ITC DELTACOM INC, S-1/A, 1997-10-22

ITC DELTACOM INC
S-1/A, 1997-10-22
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 22, 1997

REGISTRATION NO. 333- 36683
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

----------------

AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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ITC/\DELTACOM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4813 58-2301135
(PRIMARY STANDARD (I.R.S. EMPLOYER
(STATE OR OTHER INDUSTRIAL IDENTIFICATION NUMBER)
JURISDICTION OF CLASSIFICATION CODE
INCORPORATION OR NUMBER)
ORGANIZATION)

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206 WEST NINTH STREET WEST POINT, GEORGIA 31833 (706) 645-8990
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

----------------
ANDREW M. WALKER CHIEF EXECUTIVE OFFICER ITC/\DELTACOM, INC. 206 WEST NINTH
STREET WEST POINT, GEORGIA 31833 (706) 645-8990
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
RICHARD J. PARRINO, ESQ. NANCY J. JERRY V. ELLIOTT, ESQ. SHEARMAN &
KELLNER, ESQ. HOGAN & HARTSON L.L.P. STERLING 599 LEXINGTON AVENUE NEW
555 THIRTEENTH STREET, N.W. YORK, NEW YORK 10022 (212) 848-4000
WASHINGTON, D.C. 20004 (202) 637-5600
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, $.01 par
value................. 5,750,000 shares(1) $16.50(2) $94,875,000(2) $28,750(3)
</TABLE>
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(1) Includes 750,000 shares to cover over-allotments, if any.
(2) Estimated solely for purposes of calculating the registration fee.
(3) Previously paid.

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

- -------------------------------------------------------------------------------
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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)

Issued October 22, 1997

5,000,000 Shares

[LOGO OF ITC/\DELTACOM APPEARS HERE]

COMMON STOCK

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ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE
COMPANY. PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE
COMMON STOCK. IT IS CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC OFFERING
PRICE OF THE COMMON STOCK WILL BE BETWEEN $14.50 AND $16.50 PER SHARE. SEE
"UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS TO BE CONSIDERED IN
DETERMINING THE INITIAL PUBLIC OFFERING PRICE.

-----------

THE COMMON STOCK HAS BEEN APPROVED FOR QUOTATION ON THE NASDAQ NATIONAL MARKET,
SUBJECT TO OFFICIAL NOTICE OF ISSUANCE, UNDER THE SYMBOL "ITCD."

-----------

SEE "RISK FACTORS" BEGINNING ON PAGE 10 OF THIS PROSPECTUS FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

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PRICE $ A SHARE

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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
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<S> <C> <C> <C>
Per Share.................................. $ $ $
Total (3).................................. $ $ $
</TABLE>
- -----
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriters."
(2) Before deducting estimated offering expenses of $750,000 payable by the
Company.
(3) The Company has granted to the Underwriters an option, exercisable within
30 days of the date hereof, to purchase up to an aggregate of 750,000
additional Shares of Common Stock at the price to public less
underwriting discounts and commissions, for the purpose of covering over-
allotments, if any. If the Underwriters exercise such option in full, the
total price to public, underwriting discounts and commissions, and
proceeds to Company will be $ , $ and $ , respectively. See
"Underwriters."

-----------

The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters and subject to approval of certain legal matters by Shearman &
Sterling, counsel for the Underwriters. It is expected that delivery of the
Shares will be made on or about , 1997 at the office of Morgan Stanley & Co.
Incorporated, New York, N.Y., against payment therefor in immediately available
funds.

-----------

MORGAN STANLEY DEAN WITTER
MERRILL LYNCH & CO.
J.C. BRADFORD & CO.
WHEAT FIRST BUTCHER SINGER
, 1997
<PAGE>

No person is authorized in connection with any offering made hereby to give
any information or to make any representations not contained in this
Prospectus, and, if given or made, such information or representations must
not be relied upon as having been authorized by the Company or any
Underwriter. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Common Stock
offered hereby, nor does it constitute an offer to sell or a solicitation of
an offer to buy any securities offered hereby to any person in any
jurisdiction in which it is unlawful to make such an offer or solicitation to
such person. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create any implication that the
information contained herein is correct as of any date subsequent to the date
hereof.

No action has been or will be taken in any jurisdiction by the Company or
any Underwriter that would permit a public offering of the Common Stock or
possession or distribution of this Prospectus in any jurisdiction where action
for that purpose is required, other than in the United States. Persons into
whose possession this Prospectus comes are required by the Company and the
Underwriters to inform themselves about and to observe any restrictions as to
the offering of the Common Stock and the distribution of this Prospectus.

In this Prospectus references to "dollar" and "$" are to United States
dollars, and the terms "United States" and "U.S." mean the United States of
America, its states, its territories, its possessions and all areas subject to
its jurisdiction.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary................ 3
Risk Factors...................... 10
History of the Company............ 21
Use of Proceeds................... 23
Dividend Policy................... 23
Capitalization.................... 24
Dilution.......................... 25
Selected Financial and Operating
Data............................. 26
Pro Forma Financial Data.......... 28
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........ 32
Business.......................... 49
Management........................ 64
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Transactions.......................................................... 68
Principal Stockholders........................................................ 71
Description of Certain Indebtedness........................................... 72
Description of Capital Stock.................................................. 75
Shares Eligible for Future Sale............................................... 78
Certain United States Federal Tax Consequences for Non-United States Holders.. 80
Underwriters.................................................................. 83
Legal Matters................................................................. 85
Experts....................................................................... 85
Available Information......................................................... 86
Glossary...................................................................... G-1
Index to Financial Statements................................................. F-1
</TABLE>

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The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by an independent public
accounting firm and quarterly reports containing unaudited consolidated
financial data for the first three quarters of each year.

----------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING
AND MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."

2
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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, the notes thereto and the other financial
data contained elsewhere in this Prospectus. Except as otherwise indicated
herein, all share and per share amounts set forth in this Prospectus (i) give
effect to consummation of the Merger (as defined herein) and (ii) assume an
initial public offering price of $15.50 per share of Common Stock and no
exercise of the Underwriters' over-allotment option. References herein to the
"Company" or "ITC/\DeltaCom" refer to ITC/\DeltaCom, Inc. and its subsidiaries
and references herein to EBITDA refer to earnings before extraordinary item,
preacquisition (earnings) losses, equity in losses of unconsolidated
subsidiaries, net interest, income taxes, depreciation and amortization.
Certain other terms used in this Prospectus are defined in the "Glossary"
appearing elsewhere herein.

THE COMPANY

The Company provides retail long distance services to mid-sized and major
regional businesses in the southern United States and is a leading regional
provider of wholesale long-haul services to other telecommunications companies
using the Company's owned, operated and managed fiber optic network (the
"Carriers' Carrier Services"). The Company intends to become a leading regional
provider of integrated telecommunications services to mid-sized and major
regional businesses in the southern United States by offering such customers a
broad range of telecommunications services, including local exchange and long
distance data and voice, Internet and operator services, and the sale and
servicing of customer premise equipment (collectively, the "Retail Services")
in a single package tailored to the business customer's specific needs. The
Company had pro forma revenues of approximately $85.4 million for the year
ended December 31, 1996 and approximately $54.3 million for the six months
ended June 30, 1997.

The Company provides Carriers' Carrier Services to other telecommunications
carriers, including AT&T, MCI, Sprint, WorldCom, Cable & Wireless, LCI,
Frontier and IXC. The Company's fiber optic network reaches over 60 points of
presence ("POPs") in ten southern states (Alabama, Arkansas, Florida, Georgia,
Louisiana, Mississippi, North Carolina, South Carolina, Tennessee and Texas)
and extends approximately 6,000 route miles, of which approximately 3,000 miles
are Company-owned and approximately 3,000 miles are owned and operated
principally by three public utilities (Duke Power Company, Florida Power &
Light Company and Entergy Technology Company) and managed and marketed by the
Company. The Company expects to add approximately 300 owned and operated route
miles to its fiber network by the end of 1997 through long-term dark fiber
leases. For the six months ended June 30, 1997, pro forma revenue for the
Company's Carriers' Carrier Services was $14.3 million and pro forma EBITDA as
a percentage of revenue ("EBITDA Margin") for the Company's Carriers' Carrier
Services was 59%. As of June 30, 1997, on a pro forma basis, the Company had
remaining future long-term contract commitments totaling approximately $75.8
million. These contracts expire on various dates through 2006 and are expected
to generate approximately $56.0 million in revenues to the Company through
2001, of which approximately $14.5 million are expected to be realized in 1998.

The Company currently provides a variety of Retail Services, including retail
long distance services such as traditional switched and dedicated long
distance, 800/888 calling, calling card and operator services, Asynchronous
Transfer Mode ("ATM"), frame relay, high capacity broadband private line
services, as well as Internet, Intranet and Web page hosting and development
services, and customer premise equipment installation and repair. As of June
30, 1997, the Company provided services to over 6,600 business customers. The
Company currently offers Retail Services, other than local exchange services
(which are provided in two markets), in 14 metropolitan areas in Alabama,
Florida, Georgia, Louisiana, North Carolina and South Carolina and intends to
provide a full range of Retail Services (including local exchange services) in
approximately 22 additional

3
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metropolitan areas throughout the southern United States over the next five
years. For the six months ended June 30, 1997, pro forma revenue for the
Company's Retail Services was $40.0 million and pro forma EBITDA Margin for the
Company's Retail Services was 8%.

In August 1997, the Company began offering local exchange services in
Birmingham and Montgomery, Alabama by both reselling the services of the
incumbent local exchange carrier and using its own switching facilities. The
Company expects to offer local exchange services as part of its Retail Services
in a total of six to nine markets (including Birmingham and Montgomery) by the
end of 1997, initially by reselling the services of incumbent local exchange
carriers and, where market conditions warrant, by using its own local switching
facilities.

In connection with offering local exchange services, the Company has entered
into an Interconnection Agreement (the "Interconnection Agreement") with
BellSouth Telecommunications, Inc. ("BellSouth") to (i) resell BellSouth's
local exchange services and (ii) interconnect the Company's network with
BellSouth's network for the purpose of immediately gaining access to all of
BellSouth's unbundled network elements. This agreement will allow the Company
to enter new markets with minimal capital expenditures and to offer local
exchange services to its current customer base. The Interconnection Agreement
currently allows the Company to provide local service on a resale basis or by
purchasing all unbundled network elements required to provide local service on
a facilities basis, without using Company-owned facilities. The terms of the
Interconnection Agreement, including interim pricing terms agreed to by the
Company and BellSouth, have been approved by state regulatory authorities in
most states, although they remain subject to review and modification by such
authorities. In addition, the Interconnection Agreement does not resolve all
operational issues, particularly those relating to the collocation of the
Company's equipment with that of BellSouth. The Company and BellSouth are
continuing to negotiate to resolve such issues. The Company expects that the
Interconnection Agreement will provide a foundation for it to provide local
services on a reasonable commercial basis, but there can be no assurance in
this regard and important issues remain unsettled as a result of legal and
regulatory developments and related matters. The Interconnection Agreement
expires in July 1999, and there can be no assurance that the Company will be
able to renew it under favorable terms, or at all.

BUSINESS STRATEGY

The Company's objectives are to maintain its leadership position in the
provision of Carriers' Carrier Services and to become a leading provider of
Retail Services in the southern United States. The Company intends to increase
its market share in existing markets and expand into new markets. The principal
elements of the Company's business strategy include the following:

PROVIDING INTEGRATED TELECOMMUNICATIONS SERVICES TO EXISTING BASE OF MID-
SIZED AND MAJOR REGIONAL BUSINESS CUSTOMERS. By providing additional
telecommunications services such as local telephone service to its existing,
well-established base of long distance customers, the Company expects to be
able to increase revenues at relatively low incremental cost. The Company
believes that bundling a variety of telecommunications services and presenting
customers with one fully integrated monthly billing statement for all of those
services will allow it to penetrate its target markets rapidly and build
customer loyalty. The Company believes that there is substantial demand in its
target markets among mid-sized and major regional business customers for an
integrated package of telecommunications services that meets all of their
telecommunications needs.

LEVERAGING ITS EXTENSIVE FIBER OPTIC NETWORK. The Company intends to leverage
its extensive fiber optic network, which currently reaches over 60 POPs, by (i)
continuing to provide switched and transport services to other communications
carriers throughout its region to enable such carriers to diversify their
routes and expand their networks; (ii) targeting customers that need to
transmit large amounts of data within the Company's service region, such as
banks and local and state governments; and (iii) offering local exchange
services to its business customers, which began on a limited basis in the
second half of 1997, as part of its integrated package of telecommunications
services. The Company intends initially to provide local exchange services by
reselling the

4
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services of incumbent local exchange carriers and, in some established markets,
using its own local switching facilities. Over time, the Company expects to
provide local services primarily using the Company's own switching facilities
and existing regional fiber optic network, supplemented by unbundled facilities
of incumbent local exchange carriers or other competitive local exchange
carriers. The configuration of the Company's network enables the Company to
expand its network by installing additional remote local switches, which
operate in conjunction with the Company's DMS-500 switches to provide
facilities-based local services. Because remote local switches are less
expensive to purchase and install than DMS-500 switches, and can be installed
more quickly than DMS-500 switches, the Company believes that it will be able
to enter new markets at less expense than many of its competitors. At present,
the Company does not plan to construct intra-city local loop facilities.

FOCUSING ON THE SOUTHERN UNITED STATES. The Company intends to continue to
focus on the southern United States in order to leverage its extensive
telecommunications network in the region. The Company believes that its
regional focus will enable it to take advantage of economies of scale in
management, network operations and sales and marketing. The regional
concentration of the Company's network also provides an opportunity for
improved margins because a high portion of the Company's customers'
telecommunications traffic originates and terminates within the region. The
Company also believes that its regional focus will enable it to build on its
long-standing customer and business relationships in the region.

BUILDING MARKET SHARE THROUGH PERSONALIZED CUSTOMER SERVICE. The Company
believes that the key to revenue growth in its target markets is capturing and
retaining customers by emphasizing marketing, sales and customer service.
Management believes that customers prefer one company to be accountable for
their telecommunications services, and that a consultative, face-to-face sales
and service strategy is the most effective method of acquiring and maintaining
a high quality customer base. The Company seeks to obtain long-term commitments
from its business customers by responding rapidly and creatively to their
telecommunications needs. The Company currently operates 14 sales offices in
Alabama, Florida, Georgia, Louisiana, North Carolina and South Carolina. Each
sales office is staffed by personnel capable of marketing all of the Company's
products and providing comprehensive support to the Company's customers. In the
future, the Company expects to expand significantly its direct sales force and
open sales offices in additional major and secondary population centers in the
southern United States.

EXPANDING ITS FIBER OPTIC NETWORK AND SWITCHING FACILITIES. The Company
expects to expand its fiber optic telecommunications network and switching
facilities to include additional markets within the southern United States. The
Company currently owns and operates approximately 3,000 route miles of fiber
optic network extending from Georgia to Texas, with an additional 300 owned and
operated route miles expected to be added by the end of 1997. The Company also
markets and manages capacity on 3,000 additional network route miles through
its strategic relationships principally with public utilities. In addition, the
Company has a buy-sell agreement with Carolinas Fibernet, LLC, which manages
fiber optic facilities in North Carolina and South Carolina. This agreement
enables the parties to buy and sell capacity on each other's networks and
allows the Company to provide customers with access to POPs throughout those
states. The Company believes that, by continuing to combine its owned network
with the networks of public utilities and by adding switching facilities
throughout its network, it will be able to achieve capital efficiencies and
rapidly expand its network in a cost-effective manner.

LEVERAGING PROVEN MANAGEMENT TEAM. The Company's management team consists of
experienced telecommunications managers who in the past have successfully
implemented a customer-focused long distance telecommunications strategy in the
southern United States. Members of the team include Andrew Walker, Chief
Executive Officer of the Company, Foster McDonald, President of the Company,
and Douglas Shumate, Chief Financial Officer of the Company. ITC Holding
Company, Inc. ("ITC Holding"), a diversified company with substantial holdings
in telecommunications businesses operating in the southern United States, was
the Company's sole stockholder prior to the Merger. The Company anticipates
that the experience and contacts of ITC Holding's management and certain of its
stockholders in the telecommunications industry will enhance the Company's
development.

5
<PAGE>

HISTORY OF THE COMPANY

ITC/\DeltaCom was incorporated in March 1997 as a wholly owned subsidiary of
ITC Holding to acquire and operate ITC Holding's Retail Services and Carriers'
Carrier Services businesses. The Company acquired such businesses on July 25,
1997 in the Reorganization described below.

BACKGROUND. ITC Holding has provided operator and directory assistance
services since March 1992 through its subsidiary, Eastern Telecom, Inc., which
does business as InterQuest ("InterQuest"). Carriers' Carrier Services have
been offered since April 1992 through Interstate FiberNet, a partnership
originally formed by ITC Holding (with a 49% interest) and SCANA
Communications, Inc. ("SCANA") (with a 51% interest). In August 1994, ITC
Holding acquired SCANA's interest in Interstate FiberNet through ITC
Transmission Systems II, Inc., a wholly-owned subsidiary of ITC Holding
("Transmission II"). Also in August 1994, ITC Holding and SCANA formed a second
partnership, Gulf States FiberNet, to construct and operate a fiber optic route
primarily between Atlanta, Georgia and Shreveport, Louisiana with several
supplemental spur routes. In a transaction consummated in March 1997 (the "Gulf
States Acquisition"), ITC Holding acquired SCANA's 64% partnership interest in
Gulf States FiberNet and certain fiber and fiber-related assets, including a
significant customer contract for network services in Georgia (the "Georgia
Fiber Assets"). Following the Gulf States Acquisition, ITC Holding contributed
the remaining 64% interest in Gulf States FiberNet to Gulf States Transmission
Systems, Inc., a wholly owned subsidiary of ITC Holding ("Gulf States
Transmission"), and the Georgia Fiber Assets to ITC Transmission Systems, Inc.,
a wholly owned subsidiary of ITC Holding ("Transmission"). Members of the
Company's management have been managing the businesses of both Interstate
FiberNet and Gulf States FiberNet since their inception.

In January 1996, through its acquisition (the "DeltaCom Acquisition") of
DeltaCom, Inc. ("DeltaCom"), ITC Holding entered the retail long distance
business and acquired several fiber optic routes within the state of Alabama
that complemented the existing networks operated by Interstate FiberNet
(including a fiber optic route from Atlanta, Georgia to Columbus, Georgia) and
Gulf States FiberNet. DeltaCom, a provider of telecommunications services since
its inception in 1982, provides long distance services to mid-sized businesses
primarily in Alabama. In July 1996, DeltaCom purchased substantially all of the
assets of Viper Computer Systems, Inc. ("ViperNet"), which provides Internet
access, Web-hosting and Web page development services to business customers.

To finance the DeltaCom Acquisition and to refinance existing DeltaCom debt,
ITC Holding incurred approximately $74.0 million of indebtedness, which was
pushed down to the Company (the "DeltaCom Indebtedness"). The aggregate
consideration paid by ITC Holding in the Gulf States Acquisition was
approximately $27.9 million, of which $10.0 million consisted of an unsecured
note (the "SCANA Note"), which has been assumed by a subsidiary of the Company,
and $17.9 million consisted of ITC Holding preferred stock. In connection with
the Gulf States Acquisition, Gulf States Transmission borrowed $41.6 million
under a credit facility (the "Bridge Facility") with NationsBank, N.A., to
refinance a project loan incurred by Gulf States FiberNet.

SENIOR NOTE OFFERING. On June 3, 1997, the Company completed the sale of
$200.0 million principal amount of its 11% Senior Notes due 2007 (the "Senior
Notes"). The net proceeds from the sale of the Senior Notes (the "Senior Note
Offering"), other than the portion of such proceeds invested in U.S. government
securities (the "Pledged Securities") pledged to secure and fund the first six
scheduled interest payments on the Senior Notes, were released to the Company
upon consummation of the Reorganization.

REORGANIZATION. On July 25, 1997, ITC Holding contributed to the Company in a
series of transactions the businesses of Interstate FiberNet, Gulf States
FiberNet, DeltaCom and InterQuest (such transactions collectively referred to
herein as the "Reorganization"). In connection with the Reorganization,
approximately $31.0 million of the $74.0 million of the DeltaCom Indebtedness
was forgiven by ITC Holding and contributed

6
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to the Company as additional equity. Following the Reorganization, the Company
repaid the remaining $43.0 million of the DeltaCom Indebtedness, accrued
interest on all $74.0 million of such indebtedness and the $41.6 million of
indebtedness outstanding under the Bridge Facility and accrued interest thereon
with a portion of the net proceeds from the Senior Note Offering.

HOLDING COMPANY MERGER. On October 20, 1997, as part of a reorganization of
the ITC Holding group of companies, ITC Holding transferred all of its assets
(other than its stock in the Company) and all of its liabilities to another
entity and then merged (the "Merger") with and into the Company, which is the
surviving corporation in the Merger. In connection with the Merger, holders of
ITC Holding common stock and convertible preferred stock received shares of the
Company's Common Stock and Series A Convertible Preferred Stock (the "Series A
Preferred Stock"), respectively.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered hereby.. 5,000,000 shares
Common Stock to be
outstanding after the
Offering.................... 24,126,731 shares(1)
Use of Proceeds.............. The net proceeds from the offering of Common
Stock hereby (the "Offering") will be used to
fund expansion of the Company's
telecommunications business, including expansion
of the Company's fiber optic network and the
opening of new sales offices, and for additional
working capital and general corporate purposes.
Nasdaq National Market sym-
bol......................... ITCD
</TABLE>
- --------

(1) Based on the number of shares outstanding as of October 20, 1997. Excludes
(i) 1,452,793 shares of Common Stock issuable upon the exercise of options
outstanding as of October 20, 1997 under the Company's 1997 Stock Option
Plan (the "Stock Option Plan"), (ii) 96,300 shares of Common Stock issuable
upon the exercise of options outstanding as of October 20, 1997 under the
Company's 1997 Director Stock Option Plan (the "Director Stock Option
Plan"), (iii) 3,461,833 shares of Common Stock issuable upon the exercise
of options which were originally granted by ITC Holding under the ITC
Holding stock option plans and which were assumed by the Company in the
Merger and (iv) 1,486,440 shares of Common Stock which will be issuable
upon conversion of the Series A Preferred Stock issued in the Merger and
shares of Common Stock which will be issuable upon conversion of any
additional Series A Preferred Stock which may be issued under an earn-out
arrangement related to the Gulf States Acquisition. See "History of the
Company--Holding Company Merger," "Management--Stock Option Plans,"
"Certain Transactions" and "Description of Capital Stock--Series A
Preferred Stock."

RISK FACTORS

Potential investors should consider carefully certain factors relating to the
Company, its business and an investment in the Common Stock. See "Risk
Factors."

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<PAGE>

SUMMARY FINANCIAL AND OPERATING DATA

The summary historical and pro forma financial and operating data set forth
below should be read in conjunction with "History of the Company," "Use of
Proceeds," "Selected Financial and Operating Data," "Pro Forma Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the financial statements and notes thereto, and other financial
and operating data contained elsewhere in this Prospectus. The pro forma
statement of operations data for 1996 give effect to the following transactions
as if each had occurred on January 1, 1996: (i) the DeltaCom Acquisition; (ii)
the Gulf States Acquisition; (iii) the Reorganization; (iv) the Senior Note
Offering and the application of the net proceeds therefrom; (v) the Merger; and
(vi) the Offering. The pro forma statement of operations data for the six
months ended June 30, 1997 give effect to the following transactions as if each
had occurred on January 1, 1996: (i) the Gulf States Acquisition; (ii) the
Reorganization; (iii) the Senior Note Offering and the application of the net
proceeds therefrom; (iv) the Merger; and (v) the Offering. The pro forma
balance sheet data at June 30, 1997 give effect to the following transactions
as if each had occurred on June 30, 1997: (i) the Reorganization; (ii) the
application of the net proceeds from the Senior Note Offering; (iii) the
Merger; and (iv) the Offering. The pro forma financial and operating
information does not purport to represent what the Company's consolidated
results of operations would have been if these transactions had in fact
occurred on these dates, nor does it purport to indicate the future
consolidated financial position or consolidated results of future operations of
the Company. The pro forma adjustments are based on currently available
information and certain assumptions that management believes to be reasonable.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------------- ---------------------------------------
COMBINED PRO FORMA COMBINED PRO FORMA
----------------------------------- CONSOLIDATED ------------------------ CONSOLIDATED
1994(A)(B) 1995 1996(C) 1996(D) 1996(C) 1997(E)(F) 1997(D)(E)(F)
---------- ---------- ----------- ------------ ----------- ----------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Operating revenues...... $4,945,902 $5,750,587 $66,518,585 $ 85,374,362 $28,574,799 $53,365,061 $ 54,250,511
Operating expenses:
Cost of service........ 2,484,744 3,149,231 38,756,287 42,587,228 16,129,463 25,302,747 25,302,747
Selling, operations and
administration
expense............... 948,230 1,626,678 18,876,572 23,866,169 8,206,621 16,961,324 17,209,549
Depreciation and
amortization.......... 738,052 1,267,882 6,438,074 14,612,761 2,832,017 8,273,232 8,634,041
---------- ---------- ----------- ------------ ----------- ----------- ------------
Total operating
expenses.............. 4,171,026 6,043,791 64,070,933 81,066,158 27,168,101 50,537,303 51,146,337
Operating income
(loss)................. 774,876 (293,204) 2,447,652 4,308,204 1,406,698 2,827,758 3,104,174
Equity in losses of
unconsolidated
subsidiaries........... (96,920) (258,242) (1,589,812) -- (1,088,404) -- --
Interest expense........ (273,759) (297,228) (6,172,421) (26,266,789) (2,762,757) (7,561,591) (12,389,998)
Interest and other
income................. 82,348 41,734 171,514 3,717,951 107,216 883,388 2,697,611
---------- ---------- ----------- ------------ ----------- ----------- ------------
Income (loss) before
taxes, preacquisition
(earnings) losses and
extraordinary item..... 486,545 (806,940) (5,143,067) (18,240,634) (2,337,247) (3,850,445) (6,588,213)
Income tax (provision)
benefit................ (113,248) 302,567 1,233,318 6,167,132 671,467 1,005,809 2,046,160
Preacquisition
(earnings) losses...... (236,300) -- -- -- -- 74,132 --
---------- ---------- ----------- ------------ ----------- ----------- ------------
Income (loss) from
continuing operations.. 136,997 (504,373) (3,909,749) (12,073,502) (1,665,780) (2,770,504) (4,542,053)
Extraordinary item (net
of tax benefit)........ -- -- -- -- -- (507,515) (507,515)
---------- ---------- ----------- ------------ ----------- ----------- ------------
Net income (loss)....... $ 136,997 $ (504,373) $(3,909,749) $(12,073,502) $(1,665,780) $(3,278,019) $ (5,049,568)
========== ========== =========== ============ =========== =========== ============
Pro forma net income
(loss) per common
share: (g)
Before extraordinary
loss.................. $ 0.01 $ (0.02) $ (0.18) $ (0.46) $ (0.08) $ (0.13) $ (0.17)
Extraordinary loss..... -- -- -- -- -- (0.02) (0.02)
---------- ---------- ----------- ------------ ----------- ----------- ------------
Net income (loss)...... $ 0.01 $ (0.02) $ (0.18) $ (0.46) $ (0.08) $ (0.15) $ (0.19)
========== ========== =========== ============ =========== =========== ============
Pro forma weighted
average common and
common equivalent
shares outstanding:
(g).................... 21,381,209 21,382,477 21,456,340 26,379,847 21,450,102 21,462,477 26,385,984
</TABLE>

8
<PAGE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------------- ------------------------------------
COMBINED PRO FORMA COMBINED PRO FORMA
-------------------------------- CONSOLIDATED ----------------------- CONSOLIDATED
1994(A)(B) 1995 1996(C) 1996 1996(C) 1997(E)(F) 1997(E)(F)
---------- ---------- ---------- ------------ ----------- ----------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
Capital expenditures.... $3,703,835 $1,805,742 $6,172,660 $ 7,427,263 $2,279,913 $12,357,471 $12,559,439
Cash flows provided by
operating activities... 978,775 1,437,317 8,188,618 8,252,717 2,448,698 9,409,779 10,212,231
EBITDA (h).............. 1,512,928 974,678 8,885,726 18,920,965 4,238,715 11,100,990 11,738,215
</TABLE>

<TABLE>
<CAPTION>
AT JUNE 30, 1997
----------------------------------------
PRO FORMA
CONSOLIDATED
HISTORICAL PRO FORMA AS
COMBINED CONSOLIDATED ADJUSTED (D)
------------ ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)............ $ 68,175,664 $ 53,895,964 $125,220,964
Property and equipment, net.......... 115,852,080 115,852,080 115,852,080
Total assets......................... 402,015,721 301,908,472 373,233,472
Long-term debt, advances from ITC
Holding and capital lease
obligations, including current
portions........................... 335,915,346 214,429,126 214,429,126
Preferred Stock ..................... -- 14,864 14,864
Common Stock......................... 150,826 191,267 241,267
Additional paid-in capital........... 40,814,227 64,885,543 136,160,543
Retained earnings (accumulated
deficit)............................ (7,514,481) (971,275) (971,275)
Total stockholders' equity........... 33,450,572 64,120,399 135,445,399
</TABLE>
- --------
(a) Through August 17, 1994, the Company owned a 49% interest in Interstate
FiberNet and accounted for this investment under the equity method. On
August 17, 1994, the Company purchased the remaining 51% interest in
Interstate FiberNet from SCANA. Therefore, Interstate FiberNet's revenues
and expenses have been included in the combined statement of operations
data effective January 1, 1994, with the preacquisition earnings
attributable to SCANA deducted to determine the combined net income for
1994. See Note 5 to the combined financial statements.
(b) On August 17, 1994, the Company entered into the Gulf States FiberNet
partnership with SCANA. The Company obtained a 36% general partnership
interest and the investment was accounted for under the equity method. See
Note 5 to the combined financial statements.
(c) On January 29, 1996, ITC Holding purchased DeltaCom. DeltaCom's results of
operations are included in the historical statement of operations data
since the date of acquisition. See Note 13 to the combined financial
statements.

(d) Gives effect to the Offering. See "Use of Proceeds."

(e) On March 27, 1997, the Company purchased the Georgia Fiber Assets from
SCANA. The results of operations for the Georgia Fiber Assets were included
in the combined statements of operations beginning April 1, 1997. See Note
16 to the combined financial statements.

(f) On March 27, 1997, the Company purchased the remaining 64% partnership
interest in Gulf States FiberNet from SCANA. Therefore, Gulf States
FiberNet's revenues and expenses have been included in the combined
statement of operations data effective January 1, 1997 with the
preacquisition losses attributable to SCANA deducted to determine the
combined net loss for the six months ended June 30, 1997. See Note 16 to
the combined financial statements.

(h) EBITDA represents earnings before extraordinary item, preacquisition
(earnings) losses, equity in losses of unconsolidated subsidiaries, net
interest, income taxes, depreciation and amortization. EBITDA is provided
because it is a measure commonly used in the industry. EBITDA is not a
measurement of financial performance under generally accepted accounting
principles and should not be considered an alternative to net income as a
measure of performance or to cash flow as a measure of liquidity. EBITDA is
not necessarily comparable with similarly titled measures for other
companies.

9
<PAGE>

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
shares of Common Stock offered hereby. This Prospectus contains forward-
looking statements that involve risks and uncertainties. The Company's actual
results may differ materially from the results discussed in such forward-
looking statements. Factors that may cause such a difference include, but are
not limited to, those discussed below and in the sections of this Prospectus
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business."

HISTORICAL AND ANTICIPATED FUTURE OPERATING LOSSES AND NEGATIVE CASH FLOW
AFTER CAPITAL EXPENDITURES

The Company expects to incur significant and increasing operating losses and
negative cash flow (after capital expenditures) during the next several years
as it implements its business strategy to expand its telecommunications
service offerings, expand its fiber optic network and enter new markets.
Although the Company expects that a majority of its revenue growth will come
from Retail Services, it does not expect its Retail Services to obtain a
significant share of the market for telecommunications services in the
southern United States, and there can be no assurance that the Company will
achieve or sustain profitability or positive net cash flow in the future. If
the Company cannot achieve or sustain operating profitability and positive net
cash flow, it may not be able to meet its working capital or debt service
requirements and the Common Stock may have little or no value. See "--
Significant Capital Requirements; Uncertainty of Additional Financing,"
"Selected Financial and Operating Data," "Pro Forma Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

SIGNIFICANT CAPITAL REQUIREMENTS; UNCERTAINTY OF ADDITIONAL FINANCING

Expansion of the Company's network, operations and services will require
significant capital. Assuming consummation of the Offering, the Company
currently estimates that its aggregate capital requirements will total
approximately $150 million in 1997 and 1998, of which approximately $55
million is expected to be incurred in 1997 (including $12.4 million of capital
expenditures made as of June 30, 1997) and $95 million in 1998. The Company
anticipates making substantial capital expenditures thereafter. Capital
expenditures will be primarily for the following: (i) the addition of
facilities-based local telephone service to the Company's bundle of integrated
telecommunications services, including acquisition and installation of
switches; (ii) market expansion; (iii) continued development and construction
of its fiber optic network (including transmission equipment); and (iv)
infrastructure enhancements, principally for information systems. The Company
believes that the net proceeds from the Offering, together with cash on hand,
cash flow from operations and borrowings expected to be available under a $100
million secured credit facility (the "Credit Facility") from NationsBank of
Texas, N.A. ("NationsBank"), will provide sufficient funds to enable the
Company to expand its business as currently planned through the maturity of
the Credit Facility in 2002, after which the Company will need to seek
additional financing to fund capital expenditures and working capital. Because
the Credit Facility will mature in 2002, the Company may not have a ready
source of liquidity after 2002. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Description of Certain
Indebtedness."

The actual amount and timing of the Company's future capital requirements
may differ materially from the Company's estimate depending on the demand for
the Company's services and as a result of regulatory, technological and
competitive developments (including new market developments and new
opportunities) in the Company's industry. The Company may also require
additional capital in the future (or sooner than currently anticipated) for
new business activities related to its current and planned businesses, or in
the event it decides to make additional acquisitions or enter into joint
ventures and strategic alliances. Sources of additional capital may include
cash flow from operations and public and private equity and debt financings.
There can be no assurance, however, that the Company will be successful in
producing sufficient cash flows or raising sufficient debt or equity capital
to meet its strategic objectives or that such funds, if available at all, will
be available on a timely basis or on terms that are acceptable to the Company.
Failure to generate or raise sufficient funds would require the Company to
delay or abandon some or all of its future expansion plans or expenditures,
which could have a

10
<PAGE>

material adverse effect on the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview."

HIGH LEVERAGE; ABILITY TO SERVICE DEBT; RESTRICTIVE COVENANTS

At June 30, 1997, on a pro forma basis, giving effect to the Reorganization,
including the forgiveness of, or repayment in full of, certain indebtedness
with a portion of proceeds from the Senior Note Offering, the Merger and the
Offering, the Company would have had $214.4 million of indebtedness and its
stockholders' equity would have been $135.4 million. On a pro forma basis, the
Company's earnings would have been insufficient to cover its fixed charges for
the year ended December 31, 1996 and the six months ended June 30, 1997 by
$18.2 million and $6.6 million, respectively, and its EBITDA less capital
expenditures and interest expense would have been negative $14.8 million and
negative $13.2 million, respectively.

The indenture pursuant to which the Senior Notes were issued (the "Senior
Note Indenture") and the Credit Facility contain restrictions on the Company
and its subsidiaries that affect, and in certain cases significantly limit or
prohibit, among other things, the ability of the Company and its subsidiaries
to incur additional indebtedness, create liens, make investments, issue stock
of subsidiaries and sell assets. In addition, the Credit Facility requires the
Company to maintain certain financial ratios. See "Description of Certain
Indebtedness--Credit Facility." There can be no assurance that the Company
will be able to maintain such ratios or that such covenants will not adversely
affect the Company's ability to finance its future operations or capital needs
or to engage in other business activities that may be in the interest of the
Company. The limitations in the Senior Note Indenture are subject to a number
of important qualifications and exceptions. In particular, while the Senior
Note Indenture restricts the Company's ability to incur indebtedness by
requiring compliance with specified leverage ratios, it permits the Company to
incur an unlimited amount of additional indebtedness to finance the
acquisition of equipment, inventory or network assets.

There can be no assurance that the Company will be able to improve its
earnings before fixed charges or that the Company will be able to meet its
debt service obligations. If the Company is unable to generate sufficient cash
flow or otherwise obtain funds necessary to make required payments, or if the
Company otherwise fails to comply with the various covenants in its debt
obligations, it would be in default under the terms thereof, which would
permit the holders of such indebtedness to accelerate the maturity of such
indebtedness and could cause defaults under other indebtedness of the Company.
The ability of the Company to meet its obligations will be dependent upon the
future performance of the Company, which will be subject to prevailing
economic conditions and to financial, business and other factors. See
"Description of Certain Indebtedness."

The level of the Company's indebtedness could adversely affect the Company
in a number of ways. For example, (i) the ability of the Company to obtain any
necessary financing in the future for working capital, capital expenditures,
debt service requirements or other purposes may be limited; (ii) the Company's
level of indebtedness could limit its flexibility in planning for, or reacting
to, changes in its business; (iii) the Company will be more highly leveraged
than some of its competitors, which may place it at a competitive
disadvantage; (iv) the Company's degree of indebtedness may make it more
vulnerable to a downturn in its business or the economy generally; and (v) a
substantial portion of the Company's cash flow from operations must be
dedicated to the payment of principal and interest on its indebtedness and
will not be available for other purposes.

The successful implementation of the Company's strategy, including expansion
of its network and obtaining and retaining a significant number of customers,
and significant and sustained growth in the Company's cash flow are necessary
for the Company to be able to meet its debt service requirements. There can be
no assurance that the Company will successfully implement its strategy or that
the Company will be able to generate sufficient cash flow from operating
activities to meet its debt service obligations and working capital
requirements. In the event the implementation of the Company's strategy is
delayed or is unsuccessful or the Company does not generate sufficient cash
flow to meet its debt service and working capital requirements, the Company
may need to seek additional financing. There can be no assurance that any such
financing could be obtained on terms that are acceptable to the Company, or at
all. In the absence of such financing, the Company could be forced to

11
<PAGE>

dispose of assets in order to make up for any shortfall in the payments due on
its indebtedness under circumstances that might not be favorable to realizing
the highest price for such assets. A substantial portion of the Company's
assets consist of intangible assets, the value of which will depend upon a
variety of factors (including the success of the Company's business). As a
result, there can be no assurance that the Company's assets could be sold
quickly enough or for sufficient amounts to enable the Company to meet its
obligations.

ABILITY TO MANAGE GROWTH

The expansion and development of the Company's business will depend on,
among other things, the Company's ability to implement successfully its sales
and marketing strategy, evaluate markets, design fiber routes, secure
financing, install facilities, acquire rights of way, obtain any required
government authorizations, implement interconnection to, and co-location with,
facilities owned by incumbent local exchange carriers and obtain appropriately
priced unbundled network elements and wholesale services from the incumbent
local exchange carriers, all in a timely manner, at reasonable cost and on
satisfactory terms and conditions. The Company's rapid growth, particularly in
the provision of Retail Services, has placed, and anticipated growth in other
services in the future may also place, a significant strain on its
administrative, operational and financial resources. The Company's ability to
continue to manage its growth successfully will require the Company to enhance
its operational, management, financial and information systems and controls
and to hire and retain qualified sales, marketing, administrative, operating
and technical personnel. There can be no assurance that the Company will be
able to do so. In addition, as the Company increases its service offerings and
expands its targeted markets, there will be additional demands on customer
support, sales and marketing, administrative resources and network
infrastructure. The Company's inability to manage its growth effectively could
have a material adverse effect on the Company's business, results of
operations and financial condition.

