UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
----------
FORM 10-Q
(Mark One)
|x| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
ENVIROTEST SYSTEMS CORP.
------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-21454 06-0914220
-------- ------- ----------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
ENVIROTEST TECHNOLOGIES, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-57384-01, 033-75406-01 36-2680300
-------- ------------------------- ----------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
246 Sobrante Way
Sunnyvale, CA 94086
-------------------
(Address of principal executive offices, including zip code, of registrants)
(408) 774-6300
--------------
(Registrants' telephone number, including area code)
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes X No ___
---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class of Common Stock Outstanding at April 30, 1997
--------------------- -----------------------------
Class A Common Stock, $0.01 par value 13,204,396 shares
Class B Common Stock, $0.01 par value 1,389,749 shares
Class C Common Stock, $0.01 par value 2,026,111 shares
1
<PAGE>
ENVIROTEST SYSTEMS CORP.
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets:
March 31, 1997 and September 30, 1996 3
Condensed Consolidated Statements of Operations:
three and six months ended March 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows:
six months ended March 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 5. Other 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
ENVIROTEST SYSTEMS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
March 31, September 30,
1997 1996
--------- -------------
(unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 135,827 $ 53,104
Short-term investments -- 7,991
Settlement due from Commonwealth of Pennsylvania -- 80,000
Contract receivables, net 10,577 10,969
Prepaid and other current assets 6,708 6,432
--------- ---------
Total current assets 153,112 158,496
Restricted cash 18,935 21,108
Property, plant and equipment, net 184,597 192,400
Assets held under capital lease, net 44,858 46,108
Assets held for sale, net 31,601 32,246
Intangible assets, net 13,564 14,927
Deferred debt acquisition costs, net 13,296 13,159
Deferred charges, net 1,238 1,189
Other assets 1,325 1,151
--------- ---------
Total assets $ 462,526 $ 480,784
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,059 $ 3,825
Accrued interest 1,581 1,689
Current portion of long-term debt 4,570 4,740
Current portion of capital lease and long-term debt obligation 4,900 3,880
Accrued expenses and other current liabilities 26,120 27,754
--------- ---------
Total current liabilities 40,230 41,888
Senior long-term debt, net 199,283 199,192
Senior subordinated debt 125,000 125,000
Capital lease and long-term debt obligation, net of current portion 55,695 58,155
Other long-term debt, net of current portion 35,663 38,129
Other long-term liabilities 5,480 5,266
--------- ---------
Total liabilities 461,351 467,630
Stockholders' equity:
Common stock 166 166
Additional paid-in capital 60,172 60,172
Cumulative currency adjustment (174) (96)
Accumulated deficit (53,411) (41,510)
Predecessor carry-over basis (5,578) (5,578)
--------- ---------
Total stockholders' equity 1,175 13,154
--------- ---------
Total liabilities and stockholders' equity $ 462,526 $ 480,784
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
<PAGE>
ENVIROTEST SYSTEMS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three Six
Months Ended Months Ended
March 31, March 31,
1997 1996 1997 1996
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Contract revenues $ 33,715 $ 30,024 $ 64,894 $ 58,208
Costs of services 25,825 28,212 50,429 50,104
-------- -------- -------- --------
Gross profit 7,890 1,812 14,465 8,104
Selling, general and administrative expenses 4,984 6,272 9,278 10,449
Consolidation expense -- 1,850 -- 1,850
Amortization expense 669 873 1,341 1,884
Gain on Pennsylvania settlement -- -- -- (15,307)
-------- -------- -------- --------
Income (loss) from operations 2,237 (7,183) 3,846 9,228
Other expense (income):
Interest expense 10,294 10,066 19,842 18,392
Other 175 (12) 95 8
Interest income (2,505) (2,740) (4,190) (3,835)
-------- -------- -------- --------
Income (loss) before income taxes (5,727) (14,497) (11,901) (5,337)
Income tax expense -- 1,918 -- 5,490
-------- -------- -------- --------
Net loss $ (5,727) $(16,415) $(11,901) $(10,827)
======== ======== ======== ========
Loss per common and common
equivalent share $ (0.34) $ (0.99) $ (0.72) $ (0.66)
======== ======== ======== ========
Weighted average common shares and
common equivalent shares 16,620 16,571 16,620 16,485
======== ======== ======== ========
Loss per common share - assuming
full dilution $ (0.34) $ (0.99) $ (0.72) $ (0.66)
======== ======== ======== ========
Weighted average common shares and common
equivalent shares 16,620 16,571 16,620 16,485
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
<PAGE>
ENVIROTEST SYSTEMS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
1997 1996
--------- ---------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities $ 1,894 $ 18,641
--------- ---------
Cash flows from investing activities:
Maturity of short-term investments 7,991 1,347
Payment for purchase of Systems Control, Inc.,
net of cash acquired -- (1,032)
Purchases of property, plant and equipment (4,468) (38,917)
--------- ---------
Net cash provided by (used in) investing activities 3,523 (38,602)
Cash flows from financing activities:
Proceeds from sale of Pennsylvania receivable 79,405 --
Proceeds from borrowings of long-term debt -- 17,000
Decrease in restricted cash 2,173 19,067
Repayment of long-term debt (1,776) (800)
Repayment of obligations under capital lease (2,300) --
Capitalization of loan fees (201) (855)
Other -- 148
--------- ---------
Net cash provided by financing activities 77,301 34,560
Effect of exchange rate on cash 5 17
--------- ---------
Net increase in cash and cash equivalents 82,723 14,616
Cash and cash equivalents, beginning of period 53,104 17,079
--------- ---------
Cash and cash equivalents, end of period $ 135,827 $ 31,695
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
<PAGE>
ENVIROTEST SYSTEMS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The condensed consolidated financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. In the opinion of management,
all material adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.
The accompanying condensed consolidated financial statements should be
read in conjunction with the Company's audited consolidated financial statements
and related footnotes included in the Company's Annual Report on Form 10-K for
the year ended September 30, 1996, filed with the Securities and Exchange
Commission.
Operating results for the interim periods shown in this report are not
necessarily indicative of the results to be expected for any other interim
period or the full fiscal year.
2. Deferred Charges
The Company incurs significant expenses associated with bringing new
emissions testing programs into operation, including staff recruiting and
training, public information and similar pre-operating costs. These expenses are
deferred and amortized over a twelve month period beginning with the
commencement of the emissions program. At March 31, 1997, the Company had
incurred and deferred approximately $1.2 million, net of accumulated
amortization, of such expenses relating to the Indiana emissions program. The
Company expects that its results of operations during any fiscal period that
includes the commencement of a program will be adversely impacted by this
accelerated amortization.
3. Pennsylvania Settlement
On December 11, 1996, the Company sold its right to receive the two
remaining installment payments totaling $80 million (the "Receivables Assets")
in principal amount due under a settlement agreement with the Commonwealth of
Pennsylvania (the "Settlement Agreement") for approximately $79,405,000.
The transaction was effected through a sale of the Receivables Assets
from Envirotest Partners ("Partners"), a Pennsylvania general partnership owned
by Envirotest and ETI, to a newly formed wholly owned subsidiary of the Company,
ES Funding Corp. ("Funding"). Funding, in turn, transferred the Receivables
Assets to an affiliate of a Pennsylvania bank. Funding and Partners provided
certain representations in connection with the transaction, including
representations as to enforceability of the Settlement Agreement against the
Commonwealth, and agreed to repurchase the Receivables Assets if Partners fails
to comply with its obligations under the Settlement Agreement.
6
<PAGE>
The Settlement Agreement requires the Company to use its best efforts
to dispose of the assets it acquired to perform vehicle emissions testing
services in Pennsylvania. If the net proceeds received by the Company from the
sale of the assets is less than $55 million, Pennsylvania is obligated to pay
the Company fifty percent of the difference up to $11 million no later than July
31, 1998. The amount of this contingent payment was reduced from $15 million in
an amendment to the Settlement Agreement that permitted the Company to complete
the sale of the receivable assets. Should the net proceeds from the sale of the
real estate and other program related assets exceed $55 million, the Company is
obligated to pay the Commonwealth 75% of the amount by which the net proceeds
exceed $55 million. Based upon the experience with recent sales of these assets
and the sufficiency of reserves, the Company is of the opinion that upon final
disposition of properties no loss will be recognized.
4. Business Acquisition
In January 1996, the Company purchased from Systems Control, Inc.
("SCI") the stock of SCI-WA, a Washington company and operator of the State of
Washington centralized emissions testing program, all intellectual property of
SCI and an option to purchase SCI's Indiana subsidiary for $3.2 million. The
Company exercised the option in June, 1996 and purchased the assets of the
Indiana subsidiary. The results of operations of SCI-WA have been included in
consolidated results from the date of acquisition.
5. Income Taxes
The deferred tax asset is fully reserved as of March 31, 1997. The
amount of the deferred tax asset considered realizable may change in the near
term if estimates of future taxable income are revised.
6. Legal Proceedings
The State of Connecticut has made certain claims stating that the
Company owes the State $2.4 million plus accruing amounts for certain cost
savings in the start up of the enhanced testing program in Connecticut. The
Company cannot predict the outcome of this complaint. However, the Company
believes that it has valid defense against these claims.
The Company is a defendant in Grendell, et al. V. Ohio EPA. et al, a
taxpayers' class action suit originally filed on October 3, 1996 in Geauga
County Court of Common Pleas, State of Ohio. The case has been remanded to the
Common Pleas Court in Franklin County, Ohio. Plaintiffs seek to enjoin the Ohio
motor vehicle emission inspection program and the Company's Ohio contracts as
invalid and void based on certain Ohio constitutional provisions. The Company
believes that it has valid defenses to the claims contained in the complaint and
intends to defend the matter vigorously.
On January 30, 1997, Ron Young, as relator, filed an action for a writ
of quo warranto and ancillary relief in the Ohio Supreme Court. The action named
the State Attorney General as respondent, and sought to establish by what
authority the Ohio General Assembly enacted Am. Sub. S. B. 18, the authorizing
legislation for the State's existing motor vehicle inspection and maintenance
program. On February 24, 1997, the Attorney General filed a motion to dismiss
the action. On March 12, 1997, the Ohio Supreme Court sustained the motion, and
dismissed the case matter in its entirety.
On May 12, 1997 the Company was served with a complaint asserting that
Timothy Dore purports to represent a class of all "front range drivers who have
paid to have their vehicle emissions systems tested by the Company". The
complaint, filed in Denver District Court, states two claims for relief, breach
of contract and negligence, and seeks damages equal to the difference in price
between the new emissions test and the old tail pipe test for all test for
members of the class undertaken on the front range since implementation of the
Company's testing program. The complaint also seeks cancellation of the contract
for the State of Colorado. The Company believes that it has valid defenses to
the claims contained in the complaint and intends to defend the matter
vigorously.
The Company is a party to various other legal proceedings and claims in
the ordinary course of business. The Company does not believe that the outcome
of any pending matters will have a material adverse affect on its consolidated
financial position or results of operations.
See Part II., Item 1 - Legal Proceedings for further discussion.
7
<PAGE>
ENVIROTEST SYSTEMS CORP.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company conducts its operations directly and through its principal
wholly owned subsidiaries, Envirotest Technologies, Inc. ("ETI"), Envirotest
Wisconsin, Inc. and Systems Control, Inc., a Washington corporation. The
Company's British Columbia, Canada operations are conducted through a British
Columbia partnership, Envirotest Canada which is wholly owned by the Company
(through its subsidiaries).
Certain sections of this Form 10-Q, including "Management's Discussion
and Analysis of Financial Condition and Results of Operations," contain forward
looking statements within the meaning of Section 21E of the Securities Exchange
Act of 1934, with respect to the Company's expectations or belief concerning
future events. The Company cautions that these statements are further qualified
by important factors that could cause actual results to differ materially from
those in the forward looking statements. The forward looking statements include,
without limitation, the amounts of reserves recognized, the number of annual
tests, the commencement of operations for a particular program, the amount of
revenues that will be generated under a contract, and ultimate outcome of
pending litigation.
Recent Developments
During the second fiscal quarter, the Company signed an agreement
with the State of Florida extending the current contract at the same test fee
for two additional years to expire March 31, 2000. The extension is expected to
generate aggregate revenues of up to $32 million. The Company was also awarded a
contract to provide a vehicle safety and inspection program in Connecticut which
commenced January, 1, 1997. Under the terms of the contract, which expires in
June, 2002, Envirotest will provide safety inspections on an estimated 160,000
vehicles per year with anticipated annual revenues of approximately $2.1 million
to the Company.
As of March 31, 1997, the State of California elected to terminate the
Company's contract to provide remote sensing services. The contract was expected
to extend through June 30, 1998 and provide $2.3 million of revenue to the
Company. The termination was related to the State's decision to reassess its
future vehicle emissions testing program.
Results of Operations
Contract revenues increased to $33.7 million in fiscal second quarter
1997 from $30.0 million in fiscal second quarter 1996, an increase of $3.7
million or 12.3%. For the six months ended March 31, 1997, contract revenues
were $64.9 million, an increase of $6.7 million, or 11.5%, over contract
revenues of $58.2 million for the corresponding period in fiscal 1996. The
increase in contract revenues in fiscal second quarter 1997 as compared to
fiscal second quarter 1996 was primarily due to additional revenues of
approximately $1.4 million generated from a new program with the State of
Indiana which commenced operations in January, 1997, additional revenues of $0.8
million from the Washington State program acquired on January 30, 1996, $1.4
8
<PAGE>
million of additional revenues in the British Columbia program of which
approximately $0.6 million is attributable to the employee strike which impacted
operations during fiscal second and third quarters of 1996 and $0.8 million from
a one time adjustment in test scheduling, and $0.5 million increase in remote
sensing unit sales. These increases were offset by a $0.5 million decrease in
revenue as a result of the expiration of the California Quality Assurance
contract on September 30, 1996.
The increase in contract revenues of $6.7 million for the six months
ended March 31, 1997 resulted primarily from additional revenues of
approximately $7.1 million generated from new contracts with the states of
Indiana and Ohio, and a full quarter of operations in the Washington state
program; $2.5 million from the British Columbia program resulting from a one
time adjustment in test scheduling and the absence of testing due to an employee
strike during the second and third quarters of fiscal year 1996; and $0.8
million increase in remote sensing unit sales. These increases were offset by a
decrease of $1.9 million in the Colorado program and $0.9 million in the
Connecticut program as more vehicles were scheduled for testing in these
programs in the corresponding period in fiscal 1996. Revenue also decreased $1.0
million as a result of the expiration of the California Quality Assurance
Contract.
Gross profit increased to $7.9 million in fiscal second quarter 1997
from $1.8 million in fiscal second quarter 1996, an increase of $6.1 million, or
335.4%. As a percentage of contract revenues, gross profit increased to 23.4% in
fiscal second quarter 1997 from 6.0% in fiscal second quarter 1996, an absolute
increase of 17.4%. This increase was attributable to several factors including
lower operating costs of $2.9 million in the Ohio and Wisconsin programs, which
were burdened with start-up and accelerated amortization of deferred charges in
the corresponding fiscal quarter; contribution of $1.4 million from new and
acquired programs in Indiana and Washington; improvement of $1.0 million in the
British Columbia program which benefited from a one time volume increase and the
settlement of the employee strike as discussed above. Most other programs also
experienced improved margins resulting from operating efficiencies.
For the six months ended March 31, 1997, gross profit increased to
$14.5 million from $8.1 million for the corresponding period in fiscal 1996, an
increase of $ 6.4 million or 78.5%. As a percentage of contract revenues, gross
profit increased to 22.3% from 13.9% in the corresponding period in fiscal 1996,
an absolute increase of 8.4%. This increase was attributable to increased
contribution of $2.3 million from the Ohio and Wisconsin programs resulting from
higher revenues in the new enhanced programs and cost efficiencies as compared
to the prior fiscal period which included higher operating expenditures
associated with the startup of these new enhanced programs. In addition,
improved gross profit resulted from the new and acquired programs in Indiana and
Washington which made additional contributions of $1.6 million. British Columbia
program contributed $1.9 million for the reasons discussed above and other
general improvements added $1.4 million to the Company's operating results.
These increases were offset by a decrease in contribution from the California
Quality Assurance contract that expired in September 30, 1996.
Selling, general and administrative ("SG&A") expenses decreased to $5.0
million in fiscal second quarter 1997 from $6.3 million in fiscal second quarter
1996, a decrease of $1.3 million or 20.5%. As a percentage of contract revenues,
SG&A expenses decreased to 14.8% in fiscal second quarter 1997 from 20.9% in
fiscal second quarter 1996, an absolute decrease of 6.1%. For the six months
ended March 31, 1997, SG&A decreased to $9.3 million from $10.4 million for the
corresponding period in fiscal 1996, a decrease of $1.1 million or 11.2%. As a
percentage of contract revenues, SG&A expenses decreased to 14.3% for the six
months ended
9
<PAGE>
March 31, 1997 from 18.0% for the corresponding period in 1996, an absolute
decrease of 3.7%. The decrease in SG&A expenses is primarily due to relocation
costs of $1.5 million resulting from the consolidation of the corporate
headquarters to Sunnyvale, California during fiscal second quarter 1996. Also,
in fiscal second quarter 1996, the Company recorded a consolidation expense of
$1.9 million representing the costs associated with the closure of the Phoenix
corporate headquarters and other restructuring costs.
Amortization expense decreased to $0.7 million in fiscal second quarter
1997 from $0.9 million in fiscal second quarter 1996, a decrease of $0.2
million. For the six months ended March 31, 1997, amortization expense decreased
to $1.3 million from $1.9 million for the corresponding period in fiscal 1996.
The decrease was attributable to the expiration of the California Quality
Assurance contract as of September 30, 1996.
A one time gain on the Pennsylvania settlement of $15.3 million was
included in the six months ended March 31, 1996.
Income from operations increased to $2.2 million in fiscal second
quarter 1997 from a $7.2 million loss in fiscal second quarter 1996, an increase
of $9.4 million. As a percentage of contract revenues, income from operations
increased to 6.6% as compared to a 23.9% loss in the corresponding period of the
prior year, an absolute increase of 30.5%. The increase in income is due to the
increase in gross profit of $6.1 million, SG&A reductions of $1.3 million,
reduced amortization expenses of $0.2 million, and the absence of the
consolidation expense incurred in fiscal second quarter 1996 of $1.9 million, as
discussed above. For the six months ended March 31, 1997, income from operations
decreased to $3.8 million from $9.2 million in the corresponding period of the
prior year, a decrease of $5.4 million. For the six months ended March 31, 1997,
income from operations as a percentage of contract revenues decreased to 5.9%
compared to 15.9% in the corresponding period of the prior year, an absolute
decrease of 10.0%. The decrease is due to the inclusion of the gain on the
Pennsylvania settlement of $15.3 million in the comparable fiscal period in 1996
offset by the absence of the prior year consolidation expense of $1.9 million,
reduced SG&A expenses of $1.2 million, lower amortization expense of $0.5
million, and increased gross profit of $6.4 million in the six month period
ending March 31, 1997.
