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As the seven-hour emergency board meeting neared its end on the second Sunday night of the new century, the directors of Time Warner Inc. still had a large ministerial matter to approve. What would they pay their banking and legal advisers for helping complete the largest merger in history — the $156 billion deal with Internet giant America Online, Inc.?

The bankers were easy: Morgan Stanley Dean Witter & Co. would take its customary cut if the deal went through. If it fell apart, the bankers would get nothing. For the lawyers, new Time Warner general counsel Christopher Bogart spoke up with a surprise: Rather than pay an hourly rate plus a hefty premium if the deal closed, Bogart announced that his lawyers at Cravath, Swaine & Moore had agreed to a contingency fee. If the AOL deal closed, the law firm would receive one of the biggest transaction fees ever — a staggering $35 million. But if the deal falls apart, say several sources familiar with the deal, Cravath’s lawyers, like Morgan Stanley’s bankers, could potentially go home empty-handed.

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