BUSINESS DEVELOPMENT AND EXPANSION RISKS

The successful implementation of the Company's business strategy to provide
an integrated bundle of telecommunications services and expand its operations
will be subject to a variety of risks, including competition and pricing, the
availability of capital on favorable terms, regulatory uncertainties,
operating and technical problems, the need to establish interconnection and
co-location arrangements with incumbent local exchange carriers in its target
markets and the potential difficulties in adding a local service offering. See
"--Dependence on Incumbent Local Exchange Carriers." In addition, the
expansion of the Company's business may involve acquisitions of other
telecommunications businesses and assets that, if made, could divert the
resources and management time of the Company and could require integration
with the Company's operations. There can be no assurance that any such
acquisition could be successfully integrated into the Company's operations or
that any acquired business will perform as expected. Failure of the Company to
implement its expansion and growth strategy successfully would have a material
adverse effect on the Company's business, results of operations and financial
condition.

RISKS RELATED TO LOCAL SERVICES STRATEGY

The Company plans to enter the newly created competitive local
telecommunications services industry. The local dial tone services market has
only recently been opened to competition through the passage of the
Telecommunications Act of 1996 (the "Telecommunications Act") and subsequent
state and federal regulatory actions designed to implement the
Telecommunications Act. Regulatory bodies have not completed all actions
expected to be needed to implement local service competition, and there is
little experience under those decisions that have been made to date. The
Company will have to make significant operating and capital investments in
order to implement its local exchange services strategy. There are numerous
operating complexities associated with providing these services. The Company
will be required to develop new products, services and systems and will need
to develop new marketing initiatives and train its sales force in connection
with selling these services. The Company will also need to implement the
necessary billing and collecting systems for these services. The Company will
face significant competition from the Regional Bell Operating Companies, whose
core business is

12
<PAGE>

providing local dial tone service. The Regional Bell Operating Companies, who
currently are the dominant providers of services in their markets, are
expected to mount a significant competitive response to new entrants in their
markets such as the Company. The Company also will face significant
competitive product and pricing pressures from other incumbent local exchange
carriers and from other firms seeking to compete in the local services market.

The Company also expects that the addition of local service to its bundle of
telecommunications services will have an adverse impact on its gross margin
because the gross margin on the resale of local services through incumbent
local exchange carrier facilities is lower than the gross margin on the
Company's existing business. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview."

PRICING PRESSURES AND RISKS OF INDUSTRY OVER-CAPACITY

The long distance transmission industry has generally been characterized by
over-capacity and declining prices since shortly after the AT&T divestiture in
1984. The Company believes that, in the last several years, increasing demand
has ameliorated the over-capacity and that pricing pressure has been reduced.
However, the Company anticipates that prices for its Carriers' Carrier
Services will continue to decline over the next several years. The Company is
aware that certain long distance carriers are expanding their capacity and
believes that other long distance carriers, as well as potential new entrants
to the industry, are constructing new fiber optic and other long distance
transmission networks in the southern United States. Since the cost of the
actual fiber (as opposed to construction costs) is a relatively small portion
of the cost of building new transmission lines, persons building such lines
are likely to install fiber that provides substantially more transmission
capacity than will be needed over the short or medium term. Further, recent
technological advances may greatly expand the capacity of existing and new
fiber optic cable. Although such technological advances may enable the Company
to increase its capacity, an increase in the capacity of the Company's
competitors could adversely affect the Company's business. If industry
capacity expansion results in capacity that exceeds overall demand along any
of the Company's routes, severe additional pricing pressure could develop. In
addition, strategic alliances or similar transactions, such as the long
distance capacity purchasing alliance among certain Regional Bell Operating
Companies announced in the spring of 1996, could result in additional pricing
pressure on long distance carriers. Furthermore, the marginal cost of carrying
an additional call over existing fiber optic cable is extremely low. As a
result, within a few years, there may be dramatic and substantial price
reductions. Such pricing pressure could have a material adverse effect on the
Company. In addition, the Federal Communications Commission (the "FCC") has
announced changes to its interstate access rules which may result in
additional pricing pressures. See "--Competition."

DEPENDENCE ON BILLING, CUSTOMER SERVICE AND INFORMATION SYSTEMS

Sophisticated information and processing systems are vital to the Company's
growth and its ability to monitor costs, bill customers, provision customer
orders and achieve operating efficiencies. As the Company commences providing
dial tone and switched local access services, the need for enhanced billing
and information systems will increase significantly. The inability of the
Company to identify adequately all of its information and processing needs, or
to upgrade systems as necessary, could have a material adverse impact on the
ability of the Company to reach its objectives and on its financial condition
and results of operations.

DEPENDENCE ON RIGHTS OF WAY AND OTHER THIRD PARTY AGREEMENTS

The Company has obtained easements, rights of way, franchises and licenses
from various private parties, including actual and potential competitors, and
local governments in order to construct and maintain its fiber optic network.
There can be no assurance that the Company will continue to have access to
existing rights of way and franchises after the expiration of such agreements.
If a franchise, license or lease agreement were terminated and the Company
were forced to remove or abandon a significant portion of its network, such
termination could have a material adverse effect on the Company.

13
<PAGE>

REGULATION

The Company is required to obtain certain authorizations from the FCC and
state public utility commissions ("PUCs") to offer certain of its
telecommunications services, as well as file tariffs for many of its services.
To date the Company has not experienced significant difficulties in receiving
certification, maintaining tariffs or otherwise complying with its regulatory
obligations. The Company will face new obligations arising out of the
Telecommunications Act as it begins to enter the local telephone market. It
also is likely that state PUCs will regulate the local telephone services
offered by the Company and other competitive local exchange carriers more
heavily than competitive long distance services have been regulated in the
past. Because the FCC and the states have yet to adopt many of the rules and
policies necessary to implement the Telecommunications Act, or to respond to
other related local telephone competition issues, it is uncertain how
burdensome these requirements will be for the Company.

Although the Company entered into the Interconnection Agreement pursuant to
which it will obtain wholesale local services and access to unbundled network
elements from BellSouth, the terms of the Interconnection Agreement are
subject to the approval of the PUCs regulating the Company's markets. Such
approval has been received from the PUCs of Alabama, Florida, Georgia,
Kentucky, Louisiana, Mississippi, North Carolina, South Carolina and
Tennessee.

In addition, the Company's plans to provide local telephone service are
heavily dependent upon implementation of provisions of the Telecommunications
Act. The Telecommunications Act preempted state and local laws to the extent
that they prohibited local telephone competition, and imposed a variety of new
duties on incumbent local exchange carriers intended to advance such
competition, including the duty to negotiate in good faith with competitors
requesting interconnection to the incumbent local exchange carrier's network.
However, negotiations with incumbent local exchange carriers have sometimes
involved considerable delays and the resulting negotiated agreements may not
necessarily be obtained on terms and conditions that are acceptable to the
Company. In such instances, the Company may petition the proper state
regulatory agency to arbitrate disputed issues. There can be no assurance that
the Company will be able to negotiate acceptable new interconnection
agreements with incumbent local exchange carriers or that if state regulatory
authorities impose terms and conditions on the parties in arbitration, such
terms will be acceptable to the Company. On August 8, 1996, the FCC adopted
rules and policies implementing the local competition provisions of the
Telecommunications Act, which rules, in general, were considered favorable to
new competitive entrants, but those rules have not been fully implemented. The
FCC's rules were challenged in the federal courts by GTE, Regional Bell
Operating Companies, large independent incumbent local exchange carriers and
state regulatory commissions. On October 15, 1996, the U.S. Court of Appeals
for the Eighth Circuit issued a stay of the implementation of certain of the
FCC's rules, and on July 18 and October 14, 1997, the Court issued decisions
finding that the FCC lacked statutory authority under the Telecommunications
Act for certain of its rules. In particular, the Court found that the FCC was
not empowered to establish the pricing standards governing unbundled local
network elements or wholesale local services of the incumbent local exchange
carriers, or to require such carriers to provide network elements in a
combined form. The Court also struck down other FCC rules, including one that
would have enabled new entrants to "pick and choose" from provisions of
established interconnection agreements between the incumbent local exchange
carriers and other carriers. The Court rejected certain other objections to
the FCC rules brought by the incumbent local exchange carriers or the states,
including challenges to the FCC's definition of unbundled elements, and to the
FCC's rules allowing new competitors to create their own networks by combining
incumbent local exchange carrier network elements together without adding
additional facilities of their own. The overall impact of the Court's decision
is to limit the obligations of incumbent local exchange carriers as originally
interpreted by the FCC, materially reduce the role of the FCC in fostering
local competition, including its ability to take enforcement action if the
Telecommunications Act is violated, and increase the role of state utility
commissions. The FCC has indicated that it will ask the Supreme Court to
review the Court's decisions. Meanwhile, certain state commissions have
asserted that they will be active in promoting local telephone competition
using the authority they have under the ruling, lessening the significance of
the reduced FCC role. At this time the impact of the Court's decision cannot
be evaluated, but there can be no assurance that the Court decision and
related developments will not have a material adverse effect on the Company.
Furthermore, other FCC rules related to local telephone

14
<PAGE>

competition remain the subject of legal challenges, and there can be no
assurance that decisions affecting those rules will not be adverse to
companies seeking to enter the local telephone market.

The Telecommunications Act also creates the foundation for increased
competition in the long distance market from the incumbent local exchange
carriers, which could affect the successful implementation of the Company's
business plans. For example, certain provisions eliminate previous
prohibitions on the provision of interLATA long distance services (both retail
and carriers' carrier) by the Regional Bell Operating Companies subject to
compliance by such companies with requirements set forth in the
Telecommunications Act and implemented by the FCC. The Company could be
adversely affected if the Regional Bell Operating Companies (and particularly
BellSouth) are allowed to provide wireline interLATA long distance services
within their own regions before local competition is established. In a related
development, the FCC is considering proposed new policies and rules that would
grant the incumbent local exchange carriers additional flexibility in the
pricing of interstate access services, and states are considering or are
expected to consider incumbent local exchange carrier requests for similar
regulatory relief with respect to intrastate services. Such flexibility is
likely to come first for services offered in the business market. Any pricing
flexibility or other significant deregulation of the incumbent local exchange
carriers could have a material adverse effect on the Company. See "Business--
Regulation."

COMPETITION

The Company operates in a highly competitive environment, and the level of
competition, particularly with respect to pricing, is increasing. Local
telephone and intraLATA long distance services substantially similar to those
expected to be offered by the Company are also offered by the incumbent local
exchange carriers serving the markets that the Company plans to serve.
BellSouth is the incumbent local exchange carrier and a particularly strong
competitor in most of the markets to be served by the Company. BellSouth and
other incumbent local exchange carriers already have relationships with every
customer and have the potential to subsidize services of the type offered by
the Company from service revenues not subject to effective competition, which
could result in even more intense price competition. The Company competes with
long distance carriers in the provision of interLATA long distance Retail and
Carriers' Carrier Services. The interLATA long distance market consists of
three major competitors (AT&T, MCI and Sprint) but other companies operate or
are building networks in the southern United States and other geographic
areas. Other competitors of the Company in the Retail and Carriers' Carrier
Services markets are likely to include Regional Bell Operating Companies
providing out-of-region (and, with the future removal of regulatory barriers,
in-region) long distance services, other competitive local exchange carriers,
microwave and satellite carriers, and private networks owned by large end-
users. In addition, the Company competes with direct marketers, equipment
vendors and installers, and telecommunications management companies with
respect to certain portions of its business. Many of the Company's existing
and potential competitors have financial, technical and other resources and
customer bases and name recognition far greater than those of the Company. The
long distance business is extremely competitive and prices have declined
substantially in recent years and are expected to continue to decline, which
will adversely affect the Company's gross margins as a percentage of revenues.
The FCC recently announced changes to its interstate access rules that will
reduce per-minute access charges and substitute new per-line flat-rate monthly
charges. These actions are expected to reduce access rates. AT&T has committed
to reduce its long distance rates to reflect access cost reductions, and other
competitors of the Company are likely to make similar reductions. In such
event, the Company may need to reduce its rates to respond to competitive
pressures. See "--Dependence on Incumbent Local Exchange Carriers" and
"Business--Regulation."

The Telecommunications Act, other recent state legislative actions, and
current federal and state regulatory initiatives provide increased business
opportunities for the Company by removing or substantially reducing certain
barriers to local exchange competition. However, these new competitive
opportunities are expected to be accompanied by new competitive opportunities
for the incumbent local exchange carriers. It is also expected that increased
local competition will result in increased pricing flexibility for, and
relaxation of regulatory oversight of, the incumbent local exchange carriers.
If the incumbent local exchange carriers are permitted to engage in increased
volume and discount pricing practices or charge competitive local exchange
carriers increased fees for

15
<PAGE>

interconnection to their networks, or if the incumbent local exchange carriers
seek to delay implementation of interconnection by competitors to their
networks, the Company's results of operations and financial condition could be
adversely affected. There can be no assurance that the Company will be able to
achieve or maintain adequate market share or revenues, or compete effectively
in any of its markets.

In addition, a continuing trend toward business combinations and strategic
alliances in the telecommunications industry may further enhance competition.
For example, the national long distance carrier WorldCom acquired MFS
Communications Company, Inc., a competitive local exchange carrier, in
December 1996. In March 1997, BellSouth and International Business Machines
Corporation ("IBM") announced an alliance to provide Internet and Intranet
services to businesses in the southern United States. These types of strategic
alliances could put the Company at a significant competitive disadvantage.

The Company will face competition in the markets in which it operates from
one or more competitive local exchange carriers operating fiber optic
networks, in some cases in conjunction with the local cable television
operator. One of the primary purposes of the Telecommunications Act is to
promote competition, particularly in the local telephone market. AT&T, MCI,
Sprint and others have begun to offer local telecommunications services,
either directly or in conjunction with other competitive local exchange
carriers in certain locations, and are expected to expand that activity as
opportunities created by the Telecommunications Act develop. BellSouth has
announced plans to provide local service in areas of its region where it is
not the incumbent local exchange carrier.

To complement its telecommunications services offerings, the Company offers
data transmission services. The data transmission business is extremely
competitive and prices have declined substantially in recent years and are
expected to continue to decline.

The recent World Trade Organization ("WTO") agreement on basic
telecommunications services could increase the level of competition faced by
the Company. Under this agreement, the United States and other members of the
WTO committed themselves to opening their telecommunications markets to
competition and foreign ownership and to adopting regulatory measures to
protect against anticompetitive behavior by dominant telephone companies
effective as early as January 1, 1998.

The Company also believes that providers of wireless services increasingly
will offer, in addition to products that supplement a customer's wireline
communications (similar to cellular telephone services in use today), wireline
replacement products that may result in wireless services becoming the
customer's primary mode of communication. For example, AT&T recently announced
plans to offer local services using a new wireless technology. AT&T's proposed
wireless system would link residential and business telephones via radio waves
to the AT&T network. If successful, this new service could further enhance
AT&T's ability to market, on a nationwide basis, "one-stop" telecommunications
services. Competition with providers of wireless telecommunications services
may be intense. Many of the Company's potential wireless competitors have
substantially greater financial, technical, marketing, sales, manufacturing
and distribution resources than those of the Company.

DEPENDENCE ON INCUMBENT LOCAL EXCHANGE CARRIERS

The Company is dependent on incumbent local exchange carriers to provide
access service for the origination and termination of its toll long distance
traffic and interexchange private lines. Historically charges for such access
service have made up a significant percentage of the overall cost of providing
long distance service. On May 7, 1997, the FCC adopted changes to its
interstate access rules that, among other things, will reduce per-minute
access charges and substitute new per-line flat rate monthly charges. The FCC
also approved reductions in overall access rates, and established new rules to
recover subsidies to support universal service and other public policies. The
impact of these changes on the Company or its competitors is not yet clear.
The

16
<PAGE>

Company could be adversely affected if it does not experience access cost
reductions proportionally equivalent to those of its competitors. See
"Business--Regulation."

The Company also generally will be dependent on incumbent local exchange
carriers for provision of local telephone service through access to local
loops, termination service and, in some markets, central office switches of
such carriers. In addition, the Company intends to obtain the local telephone
services of the incumbent local exchange carriers on a wholesale basis and
resell that service to end users, particularly in the early stages of its
local telephone service business.

Any successful effort by the incumbent local exchange carriers to deny or
substantially limit the Company's access to the incumbent local exchange
carrier's network elements or wholesale services would have a material adverse
effect on the Company's ability to provide local telephone services. Although
the Telecommunications Act imposes interconnection obligations on incumbent
local exchange carriers, there can be no assurance that the Company will be
able to obtain access to such network elements or services at rates, and on
terms and conditions, that permit the Company to offer local services at rates
that are both profitable and competitive. As noted above, the Eighth Circuit
Court of Appeals recently struck down certain FCC rules intended to govern
such rates, terms and conditions. See "--Regulation." One result of this
decision is to give state utility commissions a significantly larger role in
implementing the Telecommunications Act. It is uncertain whether such
commissions will adopt and enforce rules or take other actions that will
permit new carriers to have economical use of incumbent local exchange carrier
networks and facilities. The Interconnection Agreement currently allows the
Company to provide local service on a resale basis or by purchasing all
unbundled network elements required to provide local service on a facilities
basis, without using Company-owned facilities. The terms of the
Interconnection Agreement, including interim pricing terms agreed to by the
Company and BellSouth, have been approved by state regulatory authorities in
most states, although they remain subject to review and modification by such
authorities. In addition, the Interconnection Agreement does not resolve all
operational issues, particularly those relating to the collocation of the
Company's equipment with that of BellSouth. The Company and BellSouth are
continuing to negotiate to resolve such issues. Many issues relevant to the
terms and conditions by which competitors may use the incumbent local exchange
carrier network and wholesale services remain to be resolved. For example,
BellSouth and certain other incumbent local exchange carriers have taken the
position that when a carrier seeking to provide local service obtains all
necessary elements (loops and switches) from the incumbent local exchange
carrier, the incumbent local exchange carrier retains the right to receive the
access revenues associated with the service to the customers served on that
basis. Although the FCC has rejected this position, further legal challenges
are in progress and other important issues related to this form of
interconnection remain open. For example, many new carriers, including the
Company, have experienced problems with respect to the operational support
systems used by new carriers to order and receive network elements and
wholesale services from the incumbent local exchange carriers. These systems
are necessary for new carriers like the Company to provide local service to
customers on a timely and competitive basis. The FCC has recently created a
task force to examine problems that have slowed the development of local
telephone competition. The Telecommunications Act creates incentives for local
exchange carriers to permit access to their facilities by denying such
carriers the ability to provide long distance services until there is adequate
competition at the local level. BellSouth is not yet permitted to offer long
distance services. There can be no assurance, however, that BellSouth or other
local exchange carriers will be accommodating to the Company once they are
permitted to offer long distance service. See "Business--Regulation" and "--
Services and Facilities."

DEPENDENCE ON CERTAIN CUSTOMERS

For the year ended December 31, 1996 and the six months ended June 30, 1997,
giving effect to the Reorganization, the Company's two largest Carriers'
Carrier customers would together have accounted for approximately 15% and 12%,
respectively, of the Company's combined pro forma revenues. For the six months
ended June 30, 1997, the Company's five largest Retail Services customers
would have represented an aggregate of approximately 10% of the Company's
combined pro forma revenues. The Company's customers generally use more than
one service provider and may reduce their use of the Company's services and
switch to other

17
<PAGE>

providers without incurring significant expense. The Company's agreements with
its customers generally provide that the customer may terminate service
without penalty in the event of certain outages in service and for certain
other defined causes. Although, as of June 30, 1997, on a pro forma basis, the
Company's Carriers' Carrier business had remaining future long-term contract
commitments totaling approximately $75.8 million, some of such contractual
commitments provide that, if the customer is offered lower pricing with
respect to any circuit by another carrier, the customer's commitment to the
Company will be reduced to the extent the Company does not match the price for
such circuit and the customer purchases such circuit from the other carrier.
There can be no assurance that the Company will be able to retain its
customers. The loss of or a significant decrease of business from any of its
largest customers would have a material adverse effect on the Company's
business, results of operations and financial condition.

RISK OF RAPID TECHNOLOGICAL CHANGES

The telecommunications industry is subject to rapid and significant changes
in technology. Although the Company believes that, for the foreseeable future,
these changes will neither materially affect the continued use of its fiber
optic network, digital switches and transmission equipment, nor materially
hinder its ability to acquire necessary technologies, the effect of
technological changes on the business of the Company, such as changes relating
to emerging wireline (including fiber optic) and wireless (including
broadband) transmission technologies, cannot be predicted. In addition, the
Company may be required to select in advance one technology over another, but
it will be impossible to predict with any certainty, at the time the Company
is required to make its investment, which technology will prove to be the most
economic, efficient or capable of attracting customer usage.

DEPENDENCE ON NETWORK INFRASTRUCTURE

The Company has entered into marketing and management agreements with three
southern public utility companies to sell long-haul private line services on a
commission basis on the fiber optic networks owned by these companies.
Pursuant to these agreements, which have remaining terms ranging from five to
eight years, the Company generally earns a commission based upon a percentage
of the gross revenues generated by the sale of capacity on the utility's
networks. By interconnecting the Company's owned network to these other
networks owned by the public utilities, and by marketing and selling capacity
on such networks to the Company's customers, the Company has effectively
extended its network with minimal capital expenditure. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Overview." The Company also has a buy-sell agreement with Carolinas Fibernet,
LLC, which manages fiber optic facilities in North Carolina and South
Carolina. Although the Company does not believe that any of these agreements
will be terminated in the near future, cancellation or non-renewal of any of
such agreements could materially adversely affect the Company's business. In
addition, two of the Company's three agreements with public utility companies
are nonexclusive, and the Company may encounter competition for capacity on
the utilities' networks from other service providers that enter into
comparable arrangements with the utilities. Any reduction in the amount of
capacity that is made available to the Company could adversely affect the
Company. To the extent the Company is unable to establish similar arrangements
in new markets, it may be required to make additional capital expenditures to
extend its fiber network.

The Company's business also could be materially adversely affected by a
cable cut or equipment failure in the Company's fiber optic network. Although
the Company has implemented electronic redundancy throughout its network,
which enables traffic to be rerouted to another fiber in the same fiber sheath
in the event of a partial fiber cut or electronics failure, a substantial
portion of the Company's owned and managed fiber optic network is not
protected in the event of a total cable cut.

DEPENDENCE ON KEY PERSONNEL

The Company's business is currently managed by a small number of key
management and operating personnel. The Company does not have any employment
agreements with, nor does the Company maintain "key

18
<PAGE>

man" insurance on, these employees. The loss of the services of key personnel,
or the inability to attract, recruit and retain sufficient or additional
qualified personnel, could have a material adverse effect on the Company. See
"Management."

POTENTIAL INFLUENCE BY AND RELATIONSHIP WITH CERTAIN STOCKHOLDERS

After the Offering, Campbell B. Lanier, III will beneficially own
approximately 18.9% of the outstanding Common Stock. See "Principal
Stockholders." To the extent that Mr. Lanier exercises his voting and
investment rights in concert with other stockholders, Mr. Lanier and such
other stockholders may be able to exercise control over the Company's business
by virtue of their voting power with respect to the election of directors and
other actions requiring stockholder approval.

DIVIDEND POLICY; RESTRICTION ON PAYMENT OF DIVIDENDS

The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate paying cash dividends in the foreseeable future.
See "Dividend Policy." In addition, the Company's ability to pay dividends is
limited by the terms of the Credit Facility and the Senior Note Indenture. See
"Description of Certain Indebtedness--Credit Facility" and "--Senior Notes."

IMMEDIATE AND SUBSTANTIAL DILUTION

Investors participating in the Offering will incur immediate, substantial
dilution in net tangible book value per share of Common Stock. There may be
further substantial dilution to the extent that options to purchase the Common
Stock are exercised by certain employees or directors. See "Dilution."

CERTAIN ANTI-TAKEOVER PROVISIONS

Certain provisions of the Company's Certificate of Incorporation (the
"Certificate of Incorporation") and Bylaws (the "Bylaws") and the General
Corporation Law of the State of Delaware (the "Delaware Corporation Law")
could delay or impede the removal of incumbent directors and could make more
difficult a merger, tender offer or proxy contest involving the Company, or
could discourage a third party from attempting to acquire control of the
Company, even if such events would be beneficial to the interests of the
stockholders. In particular, the classification of the Company's Board of
Directors could have the effect of delaying a change in control of the
Company. In addition, the Certificate of Incorporation authorizes the Board of
Directors to provide for the issuance of shares of preferred stock of the
Company, in one or more series, which the Board of Directors could issue
without further stockholder approval and upon such terms and conditions, and
having such rights, privileges and preferences, as the Board of Directors may
determine. See "Description of Capital Stock--Certain Charter, Bylaw and
Statutory Provisions."

VARIABILITY OF OPERATING RESULTS

As a result of the significant expenses associated with the construction and
expansion of its network and services, the Company anticipates that its
operating results could vary significantly from period to period. Such
variability could have a material adverse effect on the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Common Stock.
There can be no assurance that an active trading market will develop or be
sustained. The price of the Common Stock in the Offering will be determined by
negotiations between the Company and the Underwriters, and there can be no
assurance that the prices at which the Common Stock will sell in the public
market after the Offering will not be lower than the price at which they are
sold in the Offering. For a description of the factors to be considered in
determining the initial public offering price, see "Underwriters--Pricing of
the Offering." Although the Common Stock has been

19
<PAGE>

approved for quotation on the Nasdaq National Market, subject to official
notice of issuance, there can be no assurance that an active trading market
for the Common Stock will develop or if developed, that such a market will be
sustained. The market price for shares of the Common Stock may be
significantly affected by such factors as the Company's net sales, earnings
and cash flow, the difference between the Company's actual results and results
expected by investors and analysts, or changes in the conditions of the
telecommunications industry in general. In addition, broad market fluctuations
and general economic conditions may adversely affect the market price of the
Common Stock, regardless of the Company's actual performance.

SHARES ELIGIBLE FOR FUTURE SALE

Sales of a substantial number of shares of Common Stock in the public market
following the Offering, or the perception that such sales could occur, could
adversely affect the prevailing market price of the Company's Common Stock and
could make it more difficult for the Company to raise funds through equity
offerings in the future. Upon completion of the Offering, there will be
24,126,731 shares of Common Stock outstanding. Of these shares, the 5,000,000
shares expected to be sold in the Offering will be freely transferable without
restriction or further registration under the Securities Act of 1933, as
amended (the "Securities Act"), except for any shares purchased by
"affiliates" of the Company, as that term is defined in Rule 144 under the
Securities Act. The remaining 19,126,731 shares of Common Stock outstanding
will be "restricted securities," as that term is defined in Rule 144, and may
in the future be sold without registration under the Securities Act to the
extent permitted by Rule 144 or any applicable exemption under the Securities
Act. See "Shares Eligible for Future Sale." In connection with the Offering,
the Company, its directors and executive officers and certain other
stockholders have agreed that, subject to certain exceptions, they will not
sell, offer or contract to sell any shares of Common Stock without the prior
written consent of Morgan Stanley & Co. Incorporated, for a period of 180 days
after the date of this Prospectus. In addition, as soon as practicable after
the Offering, the Company intends to register under the Securities Act a total
of 2,407,500 shares of Common Stock reserved for issuance under the Stock
Option Plan, a total of 240,750 shares reserved for issuance under the
Director Stock Option Plan and 3,461,833 shares issuable upon the exercise of
options which were originally granted by ITC Holding under the ITC Holding
stock option plans and which were assumed by the Company in the Merger. As of
October 20, 1997, options to purchase 1,549,093 shares of Common Stock were
outstanding under the Stock Option Plan and the Director Stock Option Plan.
See "Shares Eligible for Future Sale" and "Management--Stock Option Plans."

20
<PAGE>

HISTORY OF THE COMPANY

ITC/\DeltaCom was incorporated in Delaware in March 1997 as a wholly owned
subsidiary of ITC Holding to acquire and operate ITC Holding's Retail Services
and Carriers' Carrier Services businesses. The Company acquired such
businesses on July 25, 1997 in the Reorganization.

BACKGROUND

ITC Holding has provided operator and directory assistance services since
March 1992 through InterQuest. Carriers' Carrier Services have been offered
since late 1992 through Interstate FiberNet, a partnership originally formed
by ITC Holding (with a 49% interest) and SCANA (with a 51% interest). In
August 1994, ITC Holding acquired SCANA's interest in Interstate FiberNet
through Transmission II. Also in August 1994, ITC Holding and SCANA formed a
second partnership, Gulf States FiberNet, to construct and operate a fiber
optic route primarily between Atlanta, Georgia and Shreveport, Louisiana with
several supplemental spur routes. In the Gulf States Acquisition, ITC Holding
acquired SCANA's 64% partnership interest in Gulf States FiberNet and the
Georgia Fiber Assets, which included one customer contract representing $3.5
million in annual revenues through August 2001, the term of the contract.
Following the Gulf States Acquisition, ITC Holding contributed the remaining
64% interest in Gulf States FiberNet to Gulf States Transmission and the
Georgia Fiber Assets to Transmission. Members of the Company's management have
been managing the businesses of both Interstate FiberNet and Gulf States
FiberNet since their inception.

In January 1996, as a result of the DeltaCom Acquisition, ITC Holding
entered the retail long distance business and acquired several fiber optic
routes within the state of Alabama that complemented the existing networks
operated by Interstate FiberNet and Gulf States FiberNet. DeltaCom, a provider
of telecommunications services since its inception in 1982, provides long
distance services to mid-sized businesses primarily in the state of Alabama.
In July 1996, DeltaCom purchased substantially all of the assets of ViperNet,
which provides Internet access, Web-hosting and Web page development services
to business customers.

The aggregate consideration paid by ITC Holding in the DeltaCom Acquisition
was approximately $71.4 million (of which $6.0 million consisted of ITC
Holding common stock). To finance the DeltaCom Acquisition and to refinance
existing DeltaCom debt, ITC Holding incurred approximately $74.0 million of
indebtedness, which was pushed down to the Company (the DeltaCom
Indebtedness). See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Effects of Accounting Standards." The
aggregate consideration paid by ITC Holding in the Gulf States Acquisition was
approximately $27.9 million, of which $10.0 million consisted of the SCANA
Note, which has been assumed by a subsidiary of the Company, and $17.9 million
consisted of ITC Holding preferred stock. If the Gulf States FiberNet business
achieves a specified performance target for 1997, SCANA will be entitled to
receive shares of the Company's Series A Preferred Stock. Prior to the Merger,
in a payment made pursuant to this earn-out provision, ITC Holding issued to
SCANA 56,742 shares of ITC Holding Series A Convertible Preferred Stock, which
was converted in the Merger into 130,734 shares of the Company's Series A
Preferred Stock. Additional shares of Series A Preferred Stock may be issued
to SCANA in connection with this earn-out arrangement. See "Certain
Transactions--SCANA." In connection with the Gulf States Acquisition, Gulf
States Transmission borrowed $41.6 million under the Bridge Facility to
refinance a project loan incurred by Gulf States FiberNet.

SENIOR NOTE OFFERING

On June 3, 1997, the Company completed the sale of $200.0 million principal
amount of Senior Notes. The net proceeds to the Company from the sale of the
Senior Notes were approximately $192.7 million, after deducting the
underwriting discounts and commissions and other estimated expenses payable by
the Company. Approximately $62.7 million of such net proceeds are held by the
trustee for the Senior Notes (the "Senior Note Trustee") as security for and
to fund the first six interest payments on the Senior Notes. The remaining net
proceeds from the sale of the Senior Notes were released to the Company upon
consummation of the Reorganization.

REORGANIZATION

On July 25, 1997, upon receipt of certain regulatory approvals and certain
other consents, ITC Holding contributed to the Company in the Reorganization
the businesses of Interstate FiberNet, Gulf States FiberNet,

21
<PAGE>

DeltaCom and InterQuest. As a result of the Reorganization, the Company became
the sole stockholder of Interstate FiberNet, Inc. (formerly Transmission,
Transmission II, InterQuest and Interstate FiberNet), and Interstate FiberNet,
Inc. became the sole stockholder of Gulf States FiberNet and DeltaCom.

In connection with the Reorganization, approximately $31.0 million of the
DeltaCom Indebtedness was forgiven by ITC Holding and contributed to the
Company as additional equity. Following the Reorganization, the Company repaid
the remaining $43.0 million of the DeltaCom Indebtedness, accrued interest on
all $74.0 million of such indebtedness and the $41.6 million of indebtedness
outstanding under the Bridge Facility and accrued interest thereon with a
portion of the net proceeds from the Senior Note Offering. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."

HOLDING COMPANY MERGER

On October 20, 1997, as part of a reorganization of the ITC Holding group of
companies, ITC Holding transferred all of its assets (other than its stock in
the Company) and all of its liabilities to another entity and then merged with
and into the Company, which is the surviving corporation in the Merger.

In connection with the Merger, holders of ITC Holding common stock received
19,126,731 shares of the Company's Common Stock and SCANA, the sole holder of
ITC Holding preferred stock, received 1,486,440 shares of the Company's Series
A Preferred Stock. See "Description of Capital Stock." Additional shares of
Series A Preferred Stock may be issued to SCANA in connection with an earn-out
arrangement related to the Gulf States Acquisition. See "Certain
Transactions--SCANA." In addition, options outstanding under the ITC Holding
stock option plans were assumed by the Company and were converted into options
to purchase 3,461,833 shares of Common Stock. See "Management--Stock Option
Plans."

The following chart reflects the organizational structure of the Company
following the Reorganization and Merger.

ITC/\DeltaCom, Inc.

Interstate FiberNet, Inc.
(formerly Transmission, Transmission
II, InterQuest and Interstate
FiberNet)

---------------------

Gulf States
Transmission DeltaCom, Inc.
Systems, Inc.

In connection with the Merger, the Company's Certificate of Incorporation
was amended and restated to eliminate the Company's Class A Common Stock, par
value $.01 per share, and the Company's Class B Common Stock, par value $.01
per share, as authorized classes of capital stock and to authorize the single
class of Common Stock offered hereby. Options to purchase shares of Class A
Common Stock outstanding under the Company's Stock Option Plan or Director
Stock Option Plan prior to the Merger were converted into options to purchase
shares of Common Stock. See "Description of Capital Stock."

22
<PAGE>

USE OF PROCEEDS

The net proceeds from the sale of the 5,000,000 shares of Common Stock
offered hereby are estimated to be approximately $71.3 million (approximately
$82.1 million if the Underwriters' over-allotment option is exercised in
full), after deducting underwriting discounts and commissions and estimated
expenses of the Offering. The Company intends to use the net proceeds from the
Offering, together with cash on hand and borrowings expected to be available
under the Credit Facility, as follows: (i) to fund market expansion activities
of the Company's telecommunications business, including development and
construction costs of the Company's fiber optic network and its regional sales
offices; and (ii) for additional working capital and other general corporate
purposes. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources." The Company currently
intends to allocate substantial proceeds to each of the foregoing uses. The
precise allocation of funds among these uses, however, will depend on future
technological, regulatory and other developments in or affecting the Company's
business, the competitive climate in which it operates and the emergence of
future opportunities.

As part of its business strategy, the Company intends to continue to
evaluate potential acquisitions, joint ventures and strategic alliances in
areas such as wireline and wireless services, network construction and
infrastructure and Internet access. The Company has no definitive agreement
with respect to any acquisition, although from time to time it has discussions
with other companies and assesses opportunities on an on-going basis. A
portion of the net proceeds from the Offering may be used to fund any such
acquisitions, joint ventures and strategic alliances.

Pending the foregoing uses, the net proceeds of the Offering will be
invested in short-term, interest-bearing, investment grade securities.

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate paying cash dividends on the Common Stock in the
foreseeable future. It is the current policy of the Company's Board of
Directors to retain earnings to finance the expansion of the Company's
operations. Future declaration and payment of dividends, if any, will be
determined in light of the then-current conditions, including the Company's
earnings, operations, capital requirements, financial condition, restrictions
in financing agreements, and other factors deemed relevant by the Board of
Directors. The Company's ability to pay cash dividends is limited by the terms
of the Credit Facility and the Senior Note Indenture. See "Description of
Certain Indebtedness--Credit Facility" and "--Senior Notes."

23
<PAGE>

CAPITALIZATION

The following table sets forth, as of June 30, 1997, (i) the actual combined
capitalization of the Company, (ii) the pro forma consolidated capitalization
of the Company giving effect to the Reorganization, to the application of the
net proceeds from the Senior Note Offering, and to the Merger, and (iii) the
pro forma consolidated capitalization of the Company as adjusted for the
Offering. The data set forth below should be read in conjunction with "History
of the Company," "Use of Proceeds," "Pro Forma Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
financial statements and notes thereto and the other financial data included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1997
------------------------------------------
PRO FORMA
HISTORICAL PRO FORMA CONSOLIDATED
COMBINED CONSOLIDATED(A) AS ADJUSTED
------------ --------------- ------------
<S> <C> <C> <C>
Advances from ITC Holding.......... $ 79,886,220 $ -- $ --
------------ ------------ ------------
Long term debt and capital lease
obligations:
Capital lease obligations,
including current portion of
$563,153........................ 3,542,360 3,542,360 3,542,360
Senior Notes..................... 200,000,000 200,000,000 200,000,000
Bridge Facility, including
current portion of $41,600,000.. 41,600,000 -- --
SCANA Note, including current
portion of $1,992,818........... 9,964,091 9,964,091 9,964,091
Other, including current portion
of $282,563..................... 922,675 922,675 922,675
------------ ------------ ------------
Total long-term debt and capital
lease obligations, including
current portion................. 256,029,126 214,429,126 214,429,126
------------ ------------ ------------
Stockholders' equity:
Preferred stock, $.01 par value,
5,000,000 shares authorized; 0,
1,486,440 and 1,486,440 shares
issued and outstanding at June
30, 1997, pro forma and
pro forma as adjusted,
respectively.................... -- 14,864 14,864
Common Stock, $.01 par value,
90,000,000 shares authorized;
15,000,000, 19,126,731 and
24,126,731 shares issued and
outstanding at June 30, 1997,
pro forma and pro forma as
adjusted, respectively (b)...... 150,826 191,267 241,267
Additional paid-in capital....... 40,814,227 64,885,543 136,160,543
Accumulated deficit.............. (7,514,481) (971,275) (971,275)
------------ ------------ ------------
Total stockholders' equity....... 33,450,572 64,120,399 135,445,399
------------ ------------ ------------
Total capitalization........... $369,365,918 $278,549,525 $349,874,525
============ ============ ============
</TABLE>
- --------
(a) Includes (i) the repayment of $48,886,320 in advances from ITC Holding and
the forgiveness and contribution by ITC Holding of $30,999,900 to the
Company in connection with the Reorganization; (ii) the repayment of Gulf
States FiberNet debt; (iii) the write-off of $330,072 of debt issuance
costs related to the Bridge Facility, which was repaid with a portion of
the proceeds from the Senior Note Offering; (iv) the Reorganization and
corresponding consolidating entry to eliminate the Company's investment in
its subsidiaries; and (v) the Merger. See "History of the Company."
Excludes any potential borrowings under the Credit Facility. See
"Description of Certain Indebtedness--Credit Facility."

(b) Excludes (i) 1,452,793 shares of Common Stock issuable upon the exercise
of options outstanding as of October 20, 1997 under the Stock Option Plan,
(ii) 96,300 shares of Common Stock issuable upon the exercise of options
outstanding as of October 20, 1997 under the Director Stock Option Plan,
(iii) 3,461,833 shares of Common Stock issuable upon the exercise of
options which were originally granted by ITC Holding under the ITC Holding
stock option plans and which were assumed by the Company in the Merger and
(iv) 1,486,440 shares of Common Stock which will be issuable upon
conversion of the Series A Preferred Stock issued in the Merger and shares
of Common Stock which will be issuable upon conversion of any additional
Series A Preferred Stock which may be issued under an earn-out arrangement
related to the Gulf States Acquisition. See "History of the Company--
Holding Company Merger," "Management--Stock Option Plans," "Certain
Transactions" and "Description of Capital Stock--Series A Preferred
Stock."