Interest expense increased to $10.3 million in fiscal second quarter
1997 from $10.0 million in fiscal second quarter 1996, an increase of $0.3
million. For the six months ended March 31, 1997, interest expense increased to
$19.8 million from $18.4 million in the corresponding period of the prior year,
an increase of $1.4 million. These increases were primarily attributable to debt
associated with the Wisconsin, Washington and Indiana programs.
Interest income decreased to $2.5 million in fiscal second quarter 1997
from $2.7 million in fiscal second quarter of 1996, a decrease of $0.2 million.
For the six months ended March 31, 1997, interest income increased to $4.2
million compared to $3.8 million in the corresponding period of the prior year.
This increase over the prior year was primarily attributable to the interest
earned on amounts under the Pennsylvania settlement.
There was no income tax benefit on the pretax loss in the fiscal second
quarter 1997 compared to income tax expense of $1.9 million in fiscal second
quarter 1996. There was no income tax benefit on the pretax loss for the six
months ended March 31, 1997 compared to income tax expense of $5.5 million for
the six months ended March 31, 1996. The absence of the tax credit at the
combined federal and state effective tax rate of approximately 39% is a result
of recording a valuation allowance to fully reserve the net deferred tax asset.
10
<PAGE>
Net loss was $5.7 million in fiscal second quarter 1997 compared to a
$16.4 million loss in fiscal second quarter 1996, a decrease of $10.7 million.
For the six months ended March 31, 1997, net loss was $11.9 million compared to
$10.8 million for the corresponding period in fiscal 1996.
Liquidity, Capital Resources and Commitments
Cash and cash equivalents, short-term investments and restricted cash
increased to $154.8 million at March 31, 1997 from $82.2 million at September
30, 1996. The increase of $72.6 was primarily a result of the proceeds of $79.4
million received as a result of the Company selling its rights to receive the
two remaining installment payments totaling $80 million from the Commonwealth of
Pennsylvania and $1.9 million of cash generated from operations. These increases
in cash were partially offset by $4.3 million of debt and capital lease payments
and $4.5 million of purchases of property, plant and equipment primarily for the
new Indiana program.
The Company's primary uses of cash are the funding of the Company's
capital expenditure requirements, debt repayments, payments on capital and
operating leases, interest payments and other working capital needs. The
Company's capital and operating leases currently require minimum lease payments
of approximately $15.7 million in fiscal year 1997, decreasing to approximately
$14.3 million through 1999 and decreasing thereafter as certain leases are
scheduled to expire.
The Company's capital expenditures include expenditures for maintenance
of existing facilities, and development and construction expenditures for new
emissions facilities. The Company's development and construction capital
expenditures are dependent on the number of contracts it is awarded, and are
only incurred after the contract has been signed. After signing a contract, the
Company may incur significant development and construction expenditures, which
the Company expects to finance with existing cash resources, internally
generated funds, additional borrowings and alternative financing sources,
including leasing alternatives. It generally takes one to two years after a
contract has been signed for a program to begin operations and generate
revenues, depending on the size of the program.
The Company's principal commitments at March 31, 1997 consist of
approximately $2.1 million of capital expenditure requirements for two
facilities still to be completed in the Indiana program . Also in fiscal year
1997, the Company intends to spend approximately $1.2 million on maintenance
capital expenditures. The Company believes that its existing cash resources,
cash generated from operations and alternative financing sources, including
leasing alternatives, will be sufficient to complete implementation of the
Indiana program and to meet its liquidity requirements for the foreseeable
future.
Recent Accounting Pronouncements
During February 1997, the Financial Accounting Standards Board issued
Statement No. 128 , "Earnings per Share"(SFAS No. 128) which establishes
standards for computing and presenting earnings per share (EPS) more comparable
to international standards. It replaces the presentation of primary EPS with a
presentation of basic EPS. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. The Company is studying the impact of SFAS No. 128,
which is effective for the financial statements issued for periods ending after
December 15, 1997, will have on its EPS calculation.
11
<PAGE>
ENVIROTEST SYSTEMS CORP.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company's new contract with the State of Connecticut began January 1, 1995.
Enhanced testing was scheduled to begin on April 3, 1995. Just prior to the
startup of enhanced testing, the State unilaterally decided to continue the old
testing procedure and phase in the enhanced testing. Additionally, the Company
was unable to build two facilities, one due to the State's inability to provide
the land the contract required and the other due to the Company's inability to
obtain zoning. The State claimed that it was entitled to be paid for the cost
savings to the Company for not having performed the enhanced test and not having
built the facilities. The Company claimed additional costs incurred when the
State unilaterally changed the test. After unsuccessful settlement negotiations,
the Commissioner of Department of Motor Vehicles decided on February 9, 1996
that the Company owed the State $2.4 million plus other non-qualified amounts
for 1995 and additional accruing amounts until the enhanced test was performed
and the facilities built. In accordance with the contract and to protect its
rights, the Company appealed the Commissioner's decision to binding arbitration
under rules of the American Arbitration Association. On May 1, 1996, prior to
the appointment of the arbitrators, the State filed a complaint in the Superior
Court in Hartford, Connecticut to enjoin the arbitration claiming that the
American Arbitration Association had no power to administer hearings in this
matter. The State has taken no further action on this matter and no hearing date
with regard to the State's complaint has been scheduled.
The Company is a defendant in Grendell, et al. V. Ohio EPA. et al, a taxpayers'
class action suit originally filed on October 3, 1996 in Geauga County Court of
Common Pleas, State of Ohio. The case has been remanded to the Common Pleas
Court in Franklin County, Ohio. Plaintiffs seek to enjoin the program and the
Company's Ohio contracts as invalid and void based on certain Ohio
constitutional provisions. The Company believes that it has valid defenses to
the claims contained in the complaint and intends to defend the matter
vigorously.
On January 30, 1997, Ron Young, as relator, filed an action for a writ of
quo warranto and ancillary relief in the Ohio Supreme Court. The action named
the State Attorney General as respondent, and sought to establish by what
authority the Ohio General Assembly enacted Am. Sub. S. B. 18, the State's most
recent version of its motor vehicle inspection and maintenance program. On
February 24, 1997, the Attorney General filed a motion to dismiss the action. On
March 12, 1997, the Ohio Supreme Court sustained the motion, and dismissed the
case in its entirety.
On May 12, 1997 the Company was served with a complaint asserting that
Timothy Dore purports to represent a class of all "front range drivers who have
paid to have their vehicle emissions systems tested by the Company". The
complaint, filed in Denver District Court, states two claims for relief, breach
of contract and negligence, and seeks damages equal to the difference in price
between the new emissions test and the old tail pipe test for all test for
members of the class undertaken on the front range since implementation of the
Company's testing program. The complaint also seeks cancellation of the contract
for the State of Colorado. The Company believes that it has valid defenses to
the claims contained in the complaint and intends to defend the matter
vigorously.
12
<PAGE>
The Company is a party to various other legal proceedings and claims in the
ordinary course of business. The Company does not believe that the outcome of
any pending matters will have a material adverse affect on its consolidated
financial position or results of operations.
Item 5. OTHER
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
Employment Agreement between Richard Webb and Envirotest Systems
Corp. as of April 14, 1997.................................................10.115
Agreement for Renewal of Contract for Motor Vehicle Inspection
Program between Envirotest Technologies and the Florida Department
of Highway Safety and Motor Vehicles dated February 97......................10.116
Connecticut Safety Inspection Extension Contract for the period
September 24, 1996 through June 30, 2002, between Envirotest Systems
Corp. and the Connecticut Department of Motor Vehicles......................10.117
Statement of Computation of Loss Per Share .....................................11
Financial Data Schedule.........................................................27
</TABLE>
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
ended March 31, 1997.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused their report to be signed on their behalf by the
undersigned thereunto duly authorized.
ENVIROTEST SYSTEMS CORP.
------------------------
(Registrant)
ENVIROTEST TECHNOLOGIES, INC.
-----------------------------
(Registrant)
Date: May 13, 1997 By /s/ F. Robert Miller
--------------------------------------
F. Robert Miller
President and Chief Executive Officer
Date: May 13, 1997 By /s/ Raj Modi
---------------------------------------
Raj Modi
Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary
(Principal Financial Officer)
14
<PAGE>
ENVIROTEST SYSTEMS CORP.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number: Page No.
- ------- --------
<S> <C> <C>
(11) Statement of Computation of Per Share Earnings
(27) Financial Data Schedule
(10.115) Employment Agreement between Richard Webb and Envirotest
Systems Corp. as of April 14, 1997.
(10.116) Agreement for Renewal of Contract for Motor Vehicle Inspection
Program between Envirotest Technologies and the Florida Department of
Highway Safety and Motor Vehicles dated February 1997.
(10.117) Connecticut Safety Inspection Extension Contract for the period
September 24, 1996 through June 30, 2002, between Envirotest Systems
Corp. and the Connecticut Department of Motor Vehicles
</TABLE>
15
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 14th day of April, 1997, by and between
ENVIROTEST SYSTEMS CORP., a Delaware corporation with an office at 246 Sobrante
Way, Sunnyvale, California 94086 (hereinafter referred to as the "Company"), and
RICHARD P. WEBB, an individual residing at 174 Waterville Road, Farmington,
Connecticut 06032 (hereinafter referred to as the "Employee").
W I T N E S S E T H:
WHEREAS, the Company desires to retain the services of the Employee, and
the Employee desires to be employed by the Company, upon the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter contained, the parties hereby agree as follows:
1. Employment and Term.
(a) The Company shall employ the Employee, and the Employee shall
serve the Company, upon the terms and conditions hereinafter set forth.
(b) The employment of the Employee by the Company hereunder shall
commence as of the date hereof and, unless sooner terminated in the manner as
herein provided, shall terminate on the second anniversary hereof (the "Term").
2. Duties. During the Term, the Employee shall serve as Executive Vice
President and Chief Operating Officer of the Company, faithfully and to the best
of his ability, and perform such duties and have such responsibilities and
authority as are consistent with (i) his position and status as Executive Vice
President and Chief Operating Officer of the Company and (ii) the practices and
policies of the Company generally applicable to executive employment
arrangements.
3. Salary. During the first year of the Term of his employment hereunder,
the Company shall pay to the Employee a salary for his services at a rate of
$275,000 per annum, payable in accordance with the regular payroll practices of
the Company. For the second year of the Term, the Company shall pay a salary for
the Employee's service at a rate of the previous year's salary for the
immediately preceding year, increased by the greater of (i) five percent (5.0%)
or (ii) the aggregate monthly percentage increase in the Consumer Price Index
for all Urban Consumers (CPI-U) for the United States, All Items (1982-1984 =
100), published by the U.S. Department of Labor, after taking into account any
revisions, for the most recent twelve months for which the Consumer Price Index
data is published prior to the first day of such
-1-
<PAGE>
additional year.
4. Bonus Arrangement; Stock Options.
(a) In addition to the salary provided for in Paragraph 3 of this
Agreement, the Employee is eligible to participate in the Company's bonus and
other compensation plans for the Company's employees of like classification
during the term of employment hereunder. The Employee shall not be eligible for
payment under such a plan if his employment is terminated for cause. The
Employee shall have the opportunity to earn an annual target bonus of up to one
hundred percent (100%) of the salary provided for in paragraph 3 of this
Agreement, measured against objective financial criteria to be determined by the
Board.
(b) The Company shall recommend to the Compensation Committee of the
Board, which administers the Company's stock option plan, that, as of the date
hereof, the Company grant to the Employee options with respect to 200,000 shares
of Company's common stock. Such options shall be granted at an exercise price
equal to the closing Nasdaq National Market quotation on the most recent trading
date prior to the date of grant. Such options shall vest according to the
following schedule:
(i) 50% of such options shall vest on the first year
anniversary of the date of grant; and
(ii) the remaining options shall vest on the second year
anniversary of the date of grant.
The options shall expire, if not exercised, on the tenth anniversary
of the date of grant. Said options shall be granted pursuant to a subscription
agreement or other instrument, as determined by the Compensation Committee. Such
options shall also be subject to all of the terms and conditions imposed upon
stock options granted under the Company's Stock Option Plan.
(c) In the event that a "change of control" of the Company occurs
during the Term, one hundred percent (100%) of all options granted to the
Employee prior to the date on which such change of control occurs shall vest
upon such change of control and may be exercised by the Employee at any time
during the ninety (90) day period commencing upon the date such change of
control occurs. Change of control shall have the meaning set forth in Exhibit I
hereto.
-2-
<PAGE>
5. Employee Benefits and Perquisites. During the Term, the Company will
provide to the Employee the following benefits and/or perquisites:
(a) The Employee shall be a participant in all benefit programs
provided for the Company's management executives of like classification,
including, but not limited to, insurance, retirement, tax-deferred plans, health
and other benefit plans (including the Medical Reimbursement Program) for which
he qualifies.
(b) The Employee shall be entitled to receive fringe benefits and
perquisites (other than the above-mentioned employee benefit plans and programs)
in the aggregate substantially equivalent to those provided to the Company's
management executives of like classification, including vacation time and
reasonable sick leave.
(c) During the Term, the Company shall furnish to the Employee an
automobile of the Company's reasonable choice. The Company shall pay for all
expenses associated with the use, operation and enjoyment of the automobile
(including insurance coverage but exclusive of gasoline expense).
(d) During the Term, the Employee shall be resident in the
Sunnyvale, California area or such other area where the Company's headquarters
are located. Within the terms of the Company's Relocation Policy, the Company
will make arrangements to keep Employee whole for a period of at least one year
as a result of expenses associated with the relocation from his current home,
including payment of rent by the Company for a home in the Sunnyvale area. The
Company and Employee agree to negotiate in good faith the relocation-related
arrangements for the second year of the Term.
6. Permanent Disability. In the event of the permanent disability (as
hereinafter defined) of the Employee during the Term, the Company shall have the
right, upon written notice to the Employee, to terminate his employment
hereunder, effective upon the giving of such notice. Upon such termination, the
Company shall be discharged and released from any further obligations under this
Agreement, except for the obligation to pay salary and other benefits pursuant
to Paragraph 8(b) of this Agreement. Disability benefits due under applicable
plans and programs of the Company shall be determined under the provisions of
such plans and programs. For purposes of this Paragraph 6, "permanent
disability" shall be defined as any physical or mental disability or incapacity
which renders the Employee unable to execute his duties hereunder for 180
consecutive days or an aggregate period of more than 210 days in any twelve (12)
month period.
7. Death. In the event of the death of the Employee during the Term, the
salary and other benefits to which the Employee is entitled pursuant to
Paragraph 8(b) hereof shall be paid to the beneficiary so designated by the
Employee by written notice to the Company, or, failing such designation, to his
estate. The Employee shall have the right to name, from time to time, any one
person as beneficiary hereunder or, with the consent of the Board, he may make
other
-3-
<PAGE>
forms of designation of beneficiary or beneficiaries. The Employee's designated
beneficiary or personal representative, as the case may be, shall accept the
payments provided for in this Paragraph 7 in full discharge and release of the
Company of and from any further obligations under this Agreement. Any other
benefits due under applicable plans and programs of the Company shall be
determined under the provisions of such plans and programs.
8. Termination and Expiration of Employment.
(a) The Employee's employment hereunder may be terminated by the
Company for "cause" at any time. Termination of employment for "cause" shall
mean termination upon (1) the willful failure by the Employee to materially
perform his duties with the Company or to follow the instructions of the Board
(other than any such failure resulting from his incapacity due to physical or
mental illness), (2) the willful engaging by the Employee in conduct that is
materially injurious to the Company, monetarily or otherwise, (3) the commission
of any act of fraud, theft or dishonesty by the Employee against the Company,
(4) the conviction of the Employee of (or the pleading by the Employee of nolo
contendere to) any felony, fraud or embezzlement or (5) any willful breach by
the Employee of the terms of this Agreement, unless any such breach of this
Agreement by the Employee that is capable of being corrected is corrected in all
material respects within thirty (30) days following written notification by the
Company to the Employee that the Company intends to terminate the employment of
Employee hereunder by reason of a willful breach of this Agreement for cause as
specified in such written notice to the Employee.
If the Employee is terminated for "cause," the Company shall have no
further obligations under this Agreement, except for the obligation to pay all
salary and other benefits earned but unpaid to the date of termination, and all
options granted to the Employee and not exercised prior to the date of such
termination shall be extinguished on the date of such termination.
(b) If (i) the Company terminates the employment of the Employee
during the Term other than for "cause" (as defined in Paragraph 8(a) of this
Agreement), or (ii) during the Term there is a change in control of the Company
and the successor entity (or purchaser) does not accept an assignment of this
Agreement, or (iii) the terms of the Employee's employment are materially
adversely changed or his duties and responsibilities are materially diminished,
following a change of control or otherwise (including, by way of example and not
by limitation, by reason of the Employee ceasing to be an Executive Vice
President and Chief Operating Officer of the Company), whereupon, in the case of
this clause (iii), the Employee shall have the right to consider his employment
hereunder to have been terminated by the Company by giving written notice to the
Company within 10 business days after the date on which the Employee believes
that such adverse change has occurred, the action(s) constituting such adverse
change or diminution, and the fact that he is terminating this Agreement
pursuant to this Paragraph 8(b)(iii), then (A) the Company shall retain Employee
and Employee agrees to serve as a consultant to the Company for the longer of
the remainder of the Term or six (6) months ("Consulting Period");
-4-
<PAGE>
(B) the Employee's options shall vest as set forth in Section 4(c) above; and
(C) the Employee shall be entitled to continue to receive (1) on the same
schedule as was in existence prior to such termination, payment of his base
salary and all other benefits to which he is entitled for the Consulting Period
and (2) the pro rata portion of any bonus earned by the Employee for the fiscal
year in which the termination occurred.
9. Confidentiality; Injunctive Relief.
(a) Recognizing that the knowledge, information and relationship
with customers, suppliers and agents, and the knowledge of the Company's
business methods, systems, plans and policies which he may hereafter receive or
obtain as an employee of the Company, are valuable and unique assets of the
Company, the Employee agrees that, during and after the Term, he shall not
(otherwise than pursuant to his duties hereunder) disclose, without the prior
written approval of the Board, any such knowledge or information pertaining to
the Company, its business, personnel or policies, to any person, firm,
corporation or other entity, for any reason or purpose whatsoever. The
provisions of this Paragraph 9(a) shall not apply to (i) information which is or
shall become generally known to the public or the trade, or information which is
or shall become available in trade or other publications (except by reason of
the Employee's breach of his obligations hereunder) and (ii) information which
the Employee is required to disclose by law or by a governmental entity or by an
order of a court of competent jurisdiction or pursuant to a subpoena from such a
court or agency. If the Employee is required by law or a court order to disclose
such information, he shall notify the Company of such requirement and provide
the Company an opportunity to contest such law or court order.
