SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 10, 1995
NATIONAL CONVENIENCE STORES INCORPORATED
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-7936 74-1361734
- ---------------------------- ------------ -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
100 Waugh Drive
Houston, Texas 77007
- --------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 863-2200
<PAGE>
Item 5. Other Events.
National Convenience Stores Incorporated (the "Company") gave notice in
July 1995 to Affiliated Computer Services, Inc. ("ACS") that the Company had
decided not to renew a 1992 contract between it and ACS relating to automatic
teller machines ("ATMs") in certain of the Company's stores because of the
Company's dissatisfaction with ACS' performance under the contract.
Subsequently, ACS claimed that the Company's notice of non-renewal was
somehow ineffective or improper and made various other claims. As a result,
the Company filed a declaratory judgment action that the 1992 contract does
not obligate the Company to provide ACS with an opportunity to review and
match a proposal by NationsBank of Texas, N.A., with which the Company has
entered into an ATM agreement, and that ACS -- regardless of any proposal
that ACS makes -- is not entitled to continue its relationship with the
Company beyond December 1, 1995.
On October 10, 1995, ACS filed an answer and a counterclaim alleging
that NCS had breached the 1992 contract with ACS and seeking unspecified
damages alleged to be "comprised, at a minimum, of the millions of dollars of
profit ACS would have derived from a contract" with the Company on the terms
agreed to by NationsBank of Texas, N.A.
The foregoing description of this matter is qualified in its entirety by
reference to the Company's Original Petition for Declaratory Judgment and
ACS' Original Answer and Counterclaim, copies of which are filed as exhibits
hereto and are incorporated herein by this reference.
The Company believes that it will prevail in this matter and therefore
that the matter will not have a material adverse effect on the Company's
business, financial condition or results of operations.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit 99.1 Original Petition for Declaratory Judgment, National
Convenience Stores Incorporated v. Affiliated Computer
Services, Inc., No. 95-9517 in the 101st Judicial District
Court, Dallas County, Texas.
Exhibit 99.2 Original Answer and Counterclaim, National Convenience Stores
Incorporated v. Affiliated Computer Services, Inc., No. 95-
9517 in the 101st Judicial District Court, Dallas County,
Texas.
<PAGE>
S I G N A T U R E
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
NATIONAL CONVENIENCE STORES
INCORPORATED
Dated: October 30, 1995 By: /s/ A.J. Gallerano
__________________________________________
A. J. Gallerano
Senior Vice President, General Counsel
and Secretary
<PAGE>
EXHIBIT INDEX
Exhibit Page
Number Description Number
99.1 Original Petition for Declaratory
Judgment, National Convenience Stores
Incorporated v. Affiliated Computer
Services, Inc., No. 95-9517 in the
101st Judicial District Court, Dallas
County, Texas.
99.2 Original Answer and Counterclaim,
National Convenience Stores
Incorporated v. Affiliated Computer
Services, Inc., No. 95-9517 in the
101st Judicial District Court, Dallas
County, Texas.
EXHIBIT 99.1
<PAGE>
NO. 95-9517
NATIONAL CONVENIENCE STORES ) IN THE DISTRICT COURT OF
INCORPORATED, )
)
Plaintiff, ) DALLAS COUNTY, T E X A S
)
V. )
) JURY TRIAL DEMANDED
AFFILIATED COMPUTER SERVICES, ) -------------------
INC., )
)
Defendant. ) _____ JUDICIAL DISTRICT
PLAINTIFF'S ORIGINAL PETITION FOR DECLARATORY JUDGMENT
------------------------------------------------------
TO THE HONORABLE JUDGE OF SAID COURT:
Plaintiff National Convenience Stores, Incorporated ("NCS"), files this
its Original Petition for Declaratory Judgment pursuant to the Uniform
Declaratory Judgments Act. Tex. Civ. Prac. & Rems. Code Section 37, seeking
a declaration of the rights, status and obligations of the parties to an
agreement dated December 28, 1992 between NCS and defendant Affiliated
Computer Services, Inc. ("ACS"). In support of its petition for declaratory
relief, plaintiff NCS shows the Court as follows:
I.
PARTIES
-------
1. Plaintiff NCS is a Delaware corporation, duly authorized to do
business in Texas and having its principal place of business in Harris
County, Texas. NCS owns and operates convenience stores under the Stop 'N'
Go name.
2. Defendant ACS is a Delaware corporation having its principal place
of business in Dallas, Texas. It can be served through its agent for service
of process, CT Corporation
PLAINTIFF'S ORIGINAL PETITION FOR DECLARATORY JUDGMENT - Page 1
<PAGE>
System, 350 N. St. Paul Street, Dallas, Texas 75201, or through any
authorized agent for service of process. ACS provides various services
including the operation of automatic teller machines ("ATM") in certain
of NCS' stores.
3. Because both NCS and ACS are citizens of the same state (Delaware)
for purposes of 28 U.S.C. Section 1332, diversity of citizenship does not
exist. Because diversity of citizenship does not exist, and because NCS
does not assert claims arising under federal statues or raising federal
questions, this action may not be removed to federal district court
pursuant to 28 U.S.C. Section 1441.
II.
JURISDICTION AND VENUE
----------------------
4. This court has jurisdiction pursuant to Tex. Civ. Prac. & Rems.
Code Section 37.003(a).
5. Venue is proper in this district pursuant to Tex. Civ. Prac. &
Rems. Code Section 15.002, and the parties' contract specifies that this
action shall be brought in Dallas County.
III.
FACTUAL BACKGROUND
------------------
6. On December 28, 1992, NCS and ACS entered into a contract
(effective December 1, 1992) relating to ACS' operation of ATM's in certain
of NCS' convenience stores.