24
<PAGE>

DILUTION

The pro forma net tangible book value of the Company at June 30, 1997 after
giving effect to the Reorganization, the application of the net proceeds from
the Senior Note Offering and the Merger, would have been approximately
$(2,200,000) or approximately $(.11) per share of Common Stock. Pro forma net
tangible book value per share represents the amount of total tangible assets
of the Company less the amount of total liabilities divided by the total
number of shares of Common Stock outstanding. After giving effect to the sale
by the Company of the 5,000,000 shares of Common Stock offered hereby (at an
assumed initial public offering price of $15.50 per share), the pro forma net
tangible book value of the Company at June 30, 1997 would have been
approximately $69.1 million, or $2.70 per share of Common Stock. This
represents an increase in pro forma net tangible book value of $2.81 per share
to the existing stockholders and dilution of $12.80 per share to new investors
purchasing shares of Common Stock in the Offering. The following illustrates
this per share dilution to new investors:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $15.50
Pro forma net tangible book value per share at June 30,
1997........................................................ $ (.11)
Increase per share attributable to new investors............. 2.81
------
Pro forma net tangible book value per share after the
Offering...................................................... 2.70
------
Dilution per share to new investors (1)........................ $12.80
======
</TABLE>
- --------

(1) If the Underwriters' over-allotment option is exercised in full, pro forma
net tangible book value of the Company would be $3.03 per share,
representing an increase in pro forma net tangible book value of $3.14 per
share and dilution to new investors of $12.47 per share.

The foregoing computations assume conversion of the Series A Preferred
Stock, but assume no exercise of stock options by employees or directors of
the Company. At October 20, 1997, options to purchase an aggregate of
5,010,926 shares of Common Stock at a weighted average exercise price of
approximately $4.26 per share were outstanding, including options outstanding
under the Stock Option Plan and the Director Stock Option Plan to purchase
1,549,093 shares of Common Stock and options to purchase 3,461,833 shares of
Common Stock which were originally granted by ITC Holding under the ITC
Holding stock option plans and which were assumed by the Company in the
Merger. If all of such stock options had been exercised, the dilution to new
investors would be $12.55 per share.

The following table sets forth on the pro forma basis described above the
number of shares and percentage of total outstanding Common Stock purchased,
the total consideration and percentage of total consideration paid and the
average price per share paid by the existing stockholders and by new public
investors purchasing shares of Common Stock in the Offering (assuming an
initial public offering price of $15.50 per share):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- -------------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing
stockholders(1)........ 19,126,731 79.3% $ 71,964,953(2) 48.1% $ 3.76
New investors........... 5,000,000 20.7 77,500,000 51.9 15.50
---------- ----- ------------ -----
Total............... 24,126,731 100.0% $149,464,953 100.0%
========== ===== ============ =====
</TABLE>
- --------

(1) Based on the number of shares of Common Stock outstanding as of October
20, 1997. Excludes (i) 1,452,793 shares of Common Stock issuable upon the
exercise of options outstanding as of October 20, 1997 under the Stock
Option Plan, (ii) 96,300 shares of Common Stock issuable upon the exercise
of options outstanding as of October 20, 1997 under the Director Stock
Option Plan, (iii) 3,461,833 shares of Common Stock issuable upon the
exercise of options which were originally granted by ITC Holding under the
ITC Holding stock option plans and which were assumed by the Company in
the Merger and (iv) 1,486,440 shares of Common Stock which will be
issuable upon conversion of the Series A Preferred Stock issued in the
Merger and shares of Common Stock which will be issuable upon conversion
of any additional Series A Preferred Stock which may be issued under an
earn-out arrangement related to the Gulf States Acquisition. See "History
of the Company--Holding Company Merger," "Management--Stock Option Plans,"
"Certain Transactions" and "Description of Capital Stock--Series A
Preferred Stock."
(2) Consists of the following consideration paid by ITC Holding: (i) $150,000
in cash, (ii) the contribution of the businesses of Interstate FiberNet,
Gulf States FiberNet, DeltaCom and InterQuest (less returns of capital
contributed) and (iii) the forgiveness of $30,999,900 of the DeltaCom
Indebtedness. See "History of the Company--Reorganization."

25
<PAGE>

SELECTED FINANCIAL AND OPERATING DATA

The following table sets forth selected financial and operating data for the
Company. The selected historical statement of operations data for each of the
years ended December 31, 1994, 1995 and 1996, and the selected historical
balance sheet data for the years then ended, have been derived from the
combined financial statements that have been audited by Arthur Andersen LLP,
independent public accountants. The selected historical statement of
operations data for the six months ended June 30, 1996 and 1997 have been
derived from the Company's unaudited combined financial statements and
include, in the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the data for such
periods. Operating results for interim periods are not necessarily indicative
of results for the full fiscal year. The selected historical financial and
operating data should be read in conjunction with "Use of Proceeds," "Pro
Forma Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the financial statements and notes
thereto, and other financial and operating data included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------------- --------------------------
1992(A)(B) 1993(A) 1994(A)(C) 1995 1996(D) 1996 1997(E)(F)
----------- ----------- ---------- ---------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Operating revenues...... $ -- $ 636,913 $4,945,902 $5,750,587 $ 66,518,585 $ 28,574,799 $ 53,365,061
Operating expenses:
Cost of service........ -- 578,206 2,484,744 3,149,231 38,756,287 16,129,463 25,302,747
Selling, operations and
administration
expense............... -- 235,627 948,230 1,626,678 18,876,572 8,206,621 16,961,324
Depreciation and
amortization.......... -- 47,068 738,052 1,267,882 6,438,074 2,832,017 8,273,232
---------- ---------- ---------- ---------- ------------ ------------ ------------
Total operating
expenses.............. -- 860,901 4,171,026 6,043,791 64,070,933 27,168,101 50,537,303
Operating income
(loss)................. -- (223,988) 774,876 (293,204) 2,447,652 1,406,698 2,827,758
Equity in losses of
unconsolidated
subsidiaries........... (25,819) 360,257 (96,920) (258,242) (1,589,812) (1,088,404) --
Interest expense........ -- -- (273,759) (297,228) (6,172,421) (2,762,757) (7,561,591)
Interest and other
income (other
expense)............... -- (826) 82,348 41,734 171,514 107,216 883,388
---------- ---------- ---------- ---------- ------------ ------------ ------------
Income (loss) before
taxes, preacquisition
earnings (losses) and
extraordinary item..... (25,819) 135,443 486,545 (806,940) (5,143,067) (2,337,247) (3,850,445)
Income tax (provision)
benefit................ 15,672 (54,582) (113,248) 302,567 1,233,318 671,467 1,005,809
Preacquisition
(earnings) losses...... -- -- (236,300) -- -- -- 74,132
Extraordinary item (net
of tax benefit)........ -- -- -- -- -- -- (507,515)
---------- ---------- ---------- ---------- ------------ ------------ ------------
Net income (loss)....... $ (10,147) $ 80,861 $ 136,997 $ (504,373) $ (3,909,749) $ (1,665,780) $ (3,278,019)
========== ========== ========== ========== ============ ============ ============
Pro forma net income
(loss) per common
share: (g)
Before extraordinary
loss.................. $ -- $ -- $ 0.01 $ (0.02) $ (0.18) $ (0.08) $ (0.13)
Extraordinary loss..... -- -- -- -- -- -- (0.02)
---------- ---------- ---------- ---------- ------------ ------------ ------------
Net income (loss)...... $ -- $ -- $ 0.01 $ (0.02) $ (0.18) $ (0.08) $ (0.15)
========== ========== ========== ========== ============ ============ ============
Pro forma weighted
average common and
common equivalent
shares
outstanding:(g)........ 21,379,947 21,380,347 21,381,209 21,382,477 21,456,340 21,450,102 21,462,477
</TABLE>

26
<PAGE>

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------------- ------------------------
1992(A)(B) 1993(A) 1994(A)(C) 1995 1996(D) 1996 1997(E)(F)
----------- ----------- ---------- ---------- ----------- ------------ -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT
PERIOD END):
Working capital
(deficit).............. $ -- $ 382,562 $ 254,988 $ (242,136) $ 3,415,088 $68,175,664
Property and equipment,
net.................... -- 5,204,153 8,486,996 9,386,444 31,880,556 115,852,080
Total assets........... 2,118,761 6,294,266 20,062,286 20,922,337 113,207,979 402,015,721
Long-term debt, advances
from ITC Holding, and
capital lease
obligations, including
current portions....... -- 797,288 4,013,977 3,143,977 75,442,971 335,915,346
Stockholders' equity.... 2,105,681 4,737,090 13,761,409 14,307,036 19,256,526 33,450,572
OTHER FINANCIAL DATA:
Capital expenditures.... -- 531,187 3,703,835 1,805,742 6,172,660 $ 2,279,913 12,357,471
Cash flows provided by
(used in) operating
activities............. (25,819) 33,667 978,775 1,437,317 8,188,618 2,448,698 9,409,779
EBITDA (h).............. -- (176,920) 1,512,928 974,678 8,885,726 4,238,715 11,100,990
</TABLE>
- --------
(a) Through August 17, 1994, the Company owned a 49% interest in Interstate
FiberNet and accounted for this investment under the equity method. On
August 17, 1994, the Company purchased the remaining 51% interest in
Interstate FiberNet from SCANA. Therefore, Interstate FiberNet's revenues
and expenses have been included in the combined statement of operations
data effective January 1, 1994, with the preacquisition earnings
attributable to SCANA deducted to determine combined net income for 1994.
See Note 5 to the combined financial statements.
(b) Includes operations of InterQuest from March 1992 (date of inception).
(c) On August 17, 1994, the Company entered into the Gulf States FiberNet
partnership with SCANA. The Company obtained a 36% general partnership
interest, and the investment was accounted for under the equity method.
See Note 5 to the combined financial statements.
(d) On January 29, 1996, ITC Holding purchased DeltaCom. DeltaCom's results of
operations are included in the historical statement of operations data
since the date of acquisition. See Note 13 to the combined financial
statements.

(e) On March 27, 1997, the Company purchased the Georgia Fiber Assets from
SCANA. The results of operations for the Georgia Fiber Assets are included
in the combined statements of operations beginning April 1, 1997. See Note
16 to the combined financial statements.

(g) Pro forma net income (loss) per share is computed using the weighted
average number of common and dilutive common equivalent shares from
convertible preferred stock (using the if-converted method) and stock
options (using the treasury stock method). Common and common equivalent
shares issued at prices below the expected public offering price during
the twelve-month period prior to the Offering have been included in the
calculation as if they were outstanding for all periods prior to the
Offering, regardless of whether they are dilutive. Accordingly, all shares
issued by the Company, all stock options granted by the Company and all
stock options originally granted by ITC Holding since October 30, 1996 and
assumed by the Company in the Merger are included in the earnings per
share calculations for all periods presented, even though the effect on
net loss per share is anti-dilutive. The impact of all other options
originally granted by ITC Holding and assumed by the Company in the
Merger, as well as the Company's Series A Preferred Stock issued in the
Merger, is anti-dilutive and has not been included in the earnings per
share calculation.
(h) EBITDA represents earnings before extraordinary item, preacquisition
(earnings) losses, equity in losses of unconsolidated subsidiaries, net
interest, income taxes, depreciation and amortization. EBITDA is provided
because it is a measure commonly used in the industry. EBITDA is not a
measurement of financial performance under generally accepted accounting
principles and should not be considered an alternative to net income as a
measure of performance or to cash flow as a measure of liquidity. EBITDA
is not necessarily comparable with similarly titled measures for other
companies.

27
<PAGE>

PRO FORMA FINANCIAL DATA

As discussed in Note 1 to the combined financial statements, the historical
combined financial statements include the financial statements of the
following wholly owned subsidiaries of ITC Holding prior to the
Reorganization: Transmission, Transmission II, Gulf States Transmission,
InterQuest and DeltaCom. The historical combined financial statements include
the results of DeltaCom's operations effective as of the date of acquisition,
January 29, 1996. The Company's historical combined financial statements also
include the results of operations of Interstate FiberNet, a partnership
between Transmission and Transmission II, as well as Gulf States
Transmission's 36% equity interest in the results of operations of Gulf States
FiberNet.

The pro forma adjustments to the statements of operations for the year ended
December 31, 1996 and for the six months ended June 30, 1997 reflect (i) the
DeltaCom Acquisition, with respect to the year ended December 31, 1996, (ii)
the Gulf States Acquisition, (iii) the Reorganization, (iv) the Senior Note
Offering and the application of the net proceeds therefrom, (v) the Merger and
(vi) the Offering, as if each of such transactions had occurred on January 1,
1996. The pro forma adjustments to the balance sheet reflect (i) the
Reorganization, (ii) the application of the net proceeds from the Senior Note
Offering, (iii) the Merger and (iv) the Offering, as if each of such
transactions had occurred on June 30, 1997.

The pro forma financial and operating information does not purport to
represent what the Company's consolidated results of operations would have
been if these transactions had in fact occurred on these dates, nor does it
purport to indicate the future consolidated financial position or consolidated
results of future operations of the Company. The pro forma adjustments are
based on currently available information and certain assumptions that
management believes to be reasonable.

28
<PAGE>

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
HISTORICAL GULF STATES GEORGIA PRO FORMA PRO FORMA
COMBINED DELTACOM(A) FIBERNET FIBER ASSETS ADJUSTMENTS CONSOLIDATED
----------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues...... $66,518,585 $5,256,931 $10,056,544 $3,542,302 $ -- $ 85,374,362
Cost of services........ 38,756,287 2,963,383 867,558 -- -- 42,587,228
----------- ---------- ----------- ---------- ------------ ------------
Gross margin............ 27,762,298 2,293,548 9,188,986 3,542,302 -- 42,787,134
Operating expenses:
Selling, operations and
administration........ 18,876,572 1,343,761 2,785,596 860,240 -- 23,866,169
Depreciation and
amortization.......... 6,438,074 290,226 6,620,382 1,063,408 200,671 (b) 14,612,761
----------- ---------- ----------- ---------- ------------ ------------
Total operating
expenses.............. 25,314,646 1,633,987 9,405,978 1,923,648 200,671 38,478,930
Operating income
(loss)................. 2,447,652 659,561 (216,992) 1,618,654 (200,671) 4,308,204
Other income (expense):
Equity in losses of
unconsolidated
subsidiary............ (1,589,812) -- -- -- 1,589,812 (c) --
Interest expense....... (6,172,421) (143,883) (4,345,001) -- (15,605,484)(d) (26,266,789)
Interest and other
income................ 171,514 12,334 145,851 -- 3,388,252 (e) 3,717,951
----------- ---------- ----------- ---------- ------------ ------------
Total other income
(expense)............. (7,590,719) (131,549) (4,199,150) -- (10,627,420) (22,548,838)
Income (loss) before
taxes.................. (5,143,067) 528,012 (4,416,142) 1,618,654 (10,828,091) (18,240,634)
Income tax (provision)
benefit................ 1,233,318 (200,645) 1,678,134 (615,089) 4,071,414 (f) 6,167,132
----------- ---------- ----------- ---------- ------------ ------------
Net income (loss)....... $(3,909,749) $ 327,367 $(2,738,008) $1,003,565 $ (6,756,677) $(12,073,502)
=========== ========== =========== ========== ============ ============
Pro forma net loss per
common share:(g)....... $ (0.18) $ (0.46)(h)
=========== ============
Pro forma weighted
average common and
common equivalent
shares
outstanding:(g)........ 21,456,340 26,379,847 (h)
=========== ============
</TABLE>
- --------
(a) Represents the operations of DeltaCom from January 1, 1996 to January 29,
1996, the date it was acquired by ITC Holding.
(b) Reflects one month of additional goodwill amortization resulting from the
DeltaCom Acquisition ($113,844), as well as additional goodwill
amortization resulting from the Gulf States Acquisition ($86,827). See
Notes 13 and 16, respectively, to the combined financial statements. The
goodwill amounts will be amortized over 40 years.
(c) Reflects the elimination of Gulf States Transmission's 36% share of Gulf
States FiberNet's results of operations for 1996.
(d) Reflects (i) additional interest expense of $1,096,050 related to the
$10.0 million SCANA Note issued by ITC Holding in connection with the Gulf
States Acquisition and assumed by Interstate FiberNet, Inc.; (ii) one
month of additional interest expense of $530,065 related to the DeltaCom
Indebtedness; (iii) interest expense of $22,000,000 related to the Senior
Notes; (iv) the amortization of $735,000 of debt issuance costs relating
to the Senior Note Offering; (v) the elimination of $9,789,687 of interest
expense related to the DeltaCom Indebtedness and the Gulf States FiberNet
debt, $84.6 million of which was repaid with a portion of the proceeds
from the Senior Note Offering and approximately $31.0 million of which was
forgiven by ITC Holding and contributed to equity in connection with the
Reorganization; and (vi) the write-off of $1,034,056 of debt issuance
costs related to Gulf States FiberNet's existing debt and the Bridge
Facility, which was repaid with a portion of the net proceeds from the
Senior Note Offering.

(e) Reflects the estimated interest income that would have been earned on the
approximately $62.7 million of Senior Note Offering proceeds placed in a
pledged account (reflected as restricted cash on the pro forma balance
sheet) to secure and fund the first six scheduled payments of interest
(including .5% interest per annum in the event that the Company's exchange
offer under the Senior Note Indenture is not consummated on or before
December 3, 1997) on the Senior Notes (at an average interest rate of
6.15% per annum). Under the terms of the Senior Note Indenture, the
amounts placed in the pledged account are required to be invested in
Pledged Securities, which secure the Senior Notes.
(f) Reflects the income tax effects of the pro forma adjustments above and
includes the additional income tax benefits from additional interest
expense and goodwill amortization.

(h) Reflects the 5,000,000 shares of Common Stock offered hereby.

29
<PAGE>

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997

<TABLE>
<CAPTION>
GEORGIA
HISTORICAL FIBER PRO FORMA PRO FORMA
COMBINED ASSETS ADJUSTMENTS CONSOLIDATED
----------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Operating revenues...... $53,365,061 $885,450 $ -- $ 54,250,511
Cost of services........ 25,302,747 -- -- 25,302,747
----------- -------- ----------- ------------
Gross margin............ 28,062,314 885,450 -- 28,947,764
Operating Expenses:
Selling, operations,
and administration.... 16,961,324 248,225 -- 17,209,549
Depreciation &
amortization.......... 8,273,232 334,034 26,775 (a) 8,634,041
----------- -------- ----------- ------------
Total operating
expenses.............. 25,234,556 582,259 26,775 25,843,590
Operating income........ 2,827,758 303,191 (26,775) 3,104,174
Other income (expense):
Interest expense....... (7,561,591) -- (4,828,407)(b) (12,389,998)
Interest and other
income (expense)...... 883,388 -- 1,814,223 (c) 2,697,611
----------- -------- ----------- ------------
Total other income
(expense)............. (6,678,203) -- (3,014,184) (9,692,387)
Income before taxes,
preacquisition losses
and extraordinary
item................... (3,850,445) 303,191 (3,040,959) (6,588,213)
Income tax (provision)
benefit................ 1,005,809 (115,213) 1,155,564 (d) 2,046,160
----------- -------- ----------- ------------
Income (loss) before
acquisition losses and
extraordinary item..... (2,844,636) 187,978 (1,885,395) (4,542,053)
Preacquisition losses... 74,132 -- (74,132) --
----------- -------- ----------- ------------
Net income (loss) before
extraordinary item..... $(2,770,504) $187,978 $(1,959,527) $ (4,542,053)(e)
=========== ======== =========== ============
Pro forma net loss
before extraordinary
item per common
share(f)............... $ (0.13) $ (0.17)(g)
=========== ============
Pro forma weighted
average common and
common equivalent
shares
outstanding(f):........ 21,462,102 26,385,984 (g)
=========== ============
</TABLE>
- --------
(a) Reflects additional goodwill amortization resulting from the Gulf States
Acquisition. See Note 16 to the combined financial statements. The
goodwill will be amortized over 40 years.
(b) Reflects (i) additional interest expense of $274,013 related to the $10.0
million SCANA Note issued by ITC Holding in connection with the Gulf
States Acquisition and assumed by Interstate FiberNet, Inc.; (ii) interest
expense of $9,166,667 related to the Senior Notes; (iii) the amortization
of $304,167 of debt issuance costs relating to the Senior Note Offering;
(iv) the elimination of $5,246,512 of interest expense related to the
DeltaCom Indebtedness and the Gulf States FiberNet debt, $84.6 million of
which was repaid with a portion of the net proceeds from the Senior Note
Offering and approximately $31.0 million of which was forgiven by ITC
Holding and contributed to equity in connection with the Reorganization;
and (v) the write-off of $330,072 of debt issuance costs related to the
Bridge Facility, which was repaid with a portion of the net proceeds from
the Senior Note Offering.

(c) Reflects the estimated interest income that would have been earned on the
approximately $62.7 million of Senior Note Offering proceeds placed in a
pledged account (reflected as restricted cash on the pro forma balance
sheet) to secure and fund the first six scheduled payments of interest
(including .5% interest per annum in the event that the Company's exchange
offer under the Senior Note Indenture is not consummated on or before
December 3, 1997) on the Senior Notes (at an average interest rate of
6.15% per annum). Under the terms of the Senior Note Indenture, the
amounts placed in the pledged account are required to be invested in
Pledged Securities, which secure the Senior Notes.
(d) Reflects the income tax effects of the pro forma adjustments above and
includes the additional income tax benefits from additional interest
expense and goodwill amortization.
(e) In March 1997, the Company incurred an extraordinary loss on the early
retirement of debt totaling $507,515, net of tax. Including this
extraordinary loss, the pro forma consolidated net loss for the six months
ended June 30, 1997 would be $5,049,568 and pro forma net loss per share
would be $(0.19).

(f) Pro forma net income (loss) per share is computed using the weighted
average number of dilutive common and common equivalent shares from
convertible preferred stock (using the if-converted method) and stock
options (using the treasury stock method). Common and common equivalent
shares issued at prices below the expected public offering price during
the twelve-month period prior to the Offering have been included in the
calculation as if they were outstanding for all periods prior to the
Offering, regardless of whether they are dilutive. Accordingly, all shares
issued by the Company, all stock options granted by the Company and all
stock options originally granted by ITC Holding since October 30, 1996 and
assumed by the Company in the Merger are included in the earnings per
share calculations for all periods presented, even though the effect on
net loss per share is anti-dilutive. The impact of all other options
originally granted by ITC Holding and assumed by the Company in the
Merger, as well as the Company's Series A Preferred Stock issued in the
Merger, is anti-dilutive and has not been included in the earnings per
share calculation.

(g) Reflects the 5,000,000 shares of Common Stock offered hereby.

30
<PAGE>

UNAUDITED PRO FORMA BALANCE SHEET
AS OF JUNE 30, 1997

<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR REORGANIZATION, PRO FORMA
HISTORICAL SENIOR NOTE PROCEEDS PRO FORMA PRO FORMA CONSOLIDATED
COMBINED AND MERGER ELIMINATIONS CONSOLIDATED AS ADJUSTED (F)
------------ -------------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equiva-
lents.................. $ 5,478,614 $ 31,029,025 (a) $ -- $ 36,507,639 $107,832,639
Current restricted as-
sets................... 194,775,128 (176,085,802)(a) -- 18,689,326 18,689,326
Accounts receivable, net
of allowance for
uncollectible
accounts............... 17,487,268 -- -- 17,487,268 17,487,268
Other current assets.... 3,006,700 -- -- 3,006,700 3,006,700
Long-term restricted as-
sets................... -- 44,018,820 (a) -- 44,018,820 44,018,820
Investments............. 5,000 33,941,775 (b) (33,941,775)(e) 5,000 5,000
Intangible assets, net.. 65,397,003 930,708 (c) -- 66,327,711 66,327,711
Property, plant, and
equipment, net......... 115,852,080 -- -- 115,852,080 115,852,080
Other long-term assets.. 13,928 -- -- 13,928 13,928
------------ ------------- ------------ ------------ ------------
Total assets........... $402,015,721 $ (66,165,474) $(33,941,775) $301,908,472 $373,233,472
============ ============= ============ ============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Accounts payable........ $ 10,794,956 $ -- $ -- $ 10,794,956 $ 10,794,956
Accrued interest expense
payable to ITC Hold-
ing.................... 9,011,106 (9,011,106)(a) -- -- --
Other accrued liabili-
ties................... 8,441,230 (279,751)(a) -- 8,161,479 8,161,479
Current portion of long-
term debt and capital
lease obligations...... 44,438,534 (41,600,000)(a) -- 2,838,534 2,838,534
Advances from ITC Hold-
ing.................... 79,886,220 (79,886,220)(a)(b) -- -- --
Long-term debt and
capital lease
obligations............ 211,590,592 -- -- 211,590,592 211,590,592
Deferred income taxes... 4,402,511 -- -- 4,402,511 4,402,511
Preferred Stock......... -- 14,864 (d) -- 14,864 14,684
Common Stock............ 150,826 41,267 (826)(e) 191,267 241,267
Additional paid-in capi-
tal.................... 40,814,227 64,885,543 (d) (40,814,227)(e) 64,885,543 136,160,543
Accumulated deficit..... (7,514,481) (330,072)(c) 6,873,278 (e) (971,275) (971,275)
------------ ------------- ------------ ------------ ------------
Total liabilities and
stockholders' equity.. $402,015,721 $ (66,165,474) $(33,941,775) $301,908,472 $373,233,472
============ ============= ============ ============ ============
</TABLE>
- --------
(a) Reflects the release of $132,066,982 in net proceeds from the Senior Note
Offering (excluding $62,708,146 (including $18,689,326 current portion),
which has been invested in certain U.S. government securities and is held
in a pledged account to secure and fund the first six scheduled interest
payments on the Senior Notes under the terms of the Senior Note Indenture)
less: (i) the repayment of $48,886,320 of advances from ITC Holding (the
DeltaCom Indebtedness) and related interest of $9,011,106; (ii) the
repayment of indebtedness under the Bridge Facility of $41,600,000 and
related interest of $279,751; and (iii) estimated $1,260,780 payment of
remaining debt issuance costs.
(b) Reflects ITC Holding's contribution to the Company of its investments in
the historical combined subsidiaries and its forgiveness and contribution
of $30,999,900 of DeltaCom Indebtedness in connection with the
Reorganization.
(c) Reflects the estimated payment of $1,260,780 additional debt issuance
costs from the Senior Note Offering, partially offset by the write-off of
$330,072 of debt issuance costs related to the Bridge Facility.
(d) Reflects the Merger and the related issuance of Common Stock and Series A
Preferred Stock. See "History of the Company--Holding Company Merger."
(e) Reflects the Reorganization and corresponding consolidating entry to
eliminate the Company's investment in its subsidiaries. See Note 1 to the
combined financial statements.
(f) Reflects the Offering (at an assumed initial public offering price of
$15.50 per share).

31
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following analysis should be read in conjunction with the financial
statements and the notes thereto and the other financial data appearing
elsewhere in this Prospectus. The Company has included EBITDA data in the
following analysis because it is a measure commonly used in the industry.
EBITDA represents earnings before extraordinary item, preacquisition
(earnings) losses, equity in losses of unconsolidated subsidiaries, net
interest, income taxes, depreciation and amortization. EBITDA is not a measure
of financial performance under generally accepted accounting principles and
should not be considered an alternative to net income as a measure of
performance or to cash flows as a measure of liquidity. EBITDA is not
necessarily comparable with similarly titled measures for other companies.
Unless otherwise indicated, dollar amounts have been rounded to the nearest
hundred thousand.

OVERVIEW

Company Background. ITC/\DeltaCom was incorporated in March 1997 as a wholly
owned subsidiary of ITC Holding to acquire and operate ITC Holding's Retail
Services and Carriers' Carrier Services businesses.

ITC Holding has provided operator and directory assistance services since
March 1992 through InterQuest. Carriers' Carrier Services have been offered
since late 1992 through Interstate FiberNet, a partnership originally formed
by ITC Holding (with a 49% interest) and SCANA (with a 51% interest). In
August 1994, ITC Holding acquired SCANA's interest in Interstate FiberNet.
Also in August 1994, ITC Holding formed a second partnership with SCANA, Gulf
States FiberNet, to construct and operate a fiber optic route primarily
between Atlanta, Georgia and Shreveport, Louisiana with several supplemental
spur routes. In the Gulf States Acquisition, ITC Holding acquired SCANA's 64%
partnership interest in Gulf States FiberNet and the Georgia Fiber Assets,
which included one customer contract representing $3.5 million in annual
revenues through August 2001, the term of the contract. Members of the
Company's management have been managing the businesses of both Interstate
FiberNet and Gulf States FiberNet since their inception. In 1995, the Company
began offering SS7 Services to its Carriers' Carrier customers.

In January 1996, as a result of the DeltaCom Acquisition, ITC Holding
entered the retail long distance business and acquired several fiber optic
routes within Alabama that complemented the existing networks operated by
Interstate FiberNet and Gulf States FiberNet. DeltaCom, a provider of
telecommunications services since its inception in 1982, provides long
distance services to mid-sized businesses primarily in Alabama.

The aggregate consideration paid by ITC Holding in the DeltaCom Acquisition
was approximately $71.4 million, consisting of approximately $65.4 million in
cash and $6.0 million of ITC Holding common stock. Concurrently with its
acquisition of DeltaCom, ITC Holding advanced $8.6 million to DeltaCom to
repay DeltaCom's outstanding debt. The DeltaCom Acquisition has been accounted
for under the purchase method. To finance the DeltaCom Acquisition and to
refinance DeltaCom's existing debt, ITC Holding incurred approximately $74.0
million of indebtedness, which was pushed down to DeltaCom (the "DeltaCom
Indebtedness"). See "--Effects of Accounting Standards."

The aggregate consideration paid by ITC Holding in the Gulf States
Acquisition was approximately $27.9 million, consisting of the $10.0 million
SCANA Note, which was assumed by Interstate FiberNet, Inc., and $17.9 million
of ITC Holding preferred stock. Under an earn-out provision, SCANA will be
entitled to receive shares of the Company's Series A Preferred Stock if the
Gulf States FiberNet business achieves a specified performance target for
1997. Prior to the Merger, in a payment made pursuant to this earn-out
provision, ITC Holding issued to SCANA 56,742 shares of ITC Holding Series A
Convertible Preferred Stock, which was converted in the Merger into 130,734
shares of the Company's Series A Preferred Stock. Additional shares of Series
A Preferred Stock may be issued to SCANA in connection with this earn-out
arrangement. See "Certain Transactions--SCANA." The Company accounted for the
Gulf States Acquisition under the purchase method. Of the purchase price,
approximately $17.0 million was allocated to the Gulf States FiberNet
partnership interest and $10.9 million was allocated to the Georgia Fiber
Assets.

32
<PAGE>

In connection with the Reorganization, approximately $31.0 million of the
DeltaCom Indebtedness was forgiven by ITC Holding and contributed to the
Company as additional equity. Following the Reorganization, the Company repaid
the remaining $43.0 million of the DeltaCom Indebtedness, accrued interest on
all $74.0 million of such indebtedness and the $41.6 million of indebtedness
outstanding under the Bridge Facility and accrued interest thereon. See
"History of the Company--Reorganization" and "--Liquidity and Capital
Resources."

Revenues. The Company derives revenues primarily from two business segments:
(i) Retail Services, which encompass the retail sale of long distance, data,
Internet services and the sale and installation of customer premise equipment
to mid-sized and major regional business customers and certain switched
services telecommunications companies, and (ii) Carriers' Carrier Services,
which encompass the sale of long-haul private line services on a wholesale
basis to other telecommunications companies, using the Company's owned and
managed fiber optic network.

The Company currently offers a wide range of Retail Services, including
retail long distance services such as traditional switched and dedicated long
distance, 800/888 calling, calling card and operator services, ATM and frame
relay, high capacity broadband private line, as well as Internet, Intranet and
Web page hosting and development services, and customer premise equipment
installation and repair. Since January 1996, the Company has expanded its
retail long distance operations into the following markets: Pensacola,
Florida; Atlanta, Georgia; Charlotte, North Carolina; Greenville, South
Carolina; and New Orleans and Baton Rouge, Louisiana. As of June 30, 1997, the
Company provided Retail Services to over 6,600 business customers and
approximately 7,100 residential customers. Such residential customers
represented less than 5% of the Company's revenues for the year ended 1996 and
the six months ended June 30, 1997.

In August 1997, the Company began offering local exchange services in
Birmingham and Montgomery, Alabama by both reselling the services of the
incumbent local exchange carrier and using its own switching facilities.
Although the Company's local exchange services offerings in such markets are
in the very early stages, initial expressions of customer interest in such
services have been positive, consistent with management's expectations.
However, there can be no assurance that demand for the Company's local
services will match such preliminary indications of customer interest. The
Company expects to offer local exchange services as part of its Retail
Services in a total of six to nine markets (including Birmingham and
Montgomery) by the end of 1997, initially by reselling the services of
incumbent local exchange carriers and, where market conditions warrant, by
using its own local switching facilities.

In connection with offering local exchange services, the Company has entered
into the Interconnection Agreement with BellSouth to (i) resell BellSouth's
local exchange services and (ii) interconnect the Company's network with
BellSouth's network for the purpose of gaining immediate access to all of
BellSouth's unbundled network elements. This agreement will allow the Company
to enter new markets with minimal capital expenditures and to offer local
exchange service to its current customer base. The Interconnection Agreement
currently allows the Company to provide local service on a resale basis or by
purchasing all unbundled network elements required to provide local service on
a facilities basis, without using Company-owned facilities. The terms of the
Interconnection Agreement, including interim pricing terms agreed to by the
Company and BellSouth, have been approved by state regulatory authorities in
most states, although they remain subject to review and modification by such
authorities. In addition, the Interconnection Agreement does not resolve all
operational issues, particularly those relating to the collocation of the
Company's equipment with that of BellSouth. The Company and BellSouth are
continuing to negotiate to resolve such issues. The Company expects that the
Interconnection Agreement will provide a foundation for it to provide local
service on a reasonable commercial basis, but there can be no assurance in
this regard and important issues remain unsettled as a result of legal and
regulatory developments and related matters. The Interconnection Agreement
expires in July 1999, and there can be no assurance that the Company will be
able to renew it under favorable terms or at all.

The Company's strategy is ultimately to offer facilities-based local service
in certain established markets by collocating its equipment with that of
BellSouth which will enable the Company to purchase fewer unbundled

33
<PAGE>

network elements. The Company expects that it will be able to begin providing
local service to such markets in the fourth quarter of 1997 by using its own
facilities and network, as supplemented by BellSouth's unbundled network
elements. In August 1997, the Company began the process of arranging for
collocation of its equipment with BellSouth in certain markets, primarily in
Alabama, in which the Company has an existing base of long distance customers.
The Company and BellSouth are negotiating the terms of an agreement with
respect to such equipment collocations. In addition, BellSouth has been
experiencing certain central office space limitations, resulting in delays in
completing arrangements for physical collocation of Company equipment. There
can be no assurance that the Company and BellSouth will enter into a
collocation agreement on terms acceptable to the Company or at all, nor can
there be any assurance that BellSouth's space limitations will be resolved to
the Company's satisfaction, in a timely manner, or at all. In the event that
collocation is not possible, the Company plans to provide facilities-based
local service primarily by purchasing unbundled network elements.

The Company anticipates that an increasing portion of its revenue will be
derived from local services, primarily those provided pursuant to the
Interconnection Agreement with BellSouth and similar agreements with other
local exchange carriers. Management expects that gross margin associated with
local Retail Services will be slightly better than gross margin associated
with long distance Retail Services, but that, in general, gross margin
associated with Retail Services will be lower than that associated with
Carriers' Carrier Services. There can be no assurance that the Company will be
able to enter into additional interconnection agreements on terms acceptable
to the Company or at all, or that the incumbent local exchange carriers will
provide the operational support required for the Company to provide local
services to end users. See "Risk Factors--Dependence on Incumbent Local
Exchange Carriers," "--Regulation," "Business--Services and Facilities," and
"--Regulation."

As the Company begins to offer local service on a facilities rather than
resale basis, it will begin to sell switched access and termination services
to carriers terminating calls to its local end user customers, and originating
switched access to long distance companies where the end users choose a
carrier other than the Company for that service. Certain incumbent local
exchange companies, including BellSouth, have taken the position that when a
carrier seeking to provide local service obtains all necessary elements (loops
and switches) from the incumbent local exchange carrier in a combined form,
the incumbent local exchange carrier retains the right to receive the access
revenues associated with service to the customers served on that basis.
Although a recent Eighth Circuit Court of Appeals decision appears to reject
this position, further legal challenges are likely and important issues
related to this form of interconnection remain open.

The Company provides Carriers' Carrier Services using its owned and managed
fiber optic network, which reaches over 60 POPs in ten southern states
(Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina,
South Carolina, Tennessee and Texas). Of the network's approximately 6,000
route miles, approximately 3,000 are Company-owned and operated and
approximately 3,000 are owned and operated principally by three public
utilities (Duke Power Company, Florida Power & Light Company and Entergy
Technology Company) with which the Company has marketing and management
arrangements. The Company's arrangement with Entergy is exclusive. In
addition, the Company has a buy-sell agreement with Carolinas Fibernet, LLC,
which manages fiber optic facilities in North Carolina and South Carolina.
This agreement enables the parties to buy and sell capacity on each other's
networks and allows the Company to provide customers with access to POPs
throughout those states. The Company expects to add approximately 300 owned
and operated route miles to its fiber network by the end of 1997 through long-
term dark fiber leases. In addition, as part of its strategy, the Company
intends to continue to evaluate the potential expansion of its network through
a combination of new construction, long-term dark fiber leases and fiber swap
transactions, depending on the extent of capital required over the economic
life of the fiber assets to be deployed. To the extent that the Company elects
to expand its network through long-term leases in lieu of construction or
fiber swap transactions, the Company expects such leases to have a negative
effect on EBITDA; however, the Company expects any such expansion of its
network would provide opportunities to generate additional revenues, which
would partly offset such negative effects.

The Company derives commission revenues from the marketing, sale and
management of capacity on the utility-owned portions of the Company's network.
Negligible incremental costs are associated with these

34
<PAGE>

commissions, because the Company uses the same marketing and sales force in
servicing the utility-owned portions of the network as it does for the
portions owned by the Company. In 1996, the Company's commission revenues from
these arrangements amounted to approximately $170,000 because, although the
utility-owned portions owned by Duke Power Company began generating revenues
in late 1995, the portions owned by Florida Power & Light Company and Entergy
Technology Company began generating revenues in late 1996. For the six months
ended June 30, 1997, the Company's commission revenues from these arrangements
amounted to approximately $500,000. The Company expects commissions associated
with the utility-owned portions of the network, which will become fully
operational in the current year, to continue to increase in 1997.

The Company provides long-haul services to its carrier customers on a "take
or pay" long-term basis, on an individual circuit basis, or on a month-to-
month basis after the initial term of the "take or pay" or individual circuit
contract. As of June 30, 1997, the Company had remaining future long-term
contract commitments totaling approximately $75.8 million. These contracts
expire on various dates through 2006 and are expected to generate
approximately $56.0 million in revenues to the Company through 2001, of which
approximately $14.5 million are expected to be realized in 1998. No single
Carriers' Carrier Services customer or Retail Services customer represented
over 10% of the Company's total revenues for the six months ended June 30,
1997.

Although the Company expects that a majority of its revenue growth will come
from its Retail Services business, the Company does not expect its Retail
Services to obtain a significant share of the market for telecommunications
services in the southern United States. The customer contracts for Retail
Services generally provide for payment in arrears based on minutes of use for
switched services and payment in advance for private line services. The
contracts generally also provide that the customer may terminate the affected
services without penalty in the event of certain outages in service, and for
certain other defined causes. To date, no customers have terminated any
services under these provisions. The contracts also typically provide that the
customer must use at least a minimum dollar amount of switched long distance
services per month for the term of the contract. During the past several
years, market prices for many telecommunications services segments have been
declining, which the Company believes will likely continue. In response to
these and other competitive pressures, the Company recently modified certain
of its retail contracts to extend to certain customers lower rates over longer
terms as a means of maintaining and developing the Company's customer base. In
the future, in response to competitive considerations, the Company may decide
to modify certain other retail customer contracts in a similar manner,
emphasizing lower pricing and longer commitment periods. A substantial portion
of the Company's total revenues are from retail long distance services.
Revenue per minute from such services has been declining and is expected to
continue to decline. This decline will have a negative effect on the Company's
gross margin which may not be offset completely by savings from decreases in
the Company's cost of services.

