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Bear Analysts Irked By Severance Memo

The way their jobs are categorized for proposed severance packages could cost some thousands of dollars.


Bear Stearns


employees await word of whether they will lose their jobs after

JPMorgan Chase

(JPM) - Get JPMorgan Chase & Co. Report

takes over, grumbling is emerging over proposed severance packages.

Sources familiar with the situation told

that Bear's analysts are furious at a decision to characterize their jobs as "non-administrative," a move that could cost them thousands of dollars in severance money. Most Bear employees expect to hear from JPMorgan about their fate this week and JPMorgan said it plans to tell everyone by the end of the month.

An email obtained by

sent last week by Kay Booth, head of Bear's equity research, said analysts were "generally considered to be a revenue generating and client facing role." Revenue producers have been told they can expect to qualify for between 25% and 33% of last year's bonus in their severance package, vs. as much as 75% for administrative employees, according to accounts of communications from JPMorgan provided by several Bear employees, including two in senior positions with the firm.

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The severance packages also include roughly three weeks of pay for each year an employee worked at the firm, plus an automatic eight weeks and the portion of the bonuses, according to the Bear employees. All Bear employees also will receive a one-time grant of restricted JPMorgan stock on June 2 and a cash bonus and more restricted stock at the end of the year. The stock will vest in two to three years.

An analyst with 10 years of experience at a northeastern firm Bear's size can expect a salary in the market midrange of between $70,374 and $89,740 and a bonus of between $68,456 and $84,856, according to

All other employees in the research department were designated administrative, making them eligible for the higher payments. While the research department does produce revenue, most of it was internal. The clearing department pays millions to fund the department, as does the institutional and private-equity departments. The research was also sold externally, but the amounts were not significant enough to make much difference. While analysts do meet with clients, they do not earn commissions for doing so.

Bear spokeswoman Monica Orbe declined to comment on Booth's memo. She referred questions about potential severance to JPMorgan. A JPMorgan spokeswoman declined to comment.

Shareholders are expected to officially vote on the merger deal on May 29, but the meeting is seen as a technicality since JPMorgan has already secured enough votes for it to pass. Many Bear employees have already met at least once with JPMorgan and some have additional meetings coming up, the Bear employees say.

"I've been assured I have a job through the summer, but after that who knows," says one employee, who declined to be identified. "I have another interview

Monday with

JPMorgan, but I have no idea which way it will go."

Some of the Bear employees expected to be laid off have been asked to remain for 90 days to assist with the transition, the sources said. The formula to determine how much of administrative workers' 2007 bonus will be paid as severance is based on how many weeks they work in 2008. So if they stay 90 days after the deal closes, it could be three-quarters of the year.

Rob Ottinger of the Ottinger Firm, a legal firm that specializes in severance negotiations, called JPMorgan's severance package "generous," saying most big banks only offer two weeks of severance per year the employee worked for the company. He questioned, however, how JPMorgan could afford such a large payout, given the disruptions in the financial market.

"It seems highly unusual. I didn't think they had that much money to play with," he says.

Ottinger said the generous package seemed to signal either a guilty conscience or the desire to keep well-connected, soon-to-be ex-employees silent. Once they agree to the package, they are committed to not speak about it.

"They want the silence and not to be sued," said Ottinger.