(b) The Employee acknowledges that the services to be rendered by
him are of a special, unique and extraordinary character and, in connection with
such services, he will have access to confidential information vital to the
Company's business. By reason of this, the Employee consents and agrees that if
he violates any of the provisions of this Agreement with respect to
confidentiality, the Company would sustain irreparable harm and, therefore, in
addition to any other remedies which the Company may have under this Agreement
or otherwise, the Company shall be entitled to apply to any court of competent
jurisdiction for an injunction restraining the Employee from committing or
continuing any such violation of this Agreement, and the Employee shall not
object to any such application.
10. Representation, Warranty and Covenant of the Employee. The Employee
represents, warrants and covenants to the Company that he is not and will not
during the Term become a party to any agreement, contract or understanding,
whether employment or otherwise, which would in any way restrict or prohibit him
from undertaking or performing his employment in accordance with the terms and
conditions of this Agreement.
11. Representation and Warranty of the Company. The Company represents and
warrants that this Agreement constitutes a valid and legally binding obligation
of the Company, enforceable in accordance with the terms herein set forth,
except to the extent that the
-5-
<PAGE>
enforceability of this Agreement may be affected by bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
equity).
12. Deductions and Withholding. The Employee agrees that the Company shall
withhold from any and all payments required to be made to the Employee pursuant
to this Agreement, all federal, state, local and/or other taxes which the
Company determines are required to be withheld in accordance with applicable
statutes and/or regulations from time to time in effect.
13. Entire Agreement. This Agreement, together with the other agreements
specifically referred to herein, sets forth the entire agreement and
understanding of the parties, and cancels and supersedes any and all prior
agreements and understandings (whether written or oral) between the parties
hereto, with respect to the employment of the Employee by the Company, and no
statement, representation, warranty or covenant has been made by either party
with respect thereto except as expressly set forth herein.
14. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt requested, to the other party
hereto at his or its address as set forth at the beginning of this Agreement.
Either party may change the address to which notices, requests, demands and
other communications hereunder shall be sent by sending written notice of such
change of address to the other party.
15. Assignability, Binding Effect and Survival. This Agreement shall inure
to the benefit of and shall be binding upon the heirs, executors,
administrators, successors and legal representatives of the Employee, and shall
inure to the benefit of and be binding upon the Company and its successors and
assigns. Notwithstanding the foregoing, the obligations of the Employee may not
be delegated and, except as expressly provided in Paragraph 7 hereof relating to
the designation of beneficiaries, the Employee may not assign, transfer, pledge,
encumber, hypothecate or otherwise dispose of this Agreement, or any of his
rights hereunder, and any such attempted delegation or disposition shall be null
and void and without effect. The provisions of Paragraphs 6, 7, 8, 9, 21 and 22
hereof shall survive termination of this Agreement.
16. Amendment. This Agreement shall not be altered, modified, amended or
terminated except by written instrument signed by each of the parties hereto.
Waiver by either party hereto of any breach hereunder by the other party shall
not operate as a waiver of any other breach, whether similar to or different
from the breach waived.
17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF
-6-
<PAGE>
CALIFORNIA WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW.
18. Paragraph Headings. The paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
19. Severability. If any provision of this Agreement or the application of
any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable, shall not be affected thereby, and each provision
hereof shall be validated and shall be enforced to the fullest extent permitted
by law.
20. Arbitration. The parties agree that any disputes that may arise in
connection with, arising out of or relating to this Agreement, or any dispute
that relates in any way, in whole or in part, to the Employee's employment with
the Company, the termination of that employment or any other dispute by and
between the parties or their successors or assigns, will be submitted to binding
arbitration in Los Angeles, California according to the rules and procedures of
the American Arbitration Association and California Code of Civil Procedure
Section 1283.05. The parties agree that each will bear his or its own attorney's
fees and costs in connection with any such arbitration and each party will pay
half of any costs associated with the arbitration. This arbitration obligation
extends to any and all claims that may arise by and between the parties or their
successors, assigns or affiliates, and expressly extends to, without limitation,
claims or causes of action for wrongful termination, impairment of ability to
compete in the open labor market, breach of an express or implied contract,
breach of any collective bargaining agreement, breach of the covenant of good
faith and fair dealing, breach of fiduciary duty, fraud, misrepresentation,
defamation, slander, infliction of emotional distress, disability, loss of
future earnings, and claims under the California Constitution, the United States
Constitution, and applicable state and federal fair employment laws, federal
equal employment opportunity laws, and federal and state labor statutes and
regulations, including, but not limited to, the Civil Rights Act of 1964, as
amended, the Fair Labor Standards Act, as amended, the Americans With
Disabilities Act of 1990, the Rehabilitation Act of 1973, as amended, the
Employee Retirement Income Security Act of 1974, as amended, and the Age
Discrimination in Employment Act of 1967.
21. Consulting Services.
(a) For a period of one (1) year after the Employee ceases to be
employed by the Company (the "Additional Consulting Period"), at the discretion
of the Company (which discretion should be exercised within 30 days following
the end of the Term), the Company may elect to retain Employee and Employee
agrees to serve as a consultant to the Company. During the Additional Consulting
Period, Employee shall be available to provide such consulting services to the
Company as the Company may reasonably desire.
-7-
<PAGE>
(b) During the Additional Consulting Period, if the Company has
elected to retain the Employee to serve as a consultant to the Company, the
Employee shall receive consulting fees in an amount equal to Employee's base
salary then in effect, less any appropriate deductions, that shall be paid in
accordance with the Company's ordinary payroll practices.
22. Noncompetition. During (i) the Term of this Agreement, (ii) the
Consulting Period, if any, under Paragraph 8(b) hereof, and (iii) the Additional
Consulting Period, if the Company has elected to retain the Employee to serve as
a consultant to the Company, the Employee shall not, directly or indirectly,
without the prior written consent of the Company, provide consultation services
or otherwise provide services to (whether as an employee or a consultant, with
or without pay), own, manage, operate, join, control, participate in, or be
connected with (as a stockholder, partner, or otherwise), any business,
individual, partner, firm, corporation, or other entity that is then a
competitor of the Company, including any entity engaged in the business of
providing vehicle emissions testing services or services directly related
thereto that comprise a material portion of the Company's business or any other
business that is definitely planned by or that is under development by the
Company or any of its affiliates during the Employee's employment (if Employee
is currently employed) or at the time of the Employee's date of termination
(each such competitor a "Competitor of the Company"); provided, however, that
the "beneficial ownership" by the Employee, either individually or as a member
of a "group" (as such terms are used in Section 13(d) of the Securities Exchange
Act of 1934 (the "Exchange Act") and Regulation 13D under the Exchange Act) of
not more than five percent (5%) of the voting stock of any publicly held
corporation shall not alone constitute a violation of this Agreement.
It is further expressly agreed that the Company will or would suffer
irreparable injury if the Employee were to compete with the Company or any
subsidiary or affiliate of the Company in violation of this Agreement and that
the Company would by reason of such competition be entitled to injunctive relief
in a court of appropriate jurisdiction, and the Employee further consents and
stipulates to the entry of such injunctive relief in such a court prohibiting
the Employee from competing with the Company or any subsidiary or affiliates of
the Company in violation of this Agreement.
IN WITNESS WHEREOF, the parties hereto set their hands as of the day and
year first above written.
ENVIROTEST SYSTEMS CORP.
By: /s/ Chester C. Davenport
------------------------------
Its: Chairman
/s/ Richard P. Webb
------------------------------------
Richard P. Webb, Individually
-8-
<PAGE>
EXHIBIT I
"Change of Control" means (i) any sale, transfer or other conveyance
(other than to the Company or a wholly owned Subsidiary of the Company), whether
direct or indirect, of all or substantially all of the assets of the Company, on
a consolidated basis, in one transaction or a series of related transactions,
if, immediately after such transaction, any "person" or "group" becomes the
"beneficial owner," directly or indirectly, of more than 50% of the total voting
power entitled to vote in the election of directors, managers, or trustees of
the transferee, (ii) any "person" or "group" is or becomes the "beneficial
owner," directly or indirectly, of more than 50% of the total voting power of
the Voting Stock then outstanding, or (iii) during any period of 24 consecutive
months, individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by such
Board or whose nomination for election by the shareholders of the Company was
approved by a vote of a majority of the directors then still in the office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved), cease for any reason to
constitute a majority of the Board of Directors of the Company then in office.
For purposes of this definition, (i) the terms "person" and "group" shall
have the meanings used for purposes of Rules 13d and 13d-5 of the Exchange Act,
whether or not applicable; provided that no Excluded Person and no person or
group controlled by Excluded Persons shall be deemed to be a "person" or "group"
and (ii) the term "beneficial owner" shall have the meaning used in Rules 13d-3
and 13d-5 under the Exchange Act, whether or not applicable, except that a
person shall be deemed to have "beneficial ownership" of all shares that any
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time or upon the occurrence of certain
events.
"Voting Stock" means the Capital Stock of the Company having generally the
right to vote in the election for a majority of the directors of the Company.
"Excluded Person" means any beneficial holder of 5% or more of any class
of common stock of the Company outstanding immediately prior to the consummation
of the initial underwritten public offering by the Company of 3,400,000 shares
of the Company's Class A Common Stock in April 1993.
AGREEMENT FOR RENEWAL OF CONTRACT FOR
MOTOR VEHICLE INSPECTION PROGRAM
ZONE 3-PALM BEACH COUNTY
WHEREAS, Envirotest Technologies (hereinafter referred to as
"Contractor"), and the Department of Highway Safety and Motor Vehicles
(hereinafter referred to as "the State"), are parties to an agreement entitled
"A Contract for Motor Vehicle Inspection Program" and assigned Contract Number
M0169 (hereinafter "the Contract"), and
WHEREAS, the Contract will expire on March 31, 1998, and
WHEREAS, the parties desire to exercise the renewal option set forth in
section I, paragraph U of the Contract,
NOW, THEREFORE, be it agreed that the Contractor and the State do hereby
covenant and agree that the term of the Contract be renewed for two additional
one year periods, up to and including March 31, 2000, and,
BE IT FURTHER AGREED that the Contract, all exhibits thereto, and all
amendments thereto, if any, are incorporated by reference in this Agreement just
as though fully set out herein, and, except as otherwise provided herein, the
Contractor and the State do hereby bind themselves to perform all the
obligations of said Contract until the same expires on March 31, 2000, and,
BE IT FURTHER AGREED that during the renewal period and as consideration
for this renewal, the Contractor waives and releases the State from any claims
for damages pursuant to section 325.207(8)(i), Florida Statutes, and Section V,
paragraph H of the Contract as a result of cancellation of the Program at any
time during the renewal period by the Legislature. This waiver and
<PAGE>
release extends to any compensation to which the Contractor may be entitled in
equity, law, or contract arising out of section 325.207(8)(i), Florida Statutes,
and Section V, paragraph H of the Contract. In furtherance of this waiver, the
Contractor hereby releases the State from any and all obligations it may have in
equity, law, or contract arising out of section 325.207(8)(i), Florida Statutes,
and Section V, paragraph H of the Contract: to negotiate an amount to be paid to
the Contractor as compensation for such termination; to determine such an
amount; to offer the Contractor a point of entry to an administrative proceeding
relating such compensation; and to seek or request an appropriation for payment
of such compensation from the Legislature.
BE IT FURTHER AGREED that this waiver and release shall not apply to any
funds expended by the Contractor in response to the enactment of any law that
alters the services to be provided by the Contractor as part of the Program.
BE IT FURTHER AGREED that this waiver and release shall not apply to the
damages arising from the Contractor's obligation under the leases entered into
in furtherance of its obligations under the Contract.
2
<PAGE>
IN WITNESS WHEREOF, State and Contractor have caused this Agreement to be
executed by their respective undersigned officials authorized to do so, on the
dates set out below.
Contractor:
/s/ F. Robert Miller
- --------------------------------------- -----------------------------------
/s/Barbara L. Davis President & CEO
- --------------------------------------- -----------------------------------
Witness as to Contractor Title
February 14, 1997
- --------------------------------------- -----------------------------------
Date
State:
/s/
- --------------------------------------- -----------------------------------
Director of Administrative Services
2/24/97
- ---------------------------------------- -----------------------------------
Witness as to State Date
Approved as to form and legality, subject only to full and proper execution by
the parties.
/s/ Enoch J. Whitney
-----------------------------------
Enoch J. Whitney
General Counsel
3
<PAGE>
AGREEMENT FOR RENEWAL OF CONTRACT FOR
MOTOR VEHICLE INSPECTION PROGRAM
ZONE 5-DADE COUNTY
WHEREAS, Envirotest Technologies (hereinafter referred to as
"Contractor"), and the Department of Highway Safety and Motor Vehicles
(hereinafter referred to as "the State"), are parties to an agreement entitled
"A Contract for Motor Vehicle Inspection Program" and assigned Contract Number
M0171 (hereinafter "the Contract"), and
WHEREAS, the Contract will expire on March 31, 1998, and
WHEREAS, the parties desire to exercise the renewal option set forth in
section I, paragraph U of the Contract,
NOW, THEREFORE, be it agreed that the Contractor and the State do hereby
covenant and agree that the term of the Contract be renewed for two additional
one year periods, up to and including March 31, 2000, and,
BE IT FURTHER AGREED that the Contract, all exhibits thereto, and all
amendments thereto, if any, are incorporated by reference in this Agreement just
as though fully set out herein, and, except as otherwise provided herein, the
Contractor and the State do hereby bind themselves to perform all the
obligations of said Contract until the same expires on March 31, 2000, and,
BE IT FURTHER AGREED that during the renewal period and as consideration
for this renewal, the Contractor waives and releases the State from any claims
for damages pursuant to section 325.207(8)(i), Florida Statutes, and Section V,
paragraph H of the Contract as a result of cancellation of the Program at any
time
<PAGE>
during the renewal period by the Legislature. This waiver and release extends to
any compensation to which the Contractor may be entitled in equity, law, or
contract arising out of section 325.207(8)(i), Florida Statutes, and Section V,
paragraph H of the Contract. In furtherance of this waiver, the Contractor
hereby releases the State from any and all obligations it may have in equity,
law, or contract arising out of section 325.207(8)(i), Florida Statutes, and
Section V, paragraph H of the Contract: to negotiate an amount to be paid to the
Contractor as compensation for such termination; to determine such an amount; to
offer the Contractor a point of entry to an administrative proceeding relating
such compensation; and to seek or request an appropriation for payment of such
compensation from the Legislature.
BE IT FURTHER AGREED that this waiver and release shall not apply to any
funds expended by the Contractor in response to the enactment of any law that
alters the services to be provided by the Contractor as part of the Program.
BE IT FURTHER AGREED that this waiver and release shall not apply to the
damages arising from the Contractor's obligation under the leases entered into
in furtherance of its obligations under the Contract.
2
<PAGE>
IN WITNESS WHEREOF, State and Contractor have caused this Agreement to be
executed by their respective undersigned officials authorized to do so, on the
dates set out below.
Contractor:
/s/ F. Robert Miller
- --------------------------------------- -----------------------------------
/s/Barbara L. Davis President & CEO
- --------------------------------------- -----------------------------------
Witness as to Contractor Title
February 14, 1997
- --------------------------------------- -----------------------------------
Date
State:
/s/
- --------------------------------------- -----------------------------------
Director of Administrative Services
2/24/97
- ---------------------------------------- -----------------------------------
Witness as to State Date
Approved as to form and legality, subject only to full and proper execution by
the parties.
/s/ Enoch J. Whitney
-----------------------------------
Enoch J. Whitney
General Counsel
3
PERSONAL SERVICE AGREEMENT
Identification No. 2902101
Contractor Envirotest Systems Corp.
246 Sobrante Way Sunnyvale, CA 94086
Contractor Fein/SSN 060-91-4220-01
State Agency Dept. of Motor Vehicles
60 State Street
Wethersfield, CT 06161
Agency No. 2101
Contract Period 10/01/96
Through (To) 06/30/2002
Cancellation Clause This agreement shall remain in full force and
effect for the entire term of the contract
period stated above unless canceled by the
state agency, by giving the contractor written
notice of such intention. Required no. of days
written notice: 30
Complete Description of Service: Perform passenger motor vehicle identification
number inspections at specially designated and
equipped lanes in its emissions inspection
stations, in accordance with the attached
"Additional Terms and Conditions" consisting
of twenty (20) pages and Exhibits A to D
inclusive, also attached and made part hereof.
Cost and Schedule of Payments: Monthly, in arrears at initial base rate of
$12.95 per completed inspection subject to the
provisions of Paragraph No. 14 of the attached
"Additional Terms and Conditions".
Act CD: A Doc Typ: PS
Orig Agcy: 2101 Document No.: 2902101
Vendor Fein / SSN Suffix: 060-91-4220-01
Committed Amount: $100,000 Obligated Amount: $14,100,000
Contract Period (From/To) 10/01/96 - 06/30/2002
Act CD: A Comm Line No.: 1
Comm Agcy.: 2101 Fund: 2101
Fund: 6031 SID: 999
Object: 02230 Function: 2
Activity: 201 Year: 97
ACCEPTANCES AND APPROVALS STATUTORY AUTHORITY: C.G.S. 14-3, 14-164c, 14-164j
- --------------------------------------------------------------------------------
CONTRACTOR (OWNER OR AUTHORIZED SIGNATURE) TITLE DATE
/s/ F. Robert Miller President 9/16/96
- --------------------------------------------------------------------------------
STATE AGENCY (AUTHORIZED OFFICIAL) TITLE DATE
/s/ Michael W. Kozlowski Commissioner 9/24/96
- --------------------------------------------------------------------------------
OFFICE OF POLICY & MGMT/DEPT OF ADMIN SERV TITLE DATE
- --------------------------------------------------------------------------------
ATTORNEY GENERAL (APPROVED AS TO FORM) TITLE DATE
/s/ Assoc. Atty. Gen 10/25/96
- --------------------------------------------------------------------------------
<PAGE>
CERTIFICATE OF AUTHORITY
I, C. Michael Alston, am the Secretary of Envirotest Systems Corp. and in
such capacity can provide certificates verifying the capacity of employees of
Envirotest Systems Corp. to sign on behalf of Envirotest Systems Corp.
I hereby certify that F. Robert Miller is authorized to sign the
Connecticut Safety Inspection Extension Contract for the period September 24,
1996 through June 30, 2002 on behalf of Envirotest Systems Corp. with regard to
services provided to the State of Connecticut by Envirotest Systems Corp., and
when so signed such documents are binding on Envirotest Systems Corp.
September 23, 1996 /s/ C. Michael Alston
---------------------------------
C. Michael Alston
Secretary
Envirotest Systems Corp.
<PAGE>
REQUEST FIOR WAIVER
This form is to be completed when requesting a waiver from the competitive bid
requirement.
Agency: Department of Motor Vehicles
Date: August 27, 1996
Agency Court: Michael Kozlowski
Phone: 566-2240
Description of Services:
Provide ten (10) year old and out-of-state safety inspections at Emissions
Testing Facilities.
Need for the Services:
The Department requires an expanded safety inspection network to standardize the
10-year old and out-of-state safety inspection offered to the public and to
reduce wait time by offering the public an expanded safety inspection network
with enclosed inspection lanes. The proposed amendment also enables the
Department to offer one-stop shopping by providing for license and registration
transactions at Emissions stations.
