It was sometime after 6 on the night of Jan. 15 when the phone rang in the 26th-floor office of Dallas lawyer William A. McKenzie. Bo Schembechler, football coach at the University of Michigan, was on the line and he had some problems to discuss.

McKenzie patched the call through to the home of Harvey R. (Bum) Bright, a wealthy independent oilman in Dallas and chairman of the board of regents at Texas A&M University. For more than a month, the two men had secretly been trying to lure Schembechler away from Michigan to become head football coach and athletic director at A&M. But Schembechler's price was staggeringly high: a 10-year contract at $225,000 a year--and some of the fine print had made McKenzie and Bright balk. The two men provided the details of the negotiations to The Washington Post.

During the previous day, news of the negotiations had leaked out, and now there was a sense of urgency on both sides. The three talked about their differences, and it soon became clear that Schembechler might get away. The conversation ended inconclusively, then about 8:30 p.m., Schembechler phoned McKenzie to say he was staying at Michigan.

Weeks earlier, a third party acting on behalf of A&M had quietly contacted the successful young coach at the University of Pittsburgh, Jackie Sherrill, to sound him out about A&M. Word was relayed through these back channels that Sherrill was interested. In fact, at the East-West game, Sherrill had urged Schembechler to take the A&M offer, characterizing it later as "the greatest opportunity in college coaching today."

Now McKenzie, himself an A&M regent and the action officer on a search committee for the university, placed a call to Sherrill. Could they get together to talk? After clearing it with his school, Sherrill said come ahead. By the next afternoon, McKenzie and two other men representing Texas A&M were on their way to Pittsburgh, and that evening they met Sherrill at his home to discuss the job of head coach and athletic director.

Two days later, Sherrill and A&M had come to terms on one of the most lucrative contracts ever signed by a college football coach in America, a rolling five-year deal worth an estimated $240,000 a year.

It is clearer now than it was then to the men involved just what the deal would cost Texas A&M, not only in dollars and cents but in reputation. The episode nearly cost the university its new president, it humiliated then-head coach Tom Wilson, it outraged faculty members, alumni and students, and it exposed A&M to the rest of the country as an institution seemingly willing to pay any price for a national championship in football.

The connection between college football and big money is, of course, nothing new. Alabama's Bear Bryant is said to earn, with salary and side deals, close to $300,000 a year. Jerry Claiborne, who just left the University of Maryland to take over the head coaching job at the University of Kentucky, reportedly will earn close to $200,000 a year. Schembechler reportedly told the regents at Texas A&M he was earning about $200,000 a year at Michigan and that the school had "sweetened the pot" to keep him there.

But the events that transpired at Texas A&M over the past few weeks were characterized by a quality of rawness and insensitivity that shocked even those people who seem to have grown accustomed to big money in college sports. This was not, after all, Michigan or Notre Dame searching to replace a legend; it was a university with a mediocre reputation in athletics grasping for greatness.

In Jackie Sherrill, it may have gotten that for its athletic program. Eventually it may return handsome dividends for the whole school. But the price seems to many on the campus at A&M to have been exorbitant. Said one disgruntled faculty member, "It will take us 10 years to recover from this."

College Station, Tex., is a city of 37,000 people that sits by the Brazos River in farm country between Houston and Dallas. Twinned with neighboring Bryan, Tex., the area is known for one thing: Aggies.

Graduates speak reverently about their years on campus, and the traditions that have become imbedded over the years stagger any newcomer to campus. Where else would 30,000 people show up at midnight before a football game for "Yell practice"? Where else do students stand throughout an entire football game as a symbol of their readiness to aid their team? Where else is built a gigantic bonfire of wood cut by students and stacked stories high over a period of weeks? As one successful graduate once put it, "A&M is more than a school, it's mommy and daddy."

A&M started as an all-male military school, and the cadet corps created both the traditions and the bonds that remain strong. In the mid-1960s, the corps was made nonmandatory, and is today only a few thousand strong. In the '60s, women were allowed in.

Today, new buildings dominate the grounds and plans for the future sound limitless. In an odd way, A&M is the Houston of American universities, an institution of great wealth straining under growth, stretching to be great and struggling for credibility.

"I want preeminence in every field for Texas A&M," says Bum Bright, who serves as finance chairman for Republican Gov. Bill Clements' campaign committee and who has been chairman of the board of regents since he was appointed to the board a year ago by Clements.

Says one alumnus, "I think there are some people on this board who think you can buy anything with money."

If money were the only question, A&M would have achieved a reputation for excellence already. Few schools receive as much in private donations as does A&M. Last year it raised an estimated $25 million from outside sources. According to one regent, its development foundation, which was worth about $1 million eight years ago, is now worth about $50 million. Supporters have set a goal of $500 million by 1990. Because A&M shares the revenues from state-owned oil-producing lands in Texas, it is now one of the wealthiest universities in America.

There is no doubt that A&M is seeking excellence. It has upgraded its student body and is endowing professorial chairs at a seemingly prodigious rate. But to much of the outside world, it remains a cow college. Aggie jokes abound, all of them to suggest ignorance and bumpkinism are the norm at College Station. To some of the members of the board of regents, the football team was a symbol of the mediocrity they were no longer willing to tolerate.

The last time Texas A&M went to the Cotton Bowl was in 1941, and the displeasure over that fact affected attitudes toward the entire atheltic program. Last October, Athletic Director Marvin Tate was given the choice of resigning or being fired by Frank Vandiver, the new university president who was under orders to do so by the regents. "That was an event over which I had no control," he says.

