What Were CEO Fred Hassan and GC Tom Sabatino up to, on February 26-27, 2009?

[Updated -- 05.21.09 @ 8:50 AM EDT: Here's a genuinely-friendly little tip of the hat, and a wave, to all the able early-rising partners (and hard-working, late night-oil-burning associates) at Wachtell Lipton -- thanks for looking in on us, over the last 18 hours, one and all! For those not fully-conversant in these matters, lawyers from Wachtell are involved in both this Sch-Merck deal, and the Pfizer-Wyeth deal. Do stop in, again soon! -- The Condor]



According to their own sworn SEC Form S-4 preliminary merger filing, tonight, just this (at page 55):

. . . .In a regular board-only dinner on February 26, 2009, Mr. Hassan updated the Schering-Plough board on the status of the proposed transaction and the board expressed to Mr. Hassan its expectations regarding the information it expected to receive from its outside legal and financial advisors the following day.

The following day, February 27, 2009, the Schering-Plough board reconvened, along with its legal and financial advisors. Goldman Sachs and Morgan Stanley presented a financial analysis of the proposed transaction, and also reviewed each of the large multinational pharmaceutical companies and assessed their ability and willingness to complete a strategic transaction with Schering-Plough, and advised that Merck and Company X were the companies most likely to be interested in, and capable of completing, a business combination with Schering-Plough. Wachtell Lipton discussed the fiduciary duties of the directors and the current state of negotiations with respect to the merger agreement, describing in further detail the most significant issues raised in the initial draft of the merger agreement.

Later that day, Mr. Hassan called Mr. Clark to update him on the Schering-Plough board deliberations.

During that week, representatives of Wachtell Lipton contacted Fried Frank to provide responses to the draft merger agreement. Among other things, Wachtell Lipton noted to Fried Frank that deal certainty was critical to Schering-Plough and that the need for a right to avoid closing based on financing seemed unnecessary given the strong cash flows of the two companies, the cash on hand, as well as the relatively small financing requirement to close the transaction. Relatedly, Wachtell Lipton noted that from Schering-Plough’s perspective the extent of required regulatory efforts required by the draft merger agreement needed to be enhanced. Wachtell Lipton also noted that the draft merger agreement did not contain a right of Schering-Plough to terminate the agreement in the event the Schering-Plough board changed its recommendation in response to a superior alternative proposal. Finally, Wachtell Lipton, without making any request, noted that the agreement was silent with respect to representation of current Schering-Plough directors on the board of the post-merger company. . . .

Throughout the next days, negotiations with respect to the merger agreement continued, including with respect to transaction certainty. . . .

And, then -- on the very same day, February 27, 2009 -- the Schering-Plough Compensation Committee of the Board of Directors, on the motion of its Chairman, Hans Becherer, granted these officers massive deferred stock units. These phantom units are equivalent to common shares, except that they are payable in cash, as soon as the executive leaves the company. It bears repeating -- "in cash" -- as they leave.

Mr. Becherer granted the Top Five (along with many others, not required to be individually-disclosed to the SEC) the following amounts, that day: CEO Hassan -- $3.4 million; Messrs. Bertolini, Cheeley, Kohan, Saunders, Sabatino (who already received an unscheduled $500,000, in cash in December 2008), and Ms. Cox each received between $1 million, and $1.2 million worth of identical phantom units, as well. Over $9 million in the aggregate, just from this one pot. That was when the stock was at $17.39 a share -- February 27, 2009.

Each of the above figures needs to be inflated by about 36 percent, now that Schering-Plough stock is trading north of $23.66 a share tonight (post the proposed reverse-merger announcement of March 9, 2009). So -- Hassan's soaking, from this one tub, was actually $4.6 million; Sabatino -- and the rest -- actually soaked the company for between $1.36 million and $1.63 million each -- or, $12.25 million in the aggregate, for just the Top Five, and just for that one grant.

Disturbingly conflicted interests, no? Let me repeat it again, from above: ". . . .During that week. . . responses to the draft merger agreement. . . deal certainty was critical to Schering-Plough. . . negotiations for transaction certainty. . . ." Gee -- I wonder why.