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12-0930_AMERICAN TRAFFIC SOLUTIONS, INC_D2_Agenda ReportAGENDA REPORT TO: Karen P. Brust, City FROM: Lt. John Meyer, Chief Services 5/30/2012 D2 SUBJECT: Consideration of Agreement for Red Light Photo Enforcement Services with American Traffic Solutions (ATS). RECOMMENDATION: By motion, direct staff to notify American Traffic Solutions that the current Lease & Services Agreement for operation of the Red Light Photo Enforcement Program will not be renewed upon expiration on September 29, 2012; and, direct staff to negotiate an extended Lease & Services Agreement for up to three months from September 30, 2012 to December 31, 2012 to process outstanding citations. SITUATION: The five year Lease & Services Agreement with American Traffic Solutions (ATS) for red light photo enforcement services will end on September 29, 2012 (Attachments 1, 2 & 3). Red light photo enforcement takes place at two City intersections: 1. Del Obispo Street and Ortega Highway 2. Del Obispo Street and Camino Capistrano The Red Light Photo Enforcement Program in San Juan Capistrano began in 2000. The purpose of the program is to enhance the safety of motorists in San Juan Capistrano by reducing traffic collisions in and around the intersections equipped with cameras. Collisions have steadily declined at these intersections since the inception of this program. There has also been a decline in the number of citations issued annually, which can be attributed in part to a positive change in the driving habits of those who frequently travel through these intersections. Between 2000 and 2010, statistics show a 44.4% decrease in total collisions at the intersection of Ortega Highway and Del Obispo Street. Between 2000 and 2010, statistics show an 80.7% decrease in total collisions at the intersection of Del Obispo Street and Camino Capistrano. Agenda Report Page 2 May 30, 2012 Citations have also decreased over the past 4 years, also indicating a positive change in driving habits with fewer red light camera activations. The chart below indicates the number of citations issued since 2009. Year Citations Issued 2009 4353 2010 4243 2011 2463 2012 1687 Projected COMMISSIOWBOARD REVIEW AND RECOMMENDATIONS: Not Applicable. FINANCIAL CONSIDERATIONS: The current Lease & Services Agreement is for $4850 per intersection approach per month. The two red light photo enforcement intersections have two approaches each for a total of four approaches (4 approaches x $4850/approach/month = $19,400/month x 12 months = $232,800/year). One Motorcycle Patrol Deputy spends about 30% of his time dedicated to processing red light camera violations. The chart below indicates the annual gross revenues less costs, which equals the net revenues to the City. Annual Gross Annual Contract Annual Deputy Net Revenues to City Revenues Costs Costs Fiscal Year $232,800 $60,881 = 30% of $287,804 2008-09: Deputy's time $581,485 Fiscal Year $176,717 $61,111 = 30% of $361,475 2009-10: (reduced due to Deputy's time $599,303 down repair time Fiscal Year $232,146 $62,797 = 30% of $259,656 2010-11: (reduced due to Deputy's time $554,599 down repair time (Estimated) (Estimated) (Estimated) (Estimated) Fiscal Year $232,800 $63,110 = 30% of 2011-12: Deputy's time _$39,192 $256,718 Agenda Report Page 3 May 30, 2012 An extended Lease & Services Agreement with ATS for up to three months from September 30, 2012 to December 31, 2012 will vary from $1500 to $3000 per month. The monthly services fees will depend on the number of appeals and court appearances. The revenue stream for outstanding citations will continue to offset service fees. NOTIFICATION: American Traffic Solutions, Inc. RECOMMENDATION: By motion, direct staff to notify American Traffic Solutions that the current Lease & Services Agreement for operation of the Red Light Photo Enforcement Program will not be renewed upon expiration on September 29, 2012; and, direct staff to negotiate an extended Lease & Services Agreement for up to three months from September 30, 2012 to December 31, 2012 to process outstanding citations. Respectfully submitted, Lt. John Meyer Chief of Police Services Attachments: 1. June 29, 2007 Lease & Services Agreement with Nestor Traffic Systems 2. February 2, 2009, Amendment to Lease & Services Agreement with Nestor Traffic Systems 3. October 7, 2009, Assumption Agreement with American Traffic Solutions NESTOR TRAFFIC SYSTEMS, INC. AND THE MUNICIPALITY OF SAN JUAN CAPISTRANO, CALIFORNIA TRAFFIC SIGNAL VIOLATION VIDEO -ENFORCEMENT SYSTEM LEASE & SERVICES AGREEMENT This AGREEMENT (the "Agreement") made this day of Iune 2007, by and between Nestor Traffic Systems, Inc., a Delaware corporation having a place of business at 42 Oriental Street, Providence, RI 02908 ("Nestor"), and San Juan Capistrano, a municipal corporation of the State of California having an address of 32400 Paseo Adelanto, San Juan Capistrano, Ca 92675 (the "Municipality" and together with Nestor, the "Parties" and each singularly a "Party"). WHEREAS, the Municipality has issued a request for proposals named "RFP for Red Light Photo Enforcement Services" and dated October 18, 2005 (the "Request for Proposals'); WHEREAS, Nestor submitted on November 8, 2005, a Proposal (the "Proposal") in response to the Request for Proposals; and WHEREAS, the Parties desire to enter into this Agreement, whereby Nestor will (i) install and assist the Municipality in the administration and operation of a traffic signal violation detection system (the "System") at the intersections located within the Municipality indicated on Exhibit A attached to this Agreement, and provide to the Municipality the services (the "Services"), all as more fully described on Exhibit A, and (ii) in connection with the Services, license certain software and lease certain equipment to the Municipality. NOW, THEREFORE, the Parties, intending to be legally bound, agree as follows: 1. SERVICES 1.1 Nestor agrees to use commercially reasonable efforts to provide to the Municipality the Services, as more fully described in Exhibit A. If and to the extent set forth in Exhibits A, B, and C, the Services shall include: (i) the equipment (the "Equipment") and software (the "Software') to be supplied and installed by Nestor in accordance with Exhibit A; (ii) citation preparation processes that assist the Municipality in complying with current applicable law; (iii) training of Municipality personnel involved with the operation of the System and/or the disposition of citations; and (iv) other support services for the System. 1.2 If and to the extent the Municipality has or obtains during the Term (as hereinafter defined) custody, possession or control over any of the Equipment or Software, the Municipality agrees: (i) such Software, if manufactured by Nestor, is supplied under the license set forth in Exhibit ATTACHMENT B (the "License") to which the Municipality agrees; (ii) such Software, if manufactured by third parties, is supplied under third -party licenses accompanying the Software, which licenses the Municipality acknowledges receiving and to which it hereby agrees; and (iii) such Equipment is supplied under the lease terms set forth in Exhibit C (the "Lease") to which the Municipality hereby agrees. 1.3 The Municipality understands and agrees that (i) Nestor may subcontract with third parties for the provision or installation of part or parts of the System or Services; provided, however, that prior to subcontracting to any third party, Nestor shall first secure the consent of the Municipality, which consent shall not be unreasonably withheld and which consent the City Manager, or his designee, is authorized to provide, and (ii) installation of the System requires the Municipality's cooperation and compliance with Nestor's instructions (including but not limited to Municipality's provision of the personnel, equipment, engineering plans, and other resources as described in Exhibit A or as otherwise reasonably requested by Nestor) and access by Nestor (or such third parties) to Municipality premises and systems and the Municipality agrees to provide all of the foregoing to Nestor. The Municipality further agrees that the estimated dates of installation and activation of the System set forth in Exhibit A (or incorporated therein) are subject to conditions beyond the controf of Nestor and are not guaranteed. 1.4 The Municipality understands and agrees that the System will be owned by Nestor (or its designees). The Municipality agrees to reimburse Nestor for costs incurred to repair any damage to the System caused by the Municipality or any of the Municipality's employee's, agents, or independent contractors (other than Nestor). The Municipality agrees that it will use its commercially reasonable efforts to assist Nestor to identify and obtain compensation from any third -party who is responsible for damage to the System or any part thereof. 