Estimated Cost of Services: $14.3 million
Acceptable criteria for requesting a non-competitive personal service agreement
are listed below. Check of all items that apply.
__ The cost to the state of a competitive selection procedure would outweigh
the benefits of such procedure (documentation must be provided)
__ Proprietary services / patent rights
__ Services to be provided by a contractor mandated by the general statutes or
a public or special act
__ Emergency services, including services needed for the protection of life or
health
__ Contractor is another government agency
__ Services will be used in specific academic areas that include instructional
or research activities
X Contractor has special capability or experience
Explain in detail any item checked above. Attach supporting documentation.
The Emissions contractor has a statewide network of testing facilities and has
been performing safety inspections for the Department since 1993. Section 14-16a
of the Connecticut General Statutes allows the Commissioner of Motor Vehicles to
authorize
<PAGE>
Emissions stations to provide safety inspections.
Request for Waiver
The Department of Motor Vehicles operates (13) facilities throughout the state
that offer safety inspections. Of these (13) facilities that are state owned and
operated (7) have enclosed inspection lanes.
The safety inspection that is performed at an enclosed lane varies from the
safety inspection performed at an outside lane; the quality of the inspection
may vary at a specific lane as well. Safety inspections conducted at outside
lanes are mainly a visual inspection of the vehicle with some manual
manipulation of parts.
It is the Department's goal to standardize all safety inspections that are given
or administered by the Department. To accomplish this, we are proposing that an
agreement be negotiated with the emissions contractor to conduct safety
inspections at emissions testing facilities. The use of emissions testing
facilities would enable the Department to standardize the safety inspection
facilities. We would then be able to achieve a major goal of the Department: the
ability to offer the citizens of Connecticut one-stop shopping for related motor
vehicle services such as registering vehicles that require safety and emissions
inspection tests.
Connecticut General Statute 14-164(c), which confers authority on the
commissioner of motor vehicles to negotiate the contract for vehicle emissions
testing states:
"The commissioner may employ such system and the services of such
contractor or contractors to conduct safety inspections as provided by
section 14-16a, subsection (g) of section 14-12 and section 14-103a."
The referenced statutes pertain to different classes of vehicles that are
subject to inspection, and allow the commissioner to accept the results of any
inspection performed at an emissions station.
It is our understanding that the above-referenced statutes confer the authority
to contract for safety testing at the emissions stations.
<PAGE>
PERSONAL SERVICES AGREEMENT EVALUATION
Agency Name / Address: Date:
Agency Contract: Phone:
Name and Address of Contractor:
================================================================================
Contract Contract Term Competitive (Yes/No)
Identification (Start/End Date)
- --------------------------------------------------------------------------------
Description of Services (Purpose, Scope, Activities, Outcomes)
- --------------------------------------------------------------------------------
Performance Rating (use a scale of 1 to 5. 1 - very satisfied / 5 - very
satisfied)
- - Contractor fulfilled the contractual responsibilities
- - Contractor's staff were qualified as represented
- - Contractor completed work on time
- - Contractor kept to the cost estimate
- - Contractor adhered to the project scope
- - Contractor objectives were achieved
- - Contractor was easy to work with and was cooperative
- - Final Report was clear and submitted on time
- --------------------------------------------------------------------------------
Cost of Services: Fund:
- --------------------------------------------------------------------------------
If the service was not completed on time, describe the reasons and any
additional incurred costs:
- --------------------------------------------------------------------------------
Describe any contract provisions that were unfulfilled or violated by the
contractor:
- --------------------------------------------------------------------------------
Additional comments:
- --------------------------------------------------------------------------------
Evaluator's Name and Title Evaluators' Signature
================================================================================
<PAGE>
Additional Terms and Conditions
1. Scope and Purpose
Contractor agrees and undertakes to perform passenger motor vehicle safety
inspections by qualified personnel at specially designated and equipped lanes at
its emissions inspection stations, and DMV agrees to pay Contractor on the basis
of each completed inspection, in accordance with the following terms and
conditions.
2. Types of Inspections
Contractor shall perform so-called "out-of-state" inspections for used vehicles
not previously registered in the State of Connecticut, as required by subsection
(g) of Section 14-12 of the General Statutes, and so-called "ten-year-old"
inspections for used vehicles which are ten years of age or older, and seeking
registration due to transfer of ownership, as required by subsection (a) of
Section 14-16a. Both types of inspections shall include motor vehicles
regardless of body style with a gross vehicle weight rating of ten thousand
(10,000) pounds or less. Contractor shall not perform any other type of vehicle
safety inspection currently performed by DMV personnel pursuant to statutory or
administrative requirements. It is understood that the "out-of-state" category
of allowed inspections does not include certain vehicles bearing valid
inspection decals issued by other states having safety inspection programs
approved by the commissioner. A more detailed statement of the criteria for
allowed inspections to be performed under this Agreement, and for types of
inspections not allowed and not to be performed by the Contractor is set forth
in Exhibit A, attached hereto and made part hereof. Exhibit A also includes the
list of approved programs of other jurisdictions, which DMV may modify at any
time and from time to time during the term of the Agreement, subject to the
provision of Paragraph No. 27, Notices, and Paragraph No. 29, Changes. It is
understood that whenever the terms "inspection" or "inspections", or "safety
inspection" or "safety inspections" are used in the remainder of this Agreement,
they refer to the types of safety inspections which the Contractor is authorized
to perform.
3. Volume of Inspections
DMV and the Contractor estimate that the safety program as established should
produce a minimum annual volume of safety inspections of 165,000 and the initial
target fee as stated in Paragraph No. 14 is established based on that volume. In
the event that the annual volume of safety inspections varies from 165,000
<PAGE>
for whatever reason, except a change in governing law as to vehicle inspection
requirements which requires negotiation as provided in Paragraph No. 21, then
the fees shall be adjusted in accordance with Paragraph No. 14. Although it is
the intent of DMV and a major purpose of DMV in entering into this Agreement for
the Contractor to perform substantially all of the vehicle safety inspections in
the above-described categories, and thereby to provide vehicle owners with more
convenient service and reduce the numbers and types of transactions that must be
performed in DMV branch offices, this Agreement shall not restrict DMV from
continuing to conduct inspections or reinspections, at branch offices or
elsewhere in the circumstances hereinafter set forth in this Agreement, or
whenever, in the discretion of the commissioner, inspection by DMV staff will be
most expedient to complete registration transactions for vehicle owners.
4. Facilities
Contractor commits to perform inspections at specially designated and equipped
safety lanes at designated emissions inspection stations, in accordance with the
following list:
Station No. of Lanes
------- ------------
North Haven 2
Manchester 2
Southington 2
Bridgeport 2
*Norwalk (new) 2
Thomaston 1
North Windham 1
Taftville 1
East Lyme 1
Waterbury 1
Danbury 1
**Darien 1
Total 17
*Norwalk station not yet constructed.
**To remain operational until Norwalk is constructed.
At any time during the term either party may require changes in the above
network, including net increases or reductions with respect to the size of the
network. Any such changes shall be made by Change Order in accordance with the
provisions of Paragraph No. 29 and shall contain such terms, conditions and
schedules as may be agreed. It is understood that any such Change Order shall
include provisions for financial adjustments and payments as may be warranted by
change in the size of the network and costs or cost savings resulting therefrom.
In order to assure service to the public, the emissions inspection
<PAGE>
of any vehicle, unless required in conjunction with a safety inspection for that
vehicle, shall not be performed by the Contractor in an above-designated safety
inspection lane. The Contractor will take all reasonable steps, including
adequate signage and positioning of traffic control devices or barriers, to
ensure that vehicles requiring safety inspections are directed to the correct
lane or lanes.
5. Term
Unless sooner terminated in accordance with any other provision of this
Agreement, this Agreement shall be for a term beginning on the date of approval
by the Attorney General and ending on June 30, 2002. Performance of safety
inspection by the Contractor shall begin not more than four months after the
effective date of this Agreement at all facilities as designated above unless
the parties agree in writing to an alternative date and/or to multiple
alternative dates with respect to different facilities.
6. Safety Inspection Procedures
The standards and procedures for each safety inspection shall be substantially
in accordance with the current standards and procedures being used by the
contractor to perform inspections at the stations located in Darien and Beacon
Falls, as more particularly described in Exhibit A, attached hereto and made
part hereof. In addition, for the purpose of this Agreement, the Contractor
shall install and use in each safety lane (a) permanent floor lighting and (b)
Hunter Engineering Company B400 Computerized Plate Brake Testers, or equivalent
subject to reasonable approval of DMV. If DMV desires the Contractor to install
and use equipment for a side slip test of alignment, then such shall be done by
Change Order. All vehicles in the ten-year old category and showing an odometer
reading of more than 50,000 miles shall remain subject to front-end jacking for
visual inspection for looseness of ball joints, and any other safety defects in
the steering system.
7. Vehicle Identification Number (VlN) Inspection Procedures
The Contractor shall continue to perform VIN-inspections and verifications on
all vehicles requiring safety inspection, and VIN-only checks of vehicle with
valid safety decals from other states, as herein above referenced in Paragraph
No.2. No fees shall be collected for VIN-only checks, nor shall these be
included in the count of inspections for which payment is made to the
Contractor, in accordance with Paragraph No. 14. VIN-only checks shall continue
to be performed at all emissions stations operated by the Contractor.
The standards and procedures for VlN inspections for vehicles
<PAGE>
receiving safety inspections shall be substantially in accordance with current
standards and procedures being used by the Contractor to perform inspections at
the stations located in Darien and Beacon Falls. VIN-only inspections not in
conjunction with safety inspections will be performed in accordance with the
standards and procedures used in current emissions inspection-only stations.
However, the Contractor will be required to locate the secondary VIN for all
vehicles requiring safety inspections, if present in accessible areas of the
vehicle (excluding the engine, transmission or other areas which require special
means of access), in order to complete inspections of as many of these vehicles
as reasonably possible without adversely impacting throughput and wait times.
The Contractor will refer customers to the State Representative if a vehicle
fails due to the absence of a secondary VIN but only if the State Representative
is immediately available; otherwise the vehicle will be referred to a DMV branch
office to complete the inspection process. The Contractor shall notify the State
Representative present in the station of all cases of suspected of tampered or
altered VINs; if there is no State Representative present or available the
Contractor will use its best efforts to notify DMV of each such case, which
shall include a fax transmission of such notification using facsimile equipment
installed by the State at the inspection site.
8. Personnel Conducting Inspections; Training; Removal
Contractor acknowledges that the above-described procedures and tasks for safety
and VIN inspections can be performed adequately and effectively only by
personnel with the necessary level of skills. In order to assure the possession
of such skills, the Contractor agrees that all personnel assigned to perform
and/or to supervise the safety and VlN inspection function will attend and
successfully complete a training program to be given by the Contractor with
curriculum approved by DMV prior to the start-up of inspections. DMV shall have
the right to request the Contractor to remove any employee performing inspection
duties in a less than satisfactory manner or in dereliction of duties by giving
the Contractor specific information about such employee. However, the final
decision for taking action on the employee shall rest with the Contractor in its
sole discretion. The basic requirements and curriculum for the said mandatory
training programs are as set forth in Exhibit B, attached hereto and made part
hereof.
9. Photograph Records
For each vehicle which is safety inspected, the Contractor shall use its best
effort to obtain a color photograph of the vehicle which shall, to the extent
possible, capture the registration marker plate on the vehicle and show the make
and model of the vehicle. The photographic film used shall be packaged at the
completion of each roll and shall, after being clearly labeled as
<PAGE>
to the dates and station, be brought within 48 hours of the completion of each
roll to the central office of Envirotest. Such film shall be available to DMV at
all reasonable times.
10. Inspection Reports; Other Documents Provided to Public
The parties understand and agree that the owner of a motor vehicle subject to
safety and/or VIN inspection may appear initially at either a DMV branch office
or any one of the above-listed emissions stations. If such owner appears at a
branch office, he or she will be given DMV Form H-13, "Application for
Registration and Title", an informational booklet and directions to the nearest
designated emissions station. If the owner appears first at a station, he or she
will, after passing inspection, be given an inspection report or reports, as
hereinafter described, and an H-13 Form by the Contractor. and directions to the
nearest branch office. Appropriate instructions and information will be given to
owners failing inspections.
With respect to each completed safety inspection, the owner (or operator of the
vehicle) shall be given a computer generated safety inspection report (SIR),
which shall contain the information and be substantially in-the form of Exhibit
C, attached hereto and made part hereof. With respect to each completed VIN-only
inspection, the owner (or operator of the vehicle) shall be given a copy of the
DMV Form 302B, marked Exhibit D attached hereto and made part hereof. Each Form
302B shall be stamped by the Contractor for authentication purposes in the block
marked "Official Use Only".
All inspections and VIN-only reports shall include evidence of the identity of
the individual employee performing the inspection and/or the identity of the
individual employee issuing the report.
11. Computerized Inspection Records
Contractor shall develop and install an automated data system to maintain
inspection records and to substantiate the numbers of inspections performed. The
system shall be integrated with the system which supports emission testing as
more particularly described in the Technical Specifications to the Contract
between the parties for the Emissions Inspection Program; provided, however, the
Contractor shall be permitted to use a stand-alone system having the same
functional capabilities on a temporary basis since the work of installing the
integrated system is not expected to be completed as of the start date for
performance of inspections under this Agreement. The system shall be capable of
providing next day access to DMV of all data elements of each individual
inspection including the lane identification, year of vehicle and registration
marker plate number and state of origin. The Contractor shall generate and
provide regular reports of program activity in a format agreeable to both
parties. In addition, from time to time the Contractor may be requested to
<PAGE>
produce extracts from the data base and/or statistical reports for DMV
management purposes, such as, for example, the number of 10 year old vehicles
failing the brake test, and Contractor shall cooperate fully with any such
request either by providing the data requested or permitting DMV staff the
necessary access to obtain the data being sought; however, if the aggregate of
requests including prior request are expected to require in excess of a total of
10 hours per year, then such requests may be accomplished only by Change Order.
The provisions of this paragraph requiring an automated data system shall not be
construed to relieve the Contractor of its responsibilities for performance in
the event of any malfunction of the system, and the Contractor agrees to put in
place and have available a back-up system, manual or otherwise, to allow
performance to continue.
12. Collection of Fees
The Contractor shall collect and account for all statutory fees required to be
paid by vehicle owners for safety or combined safety and emissions inspections.
Fees may be paid in cash or by personal check of the operator or registered
owner in the total amount due per customer transaction. The current fee for a
safety inspection is twenty-five dollars ($25.00). There is no additional fee
charged for one reinspection of a vehicle within thirty (30) calendar days of
the date of initial inspection if the customer presents the original Safety
Inspection Report (SIR). If payment is by check, the Contractor shall record the
driver license number of the driver on the check after verifying that the name
of the check matches the name on the driver's license and/or vehicle ownership
documents. Checks will be made payable to "State of Connecticut DMV". The
Contractor shall have no responsibility for collection of dishonored checks.
Contractor's responsibility with respect to the timely deposit of all fee
receipts shall be in accordance with the provisions of the Contract between the
parties for the Vehicle Inspection Program.
Contractor agrees to report to DMV promptly any incident of loss, theft,
irregular or unsafe handling of fee receipts, and shall cooperate with DMV with
respect to the investigation of any such incident and follow-up actions
required, including remedial actions to avoid recurrence of any such incident.
13. Reinspections
When a vehicle fails a safety inspection, the Contractor will inform the vehicle
operator to have the repairs and/or maintenance indicated on the SIR completed,
and then return to any network facility with a copy of the SIR within thirty
days thereafter DMV may establish a program to allow certain approved licensed
dealers and repairers to perform reinspections with respect to any vehicle
<PAGE>
repaired by the owner or such licensee. This program will be limited to
reinspection within thirty (30) calendar days, for which no fee is required.
Failure to provide the form with the initial test results or a reinspection
which is more than thirty (30) calendar days from the date of initial inspection
will require payment of a new fee and must be performed at a network facility,
unless the vehicle has been referred to a DMV branch office for completion of
inspection and/or VIN verification, or assignment of a new VIN, as mentioned
above and detailed in Exhibit A.
14. Payment to Contractor
In consideration of the services performed by Contractor under this Agreement,
DMV agrees to pay the Contractor at the following rates per each completed
inspection for which the fee is collected:
VOLUME SAFETY SLIDING FEE SCALE
VOLUME (, 000)
130 135 145 155 165 175 185 200
*1996-97 $16.44 15.83 14.74 13.79 12.95 12.21 11.55 10.68
1998 $17.03 16.40 15.27 14.29 13.42 12.65 11.97 11.07
1999 $17.63 16.98 15.81 14.79 13.89 13.10 12.39 11.46
2000 $18.25 17.58 16.36 15.31 14.38 13.56 12.83 11.86
2001 $18.89 18.19 16.93 15.84 14.88 14.03 13.27 12.28
*2002 $19.55 18.82 17.52 16.39 15.40 14.52 13.74 12.71
*Volumes indicated will be prorated for less than one full year of performance
of inspections.
In the event that the actual volume of paid inspections for the first twelve
(12) twelve months of the period of performance of this Agreement, or for any
subsequent period of (12) twelve months thereafter is either less than 130,000
or more than 200,000 then either party shall have the right upon written notice
to the other party to compel a timely good faith renegotiation of the fee per
test. If the parties are unable as a result of such renegotiation to agree on a
new fee per test, then the fee in the above schedule which is closest to the
actual volume shall continue to be charged by the Contractor and paid by DMV,
but either party shall have the right to obtain relief through the filing of a
claim for arbitration in the same manner and subject to the same provisions
concerning arbitration contained in section 12.0, Exhibit E of the Contract
between the parties for the Emissions Inspection Program. It is intended that
the relief sought by the Contractor in the event the actual volume is less than
130,000 or in the event the actual volume is more than 200,000 will be such as
to fairly compensate the party seeking relief with reference to the actual scope
of services required and being performed. It is intended that, in the case of
volume below target levels, such relief will be in the form of an increase in
the fee such as to (i) enable the Contractor to continue to recoup capital costs
at the same rate as if volume had reached target levels., and (ii) compensate
the Contractor for such demonstrable inefficiencies in operations as may result
from such reduced volume.
<PAGE>
In using the foregoing table, if annual volume is 130,000 or more vehicles and
200,000 or fewer vehicles per year the applicable rate per vehicle shall be the
rate most closely approximating the applicable table heading volume.
The Contractor may submit invoices stating the number of inspections performed
during a specified period of time and the total amount due. Such invoices may be
submitted not more frequently than once per month, in arrears, to the attention
of DMV Fiscal Services Office. DMV shall cause such invoices to be paid promptly
in accordance with existing State of Connecticut payment procedures but in no
event more than (30) thirty days after submission, subject to the provisions of
the following Paragraph No. 15, regarding the responsibility of the Contractor
to substantiate any discrepant inspections and/or amounts.