7. The contract is for a three-year term, automatically renewable
unless either party elects not to renew the arrangement. A party choosing
not to renew the contract must give notice to the other party at least 120
days prior to the expiration of the three-year term.
8. The contract provides that if NCS elects not to renew for some
reason other than material default by ACS or NCS' dissatisfaction with ACS'
performance under the contract, then
PLAINTIFF'S ORIGINAL PETITION FOR DECLARATORY JUDGMENT - Page 2
<PAGE>
ACS has certain rights to match any proposal received by NCS from
a third-party to install ATM's in NCS stores. However, if NCS' non-renewal
is because of ACS' material breach or NCS' dissatisfaction with ACS'
performance, the contract provides ACS with no right to match a third
party's proposal or otherwise require NCS to continue its business
relationship with ACS.
9. On July 28, 1995, which was more than 120 days prior to the
expiration of the three-year contract term, NCS gave ACS timely and proper
notice that NCS had decided not to renew the contract because of its
dissatisfaction with ACS' performance under the contract.
10. Since receiving the July 28 notice letter, ACS has claimed that
NCS' notice of non-renewal because of dissatisfaction was somehow ineffective
or improper.
11. Since receiving the July 28 notice letter, ACS has claimed that,
notwithstanding NCS' notice of non-renewal because of dissatisfaction, ACS is
entitled under the contract to a period of 30 days in which to consider
whether to match any alternative ATM agreement proposed to NCS.
12. NCS has entered into an ATM agreement with NationsBank of Texas,
N.A. ("NationsBank"). Because NCS elected not to renew its contract with ACS
because of dissatisfaction with ACS' performance under the contract, ACS has
no right to match the NationsBank proposal or in any way impeded or interfere
with the new arrangement between NCS and NationsBank.
13. ACS continues to claim that it has the right under the 1992
contract to match the NationsBank proposal and thereby require NCS to
continuing doing business with ACS instead.
14. ACS has indicated that it may bring litigation against NCS at some
point.
PLAINTIFF'S ORIGINAL PETITION FOR DECLARATORY JUDGMENT - Page 3
<PAGE>
15. ACS' conduct creates an actual controversy that threatens to
disrupt and interfere with the orderly transition by which ACS' ATM machines
that now are in certain NCS stores will be replaced with machines provided by
NationsBank under the new agreement.
IV.
FIRST CAUSE OF ACTION
---------------------
(DECLARATORY JUDGMENT)
16. Plaintiff NCS seeks a declaration from this Court that NCS' 1992
contract does not obligate NCS to provide ACS with an opportunity to review
and match the NationsBank proposal; and that ACS--regardless of any proposal
ACS makes--is not entitled to continue its relationship with NCS beyond
December 1, 1995.
17. ACS' threats of legal action and its other conduct have created
uncertainty and insecurity with respect to the rights, status and obligations
of NCS and ACS under the 1992 agreement. Tex. Civ. Prac. & Rems. Code
Section 37.002 provides that this Court is to construe and administer the
Uniform Declaratory Judgments Act liberally in order to afford relief from
such uncertainty and insecurity.
18. Pursuant to Tex. Civ. Prac. & Rems. Code Section 37.009, NCS
requests that the Court award NCS its costs and reasonable and necessary
attorneys fees as are equitable and just.
V.
PRAYER FOR RELIEF
-----------------
WHEREFORE, PREMISES CONSIDERED, plaintiff NCS requests that defendant
ACS be cited to appear and answer herein, and that on final hearing plaintiff
NCS have judgment for a declaration that NCS' July 28, 1995 notice of
nonrenewal was effective, and that ACS has no rights under the 1992 contract
to compel or require a continuation of its business relationship
PLAINTIFF'S ORIGINAL PETITION FOR DECLARATORY JUDGMENT - Page 4
<PAGE>
with NCS beyond the expiration of the 1992 contract on December 1, 1995.
Plaintiff NCS further requests that the Court award it all of its costs and
its reasonable necessary attorneys fees, together with such other and further
relief to which NCS may show itself to be justly entitled.
VI.
JURY DEMAND
-----------
Pursuant to Tex. Civ. Prac. & Rems. Code Section 37.007, plaintiff NCS
demands a trial by jury on all issues so triable in this case.
Respectfully submitted,
SUSMAN GODFREY L.L.P.
/s/ Neal S. Manne
--------------------------------------
Stephen D. Susman
TSB# 19521000
Neal S. Manne
TSB# 12937980
Eric J. Mayer
TSB# 13274675
1000 Louisiana Street, Suite 5100
Houston, Texas 77002-5096
Telephone (713) 651-9366
Facsimile (713) 653-7897
SUSMAN GODFREY L.L.P.
2323 Bryan Street, Suite 1400
Dallas, Texas 75201-2663
Telephone (214) 754-1900
Facsimile (214) 754-1933
Attorneys for Plaintiff
National Convenience Stores Incorporated
PLAINTIFF'S ORIGINAL PETITION FOR DECLARATORY JUDGMENT - Page 5
EXHIBIT 99.2
<PAGE>
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
--------------------------------------------
Defendant Affiliated Computer Services, Inc. ("ACS") files this Original
Answer and Counterclaim and would respectfully show the Court the following:
GENERAL DENIAL
--------------
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
------------
ACS complains of NCS as follows:
PLAINTIFF'S ORIGINAL PETITION FOR DECLARATORY JUDGMENT - Page 1
<PAGE>
Summary of Counterclaim
-----------------------
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
<PAGE>
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
------------------
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
-------------------------------------------
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
<PAGE>
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
---------------------------------
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
<PAGE>
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
---------------------------------------
Charles W. Cunningham
PLAINTIFF'S ORIGINAL PETITION FOR DECLARATORY JUDGMENT - Page 8
