EXHIBIT 99.2
NO. 95-9517-E
NATIONAL CONVENIENCE STORES ) IN THE DISTRICT COURT OF
INCORPORATED, )
)
Plaintiff, )
)
VS. ) DALLAS COUNTY, T E X A S
)
AFFILIATED COMPUTER SERVICES, )
INC., )
)
Defendant. ) 101ST JUDICIAL DISTRICT
DEFENDANT'S ORIGINAL ANSWER AND COUNTERCLAIM
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Defendant Affiliated Computer Services, Inc. ("ACS") files this Original
Answer and Counterclaim and would respectfully show the Court the following:
GENERAL DENIAL
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ACS denies all of the material allegations of the Original Petition for
Declaratory Judgment filed by National Convenience Stores Incorporated
("NCS") and demands proof thereof as required by law.
COUNTERCLAIM
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ACS complains of NCS as follows:
PLAINTIFF'S ORIGINAL PETITION FOR DECLARATORY JUDGMENT - Page 1
Summary of Counterclaim
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1. ACS and NCS have a contract (the "Contract") pursuant to which ACS
has placed automatic teller machines ("ATMs") in STOP 'N Go convenience
stores owned and/or operated by NCS. Pursuant to its terms, the Contract is
scheduled to expire on December 1, 1995. Under the Contract, ACS has the
right to meet the terms and conditions proposed by any third party seeking to
succeed ACS as the operator of ATMs in STOP 'N Go stores for a period of one
year after termination of the Contract. In derogation of that contractual
right, NCS, without affording ACS the opportunity to meet its terms, recently
announced the award of a contract to NationsBank of Texas, N.A.
("NationsBank") to replace the Contract.
2. NCS was motivated to deny ACS its contractual right to meet the
NationsBank terms and to continue to provide ATM service in STOP 'N Go
stores. When the NationsBank agreement was announced, NCS was actively
opposing an unsolicited takeover bid by Circle K. On information and belief,
NCS concluded that announcing an agreement of this magnitude with NationsBank
(which was assisting it in its fight with Circle K) would help NCS thwart the
Circle K takeover. In fighting the takeover, it was important for NCS to
inflate its future earning prospects, which it was able to do by announcing
the NationsBank agreement without disclosure of ACS's rights under the
Contract, rights which seriously diminished or eliminated the value of the
NationsBank agreement as announced to the public. As would be expected, NCS
and NationsBank timed the announcement of their agreement (without disclosure
of a material breach of the Contract) to correspond with the announcement of
NCS's opposition to the Circle K bid and the adoption by NCS of an array of
tactics to defeat the bid.
PLAINTIFF'S ORIGINAL PETITION FOR DECLARATORY JUDGMENT - Page 2
3. In entering into the agreement with NationsBank, NCS breached its
promise to ACS to permit it to meet the terms and conditions of the
NationsBank offer. The apparent purpose of the contractual breach was to
manipulate the financial picture of NCS and to justify its refusal to accept
the unsolicited Circle K bid, thereby preserving the jobs of NCS management.
Apparently, NCS felt it had to respond to the Circle K offer immediately and
chose not to honor the terms of the Contract with ACS requiring ACS to
provide 30 days to meet the terms of the NationsBank offer.
Statement of Facts
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4. ACS. ACS is an information services technology company
headquartered in Dallas, Texas. Among other lines of business, it is engaged
in the business of owning and operating ATM machines in locations owned by
retailers.
5. THE NCS RELATIONSHIP. The relationship between ACS and NCS
commenced indirectly approximately 13 years ago when NCS acquired certain 7-
11 stores from Southland Corporation and transformed them into STOP 'N Go
facilities. Those stores had ATM machines owned by a predecessor of ACS; as
a result of the NCS acquisition of the stores, ACS and NCS entered into an
operating agreement to permit ACS to continue to own and operate machines in
those stores. That agreement was replaced by a series of subsequent
agreements, the last of which was the Contract at issue in this suit.
6. THE CONTRACT. The Contract was entered into as of December 1,
1992. Under the Contract, ACS owned and operated the ATM machines and
PLAINTIFF'S ORIGINAL PETITION FOR DECLARATORY JUDGMENT - Page 3
received a transaction fee for each transaction completed at the ATM facility
in the stores covered by the Contract. ACS fully performed its obligations
under the Contract. Indeed, in the 13 years of performance of the services
covered by the Contract and its predecessor agreements, NCS expressed
satisfaction with the ATM services provided to it and to its customers and
never expressed any dissatisfaction whatsoever with ACS's performance under
the Contract.
7. EFFORTS TO RENEW THE CONTRACT. In light of the scheduled
termination of the Contract at the end of 1995, ACS and NCS began discussions
in late 1994 to extend the Contract. For a period of time, those
negotiations moved smoothly, and final documents were drafted. Early in the
Spring of 1995, ACS began to experience a series of unusual delays on the
part of NCS in responding to requests to execute the documents that had been
negotiated. In or about April, 1995, NCS indicated that, instead of
executing the agreement with ACS, it was issuing a request for proposal
("RFP") in order to give others an opportunity to bid for the Contract.