Operating Expenses. The Company's principal operating expenses consist of
cost of services, selling, operations and administration expenses, and
depreciation and amortization. Cost of services related to Retail Services
consists primarily of access charges and local facility charges paid to local
exchange carriers, as well as wholesale carrier origination, termination and
interexchange facility charges paid to other interexchange carriers. Cost of
services related to Carriers' Carrier Services are substantially all fixed
costs attributable to (i) the leasing of dark fiber under long-term operating
leases, (ii) the leasing of capacity outside the Company's owned or managed
network (off-net capacity) to meet customer requirements, (iii) labor
associated with operator services and (iv) network costs associated with the
provision of SS7 Services. The Company purchases off-net capacity to provide
Carriers' Carrier Services in cases where the Company plans to construct its
own network to replace the off-net portion of certain fiber routes. The
Company also purchases off-net capacity in connection with an existing
customer contract, pursuant to which the Company is the exclusive provider of
network capacity to such customer. Although the Company is substantially able
to meet the requirements of such customer on the Company's network, the
Company purchases off-net capacity to fill such customer's requirements that
cannot be met on the Company's network. Selling, operations and administration
expenses consist of expenses of selling and marketing, field personnel engaged
in direct network maintenance and monitoring, customer service and corporate
administration. Depreciation and amortization include depreciation of the
Company's

35
<PAGE>

telecommunications network and equipment and amortization of goodwill and
other intangible assets related to acquisitions, primarily the DeltaCom
Acquisition.

As the Company continues to expand into new geographic markets, add new
sales offices and facilities and enlarge its current product offerings to
include local telephone and other services, cost of services and selling,
operations and administration expenses are expected to increase substantially.
Therefore, the Company expects to incur increasing operating losses over the
next few years. Although the Company anticipates that it will continue to
generate positive cash flow from operations, it expects that such cash flows
will be more than offset by capital expenditures during the next several years
as it implements its business plan. The Company also expects that the addition
of local service to its bundle of telecommunications services will have an
adverse impact on its gross margin, because the gross margin on the resale of
local services through incumbent local exchange carrier facilities will be
lower than the gross margin on the Company's existing businesses. As the
Company increasingly uses incumbent local exchange carrier unbundled network
elements instead of resold services, the Company expects gross margin on local
service to improve. Such improvement is expected to result from reduced access
charges and from efficiencies realized through increased reliance on the
Company's owned network. Such improved margins, however, could be offset by
competitive market pressures to reduce prices for Retail Services, as
discussed above. There can be no assurance that growth in the Company's
revenues or customer base will continue or that the Company will be able to
achieve or sustain profitability or positive net cash flows.

36
<PAGE>

CERTAIN PRO FORMA RESULTS OF OPERATIONS

The following table sets forth certain summary unaudited pro forma financial
data for the years ended December 31, 1994, 1995 and 1996 and the six months
ended June 30, 1996 and 1997. The pro forma data reflect the results of
operations for such periods related to (i) Retail Services, consisting of
certain historical data for DeltaCom as if the DeltaCom Acquisition had
occurred as of the beginning of each period presented, and (ii) Carriers'
Carrier Services, consisting of certain pro forma combined data for Interstate
FiberNet, InterQuest, Gulf States FiberNet and the Georgia Fiber Assets as if
the Gulf States Acquisition had occurred as of the beginning of each period
presented. The information set forth below does not purport to represent what
the Company's financial position or results of operations would have been if
these acquisitions had actually occurred as of such dates, or to project the
Company's financial position or results of operations for any future date or
period. The information presented below should be read in conjunction with the
financial statements and the notes thereto included elsewhere in this
Prospectus.

UNAUDITED PRO FORMA RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------------------------------ -------------------------------------------
% OF % OF % OF % OF % OF
1994 REVENUES 1995 REVENUES 1996 REVENUES 1996 REVENUES 1997 REVENUES
----------- -------- ------------ -------- ----------- -------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Retail Servic-
es............. $53,777,565 86% $ 56,271,011 77% $65,176,807 76% $31,106,856 79% $39,920,414 74%
Carriers'
Carrier
Services....... 8,582,444 14% 16,837,906 23% 20,197,555 24% 8,495,298 21% 14,330,097 26%
----------- ------------ ----------- ----------- -----------
Total........... $62,360,009 $ 73,108,917 $85,374,362 $39,602,154 $54,250,511
=========== ============ =========== =========== ===========
Gross margin
Retail
Services....... $20,608,785 38% $ 23,915,653 43% $25,820,210 40% $13,140,448 42% $16,392,403 41%
Carriers'
Carrier
Services....... 5,728,170 67% 12,521,873 74% 16,966,924 84% 7,152,759 84% 12,555,361 88%
----------- ------------ ----------- ----------- -----------
Total........... $26,336,955 42% $ 36,437,526 50% $42,787,134 50% $20,293,207 51% $28,947,764 53%
=========== ============ =========== =========== ===========
EBITDA
Retail
Services....... $ 9,999,787 19% $ 10,069,786 18% $ 7,426,297 11% $ 4,441,728 14% $ 3,221,943 8%
Carriers'
Carrier
Services....... 3,958,559 46% 8,735,909 52% 11,494,668 57% 4,311,693 51% 8,516,272 59%
----------- ------------ ----------- ----------- -----------
Total (a)....... $13,958,346 22% $ 18,805,695 26% $18,920,965 22% $ 8,753,421 22% $11,738,215 22%
=========== ============ =========== =========== ===========
Net income (loss)
from continuing
operations
Retail
Services....... $(1,441,323) (3)% $ (1,405,651) (3)% $(3,701,538) (6)% $(1,049,660) (3)% $(2,235,487) (6)%
Carriers'
Carrier
Services....... 793,759 9% (462,146) (3)% (1,805,472) (9)% (1,246,039) (15)% 33,544 --
----------- ------------ ----------- ----------- -----------
Total (b)....... $ (647,564) (1)% $ (1,867,797) (3)% $(5,507,010) (6)% $(2,295,699) (6)% $(2,201,943) (4)%
=========== ============ =========== =========== ===========
</TABLE>
- --------
(a) Excludes interest income that would have been earned during the periods
presented on the $62.7 million of Senior Note Offering proceeds invested
in Pledged Securities and held to secure and fund the first six interest
payments on the Senior Notes.
(b) Excludes net interest related to the Senior Note Offering and the
application of the net proceeds therefrom totaling $6,566,492 and
$2,340,110 for the year ended December 31, 1996 and the six months ended
June 30, 1997, respectively.

PRO FORMA SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO PRO FORMA SIX MONTHS
ENDED JUNE 30, 1997

Revenues

Pro forma revenues increased 37% from $39.6 million for the six months ended
June 30, 1996 to $54.3 million for the six months ended June 30, 1997. Retail
Services operations' pro forma revenues increased $8.9

37
<PAGE>

million from $31.1 million for the six months ended June 30, 1996 to $40.0
million for the six months ended June 30, 1997. Of this increase, $7.1 million
was attributable to long distance services, $900,000 to sales of customer
premise equipment and $900,000 to Internet sales and services. The growth in
long distance services was primarily the result of an increase in minutes from
new and existing customers, partially offset by a decrease in revenues per
minute due to lower prices. Pro forma revenues from Carriers' Carrier Services
operations contributed $5.8 million of this increase, increasing from $8.5
million for the six months ended June 30, 1996 to $14.3 million for the six
months ended June 30, 1997. Revenues from Carriers' Carrier Services increased
due to increased demand for Carriers' Carrier Services from new and existing
customers.

Gross Margin

Pro forma gross margin increased from $20.3 million for the six months ended
June 30, 1996 to $28.9 million for the six months ended June 30, 1997. Pro
forma gross margin for Carriers' Carrier Services as a percentage of Carriers'
Carrier Services revenues increased from 84% for the six months ended June 30,
1996 to 88% for the six months ended June 30, 1997, primarily due to
additional revenues. Retail Services pro forma gross margin as a percentage of
Retail Services revenues was 42% and 41%, respectively, for the six months
ended June 30, 1996 and 1997. The Company anticipates that increased
competition, particularly with respect to pricing, in the long distance market
will likely adversely affect the Company's gross margin on long distance
services as a percentage of revenues. Management expects that the Company will
increasingly utilize its fiber optic network in the deployment of the
Company's switched network design, favorably affecting the Company's gross
margin on the Retail Services segment. As the Company increases the volume of
traffic it either originates or terminates on its own network, it expects to
be able to use more effectively its switched network to reduce per-minute
costs. The Company expects that the provision of local telecommunications
service through the resale of incumbent local exchange carrier facilities will
adversely affect its gross margin. As the Company begins to utilize incumbent
local exchange carrier unbundled network elements instead of reselling local
services, the Company expects gross margin on local services to improve.

EBITDA

Pro forma EBITDA increased $2.9 million from $8.8 million for the six months
ended June 30, 1996 to $11.7 million for the six months ended June 30, 1997,
an increase of 33%. For Carriers' Carrier Services, pro forma EBITDA increased
as a percentage of Carriers' Carrier Services revenues from 51% for the six
months ended June 30, 1996 to 59% for the six months ended June 30, 1997,
primarily due to increased revenues. Pro forma EBITDA related to Retail
Services decreased $1.2 million, from $4.4 million for the six months ended
June 30, 1996 to $3.2 million for the six months ended June 30, 1997. This
decrease was attributable to the costs associated with new sales offices
opened since March 31, 1996 and employment of additional support personnel to
better position this segment for growth and expansion. The Company expects
that EBITDA for Retail Services will continue to decline at least through
1998, as the Company expands its offering of local services and opens
additional sales offices.

Net Income (Loss) From Continuing Operations

Pro forma net loss decreased $100,000 from $2.3 million for the six months
ended June 30, 1996 to $2.2 million for the six months ended June 30, 1997.
The pro forma net loss from Retail Services increased from $1.0 million for
the six months ended June 30, 1996 to a loss of $2.2 million for the six
months ended June 30, 1997. This additional loss resulted from increased costs
associated with new sales offices opened since March 31, 1996, and employment
of additional support personnel to position this segment for growth and
expansion. Carriers' Carrier Services had a net loss of $1.2 million for the
six months ended June 30, 1996 and net income of less than $100,000 for the
six months ended June 30, 1997. This increase in net income was primarily
attributable to increased revenues and gross margins.

38
<PAGE>

PRO FORMA YEAR ENDED DECEMBER 31, 1995 COMPARED TO PRO FORMA YEAR ENDED
DECEMBER 31, 1996

Revenues

Pro forma revenues increased 17% from $73.1 million in 1995 to $85.4 million
in 1996. Of this increase, $8.9 million was attributable to Retail Services,
which increased $7.6 million from long distance services and $1.3 million from
Internet services and sales of customer premise equipment. The growth in long
distance services was primarily the result of an increase in minutes from new
and existing customers, which was partially offset by a decrease in revenues
per minute (because of lower prices). The Company also opened six additional
sales offices during the first half of 1996 in the following new markets: New
Orleans, Baton Rouge, Atlanta, Greenville, Charlotte and Pensacola. Carriers'
Carrier Services accounted for $3.4 million of the total revenues increase.
Pro forma revenues for this segment in 1995 included a $3.3 million
nonrecurring payment from a major customer related to the initial construction
of the Gulf States FiberNet fiber optic route. Excluding the effect of this
nonrecurring payment, pro forma revenues attributable to Carriers' Carrier
Services increased 49%, or $6.6 million, to $20.2 million in 1996. Of this
increase, $5.7 million was due to services provided on new network capacity,
primarily the Gulf States FiberNet portions of the network, which were fully
operational for all of 1996, after being operational for only approximately
six months in 1995. The balance of the increase was attributable to increased
demand over existing portions of the Company's network. Gulf States FiberNet
represented $10.1 million and the Georgia Fiber Assets customer contract
represented $3.5 million of the total $20.2 million of Carriers' Carrier
Services pro forma revenues in 1996. For 1995, excluding the effect of the
$3.3 million nonrecurring payment, Gulf States FiberNet represented $4.3
million and the Georgia Fiber Assets customer contract represented $3.5
million of Carriers' Carrier Services pro forma revenues of $13.6 million.

Gross Margin

Pro forma gross margin increased from $36.4 million in 1995 to $42.8 million
in 1996. For Carriers' Carrier Services, pro forma gross margin as a
percentage of revenues increased from 74% in 1995 to 84% in 1996, primarily
because most Carriers' Carrier Services are long-haul private line services
which have low associated variable cost of services. For Retail Services, pro
forma gross margin as percentage of revenues decreased from 43% in 1995 to 40%
in 1996, primarily because of an increase in the number of wholesale switched
minutes sold to other telecommunications companies as a percentage of total
switched minutes in 1996 compared to 1995. The gross margin on these wholesale
services is lower than the gross margin on retail switched services. In
addition, in 1996, the Company modified certain of its retail contracts to
extend to certain customers lower rates over longer terms as a means of
maintaining and developing the Company's customer base.

EBITDA

Pro forma EBITDA increased $100,000 from $18.8 million in 1995 to $18.9
million in 1996. Pro forma EBITDA related to Retail Services decreased $2.7
million from $10.1 million in 1995 to $7.4 million in 1996, principally
because of costs incurred to open six new sales offices during 1996 and the
addition of management and infrastructure after the DeltaCom Acquisition to
position this segment for growth and expansion. EBITDA related to Carriers'
Carrier Services increased from $8.7 million in 1995 to $11.5 million in 1996
on a $3.4 million increase in revenues because the long-haul portion of the
Carriers' Carrier business has low associated variable costs. EBITDA and
revenues for 1995 include a $3.3 million nonrecurring payment related to the
initial construction of the Gulf States FiberNet fiber optic route.

Net Income (Loss) From Continuing Operations

Pro forma net loss increased $3.6 million from $1.9 million in 1995 to $5.5
million in 1996. Of this increase, $2.3 million was attributable to Retail
Services primarily due to costs incurred to open six new sales offices during
1996 and the addition of management and infrastructure to position this
segment for growth and expansion. Pro forma net loss from Carriers' Carrier
Services increased $1.3 million from $500,000 in 1995 to $1.8 million in 1996.
This increased net loss was primarily attributable to increased depreciation
and amortization expense and increased interest expense.

39
<PAGE>

PRO FORMA YEAR ENDED DECEMBER 31, 1994 COMPARED TO PRO FORMA YEAR ENDED
DECEMBER 31, 1995

Revenues

Pro forma revenues increased 17% from $62.4 million in 1994 to $73.1 million
in 1995. Revenues from Retail Services accounted for $2.5 million of the $10.7
million total increase, due to an increase of $1.8 million attributable to
long distance services and $700,000 attributable to sales of customer premise
equipment. Revenues from Carriers' Carrier Services contributed $8.3 million
to the total increase, including a $3.3 million nonrecurring payment from a
major customer related to the initial construction of the Gulf States FiberNet
fiber optic route. Excluding the effect of this nonrecurring payment, $4.2
million of the $5.0 million increase in revenues attributable to Carriers'
Carrier Services consisted of revenues generated from the newly constructed
Gulf States FiberNet route, which began operations in June 1995. The remaining
$800,000 was attributable to increased sales on existing network routes and
the sale of newly introduced SS7 Services.

Gross Margin

Pro forma gross margin as a percentage of revenues increased from 42% in
1994 to 50% in 1995. Pro forma gross margin as a percentage of revenues
generated by Retail Services increased from 38% in 1994 to 43% in 1995. This
improvement was primarily a result of (i) reductions in the cost of intrastate
switched access and (ii) newly renegotiated favorable contract terms resulting
in higher revenues to the Company for off-net originating and terminating
interstate services. As a result of the increased revenues derived from
Carriers' Carrier Services, pro forma gross margin as percentage of revenues
generated by this business segment increased from 67% in 1994 to 75% in 1995.

EBITDA

Pro forma EBITDA increased 34% from $14.0 million in 1994 to $18.8 million
in 1995. Pro forma EBITDA related to Retail Services increased slightly from
$10.0 million in 1994 to $10.1 million in 1995. Increases in pro forma 1995
gross margin for Retail Services were partially offset by approximately $1.0
million of costs related to personnel additions to the Company's human
resources, marketing, customer service and information services departments
and approximately $600,000 of costs related to management services. Although
pro forma revenues related to Carriers' Carrier Services increased $8.3
million in 1995 compared to 1994, pro forma EBITDA for Carriers' Carrier
Services only increased $4.7 million from $4.0 million in 1994 to $8.7 million
in 1995. The Carriers' Carrier Services revenues increase was offset in part
by (i) a $1.5 million increase in cost of services related primarily to
network costs associated with the initiation of SS7 Services, a network
management contract for a large enhanced specialized mobile radio customer and
off-net lease expense incurred in the sale of certain long-haul private lines
and (ii) a $2.0 million increase in selling, operations and administration
expense related to the hiring of additional senior management and key
operations personnel to position the Company for future growth. Also included
in this $2.0 million increase is the opening of a fully staffed network
operation center to monitor the entire fiber optic network 24 hours a day,
seven days a week.

Net Income (Loss) From Continuing Operations

Pro forma net loss increased $1.3 million from $600,000 in 1994 to $1.9
million in 1995. This increased loss was attributable to the loss from
Carriers' Carrier Services which increased $1.3 million to a net loss of
$500,000 in 1995 as compared to net income of $800,000 in 1994. This loss was
attributable to (i) an increase in selling, operations and administration
expense related to the hiring of additional management and key operations
personnel to position the Company for future growth and (ii) an increase in
depreciation and amortization expense and interest expense which resulted
primarily from the operations of the Gulf States FiberNet routes which
commenced in August 1994.

40
<PAGE>

HISTORICAL RESULTS OF OPERATIONS

The following tables set forth certain historical financial data for the
years ended December 31, 1994, 1995 and 1996 and the six months ended June 30,
1996 and 1997 for the Carriers' Carrier Services business and for the year
ended December 31, 1996 and the six months ended June 30, 1996 and 1997 for the
Retail Services business.

The comparability of the historical financial data for the six months ended
June 30, 1996 and 1997 has been affected by the DeltaCom Acquisition and the
Gulf States Acquisition. The historical financial statements for the six months
ended June 30, 1996 include the results of operations for DeltaCom since its
acquisition on January 29, 1996. For the six months ended June 30, 1996, the
Company's 36% interest in Gulf States FiberNet's results of operations is
reflected using the equity method. Due to the Gulf States Acquisition on March
27, 1997, the results of operations for the six months ended June 30, 1997
reflect the total revenues and expenses from January 1, 1997 attributable to
Gulf States FiberNet with the preacquisition losses attributable to SCANA from
January 1, 1997 deducted to determine combined net loss. The results of
operations for the six months ended June 30, 1997 also reflect the revenues and
expenses of Georgia Fiber since April 1, 1997.

HISTORICAL RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
CARRIERS' CARRIER SERVICES
---------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------------------- ----------------------------------
1994 % 1995 % 1996 % 1996 % 1997 %
----------- --- ----------- --- ----------- --- ----------- --- ------------ ---
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $ 4,945,902 100% $ 5,750,587 100% $ 6,598,709 100% $ 2,724,874 100% $ 13,444,647 100%
Cost of services........ 2,484,744 50% 3,149,231 55% 2,363,073 36% 1,126,438 41% 1,774,736 13%
----------- ----------- ----------- ----------- ------------
Gross margin............ 2,461,158 50% 2,601,356 45% 4,235,636 64% 1,598,436 59% 11,669,911 87%
Selling, operations and
administration
expense................ 948,230 19% 1,626,678 28% 1,826,420 28% 851,662 31% 3,790,864 28%
Depreciation and
amortization........... 738,052 15% 1,267,882 22% 1,656,685 25% 759,366 28% 5,315,500 40%
----------- ----------- ----------- ----------- ------------
Total operating
expenses............... 1,686,282 34% 2,894,560 50% 3,483,105 53% 1,611,028 59% 9,106,364 68%
----------- ----------- ----------- ----------- ------------
Operating income
(loss)................. $ 774,876 16% $ (293,204) (5)% $ 752,531 11% $ (12,592) -- $ 2,563,547 19%
=========== =========== =========== =========== ============
</TABLE>

<TABLE>
<CAPTION>
RETAIL SERVICES
-------------------------------------------------
YEAR ENDED
DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------- --------------------------------
1996 % 1996 % 1997 %
----------- --- ----------- --- ----------- ---
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues................... $59,919,876 100% $25,849,925 100% $39,920,414 100%
Cost of services........... 36,393,214 61% 15,003,025 58% 23,528,011 59%
----------- ----------- -----------
Gross margin............... 23,526,662 39% 10,846,900 42% 16,392,403 41%
Selling, operations and
administration expense.... 17,050,152 28% 7,354,959 28% 13,170,460 33%
Depreciation and
amortization.............. 4,781,389 8% 2,072,651 8% 2,957,732 7%
----------- ----------- -----------
Total operating expenses... 21,831,541 36% 9,427,610 36% 16,128,192 40%
----------- ----------- -----------
Operating income........... $ 1,695,121 3% $ 1,419,290 5% $ 264,211 1%
=========== =========== ===========
</TABLE>

41
<PAGE>

HISTORICAL SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH HISTORICAL SIX MONTHS
ENDED JUNE 30, 1996

Revenues

Revenue for the six months ended June 30, 1997 increased from $28.6 million
for the six months ended June 30, 1996 to $53.4 million for the six months
ended June 30, 1997. Revenues from Retail Services increased $14.1 million
from $25.8 million for the six months ended June 30, 1996 to $39.9 million for
the six months ended June 30, 1997. Results for the six months ended June 30,
1996 reflect only five months of Retail Services revenues because the DeltaCom
Acquisition occurred on January 29, 1996. Revenues from Carriers' Carrier
Services increased from $2.7 million for the six months ended June 30, 1996 to
$13.4 million for the six months ended June 30, 1997. Of the $10.7 million
increase, $8.8 million was attributable to revenues generated during the six
months ended June 30, 1997 by Gulf States FiberNet. Excluding revenues
attributable to Gulf States FiberNet during the six months ended June 30,
1997, Carriers' Carrier Services increased $1.9 million, of which $900,000 was
attributable to revenue from the Georgia Fiber Assets acquired March 27, 1997.

Cost of Services

Cost of services increased $9.2 million from $16.1 million for the six
months ended June 30, 1996 to $25.3 for the six months ended June 30, 1997.
Cost of services for Retail Services' operations increased $8.5 million to
$23.5 million for the six months ended June 30, 1997 from $15.0 million for
the six months ended June 30, 1996, which reflects only five months of cost of
services attributable to Retail Services operations. Cost of services for
Retail Services' operations as a percentage of revenue increased to 59% for
the six months ended June 30, 1997 compared to 58% for the six months ended
June 30, 1996. This increase was attributable to the cost of new facilities in
order to service expanded retail markets, and the impact of increased minutes
of usage at lower prices per minute. Cost of services attributable to
Carriers' Carrier Services increased $700,000 from $1.1 million for the six
months ended June 30, 1996 to $1.8 million for the six months ended June 30,
1997. Cost of services for Carriers' Carrier Services as a percentage of
revenue decreased to 13% for the six months ended June 30, 1997 compared to
41% for the six months ended June 30, 1996, due to increases in revenue from
long-haul private line services, which have low associated variable costs.

Selling, Operations and Administration Expense

Selling, operations and administration expense increased $8.8 million from
$8.2 million (29% as a percentage of revenue) for the six months ended June
30, 1996 to $17.0 million (32% as a percentage of revenue) for the six months
ended June 30, 1997. Selling, operations and administration expense
attributable to Retail Services increased $5.8 million from $7.4 million (or
28% of Retail Services revenues) for the six months ended June 30, 1996 to
$13.2 million (or 33% of Retail Services revenues) for the six months ended
June 30, 1997. This increase resulted from employment of additional sales,
information services and provisioning personnel to support the Company's
geographical market and product expansion as the Company prepared to offer
local service and expand into new markets. Results for the six months ended
June 30, 1996 reflect only five months of selling, operations and
administration expense attributable to Retail Services. Selling, operations
and administration expense attributable to Carriers' Carrier Services
increased $2.9 million from $900,000 (or 31% of Carriers' Carrier Services
revenues) for the six months ended June 30, 1996 to $3.8 million (or 28% of
Carriers' Carrier Services revenues) for the six months ended June 30, 1997.
Of the $2.9 million increase, $1.8 million was attributable to the Acquisition
of Gulf States FiberNet. The remaining $1.1 million of this increase was
attributable to increased costs of administrative personnel employed to
support expansion of the business.

Depreciation and Amortization

Depreciation and amortization expense increased $5.5 million from $2.8
million for the six months ended June 30, 1996 to $8.3 million for the six
months ended June 30, 1997. Retail Services accounted for $900,000 of the
increase, which was primarily related to installation of new central office
equipment. Depreciation and amortization for Carriers' Carrier Services
operations accounted for $4.6 million of the increase and was primarily
related to the acquisition of Gulf States FiberNet.

42
<PAGE>

Interest Expense

Interest expense increased from $2.8 million for the six months ended June
30, 1996 to $7.6 million for the six months ended June 30, 1997. Of this $4.8
million increase, $2.2 million was attributable to the acquisition of Gulf
States FiberNet, $1.8 million was attributable to the Senior Notes, $500,000
was attributable to the DeltaCom Indebtedness, and the balance was
attributable to the SCANA Note.

Income Taxes

The Company is included in the consolidated federal income tax returns of
its parent prior to the Merger, ITC Holding, which results in the Company
receiving benefits for certain of its net operating losses. The benefit
received as a percentage of taxable income was 26% and 29% for the six month
periods ended June 30, 1997 and 1996, respectively.

EBITDA

EBITDA increased from $4.2 million for the six months ended June 30, 1996 to
$11.1 million for the six months ended June 30, 1997. Carriers' Carrier
Services accounted for $7.1 million of the increase. EBITDA attributable to
Retail Services for the six months ended June 30, 1996 was $3.5 million,
compared to $3.2 million for the six months ended June 30, 1997. EBITDA
attributable to Retail Services decreased from 14% of revenues for the six
months ended June 30, 1996 to 8% for the six months ended June 30, 1997,
primarily due to increased costs associated with the expansion of new sales
offices and the employment of additional support personnel to position this
segment for growth and expansion. The Company expects that EBITDA for Retail
Services will continue to decline through at least 1998 as the Company opens
additional sales offices and prepares to offer local service.

HISTORICAL YEAR ENDED DECEMBER 31, 1995 COMPARED WITH HISTORICAL YEAR ENDED
DECEMBER 31, 1996

Revenues

Revenues increased from $5.8 million in 1995 to $66.5 million in 1996. The
$60.7 million increase was primarily attributable to revenues of $59.9 million
generated by DeltaCom since it was acquired on January 29, 1996. Revenues from
Carriers' Carrier Services increased approximately $800,000 in 1996 (15%),
primarily due to the growth in new SS7 Services and directory assistance
products and growth in demand for Carriers' Carrier Services.

Cost of Services

Cost of services increased from $3.1 million in 1995 to $38.8 million in
1996. DeltaCom's operations accounted for $36.4 million of this increase.
Carriers' Carrier Services accounted for a decrease of $700,000 primarily due
to intersegment eliminations related to its utilization of DeltaCom's network
infrastructure.

Selling, Operations and Administration Expense

Selling, operations and administration expense increased from $1.6 million
in 1995 to $18.9 million in 1996. DeltaCom's operations accounted for $17.1
million of the increase. Carriers' Carrier Services accounted for $200,000 of
the increase.

Depreciation and Amortization

Depreciation and amortization expense increased from $1.3 million in 1995 to
$6.4 million in 1996. Of this $5.1 million increase, $4.8 million was
attributable to DeltaCom, including $1.3 million of intangible amortization on
$54.6 million of intangibles pushed down to the Company. See "--Effects of
Accounting Standards." Carriers' Carrier Services accounted for $300,000 of
the increase as a result of additional capital

43
<PAGE>

expenditures made for the provision of SS7 Services, capital expenditures
associated with the Company's network management systems required to support
the various management and marketing agreements with various utilities, and
small electronic overbuilds on existing network segments.

Other Income (Expense)

Other expense increased from $200,000 in 1995 to $1.4 million in 1996. The
Company's share of Gulf States FiberNet's partnership losses accounted for
$1.3 million of this increase, which was partially offset by a $100,000
increase in other interest and miscellaneous income. Gulf States FiberNet
began full operations in late 1995 and, accordingly, the effect of a full year
of operations was not reflected until 1996. Gulf States FiberNet recorded a
pretax loss of $4.4 million in 1996, compared to a pretax loss of $700,000 in
1995. As of December 31, 1995 and 1996, the Company owned 36% of Gulf States
FiberNet and recorded losses of $300,000 and $1.6 million, respectively, from
such interest.

Interest Expense

Interest expense increased from $300,000 in 1995 to $6.2 million in 1996.
The increase was primarily attributable to the increase in the Company's
aggregate indebtedness resulting from the $74.0 million of DeltaCom
Indebtedness. See "--Effects of Accounting Standards." The Company incurred
interest expense of $5.8 million related to such indebtedness in 1996.

EBITDA

EBITDA increased from $1.0 million in 1995 to $8.9 million in 1996. DeltaCom
accounted for $6.5 million and Carriers' Carrier Services accounted for $1.4
million of the increase. The increased EBITDA attributable to Carriers'
Carrier Services is a result of an increase in revenues with minimal increases
in associated variable costs.

HISTORICAL YEAR ENDED DECEMBER 31, 1994 COMPARED WITH HISTORICAL YEAR ENDED
DECEMBER 31, 1995

Revenues

Revenues increased from $4.9 million in 1994 to $5.8 million in 1995. The
increase was primarily attributable to additional capacity sales on the
Atlanta-to-Columbus fiber route and the introduction of SS7 Services in early
1995. Revenues from operator services remained stable between years at
approximately $2.5 million.

Cost of Services

Cost of services increased from $2.5 million in 1994 to $3.1 million in
1995, primarily as a result of network costs associated with SS7 Services in
1995 and the network management contract for a large enhanced specialized
mobile radio customer.

Selling, Operations and Administration Expense

Selling, operations and administration expense increased from $900,000 in
1994 to $1.6 million in 1995. The increase principally reflected higher
management and personnel costs resulting from the hiring of additional senior
management and a team of key operations personnel in order to position the
Company for future growth.

Depreciation and Amortization

Depreciation and amortization expense increased from $700,000 in 1994 to
$1.3 million in 1995. The $600,000 increase in depreciation and amortization
resulted from additional depreciation on capital assets related

44
<PAGE>

to the establishment of the network operations center that operates 24 hours a
day, seven days a week, several minor spur routes, the initiation of SS7
Services, and ongoing capital expenditures for Carriers' Carrier Services.

Other Income (Expense)

Other expense increased from less than $100,000 in 1994 to $200,000 in 1995.
The Company's share of the partnership losses related to Gulf States FiberNet
accounted for this increase. Gulf States FiberNet was in the construction
phase during 1994 and incurred a pretax loss of $300,000 in 1994, compared to
a pretax loss of $700,000 in 1995. As of December 31, 1994 and 1995, the
Company owned 36% of Gulf States FiberNet and recorded equity in partnership
losses of $100,000 and $300,000, respectively. The equity in partnership
losses was partially offset by other miscellaneous income in both years.

EBITDA

EBITDA decreased from $1.5 million in 1994 to $1.0 million in 1995. The
decrease in EBITDA primarily reflected increased selling, operations and
administration expense incurred in connection with the hiring of additional
senior management, as discussed above, and additional expense related to the
Company's initiation of SS7 Services.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically generated positive cash flow from operations
from its existing lines of business, but has required equity infusions and
advances from ITC Holding to finance a significant portion of its investing
and financing activities. Cash flow from operations totaled $1.0 million, $1.4
million and $8.2 million for 1994, 1995 and 1996, respectively, and $9.4
million for the six months ended June 30, 1997. The components of cash flow
from operations consisting of net loss adjusted for depreciation,
amortization, deferred income taxes, equity in losses of investee,
preacquisition losses, extraordinary item-loss on extinguishment of debt and
other totaled $1.4 million, $1.5 million and $4.7 million for 1994, 1995 and
1996, respectively, and $5.7 million for the six months ended June 30, 1997.
Changes in working capital used were $400,000 and $42,000 in 1994 and 1995,
respectively, and provided $3.5 million and $3.7 million for 1996 and the six
months ended June 30, 1997, respectively. Such changes were primarily due to
an increase in accounts receivable in 1994, which resulted from increased
earned and unearned revenue, increases in income tax receivables and prepaid
expenses in 1995, and, during 1996, an increase in accrued interest, accounts
payable and unearned revenue, partially offset by an increase in accounts
receivable. The increase in 1996 in accrued interest, accounts payable and
accounts receivable resulted primarily from the DeltaCom Acquisition. Such
changes were primarily due to increases in unearned revenue, accrued
liabilities and income tax refunds receivable, offset by increases in accounts
receivable for the six months ended June 30, 1997. Of this increase in
accounts receivable and unearned revenue, $2.3 million and $1.3 million,
respectively, resulted from the Gulf States Acquisition, with the remaining
increase in accounts receivable attributable to increased earned and unearned
revenue in the Carriers' Carrier Services and Retail Services.

Cash used for investing activities was $10.7 million, $1.5 million and $72.7
million for the years ended December 31, 1994, 1995 and 1996, respectively,
and $11.8 million for the six months ended June 30, 1997 (excluding the
investment of $194.8 million of proceeds from the Senior Note Offering pending
the consummation of the Reorganization). The cash used in 1996 was primarily
attributable to the investment of $63.5 million, net of cash received, in
connection with the DeltaCom Acquisition in January 1996. The Company made
capital expenditures of $3.7 million, $1.8 million and $6.2 million for the
years ended December 31, 1994, 1995 and 1996, respectively, and $12.4 million
for the six months ended June 30, 1997. Of the $6.2 million of capital
expenditures in 1996, $4.1 million related to Retail Services and $2.1 million
related to Carriers' Carrier Services. In addition, the Company contributed an
additional $2.4 million to Gulf States FiberNet in 1996 to meet debt service
requirements and to fund additional capital requirements of that business. Of
the $12.4 million of capital expenditures for the six months ended June 30,
1997, $5.7 million related to Carriers' Carrier Services and $6.7 million
related to Retail Services.

45
<PAGE>

Cash provided by financing activities was $10.1 million, $200,000, and $65.1
million for the years ended December 31, 1994, 1995 and 1996, respectively,
and $201.3 million for the six months ended June 30, 1997. Net cash provided
by financing activities for the six months ended June 30, 1997 consisted
primarily of net proceeds of $194.3 million from the sale of the Senior Notes
and $8.2 million of advances received from ITC Holding. For 1996, most of the
cash provided by financing activities was attributable to the DeltaCom
Indebtedness, which was advanced to the Company by ITC Holding from funds
borrowed under a bank facility. See "--Effects of Accounting Standards."

ITC Holding partially financed the DeltaCom Acquisition and the Gulf States
Acquisition with debt, which consists of the following: (i) a $74.0 million
term loan under a bank facility incurred in connection with the DeltaCom
Acquisition and pushed down to the Company (the DeltaCom Indebtedness); (ii) a
$41.6 million Bridge Facility incurred in connection with the Gulf States
Acquisition, which required the refinancing of Gulf States FiberNet's existing
project facility; and (iii) the $10.0 million SCANA Note issued in connection
with the Gulf States Acquisition and assumed by a subsidiary of the Company.

Upon consummation of the Reorganization on July 25, 1997, approximately
$62.7 million of the $192.7 million of net proceeds from the sale of the
Senior Notes were used to purchase U.S. government securities that are being
held by the Senior Note Trustee in a pledged account as security for and to
fund the first six scheduled interest payments on the Senior Notes. The
balance of the net proceeds from the Senior Note Offering, approximately
$131.6 million, was released to the Company. A portion of the released
proceeds was applied on July 25, 1997 as follows: (i) to repay approximately
$48.3 million of indebtedness to ITC Holding (together with approximately $9.5
million of accrued interest) associated with the DeltaCom Acquisition and
advances used by the Company for capital expenditures; and (ii) to repay
approximately $41.6 million of indebtedness incurred under the Bridge Facility
(together with approximately $200,000 of accrued interest). In connection with
the Reorganization, $31.0 million of the DeltaCom Indebtedness was forgiven by
ITC Holding and contributed to the Company as additional equity.

The Company intends to use the net proceeds from the Offering, together with
cash on hand and borrowings expected to be available under the Credit
Facility, (i) to fund market expansion activities of the Company's
telecommunications business, including development and construction costs of
the Company's fiber optic network and its regional sales offices, and (ii) for
additional working capital and other general corporate purposes, including the
funding of cash flow deficits (after capital expenditures). Pending such uses,
the Company will invest such amounts in short-term, interest-bearing,
investment grade securities.

In January 1995, Gulf States FiberNet entered into an interest rate swap
agreement with a $47.5 million principal amount. The agreement swapped the
applicable three-month LIBOR rate selected under Gulf States FiberNet's
project facility with a fixed rate of 8.25%. As of June 30, 1997, Gulf States
FiberNet would have been required to pay $2.1 million to terminate the
interest rate swap. Gulf States FiberNet made payments totaling $600,000, $1.3
million and $500,000 for the years ended December 1995 and 1996 and the six
months ended June 30, 1997, respectively, in connection with this interest
rate swap agreement. Although the related debt (the Bridge Facility) has been
repaid, the Company does not currently intend to terminate this interest rate
swap agreement since the Company plans to draw upon its variable rate Credit
Facility to fund capital expenditures and operating losses in accordance with
its expansion plans. The interest rate swap agreement expires in December
2002.

To achieve its business plan, the Company will need significant financing
for capital expenditure and working capital requirements, including repayment
of indebtedness and operating losses. Expansion of the Company's network,
operations and services will require significant capital expenditures.
Assuming consummation of the Offering, the Company currently estimates that
its aggregate capital requirements will total approximately $150 million in
1997 and 1998, of which a total of approximately $55 million is expected to be
incurred in 1997 (including $12.4 million of capital expenditures made as of
June 30, 1997) and approximately $95 million is expected to be incurred in
1998. The Company expects to make substantial capital expenditures thereafter.
The Credit Facility permits the Company to apply the proceeds of equity
issuances such as the

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Offering to fund capital expenditures. Capital expenditures will be primarily
for the following: (i) addition of facilities-based local telephone service to
its bundle of integrated telecommunications services, including acquisition
and installation of switches and related equipment; (ii) market expansion;
(iii) continued development and construction of its fiber optic network
(including transmission equipment); and (iv) infrastructure enhancements,
principally for information systems. At June 30, 1997, the Company had entered
into agreements with vendors to purchase approximately $11.5 million of
equipment and services, and, for the six months ended June 30, 1997, had made
capital expenditures of $12.4 million. The actual amount and timing of the
Company's capital requirements may differ materially from the foregoing
estimate as a result of regulatory, technological and competitive developments
(including market developments and new opportunities) in the Company's
industry. See "Risk Factors--Significant Capital Requirements; Uncertainty of
Additional Financing."

In September 1997, Interstate FiberNet, Inc., a wholly owned subsidiary of
the Company, entered into a credit agreement with NationsBank for a five-year
$100.0 million term and revolving credit facility to be used for working
capital and other corporate purposes, including refinancing existing
indebtedness of Interstate FiberNet, Inc. at the closing of the Credit
Facility, capital expenditures and permitted acquisitions. The Credit Facility
consists of a $50.0 million multi-draw term facility and a $50.0 million
revolving credit facility, and contains restrictions on Interstate FiberNet,
Inc. and its subsidiaries and requires Interstate FiberNet, Inc. to comply
with certain financial tests and to maintain certain financial ratios. The
Credit Facility is guaranteed by the Company, DeltaCom and Gulf States
Transmission Systems, Inc. and is secured by a first priority lien on all
current and future assets of Interstate FiberNet, Inc. and its subsidiaries
and a first priority pledge of the stock of Interstate FiberNet, Inc. and its
subsidiaries. See "Risk Factors--High Leverage; Ability to Service Debt;
Restructure Covenants" and "Description of Certain Indebtedness--Credit
Facility."