Within 15 days following the end of each calendar year, the Contractor shall
submit a statement of the total number of inspections performed during such
calendar year and a calculation of any adjustment in the per vehicle fee amount
payable. If the applicable rate differs from the rate for 165,000 vehicles, then
the Contractor or the State, as the case may be, shall be entitled to an
adjustment determined by multiplying the difference between the per vehicle rate
actually paid and the applicable rate in accordance with the above table times
the total number of vehicles inspected during the calendar year. The amount of
such adjustment shall be paid by the State or the contractor, as the case may
be, within 15 days thereafter; provided, however, that in the case of any
adjustment in favor of the State, the Contractor may elect to have the amount of
such adjustment offset against amounts owing by the State to the Contractor in
respect of current fee remittances.
15. Billing Substantiation and Audit Rights
The contractor shall be responsible to maintain and provide sufficient, accurate
records to substantiate the numbers of inspections, as stated in its invoices to
DMV. The billings submitted shall be in such format and accompanied by such
substantiating documents and records as directed initially and from time to time
thereafter, by the DMV Fiscal Services Office, as necessary to enable payments
to be processed in accordance with requirements of the fiscal control and
disbursement agencies of the State of Connecticut.
If DMV rejects or disputes the amount of any invoice submitted, it shall inform
the Contractor in writing within twenty (20) days of receipt and shall state the
reasons for its position and the actions and/or additional substantiation
required to be taken or provided by the Contractor. Any amounts not in question
shall be processed for payment and shall not be delayed by reason of DMV's
position with respect to remaining amounts claimed or by any actions that may be
taken between the parties to achieve a
<PAGE>
reconciliation or resolution of the dispute. DMV shall have the right, by itself
or any authorized agent, to periodically inspect and audit the records of the
Contractor to (a) substantiate the numbers of inspections claimed, (b) to
ascertain that the Contractor has properly collected, accounted for, and
deposited in a timely manner the appropriate amounts of fees, or (c) for any
other reason related to proper administrative fiscal management of terms of the
Agreement. Any such inspection or audit shall be upon reasonable notice to the
Contractor. If audit discrepancies occur, the Contractor shall be afforded
adequate time to respond to such discrepancies.
16. Termination for Non-Appropriation of Funds
Notwithstanding the above-stated term of this Agreement and the expected date
for the beginning of performance hereunder by the Contractor, DMV shall have the
right to terminate in the event DMV does not have funds appropriated by the
General Assembly of the State of Connecticut to meet the obligations for payment
to the Contractor in accordance with Paragraph No. 14. Said right of DMV to
terminate may be exercised at any time after one (1) year from the beginning
date of performance by the Contractor. DMV shall give written notice to the
Contractor and the termination will be final and effective on the date set forth
in the notice (but in no event sooner than one (1) year from the beginning of
performance hereunder). DMV agrees to make all necessary budget requests and
submittals in the normal State budget process throughout the term of the
Agreement to obtain funds to continue the Agreement. DMV shall keep the
Contractor informed as to the status of funding and shall endeavor to give the
Contractor the maximum number of days notice of termination due to insufficient
funds.
In the event of such termination due to lack of sufficient funds, DMV shall pay
to the Contractor all amounts earned for services performed prior to the
effective date of termination. The Contractor shall be entitled to the
recoupment of its undepreciated capital costs in accordance with the provisions
of Paragraph No.30.
17. Termination for Unsatisfactory Performance
DMV shall have the right in accordance with the procedures set forth in this
Paragraph to terminate this Agreement at any time after thirty (30) days from
the beginning date of the Contractor's performance if there is, in the opinion
of DMV, a material failure by the Contractor to perform, or substantial defect
in performance of any of the material services specified in this Agreement. DMV
shall give written notice to the Contractor of-the existence of any such failure
to perform, which notice shall detail the alleged failure and set forth the
remedial actions required to be taken. The Contractor shall have thirty (30)
days from its receipt of such notice to cure such failure or defect to the
satisfaction of DMV. If, after the expiration of such period of time performance
<PAGE>
remains unsatisfactory in the sole opinion of DMV, or there is not, in the sole
opinion of DMV, substantial progress made to achieve a satisfactory level of
performance, DMV may give written notice to the Contractor of termination of
this Agreement, which termination shall be final and effective on the date set
forth in the notice.
For the purpose of this paragraph, a "material failure" or "substantial defect"
regarding performance by the Contractor shall include any repeated, continuing
and substantial occurrence of failure to perform the obligations of this
Agreement including (a) safety or VIN inspections not being performed in
accordance with the standards set forth in Exhibit A and the terms of this
Agreement, (b) excessive delays and waiting times experienced by the public in
the queuing area or in the facilities, unless the same are caused by
circumstances or events beyond the reasonable control of the Contractor, or (c)
failure to collect, account for and make timely deposit of inspection fees.
Termination under this paragraph shall not relieve the Contractor of any
liability which it may have to DMV. DMV may withhold any payments due to the
Contractor until such time as the exact amount of liability is determined.
18. Termination Due to Termination of Emissions Contract
DMV shall have the right to terminate this Agreement upon written notice to the
Contractor, effective on the date set forth in the notice, in the event that DMV
takes action to terminate the subject Contract between the parties for the
vehicle emissions inspection program, dated April 14,1994, as authorized by
Exhibit E, Sections 10 and 11 of the said contract, or the said Contract is
terminated for any other reason or cause, including, without limitation,
bankruptcy or insolvency of the Contractor, mutual consent, or change in
governing law.
19. Contractor Supervision; Customer Complaints
Contractor agrees that it will have supervisory staff present and available in
the above-designated stations to manage and oversee the performance of
inspections, and to provide necessary direction to employees regarding questions
or problems arising in connection with individual inspections. The supervisory
personnel also will be responsible for direct contact with members of the
public, as may be necessary to respond appropriately to questions, unusual
requests, or complaints regarding any aspect of the safety or VIN inspection
process.
The parties agree that the provisions of the Contract for the Vehicle Emissions
Inspection Program, Exhibit C, Section 6.4, shall apply to the handling and
disposition of all customer complaints.
<PAGE>
20. Indemnity to State and Liability to Public
Contractor agrees that the provision of the Contract for the Vehicle Emissions
Program regarding indemnity to the State of Connecticut, Exhibit E, Section 4.0,
and regarding potential liability to the public and related insurance
requirements, Exhibit E, Section 25.0, shall apply with equal force and effect
to this Agreement and to all aspects of the Contractor's performance hereunder.
Contractor shall be authorized to include in each safety inspection report, and
to post signs, containing a notice to the public, the text of which shall be
subject to approval by DMV, regarding disclaimer of liability arising out of
motor vehicle accidents, or mechanical or equipment failures of motor vehicles
subsequent to performance of inspections by the Contractor of any such vehicles.
21. Termination or Renegotiation Due to Change of Law
If at any time during the term of this Agreement the General Assembly enacts
legislation to repeal or to substantially curtail the responsibilities of DMV to
inspect passenger motor vehicles for safety in accordance with the above-cited
statutes, then DMV shall have the right to terminate the Agreement upon written
notice thereof to the Contractor effective on the date set forth in the notice.
In the event of such termination for government convenience and necessity, DMV
shall pay to the Contractor all amounts earned prior to the date of termination,
plus a reasonable amount representing an equitable adjustment for all work and
expenditures reasonably undertaken in anticipation of full performance for the
entire term, not including any anticipated profit, plus the amount payable
pursuant to Paragraph No. 30. If any final action is taken by a court of
competent jurisdiction that has the same effect as the above-described
legislative action, then the provisions of this paragraph shall apply with the
same force and effect.
If at any time during the term, final action is taken by the General Assembly or
a court that does not repeal or substantially curtail the existing safety
inspection requirements, but amends such requirements or adds new requirements
in any manner that has a substantial impact on the performance of either party
or the cost thereof, or enlarges the scope of services desired by DMV, the
parties agree to negotiate in good faith for an amendment to the Agreement.
22. Assignment
The Contractor shall not assign, transfer, convey or otherwise dispose of this
Agreement or its right, title or interest therein, or its power to execute such
Agreement to any person, firm or
<PAGE>
corporation, without the previous written consent of the DMV (which shall not
unreasonably be withheld), provided however, that the Contractor shall have the
absolute right, and without the previous written consent of the DMV to assign
this Agreement to a wholly-owned subsidiary of the Contractor, subject to the
following conditions:
1. Such subsidiary assumes all obligations of the Contractor under the
Agreement; and
2. The Contractor remains primarily liable for all obligations under
the Agreement, including obligations arising from modifications to
the Contract subsequent to such assignment.
23. Governing Law
This Agreement is being executed in the State of Connecticut and shall be
construed and enforced in accordance with the laws of said state.
24. Attorney General Approval
This Agreement shall not be effective and binding on DMV unless and until it is
approved as to legal form by the Attorney General of the State of Connecticut,
at which time it shall be deemed to be fully executed and in full force and
effect.
25. Hours of Operation
The Contractor shall perform safety inspections during all hours of operation of
each emissions inspection station, as provided in Exhibit C, Section 6.1 of the
Contract between the parties for the Connecticut vehicle emissions inspection
program, dated April 14, 1994, as the said provisions may be amended, or may be
the subject of a change order.
26. Incorporation of Proposal Materials
Contractor agrees that its performance will meet or exceed the specification and
representations made in its written technical proposal to DMV dated January 12,
1996.
27. Notices and Contact Persons
Official notices or communications arising out of performance of this Contract
to be given by the Contractor to the State shall for all purposes be deemed to
be duly given and received if sent by registered or certified mail, postage
prepaid, or by hand delivery
<PAGE>
for which a written receipt is received, addressed to:
Commissioner of Motor Vehicles
State of Connecticut
60 State Street
Wethersfield, Connecticut 06101
In similar manner notices to be given by the State to the Contractor shall for
all purposes be deemed to be duly given and received if one of the above-listed
methods is used, addressed to:
Envirotest Systems Corp. shall be:
246 Sobrante Way
Sunnyvale, CA 94086
Attention: Mr. F. Robert Miller, President and CEO
Copies of above-referenced notices shall be provided to the Contractor's
Connecticut program manager as identified below.
For the purpose of administration of this Agreement the parties shall have the
following primary contact persons, who shall be authorized and expected to
render decisions and to take actions necessary to perform the respective
obligations of the Agreement:
Contractor-Jeffrey A. Barth, 60A Weston Street, Hartford, CT DMV-Peter A.
Rosso, DMV, 60 State Street, Wethersfield, CT
Any change in the identity of a contact person of a party or the official
address for notices shall be made known to the other party in accordance with
the provisions of this Paragraph.
28. Duplicate Originals
This Agreement is being executed in the form of duplicate original documents,
with one fully executed document to be retained by each party. Execution is on
State of Connecticut Form 802A, Personal Services Agreement, to which these
additional Terms and Conditions are attached and incorporated.
29. Changes
If at any time during the term either party wishes to make a material change in
the scope of performance by the other party, including, but not limited to, the
above-mentioned possible changes with respect to allowed vehicle inspections,
the size of the network or equipment to be used by the Contractor, the following
procedures will be followed:
(a) A written request specifying the nature of the change will be mailed
to the contact person identified in Paragraph No. 27;
<PAGE>
(b) The party receiving the request may request and the requesting party
shall grant meetings or other opportunities for communications for
the purpose of determining and clarifying the exact nature of the
change;
(c) The costs and development time will be determined by the receiving
party, and said party will also inform the requesting party whether
it can meet any implementation date or dates requested, or, if not,
the alternative Implementation date or dates to which it is prepared
to commit;
(d) A written confirmation as to the above will be furnished to the
requesting party;
(e) The appropriate contact person will transmit a written response
accepting, rejecting or modifying the change proposal; and
(f) If acceptable, and if the change does not amount to more than fifty
thousand dollars (S50,000) a written Change Order incorporating the
above-mentioned proposal and response will be executed by the
authorized representatives of the parties, and will be binding and
effective on the date of such execution, or on such other date as
may be set forth in the Change Order. Any change which is estimated
by either party to have a cost of more than fifty thousand dollars
(S50,000) may be accomplished only by Amendment, which Amendment
shall be binding and effective on the date of approval as to form by
the Attorney General.
30. Recoupment of Capital Costs in the Event of Early Termination
In the event of termination of this Agreement before the end of the full term in
accordance with the provisions of Paragraph Nos. 16,18 or 21, DMV shall pay to
the Contractor a sum equal to the Contractor's cost for all equipment acquired
by the Contractor and all software purchased and developed by the Contractor for
use in connection with the safety inspection program as herein described,
reduced by 1.47% per month for each month or part thereof from the month of
beginning of performance. The Contractor's above described, costs for equipment
shall be deemed to mean its actual cost, as furnished to DMV and subject to
verification by audit, not to exceed the total amount of eight hundred and sixty
thousand dollars ($860,000).
Upon payment of the amount due hereunder, the Contractor shall forthwith
transfer possession and convey title to the equipment and rights to use the
software to the State free and clear of all
<PAGE>
encumbrances and liens.
31. DMV Personnel and Conduct
Employees of the State of Connecticut, when they are in or near any of the
facilities shall conduct themselves at all times in the same manner as the
employees of the Contractor are required to conduct themselves. Except as may be
permitted by prior agreement between management personnel of DMV and the
Contractor, no State of Connecticut employee shall have the right to direct
employees of the Contractor, interfere with station operations or business, or
take photographs of any of the employees.
32. Performance Bond
Contractor agrees to provide at the time of performance of this Agreement and to
maintain in effect throughout the term a performance bond, with surety duly
licensed in the State of Connecticut. The bond shall be in the initial amount of
eight hundred and seventy-five thousand ($875,000.), in such form and content as
is acceptable to DMV to assure the performance of the obligations of this
Agreement and to be invoked by DMV upon termination for default. At anytime and
from time to time after one year from the start date of performance the
Contractor may request a reduction in the above-state amount of the penalty of
the bond provided hereunder by an amount not to exceed S175,000 per year, and
DMV shall grant any such request or requests if reasonably related to the
present, i.e., then existing, value of the Agreement and if Contractor is
performing in a satisfactory manner.
33. Non-Discrimination
Contractor agrees to the following provisions regarding non-discrimination and
Executive Orders:
NONDISCRIMINATION AND AFFIRMATIVE ACTION PROVISIONS
This section is inserted in this contract in connection with Subsection
(a) or Section 4a-60 or the General Statutes or Connecticut as revised.
a. For the purposes of this section, "minority business enterprise" means
any small contractor or supplier of materials fifty-one per cent or more of the
capital stock, if any, or assets of which is owned by a person or persons: (1)
Who are active in the daily affairs or the enterprise, (2) who have the power to
<PAGE>
direct the management and policies of the enterprise and (3) who are members or
a minority, as such term is defined in Subsection (a) of Conn. Gen. Stat.
Section 32-9n; and "good faith" means that degree or diligence which a
reasonable person would exercise in the performance of legal duties and
obligations. "Good faith efforts" shall include, but not be limited to, those
reasonable initial efforts necessary to comply with statutory or regulatory
requirements and additional or substituted efforts when it is determined that
such initial efforts will not be sufficient to comply with such requirements.
For the purposes of this section, "commission" means the commission on
human rights and opportunities.
For the purposes or this section, "public works contract" means any
agreement between any individual, firm or corporation and the state or any
political subdivision or the state other than a municipality or construction
rehabilitation, conversion, extension, demolition or repair of a public
building, highway or other changes or improvements in real property, or which is
financed in whole or in part by the state, including, but not limited to,
matching expenditures, grants, loans, insurance or guarantees.
TEXT MISSING. ORIGINAL PAGE ILLEGIBLE. NO READABLE COPY AVAILABLE.
<PAGE>
e. The contractor shall include the provisions of Subsection b of this
section in every subcontract or purchase order entered into in order to fulfill
any obligation of a contract with the state and such provisions shall be binding
on a subcontractor, vendor or manufacturer unless exempted by regulations or
orders of the commission. The contractor shall take such action with respect to
any such subcontract or purchase order as the commission may direct as a means
of enforcing such provisions including sanctions for noncompliance in accordance
with Conn. Gen. Stat. Section 46a-56; provided; if such contractor becomes
involved in, or is threatened with, litigation with a subcontractor or vendor as
a result of such direction by the commission, the contractor may request the
state of Connecticut to enter into any such litigation or negotiation prior
thereto to protect the interests of the state and the state may so enter.
f. The contractor agrees to comply with the regulations referred to in
this section as they exist on the date of this contract and as they may be
adopted or amended from time to time during the term of this contract and any
amendments thereto.
NONDISCRIMINATION PROVISIONS REGARDING SEXUAL ORIENTATION
This section is inserted in this contract in connection with Subsection
(a) of Section 4a-60a of the General Statutes of Connecticut, as revised.
a. (1) The Contractor agrees and warrants that in the performance of the
contract such contractor will not discriminate or permit discrimination against
any person or group of persons on the grounds of sexual orientation, in any
manner prohibited by the laws of the United States or of the state of
Connecticut, and that employees are treated when employed without regard to
their sexual orientation; (2) the contractor agrees to provide each labor union
or representative of workers with which such contractor has a collective
bargaining agreement or other contract or understanding and each vendor with
which such contractor has a contract or understanding, a notice to be provided
by the commission on human rights and opportunities advising the labor union or
workers' representative of the contractor's commitments under this section, and
to post copies of the notice in conspicuous places available to employees and
applicants for employment; (3) the contractor agrees to comply with each
provision of this section and with each regulation or relevant order issued by
said commission pursuant to section 46a-56 of the general statutes; (4) the
contractor agrees to provide the commission on human rights and opportunities
with such information requested by the commission, and permit access to
pertinent books, records and accounts, concerning the employment practices and
procedures of the contractor which relate to the provisions of this section and
section 46a - 56 of the general statutes.
<PAGE>
b. The contractor shall include the provisions of Subsection a of this
section in every subcontract or purchase order entered into in order to fulfill
any obligation of a contract with the state and such provisions shall be binding
on a subcontractor, vendor or manufacturer unless exempted by regulations or
orders of the commission. The contractor shall take such action with respect to
any such subcontract or purchase order as the commission may direct as a means
or enforcing such provisions including sanctions for noncompliance in accordance
with section 46a-56 of the general statutes; provided, if such contractor
becomes involved in, or is threatened with, litigation with a subcontractor or
vendor as a result of such direction by the commission, the contractor may
request the state of Connecticut to enter into any such litigation or
negotiation prior thereto to protect the interests or the state and the state
may so enter.
c. The contractor agrees to comply with the regulations referred to in
this section as they exist on the date of this contract and as they may be
adopted or amended from time to time during the term of this contract and any
amendments thereto.
EXECUTIVE ORDER NO. THREE
This contract is subject to the provisions of Executive Order No. Three of
Governor Thomas J. Meskill promulgated June 16, 1971 and, as such, this contract
may be canceled, terminated or suspended by the state labor commissioner for
violation of or noncompliance with said Executive Order No. Three, or any state
or federal law concerning nondiscrimination, notwithstanding that the labor
commissioner is not a party to this contract. The parties to this contract, as
part of the consideration hereof, agree that said Executive Order No. Three is
incorporated herein by reference and made a part hereof. The parties agree to
abide by said Executive Order and agree that the state labor commissioner shall
have continuing jurisdiction in respect to contract performance in regard to
nondiscrimination, until the contract is completed or terminated prior to
completion.
