonard.

Harris is receiving a salary of about $114,000 in the Minnesota post an upgrade from the $74,715 he was getting in South Dakota. Harris had been with the South Dakota Lottery since 1993. Lingle's starting salary will be $58,000.

Lingle has lived nearly all of his life in Pierre. He was elected in June to the Pierre school board, finishing as the top vote-getter in a four-way race for two vacant seats. His professional experience and background has been in grants and finance at the state Department of Tourism and State Development.

He has been manager of the Community Development Grant Program since 1989. He has worked on more that 100 development projects with communities throughout South Dakota.

He holds a B.S. degree in economics from South Dakota State University. "Norm's background in economic development coupled with his compliance and regulation experience makes him the logical choice," said Rob Skjonsberg, the governor's chief of staff. "It's rare to find someone with an extensive background in both. He understands what this revenue source means to South Dakotas and the importance of protecting the integrity of the system." Skjonsberg said. "He's served the citizens well for 15 years. We have every confidence that he'll continue that tradition and excel in his elevated post."

Lingles Immediate Challenge
He officially began January 18th and the largest issue immediately facing him is the future of the VLC model 8700 video lottery terminals.

Parent company IGT no longer wants to continue supporting the machines after May 1, but many machine owners want to continue using the highly profitable and popular games rather than pay up to $10,000 apiece to replace them.

Of the 8,566 licensed terminals in the state, 96.5 percent are the VLC model 8700, according to Lottery officials. Most of the machines have been in operation for 10 years or more.

Lottery regulations currently require a manufacturer to maintain and provide an inventory of parts for repairs. The rules also require that every lottery machine conform to the specifications of the machine prototype tested by the Lottery.