The Company will be dependent on additional capital to fund its growth, as
well as to fund continued operating losses and working capital. The Company
believes that the net proceeds from the Offering, together with cash on hand,
cash flow from operations and available borrowings under the Credit Facility,
will provide sufficient funds to enable the Company to expand its business as
currently planned through the maturity of the Credit Facility in 2002, after
which the Company will need to seek additional financing to fund capital
expenditures and working capital. Because the Credit Facility will mature in
2002, the Company may not have a ready source of liquidity after the maturity
of the Credit Facility in 2002. In the event that the Company's plans or
assumptions change or prove to be inaccurate, the foregoing sources of funds
may prove to be insufficient to fund the Company's currently planned growth
and operations. In addition, if the Company successfully completes any
acquisitions, the Company may be required to seek additional capital sooner
than currently anticipated. Additional sources may include equity and debt
financings and other financing arrangements, such as vendor financing. There
can be no assurance that the Company will be able to generate sufficient cash
flow from operations or that additional financing arrangements will be
available, or if available, that they can be concluded on terms acceptable to
the Company. Failure to generate or obtain sufficient funds would result in
delay or abandonment of some or all of the Company's development and expansion
plans, which could have a material adverse effect on the Company's ability to
service its debt and on the value of the Common Stock.

At June 30, 1997, on a pro forma basis, giving effect to the Reorganization,
the Merger and the Offering, the Company would have had $214.4 million of
indebtedness and its stockholders' equity would have been $135.4 million. On a
pro forma basis, the Company's earnings would have been insufficient to cover
its fixed charges for the year ended December 31, 1996, and the six months
ended June 30, 1997 by $18.2 million and $6.6 million, respectively, and its
EBITDA less capital expenditures and interest expense would have been negative
$14.8 million and negative $13.2 million, respectively.

Although the Company's liquidity has improved, the Company's level of
indebtedness and debt service obligations has significantly increased as a
result of the Senior Note Offering. The successful implementation of the
Company's strategy, including expansion of its network and obtaining and
retaining a significant number of customers, and significant and sustained
growth in the Company's cash flow are necessary for the Company to be

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able to meet its debt service requirements. There can be no assurance that the
Company will successfully implement its strategy or that the Company will be
able to generate sufficient cash flow from operating activities to improve its
earnings before fixed charges, or to meet its debt service obligations and
working capital requirements. The ability of the Company to meet its
obligations will be dependent upon the future performance of the Company,
which will be subject to prevailing economic conditions and to financial,
business and other factors. See "Risk Factors--Significant Capital
Requirements; Uncertainty of Additional Financing" and "--High Leverage;
Ability to Service Debt; Restrictive Covenants" and "Description of Certain
Indebtedness."

EFFECTS OF ACCOUNTING STANDARDS

SFAS No. 121, SFAS No. 123 and SFAS No. 128. Statement of Financial
Accounting Standards ("SFAS") No. 121, Accounting for the Impairment of Long-
lived Assets and for Long-lived Assets to Be Disposed Of, issued by the
Financial Accounting Standards Board, requires the Company to review for
impairment, and potentially write down, the carrying values of long-lived
assets and certain identifiable intangibles (including goodwill) to be held
and used by the Company whenever events or changes in circumstances indicate
that the carrying amount of any such asset may not be recoverable. The Company
adopted SFAS No. 121, effective January 1, 1996, with no material impact on
the combined financial statements.

SFAS No. 123, Accounting for Stock-Based Compensation, establishes a fair
market value based method for financial accounting and reporting stock-based
employee compensation plans. Companies may elect to adopt the measurement
criteria of SFAS No. 123 for accounting purposes, thereby recognizing
compensation expense in results of operations on a prospective basis, or to
disclose the pro forma effects of the new measurement criteria. The Company
has elected to disclose the pro forma effects of the new measurement criteria.
See Note 9 to the combined financial statements.

SFAS No. 128, Earnings Per Share, sets out new guidelines for the
calculation and presentation of earnings per share. The Company does not
anticipate that the adoption of this statement will materially affect its
earnings per share calculation.

"Push Down" of Assets and Liabilities Related to the Acquisitions. ITC
Holding financed the cash purchase price for the DeltaCom Acquisition of
approximately $65.4 million and related debt refinancing of approximately $8.6
million principally with debt. The DeltaCom Acquisition was accounted for
under the purchase method of accounting. In accordance with applicable
accounting requirements of the Securities and Exchange Commission, purchase
transactions that result in one entity becoming substantially wholly owned by
the acquiror establish a new basis of accounting for the purchased assets and
liabilities. Thus, the purchase price for the DeltaCom Acquisition has been
allocated to the underlying assets purchased and liabilities assumed based on
their estimated fair market values at January 29, 1996, the acquisition date.
Because the DeltaCom Acquisition was recorded as a purchase, generally
accepted accounting principles require that the purchase price paid and the
debt incurred by ITC Holding for the DeltaCom Acquisition (and the related
assets) be "pushed down" to establish a new accounting basis in DeltaCom's
financial statements so that the basis of accounting for the purchased assets
and liabilities is the same between ITC Holding and DeltaCom. This accounting
treatment is also required because the Company used a portion of the proceeds
of the Senior Note Offering to repay a significant portion of the debt
incurred by ITC Holding to finance the DeltaCom Acquisition. Similarly, the
purchase price and debt associated with the Gulf States Acquisition was also
"pushed down" to the financial statements of Interstate FiberNet and Gulf
States Transmission.

INFLATION

The Company does not believe that inflation has had a significant impact on
the Company's combined operations.

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BUSINESS

The Company provides retail long distance services to mid-sized and major
regional businesses in the southern United States and is a leading regional
provider of Carriers' Carrier Services. The Company intends to become a
leading regional provider of integrated telecommunications services to mid-
sized and major regional businesses in the southern United States by offering
such customers a broad range of telecommunications services, including local
exchange and long distance data and voice, Internet and operator services, and
the sale and servicing of customer premise equipment, in a single package
tailored to the business customer's specific needs. The Company had pro forma
revenues of approximately $85.4 million for the year ended December 31, 1996
and approximately $54.3 million for the six months ended June 30, 1997.

The Company provides Carriers' Carrier Services to other telecommunications
carriers, including AT&T, MCI, Sprint, WorldCom, Cable & Wireless, LCI,
Frontier and IXC. The Company's fiber optic network reaches over 60 POPs in
ten southern states (Alabama, Arkansas, Florida, Georgia, Louisiana,
Mississippi, North Carolina, South Carolina, Tennessee and Texas) and extends
approximately 6,000 route miles, of which approximately 3,000 miles are
Company-owned and approximately 3,000 miles are owned and operated principally
by three public utilities (Duke Power Company, Florida Power & Light Company
and Entergy Technology Company) and managed and marketed by the Company. The
Company expects to add approximately 300 route miles to its fiber network by
the end of 1997 through long-term dark fiber leases. For the six months ended
June 30, 1997, pro forma revenue for the Company's Carriers' Carrier Services
was $14.3 million and pro forma EBITDA Margin for the Company's Carriers'
Carrier Services was 59%. As of June 30, 1997, on a pro forma basis, the
Company had remaining future long-term contract commitments totaling
approximately $75.8 million. These contracts expire on various dates through
2006 and are expected to generate approximately $56.0 million in revenues to
the Company through 2001, of which approximately $14.5 million are expected to
be realized in 1998.

The Company currently provides a variety of Retail Services, including
retail long distance services such as traditional switched and dedicated long
distance, 800/888 calling, calling card and operator services, ATM and frame
relay, high capacity broadband private line services, as well as Internet,
Intranet and Web page hosting and development services, and customer premise
equipment installation and repair. As of June 30, 1997, the Company provided
services to over 6,600 business customers. The Company currently offers Retail
Services, other than local exchange services (which are provided in two
markets), in 14 metropolitan areas in Alabama, Florida, Georgia, Louisiana,
North Carolina and South Carolina and intends to provide a full range of
Retail Services (including local exchange services) in approximately 22
additional metropolitan areas throughout the southern United States over the
next five years. For the six months ended June 30, 1997, pro forma revenue for
the Company's Retail Services was $40.0 million and pro forma EBITDA Margin
for the Company's Retail Services was 8%.

In August 1997, the Company began offering local exchange services in
Birmingham and Montgomery, Alabama by both reselling the services of the
incumbent local exchange carrier and using its own switching facilities.
Although the Company's local exchange services offerings in such markets are
in the very early stages, initial expressions of customer interest in such
services have been positive, consistent with management's expectations.
However, there can be no assurance that demand for the Company's local
services will match such preliminary indications of customer interest. The
Company expects to offer local exchange services as part of its Retail
Services in a total of six to nine markets (including Birmingham and
Montgomery) by the end of 1997, initially by reselling the services of
incumbent local exchange carriers and, where market conditions warrant, by
using its own local switching facilities.

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elements required to provide local service on a facilities basis, without
using Company-owned facilities. The terms of the Interconnection Agreement,
including interim pricing terms agreed to by the Company and BellSouth, have
been approved by state regulatory authorities in most states, although they
remain subject to review and modification by such authorities. In addition,
the Interconnection Agreement does not resolve all operational issues,
particularly those relating to the collocation of the Company's equipment with
that of BellSouth. The Company and BellSouth are continuing to negotiate to
resolve such issues. The Company expects that the Interconnection Agreement
will provide a foundation for it to provide local service on a reasonable
commercial basis, but there can be no assurance in this regard and important
issues remain unsettled as a result of legal and regulatory developments and
related matters. The Interconnection Agreement expires in July 1999, and there
can be no assurance that the Company will be able to renew it under favorable
terms, or at all.

ITC/\DeltaCom was incorporated in Delaware. The Company's principal executive
offices are located at 206 West Ninth Street, West Point, Georgia 31833, and
its telephone number is (706) 645-8990.

INDUSTRY OVERVIEW

The long distance and local telecommunications markets are currently
undergoing substantial changes, including fundamental changes resulting from
the February 8, 1996 enactment of the Telecommunications Act, and the Company
believes that it is well positioned to take advantage of these developments.

Long Distance Services. Until 1984, AT&T largely monopolized local and long
distance telephone services in the United States. Technological developments
gradually enabled others to compete with AT&T in the long distance market. In
1984, largely as the result of a court decree, AT&T was required to divest its
local telephone systems but was permitted to retain its long distance
operations. Since 1984, competition in the long distance market has increased,
service levels have improved, product offerings have increased and prices for
long distance services have generally declined, all of which has resulted in
increased consumer demand and significant market growth for long distance
services. The increase in competition among long distance providers has also
resulted in a growing trend toward industry consolidation.

Local Services. The market for local exchange services consists of a number
of distinct service components. These service components are defined by
specific regulatory tariff classifications including: (i) local network
services, which generally include basic dial tone, enhanced calling features
and data services (dedicated point-to-point and frame relay service); (ii)
network access services, which consist of access provided by local exchange
carriers to long distance network carriers; (iii) short-haul long distance
network services, which include intraLATA long distance calls; and (iv) other
varied services, including the publication of "white page" and "yellow page"
telephone directories. Industry sources have estimated that the 1995 aggregate
revenues of all local exchange carriers approximated $95 billion. Until
recently, there was virtually no competition in the local exchange markets.

Since 1984, several factors have served to promote competition in the local
exchange market, including: (i) rapidly growing customer demand for an
alternative to the local exchange carrier monopoly, spurred partly by the
development of competitive activities in the long distance market; (ii)
advances in the technology for transmission of data and video, which require
significant capacity and reliability levels; (iii) the development of fiber
optics and digital electronic technology, which reduced network construction
costs while increasing transmission speeds, capacity and reliability as
compared to copper-based networks; (iv) the significant access charges
interexchange carriers are required to pay to local exchange carriers to
access the local exchange carriers' networks; and (v) a willingness on the
part of legislators to enact and regulators to enforce legislation and
regulations permitting and promoting competition in the local exchange market.
In particular, the Telecommunications Act requires all local exchange carriers
to "unbundle" their local network offerings and allow other providers of
telecommunications services to interconnect with their facilities and
equipment. Most significantly, the incumbent local exchange carriers will be
required to complete local calls originated by the Company's customers and
switched by the Company and to deliver inbound local calls to the Company for
termination to its customers, assuring customers of unimpaired local calling
ability. The Company expects to

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obtain access to incumbent carrier local "loop" facilities (the transmission
lines connecting customers' premises to the public telephone network) on an
unbundled basis at reasonable rates. In addition, local exchange carriers are
obligated to provide local number portability and dialing parity upon request
and make their local services available for resale by competitors. Local
exchange carriers also are required to allow competitors non-discriminatory
access to local exchange carrier pole attachments, conduit space and other
rights-of-way. Moreover, states may not erect "barriers to entry" of local
competition, although they may regulate such competition. The Company believes
that, as a result of continued regulatory and technological changes and
competitive trends, competitive local telecommunications companies have
substantial opportunities for growth.

BUSINESS STRATEGY

The Company's objectives are to maintain its leadership position in the
provision of Carriers' Carrier Services and to become a leading provider of
Retail Services in the southern United States. The Company intends to increase
its market share in existing markets and expand into new markets. The
principal elements of the Company's business strategy include the following:

Providing Integrated Telecommunications Services to Existing Base of Mid-
sized and Major Regional Business Customers. By providing additional
telecommunications services such as local telephone service to its existing,
well-established base of long distance customers, the Company expects to be
able to increase revenues at relatively low incremental cost. The Company
believes that bundling a variety of telecommunications services and presenting
customers with one fully integrated monthly billing statement for all of those
services will allow it to penetrate its target markets rapidly and build
customer loyalty. The Company believes that there is substantial demand in its
target markets among mid-sized and major regional business customers for an
integrated package of telecommunications services that meets all of their
telecommunications needs.

Leveraging Its Extensive Fiber Optic Network. The Company intends to
leverage its extensive fiber optic network, which currently reaches over 60
POPs, by (i) continuing to provide switched and transport services to other
communications carriers throughout its region to enable such carriers to
diversify their routes and expand their networks; (ii) targeting customers
that need to transmit large amounts of data within the Company's service
region, such as banks and local and state governments; and (iii) offering
local exchange services to its business customers, which began on a limited
basis in the second half of 1997, as part of its integrated package of
telecommunications services. The Company intends initially to provide local
exchange services by reselling the services of incumbent local exchange
carriers and, in some established markets, using its own local switching
facilities. Over time, the Company expects to provide local services primarily
using the Company's own switching facilities and existing regional fiber optic
network, supplemented by unbundled facilities of incumbent local exchange
carriers or other competitive local exchange carriers. The configuration of
the Company's network enables the Company to expand its network by installing
additional remote local switches, which operate in conjunction with the
Company's DMS-500 switches, to provide facilities-based local services.
Because remote local switches are less expensive to purchase and install than
DMS-500 switches, and can be installed more quickly than DMS-500 switches, the
Company believes that it will be able to enter new markets at less expense
than many of its competitors. At present, the Company does not plan to
construct intra-city local loop facilities.

Focusing on the Southern United States. The Company intends to continue to
focus on the southern United States in order to leverage its extensive
telecommunications network in the region. The Company believes that its
regional focus will enable it to take advantage of economies of scale in
management, network operations and sales and marketing. The regional
concentration of the Company's network also provides an opportunity for
improved margins because a high portion of the Company's customers'
telecommunications traffic originates and terminates within the region. The
Company also believes that its regional focus will enable it to build on its
long-standing customer and business relationships in the region.

Building Market Share through Personalized Customer Service. The Company
believes that the key to revenue growth in its target markets is capturing and
retaining customers by emphasizing marketing, sales and customer service.
Management believes that customers prefer one company to be accountable for
their

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telecommunications services, and that a consultative, face-to-face sales and
service strategy is the most effective method of acquiring and maintaining a
high quality customer base. The Company seeks to obtain long-term commitments
from its business customers by responding rapidly and creatively to their
telecommunications needs. The Company currently operates 14 sales offices in
Alabama, Florida, Georgia, Louisiana, North Carolina and South Carolina. Each
sales office is staffed by personnel capable of marketing all of the Company's
products and providing comprehensive support to the Company's customers. In
the future, the Company expects to expand significantly its direct sales force
and open sales offices in additional major and secondary population centers in
the southern United States.

Expanding Its Fiber Optic Network and Switching Facilities. The Company
expects to expand its fiber optic telecommunications network and switching
facilities to include additional markets within the southern United States.
The Company currently owns and operates approximately 3,000 route miles of
fiber optic network extending from Georgia to Texas, with an additional 300
owned and operated route miles expected to be added by the end of 1997. The
Company also markets and manages capacity on 3,000 additional network route
miles through its strategic relationships principally with public utilities.
In addition, the Company has a buy-sell agreement with Carolinas Fibernet,
LLC, which manages fiber optic facilities in North Carolina and South
Carolina. This agreement enables the parties to buy and sell capacity on each
other's networks and allows the Company to provide customers with access to
POPs throughout those states. The Company believes that, by continuing to
combine its owned network with the networks of public utilities and by adding
switching facilities throughout its network, it will be able to achieve
capital efficiencies and rapidly expand its network in a cost-effective
manner.

Leveraging Proven Management Team. The Company's management team consists of
experienced telecommunications managers who in the past have successfully
implemented a customer-focused long distance telecommunications strategy in
the southern United States. Members of the team include Andrew Walker, Chief
Executive Officer of the Company, Foster McDonald, President of the Company,
and Douglas Shumate, Chief Financial Officer of the Company. ITC Holding was
the Company's sole stockholder prior to the Merger. The Company anticipates
that the experience and contacts of ITC Holding's management and certain of
its stockholders in the telecommunications industry will enhance the Company's
development.

SERVICES AND FACILITIES

Services. The Company currently provides two basic services: (i) Retail
Services and (ii) Carriers' Carrier Services.

Retail Services. Retail Services involve the provision of voice, data or
video telecommunications services to end users or resellers. The Company
currently provides several types of Retail Services, including basic long
distance services (switched, dedicated, and calling card), dedicated Internet
access, data network solutions (frame relay, ATM, point-to-point), the sale
and installation of customer premise equipment and, in two markets, local
exchange services. The Company intends to provide additional types of Retail
Services in the future and expand the markets in which it offers local
services as part of a bundled "one-stop" integrated telecommunications service
which will offer customers a wide range of switch-based value-added services.
The Company's customer-focused software and network architecture will permit
the Company to present its customers with one fully integrated monthly billing
statement for the entire package of Retail Services.

Set forth below are brief descriptions of the Company's Retail Services:

LOCAL SERVICES. The Company intends initially to provide local exchange
services by reselling the services of incumbent local exchange carriers
and, in some established markets, using its own local switching facilities.
Over time, the Company expects to provide local services primarily using
the Company's own switching facilities and existing regional fiber optic
network, supplemented by unbundled facilities of incumbent local exchange
carriers or other competitive local exchange carriers. In August 1997, the
Company began offering local services in Birmingham and Montgomery,
Alabama. The Company

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<PAGE>

expects to offer local services as part of its Retail Services in a total
of six to nine markets (including Birmingham and Montgomery) by the end of
1997.

In connection with offering local services, the Company has entered into
the Interconnection Agreement with BellSouth to (i) resell BellSouth's
local exchange services and (ii) interconnect the Company's network with
BellSouth's network for the purpose of immediately gaining access to the
unbundled network elements necessary to provide local exchange services.
The Interconnection Agreement contains "most favored nation" provisions
which grant the Company the right to obtain the benefit of any arrangements
entered into during the term of the Interconnection Agreement between
BellSouth and any other carrier that materially differ from the rates,
terms or conditions of the Interconnection Agreement. Under the
Interconnection Agreement, each party may resell one or more unbundled
network elements of the other party at agreed upon prices set forth in the
Interconnection Agreement. In addition, each party is required to pay for
the interconnection trunks needed to terminate traffic into the other
party's local network, with the costs of certain two-way interconnection
trunks and ports to be shared by the Company and BellSouth.

The Interconnection Agreement has a term of two years beginning July 1,
1997, and requires the parties to negotiate renewal terms by July 1, 1998
for interconnection commencing July 1, 1999. In the event the parties fail
to agree on such terms, they have agreed to operate under the existing
terms, pending a determination of new terms by a state commission.

LONG DISTANCE. The Company offers a full range of retail long distance
services, including traditional switched and dedicated long distance,
800/888 calling, international, calling card and operator services.

DATA SERVICES. The Company provides high quality data services to its
customers primarily using frame relay switches distributed strategically
throughout the Company's network, enabling customers to use a single
network connection to communicate with multiple sites throughout the
Company's fiber optic network. The Company currently provides ATM services
on a resale basis. Beginning in late 1997 or early 1998, the Company
intends to offer ATM services on its own network, providing data services
to customers that need to transmit large amounts of data within the
Company's service region, such as banks and local and state governments.
The Company will continue to seek, through strategic business relationships
with other providers, to interconnect its fiber optic network with the
fiber optic networks of other companies. The Company anticipates increased
demand for data services in the future, and expects that in the future a
larger percentage of its revenues will be derived from the sale of
dedicated data services.

INTERNET ACCESS, INTRANET SERVICES AND WEB DEVELOPMENT. Since its
acquisition in 1996 of substantially all of the assets of ViperNet, an
Internet access provider and Web page developer for business customers, the
Company has provided dedicated (frame relay) Internet access and Intranet
services, electronic mail, Web page design and Web hosting services. The
Company expects that mid-sized and larger businesses will require faster
Internet access and larger bandwidth in the future, and intends to offer
products that will meet that demand. The Company refers customers
requesting non-dedicated Internet access to MindSpring Enterprises, Inc.
("MindSpring"), a national provider of Internet access, and receives a fee
per referred customer.

CUSTOMER PREMISE EQUIPMENT. The Company sells and installs customer
premise equipment such as telephones, office switchboard systems and, to a
lesser extent, private branch exchanges (PBX) for customers in the
Huntsville, Birmingham, Dothan and Montgomery, Alabama markets. The Company
intends to offer customer premise equipment sales and installation in
additional markets in the future, with the goals of (i) enhancing and
supporting the Company's sale of local and long distance services and (ii)
enhancing customer retention. The Company plans to form relationships with
local customer premise equipment installation companies in all of its
markets for the purpose of selling and installing customer premise
equipment not otherwise provided by the Company.

Carriers' Carrier Services. The Company's Carriers' Carrier Services are
used by customers, such as major telecommunications carriers and non-
facilities based carriers that have switches but do not own transmission
facilities, to transport their already-switched traffic between LATAs. Calls
being transmitted over a

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long-haul circuit for a customer are generally routed by the customer through
a switch to a receiving terminal in the Company's network. The Company
transmits the signals over a long-haul circuit to the terminal where the
signals are to exit the Company's network. The signals are then routed by the
customer through another switch and to the call recipient through a local
exchange carrier. The Company provides DS-1, DS-3 and OC-N services. OC-N
services are used by the Company's customers for very high capacity inter-city
connectivity and specialized high speed data networking. The interface between
the Company's network and the customer's facilities is by either local
exchange carrier or a direct connection between the Company's network and the
facilities of the customer. The Company typically bills the customers a fixed
monthly rate depending on the capacity and length of the circuit, regardless
of the amount the circuit is actually used.

Facilities. The Company owns or manages approximately 6,000 miles of a high
quality fiber optic network which covers portions of ten states in the
southern United States and extends to over 60 POPs. These POPs are located in
almost all major population centers in the areas covered by the fiber optic
network and in a significant number of smaller cities where the Company's only
competitor is the incumbent local exchange carrier.

The Company owns approximately 3,000 miles of its fiber optic network, which
the Company has built or acquired since 1992. In addition, the Company has
strategic relationships principally with three public utilities, Duke Power
Company, Florida Power & Light Company and Entergy Technology Company,
pursuant to which the Company markets, sells and manages capacity on
approximately 3,000 route miles of network owned and operated by the
utilities.

In addition, the Company is able to purchase network capacity to certain
cities not covered by the Company's owned and managed network in North
Carolina and South Carolina pursuant to a buy-sell agreement with Carolinas
Fibernet, LLC, which manages fiber optic facilities in North Carolina and
South Carolina. This agreement enables the parties to buy and sell capacity on
each other's networks at pre-established prices which are generally favorable
to the prices for such capacity available in the open market. Under this
agreement, neither party is responsible for network maintenance charges
relating to the other party's network.

The Company expects to add approximately 300 owned and operated route miles
to its fiber network by the end of 1997 through long-term dark fiber leases.
In addition, as part of its strategy, the Company intends to continue to
evaluate the potential expansion of its network through a combination of new
construction, long-term dark fiber leases and fiber swap transactions,
depending on the extent of capital required over the economic life of the
fiber assets to be deployed.

The Company's decision to further expand its fiber optic network will be
based on various factors, including: (i) the number of its customers in a
market; (ii) the anticipated operating cost savings associated with such
construction; and (iii) any strategic relationships with owners of existing
infrastructure (e.g., utilities and cable operators). Through its strategic
relationships with public utility companies, the Company believes that it will
be able to achieve capital efficiencies in constructing and expanding its
fiber optic network in a rapid and cost-effective manner. The Company also
believes that its fiber optic network, in combination with its personalized
approach to customer service, will create an attractive customer-focused
platform for the provision of local, long distance and enhanced services.

The Company has implemented electronic redundancy throughout its network,
which enables traffic to be rerouted to another fiber in the same fiber sheath
in the event of a partial fiber cut or electronic failure. Approximately 40%
of the Company's owned and operated fiber optic network is also protected by
geographically diverse routing, a network design (also called a "self healing
ring") which enables traffic to be rerouted to an entirely different fiber
optic cable (assuming capacity is available) in the event of a total cable
cut. The Company is continuing to increase the geographic diversity of its
fiber optic network, and expects to have a substantial portion of its network
protected in this manner by the end of 1997.

The Company's switching facilities currently consist of Nortel DMS 500
switches in Birmingham, Alabama and Columbia, South Carolina and a Nortel DMS
250 switch in Arab, Alabama. The Arab switch is capable of

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handling long distance switching and the Birmingham and Columbia DMS 500
switches are capable of handling both local and long distance switching. These
installations enable the Company to market its Retail Services, including
local services, on a switch-based facilities basis in, among other markets,
Huntsville, Birmingham and Montgomery, Alabama; Greenville, Columbia and
Charleston, South Carolina; and Atlanta, Georgia. The Company intends to place
additional switches strategically along its fiber network over the next five
years. The Company also intends to deploy a significant number of Nortel
Access Nodes in the majority of the markets which the Company intends to
serve. The additional switches and nodes will allow the Company to perform
local and long distance switching in its markets on a host/remote type
relationship to the applicable DMS 500 switch. The Nortel Access Nodes will be
connected to the Company's DMS 500 switching platform, utilizing the Company's
fiber network wherever possible. This networking design, together with the
Interconnection Agreement, will enable the Company to be a facilities-based
provider of local and long distance services in all of the markets that it
intends to enter. For those markets in which the Company intends to resell the
services of incumbent local exchange carriers, the Company's platform will be
BellSouth's Centrex product, known as MultiServ, which provides full feature
functionality, such as caller identification, call waiting, remote call
forwarding, call blocking, anonymous call rejection and conference calling.

The Company is a member of the Associated Communications Companies of
America (the "ACCA"), a 12-member trade association that negotiates with
carriers for wholesale telecommunications services for its members. The
collective buying power of its members enables the ACCA to negotiate as if it
were one of the larger long distance providers in the United States.

The Company's data network currently consists of six Cascade 9000 frame
relay switches located in Atlanta and West Point, Georgia; Birmingham,
Montgomery and Arab, Alabama; and Columbia, South Carolina. The Company's data
network connects with BellSouth's and Intermedia Communications' frame relay
networks to provide nationwide connectivity for the Company's customers. The
data network currently serves over 105 customers connected to approximately
560 customer locations. The Company's Cascade frame relay switches have the
capability to provide ATM connectivity, and the Company has one ATM connection
to American Communication Services, Inc. for the Internet. The Company intends
to strategically locate additional frame relay and ATM switch sites over the
next five years, with approximately eight to ten frame relay switches being
added in 1997. These frame relay and ATM switches will be co-located with the
Company's DMS-500 switches at strategic network facility locations, and will
create a data backbone which will support the Company's data services.

SALES AND MARKETING

Retail Services. The Company focuses its sales efforts on mid-sized and
major regional businesses in the southern United States. The Company believes
that it can effectively compete for business customers based upon service,
product diversity, price and reliability. The Company's sales force, composed
of direct sales personnel, technical consultants and technicians, markets the
Company's long distance and local communications services. The Company's
management believes that high quality employee training is a prerequisite for
superior customer service, and as a result each member of the Company's sales
force is required to complete the Company's intensive training program. The
Company's marketing strategy is built upon the belief that customers prefer to
hold one company accountable for all of their telecommunications services.
Each sales office provides technical assistance for its voice, data, Internet
and customer premise equipment as required. Customers are assured a single
point of contact, 24 hours a day, seven days a week.

Marketing to mid-sized and major regional businesses is currently conducted
by over 70 direct sales personnel (and over 120 other field personnel) located
in 14 sales offices in the southern United States. In the future, the Company
expects to expand significantly its direct sales force and open sales offices
in additional major and secondary population centers in the southern United
States. The Company's sales personnel make direct calls to prospective and
existing business customers, conduct analyses of business customers' usage
histories and service needs, and demonstrate how the Company's service package
will improve a customer's

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communications capabilities and costs. Sales personnel locate potential
business customers by several methods, including customer referral, market
research, telemarketing and other networking alliances such as endorsement
agreements with trade associations and local chambers of commerce. The
Company's sales personnel work closely with the Company's network engineers
and information systems consultants to design new service products and
applications. The Company's sales offices are also primarily responsible for
coordinating service and customer premise equipment installation activities.
Technicians survey customers' premises to assess power and space requirements,
and coordinate delivery, installation and testing of equipment.

A primary element of the Company's Retail Services marketing strategy is to
enter into contracts with its customers. Those agreements generally provide
for payment in arrears based on minutes of use for switched services and in
advance for private line services. The agreements generally also provide that
the customer may terminate the affected service without penalty in the event
of substantial and prolonged outages arising from causes within the Company's
control, and for certain other defined causes. To date, no customers have been
terminated under these provisions. Generally, the agreements provide that the
customer must utilize at least a minimum dollar amount (measured by dollars or
minutes of use) of switched long distance services per month for the term of
the agreement.

In addition, the Company markets its business communication services through
advertisements, event sponsorships, trade journals, direct mail and trade
forums. Because the Company intends to distinguish its retail products largely
on the convenience of its single communications bundle and the benefits of the
Company's comprehensive, individualized and innovative customer support, the
Company believes that advertising will play a larger role in its marketing
strategy than it has in the past.

Carriers' Carrier Services. The Company has long-haul circuit contracts with
major long distance carriers, including AT&T, MCI, Sprint, WorldCom, Cable &
Wireless, LCI, Frontier and IXC. As of June 30, 1997, on a pro forma basis,
the Company had remaining future long term contract commitments totaling
approximately $75.8 million. These contracts expire on various dates through
2006 and are expected to generate approximately $56.0 million in revenues to
the Company through 2001, of which $14.5 million are expected to be realized
in 1998. The Company also provides long-haul transmission to customers after
contract expiration on a month-to-month basis. The Company's long-haul
contracts provide for fixed monthly payments, generally in advance. Although
sales volumes from particular customers vary from year to year, the Company
has historically enjoyed high customer retention and circuit renewal rates.

The Company believes that it can continue to compete effectively in the
wholesale, carrier-to-carrier market on the basis of price, reliability,
state-of-the-art technology, route diversity, ease of ordering and customer
service. The Company believes that demand for its Carriers' Carrier Services
will increase as the incumbent local exchange carriers begin competing in the
long distance market.

COMPETITION

The telecommunications industry is highly competitive. The Company competes
primarily on the basis of price, availability, transmission quality,
reliability, customer service and variety of product offerings. The ability of
the Company to compete effectively will depend on its ability to maintain high
quality services at prices generally equal to or below those charged by its
competitors. In particular, price competition in the retail and carrier's
carrier long distance markets has generally been intense and is expected to
increase. Many of the Company's competitors (such as AT&T, MCI, Sprint and
WorldCom on an interexchange basis and BellSouth on an intraLATA basis) have
substantially greater financial, personnel, technical, marketing and other
resources, larger numbers of established customers and more prominent name
recognition than the Company and utilize more extensive transmission networks
than the Company. In addition, IXC and Qwest Communications International Inc.
are constructing nationwide fiber optic systems, including routes through
portions of the southern United States. The Company will also increasingly
face competition in the long distance market from local exchange carriers,
switchless resellers and satellite carriers and may eventually compete with
public utilities

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and cable companies. In particular, Regional Bell Operating Companies such as
BellSouth are now allowed to provide interLATA long distance services outside
their home regions, as well as interLATA mobile services within their regions.
They will be allowed to provide interLATA long distance services within their
regions after meeting certain requirements of the Telecommunications Act
intended to foster opportunities for local telephone competition. The Regional
Bell Operating Companies already have extensive fiber optic cable, switching,
and other network facilities in their respective regions that can be used for
their long distance services. BellSouth and other Regional Bell Operating
Companies are already beginning to take steps toward obtaining approval to
provide in-region long distance services. For example, BellSouth now has an
application pending at the FCC to provide such services in South Carolina.
Although the FCC forced the withdrawal of the first Regional Bell Operating
Company request for in-region long distance authority, and rejected the next
two applications, there can be no assurance that such approvals will be
delayed until local competition is established. In addition, other new
competitors may build additional fiber capacity in the geographic areas served
by the Company.

The Company's principal competitor for local exchange services will be the
incumbent local exchange carrier in the particular market, including BellSouth
in virtually all of the Company's initial market areas. The incumbent local
exchange carriers will enjoy substantial competitive advantages arising from
their historical monopoly position in the local telephone market, including
their preexisting customer relationship with all or virtually all end users.
Furthermore, the Company will be highly dependent on the competing incumbent
local exchange carrier for local network facilities and wholesale services
required in order for the Company to assemble its own local retail products.
The Company will also face competition from competitive local exchange
carriers, some of whom have already established local operations in the
Company's target markets. See "Risk Factors--Dependence on Incumbent Local
Exchange Carriers."

Large long distance carriers, such as AT&T, MCI and Sprint, have begun to
offer local services together with their long distance telecommunications
services in certain markets, and are expected to expand that activity as
opportunities created by the Telecommunications Act develop. In addition,
incumbent local exchange carriers are expected to compete in each other's
markets in some cases. For example, BellSouth has recently announced plans to
provide local services within its geographic region in competition with
independent telephone companies. Wireless telecommunications providers may
develop into effective substitutes for wireline local telephone service. For
example, AT&T recently announced plans to offer local services using a new
wireless technology. AT&T's proposed wireless system would link residential
and business telephones via radio waves to the AT&T network. If successful,
this new service could further enhance AT&T's ability to market, on a
nationwide basis, "one-stop" telecommunications services. The Company also
competes with numerous direct marketers and telemarketers and equipment
vendors and installers with respect to certain portions of its business.

A continuing trend toward consolidation, mergers, acquisitions and strategic
alliances in the telecommunications industry could also increase the level of
competition faced by the Company or the Company's carrier customers. For
example, in December 1996, WorldCom, a national long distance carrier,
acquired MFS Communications Company, Inc., one of the largest competitive
local exchange carriers. In March 1997, BellSouth and IBM announced an
alliance to provide Internet and Intranet services to businesses in the South.
The telecommunications market is very dynamic, and additional competitive
changes are likely in the future.

REGULATION

Overview. The Company's services are subject to federal, state and local
regulation. The Company, through its wholly owned subsidiaries, holds various
federal and state regulatory authorizations. The FCC exercises jurisdiction
over telecommunications common carriers to the extent they provide, originate
or terminate interstate or international communications. The FCC also
establishes rules and has other authority over certain issues related to local
telephone competition. State regulatory commissions retain jurisdiction over
telecommunications carriers to the extent they provide, originate or terminate
intrastate communications. Local governments may require the Company to obtain
licenses, permits or franchises in order to use the public rights of way
necessary to install and operate its networks.

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Federal Regulation. The Company is categorized as a non-dominant carrier by
the FCC, and as a result is subject to relatively limited regulation of its
interstate and international services. Certain general policies and rules
apply, as well as certain reporting requirements, but the Company's rates are
not reviewed. The Company has all the authority required by the FCC to conduct
its long distance business. As a non-dominant carrier, the Company may install
and operate additional wireline facilities for the transmission of domestic
interstate communications without prior FCC authorization.

The FCC also imposes prior approval requirements on transfers of control and
assignments of operating authorizations. The FCC has the authority generally
to condition, modify, cancel, terminate or revoke operating authority for
failure to comply with federal laws and/or the rules, regulations and policies
of the FCC. Fines or other penalties also may be imposed for such violations.
There can be no assurance that the FCC or third parties will not raise issues
with regard to the Company's compliance with applicable laws and regulations.

The FCC also regulates the interstate access rates charged by incumbent
local exchange carriers for the origination and termination of interstate long
distance traffic. Those access rates make up a significant portion of the cost
of providing long distance service. The FCC has recently announced changes to
its interstate access rules that will result in restructuring of the access
charge system and changes in access charge rate levels. These changes will
reduce per-minute access charges and substitute new per-line flat-rate monthly
charges. These actions are expected to reduce access rates, and hence the cost
of providing long distance service, especially to business customers. However,
the full impact of the FCC's new decisions will not be known until those
decisions are implemented over the next several years, during which time those
decisions may be revised. Long distance companies may be disadvantaged if they
have a disproportionate number of customers with multiple local telephone
lines but relatively limited long distance requirements. In addition, AT&T has
committed to reduce its long distance rates to reflect access cost reductions,
and other competitors of the Company are likely to make similar reductions. In
such event, the Company may need to reduce its rates in response to
competitive pressures. In a related proceeding, the FCC has adopted changes to
the methodology by which access has been used in part to subsidize universal
telephone service and other public policy goals.

The Telecommunications Act also gives the FCC a role, working with the state
PUCs, in establishing rules for the implementation of local telephone
competition. The Telecommunications Act imposes a variety of new duties on
incumbent local exchange carriers in order to promote competition in local
exchange and access services, and the FCC has authority to develop rules to
implement these duties. Some smaller independent incumbent local exchange
carriers may seek suspension or modification of these obligations, and some
companies serving rural areas are exempt from them.

In that regard, on August 8, 1996, the FCC adopted the Interconnection
Decision (the "Decision") to implement the interconnection, resale and number
portability provisions of the Telecommunications Act. The Decision establishes
rules pursuant to which incumbent local exchange carriers interconnect their
networks with the networks of competitive local exchange carriers at rates
that are reasonable and non-discriminatory. The Decision also establishes
rules governing the rights of competitive local exchange carriers to obtain
and use elements of the incumbent local exchange carriers' networks at cost-
based rates either to supplement or substitute for alternative local network
facilities that the competitive local exchange carrier would otherwise be
required to install. The Decision sets rules governing competitive local
exchange carrier access to wholesale versions of the incumbent local exchange
carriers' retail local services for resale. The incumbent local exchange
carriers are required to establish administrative support systems so that
these services and functionalities can be made available to other carriers on
a nondiscriminatory basis. The Decision also created rules to deal with
reciprocal compensation for the transport and termination of local
telecommunications, non-discriminatory access to rights of way, and related
matters. A related FCC order adopted the same day established rules
implementing the Telecommunications Act with respect to local and toll dialing
parity among competitors; nondiscriminatory access to telephone numbers,
operator services, directory assistance and listings, and network information;
and reform of numbering administration.