1.5 If and to the extent this Agreement incorporates by reference any provision of the Request for Proposals or the Proposal, such provision shall be deemed a part of this Agreement. Nevertheless, if there is any conflict among the terms and conditions of this Agreement and those of any such provision or provisions so incorporated by reference, this Agreement shall govern over both the Proposal and the Request for Proposals and the Proposal shall govern over the Request for Proposals. 2. TERM The term of this Agreement, the License and the Lease shall begin upon the date of this Agreement and shall continue until the fifth (5th) anniversary of the Installation Date of the initial System (the " Term"). The Installation Date of initial System shall be the earlier of (i) the first date upon which the initial System issues a citation, or (ii) ninety (90) days from the date of this Agreement. 3. TERMINATION AND EXPIRATION 3.1 This Agreement may be terminated by either Party if the other Party defaults in the performance of any obligation under this Agreement and such default continues for more than thirty (30) days after notice thereof to the defaulting Party. 3.2 If this Agreement is terminated by Nestor pursuant to Section 3. 1, the Municipality shall be responsible and pay to Nestor on demand the termination and cancellation fee set forth in Section 4.3. Termination of this Agreement pursuant to Section 3.1 shall not relieve the breaching Party of any liability it may have under this Agreement or pursuant to law to the non -breaching Party. 3.3 Except as otherwise provided for herein, upon termination or expiration of this Agreement, the Municipality shall immediately cease using the Software and Equipment in its possession, custody or control and shall (a)(i) immediately deliver to Nestor such Equipment and (ii) immediately deliver to Nestor or irretrievably destroy, or cause to be so delivered or destroyed, any and all copies of such Software in whatever form and any written or other materials relating to such Software in the Municipality's possession, custody or control and within thirty (30) days deliver to Nestor a certification thereof or (b) allow Nestor access to the system(s) on which such Software is loaded and permission to Nestor to remove such Equipment and Software. Termination or expiration of this Agreement shall not relieve the Municipality of any obligation to pay fees or other amounts due or accrued prior to such installation or termination. This Section 3.3, as well as Sections 3.2, 6.2, 6.3, 6.4, 7 and 9 of this Agreement, Sections 4, 7, 8 and 9 (but only to the extent Section 9 corresponds to Sections of the Agreement which survive) of the License and Sections 3, 4, 5, 6, 7 and 9 (but only to the extent Section 9 corresponds to Sections of the Agreement which survive) of the Lease shall survive any expiration or termination of this Agreement, the License or the Lease. Notwithstanding anything to the contrary herein, if Nestor (x) is subject to a bankruptcy proceeding that is not dismissed within 90 days, (y) has an assignment to its creditors, or (z) ceases doing business; that, in any case, prohibit it from materially complying with terms and conditions of its service obligations hereunder; the Software and Equipment installed under this Agreement shall, to the extent permitted by any third party licenses through which Nestor licenses the same to the Municipality, become licensed to Municipality for a period of ten (10) years from the Installation Date at no further cost to. the Municipality except for any third party license fees required for the continued operation of the Software or Equipment. In such an event, the Municipality shall have full rights to operate such System solely to support the Installed Approaches for a period of ten (10) years from the Installation Date. The Municipality shall not disclose, nor permit disclosure, of any confidential information regarding the System, including but not limited to source code and operational manuals, to any third party except under confidentiality agreements and solely to support the Agreement. 3.4 Notwithstanding anything to the contrary contained herein, or in the License or the Lease, but except as provided in Section 3.3, the License and the Lease shall terminate upon the termination or expiration of this Agreement. 4. FEES AND PAYMENT 4.1 The Municipality shall pay Nestor a monthly fee equal to $4850.00 per installed approach for system and services of the System. Monthly fees shall begin on the day that video monitoring system is installed and operational at each respective intersection approach. If and to the extent that (1) an Installed Approach subject to a Monthly Fee is not capable of detecting violations or (2) Nestor is unable to print and/or mail citations, in either case, for three (3) or more consecutive days in any calendar month as a result of system malfunctions not caused by Municipality or an event described in Section 9.9 of this Agreement (collectively and each individually, an "Event"), Nestor will allow a credit against the monthly fee for systems and services for such Installed Approach for that month equal to: such Installed Approach's monthly fee for systems and services multiplied by: (a) the total number of days the approach was incapable of detecting violations, and/or printing and mailing citations (as applicable) in the month as a result of the Event, divided by (b) thirty (30) days 4.2 "Installed Approach" shall mean a signalized direction of travel on an individual access road or street to any intersection that is monitored by the System. 4.3 Subject to termination of this Agreement by Nestor pursuant to Section 3. 1, the termination and cancellation fee shall equal the product of (a) $1,333.00 per Installed Approach multiplied by (b) the Remaining Term. The "Remaining Term" shall equal the number of months in the Initial Term of this Agreement from the Installation Date (i.e., 60 months) minus the number of whole months from the Installation Date to the date of termination. 4.4 Payment of all fees and other charges owed pursuant to this Agreement is due within thirty (30) days after invoice date. Invoices will be sent to the Municipality at: City of San Juan Capistrano 32400 Paseo Adelanto San Juan Capistrano, Ca 92675 Attn: Michael Cantor 4.5 Unless the Municipality provides Nestor with evidence of an exemption therefrom, prices do not include federal or state excise, sales, use or other similar taxes or charges. The Municipality agrees to indemnify and hold harmless Nestor from any liability arising out of any such tax or charge if charged against Nestor, excluding any taxes or fees based on the income of Nestor. If incurred, such taxes or charges may be invoiced at any time. 4.6 Nestor and Municipality shall mutually perform an initial financial review of the program on the first anniversary of the installation date, and Nestor shall perform subsequent annual financial reviews of the program. Following such review, if it is determined that the gross program revenue retained by the Municipality is less than Nestor's contractual fees, then the parties shall: (i) in good faith renegotiate the service fees hereunder; if the parties are unable to agree on a renegotiated fee after such negotiation it is not successful, then (ii) consideration shall be given to eliminating existing low-volume approach(s); if neither option is successful, then Municipality shall have the right to terminate the agreement without penalty and without application of Section 4.3. 5. Responsibilities of the Municipality 5.1 The Municipality shall provide Nestor with such "as built" drawings in electronic format (AutoCad) as Nestor, may reasonably require for the preparation of drawings for the installation of the System and shall approve Nestor's engineering drawings without unusual or unreasonable cost or delay. 5.2 The Municipality shall not levy any permit fees or, if municipal ordinance requires the assessment of fees, the Municipality shall waive or be responsible for such fees associated with the installation of the System. 5.3 The Municipality, in its discretion, shall prosecute each citation and defend any challenge in any court to the use of the System or validity of its results and/or the use of the U.S. Mails to deliver the citation. Nestor may, at its own expense, participate in any proceeding challenging the use of the System or validity of its results and/or use of the U.S. Mails to deliver the citation. 5.4 The Municipality shall provide electrical connections at the roadside and pay for power required by the System. 