8. TERMINATION OF THE CONTRACT. ACS was informed by NCS that, because
NCS had decided to entertain bids from other parties, a letter would be
forthcoming reflecting the termination of the Contract for convenience in
order to foreclose the automatic renewal feature of the Contract. By letter
dated July 21, 1995, NCS gave a notice, which stated "that NCS does not wish
to renew the Agreement." The letter provided that it was being sent pursuant
to Section 9.2(a) of the Contract, which states:
This Agreement shall automatically renew for an additional three
year term unless either Party gives notice to the other Party no
later than 120 days prior to the end of the Primary term that it
does not wish to renew the Agreement.
PLAINTIFF'S ORIGINAL PETITION FOR DECLARATORY JUDGMENT - Page 4
The July 21 letter was significant because, in the event of a termination for
convenience, ACS had the right to meet a competing offer. Section 9.2 of the
Contract provides:
If NCS elects not to renew this Agreement for reasons other than
ACS's material default hereunder or NCS's dissatisfaction with the
performance of ACS hereunder, and if in such case within a period
of one (1) year following the expiration of the Primary Term NCS
receives a bona fide offer from a third party (other than an
affiliate of NCS) to install ATMs at any Store within the Market
Area, NCS shall give ACS written notice of the terms and conditions
of such offer, and ACS shall have the right to install ATM's in
such Store or Stores on the same terms and conditions as those
offered by the third party, assuming ACS can provide like or better
service than what has been proposed by the third party. * * *
A week later, on July 28, NCS, now through its Senior Attorney, wrote a
letter seeking to "clarify" the previous letter:
This is to clarify the letter sent you by Reg Kennerty dated July
21, 1995. In that letter you were notified of National Convenience
Stores Incorporated ("NCS") wish to not renew the Agreement between
Affiliated Computer Services, Inc. ("ACS") and NCS, dated
December 1, 1992. In accordance with subsection 9.2(b), the reason
NCS elects to not renew this Agreement is NCS's
dissatisfaction with the performance of ACS under this Agreement.
Importantly, prior to the July 28 letter, ACS had not received a single
complaint from NCS--neither written or oral--regarding its performance of the
Contract. After the July 28 letter and through the date this suit was filed
by NCS, ACS made repeated requests for information regarding the feigned
dissatisfaction, but it was provided with no information whatsoever, and NCS
repeatedly refused to respond to the requests.
9. THE NATIONSBANK AGREEMENT. On August 14, 1995, NCS orally informed
ACS that it was awarding the contract to NationsBank.
PLAINTIFF'S ORIGINAL PETITION FOR DECLARATORY JUDGMENT - Page 5
10. THE CIRCLE K TAKEOVER EFFORT. In early August 1995, Circle K, a
large competitor of NCS in the convenience store industry, launched an
unsolicited effort to acquire NCS. On August 31, 1995, NCS announced its
opposition to the Circle K bid, claiming that the bid was insufficient. In
the same announcement, NCS announced the agreement with NationsBank to
replace the Contract, which it touted as guaranteeing to it $16.5 million in
operating income. Conspicuously absent from the press releases and public
statements issued by both NCS and NationsBank--both of whom extolled the
agreement as "the largest ATM contract in U.S. banking history"--is a
disclosure to the investing public that the agreement between NationsBank and
NCS was in derogation of, and interfered with, the Contract. Clearly, the
rights of ACS under the Contract made the publicized value of the NationsBank
agreement grossly overstated, a result which furthered the efforts of NCS to
defeat the Circle K bid.
Causes of Action--Breach of Contract by NCS
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11. NCS breached the Contract by not permitting ACS to meet the terms
and conditions offered by NationsBank by feigning dissatisfaction with the
performance of ACS under that agreement. That breach has resulted in damages
far in excess of the minimum jurisdictional limits of this Court and are
comprised, at a minimum, of the millions of dollars of profit that ACS would
have derived from a contract with NCS on the terms agreed to by NationsBank.
PLAINTIFF'S ORIGINAL PETITION FOR DECLARATORY JUDGMENT - Page 6
Conditions Precedent
12. All conditions precedent to the initiation and prosecution of the
present action have been performed or have been waived.
WHEREFORE, PREMISES CONSIDERED, ACS prays that NCS take nothing in
this lawsuit and that upon final hearing ACS be awarded judgment against NCS
for the actual damages it has sustained and that ACS be awarded it reasonable
attorneys' fees, costs, and expenses in defending the present action, along
such other and further relief, either general or special, at law or in
equity, to which it may be justly entitled.
Respectfully submitted,
McKOOL SMITH, P.C.
By: /s/ Charles W. Cunningham
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Charles W. Cunningham
State Bar No. 05233100
Gary J. Cruciani
State Bar No. 05177300
300 Crescent Court
Suite 1500
Dallas, Texas 75201
(214) 978-4000
(214) 978-4044 FAX
Attorneys for Affiliated Computer
Services, Inc.
PLAINTIFF'S ORIGINAL PETITION FOR DECLARATORY JUDGMENT - Page 7
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing has been
faxed and mailed, certified mail, return receipt requested, to Mr. Neal S.
Manne, Susman Godfrey L.L.P., 1000 Louisiana Street, Suite 5100, Houston,
Texas 77002-5096, on this the 10 day of October, 1995.
/s/ Charles W. Cunningham
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Charles W. Cunningham
PLAINTIFF'S ORIGINAL PETITION FOR DECLARATORY JUDGMENT - Page 8