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The FCC's rules were challenged in the federal courts by GTE, the Regional
Bell Operating Companies, large independent incumbent local exchange carriers
and state regulatory commissions. On October 15, 1996, the U.S. Court of
Appeals for the Eighth Circuit issued a stay of the implementation of certain
of the FCC's rules and on July 18 and October 14, 1997, the Court issued
decisions finding that the FCC lacked statutory authority under the
Telecommunications Act for certain of its rules. In particular, the Court
found that the FCC was not empowered to establish the pricing standards
governing unbundled local network elements or wholesale local services of the
incumbent local exchange carriers, or to require such carriers to provide
network elements in a combined form. The Court also struck down other FCC
rules, including one that would have enabled new entrants to "pick and choose"
from provisions of established interconnection agreements between the
incumbent local exchange carriers and other carriers. The Court, however,
rejected certain other objections to the FCC rules brought by the incumbent
local exchange carriers or the states, including challenges to the FCC's
definition of unbundled elements, and to the FCC's rules allowing new
competitors to create their own networks by combining incumbent local exchange
carrier network elements together without adding additional facilities of
their own. The overall impact of the Court's decision is to limit the
obligations of incumbent local exchange carriers as originally interpreted by
the FCC, materially reduce the role of the FCC in fostering local competition,
including its ability to take enforcement action if the Telecommunications Act
is violated, and increase the role of state utility commissions. The FCC has
indicated that it will ask the Supreme Court to review the Court's decisions.
Meanwhile, certain state commissions have asserted that they will be active in
promoting local telephone competition using the authority they have under the
ruling, which may lessen the significance of the reduced FCC role. At this
time the impact of the Court's decision cannot be evaluated and there can be
no assurance that the Court decision and related developments will not have a
material adverse effect on the Company. Furthermore, other FCC rules related
to local telephone competition remain the subject of legal challenges. For
example, on August 22, 1997, the Eighth Circuit Court issued a second order
striking down certain FCC rules regarding dialing parity for new competitors.
There can be no assurance that these and other pending decisions affecting
local competition will not be adverse to companies seeking to enter the local
telephone market.

There can be no assurance that the FCC's remaining rules (including such
rules that may be reinstated by the Supreme Court, if any), together with
rules adopted by state public utility commissions, will be implemented in a
manner that will permit local telephone competition to develop to a
substantial extent and without significant delays. For example, many new
carriers, including the Company, have experienced problems with respect to the
operational support systems used by new carriers to order and receive network
elements and wholesale services from the incumbent local exchange carriers.
These systems are necessary for new carriers like the Company to provide local
service to customers on a timely and competitive basis. The FCC has recently
created a task force to examine problems that have slowed the development of
local telephone competition.

The Company has entered into the Interconnection Agreement with BellSouth.
The Interconnection Agreement currently allows the Company to provide local
service on a resale basis or by purchasing all unbundled network elements
required to provide local service on a facilities basis, without using
Company-owned facilities. The Company and BellSouth have agreed on interim
pricing terms for such resale and purchase of unbundled network elements. The
terms of the Interconnection Agreement, including the interim pricing terms,
are subject to the approval of the PUCs regulating the Company's markets. Such
approval has been received from the PUCs of Alabama, Florida, Georgia,
Kentucky, Louisiana, Mississippi, North Carolina, South Carolina and
Tennessee. In addition, the Interconnection Agreement does not resolve all
operational issues, particularly those relating to the collocation of the
Company's equipment with that of BellSouth. The Company and BellSouth are
continuing to negotiate to resolve such issues. The Company expects that the
Interconnection Agreement will provide a foundation for it to provide local
service on a reasonable commercial basis, but there can be no assurance in
this regard and important issues remain unsettled as a result of the Court
decision and related matters. See "Risk Factors--Dependence on Local Incumbent
Exchange Carriers."

The Company expects to negotiate similar interconnection agreements with
other incumbent local exchange carriers. However, other carriers who have
preceded the Company in the negotiation process with certain of these
incumbent local exchange carriers have expressed dissatisfaction with some of
the terms of their agreements, or

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with the operational support systems by which they obtain the interconnection
they require to provide local services to end users.

As a general matter, no assurance is possible regarding how quickly or how
adequately the Company will be able to take advantage of the opportunities
created by the Telecommunications Act. The Company could be adversely affected
if the court decision reversing some of the new FCC rules, or problems in the
related arbitration and negotiation process, result in increasing the cost of
using incumbent local exchange carrier network elements or services, or if
such actions otherwise result in delays in the implementation of the
Telecommunications Act or impediments to the development of local telephone
competition.

The Telecommunications Act also imposes certain duties on non-incumbent
local exchange carriers, such as the Company. These duties include the
obligation to complete calls originated by competing carriers under reciprocal
arrangements or through mutual exchange of traffic without explicit payment;
the obligation to permit resale of their telecommunications services without
unreasonable restrictions or conditions; and the duty to provide dialing
parity, number portability, and access to rights of way. The Company does not
anticipate that these obligations will impose a material burden on its
operations. However, in view of the fact that local telephone competition is
still in its infancy and implementation of the Telecommunications Act has just
begun, there can be no assurance in this regard.

The Telecommunications Act also establishes the foundation for substantial
additional competition with the Company's long distance operations through
elimination or modification of previous prohibitions on the provision of
interLATA long distance services by the Regional Bell Operating Companies and
GTE. The Regional Bell Operating Companies are now permitted to provide
interLATA long distance service outside those states in which they provide
local exchange service ("out-of-region long distance service") upon receipt of
any necessary state and/or federal regulatory approvals that are otherwise
applicable to the provision of intrastate and/or interstate long distance
service. They also are allowed to provide long distance services for their
cellular and other mobile services within the regions in which they also
provide local exchange service ("in-region service"). The Regional Bell
Operating Companies will be allowed to provide wireline in-region services
upon specific approval of the FCC and satisfaction of other conditions,
including a checklist of interconnection requirements. GTE is permitted to
enter the long distance market without regard to limitations by region. GTE is
also subject to the provisions of the Telecommunications Act that impose
interconnection and other requirements on local exchange carriers. BellSouth
and other Regional Bell Operating Companies have begun to take actions
directed towards obtaining authority from the FCC to offer in-region long
distance services in certain of the states in their respective regions. For
example, BellSouth now has an application pending at the FCC to provide such
services in South Carolina. Although the FCC forced the withdrawal of the
first Regional Bell Operating Company request for in-region long distance
authority, and rejected the next two applications, there can be no assurance
that such approvals will be delayed until local competition is established.
Furthermore, court actions are now pending challenging both the terms under
which the FCC has denied an in-region application and the underlying
provisions of the Telecommunications Act that restrict in-region service.
There can be no assurance that the Regional Bell Operating Companies will be
prevented from offering in-region long distance service until local
competition is established.

The FCC has granted incumbent local exchange carriers certain flexibility in
pricing their interstate special and switched access services. Under this
pricing scheme, local exchange carriers may establish pricing zones based on
access traffic density and charge different prices for access provided in each
zone. The Company anticipates that the FCC will grant incumbent local exchange
carriers increasing pricing flexibility as the number of interconnection
agreements and competitors increases. In a pending rulemaking proceeding
scheduled for completion soon, the FCC is expected to announce new and more
specific policies regarding the conditions and timing under which incumbent
local exchange carriers will be eligible for such increased pricing
flexibility. There can be no assurance that such pricing flexibility will not
place the Company at a competitive disadvantage, either as a purchaser of
access for its long distance operations, or as a vendor of access to other
carriers or end user customers.

State Regulation. The Company is also subject to various state laws and
regulations. Most public utility commissions require providers such as the
Company to obtain authority from the commission prior to the

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initiation of service. In most states, including Alabama, Georgia and Florida,
the Company also is required to file tariffs setting forth the terms,
conditions and prices for services that are classified as intrastate. The
Company also is required to update or amend its tariffs when it adjusts its
rates or adds new products, and is subject to various reporting and record-
keeping requirements.

Many states also require prior approval for transfers of control of
certified carriers, corporate reorganizations, acquisitions of
telecommunications operations, assignment of carrier assets, carrier stock
offerings and incurrence by carriers of significant debt obligations.
Certificates of authority can generally be conditioned, modified, canceled,
terminated or revoked by state regulatory authorities for failure to comply
with state law and/or the rules, regulations and policies of state regulatory
authorities. Fines or other penalties also may be imposed for such violations.
There can be no assurance that state utilities commissions or third parties
will not raise issues with regard to the Company's compliance with applicable
laws or regulations.

The Company has all necessary authority to offer intrastate long distance
services in Alabama, Arkansas, California, Colorado, Connecticut, Delaware,
District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Iowa,
Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Mississippi,
Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New York,
North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South
Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington,
West Virginia, Wisconsin and Wyoming. The Company is authorized to provide
intrastate long distance service in the states of Arizona and Pennsylvania
while certificates in those states are pending. Applications for authority to
provide intrastate long distance service are also pending in several other
states, including Maine, Minnesota and New Mexico. Applications will be filed,
in the near future, in the states of Alaska and Hawaii. The Company seeks
authority to provide long distance service in states outside of its target
markets to enhance its ability to attract business customers with offices, or
whose employees travel, outside of the Company's target markets.

The Company intends initially to provide local exchange services in its
region by reselling the retail local services of the incumbent local exchange
carrier in a given territory and, in some established markets, using its own
local switching facilities. The Company has obtained competitive local
exchange carrier certification in Alabama, Florida, Georgia, Kentucky,
Louisiana, Mississippi, North Carolina, South Carolina and Tennessee.

Many issues remain open regarding how new local telephone carriers will be
regulated at the state level. For example, although the Telecommunications Act
preempts the ability of states to forbid local service competition, the
Telecommunications Act preserves the ability of states to impose reasonable
terms and conditions of service and other regulatory requirements. However,
these statutes and related questions arising from the Telecommunications Act
will be elaborated further through rules and policy decisions made by PUCs in
the process of addressing local service competition issues.

The Company also will be heavily affected by state PUC decisions related to
the incumbent local exchange carriers, particularly in view of the July 18,
1997 decision of the Eighth Circuit Court of Appeals noted above which
recognizes a larger role for state utility commissions and a reduced role for
the FCC. For example, PUCs have significant responsibility under the
Telecommunications Act to oversee relationships between incumbent local
exchange carriers and their new competitors with respect to such competitors'
use of the incumbent local exchange carriers' network elements and wholesale
local services. PUCs arbitrate interconnection agreements between the
incumbent local exchange carriers and new competitors such as the Company when
necessary. PUCs are considering incumbent local exchange carrier pricing
issues in major proceedings now underway. PUCs will also determine how
competitors can take advantage of the terms and conditions of interconnection
agreements that incumbent local exchange carriers reach with other carriers.
It is too early to evaluate how these matters will be resolved, or their
impact on the ability of the Company to pursue its business plan.

States also regulate the intrastate carrier access services of the incumbent
local exchange carriers. The Company is required to pay such access charges to
originate and terminate its intrastate long distance traffic. The Company
could be adversely affected by high access charges, particularly to the extent
that the incumbent

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local exchange carriers do not incur the same level of costs with respect to
their own intrastate long distance services. A related issue is use by certain
incumbent local exchange carriers, with the approval of PUCs, of extended
local area calling that converts otherwise competitive intrastate toll service
to local service. States also are or will be addressing various intraLATA
dialing parity issues that may affect competition. It is unclear whether state
utility commissions will adopt changes in their rules governing intrastate
access charges similar to those recently approved by the FCC for interstate
access. The Company's business could be adversely affected by such changes.

The Company also will be affected by how states regulate the retail prices
of the incumbent local exchange carriers with which it competes. The Company
believes that, as the degree of intrastate competition increases, the states
will offer the incumbent local exchange carriers increasing pricing
flexibility. This flexibility may present the incumbent local exchange
carriers with an opportunity to subsidize services that compete with the
Company's services with revenues generated from non-competitive services,
thereby allowing incumbent local exchange carriers to offer competitive
services at lower prices than they otherwise could. The Company cannot predict
the extent to which this may occur or its impact on the Company's business.

Local Government Authorizations. The Company is required to obtain street
use and construction permits and licenses and/or franchises to install and
expand its fiber optic networks using municipal rights of way. In some
municipalities where the Company has installed or anticipates constructing
networks, it will be required to pay license or franchise fees based on a
percentage of gross revenues or on a per linear foot basis. There can be no
assurance that, following the expiration of existing franchises, fees will
remain at their current levels. In many markets, the incumbent local exchange
carriers do not pay such franchise fees or pay fees that are substantially
less than those required to be paid by the Company, although the
Telecommunications Act requires that in the future such fees be applied in a
competitively neutral manner. To the extent that, notwithstanding the Act,
competitors do not pay the same level of fees as the Company, the Company
could be at a competitive disadvantage. Termination of the existing franchise
or license agreements prior to their expiration dates or a failure to renew
the franchise or license agreements and a requirement that the Company remove
its facilities or abandon its network in place could have a material adverse
effect on the Company.

General. The telecommunications market is in a period of substantial change
and uncertainty. As the Telecommunications Act and related FCC and state
actions are implemented, new issues are likely to arise that can affect the
Company and its business plan. No assurance can be given that future
regulatory developments will not have a materially adverse impact on the
Company.

FACILITIES, REAL PROPERTY AND LEASES

The Company leases its corporate headquarters space in West Point, Georgia
from the successor to ITC Holding's interest in this property. The lease
expires in 2005 and may be terminated by either party on 90 days' notice. See
"Certain Transactions--ITC Holding." The Company also owns a switch site in
Birmingham, Alabama and leases space for a network operations center and a
switch site in Arab, Alabama. In addition, the Company intends to construct a
multi-service facility in Anniston, Alabama to function as a centralized
switching control center for the Company's network and an operator services
center. Construction of the Anniston facility is expected to commence by the
end of 1997 and to be completed in the second quarter of 1998.

The Company operates sales offices in Atlanta (two offices), Georgia;
Pensacola, Florida; Columbia and Greenville, South Carolina; Charlotte, North
Carolina; New Orleans and Baton Rouge, Louisiana; and Huntsville, Mobile,
Auburn, Dothan, Florence, Montgomery and Birmingham, Alabama. The leases for
these offices expire between 1997 and 2001.

As part of its fiber optic network and switched service system, the Company
owns or leases rights of way, land, office space and towers throughout the
southern United States.

The Company owns land and microwave transmission towers at various locations
in Alabama.

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<PAGE>

The Company expects to lease or purchase additional office space and
switching and other network facilities in connection with the planned
expansion of its telecommunications network system.

The Company believes that all of its properties are well maintained.

EMPLOYEES

As of September 30, 1997, the Company had over 500 full-time employees, none
of whom was represented by a union or covered by a collective bargaining
agreement. The Company believes that its relationship with its employees is
good. In connection with the construction and maintenance of its fiber optic
network and the conduct of its other business operations, the Company uses
third party contractors, some of whose employees may be represented by unions
or covered by collective bargaining agreements.

LEGAL PROCEEDINGS

In May 1997, the U.S. District Court for the Middle District of Alabama,
Southern Division returned a verdict against DeltaCom in Digitel Corporation
v. DeltaCom, Inc., Richard A. Wilkins, John A.R. Smith, and Edward L.
Blackwell, awarding plaintiff $265,000 in damages. Plaintiff in this action
alleged that certain of its former employees violated the non-solicitation
agreements they had entered into with plaintiff as part of their employment.
Plaintiff further alleged that DeltaCom, as the current employer of these
former employees, shares liability for their alleged violations. DeltaCom is
indemnified by the former stockholders of DeltaCom against both the attorney's
fees incurred in defending the action and the judgment resulting from the
action.

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<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The table below sets forth, as of September 30, 1997, certain information
concerning the directors and executive officers of the Company. The Board of
Directors (the "Board") currently consists of nine directors, divided into
three classes of directors serving staggered three-year terms. Directors and
executive officers of the Company are elected to serve until they resign or
are removed, or are otherwise disqualified to serve, or until their successors
are elected and qualified. Directors of the Company are elected at the annual
meeting of stockholders. Executive officers of the Company generally are
appointed at the Board's first meeting after each annual meeting of
stockholders.

<TABLE>
<CAPTION>
TERM AS
NAME AGE POSITION(S) WITH COMPANY DIRECTOR EXPIRES
---- --- ------------------------ ----------------
<C> <C> <S> <C>
Campbell B. Lanier, III.... 46 Chairman, Director 2000
Andrew M. Walker........... 55 Chief Executive Officer, 2000
Director
Foster O. McDonald......... 35 President
Douglas A. Shumate......... 32 Senior Vice President-Chief
Financial Officer
Steven D. Moses............ 47 Senior Vice President-
Network Services
J. Thomas Mullis........... 54 Senior Vice President-
General Counsel, Secretary
Roger F. Woodward.......... 44 Senior Vice President-
Sales, Marketing and
Customer Support
Sara L. Plunkett........... 47 Vice President-Finance,
Treasurer
Donald W. Burton........... 53 Director 1998
Malcolm C. Davenport, V.... 44 Director 1998
Robert A. Dolson (1)....... 52 Director 1999
O. Gene Gabbard (1)(2)..... 57 Director 1999
William T. Parr (2)........ 60 Director 1998
William H. Scott, III (2).. 50 Director 1999
William B. Timmerman....... 50 Director 2000
</TABLE>
- --------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee

Campbell B. Lanier, III has been Chairman of the Company since March 1997.
Mr. Lanier served as Chairman of the Board and Chief Executive Officer of ITC
Holding prior to the Merger and served as a director of ITC Holding since its
inception in 1985 through a predecessor company. In addition, Mr. Lanier
serves as an officer and director of several former ITC Holding subsidiaries.
He also is a director of KNOLOGY Holdings, Inc. ("KNOLOGY") (a broadband
telecommunications services company) (formerly known as CyberNet Holding,
Inc.), MindSpring (a company that provides Internet services), National Vision
Associates, Ltd. (a full service optical retailer) and K&G Men's Centers
("K&G") (a discount retailer of men's clothing), Vice Chairman of the Board of
AvData Systems, Inc. ("AvData") (a company providing data communications
networks) and Chairman of the Board of Powertel, Inc. (formerly InterCel,
Inc.) ("Powertel") (a wireless telecommunications services company). He served
as Chairman of the Board of AvData from 1988 to 1990 and has served as a
Managing Director of South Atlantic Private Equity Fund IV, Limited
Partnership since 1997.

Andrew M. Walker has been Chief Executive Officer of the Company since March
1997. He served as President and Chief Executive Officer of the managing
partner of each of Interstate FiberNet and Gulf States FiberNet from November
1994 until March 1997. Mr. Walker has served as a director of KNOLOGY since
July 1996, and he served as Chief Executive Officer and President of KNOLOGY
from July 1996 to February 1997.

64
<PAGE>

Mr. Walker worked for MCI from 1990 to 1994 as Vice President Carrier
Services. From 1986 to 1990, Mr. Walker served as a Division President for
Telecom*USA, Inc. ("Telecom*USA"). Prior to 1986, Mr. Walker held different
positions with the Christian Broadcasting Network, M/A-Com and Comsat
Laboratories ("Comsat").

Foster O. McDonald has been President of the Company since March 1997. He
served as President of DeltaCom from January 1991 until March 1997. From
February 1996 until March 1997, Mr. McDonald also served as Chief Executive
Officer of DeltaCom. From May 1984 through December 1990, Mr. McDonald served
as Vice President and General Manager of DeltaCom. He also serves as a
director of Brindlee Mountain Telephone Company.

Douglas A. Shumate has been Senior Vice President and Chief Financial
Officer of the Company since March 1997. He served as Chief Financial Officer
of the Managing Partners of each of Interstate FiberNet and Gulf States
FiberNet from January 1995 until March 1997. From May 1991 to January 1995, he
served as Vice President-Finance and Chief Financial Officer of Interstate
Telephone Company ("Interstate Telephone"), a local telephone service provider
and wholly owned subsidiary of ITC Holding. From December 1986 through April
1991, Mr. Shumate was employed as a C.P.A. at Arthur Andersen LLP.

Steven D. Moses has been Senior Vice President-Network Services of the
Company since March 1997. He served as Vice President of Interstate FiberNet
from January 1992 until April 1995 and Chief Operating Officer of Interstate
FiberNet from April 1995 until March 1997. From May 1991 to January 1992, Mr.
Moses served as Director-Special Projects of Interstate Telephone and Valley
Telephone Company ("Valley Telephone") (a local telephone service provider and
a wholly owned subsidiary of ITC Holding).

J. Thomas Mullis has been Senior Vice President, General Counsel and
Secretary of the Company since March 1997. Mr. Mullis served as General
Counsel and Secretary of DeltaCom from May 1985 to March 1997 and as Executive
Vice President of DeltaCom from January 1994 to November 1996. From November
1996 to March 1997, he also served as Senior Vice President of DeltaCom. From
January 1990 to December 1993, Mr. Mullis served as President, General Counsel
and Secretary of both Southern Interexchange Services, Inc. (a switched
services carrier) and Southern Interexchange Facilities, Inc. (a private line
carriers' carrier).

Roger F. Woodward has been Senior Vice President-Sales, Marketing and
Customer Support of the Company since March 1997. Mr. Woodward served as
Senior Vice President-Sales of DeltaCom from October 1996 until March 1997.
From March 1990 until July 1996, Mr. Woodward served in a variety of
positions, including Regional Sales Director and Vice President-Sales, with
Allnet Communications, Inc., which was acquired by Frontier in August 1995.

Sara L. Plunkett has been Vice President-Finance and Treasurer for the
Company since March 1997. She served as Vice President-Finance of DeltaCom
from October 1996 until March 1997. From May 1989 through October 1996, she
served as Chief Financial Officer of DeltaCom.

Donald W. Burton has been a director of the Company since March 1997. He has
served as the Managing General Partner of South Atlantic Venture Funds since
1983 and as the General Partner of The Burton Partnership, Limited Partnership
since 1979. Since 1981, he has served as President of South Atlantic Capital
Corporation. Mr. Burton serves as director of Powertel, K&G, MTL, Inc. (a bulk
transportation service company), the Heritage Group of Mutual Funds and
several private companies.

Malcolm C. Davenport, V has been a director of the Company since March 1997.
He has operated his own C.P.A. and law practices since 1979 and 1983,
respectively. Mr. Davenport also served as a director of ITC Holding prior to
the Merger and serves as a director of several of its former subsidiaries,
Spintek Gaming Technologies, Inc. (a gaming technology provider) and American
Artists Film Corporation (a motion picture production company).

65
<PAGE>

Robert A. Dolson has been a director of the Company since March 1997. He has
served as President and Chairman of Continental Water Company (a holding
company for regulated water utilities) since 1982 and 1989, respectively. He
has served as President and Chairman of National Enterprises, Inc. (the parent
company of Continental Water Company) since 1984 and 1989, respectively. He
served as a director of ITC Holding from December 1993. He also serves as a
director of several private companies.

O. Gene Gabbard has been a director of the Company since March 1997. He has
worked independently as an entrepreneur and consultant since February 1993.
Mr. Gabbard served as a director of ITC Holding prior to the Merger and
currently serves as Chairman of the Board of KNOLOGY and as a director of
Powertel, MindSpring and KNOLOGY. He also currently serves as a director of
two telecommunications technology companies, Dynatech Corporation and Adtran,
Inc. From August 1990 through January 1993, he served as Executive Vice
President and Chief Financial Officer of MCI. He served in various senior
executive capacities, including Chairman of the Board, President and Chief
Executive Officer of Telecom*USA, Inc. from December 1988 until Telecom's
merger with MCI in August 1990. From July 1984 to December 1988, he was
Chairman and/or President of SouthernNet, Inc. ("SouthernNet"), a long
distance telecommunications company which was the predecessor to Telecom*USA.
Mr. Gabbard has served as a Managing Director of South Atlantic Private Equity
Fund IV, Limited Partnership since 1997.

William T. Parr has been a director of the Company since March 1997. Mr.
Parr has served as Vice Chairman of J. Smith Lanier & Co. (an insurance
placement company) since 1980. He served as a director of ITC Holding prior to
the Merger and serves as a director of ITC Services Co., Inc. (a management
services company), Valley Telephone, InterCall, Inc. (a conference calling
service provider) and Globe Telecommunications, Inc. ("Globe") (a non-
regulated telecommunications provider), all of which were subsidiaries of ITC
Holding. He also serves as a director of AvData, J. Smith Lanier & Co. and
Industrial Distribution Group, Inc. (a supplier of maintenance, repair,
operating and production products). Mr. Parr previously served as a director
of SouthernNet.

William H. Scott, III has been a director of the Company since March 1997.
Mr. Scott served as President of ITC Holding from December 1991 and as a
director of ITC Holding from May 1989. Mr. Scott is a director of Powertel,
AvData, KNOLOGY and MindSpring. From 1989 to 1991, he served as Executive Vice
President of ITC Holding. From 1985 to 1989, Mr. Scott was an officer and
director of Async. Between 1984 and 1988, Mr. Scott held several offices with
SouthernNet, including Chief Operating Officer, Chief Financial Officer, and
Vice President-Administration. He was a director of SouthernNet from 1984 to
1987.

William B. Timmerman has been a director of the Company since March 1997.
Since 1978 he has served in a variety of management positions at SCANA
Corporation (a diversified utility company), including Chief Executive
Officer, President, Senior Vice President, Executive Vice President and Chief
Financial Officer. Mr. Timmerman is also director of SCANA Corporation,
Powertel and Liberty Corporation (a life insurance company) and served as a
director of ITC Holding prior to the Merger.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board currently has two committees, the Audit Committee and the
Compensation Committee. The Audit Committee, among other things, recommends
the firm to be appointed as independent accountants to audit the Company's
financial statements, discusses the scope and results of the audit with the
independent accountants, reviews with management and the independent
accountants the Company's interim and year-end operating results, considers
the adequacy of the internal accounting controls and audit procedures of the
Company and reviews the non-audit services to be performed by the independent
accountants. The current members of the Audit Committee are Messrs. Dolson and
Gabbard.

The Compensation Committee reviews and recommends the compensation
arrangements for management of the Company and administers the Company's stock
option plans. The current members of the Compensation Committee are Messrs.
Gabbard, Parr and Scott.

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<PAGE>

DIRECTOR COMPENSATION

Directors of the Company who are also employees of the Company receive no
directors' fees. Non-employee directors receive directors' fees of $750 for
each Board meeting attended in person, $200 for each Board meeting attended by
telephone and $200 for each Board committee meeting attended (whether in
person or by telephone conference). In addition, directors are reimbursed for
their reasonable out-of-pocket travel expenditures incurred. Directors of the
Company are also eligible to receive grants of stock options under the
Director Stock Option Plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The current members of the Compensation Committee are Messrs. Gabbard, Parr
and Scott.

STOCK OPTION PLANS

1997 Stock Option Plan. The Stock Option Plan provides for the grant of
options that are intended to qualify as "incentive stock options" under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), to
employees of the Company and its subsidiaries, as well as the grant of non-
qualifying options to any other individual whose participation in the Stock
Option Plan is determined to be in the best interests of the Company. The
Stock Option Plan authorizes the issuance of up to 2,407,500 shares of Common
Stock pursuant to options granted under the Stock Option Plan (subject to
anti-dilution adjustments in the event of a stock split, recapitalization or
similar transaction). The maximum number of shares subject to options that may
be awarded under the Stock Option Plan to any person is 802,500 shares. The
Compensation Committee of the Board of Directors will administer the Stock
Option Plan and will grant options to purchase Common Stock.

The option exercise price for incentive stock options granted under the
Stock Option Plan may not be less than 100% of the fair market value of the
Common Stock on the date of grant of the option (or 110% in the case of an
incentive stock option granted to an optionee beneficially owning more than
10% of the outstanding Common Stock). The option exercise price for non-
incentive stock options granted under the Stock Option Plan may not be less
than the par value of the Common Stock on the date of grant of the option. The
maximum option term is ten years (or five years in the case of an incentive
stock option granted to an optionee beneficially owning more than 10% of the
outstanding Common Stock). Options may be exercised at any time after grant,
except as otherwise provided in the particular option agreement. There is also
a $100,000 limit on the value of Common Stock (determined at the time of
grant) covered by incentive stock options that become exercisable by an
optionee in any year. Options granted will become exercisable with respect to
50% of the shares subject to the options on the second anniversary of the date
of grant and with respect to 25% of the shares subject to the options on each
of the third and fourth anniversaries of the date of grant.

The Board of Directors may amend or terminate the Stock Option Plan with
respect to shares of Common Stock as to which options have not been granted.

At October 20, 1997, options to purchase an aggregate of 1,452,793 shares of
Common Stock were outstanding under the Stock Option Plan.

Director Stock Option Plan. The Director Stock Option Plan provides for the
"formula" grant of options that are not intended to qualify as "incentive
stock options" under Section 422 of the Code to directors of the Company who
are not officers or employees of the Company, ITC Holding or any subsidiary of
the Company (each an "Eligible Director"). The Director Stock Option Plan
authorizes the issuance of up to 240,750 shares of Common Stock pursuant to
options granted under the Director Stock Option Plan (subject to anti-dilution
adjustments in the event of a stock split, recapitalization or similar
transaction). The option exercise price for options granted under the Director
Stock Option Plan will be 100% of the fair market value of the shares of
Common Stock on the date of grant of the option. Under the Director Stock
Option Plan, each Eligible Director will be granted an option to purchase
16,050 shares of Common Stock upon such person's initial

67
<PAGE>

election or appointment to serve as a director. Options granted will become
exercisable with respect to 50% of the shares subject to the options on the
second anniversary of the date of grant and with respect to 25% of the shares
subject to the options on each of the third and fourth anniversaries of the
date of grant. The options will expire ten years and 30 days after the date of
grant. The Board of Directors may amend or terminate the Director Stock Option
Plan with respect to shares of Common Stock as to which options have not been
granted.

At October 20, 1997, stock options to purchase 96,300 shares of Common Stock
were outstanding pursuant to the Director Stock Option Plan.

Assumed ITC Holding Options. In connection with the Merger, options
outstanding under the ITC Holding stock option plans were assumed by the
Company and were converted into options to purchase 3,461,833 shares of Common
Stock. See "History of the Company--Holding Company Merger."

EXECUTIVE COMPENSATION

During 1997 Messrs. Walker, McDonald, Mullis, Woodward and Moses (the "Named
Executive Officers") expect to earn salaries at annual rates of $150,000,
$135,000, $131,472, $125,000 and $110,000, respectively. If certain
performance goals are met, Messrs. Walker, McDonald, Mullis, Woodward and
Moses expect to earn bonuses of $90,000, $75,000, $35,855, $50,000 and
$61,111, respectively.

On March 24, 1997, the Company granted Messrs. Walker, McDonald, Mullis,
Woodward and Moses options to purchase 200,625, 120,375, 64,200, 80,250 and
80,250 shares of Common Stock, respectively. Messrs. Walker, McDonald, Mullis,
Woodward and Moses have been granted options to purchase 109,943, 56,140,
43,044, 36,864 and 72,811 shares of common stock of ITC Holding, respectively,
under the ITC Holding incentive stock option plan. In connection with the
Merger, options outstanding under such ITC Holding stock option plan were
assumed by the Company and were converted into options to purchase shares of
Common Stock. These options will continue to vest according to the schedule
set forth in each Named Executive Officer's respective stock option agreement
unless such Named Executive Officer's employment with the Company is
terminated, in which case options that have not vested at that time will
terminate.

CERTAIN TRANSACTIONS

The Company has adopted a policy requiring that any material transactions
between the Company and persons or entities affiliated with officers,
directors or principal stockholders of the Company be on terms no less
favorable to the Company than reasonably could have been obtained in arm's-
length transactions with independent third parties.

The following is a summary of certain transactions and relationships between
the Company and ITC Holding, its other wholly owned subsidiaries, or entities
in which ITC Holding prior to the Merger held more than 10% of the equity
interests, and among the Company and its directors, executive officers and
stockholders and its associated entities. In connection with the Merger, ITC
Holding merged with and into the Company. See "History of the Company--Holding
Company Merger."

The Company, through Interstate FiberNet, Inc. (and formerly through
Interstate FiberNet, a Georgia general partnership), sells capacity on its
fiber optic network to several former ITC Holding subsidiaries and affiliates,
including Powertel and Powertel PCS, Inc., Globe, InterCall, KNOLOGY and
MindSpring. Together, these entities paid Interstate FiberNet, Inc.
approximately $422,000, $316,000 and $243,000 for such capacity for the years
ended December 31, 1996, 1995 and 1994 and $456,000 for the six months ended
June 30, 1997, respectively.

Since 1996, the Company, through DeltaCom, has provided long distance and
carrier switched long distance service to several former ITC Holding
subsidiaries and affiliates, including KNOLOGY, InterCall, Interstate

68
<PAGE>

Telephone, Valley Telephone, Powertel and MindSpring. Together, these entities
paid DeltaCom approximately $1.4 million for the year ended December 31, 1996
and $1,755,000 for the six months ended June 30, 1997. Since 1996, DeltaCom has
also earned commissions by serving as agent for certain interexchange carriers
doing business with Powertel, InterCall and MindSpring. Under these agreements,
DeltaCom contracts with the interexchange carrier and rebills the appropriate
access charges plus a margin to Powertel, InterCall and MindSpring. Together,
Powertel, InterCall and MindSpring paid DeltaCom commissions totaling
approximately $514,000 for the year ended December 31, 1996, and $462,000 for
the six months ended June 30, 1997.

In 1995, the Company, through Interstate FiberNet and Gulfstates FiberNet,
constructed a fiber route on behalf of KNOLOGY. KNOLOGY reimbursed the Company
for approximately $62,000 worth of construction expenses. The Company also
provided certain engineering and construction-related management services,
estimated to have a value of $50,000, to KNOLOGY in 1995. The Company did not
charge KNOLOGY for these services.

In addition to his responsibilities with the Company, Mr. Walker also served
as President and Chief Executive Officer of KNOLOGY for the period from July
15, 1996 through February 20, 1997. He served in this capacity at the request
of KNOLOGY and ITC Holding and received no compensation from KNOLOGY. The
Company estimates the value of services provided to be approximately $20,000.

In 1996, Interstate FiberNet provided certain engineering and construction-
related management services to Powertel. Interstate FiberNet charged
approximately $57,000 for these services.

In 1995, the Company provided certain network optimization services for
InterCall. InterCall paid $24,000 for such services.

The Company, through Interstate FiberNet, Inc. (and formerly through
InterQuest), provides directory assistance and operator service to Powertel,
Interstate Telephone and Valley Telephone. Revenues recorded by the Company for
these services were approximately $433,000, $245,000 and $202,000 for the years
ended December 31, 1996, 1995 and 1994, respectively, and $451,000 for the six
months ended June 30, 1997.

Since 1996, DeltaCom has purchased feature group access from Interstate
Telephone and Valley Telephone. Access fees paid by DeltaCom to these entities,
in the aggregate, totaled approximately $401,000 in 1996 and $87,000 for the
six months ended June 30, 1997.

Since 1995, InterCall has provided conference calling services to Interstate
FiberNet (and now to Interstate FiberNet, Inc.) and (beginning in 1996) to
DeltaCom. The Company paid approximately $80,000 and $1,000 for such services
for the years ended December 31, 1996 and 1995, respectively, and $35,000 for
the six months ended June 30, 1997.

ITC Holding, through certain of its subsidiaries, from time to time provided
the Company (and its subsidiaries) with administrative and staff services. The
amounts paid by the Company to ITC Holding and its affiliates for these
services for the years ended December 31, 1996, 1995 and 1994, were $19,000,
$5,000 and $148,000, respectively, and $65,000 for the six months ended June
30, 1997.

Since 1995, ITC Holding advanced funds to InterQuest at a variable rate equal
to the rate paid by ITC Holding through its credit facility with First Union
and CoBank, plus .5%. For the years ended December 31, 1995 and 1996 and the
six months ended June 30, 1997, InterQuest recorded interest expenses to ITC
Holding of approximately $123,000, $97,000 and $40,000, respectively. For the
year ended December 31, 1996 and for the six months ended June 30, 1997,
DeltaCom advanced excess funds from its operations to ITC Holding at an annual
interest rate of 8.25% and DeltaCom recorded interest income of approximately
$78,000 and $7,000, respectively. The advance is repayable on demand.

69
<PAGE>

The Company leased office space in West Point, Georgia from ITC Holding
beginning in January 1995. Under its lease, the Company paid ITC Holding rent
in the amount of approximately $2,500 per month. The lease was terminable by
either party on 90 days' notice. In 1996, the Company paid ITC Holding an
additional $7,000 in tax reimbursement payments for 1995 and 1996.

In 1996, InterQuest purchased certain switching equipment located in West
Point, Georgia from Globe for approximately $120,000. During the six months
ended June 30, 1997, DeltaCom sold equipment to KNOLOGY for $204,000.

Certain officers and directors of the Company held positions in ITC Holding
prior to the Merger and hold or have held positions with various former
subsidiaries of ITC Holding. See "Management--Directors and Executive
Officers." In addition, certain Company officers and directors held ownership
interests in ITC Holding.

SCANA

In March 1997, in the Gulf States Acquisition, ITC Holding acquired SCANA's
64% partnership interest in Gulf States FiberNet and the Georgia Fiber Assets.
The purchase price of approximately $27.9 million was paid in the form of the
SCANA Note in the aggregate principal amount of approximately $10.0 million
and 588,411 shares of Series A Convertible Preferred Stock of ITC Holding. See
"Description of Certain Indebtedness--SCANA Note." In addition, pursuant to an
earn-out provision, ITC Holding agreed that, no later than April 30, 1998, it
would issue to SCANA that number of shares of such Series A Convertible
Preferred Stock that in aggregate value equal 35.7% of the product of (a) 64%,
multiplied by (b)(i) six, multiplied by (ii) the amount (if any) by which the
earnings before interest, taxes, depreciation and amortization of the Gulf
States FiberNet business for the fiscal year ended December 31, 1997 exceeds
$11,265,696. Prior to the Merger, ITC Holding issued to SCANA 56,742 shares of
its Series A Convertible Preferred Stock pursuant to this earn-out provision.
In connection with the Merger, such shares of Series A Convertible Preferred
Stock of ITC Holding were converted into 130,734 shares of Series A Preferred
Stock of the Company. After the Merger, any additional payment by the Company
under the earn-out provision will be made in shares of the Company's Series A
Preferred Stock.

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<PAGE>

PRINCIPAL STOCKHOLDERS

Prior to the Merger, which was consummated on October 20, 1997, all of the
Company's issued and outstanding capital stock, consisting of 15,000,000
shares of Class B Common Stock, was owned beneficially and of record by ITC
Holding. See "History of the Company--Holding Company Merger" and "Description
of Capital Stock."

The following table sets forth information, as of October 20, 1997,
concerning beneficial ownership of the Common Stock, as adjusted to reflect
the sale of the Common Stock in the Offering, by (i) each stockholder who is
known by the Company to be a beneficial owner of more than 5% of the Common
Stock, (ii) each director of the Company, (iii) each executive officer of the
Company and (iv) all directors and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
PRIOR TO THE OFFERING AFTER THE OFFERING
------------------------ ---------------------
NUMBER OF PERCENTAGE NUMBER PERCENTAGE
NAME OF BENEFICIAL OWNER SHARES (A)(B) OF CLASS OF SHARES OF CLASS
- ------------------------ ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
SCANA Communications, Inc.
(c)........................... 1,784,724 9.3% 1,784,724 7.4%
National Enterprises, Inc.
(d)........................... 2,016,321 10.5 2,016,321 8.4
J. Smith Lanier (e)............ 1,888,483 9.9 1,888,483 7.8
Donald W. Burton (f)........... 1,200,279 6.3 1,200,279 5.0
Malcolm C. Davenport, V (g).... 342,092 1.8 342,092 1.4
Robert A. Dolson (h)........... 2,016,321 10.5 2,016,321 8.4
O. Gene Gabbard................ 101,871 * 101,871 *
Campbell B. Lanier, III (i).... 4,610,874 23.8 4,610,874 18.9
Foster O. McDonald (j)......... 234,083 1.2 234,083 *
Steven D. Moses................ 43,826 * 43,826 *
J. Thomas Mullis............... 3,840 * 3,840 *
William T. Parr................ 127,492 * 127,492 *
Sara L. Plunkett............... 767 * 767 *
William H. Scott, III (k)...... 684,982 3.5 684,982 2.8
Douglas A. Shumate (l)......... 68,000 * 68,000 *
William B. Timmerman (m)....... 1,784,724 9.3 1,784,724 7.4
Andrew M. Walker............... 56,178 * 56,178 *
Roger F. Woodward.............. 3,838 * 3,838 *
All executive officers and di-
rectors as a group (15 per-
sons)......................... 11,191,615 56.7 11,191,615 46.4
</TABLE>
- --------
* Less than one percent.

