When dealmakers putting together the terms of Bear Stearns’ fire sale to rival JPMorgan Chase reworked the merger agreement, they not only increased the offer price but also made changes to make sure the transaction would survive scrutiny in Delaware courts, according to a Paul Hastings analysis.

JPMorgan initially agreed to buy Bear Stearns for $2 a share as the investment bank verged on collapse amid concern that the company did not have enough capital to keep going. The offer was later raised to $10 a share.

Predictably, the fire sale has led to unhappy investors who have filed lawsuits in New York and Delaware courts. The Delaware court has put the case before it on hold because of the New York action.

In a client note, “Revisiting the Bear Stearns/JP Morgan Transaction: An Analysis of Deal Protections and Fiduciary Duties” released Wednesday, the Paul Hastings lawyers wrote they expect the New York court to apply Delaware legal principles.

The plaintiffs in the New York case accuse Bear’s board of directors of violating its fiduciary duties to shareholders in agreeing to the JPMorgan deal, saying the terms are unfair and precluded any other bidders from emerging.

But thanks to the changes, the deal is likely to survive the challenges, according to the Paul Hastings note.

“It appears that the parties revised or deleted the deal protection measures in the March 24th amendment to give them a better chance of surviving scrutiny by the Delaware courts,” the Paul Hastings lawyers wrote.

For instance, the parties removed the so-called Renegotiation Covenant, which had the effect of precluding any topping bid, according to the note.

“The Delaware courts would likely take a hard stance against such a provision since it effectively precludes superior proposals,” the lawyers said.

Another example. They removed the ambiguity related to the so-called “Force the Vote Provision,” requiring Bear’s board to submit the deal to stockholders for approval even if it changed its recommendation on the deal.

The provision is now explicitly subject to the “fiduciary out,” which allows the board to change its recommendation in light of a superior proposal. But the amended agreement also weakened the “fiduciary out” by restricting when it can be used, according to the note.

It seems, then, the dealmakers had one eye on the clock, one on the prize – and one on Delaware courts.

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