The contractor agrees, as part consideration hereof, that this contract is
subject to the Guidelines and Rules issued by the state labor commissioner to
implement Executive Order No. Three, and that he will not discriminate in his
employment practices or policies, will file all reports as required, and will
fully cooperate with the State of Connecticut and the state labor commissioner.
EXECUTIVE ORDER NO. SEVENTEEN
This contract is subject to the provisions of Executive Order No.
Seventeen or Governor Thomas J. Meskill promulgated February 15, 1973, and, as
such, this contract may be canceled, terminated or suspended by the contracting
agency or the State Labor
<PAGE>
Commissioner or violation of noncompliance with said Executive Order No.
Seventeen, notwithstanding that the Labor Commissioner may not be a party to
this contract. The parties to this contract, as part of the consideration
hereof, agree that Executive Order No. Seventeen is incorporated herein by
reference and made a part hereof. The parties agree to abide by said Executive
Order and agree that the contracting agency and the State Labor Commissioner
shall have joint and several continuing jurisdiction in respect to contract
performance in regard to listing all employment openings with the Connecticut
State Employment Service.
<PAGE>
STATE OF CONNECTICUT
DEPARTMENT OF MOTOR VEHICLES
FUNCTIONAL SPECIFICATION
AND
SYSTEM REQUIREMENTS
FOR
CONDUCTING A
SAFETY
INSPECTION
Envirotest Systems Corporation
2002 North Forbes Blvd.
Tucson, Arizona 85745
PREPARED BY: -----------------------------------------------------------------
Gordon Krueger Project Engineering Date
APPROVED BY: -----------------------------------------------------------------
Jeff Barth Conn. Program, General Manager Date
-----------------------------------------------------------------
Peter Rosso State DMV Division Chief II Date
-----------------------------------------------------------------
Mark Frost ET. Engineering V.P. Date
RELEASED BY: -----------------------------------------------------------------
Gordon Krueger Project Engineering Date
NOTICE TO ALL PERSONS RECEIVING THIS DOCUMENT
This document is the property of Envirotest Systems and is delivered on the
express condition that it is not to be disclosed, reproduced in whole or in
part, or used for manufacture for anyone other than Envirotest Systems without
its written consent; and that no right is granted to disclose or to use any
information contained in said document. This restriction does not limit the
right to use information obtained from another source.
Document Number - ES - 20157
Revision: I
<PAGE>
Revision Record
Revision Effective Change Description Approval
Continued Date
A 6/27/96 As marked via revision marks for various 7/24/96
changes discussed in the initial meeting
defining details for this document.
B 7/24/96 Various changes discussed to finalize this 7/30/96
document.
C 8/1/96 Various changes discussed to finalize this 8/14/96
document.
D 8/15/96 Various changes as noted - 8/26/96
1. Section B.1.0 #6. Removed the last sentence.
2. Section C.1.0. Changed STR to VST
3. Section E.1.1, for Pos.1, #2, Safety only -
added bullet for safety inspector ID number
4. Section G.1.0, host summary report removed
wording about running it for a date range & all
stations
5. Section E.1.1, for pos.3, changed reference
from paying by check to using a check only for
the Safety test
6. Section H.1.0, Replaced figures 2a & 2b with 2.
E 8/29/96 Various changes as per Jeff Barth 8/29/96
1. Section E.1.1, removed reference to performing
any visual inspection entries at pos. 2.
2. Section E.1.1, added inserting a default entry
of `Pass' for all visual items.
3. Section E.1.1, removed all reference to
requiring a Manager PIN entry when all visual
items pass.
4. Section H.1.0, figure 2 changed to current
design.
5. Section H.1.0, wording added to define maximum
failed items printable on the VSIR.
F 9/13/96 Various changes as per discussions & Jeff Barth 9/13/96
1. Section B.1.0 - changed ambiguous wording about
time frame for implementing an interfaced system.
2. Section E.1.2 - Changed safety inspection item
list & added their abbreviations that will be
printed on the VSIR.
3. Section B.1.2 - modified verbiage to match new
safety list items.
4. Section B.1.2 - Removed verbiage pertaining to
retesting `Side Exiting Exhaust Systems' failures.
G 9/16/96 1. Section E.1.2 - Changed safety inspection 9/16/96
item list - moved items 54, 55 & 56 to group 6.
H 11/7/96 1. Section E.1.2 - Changed safety inspection
item list - 11/7/96 added a new item 74 and
renumbered items 75 through 81.
CONTINUED ON NEXT PAGE
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
2
<PAGE>
Revision Effective Change Description Approval
Date
I 1/16/97 Various changes as per W. Cole & J. Barth from Pending
our meetings & agreements
1. Section E.1.2 Changed wording of item #36
from `Glove Test' to `Exhaust System'.
2. Section E.1.1 Removed all reference to payment
types `Coupon & Voucher'.
3. Changed all abbreviations of SIR to VSIR.
4. Section B.1.2 In points 2 & 3 changed needed
documents to title or other.
5. Section B.1.2 Added point #16.
6. Section E.1.1 Removed reference to printing
additional VSIR forms if all failed components
won't fit on 1 form. Replaced this with printing
the word 'more', requiring a complete inspection
of all components upon a re-test.
7. Section E.1.1 Removed reference to performing
the gas cap pressure test.
8. Added Section E.1.3 Safety Re-test Details
9. Section B.1.0 Modified wording in item #3 to
reflect a free re-test for each paid test.
10. Section F.1.0 Added a bullet to include
recording the cashier employee number.
11. Sections D.1.3 & E.1.1 Modified pos. 3 details
to reflect collecting the fee as the second display.
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
3
<PAGE>
Table of Contents
SECTION A.1.0 OBJECTIVE ................................................. 5
SECTION B.1.0 OVERVIEW .................................................. 6
SECTION B.1.1 STATIONS & LANES .......................................... 7
SECTION B.1.2 SUBJECT VEHICLES .......................................... 7
SECTION C.1.0 GLOSSARY .................................................. 10
SECTION D.1.0 EQUIPMENT ................................................. 11
SECTION D.1.1 PLATFORM BRAKE TESTER ..................................... 11
SECTION D.1.2 UNDER VEHICLE LIGHTING .................................... 12
SECTION D.1.3 LANE LAYOUT ............................................... 12
FIGURE - 1 ........................................................... 12
SECTION E.1.0 INSPECTION PROCESS ........................................ 14
SECTION E.1.1 PROCEDURES ................................................ 14
SECTION E.1.2 VISUAL/FUNCTIONAL ITEMS ................................... 18
SECTION E.1.3 SAFETY RE-TEST DETAILS .................................... 20
FEE .................................................................. 20
ITEMS RE-INSPECTED ................................................... 20
VSIR ................................................................. 21
SECTION F.1.0 DATA COLLECTION ........................................... 22
SECTION F.1.1 FEE RECONCILIATION ........................................ 22
SECTION F.1.2 DATA ACCESS - REPORTING ................................... 22
SECTION G.1.0 REPORTING ................................................. 23
SAFETY INSPECTION - REPORTS ............................................. 23
SECTION G.1.1 WAIT TIME REPORTING ....................................... 24
SECTION H.1.0 SAFETY VEHICLE INSPECTION REPORT (VSIR) ................... 25
FIGURE - 2 ........................................................... 26
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
4
<PAGE>
Section A.1.0 OBJECTIVE
This document defines the scope of effort required by Envirotest
Engineering to implement CT Safety. This document is intended to describe the
modifications required to the current system to incorporate safety testing into
subject lanes within the network.
The combined test scheme will complement the current scheme or be used as
a separate test sequence. Subject vehicles will receive an emissions test,
opacity test or a tailpipe test alone or, combined with a safety inspection or,
the safety inspection alone.
Due to the fact that implementation of Safety testing may be required in a
4 month time frame as an accelerated implementation, a separate document titled
`Quick Start Program', phase 1, is pertinent as describing this phase of an
accelerated Safety testing implementation. Otherwise it does not pertain to the
implementation of the full Safety test plan described here. If accelerated
testing is implemented, then the remainder of this document will be instituted
as Phase 2 of the entire Safety testing plan in an agreed to time frame yet to
be determined.
Please be aware of the following notes:
1. The term "CT Safety" refers to all items in this document including
changes that must be made to the emissions software to accommodate safety
testing. Thus "CT Safety startup" refers to all items in this document.
2. After approval of this document by the State, Envirotest will document
implementation details in an updated version of the Connecticut/Envirotest
Data Specification (ES 20134) which will then be provided to the State.
3. This document addresses only modifications associated with CT Safety
contractual requirements. It is not the intent of this document to address
any other modifications and/or change requests.
4. The existing emissions test system will remain as it currently is except
as specifically documented here. The existing safety test will be replaced
in its entirety with a safety test as documented here. There should be no
"assumed" or "implied" changes beyond what is described in this document.
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
5
<PAGE>
Section B.1.0 OVERVIEW
The modification to the system allowing safety testing requires hardware
additions to the system to allow its operation. A major component will be added
to accomplish the safety test. A platform type brake tester is used to measure
the braking effectiveness for each wheel.
The brake tester is designated to be an integrated portion of the system.
This assumes that the equipment supplier will provide the necessary software to
allow this, in the time frame allotted, where we can adequately communicate with
their system. If the software is not provided, the tests will be implemented as
a stand alone, requiring the independent operator entry of the test results from
the unit into our system. Interfacing the systems, in this case, will be
accomplished in phase II or on a mutually agreed to date based on the
manufacturers delivery of the software plus our internal development time.
Additional equipment required to perform the testing consists of under
vehicle lighting and a method of separately recording a color image, a picture,
that can be manually associated to the test file. A captured image will not be
part of the stored host data.
Another major area of modification is the applications software. The
Safety test sequence uses the existing emissions test lane with the addition of
hardware. Input of the brake test results will ultimately be automatically
accomplished through system interfaces but may initially be performed through a
manual entry by the lane operator, based on the results displayed by that
system. The software will be developed to allow this entry along with the
results of the visual / functional inspection portion of the test. The
flexibility to enter any, none or all of this information at multiple test
positions is a feature of the software. The software will require an entry for
all items before allowing a test completion. Upon the completion of the test a
Vehicle Inspection Report, (VIR) and possible Diagnostic Trace Report, (DTR) &
Diagnostic Sensors Report, (DSR) will be printed if the emissions test was
performed. A Safety Inspection Report, (VSIR) will be printed giving the results
of the Safety inspection. Any combination of either one or all of these reports
will be given to the customer with a brief verbal explanation upon completion of
the test.
An operational VIN verification element, not computerized, is included to
address the requirement to perform this service as well.
Reports specific to the safety inspection are included to track Safety
testing, see Section G.1.0 for these details. Some existing reports will contain
merged data for reporting purposes, such as fee and throughput reports.
Additional items are:
1. CT Safety will be located in 11 stations, with 16 lanes, with no station
having more than 2 safety lanes.
2. Inspections will be performed for vehicles moving into the State and for
change of ownership on vehicles 10 years old or older. For greater
definition and details see section B.1.2.
3. The test fee, for Safety, is $25 for all tests including all retests
performed after 30 days of the prior paid test (31 days will be allowed if
the 30th day is either a Sunday, Holiday or snow day). A free re-test will
be given when the prior failed, paid test is within the 30 days of the
initial test. For greater definition and details see section E.1.3. This
is in
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
6
<PAGE>
addition to any fee required for the emissions test when both tests are
simultaneously performed.
4. CT Safety replaces the existing safety test. Once CT Safety is in place,
previously employed safety tests can no longer be performed. Previous
safety test data will be available through the previous access methods
only.
5. CT Safety will be integrated with the existing on-line emissions data
network. Historical safety data (obtained prior to CT Safety startup) will
not be available on-line and are not supported by CT Safety.
6. A cross-over test occurs when a safety test is performed prior to CT
Safety startup and a safety retest is performed after startup. In this
case the retest must be performed as an initial test and previously passed
items must manually be set to not applicable (N/A). If the old test was
performed within the 30 day time frame where a free re-test is applicable,
the test will be performed as an initial test using the old Safety
Inspection Report (`VSIR') as the payment method. This is a temporary (30
day) procedure that will be handled operationally.
Section B.1.1 Stations & Lanes
STATION LOCATION TOTAL LANES PROPOSED SAFETY LANES
Norwalk II (not built) 7 2
North Haven 7 2
Danbury.. 5 1
Waterbury 4 1
Bridgeport (8/96) 7 2
Thomaston 3 1
Manchester 5 2
Southington 5 2
Taftville 2 1
East Lyme 3 1
North Windham 2 1
- --------------------------------------------------------------------------------
TOTAL - 16
Section B.1.2 Subject Vehicles
CTVIP will inspect the following vehicles:
In State Vehicles: (to model year 1968 and under 10,001 GVWR)
1. Ten year and older vehicles that have completed a change of
ownership. (CT. permanent and temporary plates only)
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
7
<PAGE>
2. Vehicles bearing Connecticut Dealer Plates, without a valid
reciprocal safety inspection sticker but, they must present a title
or other approved document.
3. Vehicles bearing Connecticut Transporter plates, presenting a valid
transporter plate registration certificate, title or other approved
documents.
4. Both diesel and gasoline powered vehicles that fall into one of the
above categories.
5. A re-inspection of any of the vehicles identified above that have
failed an initial paid safety inspection at a CTVIP safety
inspection lane.
Out of State Vehicles:
1. 1968 and newer vehicles (under 10,001 GVWR) that will be registered
in Connecticut that do not display a valid reciprocal inspection
sticker.
2. Vehicles bearing out-of-state Dealer/Repairer/Transporter plates
with transfer of ownership papers reflecting sale to a Connecticut
resident.
3. All out-of-state dealers (including Mass. dealers) requesting a paid
complete safety inspection. NO out-of-state dealer will be given a
"free" VIN verification only.
4. A re-inspection of any of the vehicles identified above that have
failed an initial paid safety inspection at a CTVIP safety
inspection lane.
CTVIP will not inspect, or re-inspect the following vehicles. These vehicles
will be referred to a DMV Safety inspection lane.
1. All salvage and composite (kit cars) vehicles.
2. All "gray market" vehicle's (VIN will help distinguish these vehicles)
3. All public transportation vehicles (includes school buses, van pools etc..)
4. All taxis and livery registered vehicles (includes limo's, hearses etc..)
5. All vehicles 10,001 GVWR or more.
6. All pre 1968 model year vehicles.
7. Any vehicle obviously equipped with an aftermarket lift or lowering kit.
8. All motorcycles.
9. All trailers.
10. All high mileage vehicles (experimental or alternative fuel vehicles)
11. All wreckers.
12. All vehicles equipped with hand controls (cc15 mostly)
13. Any abandoned vehicle or vehicle using H76 form for proof of ownership.
14. Any vehicle bearing a yellow 45 day (dealer issued) temporary registration
plate or has a dealer transfer 20 day temporary registration (pink).
15. Any never previously permanently registered "new" vehicle still in
possession of a certificate of origin.
16. Any vehicle that presents a "Branded Title" at the time of the Safety
inspection.
CTVIP cannot safety re-inspect the following vehicles when the vehicle has
previously failed on the following items:
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
8
<PAGE>
1. 2nd VIN illegible: If, during a vehicle's initial safety inspection (at an
emissions station or a DMV inspection lane), the vehicle's secondary VIN
is illegible, that vehicle must go to a DMV safety inspection lane for
re-inspection of that fail item. CTVIP will treat it as a `normal' failed
item and continue to perform the rest of the (initial only) safety
inspection. However, CTVIP is not allowed to re-inspect a vehicle which
previously failed for VIN.
2. 2nd VIN altered: If, during a vehicle's initial safety inspection (at an
emissions station or a DMV inspection lane), the vehicle's secondary VIN
is suspect for being altered, tampered with or does not match the primary
VIN, that vehicle must go to a DMV safety inspection lane for
re-inspection of that fail item. CTVIP will treat it as a `normal' failed
item and continue to perform the rest of the (initial only) safety
inspection. However, CTVIP is not allowed to re-inspect a vehicle which
previously failed for VIN.
3. 2nd VIN missing: If, during a vehicle's initial safety inspection (at an
emissions station or a DMV inspection lane), the vehicle's secondary VIN
is not present, that vehicle must go to a DMV safety inspection lane for
re-inspection of that fail item. CTVIP will treat it as a `normal' failed
item and continue to perform the rest of the (initial only) safety
inspection. However, CTVIP is not allowed to re-inspect a vehicle which
previously failed for VIN.
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
9
<PAGE>
Section C.1.0 GLOSSARY
ADAPTER A holder used to properly seat the seal of a gas cap. Then is used
as the pressure vessel for pressurizing the gas cap.
CUT POINT The established standard to which measured values are compared
in order to make a `Pass / Fail' decision.
DSR Diagnostic Sensors Report form.
DTR Diagnostic Trace Report form.
SECOND CHANCE A test sequence performed exactly mimicking the first test.
TEST
VSIR Vehicle Safety Inspection Report. Within the Engineering
Department this is referred to as the SIR in the detailed
documentation and code.
VST Safety Test Record
VIR Vehicle Inspection Report.
VTR Vehicle Test Record
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
10
<PAGE>
Section D.1.0 EQUIPMENT
The equipment used for the Safety test remains unchanged from the
equipment used for the emissions test, with the following additions.
o A platform type brake tester is used to measure the braking effectiveness
for each wheel.
o A printer to print the Safety Inspection Report form (VSIR).
The equipment listed above may be designated to be applied as a stand
alone unit, requiring the independent operator entry of the results from the
unit, but is intended to ultimately be integrated into the lane data collection
function.
Additional equipment required to perform the Safety testing consists of,
o Under vehicle lighting. (Not computer interfaced)
o A camera, for providing undeveloped film to the State that can be manually
cross referenced to the Safety test record `STR' (not computer
interfaced).
The above component is installed in a modified existing lane, set up to provide
Safety inspections.
Section D.1.1 Platform Brake Tester
The brake test equipment that will be used is a platform brake test unit
consisting of 4 plates that move to measure the braking performance of each
individual wheel. The unit will provide integrated equipment needed to weigh the
vehicle as it drives across the unit. This data is used in the braking
performance calculations for the unit's determination of pass/fail results. The
vehicle is driven at approximately 4-7 mph onto the unit. Once all 4 wheels are
on the skid plates, the brakes are forcefully applied, bringing the vehicle to a
complete stop. The performance of each individual wheel's braking performance is
then calculated resulting in a pass/fail determination.
The brake tester is designated to be applied as an integrated portion of
the system. This assumes that the equipment supplier will provide the necessary
software to allow this, in the time frame allotted, where we can adequately
communicate with their system. If the software is not provided, the brake test
will be implemented as a stand alone function, requiring the independent
operator entry of the test results from the unit into our system. The automated
systems interface, in this case, will be accomplished in a timely manner at some
future date if possible. The items that will be recorded are, brake overall
performance pass/fail, braking differences front vs. rear and braking
differences left vs. right.
