Opinion ID: 1788581
Heading Depth: 1
Heading Rank: 3

Heading: The P & C Agreement

Text: By the end of 1987, First Texas and its subsidiaries were insolvent by more than $463 million. One of First Texas' subsidiaries, First Texas Computer Corporation (FTCC), recorded $12 million in losses. MoneyMaker and the government services division also incurred losses. In July 1988, in an effort to stem its operating losses, First Texas entered a Purchase and Contribution Agreement (the P & C Agreement), consolidating MoneyMaker, the governmental services division, and FTCC into a newly formed First Texas subsidiary, ACS. Before First Texas acquired ACS, Deason owned it. Because of his experience and expertise in the field, First Texas made Deason ACS's Chief Executive Officer. Before finalizing the P & C Agreement, Deason hired KPMG Peat Marwick to evaluate the ATM network, EBT business, and data processing business. In its report, Peat Marwick identified the McLaughlin Agreement as a critical issue. In fact, the McLaughlin Agreement was the only item identified in the P & C Agreement's section 10.10, entitled Conflicts of Purchase Agreement with other material agreements of [First Texas] or the Subsidiaries. The same section also listed the AMS Partners II with respect to government business transfer as requiring third-party consent and approval. Nevertheless, ACS and First Texas completed the P & C Agreement under a compressed time frame. Paragraph 7.1 of the P & C Agreement acknowledged that the McLaughlin Agreement remained with First Texas following the P & C Agreement. It further provided that First Texas would use its best efforts to cause the McLaughlin Agreement to be terminated without any further obligation or liability among the parties hereto. Additionally, First Texas agreed to indemnify Deason and ACS from any liability related to the McLaughlin Agreement if it could not be terminated by mutual agreement. Under the P & C Agreement, First Texas sold all MoneyMaker and its government service division's assets to TransFirst Corporation, another First Texas wholly owned subsidiary. However, First Texas retained the McLaughlin Agreement. Next, First Texas sold all TransFirst and FTCC stock to Gibraltar Savings Association, another one of its wholly owned subsidiaries. Finally, Gibraltar Savings Association transferred all TransFirst and FTCC stock to ACS for 50.01 percent of ACS's common stock and 100 percent of ACS's preferred stock. Kosberg, First Texas' chairman, and several other First Texas officers received ACS stock options.