5.5 To allow for proper operation of the System, the Municipality shall provide Nestor with advance written notice of any modifications proposed to intersections, including traffic signal operations, after installation of a System. In the event of any such intersection modification requires a material change to the System, the Municipality shall pay the costs reasonably incurred by Nestor to adapt the affected Installed Approach(es) to make such Installed Approacb(es) compatible therewith, unless the costs are such that the level of income to the Municipality will not cover the added costs; in which case the parties shall agree to use section 4.6 hereof to resolve that approach. Notwithstanding the above, Nestor makes no guarantee that it will be able to make any such adaptation. In addition, Nestor does not, and will not, make recommendations or otherwise manage the configuration or operation of the intersection traffic light system. 4 5.6 The Municipality shall provide such assistance as may be required for Nestor to obtain any information and approvals from the Court(s), other governmental instrumentalities, or entities necessary or desirable for Nestor to provide the Services. 5.7 During the term of this Agreement, except as expressly permitted by this Agreement the Municipality shall not use the System, or allow the System's use by a third party, without the prior written permission of Nestor. 6. LIMITED WARRANTY AND LIMITATION ON DAMAGES 6.1 Nestor warrants that the System's functionality will conform in all material respects to the description of the System set forth on Exhibit A. The parties acknowledge that the System may malfunction from time to time, and subject to the terms of this agreement, Nestor shall diligently endeavor to correct any such malfunction in a timely manner as set forth in Section 4.1 of Exhibit A. This warranty does not apply if the Municipality has failed to make all payments to Nestor required by this Agreement or as set forth in, and is subject to the conditions of, Section 6.4. 6.2 EXCEPT AS SPECIFICALLY PROVIDED HEREIN, THE SERVICES AND SYSTEM ARE NOT ERROR -FREE AND ARE BEING PROVIDED "AS -IS" WITHOUT WARRAN'T'Y OF ANY KIND AND NESTOR HEREBY DISCLAIMS ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THE SERVICES AND SYSTEM, INCLUDING, WITHOUT LIMITATION, ALL IMPLIED WARRANTIES OF TITLE,, NON-INTERFERENCE WITH ENJOYMENT, ACCURACY, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE AND ALL WARRANTIES IMPLIED FROM ANY COURSE OF DEALING OR USAGE OF TRADE. MUNICIPALITY ACKNOWLEDGES THAT EXCEPT AS EXPRESSLY PROVIDED HEREIN NO OTHER WARRANTIES HAVE BEEN MADE TO MUNICIPALITY BY OR ON BEHALF OF NESTOR OR OTHERWISE FORM THE BASIS FOR THE BARGAIN BETWEEN THE PARTIES. 6.3 REGARDLESS OF WHETHER ANY REMEDY SET FORTH HEREIN FAILS OF ITS ESSENTIAL PURPOSE, IN NO EVENT WILL NESTOR BE LIABLE TO THE MUNICIPALITY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE OR OTHER SIMILAR DAMAGES (INCLUDING ANY DAMAGES FOR LOSS OF INFORMATION, PROFITS, OR SAVINGS, OR BUSINESS INTERRUPTION) ARISING OUT OF THE SYSTEM, THE SERVICES OR THE USE OF OR INABILITY TO USE THE SYSTEM OR THE SERVICES, EVEN IF NESTOR OR AN AUTHORIZED NESTOR REPRESENTATIVE IS AWARE, OR SHOULD HAVE BEEN AWARE, OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT WILL NESTOR BE LIABLE TO MUNICIPALITY FOR ANY REASON FOR ANY AMOUNT IN EXCESS OF THE FEES ACTUALLY PAID BY MUNICIPALrTY TO NESTOR IN ACCORDANCE WITH SECTIONS 4.1 OR 4.2 FOR THE TWELVE MONTHS IMMEDIATELY PRECEDING THE EVENT(S) OR CIRCUMSTANCE(S) GIVING RISE TO NESTOR'S LIABILITY TO MUNICIPALITY. 6.4 The Municipality acknowledges and agrees that: (a) The System may not detect every red light violation; (b) Since the System may flag as a violation conduct that is in fact not a violation, the output of the System will require review, analysis and approval by personnel appropriately qualified and authorized by the Municipality under applicable law prior to the issuance of any citation; (c) The System may not detect every event for which it is desirable to recommend extension of the red light phase; (d) The System has no control over, and relies on the proper functioning of Municipality supplied equipment for signal light changes; (e) The warranty set forth in section 6.1 is not intended to, and shall not, be construed as a warranty of the level of performance of the System; (f) The proper functioning of the System requires the Municipality's full and complete compliance with the Systems' operating instructions, which it hereby agrees to do; and (g) The Municipality shall be responsible for the configuration and/or operation of all intersection traffic light systems and Nestor shall have no liability or obligations with respect thereto. 7. INDEMNITY 7.1 Nestor agrees to indemnify, defend, and hold harmless the Municipality, its elected and appointed officials, and employees from any claim of damages (including the payment of reasonable attorneys' fees) by a third party arising solely from (a) a finding that the System infringes any validly issued United States patent of (b) Nestor's negligence, provided that such liability is not attributable to (i) any act or omission set forth in Section 7.2 or (ii) any third -party software or other third -party products used with, required for use of, or supplied under their own names with or as part of the System. If, as a final result of any litigation of which Nestor is obligated to indemnify, the use of the System by Municipality is prevented, in whole or in part, by an injunction, Nestor's sole obligation to the Municipality as a result of such injunction shall be, at Nestor's option, either to (i) replace such part as has been enjoined, or (ii) procure a license for Nestor or the Municipality to use same, or (iii) remove same at no additional cost to the Municipality and terminate this Agreement. 7.2 Anything to the contrary notwithstanding, Nestor assumes no obligation or liability for, and the Municipality will indemnify, defend, and hold harmless Nestor, its officers, directors, shareholders, agents, and employees from any claim of damages (including the payment of reasonable attorneys' fees) by a third party arising from or related to (i) Nestor's compliance with any designs, specifications, or instructions of the Municipality, (ii) any modification of the System made by the Municipality, (iii) the negligence or intentional act of Municipality, (iv) failure of the Municipality to use the System in the manner described by Nestor, (v) the failure to function properly of any hardware, software or equipment of any kind used by, in or on behalf of the Municipality (other than that supplied by Nestor), (vi) the review and analysis of the System data output by Municipality personnel for citation preparation, (vii) the Municipality's use and/or administration of the System and/or any traffic signal, and (viii) an allegation regarding the permissibility under the law of the use of photo citation systems or the System. 7.3 The rights of a Party seeking indemnification under this Section 7 shall be conditioned upon (i) the indemnified Party notifying the indemnifying Party promptly upon receipt of the claim or action for which indemnification is sought (but the failure to do so shall not relieve the indemnifying Party of its obligations under this Section 7 unless and then only to the extent it is materially prejudiced thereby) and (ii) the indemnified Party's full cooperation with the indemnifying Party in the settlement or defense of such claim or action at no cost to the indemnifying Party (except for reasonable out-of-pocket traveling expenses). Such cooperation shall include, but not be limited to, the Municipality providing access for, and permission to, Nestor for the purpose of the replacement of such part or parts of System as Nestor may deem necessary or desirable. An indemnified Party may participate in the defense of any indemnified matter through counsel of its own choice and at its own expense provided that the indemnifying Party shall remain in, and responsible for, control of the matter. This Section 7 states the entire liability and obligation and the exclusive remedy of the Parties with respect to any actions or claims (i) of alleged infringement relating to or arising out of the subject matter of this Agreement or (ii) otherwise the subject of this paragraph. 8. INSURANCE Nestor represents that it and its employees are protected against the risk of loss by the following insurance coverage: a. Comprehensive general liability insurance with a combined single limit of $1,000,000 per occurrence; b. Workers Compensation as required by applicable state law; and c. Comprehensive Automobile Liability Insurance for all owned, non -owned and hired automobiles and other vehicles used by Nestor with a minimum $1,000,000 per occurrence combined single limit bodily injury and property damage. All insurance required by express provision of this Agreement shall be carried only in responsible insurance companies licensed to do business in the State of California and having a minimum Best's Guide Rating of A- Class VII or better, and shall name as additional insured the Municipality, its elected officials, officers, employees, agents and representatives. Nestor will furnish Municipality with Certificates of Insurance and applicable endorsements for all such policies promptly upon receipt of them. Nestor may effect for its own account insurance not required under this Agreement. 