Envirotest signs settlement agreement with Commonwealth of Pennsylvania enabling company to recover its investment related to its Pennsylvania vehicle emissions testing contract.

Systems Corp. (NASDAQ: ENVOI) today announced that it has signed a final General Release and Settlement Agreement with the Commonwealth of Pennsylvania which will enable the company to recoup all of its original investment in Pennsylvania's vehicle emissions testing program.

A bill passed by the Pennsylvania General Assembly, appropriating the payments to be made was signed into law on Friday by Pennsylvania's Governor, Tom Ridge. The bill signed into law provides that the payments to be made to Envirotest will come from two existing special funds, and will not require the passage of any additional appropriation measures by the Pennsylvania General Assembly.

Under the terms of the Settlement Agreement, Envirotest will receive from the Commonwealth of Pennsylvania $145 million cash plus interest paid in four installments. The first installment of $25 million will be paid prior to December 31, 1995, with three annual installments of $40 million each payable by July 31 of 1996, 1997, 1998. In addition, Envirotest will sell the assets it acquired to implement the Pennsylvania emissions testing program and will receive the first $55 million of the net sales proceeds. If the net sales proceeds are less than $55 million, the Commonwealth under the Agreement is obligated to pay Envirotest 50% of any shortfall below $55 million, up to an additional $15 million. If the net sales proceeds exceeds $55 million, Envirotest is required to pay the Commonwealth an amount equal to 75% of the excess.

The signing of the General Release and Settlement Agreement ends a 10 month old dispute between the parties, including Envirotest's $350 million law suit against the Commonwealth, arising from Pennsylvania's decision earlier this year to suspend the vehicle emissions testing program that Envirotest had contracted to build and operate for the Commonwealth in November 1993.

Chester C. Davenport, Chairman of Envirotest, stated, "We are now satisfied that this matter is finally resolved. The Governor's signature on this bill ends a tough and protracted dispute with the Commonwealth of Pennsylvania. Envirotest's management can now concentrate its full attention and the Company's human and financial resources to take advantage of Envirotest's leading position in the vehicle emissions testing industry. With states seeking a broad range of solutions to their vehicle emissions testing requirements, Envirotest is now well situated both financially and operationally to meet this demand and capitalize on opportunities in centralized, decentralized and hybrid testing markets."

Mr. Davenport noted, California and New Jersey, two states with large vehicle populations are in the process of establishing hybrid vehicle emissions testing programs. Both states are in the process of selecting private contractors to operate the centralized test only portion of their hybrid testing program. In each state, up to two million vehicles annually will be tested in contractor operated facilities. Envirotest intends to be a strong competitor for this new business. Proceeds from the settlement with the Commonwealth of Pennsylvania will be invested in these and other new business opportunities. In addition, the Company may consider the repurchase of its debt securities from time to time in the open market dependent upon market conditions, cash needs and other factors deemed relevant by the Company.

Envirotest Systems Corp. is the leading provider of centralized vehicle emissions testing programs for states and municipalities. In addition, Envirotest is the only domestic provider of contractor- operated testing services outside the United States.

CONTACT: Kekst and Company, New York 

Robert D. Siegfried, [phone]