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WaMu CEO Could Cash In on a Sale

Editor's note: Our new "On the Brink" series will provide daily insight into the financial firms facing capital shortfalls and the growing pressure from short sellers in the market.

Washington Mutual's (WM - Get Report) new CEO Alan Fishman could stand to make a windfall if his brief tenure ends with an acquisition by JPMorgan Chase (JPM - Get Report) or another suitor.

The American Banker reported Friday that JPMorgan is in "advanced discussions" to acquire the ailing Seattle thrift. The article said that "negotiations are ongoing at the highest levels of both companies," which includes JPMorgan CEO Jamie Dimon and Fishman.

While it was widely speculated that Washington Mutual brought Fishman in to replace WaMu's ousted longtime CEO Kerry Killinger to effect a sale, the company has not explicitly said so. But he certainly will be well rewarded if a deal is brokered, according to a Securities and Exchange Commission filing Thursday detailing Fishman's employment agreement.

According to the filing, if Fishman is terminated without "cause" or if he resigns as a result of "constructive termination," the employment agreement also provides for him to receive a lump sum payment equal to 2.5 times then applicable annual base salary plus the annual bonus payment from the preceding year, in addition to certain options vesting.

WaMu will also pay "certain tax gross-up payments" to Fishman if he is subject to "golden parachute excise taxes" related to a change in control, the filing says.

A source familiar with the agreement says the term "constructive termination" is a standard provision in an executive employment agreement that says if a company were to either take away the CEO's authority, reduce his compensation, or move him away from Seattle, without his consent. A sale of the company could be one of several scenarios in which there is a "constructive termination" of a CEO, the source says.
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