9. MISCELLANEOUS 9.1 Except as specifically provided in this Agreement, this Agreement may not be assigned, nor may performance be delegated, by either Party without the express written consent of the other Party, except that Nestor may assign, delegate performance under, or otherwise encumber this Agreement (a) for the purpose of obtaining financing, (b) to any entity owning, controlling, under common control with, owned by or controlled by Nestor or (c) to any third party that acquires all or substantially all of Nestor's business relating to the System. 9.2 The headings and captions used in this Agreement and the Exhibits are for convenience only and are not to be used in the interpretation of this Agreement. 93 The failure of either Party to require performance of any provision of this Agreement shall not affect the right to subsequently require the performance of such provision or any other provision of this Agreement. The waiver of either Party of a breach of any provision shall not be taken or held to be a waiver of any subsequent breach of that provision or any subsequent breach of any other provision of this Agreement. 9.4 If any covenant or provision of this Agreement is, or is determined to be, invalid, illegal or unenforceable, all remaining covenants and provisions of this Agreement shall nevertheless remain in full force and effect, and no covenant or provision of this Agreement shall be deemed to be dependent upon any covenant or provision so determined to be invalid, illegal or unenforceable unless otherwise expressly provided for herein. 9.5 This Agreement has been entered into, delivered and is to be governed by, construed, interpreted and enforced in accordance with the laws of the State in which the Municipality is located (without giving reference to choice -of -law provisions) from time to time in effect. 9.6 Except as set forth in this Agreement and the Exhibits hereto, no representation, statement, understanding or agreement, whether written or oral, has been made and there has been no reliance on anything done, said or any assumption in law or fact with respect to this Agreement for the duration, termination or renewal of this Agreement other than as expressly set forth in this Agreement and there has been no reliance upon anything so done or said that in any way tends to change or modify the terms or subject matter of this Agreement or to prevent this Agreement from becoming effective. This Agreement supersedes any agreements and understandings, whether written or oral, entered into by the Parties hereto prior to the effective date of this Agreement. 9.7 This Agreement may be modified or amended from time to time by the Parties, provided, however, that no modification or amendment hereto shall be effective unless it is stated in writing, specifically refers to this Agreement and is executed on behalf of both Parties hereto. 9.8 Except as otherwise specified, all notices, payments and reports hereunder shall be deemed given and in effect as of the date of mailing or transmission, as the case may be, when sent by next day delivery or courier service, postage pre -paid), or three days after the date of mailing when sent by first class mail, postage pre -paid, addressed in all such cases to the Parties as set forth in the preamble to this Agreement directed in each case to the President of Nestor or City Manager or his or her designee at the Municipality or to such other addresses as the Parties may from time to time give written notice of as herein provided. 9.9 Except for the obligation to make any payment of money, neither Party shall be liable to the other for failure or delay in meeting any obligations hereunder which arises in whole or in part from causes which are unforeseen by, or beyond the control of, such Party, including without limitation, acts of God or of a public enemy, acts of the Government (other than the Municipality in the case of the Municipality) in either its sovereign or contractual capacity, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, acts or omissions of subcontractors and other third -parties and unusually severe weather. When any such circumstances) exist, Nestor shall have the right, in its sole discretion, to allocate its available production, deliveries, services, supplies and other resources among any and all buyers (whether or not including the Municipality), as well as among departments and affiliates of Nestor, without any liability to the Municipality. 9.10 In the event of a dispute arising between the parties regarding performance or interpretation of this Agreement, the matter shall be resolved by binding arbitration under the auspices of the Judicial Arbitration or Mediation Service ("JAMS") or equivalent arbitration services as agreed to by the parties. 9.11 The Municipality shall use the Proprietary hiformation only for the purpose of fulfilling its duties hereunder (the "Purpose") and such Proprietary Information shall not be used for any other purpose without the prior written consent of Nestor. "Purpose" shall be deemed to not include any disclosure of the Proprietary Information to any person or entity. The Municipality shall hold in confidence, and shall not disclose to any person or entity, any Proprietary Information nor exploit such Proprietary Information for its own benefit or the benefit of another without the prior written consent of the Company. Notwithstanding anything contained in this Agreement to the contrary, this Agreement shall not prohibit the Municipality from disclosing Proprietary Information to the extent required in order for the Municipality to comply with applicable laws and regulations, provided that the Municipality provides prior written notice of such required disclosure to the Company and takes reasonable and lawful actions to avoid and/or minimize the extent of such disclosure, including, without limitation, seeking a protective order for any Proprietary Information sought in discovery. As used in this Agreement, the term "Proprietary Information" shall mean all trade secrets or confidential or proprietary information designated as such by Nestor, whether by oral statements, letter or by the use of an appropriate proprietary stamp or legend, prior to or at the time any such trade secret or confidential or proprietary information is disclosed by Nestor to the Municipality. Notwithstanding the foregoing, information which is orally or visually disclosed to the Municipality by Nestor, or is disclosed in writing without an appropriate oral statement, letter, proprietary stamp or legend, shall constitute Proprietary Information if it would be apparent to a reasonable person, familiar with Nestor's business and the industry in which it operates, that such information is of a confidential or proprietary nature the maintenance of which is important to Nestor. In addition, the term "Proprietary Information" shall be deemed to include: (a) any notes, analyses, compilations, studies, interpretations, memoranda or other documents prepared by the Recipient which contain, reflect or are based upon, in whole or in part, any Proprietary Information furnished to the Municipality. [Signatures appear on fallowing page.] IN WITNESS WHEREOF, the Parties hereto have set their hands by their duly authorized representatives as of the day and year first above written. Nestor Traffic Systems, Inc. By: me: Nigel . ebbom Title: CFO Date: -TvIv— u- Z-111 City Of San Juan Capistrano, California May a . 