(a) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), a person is deemed to be the beneficial
owner, for purposes of this table, of any shares of common stock if such
person has or shares voting power or investment power with respect to such
security, or has the right to acquire beneficial ownership at any time
within 60 days from October 20, 1997. As used herein, "voting power" is
the power to vote or direct the voting of shares and "investment power" is
the power to dispose or direct the disposition of shares. Unless otherwise
indicated, each stockholder listed has sole voting and investment power
with respect to the shares shown as beneficially owned by such
stockholder.

(b) Includes the following shares that the individuals named below have the
right to purchase within 60 days from October 20, 1997 pursuant to
options:

<TABLE>
<S> <C>
Donald W. Burton..................................................... 3,409
O. Gene Gabbard...................................................... 3,409
Campbell B. Lanier, III.............................................. 210,522
Steven D. Moses...................................................... 39,403
William H. Scott, III................................................ 278,407
Douglas A. Shumate................................................... 51,729
Andrew M. Walker..................................................... 29,030
-------
Total............................................................ 615,913
=======
</TABLE>

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<PAGE>

(c) Excludes 1,486,440 shares of Common Stock which will be issuable upon
conversion of the Series A Preferred Stock issued in the Merger and shares
of Common Stock which will be issuable upon conversion of any additional
Series A Preferred Stock which may be issued under an earn-out arrangement
related to the Gulf States Acquisition. See "History of the Company--
Holding Company Merger" and "Certain Transactions--SCANA." The address of
SCANA Communications, Inc. is 440 Knox Abbott Drive, Suite 240, Cayce, SC
29033.
(d) The address of National Enterprises, Inc. is 535 North New Ballas Road,
St. Louis, MO 63141.

(e) Includes 325,639 shares held of record by Mr. J. Lanier's wife; 29,952
shares held of record by the Lanier Family Foundation, of which Mr. J.
Lanier is co-trustee; and 57,600 shares held of record by the Campbell
Lanier, Jr. Irrevocable Life Insurance Trust, of which Mr. J. Lanier is
co-trustee.

(f) Includes 62,157 shares held of record by The Burton Partnership, Limited
Partnership, of which Mr. Burton is the sole general partner; 109,065
shares held of record by South Atlantic Venture Fund II, Limited
Partnership, of which South Atlantic Venture Partners II, Limited
Partnership is the sole general partner, of which Mr. Burton is the
managing general partner; 564,844 shares held of record by South Atlantic
Venture Fund III, Limited Partnership, of which South Atlantic Venture
Partners III, Limited Partnership is the sole general partner of which Mr.
Burton is the managing partner; 181,450 shares held of record by South
Atlantic Venture Fund IV, L.P., of which Mr. Burton is a general partner;
and 279,352 shares held of record by South Atlantic Venture Fund IV (QP),
L.P., of which Mr. Burton is a general partner. Also includes 3,409
unexercised but vested options held of record by South Atlantic Venture
Fund II, Limited Partnership.

(g) Includes 299,452 shares held of record by the Malcolm C. Davenport, V
Family Trust, of which Mr. Davenport is co-trustee.

(h) Includes 2,016,321 shares held of record by National Enterprises, Inc., of
which Mr. Dolson is President.

(i) Includes 207 shares in the aggregate held of record by Mr. C. Lanier's
wife; 29,952 shares held of record by the Lanier Family Foundation, of
which Mr. C. Lanier is co-trustee; and 57,600 shares held of record by the
Campbell Lanier, Jr. Irrevocable Life Insurance Trust, of which Mr. C.
Lanier is co-trustee.

(j) Includes 176,482 shares held of record by three McDonald family trusts, of
which Mr. McDonald is trustee.

(k) Includes 1,958 shares in the aggregate held of record by members of Mr.
Scott's immediate family; 29,952 shares held of record by the Lanier
Family Foundation, of which Mr. Scott is co-trustee; 57,600 shares held by
the Campbell Lanier, Jr. Irrevocable Life Insurance Trust, of which Mr.
Scott is co-trustee; 85,038 shares held of record by Campbell B. Lanier,
III Charitable Remainder Trust, of which Mr. Scott is trustee; 23,671
shares held in trust for Mr. Scott's minor daughter, of which Mr. Scott's
wife is co-trustee; and 1,440 shares held of record by the Campbell B.
Lanier, IV 2503(c) Trust, of which Mr. Scott is trustee.

(l) Includes 1,216 shares held of record by Mr. Shumate's wife.

(m) Includes 1,784,724 shares held of record by SCANA, of which Mr. Timmerman
is Chief Executive Officer.

DESCRIPTION OF CERTAIN INDEBTEDNESS

CREDIT FACILITY

The Company's wholly owned subsidiary, Interstate FiberNet, Inc. (the
"Borrower") has entered into a credit agreement with NationsBank, as
administrative lender, and the lenders set forth therein (the "Credit
Agreement"). The Credit Agreement provides for a $100.0 million term and
revolving Credit Facility to be used for working capital and other purposes,
including refinancing indebtedness of the Borrower existing at the closing of
the Credit Facility, capital expenditures and permitted acquisitions. The
following summary of the material provisions of the Credit Agreement does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Credit Agreement, a copy of which has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
Certain capitalized terms used in this description of the Credit Facility are
defined at the end of this section.

The Credit Facility will mature on September 15, 2002. The Credit Facility
includes a $50.0 million multi-draw term loan facility and a $50.0 million
revolving credit facility. The Borrower may draw down amounts under the term
loan facility until the second anniversary of the Credit Facility. The
aggregate amount of all advances under the term loan facility must equal $50.0
million before the Borrower may draw down any amount over $10 million under
the revolving credit facility.

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<PAGE>

Amounts drawn under the Credit Facility will bear interest, at the
Borrower's option, at either the Base Rate or the LIBOR Rate, plus an
Applicable Margin. The Applicable Margin will be an annual rate which will
fluctuate based on the Borrower's Total Leverage Ratio and which will be
between 1.75% and .75% for Base Rate borrowings and between 2.75% and 1.75%
for LIBOR Rate borrowings.

The Credit Agreement requires the Borrower to repay indebtedness outstanding
under the Credit Facility with the net cash proceeds from sales of assets by
the Company, the Borrower or the Borrower's subsidiaries other than in the
ordinary course of business and from certain public or private issuances of
equity securities (excluding the Offering) or debt securities by the Company,
the Borrower or the Borrower's subsidiaries.

The Borrower's obligations under the Credit Facility are guaranteed by the
Company and the Borrower's subsidiaries and are secured by a first priority
lien on all current and future assets and properties of the Borrower and its
subsidiaries, except for certain contract rights and interests in real estate,
and by a first priority pledge of the stock of the Borrower and its
subsidiaries.

The Credit Agreement contains negative covenants limiting the ability of the
Borrower, the Borrower's current and future subsidiaries and the Company to
incur debt, create liens, pay dividends, make distributions or stock
repurchases, make investments or capital expenditures, change their business,
issue capital stock, engage in transactions with affiliates, sell assets,
engage in mergers and acquisitions and assume or make guaranties. In addition,
the Credit Agreement contains affirmative covenants, including covenants
requiring compliance with laws, maintenance of corporate existence, licenses,
properties and insurance, payment of taxes and performance of other material
obligations and the delivery of financial and other information.

The Credit Agreement restricts the Borrower from declaring and paying
dividends or other distributions to the Company. However, the Borrower is
permitted to pay dividends to the Company to pay scheduled interest on the
Senior Notes beginning after the sixth scheduled interest payment, unless at
the time of such dividend or distribution an event of default (other than an
event of default resulting solely from the breach of a representation or
warranty) under the Credit Facility exists or would be caused by such dividend
or distribution; provided that, with respect to any event of default (other
than a payment default, a bankruptcy event with respect to the Company, the
Borrower, the Borrower's subsidiaries, any person or entity liable for the
performance of any of the obligations under the Credit Facility or any person
or entity the property of which secures the performance of any of the
obligations under the Credit Facility, or the loss of a material license or
fiber network), the Borrower will not be prohibited for more than 180 days
from paying dividends to the Company to pay scheduled cash interest due and
payable on the Senior Notes.

The Credit Agreement also requires the Borrower to comply with certain
financial tests and to maintain certain financial ratios on a consolidated
basis. The Borrower must maintain (i) a Total Leverage Ratio no greater than
9.5:1.0 through June 30, 1998, 8.75 to 1.0 from July 1, 1998 to June 30, 1999,
7.5 to 1.0 from July 1, 1999 to June 30, 2000, 6.0 to 1.0 from July 1, 2000 to
June 30, 2001 and 4.5 to 1.0 from July 1, 2001 and thereafter; (ii) a Senior
Leverage Ratio no greater than 2.75:1.0 through June 30, 1999 and 2.25:1.0
thereafter; (iii) an Interest Coverage Ratio no less than 3.75:1.0 through
June 30, 2000 and 1.75:1.0 thereafter; (iv) capital expenditures no greater
than $57,650,600 for the fiscal year 1997, $57,150,000 for the fiscal year
1998, $34,800,000 for the fiscal year 1999, $40,400,000 for the fiscal year
2000, $41,100,000 for the fiscal year 2001 and $36,750,000 for the fiscal year
2002; provided, that (A) to the extent that less than such amount is used for
any fiscal year, the limitation on capital expenditures for the immediately
succeeding fiscal year may be increased by the amount of such unused amount,
(B) during 1997, the Borrower may elect to reduce its 1998 limitation by $8
million and increase its 1997 limitation by $8 million, and (C) the amount of
net cash proceeds from certain issuances of equity securities (including the
Common Stock offered hereby) may be used for capital expenditures in excess of
the foregoing limitations; and (v) a minimum Operating Cash Flow of no less
than $16,700,000 for the fiscal year 1997, $21,700,000 for the fiscal year
1998, $36,700,000 for the fiscal year 1999, $52,800,000 for the fiscal year
2000, $77,800,000 for the fiscal year 2001 and $92,000,000 for the fiscal year
2002.

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<PAGE>

Failure to satisfy any of the financial covenants constitutes an event of
default under the Credit Facility, notwithstanding the ability of the Borrower
to meet its debt service obligations. The Credit Agreement also includes other
customary events of default, including, without limitation, a cross-default to
other indebtedness, material undischarged judgments, bankruptcy and a change
of control.

As used in this section:

"Annualized Operating Cash Flow" means Operating Cash Flow for the six-month
period most recently ended, multiplied by two.

"Interest Coverage Ratio" means, for the Borrower on a consolidated basis
for any period, the ratio of Annualized Operating Cash Flow to the aggregate
amount of interest due and payable by the Company, the Borrower and the
Borrower's subsidiaries with respect to Total Debt during such period net of
interest on the Senior Notes funded by Pledged Securities, interest income for
such period, interest actually paid-in-kind, any one-time facility fees paid
in connection with the Credit Facility and in connection with any pre-existing
debt of the Company, the Borrower or the Borrower's subsidiaries, and up to
$9.5 million of accrued interest paid by the Borrower to ITC Holding prior to
the closing of the Credit Facility.

"Operating Cash Flow" for any period means the consolidated net income
(loss) of the Company, the Borrower and the Borrower's subsidiaries for such
period plus the following amounts for such period, to the extent included in
the determination of such income (loss): depreciation expense, amortization
expense and other non-cash charges reducing income, net interest expense, and
income tax expense.

"Senior Leverage Ratio" means, for the Borrower on a consolidated basis at
any date, the ratio of Senior Debt (Total Debt minus the Senior Notes) to
Annualized Operating Cash Flow.

"Total Debt" means the aggregate indebtedness of the Borrower for borrowed
money on a consolidated basis, net of cash balances in excess of $5 million
plus, except for purposes of calculating the Senior Leverage Ratio, the
balance of Pledged Securities securing the Senior Notes.

"Total Leverage Ratio" means at any date, for the Borrower on a consolidated
basis, the ratio of Total Debt on such date to Annualized Operating Cash Flow.

SENIOR NOTES

On June 3, 1997, the Company completed the sale of $200.0 million principal
amount of its 11% Senior Notes due 2007. Interest on the Senior Notes is
payable semiannually in cash, on each June 1 and December 1, commencing on
December 1, 1997.

The Senior Notes are unsubordinated indebtedness of the Company, ranking
pari passu in right of payment with all existing and future unsubordinated
indebtedness of the Company. Approximately $63.0 million of the net proceeds
from the sale of the Senior Notes are being held in a pledged account as
security for and to fund the first six interest payments on the Senior Notes.

The Senior Notes will mature on June 1, 2007. The Senior Notes are
redeemable at the option of the Company, in whole or in part, at any time on
or after June 1, 2002, initially at 105.5% of their principal amount,
declining ratably to 100% of their principal amount, plus accrued interest, on
or after June 1, 2004. In addition, at any time prior to June 1, 2000, the
Company may redeem up to 35% of the aggregate principal amount of the Senior
Notes from the proceeds of one or more public equity offerings at 111% of
their principal amount; provided at least $130.0 million principal amount of
Notes remain outstanding.

Upon a "Change of Control" of the Company (as defined in the Senior Note
Indenture), the Company will be required to make an offer to purchase the
Senior Notes at a purchase price equal to 101% of their principal amount, plus
accrued interest.

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<PAGE>

The Senior Note Indenture contains certain covenants that affect, and in
certain cases significantly limit or prohibit, among other things, the ability
of the Company to incur indebtedness, pay dividends, prepay subordinated
indebtedness, repurchase capital stock, make investments, engage in
transactions with stockholders and affiliates, create liens, sell assets and
engage in mergers and consolidations. If the Company fails to comply with
these covenants, the Company's obligation to repay the Senior Notes may be
accelerated. However, these limitations are subject to a number of important
qualifications and exceptions. In particular, while the Senior Note Indenture
restricts the Company's ability to incur additional indebtedness by requiring
compliance with specified leverage ratios, it permits the Company and its
subsidiaries to incur an unlimited amount of additional indebtedness to
finance the acquisition of equipment, inventory and network assets and up to
$100 million of additional indebtedness.

SCANA NOTE

The SCANA Note has been assumed by Interstate FiberNet, Inc., which became a
wholly owned subsidiary of the Company as part of the Reorganization. The
SCANA Note, which has a principal balance of approximately $10.0 million, has
a maturity date of March 31, 2002. Interest accrues on the SCANA Note at an
annual rate of 11% and is payable semiannually in arrears. Principal is
payable semiannually, commencing on September 30, 1997, in equal semiannual
installments of $996,409. The SCANA Note is unsecured.

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company before the Merger consisted of
60,000,000 shares of Class A Common Stock, par value $.01 per share, of which
no shares were outstanding, 30,000,000 shares of Class B Common Stock, par
value $.01 per share, of which 15,000,000 shares held by ITC Holding were
outstanding, and 5,000,000 shares of preferred stock, par value $.01 per
share, of which no shares were outstanding. In connection with the Merger, the
Company's Certificate of Incorporation was amended and restated in order,
among other things, to change the Company's authorized capital stock. The
description of the Company's capital stock set forth below refers to the
Certificate of Incorporation as it was amended and restated at the time of the
Merger and is currently in effect.

The following description does not purport to be complete and is subject to
the provisions of the Company's Certificate of Incorporation and Bylaws, which
are included as exhibits to the Registration Statement of which this
Prospectus forms a part and by the provisions of applicable law.

AUTHORIZED AND OUTSTANDING CAPITAL STOCK

Pursuant to the Certificate of Incorporation, the Company has authority to
issue 95,000,000 shares of capital stock, consisting of 90,000,000 shares of
Common Stock, par value $.01 per share, and 5,000,000 shares of Preferred
Stock, par value $.01 per share (the "Preferred Stock"). In connection with
the Merger, holders of ITC Holding common stock received 19,126,731 shares of
Common Stock and SCANA, the sole holder of ITC Holding preferred stock,
received 1,486,440 shares of the Company's Series A Preferred Stock with terms
substantially identical to those of the ITC Holding Series A Convertible
Preferred Stock. Of the shares of the Company's Series A Preferred Stock
received by SCANA, 130,734 shares were issued upon the conversion of 56,742
shares of ITC Holding Series A Convertible Preferred Stock issued by ITC
Holding to SCANA prior to the Merger in connection with an earn-out
arrangement related to the Gulf States Acquisition. Additional shares of
Series A Preferred Stock may be issuable to SCANA in connection with this
earn-out arrangement. See "Certain Transactions--SCANA." In addition, options
outstanding under the ITC Holding stock plans were assumed by the Company in
the Merger and were converted into options to purchase 3,461,833 shares of
Common Stock. See "History of the Company--Holding Company Merger."

COMMON STOCK

Voting Rights. Each holder of the Common Stock is entitled to attend all
special and annual meetings of the stockholders of the Company and, together
with the holders of all other classes of stock entitled to attend and vote at
such meetings, to vote upon any matter or thing (including, without
limitation, the election of one or more directors) properly considered and
acted upon by the stockholders. Each holder of the Common Stock is entitled to
one vote per share with respect to all such matters.

75
<PAGE>

Liquidation Rights. In the event of any dissolution, liquidation or winding
up of the Company, whether voluntary or involuntary, the holders of the Common
Stock and holders of any class or series of stock entitled to participate
therewith, will become entitled to participate equally on a per-share basis in
the distribution of any assets of the Company remaining after the Company
shall have paid, or provided for payment of, all debts and liabilities of the
Company and after the Company shall have paid, or set aside for payment, to
the holders of any class of stock having preference over the Common Stock in
the event of dissolution, liquidation or winding up the full preferential
amounts (if any) to which they are entitled. See "--Series A Preferred Stock."

Dividends. Subject to the rights, if any, of the holders of shares of
Preferred Stock, the holders of the Common Stock and holders of any class or
series of stock entitled to participate therewith as to dividends are entitled
to receive dividends, when, as and if declared by the Board of Directors, out
of any assets legally available therefor. The Company has never paid dividends
and the Company's ability to pay cash dividends is limited by the terms of the
Credit Facility and the Senior Note Indenture. See "Dividend Policy" and
"Description of Certain Indebtedness--Credit Facility" and "--Senior Notes."

No holder of Common Stock has any preemptive right to subscribe for any of
the Company's securities, nor does any holder of Common Stock have conversion
rights. The rights, privileges, preferences and priorities of holders of the
Common Stock are subject to, and may be adversely affected by, the rights of
the holders of the Series A Preferred Stock and shares of any series of
Preferred Stock which the Company may designate and issue in the future.

SERIES A PREFERRED STOCK

The Board of Directors has designated 1,750,000 shares of Preferred Stock as
Series A Convertible Preferred Stock.

Conversion Rights. Holders of Series A Preferred Stock have the right, at
any time after March 14, 2002, to convert each share of Series A Preferred
Stock into one share of Common Stock, subject to adjustment for stock splits,
stock dividends, recapitalizations and other specified events.

Liquidation Rights. In the event of any dissolution, liquidation or winding
up of the Company, whether voluntary or involuntary, holders of Series A
Preferred Stock will be entitled to receive a distribution of $6.96 per share
(subject to adjustment based on the initial public offering price of the
Common Stock and other factors), plus any dividends declared and unpaid, prior
to any payment or distribution of assets to holders of Common Stock. After
such distribution has been made, and after the holders of any other class or
series of stock having preference over the Common Stock have received the full
preferential amounts to which they are entitled, holders of Common Stock will
be entitled to an equivalent distribution of $6.96 per share (subject to
adjustment as indicated above), plus any dividends declared and unpaid, out of
remaining assets of the Company. Holders of Series A Preferred Stock and
holders of Common Stock and any other class or series of stock entitled to
participate with the Common Stock will be entitled to share ratably in the
distribution of any remaining assets of the Company, with holders of Series A
Preferred Stock entitled to receive an amount equal to the distribution made
in respect of the number of shares of Common Stock into which the Series A
Preferred Stock is then convertible.

Dividend Rights. The holders of Series A Preferred Stock are entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available therefor, dividends in an amount per share of Series A
Preferred Stock equal to the dividends payable on the number of shares of
Common Stock into which one share of Series A Preferred Stock is then
convertible. So long as any shares of Series A Preferred Stock are
outstanding, no dividends may be declared or paid on the Common Stock any
other class or series of capital stock ranking on a parity with the Series A
Preferred Stock as to dividends.

No Redemption Rights. The Series A Preferred Stock is not subject to
mandatory or optional redemption.

Voting Rights. Except as set forth in the following sentence, holders of
Series A Preferred Stock have no voting rights. The affirmative vote of
holders of at least two-thirds of the shares of Series A Preferred Stock
outstanding is necessary for (i) the authorization or issuance of any class of
stock ranking prior to the Series A

76
<PAGE>

Preferred Stock as to dividends or the distribution of assets upon
dissolution, liquidation or winding up of the Company, (ii) an increase in the
authorized or issued amount of Series A Preferred Stock or (iii) the
amendment, alteration or repeal, whether by merger, consolidation or
otherwise, of any provision of the Certificate of Incorporation that would
affect any right, preference or voting power of the Series A Preferred Stock.

PREFERRED STOCK

The Certificate of Incorporation authorizes the Board, from time to time and
without further stockholder action, to provide for the issuance of up to
5,000,000 shares of Preferred Stock in one or more series, of which 1,750,000
shares have been designated as Series A Convertible Preferred Stock, and to
fix the relative rights and preferences of the shares, including voting
powers, dividend rights, liquidation preferences, redemption rights and
conversion privileges. As of the date hereof, the Board has not provided for
the issuance of any series of Preferred Stock other than the Series A
Preferred Stock and there are no agreements or understandings for the issuance
of any such other series of Preferred Stock. Because of its broad discretion
with respect to the creation and issuance of Preferred Stock without
stockholder approval, the Board could adversely affect the voting power of the
holders of Common Stock and, by issuing shares of Preferred Stock with certain
voting, conversion and/or redemption rights, could discourage any attempt to
obtain control of the Company.

CERTAIN CHARTER, BYLAW AND STATUTORY PROVISIONS

The Certificate of Incorporation contains provisions that may have the
effect of deferring hostile takeovers or delaying changes in control or
management of the Company. The Certificate of Incorporation provides for the
division of the Board into three classes of directors, serving staggered
three-year terms. In addition, the Certificate of Incorporation provides that
directors may be removed only by the vote of at least two-thirds of the shares
entitled to vote thereon and that vacancies on the Board of Directors and
newly created directorships generally may only be filled by a majority of the
directors then in office or by a sole remaining director. Stockholder action
generally may be taken only at an annual or special meeting of stockholders
and may not be taken by written consent in lieu of a meeting, unless such
consent is unanimous. As provided in the Certificate of Incorporation, special
meetings of stockholders may be called only by the Company's Chairman of the
Board or by a majority of the directors in office. The Certificate of
Incorporation further provides that the approval of the holders of at least
two-thirds of the shares entitled to vote thereon are necessary for (i) the
alteration, amendment or repeal of the Certificate of Incorporation relating
to the foregoing provisions, limitation of director liability and the vote
requirements for such amendments to the Certificate of Incorporation and (ii)
the amendment or repeal of the Company's Bylaws.

The Company's Bylaws provide that any stockholder wishing to nominate
persons for election as directors at a meeting of stockholders must deliver to
the Secretary of the Company at the Company's principal executive office a
written notice of the stockholder's intention to make such a nomination. The
stockholder must furnish the notice not less that 60 days prior to the meeting
date (or, if the Company provides less than 75 days' notice or prior public
disclosure of the meeting date, not later than the close of business on the
fifteenth day following the date the Company mails the notice or provides
public disclosure). The stockholder's notice is required to include the
following information: (i) as to each person whom the stockholder proposes to
nominate for election or re-election as a director, (a) the name, age,
business address and residence address of such person, (b) the principal
occupation or employment of such person, (c) the class and number of shares of
the Company's stock which are beneficially owned by such person and (d) any
other information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Exchange Act (including,
without limitation, such person's written consent to be named in the proxy
statement as a nominee and to serve as a director if elected); and (ii) as to
the stockholder giving the notice, (a) the name and address, as they appear on
the Company's books, of the stockholder and (b) the class and number of shares
of the Company's stock which are beneficially owned by the stockholder.

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<PAGE>

The Company is subject to the provisions of Section 203 of the Delaware
Corporation Law. In general, the statute prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless (i) prior to such
date, the board approved either the business combination or the transaction
that resulted in such person becoming an interested stockholder, (ii) upon
consummation of the transaction that resulted in such person becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding, for purposes of determining the number of shares
outstanding, shares owned by certain directors or certain employee stock
plans) or (iii) on or after the date the stockholder became an interested
stockholder, the business combination is approved by the board of directors
and authorized by the affirmative vote (and not by written consent) of at
least two-thirds of the outstanding voting stock excluding the stock owned by
the interested stockholder. A "business combination" includes a merger, asset
sale or other transaction resulting in a financial benefit to the interested
stockholder. An "interested stockholder" is a person who (other than the
corporation and any direct or indirect majority-owned subsidiary of the
corporation), together with affiliates and associates, owns (or, as an
affiliate or associate, within three years prior, did own) 15% or more of the
corporation's outstanding voting stock.

The Certificate of Incorporation empowers the Board to redeem any of the
Company's outstanding capital stock, at a price determined by the Board, which
price shall be at least equal to the lesser of (i) fair market value (as
determined in accordance with the Certificate of Incorporation) or (ii) in the
case of a "Disqualified Holder," the lesser of fair market value or such
holder's purchase price (if the stock was purchased within one year of such
redemption) to the extent necessary to prevent the loss or secure the
reinstatement of any license, operating authority or franchise from any
governmental agency. A "Disqualified Holder" is any holder of shares of stock
of the Company whose holding of such stock may result in the loss of, or the
failure to secure the reinstatement of, any license or franchise from any
governmental agency held by the Company or any of its subsidiaries to conduct
any portion of the business of the Company or any of its subsidiaries. Under
the Telecommunications Act, non-U.S. citizens or their representatives,
foreign governments or their representatives, or corporations organized under
the laws of a foreign country may not own, in the aggregate, more than 20% of
a common carrier licensee or more than 25% of the parent of a common carrier
licensee if the FCC determines that the public interest would be served by
prohibiting such ownership. Additionally, the FCC's rules may under certain
conditions limit the size of investments by foreign telecommunications
carriers in U.S. international carriers.

TRANSFER AGENT AND REGISTRAR

American Stock Transfer & Trust Company will serve as transfer agent and
registrar for the Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering, there has been no public market for the Common Stock
of the Company. Future sales of substantial amounts of Common Stock in the
public market, or the perception that such sales could occur, could adversely
affect the prevailing market price of the Common Stock.

Upon completion of the Offering, there will be 24,126,731 shares of Common
Stock outstanding. Of these shares, the 5,000,000 shares expected to be sold
in the Offering will be freely transferable without restriction or further
registration under the Securities Act, except for shares purchased by
"affiliates" of the Company, as that term is defined in Rule 144 under the
Securities Act. The remaining 19,126,731 shares of Common Stock outstanding
will be "restricted securities," as that term is defined in Rule 144, and may
in the future be sold without registration under the Securities Act to the
extent permitted by Rule 144 or any applicable exemption under the Securities
Act.

The Company, its directors and executive officers and certain other
stockholders, who together own more than 80% of the Common Stock outstanding
immediately prior to the Offering, have entered into "lock-up" agreements with
the Underwriters, providing that they will not (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any

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<PAGE>

securities convertible into or exercisable or exchangeable for Common Stock,
or (ii) enter into any swap or other agreement that transfers to another, in
whole or in part, any of the economic consequences of ownership of such shares
of Common Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other securities,
in cash or otherwise, for a period of 180 days after the date of this
Prospectus without the prior written consent of Morgan Stanley & Co.
Incorporated, other than (u) the sale to the Underwriters of the shares of
Common Stock offered hereby, (v) the issuance by the Company of shares of
Common Stock upon the exercise of an option or a warrant or the conversion of
a security outstanding on the date of this Prospectus of which the
Underwriters have been advised in writing, (w) transactions relating to shares
of Common Stock or other securities acquired in open market transactions after
the completion of the Offering, (x) transfers of shares of the Common Stock to
the Company, (y) a pledge, grant of security interest or other encumbrance
effected in a bona fide transaction with an unrelated and unaffiliated
pledgee, under a written pledge agreement that provides that the pledgee shall
hold the shares of the Common Stock subject to the same terms described in
this paragraph and, as a condition precedent to such pledge, security interest
or other encumbrance, shall be required to execute and deliver a "lock-up"
agreement containing terms described in this paragraph or (z) any transfer to
a trust for the benefit of such transferor or such transferor's spouse or
lineal descendants or any transfer by gift, will or intestate succession to
such transferor's spouse or lineal descendants, provided, in each case, that
as a condition precedent to such transfer, the transferee, or the trustee or
legal guardian on behalf of such transferee, executes and delivers a "lock-up"
agreement containing terms described in this paragraph. The foregoing
restrictions will not apply to (i) the issuance by the Company of shares of
Series A Preferred Stock to SCANA under an earn-out arrangement related to the
Gulf States Acquisition, (ii) the issuance by the Company of options to
purchase 3,461,833 shares of Common Stock with respect to the options
originally granted by ITC Holding under the ITC Holding stock option plans and
assumed by the Company in the Merger or (iii) the issuance of additional
options to purchase shares of Common Stock pursuant to the Stock Option Plan
or the Director Stock Option Plan.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially
owned "restricted securities" for at least one year would be entitled to sell
within any three-month period a number of shares that does not exceed the
greater of (i) 1% of the number of shares of Common Stock then outstanding
(which will equal 241,267 shares immediately after the Offering) or (ii) the
average weekly trading volume of the Common Stock on the Nasdaq National
Market during the four calendar weeks preceding the filing of a notice on Form
144 with respect to such sale with the Commission. Sales under Rule 144 are
also subject to certain other requirements regarding the manner of sale,
notice and availability of current public information about the Company. The
holding period for sales of shares pursuant to the volume limitation
provisions of Rule 144 applicable to the 19,126,731 shares of Common Stock
issued in connection with the Merger will terminate one year following the
date such shares are issued by the Company. Under Rule 144(k), a person who is
not deemed to have been an affiliate of the Company at any time during the 90
days preceding a sale, and who has beneficially owned the shares proposed to
be sold for at least two years (including the holding period of any prior
owner except an affiliate), is entitled to sell such shares without complying
with the manner of sale, public information, volume limitation or notice
provisions of Rule 144.

The preceding discussion of Rule 144 does not apply to shares of Common
Stock issuable upon the exercise of options granted under the Company's Stock
Option Plan and Director Stock Option Plan. As of October 20, 1997, options to
purchase 1,549,093 shares of Common Stock were issued and outstanding under
the two plans. As soon as practicable after the Offering, the Company intends
to register under the Securities Act a total of 2,407,500 shares of Common
Stock reserved for issuance under the Stock Option Plan, a total of 240,750
shares reserved for issuance under the Director Stock Option Plan and
3,461,833 shares issuable upon the exercise of options which were originally
granted by ITC Holding under the ITC Holding stock option plans and which were
assumed by the Company in the Merger. See "Management--Stock Option Plans."
Shares registered under such registration statement will, subject to Rule 144
volume limitations applicable to affiliates, be available for sale in the open
market, unless such shares are subject to the lock-up agreements described
above.

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<PAGE>

CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
FOR NON-UNITED STATES HOLDERS

GENERAL

The following is a general discussion of the principal United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a Non-U.S. Holder, as defined below. As used herein, the term "Non-
U.S. Holder" means a holder that for United States federal income tax purposes
is an individual or entity other than (i) a citizen or individual resident of
the United States, (ii) a corporation or partnership created or organized in
or under the laws of the United States or of any political subdivision
thereof, (iii) an estate the income of which is subject to U.S. federal income
taxation regardless of its source or (iv) a trust if both (A) a U.S. court is
able to exercise primary supervision over the administration of the trust and
(B) one or more U.S. persons have the authority to control all substantial
decisions of the trust. This discussion does not address all aspects of United
States federal income and estate taxes and does not deal with foreign, state
and local consequences that may be relevant to Non-U.S. Holders in light of
their personal circumstances, or to certain types of Non-U.S. Holders which
may be subject to special treatment under United States federal income tax
laws (for example, insurance companies, tax-exempt organizations, financial
institutions and broker-dealers). Furthermore, this discussion is based on
provisions of the Internal Revenue Code of 1986, amended (the "Code"),
existing and proposed regulations promulgated thereunder and administrative
and judicial interpretations thereof, all as of the date hereof, and all of
which are subject to change, possibly with retroactive effect. PROSPECTIVE
INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS REGARDING THE UNITED STATES
FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSEQUENCES OF
ACQUIRING, HOLDING AND DISPOSING OF SHARES OF COMMON STOCK.

An individual may, subject to certain exceptions, be deemed to be a resident
alien (as opposed to a nonresident alien) by virtue of being present in the
United States for at least 31 days in the calendar year and for an aggregate
of at least 183 days during a three-year period ending in the current calendar
year (counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year and one-sixth
of the days present in the second preceding year). Resident aliens are subject
to U.S. federal tax as if they were U.S. citizens.

DIVIDENDS

The Company does not anticipate paying cash dividends on its capital stock
in the foreseeable future. See "Dividend Policy." In the event, however, that
dividends are paid on shares of Common Stock, dividends paid to a Non-U.S.
Holder of Common Stock will be subject to withholding of United States federal
income tax at a 30% rate, or such lower rate as may be provided by an income
tax treaty between the United States and a foreign country if the Non-U.S.
Holder is treated as a resident of such foreign country within the meaning of
the applicable treaty, unless (i) the dividends are effectively connected with
the conduct of a trade or business of the Non-U.S. Holder within the United
States and the Non-U.S. Holder provides the payor with proper documentation
and (ii) if a tax treaty applies, the dividends are attributable to a United
States permanent establishment maintained by the Non-U.S. Holder. Dividends
that are effectively connected with the conduct of a trade or business within
the United States and, if a tax treaty applies, are attributable to such a
United States permanent establishment, are subject to United States federal
income tax on a net income basis (that is, after allowance for applicable
deductions) at applicable graduated individual or corporate rates. Any such
effectively connected dividends received by a foreign corporation may, under
certain circumstances, be subject to an additional "branch profits tax" at a
30% rate or such lower rate as may be specified by an applicable income tax
treaty.

Dividends paid before January 1, 1999 to an address outside the United
States will be presumed to be paid to a resident of the country of such
address for purposes of the withholding tax rules discussed above (unless the
payor has knowledge to the contrary) and, under the current interpretation of
United States Treasury regulations,

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<PAGE>

for purposes of determining the applicability of a tax treaty rate. However,
under newly issued Treasury regulations, in the case of dividends paid after
December 31, 1998, a Non-U.S. Holder generally will be subject to United
States withholding tax at a 31% rate under the backup withholding rules
described below, rather than at a 30% rate or a reduced rate under an income
tax treaty, as described above, unless certain Internal Revenue Service
("IRS") certification procedures (or, in the case of payments made outside the
United States with respect to an offshore account, certain IRS documentary
evidence procedures) are complied with. Further, in order to claim the benefit
of an applicable tax treaty rate for dividends paid after December 31, 1998, a
Non-U.S. Holder must comply with IRS certification requirements. Certain IRS
certification and disclosure requirements must be complied with in order to be
exempt from withholding under the effectively connected income exemption. The
new regulations also provide special rules for dividend payments made to
foreign intermediaries, U.S. or foreign wholly owned entities that are
disregarded for U.S. federal income tax purposes and entities that are treated
as fiscally transparent in the United States, the applicable income tax treaty
jurisdiction, or both. Prospective investors should consult with their own tax
advisers concerning the effect, if any, of the adoption of these new Treasury
regulations on an investment in the Common Stock.

GAIN ON DISPOSITION OF COMMON STOCK

A Non-U.S. Holder generally will not be subject to United States federal
income tax with respect to gain recognized on a sale or other disposition of
Common Stock unless (i) (a) the gain is effectively connected with a trade or
business conducted by the Non-U.S. Holder within the United States, and (b) if
a tax treaty applies, the gain is attributable to a United States permanent
establishment maintained by the Non-U.S. Holder, (ii) in the case of a Non-
U.S. Holder who is an individual and holds the Common Stock as a capital
asset, such holder is present in the United States for 183 or more days in the
taxable year of the sale or other disposition and certain other conditions are
met, (iii) the Non-U.S. Holder is subject to tax pursuant to certain
provisions of the Code applicable to United States expatriates or (iv) the
Company is or has been a "U.S. real property holding corporation" for United
States federal income tax purposes at any time within the shorter of the five-
year period preceding such disposition or the period such Non-U.S. Holder held
the Common Stock. A corporation is a "U.S. real property holding corporation"
if the fair market value of the United States real property interests held by
the corporation is 50% or more of the aggregate fair market value of certain
assets of the corporation. The Company believes that it has not been and is
not currently a "U.S. real property holding corporation." If the Company were,
or were to become, a U.S. real property holding corporation, gains realized
upon a disposition of Common Stock by a Non-U.S. Holder which did not directly
or indirectly own more than 5% of the Common Stock during the shorter of the
periods described above generally would not be subject to United States
federal income tax so long as the Common Stock is "regularly traded" on an
established securities market. The Company believes that the Common Stock will
be treated as "regularly traded."

If a Non-U.S. Holder who is an individual falls under clause (i) above, such
individual generally will be taxed on the net gain derived from a sale of
Common Stock under regular graduated United States federal income tax rates.
If an individual Non-U.S. Holder falls under clause (ii) above, such
individual generally will be subject to a flat 30% tax on the gain derived
from a sale, which may be offset by certain United States capital losses
(notwithstanding the fact that such individual is not considered a resident
alien of the United States). Thus, individual Non-U.S. Holders who have spent
(or expect to spend) more than a de minimis period of time in the United
States in the taxable year in which they contemplate a sale of Common Stock
are urged to consult their tax advisers prior to the sale as to the U.S. tax
consequences of such sale.

If a Non-U.S. Holder that is a foreign corporation falls under clause (i)
above, it generally will be taxed on its net gain under regular graduated
United States federal income tax rates and, in addition, will be subject to
the branch profits tax equal to 30% of its "effectively connected earnings and
profits," within the meaning of the Code for the taxable year, as adjusted for
certain items, unless it qualifies for a lower rate under an applicable tax
treaty.

FEDERAL ESTATE TAX

Common Stock owned or treated as owned by an individual who is neither a
United States citizen nor a United States resident (as defined for United
States federal estate tax purposes) at the time of death will be

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<PAGE>

included in the individual's gross estate for United States federal estate tax
purposes, unless an applicable estate tax or other treaty provides otherwise
and, therefore, may be subject to United States federal estate tax.

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

Under United States Treasury regulations, the Company must report annually
to the IRS and to each Non-U.S. Holder the amount of dividends paid to such
holder and the tax withheld with respect to such dividends. These information
reporting requirements apply even if withholding was not required because the
dividends were effectively connected with a trade or business in the United
States of the Non-U.S. Holder or withholding was reduced or eliminated by an
applicable income tax treaty. Copies of the information returns reporting such
dividends and withholding may also be made available to the tax authorities in
the country in which the Non-U.S. Holder is a resident under the provisions of
an applicable income tax treaty or agreement.