Agitated by speculation that he was next to go, head football Coach Tom Wilson asked in November for an extension of his contract, which had another year to run. He threatened to resign at halftime of the Texas game on Thanksgiving Day if his request were denied. He did not get an extension, but said at the time he was given what seemed to be reassurances by Vandiver that he would be back in 1982 and a public statetment by Vandiver seemed to confirm that. Some regents felt otherwise. Wilson was out of town last week and repeated efforts to find him were unsuccesful.

After Tate was shoved out, Bum Bright set up a search committee for a new athletic director. The members say they consulted outside experts to determine the going rate for a first-rate coach, then drew up a list of the top candidates in the country and began courting. Almost no one seemed beyond the realm of possibility to these men.

"Bear Bryant might have been the only one we thought we couldn't get," says John Blocker, a Houston oilman who headed the search committee.

In early December, the committee made contact with Schembechler to discuss the job of athletic director. He came back with demands that stunned the committee. First, he wanted to coach as well as be athletic director. In addition to his 10-year contract, he wanted 10-year contracts with sponsors of his TV and radio programs. "He was a very savvy man," Bright says. Schembechler declined to comment.

Blocker said despite the committee's skepticism about some of Schembechler's demands, "We decided to proceed and see where it took us because he was definitely interested."

It wasn't until Schembechler visited Dallas around New Year's Day that Vandiver, who on paper at least had the responsibility for hiring a new atheltic director, discovered Schembechler was being considered for both jobs. On the night of Jan. 14, word began to leak about the negotiations with Schembechler. Tom Wilson was out recruiting and that night first learned he was about to be fired.

With word leaking out about the negotiations, the search committee moved quickly to lock up Jackie Sherrill and he took advantage of their desire for a winner.

Sherrill asked for and received what is known as a five-year evergreen contract, which means it is renewed at the end of each year for an additional five years. His base salary from the university is $95,000 a year. Through radio and television shows, endorsements and board memberships, his income will be supplemented to reach $225,000 annually. In addition, through private contributions, the school will subsidize half the purchase price of a new home, up to a contribution of $150,000. He will receive an insurance policy valued at about $200,000, two cars and a membership in the local country club. McKenzie said he worked it out on paper and estimated its value at $240,000 a year.

If Sherrill is fired, he would be paid for the remaining five years of the contract, more than $1 million. There have been reports that the deal included college scholarships for Sherrill's two children. McKenzie, who helped put the deal together, says no.

It was in the final hours of the negotiations that Vandiver said he considered quitting because he "got tired of reading in the paper what was going on." He was talked out of resigning by the university chancellor, but remains angry over the effect of the hiring on A&M.

"We look as though we put the cart before the horse, that we have decided to become a great football power and thus we bring down some ridicule upon ourselves," he says. "It is a setback to the academic reputation of the university that saddens me."

The regents' handling of the affair and the size of Sherrill's contract drew protest from faculty, students, alumni and educators around the country, many of whom echoed Vandiver's sentiments about priorities of the university.

"Is our aim to be best to be defined by paying the most?" asks Paul Parrish, associate professor of English and former head of the local chapter of the American Association of University Professors.

Students wrote many critical letters to the campus newspaper, the editor of the paper attacked Bum Bright for meddling in business that wasn't his, and one alumni club publicly condemed the regents for their actions. Some of this may fade, especially if Sherrill delivers a Cotton Bowl team in the next year or two, but the regents, while acknowledging some missteps, remain focused on their overriding goal.

"We're not going to accept mediocrity in anything--academics or athletics," says John Blocker.

"I didn't create this situation, I'm here to rectify it," says Jackie Sherrill as visitors line up in his secretary's office a few feet away.

He had arrived back in College Station about 1 a.m. after a recruiting day that had begun in Houston and taken him to San Antonio and Midland. In the week since he had accepted the job, he had assembled a first-class coaching staff, begun to pick up the pieces of the recruiting effort at A&M and started to move himself and his family from Pennsylvania to Texas.

Sherrill wears monogrammed shirts that are freshly pressed and he speaks so softly that it is sometimes difficult to hear him. At the University of Alabama, he played seven positions for Bear Bryant. He has coached at Arkansas, Iowa State, Washington State and Pittsburgh. He was a high school all-America at Biloxi, Miss., and has participated in 15 bowl games as a player or coach. He is called a master recruiter and brought Tony Dorsett to Pittsburgh.

"I'm 38 but I've got a lot more miles on my body than 38 . . . in terms of longevity and what I've accomplished. The profession is very tough, very demanding. My decision was to become athletic director and coach at this time, to take this opportunity, this challenge. Everybody in the college profession feels that this is the greatest opportunity in college coaching. The tradition here is unreal, the tradition of the corps, the tradition of the students, the tradition of the school. It's probably the closest-knit football family in the whole U.S."

Sherrill believes the criticism of his salary, which has been widely misreported, is unfair. "First, it is not university money," he said. "Second, I'm in dual roles. There are a lot of coaches in the country who are making $60,000, $70,000, $80,000, just to coach . . . I will not be at home very much. If I was 55 years old, I wouldn't do this. I'm on the road 200 days a year selling Texas A&M University. Not the athletic program, but Texas A&M University. The visibility you have--what does the cover of Sports Illustrated mean? What does it mean to be in Sports Illustrated talking about the faculty, or the students or the atmosphere? That's something you can't buy."

Jackie Sherrill may speak eloquently for the high-stakes world of college athletics; and what has happened at Texas A&M has no doubt happened in less public ways at other schools around the country.

Still, it shocks even those who supposedly have power over such events. "Given an ideal world, I'd rather see this kind of money go for faculty salaries or scholarships or the library," says Frank Vandiver, the man who ultimately agreed to the contract with Jackie Sherrill. "But in this part of the world, that's not the way it is.