1, , V - ATTEST: —All jj.J4 R. Monahan, City Clerk APPROVED AS TO FORM: John R. Sha Attorney 10 Exhibit A SERVICES Nestor shall provide the Municipality with the following Services, each of which is more fully described below: 1. Site Installation Planning; Design and Equipment Installation 2. User Training and Support 3. Citation Preparation and Processing Services 4. Maintenance and Support 5. Public Education Campaign 6. Expert Witness Testimony and Court Training 7. Violation Review Station 8. Reporting 9. Meetings Site Installation Planning, Design and E ui ment Installation 1.1 The System. A total of four video monitoring systems shall be installed initially, monitoring four approaches as set forth below. Subject to mutual agreement, video monitoring systems may be installed at the intersections marked with an asterisk in the table below, monitoring at least two approaches at each selected intersection. Intersections Approaches Enforced Del Obispo and Ortega both directions on Ortega Del Obispo and Camino Capistrano both directions on Del Obispo Camino Capistrano and Stonehill Ortega and Rancho Viejo 1.2 Substitution or Addition of an Intersection. If Nestor or the Municipality reasonably determines that one or more of the above intersections is not for any reason appropriate for the System (and such determination is made at least fifteen (15) days prior to the commencement of installation of the System at any such intersection), then alternate intersection(s) may be substituted by written consent of the Municipality and Nestor. After the commencement of installation activities, the Municipality may request that Nestor relocate any existing and operating System for an individual intersection to an alternate location (to be mutually agreed to by the Municipality and Nestor) in the event that the number of citations issued at the intersection is less than sixty (60) citations per Installed Approach at that intersection per month, averaged over a three month or longer period. The Relocation Fee to be paid by the Municipality is subject to determination by Nestor based, in part, on the alternate intersection agreed to, but in any event will not exceed $75,000 per Dual Approach System if existing conduit is available at the new intersection, or $95,000 if new conduit is required. 1.3 Timeframe for Installation of the System. The above intersections will be installed and activated in phases in accordance with an Implementation Plan to be mutually agreed to by Nestor and the Municipality. Nestor will use reasonable commercial efforts to install the System in accordance with the schedule set forth in the Implementation Plan. The Municipality agrees that the estimated dates of installation and activation of the System set forth in the Implementation Plan are subject to conditions beyond the control of 11 Nestor and are not guaranteed. 1.4 Installation/Ownership of the System. Nestor will procure, install and provide support of traffic signal violation detection equipment (computer hardware, software, cameras, camera housing and mounts, communications equipment and roadside controller cabinets) as specified in the Proposal at each of the designated intersections provided for above. As between Nestor and the Municipality, all components for the System will remain the property of Nestor, -except as otherwise provided for in Section 3.3 of the Agreement. 1.5 Installation 1.5.1 Nestor shall submit plans and specifications to the Municipality for review and approval, which review and approval will not be unreasonably withheld, delayed or conditioned. These plans and specifications shall be signed and stamped as approved by a professional engineer licensed to practice in the State in which the Municipality is located. Nestor shall provide at least three sets of drawings of the wiring for the System circuitry. 1.5.2 If commercially reasonable and if capacity exists, all wiring shall be internal to equipment (not exposed) and underground in existing traffic signal conduits, except where required to directly interface with the traffic signals and electrical service. Separate conduits or overhead wiring may be used by Nestor if existing conduit(s) are at capacity. If existing conduits are used, the Municipality will not unreasonably withhold, delay or condition consent to such use. 1.5.3 The System shall be electrically isolated from the traffic signal system using industry - standard practice and methods. In the event that Nestor and the Municipality cannot agree on the method of isolation, the Municipality shall procure, at its own expense, such equipment or means to accomplish the isolation or to meet the requirements of such. 1.5.4 The System may be mounted on or utilize support of existing traffic signal poles, arms or other intersection structures where possible, subject to Municipality review and approval, such review and approval not to be unreasonably withheld, delayed or conditioned. 1.5.5 The System poles, foundations and new infrastructure, as required, shall conform to applicable law. The Municipality shall be solely responsible for remediation that may be required with respect to such poles, foundations and new infrastructure if such remediation is required due to conditions not caused by Nestor. 1.5.6 Nestor shall notify the Municipality at least 48 hours prior to interfacing with traffic signal equipment. Nestor shall be responsible for installing all its wiring into Municipality cabinets. 1.5.7 To the maximum extent pennitted by law, the Municipality shall waive any permit and licensing fees for any System construction and installation. 1.6 Production of Video Files. Nestor shall produce digital video files of each red light violation, capable of identifying vehicles traveling through the intersection during the red light phase. The violation video shall capture the driver's view of the traffic signal, the approaching vehicle as viewed from the intersection, and either a front or rear view of the vehicle's license plate. 1.7 Restoration of intersections. Upon termination or expiration of the Agreement, Nestor will use conmrercially reasonable efforts to remove the System and restore the affected public facilities including returning the intersections to their original condition; provided, however, that Nestor shall not be required to remove any conduit, 12 in -ground fixture, underground wiring or other infrastructure that will require excavation or demolition. All costs incurred by Nestor thereby will be the responsibility ofNestor. 2. User Training and Support. 2.1 Training of Municipality Personnel. After System installation, Nestor will provide up to eight (8) hours of training for up to ten (10) persons at one (1) session at the Municipality's facilities to acquaint Municipality personnel with System operation. Training shall consist of instructional and operational training as well as hands-on equipment exercises with an instructor. All necessary training materials and documentation will be provided by Nestor. If the Municipality requests additional courses or training, Nestor will provide these on a fully cost reimbursable basis. 3. Citation Preparation and Processing Services 3.1 Citation Preparation and Processing. Nestor will process approved violations utilizing a computerized traffic citation program ("Citation Composer"). hi processing violations, Nestor shall print and mail citation forms. Nestor shall pay all mailing and postage costs, and such other miscellaneous costs and expenses as may be reasonably necessary to issue a citation and deliver it by U.S. mail. To the extent required by applicable law, Nestor will obtain a certification of mailing issued by the Post Office. Notwithstanding anything to the contrary in the foregoing provisions of this Section 3.1, Nestor will not process nor support any citations not captured by the System and/or approved by the Municipality. 3.1.1 Mailing of Citations. Citations shall be mailed to the violator as soon as is reasonably practicable after being approved by the Municipality and transmitted to the processing center (managed by Nestor or such third party, to whom Nestor has delegated such operation, on behalf of the Municipality). Provided that Municipality has promptly approved citations, such citation mailings shall be postmarked no later than eleven (11) days after violation date. The form of citation shall be subject to the approval of the Municipality, which approval may not be unreasonably delayed, conditioned or withheld. 3.1.2 Cooperation With Police and the Courts. Nestor shall cooperate with the Municipality's Police Department and -the Courts in the issuance of violations. Nestor shall submit mutually agreed information necessary to issue violation notices to the Police Department. All citations shall be reviewed and approved by the Municipality's Police Department prior to mailing. In addition, Nestor will cooperate with the Courts to set up the necessary communications and procedures that will enable Nestor to send delinquent notices to those registered owners/drivers for whom such notices are appropriate. 3.2 Access to Drivers License hiformation. To the extent Nestor is able, Nestor shall access directly the drivers license information and the registered owner residence address from the State department that regulates the use and operation of motor vehicles (the "DMV"). If Nestor is unable to access such information, Nestor shall provide the license plate number of violators to the Municipality, which will provide such information to Nestor within a reasonable period of time. 3.3 Numbering S sv tem Nestor, in coordination with the Courts, will develop and implement an independent numbering system for automated red light citations. 3 A Transmission of hiformation. Nestor will provide a secure FTP site for the Municipality to receive all citation information via a comma separated value data file. Nestor shall maintain a documented chain of custody for all electronically transmitted information while the information is under Nestor's control. 