Adelphia, Schleyer Cut Deal

1/19/2003 7:00 PM Eastern

Adelphia Communications Corp. last week came to terms on hiring former AT&T Broadband CEO William Schleyer and his lieutenant, Ron Cooper, for about $41 million, sources said late last week.

Schleyer, who lost his job at AT&T Broadband after it merged with Comcast Corp. in November, will become chairman and CEO of Adelphia, replacing current chairman and acting CEO Erland Kailbourne.

Cooper will become chief operating officer and president.

Adelphia's board was locked in intense negotiations last week to amend the compensation package for Schleyer and Cooper, originally valued at about $64 million over two years.

The new pact is about 36 percent less and one year longer, but includes a guaranteed payout of $23.9 million.

The earlier compensation agreement hinged on Schleyer and Cooper attaining certain valuation benchmarks — $10.5 billion, or 20 percent above the MSO's current valuation of $8.7 billion.

The new deal includes no such benchmarks.

In a letter to Adelphia's board last Friday, attorneys for Adelphia's official committee of equity securities holders — including Citizens Communications Co. chairman Leonard Tow, one of Adelphia's largest individual shareholders — objected to the deal.

The committee also objected to the earlier agreement, suing Adelphia in U.S. Bankruptcy Court and calling for the ouster of the company's board of directors.

"The newly proposed compensation for Messrs. Schleyer and Cooper remains grossly excessive and wholly inappropriate," the committee said in its letter.

In an interview Friday, Cooper, would not comment specifically on the new compensation deal and said he believed it was fair.

"The process itself is going to require the company to submit the agreement to the bankruptcy court," Cooper said. "We think it's reasonable, the board thinks it's reasonable. We looked hard at comparable situations, companies in Chapter 11 and obviously industry comparables and peers and the board came up with this plan that they clearly believe is appropriate."

According to the committee letter, Schleyer and Cooper are also insisting that Adelphia move its headquarters from Coudersport, Pa., to Denver "sometime after approval of the proposal." That stipulation is not included in the employment contracts, and the committee estimates it would cost $50 million annually.

Cooper said a move to Denver is not in the company's immediate plans and would be up to the board of directors, not him or Schleyer. He said neither he nor Schleyer intend to move to Coudersport, though both expect to spend a lot of time there.

If the company did move, the vast majority of headquarters workers would remain in Coudersport.

Adelphia currently has about 1,400 employees in its Coudersport headquarters. According to sources familiar with the situation, if a move to Denver occured, it would likely involve about 150 people, including senior management and support functions.

"Obviously this is a different company [from AT&T], and the bankruptcy introduces significant challenges," Cooper said. "But this is an industry we know well. We understand this business and the organizational and operational issues."

"Bill and I are excited about being part of the company," he said. "The issues that need to be addressed have been identified. We have a high level of confidence in the company and in the people and in our ability to get this restructuring done in a way that adds value for all of the key constituents."

Cooper said his first priority will be to visit the various Adelphia field operations. "In the near term, we will continue to focus on delivering good service and continue to get the upgrade done."

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