Upon completion of the entire test, the Safety Inspection Report (VSIR)
will be printed giving the results listed separately for this test. The result
will be included in the overall pass/fail result determined for the vehicle with
front/rear and left/right differences. The individual test result will be stored
in the VST record.
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
11
<PAGE>
Section D.1.2 Under Vehicle Lighting
The safety lanes will be retro-fitted to provide under vehicle lighting to
aid in the inspection of the vehicle's under carriage. The lights will be flush
mounted in the floor and placed appropriately to provide the best coverage. The
lane diagram in section D.1.3 identifies the floor light location.
Section D.1.3 Lane Layout
The following diagram, Figure - 1, provides a graphical depiction of the
hardware locations for the Safety lane equipment:
[GRAPHIC OMITTED]
FIGURE - 1
Briefly, the activities at each position are:
AT POSITION - 1
When the motorist enters the facility they will be directed by the
position 1 lane operator into the test lane from the queue line. Once in the
facility the Operator will get any pertinent documentation from the motorist and
enter / confirm that data as done previously. A determination will be reached as
to the type of test(s) that are required for that vehicle. An operator
selectable prompt will be offered for the test sequence wanted. Emissions only,
Safety only or an Emissions & Safety combined test will be offered. Some of the
required visual / functional inspection may take place here with that data being
entered into the system. When applicable the jacking of the vehicle will take
place at this position to perform the front end
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
12
<PAGE>
suspension inspection. If the inspection is for Emissions only, the test will
proceed with the existing emissions test. The software system flexibility will
allow entry of some, none or all of the visual entry items at positions 1 or 3.
This includes the parking brake result.
AT POSITION - 2
At position 2, if the emissions test is required, the test will be
initiated as currently done. When the test is complete at position 2 the vehicle
is moved to position 3. If the emissions test is not required, the second
position may be used to perform some of the required visual / functional
inspection. When position 3 is open, the vehicle will proceed there.
AT POSITION - 3
At position 3, the operator will confirm that there is no vehicle on the
brake test plates then, the appropriate fee(s) will be collected. The fees will
be noted separately for the emissions test and/or safety test. During phase I of
implementation the initial display will be the fee collection display. The Lane
Operator will then be informed, via a screen prompt, to drive onto the brake
tester to perform the brake efficiency tests. With an integrated data system for
the brake test unit, the brake performance data will be automatically up-loaded
to the lane computer system. Otherwise the required braking data information
will be manually entered by the lane operator. When complete, and when
performing an emissions test with the Safety test, the Lane Operator will be
informed, via a screen prompt to perform the emissions test functions.
The remainder of the visual / functional inspection items will be checked
and their results entered by the operator. This will include the results from
the parking brake performance functional test. The software system flexibility
will allow entry of some, none or all of the visual entry items at positions 1
or 3. This includes the parking brake result.
Once the system is satisfied by having all required data for the test
entered, the VIR, and when appropriate the DTR & DSR and/or VSIR form(s) will be
printed and supplied, with a verbal explanation, to the customer.
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
13
<PAGE>
Section E.1.0 INSPECTION PROCESS
This section is a summation of the changes being implemented for the
Safety test process, from an emissions test. It must not be taken as a
replacement for the Lane Operators Training Manual. That document covers in
greater detail the operational paths that will be followed with each different
situation encountered.
At an appropriate position, a picture will be taken. The image will have
the ability to be manually cross referenced to the Safety Test Record `STR'. The
un-developed film will be packaged at the completion of each roll, date labeled
and within 48 hours delivered to the Envirotest Headquarters. The film will be
available to the DMV at all reasonable times.
Section E.1.1 Procedures
Details for position 1 are as follows:
1. The new hardware added to position will consist of the addition of the
under carriage or in floor lighting (not computer interfaced).
2. The software will be modified as follows:
o A new prompt will be added to the very beginning of each test. The
inspector will be prompted to select "emissions only", "safety only"
or "both".
o If "emissions only" is selected, then the following will occur:
o The emissions test will continue just like the existing
emissions test.
o If "safety only" is selected, then the following will occur in the
order listed:
o Vehicle identification information will be entered and the
host computer will be queried for vehicle information and
previous safety data.
Previous safety data includes each individual result. Any item that
previously passed will have its current result set to "X" for exempt
and will not be tested. Also, any item that was previously exempt
will have its current result set to exempt.
If previous data cannot be obtained from the host, previously failed
items will be entered from the returned Safety Inspection Report
(VSIR) and validated with a CRC. All other items will be set to "X".
The first re-test within 30 days (31 if the 30th day is a Sunday,
Holiday or snow day) of the initial test will require inspection of
only the previously failed items and be a free re-test, providing
the previous VSIR is presented for testing. If the re-test is beyond
30 days (31 if the 30th day is a Sunday, Holiday or snow day) or if
the VSIR is not presented, the entire inspection will performed as a
paid test.
o The visual entry screen will be displayed.
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
14
<PAGE>
This screen will contain up to 150 visual entry items. The software
system flexibility will allow entry of some, none or all of the
visual entry items at positions 1 or 3.
The items will have a full description and will be grouped by
general category. The inspector will be able to scroll or page back
and forth through all items, selecting "P" for pass, "F" for fail or
"N/A" for not applicable. No entry will also be allowed for each
item. The system will pre set all items to a `Pass' default.
All functional tests will be included as visual entries. With an
integrated brake test the system would automatically set the results
in the test record (VST) at position 3.
Items which are exempt will not be displayed. If all items are
exempt, the screen will appear for continuity but no results will be
entered.
o Entry of the Safety Inspector and PIN number will be required
o An abort will be allowed at appropriate points in the above
sequence.
o If "both" is selected, then the following will occur in the order listed:
o All steps for a normal emissions test will be performed.
o If a re-test, the host computer will be queried for previous safety
data. If previous data cannot be obtained from the host, previous
failed items will be entered from the returned Safety Inspection
Report (VSIR).
o The visual entry screen will be displayed. This screen will contain
up to 150 visual entry items. The software system flexibility will
allow entry of some, none or all of the visual entry items at
positions 1 or 3. The system will pre set all items to a `Pass'
default.
o Entry of the Safety Inspector and PIN number will be required
o An abort will be allowed at appropriate points in the above
sequence. If the test is aborted, the system will allow an abort of
either the emissions or safety test sequence separately or combined.
An abort reason code will be required and selected to record the
abort.
Details for position 2 are as follows:
1. No new hardware will be added to position two.
2. The software will be modified as follows:
o If "emissions only" was selected at position one, then the following
will occur:
o The emissions test will continue just like the existing
emissions test.
o If "safety only" is was selected at position one, then the following
will occur:
o An abort will be allowed.
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
15
<PAGE>
o If "both" was selected at position one, then the following will occur:
o The emissions test will continue just like the existing emissions
test.
o No entry of the safety inspection visual items will be recorded at
position two.
o An abort will be allowed at appropriate points in the above
sequence. If the test is aborted, the system will allow an abort of
either the emissions or safety test sequence separately or combined.
An abort reason code will be required and selected to record the
abort.
Details for position 3 are as follows:
1. The brake tester unit will be added to position three. This device will be
connected to the Envirotest computer system, if possible. If the unit is
not able to be integrated to the lane system, it will be employed as a
stand alone unit.
2. The software will be modified as follows:
o If "emissions only" was selected at position one, then the following
will occur:
o The emissions test will continue just like the existing
emissions test.
o If "safety only" is was selected at position one, then the following
will occur in the order listed:
o The operator will confirm that there is no vehicle on the
brake test plates then, the fee will be collected. During
phase I of implementation the initial display will be the fee
collection display. Current forms of payment will remain
unchanged except that more than one form of payment will be
accepted. The Safety test can be paid for by a check. When a
combined emissions and safety test is performed Only the
Safety portion may be paid by check.
o The visual entry screen will be displayed. This will allow the
inspector to enter any remaining visual data, including
service brake (entered automatically with an integrated
system). This screen will contain up to 150 visual entry
items. The software system flexibility will allow entry of
some, none or all of the visual entry items at positions 1 or
3. "No entry" will not be allowed for any item at this
position, ensuring that all items have been inspected. The
system will pre set all items to a `Pass' default.
o A Safety Test Record (VST) will be stored.
o A Vehicle Safety Inspection Report (VSIR) will be printed. If
the amount of failed components exceeds the available room on
the VSIR form, the word `More' will be printed. When this
condition occurs the re-test will require a complete
re-inspection of all components. For greater definition and
details see section E.1.3.
o An abort will be allowed at appropriate points in the above
sequence.
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
16
<PAGE>
o If "both" was selected at position one, then the following will
occur in the order listed:
o The operator will confirm that there is no vehicle on the
brake test plates then, the fee will be collected. During
phase I of implementation the initial display will be the fee
collection display. Current forms of payment will remain
unchanged except that more than one form of payment will be
accepted. The Safety test can be paid for by a check. When a
combined emissions and safety test is performed the Safety
portion only may be paid by check. Fees will be itemized by
emissions, late emissions and safety along with grand total.
o The visual entry screen will be displayed. This will allow the
inspector to enter visual data, including service brake
results. This screen will contain up to 150 visual entry
items. The software system flexibility will allow entry of
some, none or all of the visual entry items at positions 1 or
3. The system will pre set all items to a `Pass' default.
o The visual entry screen will be displayed. This will allow the
inspector to enter any remaining visual data.
o "No entry" will not be allowed for any item at this position,
ensuring that all items have been inspected.
o Two test records will be stored. A Vehicle Test Record (VTR)
will be stored for emissions and a Safety Test Record (VST)
will be stored for safety.
o Two printouts will be generated. A Vehicle Inspection Report
(VIR) will be printed for the emissions test and a Safety
Inspection Report (VSIR) will be printed for the safety test.
Additional emissions reports may be provided for vehicles
failing that test.
o An abort will be allowed at appropriate points in the above
sequence. If the test is aborted, the system will allow an
abort of either the emissions or safety test sequence
separately or combined. An abort reason code will be required
and selected to record the abort.
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
17
<PAGE>
Section E.1.2 Visual / Functional Items
The following items are checked in the visual / functional inspection. A
result of Pass - Fail or Not Applicable (N/A) will be recorded for each of these
items. Only the Failed items will be printed on the VSIR.
INSPECTION ITEMS ABBREVIATION PRINTED ON VSIR
Group One - Safety Only
1. 2nd VIN Altered 1. 2nd VIN Altered
2. 2nd VIN Illegible 2. 2nd VIN Illegible
3. 2nd VIN Missing 3. 2nd VIN Missing
4. Catalytic Converter 4. Catalytic Conv
5. Gas Cap 5. Gas Cap
Group two - Outside Lights & Lenses
6. Fog/Running Light Operation 6. Fog/Run Lt Oper
7. Fog/Running Light Lenses 7. Fog/Run Lt Lens
8. Parking Light Operation 8. Parking Lt Oper
9. Parking Light Lenses 9. Parking Lt Lens
10. Headlight Operation 10. Headlight Oper
11. High Beam 11. High Beam
12. Low Beam 12. Low Beam
13. Headlight Lenses 13. Headlight Lens
14. Turn Signal Operation 14. Trn Signal Oper
15. Turn Signal Lenses 15. Trn Signal Lens
16. 4-Way Flasher Operation 16. 4-Way Oper
17. 4-Way Flasher Lenses 17. 4-Way Lens
18. Marker Light Operation 18. Marker Lt Oper
19. Marker Light Lenses 19. Marker Lt Lens
20. Tail Light Operation 20. Tail Light Oper
21. Tail Light Lenses 21. Tail Light Lens
22. Brake Light Operation 22. Brake Lt Oper
23. Hi-Mount Brake Light 23. Hi-Mount Brake Lt
24. Brake Light Lenses 24. Brake Light lens
25. Back-Up Light Operation 25. Back-Up Lt Oper
26. Back-Up Light Lenses 26. Back-Up Lt Lens
Group Three - Miscellaneous Lights
27. Side Light Operation 27. Side Light Oper
28. Side Light Lenses 28. Side Light Lens
29. Carriage Light Operation 29. Carriage Lt Oper
30. Carriage Light Lenses 30. Carriage Lt Lens
31. Reflectors 31. Reflectors
32. Other Lights 32. Other Lights
Group Four - Vehicle Exterior
33. Driver Door Handle Operation 33. Drvr Door Handle
34. Flexible Brake Lines 34. Flx Brake Lines
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
18
<PAGE>
35. CV Boots 35. CV Boots
36. Exhaust System 36. Exhaust System
37. Excess Smoke 37. Excess Smoke
38. Fluid Leaks 38. Fluid Leaks
39. Tires 39. Tires
40. Wheels 40. Wheels
41. Lug Nuts 41. Lug Nuts
42. Bounce Test 42. Bounce Test
43. Body Sheet Metal 43. Body Sheet Metal
44. Bumpers 44. Bumpers
45. Frame/Unibody Integrity 45. Frame/Unibody
46. Floor 46. Floor
47. Trunk Floor 47. Trunk Floor
48. Solid Brake Lines 48. Solid Brake Lines
49. Fuel Lines 49. Fuel Lines
50. Parking Brake Operation 50. Parking Brake Oper
Group Five - Vehicle Systems
51. Suspension System 51. Susp System
52. Steering System 52. Steering System
53. Steering Wheel Lash 53. Steering Whl Lash
Group Six - Vehicle Interior
54. Brake Stab Test 54. Brake Stab
55. Brake Warning Light - Dashboard 55. Brake Warning Lt
56. Air Bag Warning Light - Dashboard 56. Air Bag Warning Lt
57. Horn 57. Horn
58. Shift Indicator 58. Shift Indicator
59. Front Restraint System Missing 59. Fr Restraint Missing
60. Front Restraint System Operation 60. Fr Restraint Oper
61. Rear Restraint System 61. Rear Restraints
62. Inside Mirrors 62. Inside Mirrors
63. Outside Mirrors 63. Outside Mirrors
64. Hi Beam Indicator Light - Dashboard 64. Hi Beam Indicator
65. Turn Signal Indicator Lights - Dashboard 65. Turn Sig Indicator
66. 4-Way Flasher Indicator Light - Dashboard 66. 4-Way Indicator
Group Seven - Miscellaneous
67. Windshield Wiper Operation 67. Wiper Operation
68. Windshield Wiper Blades 68. Wiper Blades
69. Defroster Operation 69. Defroster Oper
70. Drivers Window Operation 70. Drivr Window Oper
71. Other Miscellaneous Defects 71. Other Misc Defects
Group Eight - Platform Brake Test
72. Brake Force - Overall 72. Brake Force
73. Front/Rear Brake Balance 73. Fr/Rear Brake Bal
74. Left/Right Brake Balance 74. Lft/Rght Brake Bal
Group Nine - Vehicle Glazing
75. Windshield Glazing 75. Windshield Glazing
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
19
<PAGE>
76. Windshield Tint 76. Windshield Tint
77. Side Windows Glazing 77. Side Glazing
78. Side Windows Tint 78. Side Glass Tint
79. Rear Window Glazing 79. Rear Glazing
80. Rear Window Tint 80. Rear Glass Tint
81. Other Glass Defect 81. Other Glass Defect
TOTAL - 81 items inspected.
Section E.1.3 Safety Re-test Details
This section details the specifics concerning re-testing a vehicle that has
failed the prior Safety test.
FEE
On a Safety re-test the inspection will be free to the customer providing
the following conditions are met.
1. The test is a Safety re-test and the most recent test was a paid
Safety test.
2. The test is a Safety re-test and the current date is within 30 days
of the most recent paid test. The 30 days figure takes into
consideration the `Non Late Period' calculation described as when
the re-test is within 30 days (31 if the 30th day is a Sunday,
Holiday or snow day).
3. The test is a Safety re-test and the most recent VSIR is present for
testing.
All other tests not meeting this criteria are paid tests.
ITEMS RE-INSPECTED
On a Safety re-test the items to be inspected will be based upon whether
or not the current test will be a paid test or a free test.
o If the re-test will be a PAID test - then all safety items will be
inspected.
o If the re-test will be a FREE test - then only the previously failed items
from the most recent test will be
re-inspected. The only exception to
this is when the most recent paid
test discovered more than 45 items
failing then, all items will be
re-
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
20
<PAGE>
inspected. This will be evident by
the statement `More' printed on the
VSIR at the end of the last column of
failed items.
VSIR
On a failing safety test, where a fee was paid, the last eligible day of
the `Free' period (not including the non late date calculation as previously
described) is printed in the "Free Re-test On Or Before Date" field of the VSIR.
No date is printed in this field if the Safety test `Passed' or if the
test was a free re-test.
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
21
<PAGE>
Section F.1.0 Data Collection
The Safety Test Record (VST) will contain the following items at a minimum:
o Test date/time/location information
o Vehicle identification information including: Make, Model, Year,
Registration Number (plate), and State of Origin (Registration State).
o Results for up to 150 visual items (pass, fail, not applicable, exempt -
NOTE, exempt is used for retest information of previously passed items.
The operator can not select exempt as an entry) will be recorded in the
VST. Only `Failed' items are printed on the VSIR form.
o Final result (pass, fail)
o Test fee and payment information
o Free re-test due date
o Abort reason code
o Inspector identification number of the person performing the inspection.
o Inspector identification number of the cashier at position 3.
o Test number
Section F.1.1 Fee Reconciliation
The fees collected at the lane will be recorded and identified separately
for emissions, safety and emissions' late fees. The lane fee reports will
reflect the inspectors obligations as a total figure, broken down into the
listed categories. The method of payment will be recorded.
o Safety voids will be allowed and accepted for credit just as with the
existing emissions test.
o A voided VST can be credited only for another VST, and a voided VTR can be
credited only for a another VTR.
Section F.1.2 Data Access - Reporting
The safety lane data will be handled in the same manner as the emissions
data. It will be transmitted to the host as the VST record. The data collected
will be accessible through the host's data record access function.
Separate reports specific to the safety testing are detailed in section G.1.0.
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
22
<PAGE>
Section G.1.0 REPORTING
The results of the test will be stored in the Safety Test Record (VST).
Safety Inspection - Reports
Reports will be added or modified as follows:
o Existing station and lane fee reports will be expanded to include safety
fees and checks individually and in total. The fees collected at the lane
will be recorded and identified separately for emissions, safety and
emissions late fees. The lane fee reports will reflect the inspectors
obligations as a total figure, broken down into the listed categories. The
method of payment will be recorded.
* Safety voids will be allowed and accepted for credit just as with
the existing emissions test.
* A voided VST can be credited only for another VST, and a voided
VTR can be credited only for a another VTR.
o Existing host fee reports will be expanded to include safety fees and
checks individually and in total.
o A host "safety summary report" will be provided. The report can be run for
a selected date range and a selected station or "all" stations.
o All data from lanes equipped with Safety equipment will be eliminated from
the Host wait time reports.
Billing capability will be as follows:
A separate State billing tape will be provided for safety tests. At
Envirotest's option and with State approval, this may be combined with the
current vehicle test billing tape.