3.5 Customer Service. Nestor will provide an automated customer service telephone number to the 13 public. Customer Service Representatives will be available Monday through Friday, from 9:00 a.m. to 5:00 p.m. local time (of the Municipality), excluding holidays, in order to schedule violation video viewing appointments for the Police Department and to answer basic questions regarding the Municipality's program. 3.6 Notification of Failure to Appear. The Municipality shall use its best efforts to establish with the DMV an agreement or procedure to compel to the maximum extent permitted by a law a violator who has failed to appear in Court to make such appearance. To the extent permitted by law, such procedure shall include placing a hold on the violator's driver's license or automobile registration, requiring the violator to go to court to have such hold lifted, requiring the violator to sign a promise to appear and, if applicable, issuing a warrant for such violator. 4. Maintenance 4.1 Maintenance of System. Except as provided herein, Nestor shall use commercially reasonable efforts to Maintain the System (as defined below); provided however, that Nestor shall not be responsible for any maintenance, repair or replacement required as a result of (i) the negligence or intentional act of the Municipality, its employees, agents or independent contractors (other than Nestor) and/or (ii) any equipment or software not provided by Nestor. Nestor shall maintain a maintenance log that documents all service issues. To "Maintain the System" shall mean to keep the System in such a state of operation such that the System's functionality conforms in all material respects to the description of the System set forth in this Exhibit. 4.2 Equipment Checks. Nestor shall use commercially reasonable efforts to perform remote camera and PC equipment checks on a daily basis to confirm proper operation of computers, cameras and communications network. Routine in -field camera equipment inspection will be done as needed. 5. Public Education Campaign 5.1 Public Awareness Program. Nestor shall assist the Municipality with a Public Awareness Program. Such assistance shall consist of: a) Reasonable assistance for a media event to launch the community education program b) A reasonable amount of training for a Municipality staffed speaker's bureau c) The production of warning signs (as described in section 5.2) for installation by Municipality d) A toll-free customer service hotline as described in section 3.5 5.2 Warning Signs. Nestor shall provide one (1) warning sign per Installed Approach. The signs shall be in compliance with applicable law. The Municipality will be responsible for installation and Nestor will recommend appropriate installation locations. 6. Expert Witness Testimony and Court Training 6.1 Expert Witness Testimony. Nestor will provide expert witness testimony, as reasonably necessary, to testify regarding the accuracy and technical operation of the System. For any such testimony required other than once during each one-year period during the Term after the Installation Date, the Municipality shall pay Nestor a fee for the time (including time spent for preparation, travel and attendance in Court) of such expert witness based upon Nestor's then current hourly rate for such services (currently $175/hour), plus all reasonable out-of-pocket expenses. 6.2 Court Training. Nestor will conduct a one -day workshop -orientation session for Court judges 14 (and/or their designees), other appropriate court officials and the Municipality prosecutor. 7. Violation Review Station 7.1 Provision of Equipment. Nestor will provide one (1) laptop workstation and printer (which shall remain the property of Nestor) to be used by the Municipality for citation approval, violation video viewing appointments and court hearings. S. Reporting 8.1 Monthly Renort. Nestor shall submit to the Municipality a Monthly Report on project results within thirty (30) days of the end of each calendar month. To the extent reasonably commercially practical, the Monthly Report shall include information for each violation recorded by the System as well as the following items: a) Number of violations recorded b) Number of non -issued violations c) Breakdown of reasons for non -issuance d) Number of citations issued e) Court hearings scheduled and held f) Number of calls for information g) Number of violation video viewing appointments scheduled 8.2 Additional Reports or Information. Any other reports and information are not part of the Agreement and the preparation and delivery of any other such reports or information may result in additional fees. 8.3 Database. Nestor shall maintain a database with the following information (if available to Nestor) per violation: a) Location, date and time b) Number of seconds of red traffic signal c) Type of violation d) Vehicle description including license plate state and number e) Applicable vehicle code section violated f) Citation prepared or reason for not preparing citation g) Registered vehicle owner's name and address, driver's license number and related information required to prepare citations where violation is made by a driver other than registered owner (Affidavit of Non -Liability) h) Status of citation (outstanding, cancelled, reissued, paid, bail forfeited, traffic school, warrants 15 issued, etc.) 9. Meetings Nestor representative(s) shall be made reasonably available to meet with the Police Department, and other representatives of the Municipality as determined by the Municipality, on a bi-weekly basis during program implementation and on a monthly basis once the program is fully operational. Subject to approval and agreement by both parties, telephonic or other acceptable means may be used to conduct such meetings. 10. Additional Services (at the Municipalities request): a. Intentionally omitted. b. CrossingGuard VIP Program — Nestor will generate a'video-based analysis of an intersection designed to evaluate the frequency of red-light violations for up to four approaches at the targeted intersection. The video media will contain up to 16 hours of VIP monitoring assuming the equipment remains installed at the intersection during the course of monitoring, but not to exceed three consecutive calendar days. A report summarizing the results, along with the media generated will be provided to the Municipality. The VIP Program Fee is waived for two approaches at each of the following two intersections and will include 16 hours of evaluation: 1) Camino Capistrano and Stonehill Drive 2) Ortega Highway and Rancho Viejo Road. If additional VIP program evaluations are requested by the City, the VIP Program Fee is $950 for each intersection approach and includes 16 hours of evaluation. Additional 16 -hour evaluation blocks may be ordered at 50% of the VIP Program Fee for each block, assuming equipment remains installed at the intersection between blocks. The VIP Program Fee for an intersection is due upon ordering the service. If the Municipality selects the intersection approach for a full CrossingGuard System installation, Nestor will allow a credit equal to the intersection's VIP Program Fee paid against the Fees charged for the intersection. c. To order a CrossingGuard VIP analysis, the Municipality should provide a written request for the analysis to Nestor, including a description of the intersection approach(s) selected, and a check for the ordered VIP Program Fee. d. Collision Avoidance services and connections, shall be provided to the Municipality at all intersections installed with video monitoring systems. The fee for Collision Avoidance services shall be included in the intersection approach fee as set forth in 4.1. The Municipality shall have the option, in its sole discretion, to at any time disable the Collision Avoidance service for whatever period it deems desirable. e. Intersection Video Monitoring Services utilizing current fixed overview camera positions, or dedicated camera subject to customer control, fee to be determined. There is no fee for Intersection Video Monitoring Services using the context view camera at a frame rate supported by the existing communications lines at the site, which frame rate will be less than thirty frames per second. 16 (1) EXHIBIT B LICENSE AGREEMENT FOR CROSSINGGUARD SOFTWARE This License Agreement (the "License") is a legal agreement between you (the contracting counter- party in an agreement (the "Agreement') to which a copy of this License is attached as an Exhibit) and Nestor, Inc. ("Nestor") for the Nestor software product identified above, which.includes computer software and may include associated media, printed materials, and 'online" or electronic documentation (the "SOFTWARE PRODUCT'). The SOFTWARE PRODUCT also includes any updates and supplements to the original SOFTWARE PRODUCT provided to you by Nestor. Any software provided along with the SOFTWARE PRODUCT that is associated with a separate license agreement is licensed to you under the terns of that license agreement. By execution of the Agreement, you have agreed to be bound by the terms of this License. Such agreement by you is an express condition to your ability to use the SOFTWARE PRODUCT. 1. GRANT OF LICENSE. The SOFTWARE PRODUCT is licensed, not sold. This License grants you only the following rights: You may install and use one copy of the SOFTWARE PRODUCT on a single computer, including a workstation, terminal or other digital electronic device ("COMPUTER"). You may also store or install a copy of the SOFTWARE PRODUCT on a storage device, such as a network server, used only to install or run the SOFTWARE PRODUCT on your other COMPUTERS over an internal network; however, you must acquire and dedicate a license for each separate COMPUTER on or from which the SOFTWARE PRODUCT is installed, used, accessed, displayed or run. A license for the SOFTWARE PRODUCT may not be shared or used concurrently on different COMPUTERS. 2. DESCRIPTION OF OTHER RIGHTS AND LIMITATIONS. You may not reverse engineer, decompile, or disassemble the SOFTWARE PRODUCT, except and only to the extent that such activity is expressly permitted by applicable law notwithstanding this limitation. The SOFTWARE PRODUCT is licensed as a single product, Its component parts may not be separated for use on more than one computer. You may not rent, lease, transfer or lend the SOFTWARE PRODUCT. This License does not grant you any rights in connection with any trademarks or service marks of Nestor. Without prejudice to any other rights, Nestor may terminate this License if you fail to comply with the terms and conditions of this License. In such event, you must destroy all copies of the SOFTWARE PRODUCT and all of its component parts. 3. SUPPORT SERVICES AND UPGRADES. Nestor may provide you with support services related to the SOFTWARE PRODUCT ("Support Services"). Use of Support Services is governed by the Agreement. Any supplemental software code provided to you as part of the Support Services shall be considered part of the SOFTWARE PRODUCT and subject to the terms and conditions of this License. With respect to technical information you provide to Nestor as part of the Support Services, Nestor may use such information for its business purposes, including for product support and development. Nestor will not utilize such technical. information in a form that personally identifies you. If the SOFTWARE PRODUCT is labeled as an upgrade, you must be properly licensed to use a product identified by Nestor as being eligible for the upgrade in order to use the SOFTWARE PRODUCT. A SOFTWARE PRODUCT labeled as an upgrade replaces and/or supplements the product that formed the basis for your eligibility for the upgrade. You may use the resulting upgraded product only in accordance with the terms of this License. If the SOFTWARE PRODUCT is an upgrade of a component of a package of software programs that you licensed as a single product, the SOFTWARE PRODUCT may be used and transferred only as part of that single product package and may not be separated for use on more than one computer. 4. COPYRIGHT. All title and intellectual property rights in and to the SOFTWARE PRODUCT (including but not limited to any images, photographs, animations, video, audio, music, text, and "applets" 17 incorporated into the SOFTWARE PRODUCT), the accompanying printed materials, and any copies of the SOFTWARE PRODUCT are owned by Nestor or its suppliers. All title and intellectual property rights in and to the content which may be accessed through use of the SOFTWARE PRODUCT is the property of the respective content owner and may be protected by applicable copyright or other intellectual property laws and treaties. This License grants you no rights to use such content. All rights not expressly granted are reserved by Nestor. 5. DUAL -MEDIA SOFTWARE, You may receive the SOFTWARE PRODUCT in more than one medium. Regardless of the type or size of medium you receive, you may use only one medium that is appropriate for your single computer. You may not use or install the other medium on another computer. You may not loan, rent, lease, lend or otherwise transfer the other medium to another user. 6. BACKUP COPY. After installation of one copy of the SOFTWARE PRODUCT pursuant to this License, you may keep the original media on which the SOFTWARE PRODUCT was provided by Nestor solely for backup or archival purposes. If the original media is required to use the SOFTWARE PRODUCT on the COMPUTER, you may make one copy of the SOFTWARE PRODUCT solely for backup or archival purposes. Except as expressly provided in this License, you may not otherwise make copies of the SOFTWARE PRODUCT or the printed materials accompanying the SOFTWARE PRODUCT. 7. U.S. GOVERNMENT RESTRICTED RIGHTS. If you are acquiring the SOFTWARE PRODUCT (including the related documentation) on behalf of any part of the United States Government, the following provisions apply. The SOFTWARE PRODUCT and documentation are provided with RESTRICTED RIGHTS. The SOFTWARE PRODUCT is deemed to be 'commercial software" and 'commercial computer software documentation," respectively, pursuant to DFAR Section 227.7202 and FAR 12.212, as applicable. Any use, modification, reproduction, release, performance, display or disclosure of the SOFTWARE PRODUCT (including the related documentation) by the U.S. Government or any of its agencies shall be governed solely by the terms of this License and shall be prohibited except to the extent expressly permitted by the terms of this License. Manufacturer is Nestor; its address is set forth in the Agreement. 8. COMPLIANCE WITH LAW AND EXPORT RESTRICTIONS. You represent and agree that you do not intend to and will not use, disseminate or transfer in any way the SOFTWARE PRODUCT in violation of any applicable law, rule or regulation of the United States, or any State of the United States or any foreign country of applicable jurisdiction. Without limiting the foregoing, you agree that you will not export or re-export the SOFTWARE PRODUCT to any country, person, entity or end user subject to U.S. export restrictions. You specifically agree not to export or re-export the SOFTWARE PRODUCT: (i) to any country to which the U.S. has embargoed or restricted the export of goods or services, which currently include, but are not necessarily limited to Cuba, Iran, Iraq, Libya, North Korea, Sudan and Syria, or to any national of any such country, wherever located, who intends to transmit or transport the products back to such country; (ii) to any end-user who you know or have reason to know will utilize the SOFTWARE PRODUCT or portion thereof in the design, development or production of nuclear, chemical or biological weapons; or (iii) to any end-user who has been prohibited from participating in U.S. export transactions by any federal agency of the U.S. government. 9. OTHER PROVISIONS. Sections 2, 3, 6, 7 and 9 of the Agreement are hereby incorporated by reference as if herein set forth in full. W-1 EXHIBIT C LEASE AGREEMENT FOR CROSSINGGUARD SYSTEM This Lease Agreement (the "Lease") is part of an agreement (the "Agreement") (to which a copy of this Lease is attached as an Exhibit) between the Municipality and Nestor. The Parties hereto agree as follows: 1. LEASE. Nestor hereby leases to Municipality and Municipality hereby leases from Nestor, subject to the terms and conditions of this Lease, the such items of System equipment (together with all attachments, replacements, parts, additions, substitutions, repairs, accessions and accessories incorporated therein and/or affixed thereto, the "Equipment") that Municipality obtains possession, custody or control pursuant to the Agreement. 2. USE AND LOCATION. The Equipment shall be used and operated by Municipality only in connection with the operation of the System by qualified employees of Municipality and in accordance with all applicable operating instructions, and applicable governmental laws, rules and regulations. Municipality shall not part with control or possession of the Equipment without Nestor's prior written consent. 3. CONDMON. Municipality shall keep the Equipment in good condition and working order, ordinary wear and tear from proper use excepted. Municipality shall not make any alterations, additions or improvements to the Equipment without Nestor's prior written consent unless such alterations, additions or improvements do not impair the commercial value or the originally intended function or use of the Equipment and are readily removable without causing material damage to such Equipment so as to return the Equipment to its original state, less ordinary wear and tear. Any alteration, addition or improvement not removed prior to the return of the Equipment shall without further action become the property of Nestor, provided, however, that any alterations, additions and improvements which would reduce the value of the Equipment must be removed prior to the return of such Equipment. 