Data capabilities will include the following:
o Ability to handle covert vehicles will be provided. This will be identical
to emissions tests (an editable set of VINs will always appear as an
initial test).
o Safety test data will remain on-line at the host for 90 days.
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
23
<PAGE>
Section G.1.1 Wait Time Reporting
There will be no special distinction made for Safety Lane test waiting
time at the station on the existing waiting time sign.
For the purposes of reporting an accurate wait time at the station on the
wait time sign, the assumption will be made that the waiting vehicles will be
evenly distributed across all of the facilities open lanes. The existing
calculations will remain valid for determining the waiting time reported on the
stations waiting time sign. The Station Manager will make periodic checks
throughout the day to confirm accuracy of the waiting time sign. Adjustments
will be made manually if it's found that the system computed wait time is not
accurate.
For purposes of reports created from the host data, the safety test lane
wait time data will be eliminated from all Station wait time determinations.
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
24
<PAGE>
Section H.1.0 Safety Vehicle Inspection Report (VSIR)
A free format VSIR will be used. An example of the VSIR is attached as,
figure 2. A 2 part VSIR form will be printed for all Safety inspections. One for
the customer, the other will be kept at the test facility.
The VSIR form will provide adequate space to accommodate the recording of
45 failed items, if more than that are encountered the word `More' will be
printed at the end of the listing.
The information provided on the VSIR form is a subset of what is collected
in the VST record as detailed in section F.1.0, Data Collection.
There will be a re-print capability accessible, at the same lane for the
same day, for situations where the VSIR is damaged during printing or is lost
driving from the inspection facility.
A dedicated printer will be added to position 3 to accommodate printing of
the VSIR forms.
NOTE - Software development is tied to finalization of the VSIR form, for this
reason the form must be finalized, with a Velox copy, to the Engineering
Department no less than 6 weeks prior to start-up. The first 150 actual
VSIR forms, from the first printing run, must be delivered to the
Engineering Department no later than 2 weeks prior to start-up.
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
25
<PAGE>
[GRAPHIC OMITTED]
FIGURE - 2
- --------------------------------------------------------------------------------
ENVIROTEST SYSTEMS CORPORATION(R) COPYRIGHT 1996(C) CONFIDENTIAL: PROPRIETARY
INFORMATION
THIS DOCUMENT MAY NOT BE DISCLOSED OR REPRODUCED IN WHOLE, OR IN PART; WITHOUT
THE EXPRESSED WRITTEN CONSENT OF ENVIROTEST SYSTEMS CORPORATION. NO RIGHT IS
HEREBY GRANTED TO DISCLOSURE OR SO USE UPON DELIVERY OF SAID DOCUMENT.
26
<PAGE>
Exhibit A
CONNECTICUT SAFETY TESTING
Accelerated Implementation Details
for a
"SAFETY"
"QUICK START PROGRAM"
<PAGE>
REVISION RECORD
Revision Effective Change Description Approval
A 7/26/96 Various changes per discussions 7/31/96
B 8/1/96 Various changes per discussions 8/2/96
C 8/6/96 Verbage change per Hamid 8/6/96
D 8/15/96 1. Section A.1.0. change STR to VST Pending
2. Section C.1.0. Change fixed days
for retest to 30 from 31 & greater
definition on handling operationally
<PAGE>
Table of Contents
Section A.10. Glossary................................................... 4
Section B.10. Objective.................................................. 5
Section C.1.0 Overview................................................... 6
Section D.1.0. Quick Start Program........................................ 8
<PAGE>
Section A.1.0 Glossary
ADAPTER A holder used to properly seat the seal of a gas cap. Then is used
as the pressure vessel for pressurizing the gas cap.
CUT POINT The established standard to which measured values are compared in
order to make a "Pass / Fail" decision.
DSR Diagnostic Sensors Report form.
DTR Diagnostic Trace Report form.
SECOND
CHANGE
TEST A test sequence performed exactly mimicking the first tests.
SIR Safety Inspection Report
VST Safety Test Record
VIR Vehicle Inspection Report
VTR Vehicle Test Record
<PAGE>
Section B.1.0 Objective
This document defines the scope of effort required by Envirotest
Engineering to implement a "Quick Start Program" for CT Safety. This document is
intended to describe the modifications required to the current emissions system,
to incorporate safety testing into subject lanes within the network.
The combined test scheme will complement the current emissions scheme or
be used as a separate test sequence. Subject vehicles will receive an emissions.
(opacity test or a tailpipe) test alone or combined with a safety inspection or,
the safety inspection alone.
Due to the fact that implementation of Safety testing will be required in
a 4 month time frame, only selected segments of the full program (as described
in the CT Safety Functional Specification and System Requirements document) will
be implemented. The 'Quick Start Program' described here defines the first phase
of the Safety testing implementation. If accelerated testing is implemented,
then the items not addressed in this phase will be instituted as Phase 2 of the
entire Safety testing plan where the complete CT Safety Functional Specification
and System Requirements document details will be implemented.
It is important to note that the described "Quick Start Program" will
provide a safety inspection system that is integrated with either the CT-93 or
I/M 240 emissions test system. The added features deferred to the second phase
will not require extensive re-training of Operations Personnel, but will
constitute enhancements that will improve overall program efficiency and
effectiveness.
<PAGE>
Section C.1.O Overview
The "Quick Start Program" will enable safety testing to be performed 4
months from the approval of this and the Functional Specification and System
Requirement Documents. The Quick Start Program will provide software training
materials, a hard copy of the detailed terminal displays that the operator will
see during the test sequence to Operations 6 weeks prior to the start-up. The
brake test unit will be provided as quickly as possible, as determined by the
manufacturers availability. The initial 3 brake test units received will be
distributed with l to the Engineering Department and the 2 remaining unit sets
to the Program for stand alone training purposes.
The safety "Quick Start Program" will make use of the in place emissions
testing network system to send and retrieve safety data between the Lanes and
Host. The "Quick Start Program" will contain the identical elements of the
Safety Functional Specification and System Requirements Document with the
following exceptions:
o The brake test unit will not be interfaced to the test lane computer
system. interfacing will be provided for phase 2, providing the
manufacturer has this capability.
o The Phase 1 system will have the ability to display the SIR data and run
adhoc reports via the system terminals, using Impromptu. Phase 1 will not
have canned Host reports available on the collected safety test data but
again, there is the ability to create reports providing the information
needed. Phase 2 will provide reports as detailed in the Safety Functional
Specification and Requirements Document section G.1.0.
o The current system uses floppies to get the safety test data to the State.
Phase 2 will provide the safety test data on line as well as with a State
Data Tape mimicking the system used now to transfer the emissions data.
Phase 1 will not provide a State Data Tape with collected safety test data
yet the data will be available on an on-line basis as described in the
above point. This enhancement will streamline the data accessibility
factors.
o There will be at the minimum, a daily transmission of the safety data to
the Host employing the existing emissions network system. Phase 1 may not
have available real time transmission of the safety test data to or from
the Host.
o When previous test data can not be obtained from the host, we will need to
rely on the customer to supply this information via their prior SIR. The
ability to provide real time transmission via the network is the
determining factor.
<PAGE>
o There will be no change to the Wait Time calculations from the current
system. Phase 2 will eliminate the safety lane wait time from the overall
wait time report.
o The phase 1 system will provide safety lane fee reports specific to that
particular lane only. Lane and station fee reports for Safety will not be
integrated/combined with the emissions fee reports. Phase 2 will merge the
data providing a combined total as described in the Safety Functional
Specification and Requirements Document section G.1.0.
o The free re-test due date will not be printed on the SIR form
o Free re-tests will be given for a fixed 30 days, calculations for Sundays
and snow days will not be calculated by the system. During Phase 1 the
Managers Authorization form will be used to track these tests.
o There will be no vehicle data supplied by the system. requiring complete
vehicle identification entered by the operator.
o The option to enter visual items in position 2 will be implemented in
phase 2.
o When a test is "Aborted" both emissions and safety will be "Aborted".
Section, D.1.0 Quick Start Program. will describe the test elements that will be
provided as the `Quick Start Program'.
NOTE - Software development is tied to finalization of the SIR form, for this
reason the form must be finalized, with a Velox copy, to the Engineering
Department no less than 6 weeks prior to start-up. The first 150 actual
SIR forms, from the first printing run, must be delivered to the
Engineering Department no later than 2 weeks prior to start-up. Reference
section H. 1.0 of the Safety Functional Specification Document for
details pertaining to the SIR.
<PAGE>
Section D.1.0 Quick Smart Program
It is recognized that there is a need to initiate the safety inspection
program in a much shorter time frame than what is desired and as detailed in the
Safety Functional Specification and System Requirements document. To accommodate
this need a "Quick Start" program can be initiated within a 4 month time frame
from the date that a written approval is received on the technical details
(Functional Specification and System Requirements and Quick Start Program
documents).
It must be realized that there are major differences between the safety
program as detailed in the Functional Specification and System Requirements
document and the 'Quick Start Program'. This document details the Quick Start
Program only. It is not to be confused as part of the full safety program
detailed in the Functional Specification and System Requirements Document. It is
intended that the quick start option be initiated only as a last resort to meet
the immediate needs of the State. It is an optional path that is intended to
bridge the gap between the time required to develop and implement the full
safety program, and the need by the State to initiate a program in a much
shorter time frame.
The quick start program will provide a comprehensive test scheme utilizing
the existing network to collect and store test data the accelerated test scheme
will contain the following test elements:
o The test will be performed using stand alone systems of the brake test
hardware.
o The system will prompt the operator for the vehicles VIN; number and other
applicable information as detailed below, under the information printed on
the SIR.
o The system will prompt the operator for all of the Visual/Functional items
as listed in section E.I.3 of the Functional Specification and System
Requirements document. A pass-fail-N/A option will be selected for each
item.
o The items relating to the brake test will be manually input from the data
display provided by the brake test unit.
o The test information will be stored in the Safety Test Record (STR) a
subset of which will be printed on the SIR.
o The STR will include the following information:
* Test data/time/location information
* Vehicle identification information including: Make, Model, Year,
Registration Number (plate), Registration State and State of Origin.
<PAGE>
* Results for up to 150 visual items (pass, fail, not applicable.
exempt - NOTE. exempt is used for retest information of previously
passed items. The operator can not select exempt as an entry) will
be recorded in the STR. Only 'Failed' items are printed on the SIR
form.
* Final result (pass, fail)
* Test fee and payment information
* Abort reason code
* Inspector identification number of the person performing the
inspection.
* Test number
o There will be a multiple data backup system where the test data will be
stored on the local PC's hard drive, data floppy and transferred (at a
minimum daily) to Headquarters. It will be retained at both locations.
until confirmation by headquarters that the data has been received.
o State access to the raw safety test data will be through the existing
terminals where, through Impromptu, the State will be able to access the
data. There may be a 1 day minimum delay for this data
o The re-test data will be used from the prior SIR only.
<PAGE>
EXHIBIT B
DEPARTMENT OF MOTOR VEHICLES
EMISSIONS DIVISION
Date: June 12, 1966
To: Pete Rosso, Divn. Chief II
Emissions Division
From: David Maestrini, Lieutenant
Emissions Division
Re: Safety Training Curriculum
- --------------------------------------------------------------------------------
Laurel McGill from Envirotest and myself have agreed on the attached Safety
Training Curriculum. I am submitting it to you for your review and approval. If
you have any questions please contact me.
<PAGE>
Safety Training Curriculum
ENVI and DMV are in agreement to provide the following Safety Inspection
Training Curriculum for all inspectors participating in the proposed expanded
safety inspection network.
Prequisite:
Applicants for safety inspection training must meet the following requirements:
1. Certification in all aspects of emissions testing
2. Certification in VIN Verification procedures
3. Employed for a minimum of 60 - 90 days
4. Have a good work history
A Sixty-four hour course over a two--week period
1. For Safety Start-Up only, active lane requirement of 8 hours can be
replaced with simulated lane activity. Once the 17 lanes (or a suitable
number of additional safety inspection lanes are available), the
requirement of 8 hours active lane exposure will be re-instated.
2. 64 hrs training, Hunter Brake Testing training TBD.
3. There should be no more than 12 inspectors per class.
4. When doing simulated lane inspection training, there will be one trainer
(or existing safety inspector in good standing) per 4 students. Each group
of 4 students will be assigned to a safety "trainer" with exact and
precise training instruction requirements.
5. When instructing under body construction, corrosion inspection and frame
inspection, classes may be given at a lift or pit area OR using other DMV
approved techniques as slides, overheads, jacking etc. that achieve the
same effect.
6. Written and practical tests must be administered during the training
process.
7. Students must be evaluated and removed from the class if their performance
is less than satisfactory (based on test results and practical evaluation
of class trainer)
8. Test scores and attendance must be recorded. (Existing DB stucture
acceptable)
9. DMV will provide 18-20 hours of support
10. Training criteria will not change without DMV approval.
11. Signatures and employee numbers must be presented to DMV upon
certification
12. The DMV inspector and certified trainer (or designated certified manager
or assistant manager) will test and certify students with reasonable
notice of "certification day".
13. Recertification will be required once a year. Recertification will take no
mare than 2 hrs. Specific criteria TBD.
<PAGE>
14. If in agreement, DMV and ENVI have the right to suspend or remove safety
certification when an inspector has failed to meet acceptable performance
stands. Specific performance standards TBD.
15. When inspection procedures are changed for the expansion program, all
existing safety inspection staff must be trained and certified for these
changes if scheduled to work in the new safety inspection lanes.
Day 1: 7 hours
- --------------
Classroom:
- Suspension Identification: Overheads, Printed Materials
- Jacking Position: Technique
Hands On:
- Suspension Identification: Overheads, Printed Materials
- Jacking Position: Technique
Classroom:
- Suspension Component Identification (Inspection Manuals, Visuals,
Printed Materials)
- Steering Component Identification
- Brake System Component Identification
- Drive Line Identification
Hands Out:
- Component Identification - SEE ABOVE
- Practice Jacking (Various Vehicles)
Day 2: 7 hours
- --------------
Classroom:
(Inspection Manual, Visuals, Printed Materials)
- Review Day 1
- Body Construction Identification
- Body Corrosion Inspection Criteria
- Exhaust System Inspection
- Introduce Walk Around Inspection
<PAGE>
Hands On:
- Practice Jacking (Various Vehicles)
- Inspection of Suspension, Steering Exhaust, Body Sheet, Metal,
Frame, including Walk Around
Day 3: 7 hours
- --------------
Classroom:
- Review Day 1 and Day 2 materials
- Introduce all other positions #2 inspection items to complete walk
around
Hands On:
- Practice Position #2 Walk Around all tasks (various vehicles)
Classroom:
- Inspection procedures for Position #1 (Visuals) (Inspection Manuals)
using checklists
Hands On:
- Practice Position #1 Tasks - 1/2 of class (various vehicles)
- Practice Position #2 Tasks - 1/2 of class (various vehicles)
- Switch Groups (various vehicles)
Day 4: 7 hours
- --------------
Classroom:
- Vehicle Documents
- VIN Discussion by DMV Inspector (PLUS SUPPORT - goals and objectives
from both sides)
- Paperwork (VSIR) and Fee Collection
- Explanation to customer
- Re-inspection
- Brake Testing (Time to be determined)
- Rolling
Hands On:
- Practice all phases including above
Classroom:
- Written Test (re-evaluation of student)
- Cover company policy as to inspectors NOT following
<PAGE>
authorized procedures
Day 5: 7 hours
- --------------
Hand On:
o Run simulated lane (all positions)
o One on One concept - lane flow
o DMV Inspector / helping to reinforce procedures
Classroom
o Required only to clear up or reinforce procedures
Day 6: 7 hours
- --------------
Hands On: (same as day 5)
Classroom: (same as day 5)
Day 7: 7 hours
- --------------
Hands On: (same as day 5 & day 6)
Day 8: 7 hours
- --------------
Hands On: (same as day 5, 6 & 7)
Classroom:
o complete review of the course
o Q&As
o Overview of DMV certification process
Day 9: 8 hours
- --------------
Hands On:
o Changed and agreed to the following:
1. For CT Safety Start-Up only, active lane requirement can be placed with
structured simulated lane activity.
2. Once 17 (or a suitable number of additional safety inspection lanes are
available), the requirement of 8 hours active lane exposure will be
re-instated.
3. In addition to the above classroom hours, time must be added for Hunter
Brake and Slide Slip procedures, if included.
Day 10: 8 hours
- ---------------
o DMV Certification (simulated lane OR active lane, if possible)
o Can be used for an applicant needing additional help or training with
one-on-one trainer.
ENVIROTEST SYSTEMS CORP.
EXHIBIT 11 - STATEMENT OF COMPUTATION OF LOSS PER SHARE
(Amounts in thousands, except per share amounts)
Loss per share is computed using the weighted average number of shares
outstanding plus incremental shares issuable upon exercise of outstanding
options and warrants using the treasury stock method.
<TABLE>
<CAPTION>
Three Six
Months Ended Months Ended
March 31, March 31,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
LOSS
Loss $ (5,727) $(16,415) $(11,901) $(10,827)
======== ======== ======== ========
LOSS PER COMMON AND
COMMON EQUIVALENT SHARE
Weighted average number of shares outstanding 16,620 16,571 16,620 16,485
Net effect of dilutive stock options based on
the treasury method using the average
market price of common stock (a) 646 703 660 784
-------- -------- -------- --------
Common stock and common stock equivalents 17,266 17,274 17,280 17,269
======== ======== ======== ========
Loss per common and common
equivalent share $ (0.33) $ (0.95) $ (0.69) $ (0.63)
======== ======== ======== ========
LOSS PER COMMON SHARE -
ASSUMING FULL DILUTION
Weighted average number of shares outstanding 16,620 16,571 16,620 16,485
Net effect of dilutive stock options based on
the treasury method using the end of
period market price of common, if
higher than average (a) 646 703 660 784
-------- -------- -------- --------
Common stock and common stock equivalents 17,266 17,274 17,280 17,269
======== ======== ======== ========
Loss per common and common
equivalent share $ (0.33) $ (0.95) $ (0.69) $ (0.63)
======== ======== ======== ========
</TABLE>
Notes:
(a) Common stock equivalents represent stock options and warrants.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Envirotest Systems Corp. Form 10-Q dated March 31, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 135,827
<SECURITIES> 0
<RECEIVABLES> 10,577
<ALLOWANCES> 478
<INVENTORY> 0
<CURRENT-ASSETS> 153,112
<PP&E> 184,597
<DEPRECIATION> 51,209
<TOTAL-ASSETS> 462,526
<CURRENT-LIABILITIES> 40,230
<BONDS> 379,978
0
0
<COMMON> 166
<OTHER-SE> 1,009
<TOTAL-LIABILITY-AND-EQUITY> 462,526
<SALES> 64,894
<TOTAL-REVENUES> 64,894
<CGS> 50,429
<TOTAL-COSTS> 50,429
<OTHER-EXPENSES> 10,714
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,842
<INCOME-PRETAX> (11,901)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,901)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,901)
<EPS-PRIMARY> (0.72)
<EPS-DILUTED> (0.72)
</TABLE>