4. RETURN. Upon the expiration or earlier termination of the Agreement, Municipality shall return the Equipment in the same condition as when delivered to Municipality, ordinary wear and tear excepted, to Nestor at the location specified by Nestor, 5. OWNERSHIP, LIENS. The Equipment is and shall at all times be the property of Nestor. Municipality agrees to take all action necessary or reasonably requested by Nestor to ensure that the Equipment shall be and remain personal property. Nothing in this Lease, the Agreement or any Exhibit shall be construed as conveying to Municipality any interest in the Equipment other than its interest as a Municipality. If at any time during the term hereof, Nestor supplies Municipality with labels, plates or other markings evidencing ownership, security or other interest therein, Municipality shall affix and keep the same displayed on the Equipment. Municipality shall, at its expense, keep the Equipment free and clear of all liens, charges, claims and other encumbrances. 6. INSURANCE. Municipality shall, at all times prior to the return of the Equipment to Nestor in accordance with Section 4 hereof, self insure or carry and maintain, at its expense, physical damage insurance providing "all risks" coverage for the Equipment and public liability and property damage insurance in amounts and with insurance companies satisfactory to Nestor, but in no event shall the all risk insurance be for an amount less than the replacement cost of the Equipment. 7. NO MUNICIPALITY SUBLEASE: ASSIGNMENT. MUNICIPALITY SHALL NOT ASSIGN OR IN ANY WAY DISPOSE OR OTHERWISE RELINQUISH POSSESSION OR CONTROL 19 OF ALL OR PART OF ITS RIGHTS OR OBLIGATIONS UNDER THIS LEASE OR ENTER INTO ANY SUB -LEASE OF ALL OR ANY PART OF THE EQUIPMENT WITHOUT THE PRIOR WRITTEN CONSENT OF NESTOR 8. FINANCING STATEMENTS: FURTHER ASSURANCES. Nestor and Municipality intend this transaction to be a leasing transaction only, but to the extent, at any time or from time to time, this Lease is construed to be a transaction intended as security, Nestor retains and Municipality hereby grants a security interest in all the Equipment, the proceeds of any sale, assignment, lease or sublease thereof, any insurance proceeds, and any other rights of Municipality in and to the Equipment, this Lease and/or their proceeds. Municipality, at the request of Nestor and at Municipality's expense, agrees to execute and deliver to Nestor any financing statements, fixture filings or other instruments necessary for perfecting the interests and title of Nestor in the Equipment, and Municipality agrees that Nestor may, in Nestor's sole discretion, file a copy of the Agreement, this Lease and any Exhibits in lieu of a financing statement. Municipality agrees, at Nestor's expense, to promptly execute and deliver such further documents and take any and all other action reasonably requested by Nestor from time to time, for the purpose of fully effectuating the intent and purposes of this Lease, and to protect the interests of Nestor, its successors and permitted assignees. 9. OTHER PROVISIONS. Sections 2, 3, 6, 7 and 9 of the Agreement are hereby incorporated by reference as if herein set forth in full. 3i] AMENDMENT NUMBER ONE TO TRAFFIC SIGNAL VIOLATION VIDEO -ENFORCEMENT SYSTEM LEASE & SERVICES AGREEMENT This Amendment Number One is made and entered into this a244t day of February, 2009 ("Effective Date") by and between Nestor Traffic Systems, Inc., a Delaware corporation having a place of business at 42 Oriental Street, Providence, RI 02908 ("Nestor"), and San Juan Capistrano, a municipal corporation of the State of California having an address of 32400 , Paseo Adelanto, San Juan Capistrano, CA 92675 (the "Municipality", and together with Nestor, the "Parties", and each singularly, a "Party"). WHEREAS, the Parties entered into a Traffic Signal Violation Video -Monitoring System Lease and Services Agreement on June 29, 2007 (the "Agreement'); and WHEREAS, the Parties now wish to amend the Agreement to address a recent California Superior Court, Appellate Division, decision; NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows: 1. Pursuant to the Judgment on Appeal from the Superior Court, County of Orange, North Justice Center, as issued on November 21, 2008 by The Honorable Robert J. Moss, Presiding Judge, in Case No. 30-2008-93057 (the "Decision"), Section 4.6 of the Agreement (the "Cost Neutral Provision") is hereby suspended and shall no longer be in effect. 2. If and when the Decision is overturned, overridden or for any other reason whatsoever is no longer controlling and a Cost Neutral Provision is allowed under California Vehicle Code Section 21455.5(g) or other controlling law, the Parties agree that the Cost Neutral Provision of the Agreement shall automatically go into effect. 3. All terms not defined herein shall have the same meaning and use as set forth in the Agreement. 4. All other terms, conditions and provisions of the Agreement not in conflict with this Amendment Number One shall remain in full force and effect. ATTACHMENT IN WITNESS WHEREOF, the Parties hereto have set their hand by their duly authorized representative as of the day and year first written above. NESTOR TRAFFIC SYSTEMS, INC. By: r Name: Mi haet4anien . Title: Chief Executive Officer CITY OF SAN JUAN CAPISTRANO, CALIFORNIA By: Name: Dave Adams Title: City Manager Attest: City Clerk as to form: Omar Sandoval, City Attorney ASSUMPTION AGREEMENT RELATING TO TRAFFIC SIGNAL VIOLATION VIDEO -ENFORCEMENT SYSTEM LEASE SERVICES AGREEMENT This Assumption Agreement is entered into effective the 7th day of October, 2009, by and among the CITY OF SAN JUAN CAPISTRANO, a California municipal corporation ("City"), and AMERICAN TRAFFIC SOLUTIONS, INC., a Kansas Corporation ("ATS"). RECITALS A. City entered into an agreement dated June 29, 2007 with Nestor Traffic Systems, Inc., a Delaware Corporation ("Nestor"), entitled Traffic Signal Violation Video - Enforcement System Lease & Services Agreement (the "Agreement"), for the installation, and assistance in administration and operation of a traffic signal violation detection system ("System") . B. On February 2, 2009, City and Nestor entered into an agreement amendment, which suspended Section 4.6 of the Agreement pertaining to cost neutrality consistent with the Judgment on Appeal from the Superior Court, County of Orange, issued November 21, 2008 in Case No. 30-2008-93057 involving the City of Fullerton's automated enforcement system (the "Amendment"). C. On June 4, 2009, Nestor entered into receivership proceedings in the State of Rhode Island. D. On September 10, 2009, ATS acquired all of Nestor's business relating to the Agreement and System. E. Section 9.1 of the Agreement authorizes Nestor to assign, and a third party to acquire, all or substantially all of Nestor's business relating to the System. F. Pursuant to the Agreement, ATS wishes to assume all rights, responsibilities and liabilities in the Agreement as amended pursuant to the Amendment. G. Accordingly, City and ATS desire to clarify, affirm, and acknowledge their respective rights and obligations under the terms of the Agreement as amended. Attachment 3 AGREEMENT 1. ATS hereby assumes, and City hereby acknowledges ATS' assumption of, all of the rights and obligations of Nestor which ATS specifically accepted/acquired in ATS' acquisition of Nestor (but excluding those which ATS did not accept) pursuant to the terms of the Agreement as amended by the Amendment. ATS hereby expressly and unconditionally agrees to perform and fulfill, from and after the effective date, all the duties, terms, covenants, conditions and obligations required to be fulfilled and performed by Nestor under the Agreement as amended by the Amendment. 2. City hereby consents to ATS' assumption of the Agreement, provided that said consent shall not be construed to release, waive, or otherwise compromise obligations under the Agreement and applicable law which ATS specifically accepted/acquired in ATS' acquisition of Nestor (but excluding those which ATS did not accept), or any violations thereof, whether known. or unknown by City, or for any subsequent performance of the Agreement by ATS. 3. Except as modified in this Assumption Agreement, the terms and conditions of the Agreement shall remain in full force and effect. 4. This Assumption Agreement may be executed in multiple counterparts (each of which is to be deemed an original for all purposes). IN WITNESS WHEREOF, the parties have executed and delivered this Assumption Agreement as of the day and year first, above written. CITY OF SAN JUAN CCAPISTRANO AMERICAN T FFIC SOLUTIONS, INC. Adam Tuton, Exec. VP and COO Attest: City C rk Secr tary Approved as to