United States backup withholding (which generally is a withholding tax
imposed at the rate of 31% on certain payments to persons that fail to furnish
certain information under the United States information reporting
requirements) generally will not apply (i) to dividends paid to Non-U.S.
Holders that are subject to the 30% withholding discussed above (or that are
not so subject because a tax treaty applies that reduces or eliminates such
30% withholding) or (ii) before January 1, 1999, to dividends paid to a Non-
U.S. Holder at an address outside of the United States. However, under newly
issued Treasury regulations, in the case of dividends paid after December 31,
1998, a Non-U.S. Holder generally will be subject to backup withholding at a
31% rate, unless certain IRS certification procedures (or, in the case of
payments made outside the United States with respect to an offshore account,
certain IRS documentary evidence procedures) are complied with, directly or
through an intermediary.

Backup withholding and information reporting generally will apply to
dividends paid to addresses inside the United States on shares of Common Stock
to beneficial owners that are not "exempt recipients" and that fail to provide
in the manner required certain identifying information.

In general, backup withholding and information reporting will not apply to a
payment of the gross proceeds of a sale of Common Stock effected at a foreign
office of a broker. Before January 1, 1999, however, if such broker is, for
United States federal income tax purposes, a U.S. person, a controlled foreign
corporation or a foreign person, 50% or more of whose gross income for certain
periods is derived from activities that are effectively connected with the
conduct of a trade or business in the United States, such payments will not be
subject to backup withholding but will be subject to information reporting,
unless (i) such broker has documentary evidence in its records that the
beneficial owner is a Non-U.S. Holder and certain other conditions are met or
(ii) the beneficial owner otherwise establishes an exemption. Further, after
December 31, 1998, under the newly issued Treasury regulations referred to
above, information reporting and backup withholding may apply to payments of
the gross proceeds from the sale or redemption of Common Stock effected
through foreign offices of brokers having any of a broader class of
connections with the United States unless certain IRS certification
requirements are complied with. Prospective investors should consult with
their own tax advisers regarding these Treasury regulations, and in particular
with respect to whether the use of a particular broker would subject the
investor to these rules.

Payment by a United States office of a broker of the proceeds of a sale of
Common Stock is subject to both backup withholding and information reporting
unless the beneficial owner certifies under penalties of perjury that it is a
Non-U.S. Holder or otherwise establishes an exemption. Backup withholding is
not an additional tax. Any amounts withheld under the backup withholding rules
will be allowed as a refund or a credit against such holder's United States
federal income tax liability provided the required information is furnished to
the IRS.

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UNDERWRITERS

Under the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), the Underwriters named
below, for whom Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, J.C. Bradford & Co. and Wheat, First Securities,
Inc. are acting as Representatives, have severally agreed to purchase, and the
Company has agreed to sell to them, severally, the respective number of shares
of Common Stock set forth opposite the names of such Underwriters below:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated..................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated.................
J.C. Bradford & Co.................................................
Wheat, First Securities, Inc.......................................
---------
Total 5,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to
take and pay for all of the shares of Common Stock offered hereby (other than
the shares covered by the Underwriters' over-allotment option described below)
if any such shares are taken.

The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the initial public offering price set forth on
the cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $ a share under the initial public offering
price. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $ a share to other Underwriters or to certain dealers.
After the initial offering of the shares of Common Stock, the Offering price
and other selling terms may from time to time be varied by the Underwriters.

Pursuant to the Underwriting Agreement, the Company has granted to the
Underwriters an option, exercisable for 30 days of the date of this
Prospectus, to purchase up to an aggregate of 750,000 additional shares of
Common Stock at the initial public offering price set forth on the cover page
hereof, less underwriter discounts and commissions. The Underwriters may
exercise such option to purchase solely for the purpose of covering over-
allotments, if any, made in connection with the offering of the shares of
Common Stock offered hereby. To the extent such option is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares of Common Stock as
the number set forth next to such Underwriter's name in the preceding table
bears to the total number of shares of Common Stock set forth next to the
names of all Underwriters in the preceding table.

The Company, its directors and executive officers and certain other
stockholders, who together own more than 80% of the Common Stock outstanding
immediately prior to the Offering, have agreed that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters,
they will not (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant

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<PAGE>

any option, right or warrant to purchase, lend or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
(ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (i) or (ii) above is
to be settled by delivery of Common Stock or such other securities, in cash or
otherwise, during the period ending 180 days after the date of this
Prospectus, other than (u) the sale of the shares of Common Stock offered
hereby to the Underwriters pursuant to the Underwriting Agreement, (v) the
issuance by the Company of shares of Common Stock upon the exercise of an
option or a warrant or the conversion of a security outstanding on the date of
this Prospectus of which the Underwriters have been advised in writing and (w)
transactions relating to shares of Common Stock or other securities acquired
in open market transactions after completion of the Offering (x) transfers of
shares of the Common Stock to the Company, (y) a pledge, grant of security
interest or other encumbrance effected in a bona fide transaction with an
unrelated and unaffiliated pledgee, under a written pledge agreement that
provides that the pledgee shall hold the shares of the Common Stock subject to
the same terms described in this paragraph and, as a condition precedent to
such pledge, security interest or other encumbrance, shall be required to
execute and deliver a "lock-up" agreement containing terms described in this
paragraph or (z) any transfer to a trust for the benefit of such transferor or
such transferor's spouse or lineal descendants or any transfer by gift, will
or intestate succession to such transferor's spouse or lineal descendants,
provided, in each case, that as a condition precedent to such transfer, the
transferee, or the trustee or legal guardian on behalf of such transferee,
executes and delivers a "lock-up" agreement containing terms described in this
paragraph. The foregoing restrictions will not apply to (i) the issuance by
the Company of shares of Series A Preferred Stock to SCANA under an earn-out
arrangement related to the Gulf States Acquisition, (ii) the issuance by the
Company of options to purchase 3,461,833 shares of Common Stock with respect
to the options originally granted by ITC Holding under the ITC Holding stock
option plans and assumed by the Company in the Merger or (iii) the issuance of
additional options to purchase shares of Common Stock pursuant to the Stock
Option Plan or the Director Stock Option Plan.

The Common Stock has been approved for quotation on the Nasdaq National
Market, subject to official notice of issuance, under the symbol "ITCD."

The Representatives have informed the Company that they do not intend sales
to discretionary accounts to exceed five percent of the total number of shares
of Common Stock offered by them.

At the request of the Company, the Underwriters have reserved for sale up to
250,000 shares of the Common Stock offered hereby for the Company's employees,
officers and directors and to certain other individuals who have expressed an
interest in purchasing shares of Common Stock in the Offering. Such shares
will be offered for sale at the initial public offering price, except for up
to 150,000 shares reserved for sale to the Company's employees, officers and
directors, which will be offered for sale at the initial public offering price
less the selling concession. The number of shares available for sale to the
general public will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares not so purchased will be offered by the
Underwriters to the general public on the same basis as other shares offered
hereby. Reserved shares purchased by such individuals will, except as
restricted by applicable securities laws, be available for resale following
the Offering.

In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the Offering, creating a short position in the Common Stock
for their own account. In addition, to cover over-allotments or to stabilize
the price of the Common Stock, the Underwriters may bid for, and purchase,
shares of Common Stock in the open market. Finally, the underwriting syndicate
may reclaim selling concessions allowed to an Underwriter or a dealer for
distributing the Common Stock in the Offering if the syndicate repurchases
previously distributed Common Stock in transactions to cover syndicate short

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<PAGE>

positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the Common Stock above
independent market levels. The Underwriters are not required to engage in
these activities, and may end any of these activities at any time.

The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act. The
Underwriters have agreed to reimburse the Company for certain expenses in
connection with the Offering.

PRICING OF OFFERING

Prior to the Offering, there has been no public market for the Common Stock.
Consequently, the initial public offering price for the Common Stock will be
determined by negotiations among the Company and the Underwriters. Among the
factors that will be considered in determining the initial public offering
price are the future prospects of the Company and its industry in general,
sales, earnings and certain other financial and operating information of the
Company in recent periods, and the price-earnings ratios, price-sales ratios,
market prices of securities and certain financial and operating information of
companies engaged in activities similar to those of the Company and other
factors deemed relevant. There can be no assurance that a regular trading
market for the shares of Common Stock will develop after the Offering or, if
developed, that a public trading market can be sustained. There can be no
assurance that the prices at which the Common Stock will sell in the public
market after the Offering will not be lower than the price at which it is
issued by the Underwriters in the Offering.

LEGAL MATTERS

Certain legal matters in connection with the Common Stock offered hereby are
being passed upon for the Company by Hogan & Hartson L.L.P., Washington, D.C.,
counsel for the Company. Hogan & Hartson L.L.P. has provided legal services to
ITC Holding, its affiliated companies and Campbell B. Lanier, III, Chairman of
the Company. Anthony S. Harrington, a partner of Hogan & Hartson L.L.P.,
beneficially owns 80,180 shares of Common Stock of the Company. Certain legal
matters will be passed upon for the Underwriters by Shearman & Sterling, New
York, New York.

EXPERTS

The balance sheet of ITC/\DeltaCom, Inc. as of June 30, 1997 and the related
statements of operations, stockholders' deficits and cash flows for the period
from inception (March 24, 1997) through June 30, 1997 included in this
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as stated in their report with respect thereto and is
included herein in reliance upon the authority of said firm as experts in
giving said report.

The combined balance sheets of Interstate FiberNet, Inc. (formerly, ITC
Transmission Systems, Inc.), ITC Transmission Systems II, Inc., Gulf States
Transmission Systems, Inc., Eastern Telecom, Inc. (d.b.a. InterQuest), and
DeltaCom, Inc. as of December 31, 1995 and 1996, and the related combined
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1996, included in this
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, to the extent and for the periods indicated in their
report, and are included herein in reliance upon the authority of said firm as
experts in giving said report.

The statements of operations, stockholders' equity and cash flows of
DeltaCom, Inc. for the year ended December 31, 1994 included in this
Registration Statement have been audited by Martin Stuedeman & Associates,
P.C., independent auditors, as stated in their report appearing herein. The
statements of operations, stockholders' equity and cash flows of DeltaCom,
Inc. for the year ended December 31, 1995 included in this Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as stated in

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<PAGE>

their report with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in giving said report.

The balance sheets of Gulf States FiberNet as of December 31, 1995 and 1996,
and the related statements of operations, partners' capital, and cash flows
for the period from inception (August 17, 1994) through December 31, 1994 and
for the years ended December 31, 1995 and 1996 included in this Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, to the extent and for the periods indicated in their report, and
are included herein in reliance upon the authority of said firm as experts in
giving said report.

The financial statements of Georgia Fiber for the years ended December 31,
1996 and 1995 included in this Registration Statement have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein, and have been so included in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange Act
and, in accordance therewith, is required to file reports and other
information with the Commission. Such reports and other information can be
inspected and copied at the public reference facilities maintained by the
Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's regional offices at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th
Floor, New York, New York 10048. Copies of the reports and other information
can be obtained from the Public Reference Section of the Commission, upon
payment of prescribed rates, and, in certain cases, by accessing the
Commission's World Wide Web site at http://www.sec.gov.

The Company has filed with the Commission, a Registration Statement on Form
S-1 under the Securities Act (the "Registration Statement"), of which this
Prospectus forms a part, with respect to the shares of Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits thereto. Certain items are omitted
in accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits thereto.
Statements contained in this Prospectus regarding the contents of any contract
or any other document to which reference is made are not necessarily complete,
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. A copy of the
Registration Statement, and the exhibits thereto, may be inspected without
charge at the public reference facilities maintained by the Commission in Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
regional offices located at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New
York, New York 10048, and copies of all or any part of the Registration
Statement may be obtained from such offices upon the payment of the fees
prescribed by the Commission. The Registration Statement can also be inspected
by accessing the Commission's World Wide Web site at http://www.sec.gov.

86
<PAGE>

GLOSSARY

Access--Telecommunications services that permit long distance carriers to
use local exchange facilities to originate and/or terminate long distance
service.

Access charges--The fees paid by long distance carriers to local exchange
carriers for originating and terminating long distance calls on their local
network.

AT&T--AT&T Corp.

Cable & Wireless--Cable & Wireless Communications Inc.

Central offices--The switching centers or central switching facilities of
the local exchange companies.

Co-location--The ability of a competitor carrier to connect its network to
the local exchange carriers' central offices. Physical co-location occurs when
a competitor carrier places its network connection equipment inside the local
exchange company's central offices. Virtual co-location is an alternative to
physical co-location pursuant to which the local exchange company permits a
competitor carrier to connect its network to the local exchange company's
central offices on comparable terms, even through the competitor carrier's
network connection equipment is not physically located inside the central
offices.

Dedicated--Local telecommunications lines reserved for use by particular
customers, generally for connection between the customer's location and an
interexchange carrier POP.

DeltaCom--DeltaCom, Inc., an Alabama corporation which provides long
distance telephone services in the southeastern United States. DeltaCom became
a wholly owned subsidiary of the Company as part of the Reorganization.

Dialing Parity--The ability of a competing local or toll service provider to
provide telecommunications services in such a manner that customers have the
ability to route automatically, without the use of any access code, their
telecommunications to the service provider of the customer's designation.

Digital--A method of storing, processing and transmitting information
through the use of distinct electronic or optical pulses that represent the
binary digits 0 and 1. Digital transmission and switching technologies employ
a sequence of these pulses to represent information as opposed to the
continuously variable analog signal. The precise digital numbers minimize
distortion (such as graininess or snow in the case of video transmission, or
static or other background distortion in the case of audio transmission).

DS-1, DS-3--Standard telecommunications industry digital signal formats,
which are distinguishable by bit rate (the number of binary digits (0 and 1)
transmitted per second). DS-1 service has a bit rate of 1.544 megabits per
second and DS-3 service has a bit rate of 45 megabits per second.

Frontier--Allnet Communications Services, Inc. d/b/a Frontier Communications
Services.

GTE--GTE Corporation.

Gulf States FiberNet--A Georgia general partnership, prior to the
Reorganization, that operates a fiber-optic telecommunications network between
Atlanta, Georgia and Longview, Texas. Gulf States FiberNet's assets and
operations now are 100% owned by Gulf States Transmission Systems, Inc.

Gulf States Transmission--Gulf States Transmission Systems, Inc., a Delaware
corporation, formed in 1994 by ITC Holding to be the 36% managing general
partner in Gulf States FiberNet and which now owns 100% of Gulf States
FiberNet's assets and its operations. Gulf States Transmission Systems, Inc.
became a wholly owned subsidiary of the Company as part of the Reorganization.

G-1
<PAGE>

Interconnection--Interconnection of facilities between or among local
exchange carriers, including potential physical collocation of one carrier's
equipment in the other carrier's premises to facilitate such interconnection.

Interconnection Decision--The August 1996 order issued by the FCC
implementing the interconnection provisions of the Telecommunications Act.
Portions of this order have been stayed by the U.S. Eighth Circuit Court of
Appeals.

InterLATA--Telecommunications services originating in a LATA and terminating
outside of that LATA.

InterQuest--Eastern Telecom, Inc., a Georgia corporation, d/b/a InterQuest,
engaged solely in the provision of operator and other directory assistance
services. Eastern Telecom merged into Interstate FiberNet, Inc. as part of the
Reorganization.

Interstate FiberNet--A Georgia general partnership which operates a fiber-
optic telecommunications network between Georgia and Alabama. Interstate
FiberNet became part of Interstate FiberNet, Inc. following the
Reorganization.

Interstate FiberNet, Inc.--The wholly owned subsidiary of the Company that
currently holds the businesses that were held by ITC Transmission Systems,
Inc., ITC Transmission Systems II, Inc., InterQuest and Interstate FiberNet
prior to the Reorganization.

IntraLATA--Telecommunications services originating and terminating in the
same LATA.

ITC Holding--ITC Holding Company, Inc. was a diversified telecommunications
company based in West Point, Georgia, with substantial holdings in
telecommunications companies operating in the southern United States. ITC
Holding Company, Inc. merged with and into the Company on October 20, 1997.

ITC Transmission Systems II, Inc.--A Delaware corporation formed by ITC
Holding to hold a 51 percent interest in InterState FiberNet. ITC Transmission
Systems II merged into Interstate FiberNet, Inc. as part of the
Reorganization.

IXC--IXC Communications Inc.

LATA (local access and transport area)--A geographic area composed of
contiguous local exchanges, usually but not always within a single state.
There are approximately 200 LATAs in the United States.

LCI--LCI International Telecom Corp.

Local exchange--A geographic area determined by the local exchange carrier
in which calls generally are transmitted without toll charges to the calling
or called party.

Local exchange carrier--A company providing local telephone services.

Long distance carriers (interexchange carriers)--Long distance carriers
provide services between local exchanges on an interstate or intrastate basis.
A long distance carrier may offer services over its own or another carrier's
facilities.

MCI--MCI Communications Corporation.

Nortel Access Node--A remote multi-purpose vehicle for local switched access
transport services. Used to extend Nortel DMS-500 local access lines to remote
cities along the long-haul network.

G-2
<PAGE>

Number portability--The ability of an end user to change local exchange
carriers while retaining the same telephone number.

OC-N--Standard telecommunications industry measurements for optical
transmission capacity distinguishable by bit rate transmitted per second and
the number of voice or data transmissions that can be simultaneously
transmitted through fiber optic cable. "N" represents the number of DS-3s
involved. For example, an OC-3 is generally equivalent to three DS-3s and has
a bit rate of 155.52 megabits per second and can transmit 2,016 simultaneous
voice or data transmissions. An OC-12 has a bit rate of 622.08 megabits per
second and can transmit 8,064 simultaneous voice or data transmissions. An OC-
48 has a bit rate of 2488.32 megabits per second and can transmit 32,256
simultaneous voice or data transmissions.

POPs (points of presence)--Locations where a long distance carrier has
installed transmission equipment in a service area that serves as, or relays
calls to, a network switching center of that long distance carrier.

Private line--A dedicated telecommunications connection between end user
locations.

"PUC" or "Public utilities commission"--A state regulatory body, established
in most states, which regulates utilities, including telephone companies
providing intrastate services.

Reciprocal compensation--The same compensation of a new competitive local
exchange carrier for termination of a local call by the local exchange carrier
on its network as the new competitor pays the local exchange carrier for
termination of local calls on the local exchange carrier network.

Reorganization--The contribution to the Company by ITC Holding of the
businesses of Interstate FiberNet, Gulf States FiberNet, DeltaCom and
InterQuest.

Resale--Resale by a provider of telecommunications services (such as a local
exchange carrier) of such services to other providers or carriers on a
wholesale or a retail basis.

Route miles--The number of miles of the telecommunications path in which
fiber optic cables are installed.

SCANA--SCANA Communications, Inc.

Self-healing ring--A self-healing ring is a network design in which the
network backbone consists of a continuous ring connecting a central hub
facility with one or more network nodes. Traffic is routed between the hub and
each of the nodes simultaneously in both a clockwise and a counterclockwise
direction. In the event of a cable cut or component failure along one of these
paths, traffic will continue to flow along the alternate path so no traffic is
lost. In the event of a catastrophic node failure, other nodes will be
unaffected because traffic will continue to flow along whichever path (primary
or alternate) does not pass through the affected node. The switch from the
primary to the alternate path will be imperceptible to most users.

Sprint--Sprint Corporation.

"SS7" or "Signaling System 7" services--Signaling System 7 network services
utilize common channel signaling, which reduces connect time delays and
directs calls.

Switch--A device that opens or closes circuits or selects the paths or
circuits to be used for transmission of information. Switching is a process of
interconnecting circuits to form a transmission path between users.

Switched access transport services--Transportation of switched traffic along
dedicated lines between the local exchange company central offices and long
distance carrier POPs.

Switched traffic--Telecommunications traffic along the public switched
network. This traffic is generally switched at the local exchange company's
central offices.

G-3
<PAGE>

Transmission--ITC Transmission Systems, Inc., a Delaware corporation formed
by ITC Holding to hold a 49% managing interest in InterState FiberNet. ITC
Transmission Systems became a wholly owned subsidiary of the Company as part
of the Reorganization and changed its name to Interstate FiberNet, Inc.

Unbundled Access--Access to unbundled elements of a telecommunications
services provider's network, including network facilities, equipment,
features, functions and capabilities, at any technically feasible point within
such network.

WorldCom--WorldCom, Inc.

G-4
<PAGE>

INDEX TO THE FINANCIAL STATEMENTS

ITC/\DELTACOM, INC.
<TABLE>
<S> <C>
Report of Independent Public Accountants............................... F-2
Balance Sheet--June 30, 1997 .......................................... F-3
Statement of Operations for the Period From Inception (March 24, 1997)
Through June 30, 1997................................................. F-4
Statement of Stockholder's Deficit for the Period From Inception (March
24, 1997) Through June 30, 1997....................................... F-5
Statement of Cash Flows for the Period From Inception (March 24, 1997)
Through June 30, 1997................................................. F-6
Notes to Financial Statements.......................................... F-7
ITC/\DELTACOM, INC., INTERSTATE FIBERNET INC. (FORMERLY, ITC TRANSMISSION
SYSTEMS, INC.), ITC TRANSMISSION SYSTEMS II, INC., GULF STATES
TRANSMISSION SYSTEMS, INC., EASTERN TELECOM, INC., D.B.A INTERQUEST, AND
DELTACOM, INC. (REORGANIZED AS ITC/\DELTACOM, INC.)
Report of Independent Public Accountants............................... F-12
Combined Balance Sheets--December 31, 1995 and 1996 and June 30, 1997
(unaudited) .......................................................... F-13
Combined Statements of Operations for the Years Ended December 31,
1994, 1995, and 1996 and for the Six Months Ended June 30, 1996 and
1997 (unaudited)...................................................... F-14
Combined Statements of Stockholder's Equity for the Years Ended
December 31, 1994, 1995, and 1996 and for the Six Months Ended June
30, 1996 and 1997 (unaudited)......................................... F-15
Combined Statements of Cash Flows for the Years Ended December 31,
1994, 1995, and 1996 and for the Six Months Ended June 30, 1996 and
1997 (unaudited)...................................................... F-16
Notes to Combined Financial Statements................................. F-18
DELTACOM, INC.
Independent Auditors' Report........................................... F-38
Report of Independent Public Accountants............................... F-39
Statements of Operations for the Years Ended December 31, 1994 and 1995
and for the One Month Ended January 29, 1996.......................... F-40
Statements of Stockholder's Equity for the Years Ended December 31,
1994 and 1995 and for the One Month Ended January 29, 1996............ F-41
Statements of Cash Flows for the Years Ended December 31, 1994 and 1995
and for the One Month Ended January 29, 1996.......................... F-42
Notes to Financial Statements.......................................... F-43
GULF STATES FIBERNET
Report of Independent Public Accountants............................... F-46
Balance Sheets--December 31, 1995 and 1996 and March 27, 1997
(unaudited) .......................................................... F-47
Statements of Operations for the Period From Inception (August 17,
1994) Through December 31, 1994 and for the Years Ended December 31,
1995 and 1996 and for the periods ended March 31, 1996 and March 27,
1997 (unaudited)...................................................... F-48
Statements of Partners' Capital for the Period From Inception (August
17, 1994) Through December 31, 1994 and for the Years Ended December
31, 1995 and 1996 .................................................... F-49
Statements of Cash Flows for the Period From Inception (August 17,
1994) Through December 31, 1994 and for the Years Ended December 31,
1995 and 1996 and for the periods ended March 31, 1996 and March 27,
1997 (unaudited)...................................................... F-50
Notes to Financial Statements.......................................... F-51
GEORGIA FIBER
Independent Auditors' Report........................................... F-57
Balance Sheets--December 31, 1995 and 1996, and March 31, 1996 and
March 27, 1997 (unaudited)............................................ F-58
Statements of Income and Net Equity for the Years Ended December 31,
1995 and 1996 and for the periods ended March 31, 1996 and March 27,
1997 (unaudited)...................................................... F-59
Statements of Cash Flows for the Years Ended December 31, 1995 and 1996
and for the periods ended March 31, 1996 and March 27, 1997
(unaudited)........................................................... F-60
Notes to Financial Statements.......................................... F-61
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To ITC/\DeltaCom, Inc.:

We have audited the accompanying balance sheet of ITC/\DELTACOM, INC. (a
Delaware corporation) as of June 30, 1997 and the related statements of
operations, stockholder's deficit and cash flows for the period from inception
(March 24, 1997) to June 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ITC/\DeltaCom, Inc. as of
June 30, 1997 and the results of its operations and its cash flows for the
period from inception (March 24, 1997) through June 30, 1997 in conformity
with generally accepted accounting principles.

Arthur Andersen LLP

Atlanta, Georgia

July 31, 1997 (except with respect
to Note 5 as to which the date
is October 20, 1997)

F-2
<PAGE>

ITC/\DELTACOM, INC.

BALANCE SHEET

JUNE 30, 1997

<TABLE>
<S> <C>
ASSETS
CASH............................................................. $ 401,857
RESTRICTED ASSETS................................................ 194,775,128
------------
Total current assets......................................... 195,176,985
OTHER NON-CURRENT ASSETS......................................... 5,978,387
------------
TOTAL ASSETS..................................................... $201,155,372
============
LIABILITIES AND STOCKHOLDER'S DEFICIT
CURRENT LIABILITIES--Accounts payable and accrued liabilities.... $ 1,646,575
LONG-TERM DEBT................................................... 200,000,000
------------
Total liabilities............................................ 201,646,575
------------
PREFERRED STOCK, $.01 par value; 5,000,000 shares authorized, 0
shares issued and outstanding................................... 0
CLASS A COMMON STOCK, $.01 par value; 60,000,000 shares
authorized, 0 shares issued and outstanding..................... 0
CLASS B COMMON STOCK, $.01 par value; 30,000,000 shares
authorized, 24,075,000 shares issued and outstanding (Note 5)... 240,750
Additional paid-in-deficit (Note 5).............................. (90,750)
Accumulated deficit.............................................. (641,203)
------------
Total stockholder's deficit.................................. (491,203)
------------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT...................... $201,155,372
============
</TABLE>

The accompanying notes are an integral part of this balance sheet.

F-3
<PAGE>

ITC/\DELTACOM, INC.

STATEMENT OF OPERATIONS

FOR THE PERIOD FROM INCEPTION (MARCH 24, 1997)
THROUGH JUNE 30, 1997

<TABLE>
<S> <C>
OPERATING EXPENSES:
Depreciation and amortization................................... $ 60,833
-----------
OPERATING LOSS.................................................... (60,833)
-----------
OTHER INCOME (EXPENSE):
Interest expense................................................ (1,687,671)
Interest income................................................. 776,985
-----------
Total other income (expense).................................. (910,686)
-----------
LOSS BEFORE INCOME TAXES.......................................... (971,519)
INCOME TAX BENEFIT................................................ 330,316
-----------
NET LOSS.......................................................... $ (641,203)
===========
PRO FORMA NET LOSS PER COMMON SHARE .............................. $ (0.03)
===========
Pro forma weighted average common and common equivalent shares
outstanding
at June 30, 1997................................................. 21,379,848
===========
</TABLE>

The accompanying notes are an integral part of this statement.

F-4
<PAGE>

ITC/\DELTACOM, INC.

STATEMENT OF STOCKHOLDER'S DEFICIT

FOR THE PERIOD FROM INCEPTION (MARCH 24, 1997)
THROUGH JUNE 30, 1997

<TABLE>
<CAPTION>
CLASS A CLASS B ADDITIONAL
PREFERRED COMMON COMMON PAID-IN RETAINED
STOCK STOCK STOCK DEFICIT DEFICIT TOTAL
--------- ------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at inception
(March 24, 1997) (Note
5)..................... $ 0 $ 0 $150,000 $ 0 $ 0 $ 150,000
Net loss.............. 0 0 0 0 (641,203) (641,203)
--- --- -------- --- --------- ---------
Balance, June 30, 1997.. $ 0 $ 0 $150,000 $ 0 $(641,203) $(491,203)
=== === ======== === ========= =========
</TABLE>

The accompanying notes are an integral part of this statement.

F-5
<PAGE>

ITC/\DELTACOM, INC.

STATEMENT OF CASH FLOWS

FOR PERIOD FROM INCEPTION (MARCH 24, 1997)
THROUGH JUNE 30, 1997

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................. $ (641,203)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization.......................... 60,833
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities.............. 1,646,575
-------------
Total adjustments................................... 1,707,408
-------------
Net cash provided by operating activities........... 1,066,205
-------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in restricted assets (Note 1)................. (194,775,128)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock................... 150,000
Proceeds from issuance of long-term debt, net of offering
expenses................................................ 193,960,780
-------------
Net cash provided by financing activities............... 194,110,780
-------------
NET INCREASE IN CASH...................................... 401,857
CASH, BEGINNING OF THE PERIOD............................. 0
-------------
CASH, END OF THE PERIOD................................... $ 401,857
=============
</TABLE>

The accompanying notes are an integral part of this statement.

F-6
<PAGE>

ITC/\DELTACOM, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 1997

1. ORGANIZATION AND NATURE OF BUSINESS

Organization

ITC/\DeltaCom, Inc. (the "Company") was incorporated under the laws of the
State of Delaware on March 24, 1997. The purpose of incorporating the Company
was to enable ITC Holding Company, Inc. ("ITC Holding"), the Company's parent
company and only stockholder, to complete a reorganization of certain of its
wholly owned subsidiaries on July 25, 1997 (the "Reorganization"), as follows:

a. Eastern Telecom, Inc. (d.b.a. InterQuest) and ITC Transmission Systems
II, Inc. were merged with and into Interstate FiberNet, Inc. (formerly
ITC Transmission Systems, Inc.) ("FiberNet").

b. ITC Holding contributed all of the outstanding capital stock of
FiberNet, DeltaCom, Inc. ("DeltaCom") and Gulf States Transmission
Systems, Inc. to the Company.

c. The Company contributed all of the outstanding capital stock of
DeltaCom, Inc. and Gulf States Transmission Systems, Inc. to FiberNet.

In connection with the Reorganization, FiberNet undertook to repay (and
DeltaCom agreed to reimburse FiberNet) approximately $31 million of DeltaCom's
advances from ITC Holding. ITC Holding then forgave such indebtedness and
contributed it to FiberNet as additional equity.

See Note 5 for a discussion of the merger of ITC Holding with and into the
Company (the "Merger").

Nature of Business

The Company is a holding company, whose subsidiaries following the
Reorganization operate primarily in two business segments. DeltaCom is a
regional long-distance company operating primarily in the State of Alabama.
DeltaCom is engaged in the retail sale of long-distance services such as
traditional switched and dedicated long distance; 800/888 calling; calling
card and operator services; ATM and frame relay; high-capacity broadband
private line services, as well as Intranet, Internet, and Web page hosting and
development services; and customer premises equipment installation and repair.
DeltaCom primarily serves midsized and major regional businesses in the
southern United States.

FiberNet and GSTS are engaged in the sale of long-haul private-line services
on a wholesale basis to other telecommunications companies using their owned
and managed fiber optic network which extends throughout ten southern states
(Arkansas, Texas, Tennessee, Mississippi, Louisiana, Alabama, Georgia, North
Carolina, South Carolina, and Florida).

Certain of the Company's subsidiaries have experienced operating losses as a
result of efforts to build their network infrastructure and internal staffing,
develop their systems, and expand into new markets. Assuming financing is
available, the Company expects to continue to focus on increasing its customer
base and expanding its network operations. Accordingly, the Company expects
that its cost of services, selling, operations, and administration expenses
and capital expenditures will continue to increase significantly, all of which
will have a negative impact on short-term operating results. In addition, the
Company may change its pricing policies to respond to a changing competitive
environment. FiberNet has obtained a five-year, $100 million secured credit
facility with NationsBank of Texas, N.A. (Note 5) and the Company has issued
$200 million in senior notes (Note 4) to refinance certain existing
indebtedness of the Company's subsidiaries and to provide additional funds for
the Company's expansion plans. In the opinion of management, the Company's
cash flows from operations and existing credit position will be sufficient to
meet the capital and operating needs of the Company through at

F-7
<PAGE>

ITC/\DELTACOM, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

least 1997. However, there can be no assurance that growth in the Company's
revenue or customer base will continue or that the Company will be able to
achieve or sustain profitability and/or positive cash flow.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and cash equivalents

For purposes of the statement of cash flows, the Company considers all
investments purchased with a maturity of three months or less to be cash
equivalents.

Debt issuance costs

The Company has incurred debt issuance costs in connection with its long-
term debt. These costs have been capitalized and are being amortized over the
term of the related debt.

Pro Forma Net Loss Per Share

Pro forma net loss per share is computed using the weighted average number
of shares of common stock and common stock equivalent shares ("CSEs") from
stock options (using the treasury stock method). Pursuant to the applicable
Securities and Exchange Commission Staff Accounting Bulletins, shares of
Common Stock and CSEs issued at prices below the expected initial public
offering of Common Stock described in Note 5 have been included in the
calculation as if they were outstanding for all periods prior to such
offering, regardless of whether they are dilutive. Accordingly, all shares
issued in the Merger (Note 5) and all stock options granted since the
Company's inception on March 24, 1997 are included in the loss per share
calculation for the period from inception through June 30, 1997, even though
the effect on net loss per share is anti-dilutive.

3. EQUITY INTERESTS

CAPITAL STOCK

The Company has authorized two classes of common stock. Holders of the
Company's Class A Common Stock have one vote per share, while holders of the
Company's Class B Common Stock have ten votes per share. At June 30, 1997, 0
shares of the Company's Class A Common Stock and 15,000,000 shares of the
Company's Class B Common Stock were outstanding. See Note 5 for a discussion
of changes to the Company's authorized capital stock effected in a subsequent
amendment to the Company's certificate of incorporation as well as a
description of the Company's Series A Convertible Preferred Stock issued in
connection with the Merger.

EMPLOYEE STOCK OPTION PLAN

On March 24, 1997, the Company adopted and its stockholder approved the 1997
Stock Option Plan (the "Stock Option Plan"). The Stock Option Plan provides
for the grant of options that are intended to qualify as "incentive stock
options" under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), to employees of the Company, its subsidiaries obtained in the
Reorganization, and ITC Holding, as well as the grant of non-qualifying
options to any other individual whose participation in the Stock Option Plan
is determined to be in the best interests of the Company. The Stock Option
Plan authorizes the issuance of up to 1,500,000 shares of Class A Common Stock
pursuant to options granted under the Stock Option Plan (subject to anti-
dilution adjustments in the event of a stock split, recapitalization or
similar transaction). The maximum number of shares subject to options that can
be awarded under the Stock Option Plan to any person is 500,000 shares. The
Compensation Committee of the Company's board of directors will administer the
Stock Option Plan and will grant options to purchase Class A Common Stock.

F-8
<PAGE>

ITC/\DELTACOM, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

the case of an incentive stock option granted to an optionee beneficially
owning more than 10% of the outstanding Class A Common Stock). The option
exercise price for non-incentive stock options granted under the Stock Option
Plan may not be less than the par value of the Class A Common Stock on the
date of grant of the option. The maximum option term is 10 years (or five
years in the case of an incentive stock option granted to an optionee
beneficially owning more than 10% of the outstanding Class A Common Stock).
There is also a $100,000 limit on the value of Class A Common Stock
(determined at the time of grant) covered by incentive stock options that
become exercisable by an optionee in any year. Options granted will become
exercisable with respect to 50% of the shares subject to the options on the
second anniversary of the date of grant and with respect to 25% of the shares
subject to the options on each of the third and fourth anniversaries of the
date of grant.

The Company's board of directors may amend or terminate the Stock Option
Plan with respect to shares of Class A Common Stock as to which options have
not been granted.

On March 24, 1997 and July 29, 1997, the Company granted options to purchase
789,000 shares and 105,254 shares, respectively, of Class A Common Stock under
the Stock Option Plan. All options were granted at a price at least equal to
the estimated fair value of the common stock on the date of grant ($7.20) as
determined by the Company's board of directors based on equity transactions
and other analyses.

See Note 5 for a description of subsequent amendments to the Stock Option
Plan.

DIRECTOR STOCK OPTION PLAN

On March 24, 1997, the Company adopted and its stockholder approved the
Director Stock Option Plan (the "Director Plan"). The Director Plan provides
for the "formula" grant of options that are not intended to qualify as
"incentive stock options" under Section 422 of the Code to directors of the
Company who are not officers or employees of the Company, ITC Holding, or any
subsidiary of the Company (each an "Eligible Director"). The Director Plan
authorizes the issuance of up to 150,000 shares of Class A Common Stock
pursuant to options granted under the Director Plan (subject to anti-dilution
adjustments in the event of a stock split, recapitalization or similar
transaction). The option exercise price for options granted under the Director
Plan will be 100% of the fair market value of the shares of Class A Common
Stock on the date of grant of the option. Under the Director Plan, each
Eligible Director will be granted an option to purchase 10,000 shares of Class
A Common Stock upon such person's initial election or appointment to serve as
a director. Options granted will become exercisable with respect to 50% of the
shares subject to the options on the second anniversary of the date of grant
and with respect to 25% of the shares subject to the options on each of the
third and fourth anniversaries of the date of grant. The options will expire
ten years and 30 days after the date of grant.

On March 24, 1997, the Company granted options to purchase 10,000 shares of
the Company's Class A Common Stock to each of its six nonemployee directors.
All options were granted at a price at least equal to the estimated fair value
of the common stock on the date of grant ($7.20) as determined by the
Company's board of directors based on equity transactions and other analyses.

See Note 5 for a description of subsequent amendments to the Director Plan.

STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123

F-9
<PAGE>

ITC/\DELTACOM, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

"Accounting for Stock Issued to Employees." The Company has elected to account
for options granted to employees under APB Opinion No. 25, under which no
compensation cost has been recognized. Options granted to non-employees, if
any, will be accounted for under SFAS No. 123 and compensation expense equal
to the fair value of the options granted will be recognized.

4. SENIOR NOTE OFFERING

On June 3, 1997, the Company completed the issuance of $200 million
principal amount of 11% Senior Notes due 2007 (the "Senior Note Offering").
Proceeds from the Senior Note Offering were held by the trustee until all
regulatory approvals related to the Reorganization described in Note 1 were
received. On July 25, 1997, the Reorganization was completed and the proceeds
from the Offering were released to the Company. In accordance with the
Indenture related to the Notes, approximately $62.7 million of the
approximately $192.7 million net proceeds was invested in U.S. government
securities, which are held in a pledged account held by the Trustee to secure
and fund the first six interest payments on the Notes. Additionally,
approximately $99.6 million of the net proceeds was used to repay outstanding
debt and related accrued interest owed by the Company's subsidiaries. The
Company intends to use the remaining approximately $30.4 million of net
proceeds (i) to fund market expansion activities of the Company's
telecommunications business, including development and construction costs of
the Company's fiber optic network and its regional sales offices, and (ii) for
additional working capital and other general corporate purposes. Pending such
uses, the Company has invested such amounts in U.S. government securities.

5. SUBSEQUENT EVENTS

Credit Agreement

On September 17, 1997, FiberNet entered into a credit agreement with
NationsBank of Texas, N.A., as administrative lender (the "Credit Agreement").
The Credit Agreement provides for a term and revolving credit facility of up
to $100 million to be used for working capital and other purposes, including
refinancing existing indebtedness, capital expenditures, and permitted
acquisitions. The Credit Agreement matures on September 15, 2002 and includes
a $50 million multi-draw term loan facility and a $50 million revolving credit
facility. Amounts may be drawn under the term loan facility until September
15, 1999. All $50 million of the term loan facility must be utilized before
any amount over $10 million may be drawn down under the revolving credit
facility. Amounts drawn under the Credit Agreement will bear interest, at
FiberNet's option, at either the Base Rate or the LIBOR Rate, plus an
applicable margin.

Borrowings under the Credit Agreement are guaranteed by FiberNet and its
subsidiaries and are secured by a first priority lien on substantially all
current and future assets and properties of FiberNet and its subsidiaries and
a first priority pledge of the stock of FiberNet and its subsidiaries. The
Credit Agreement contains covenants limiting the ability of FiberNet, its
subsidiaries, and the Company to incur debt or make guaranties, create liens,
pay dividends, make distributions or stock repurchases, make investments or
capital expenditures, issue capital stock, engage in transactions with
affiliates, sell assets, and engage in mergers and acquisitions. The Credit
Agreement also requires FiberNet to comply with certain financial tests and to
maintain certain financial ratios on a consolidated basis.

Stock Options

On October 1, 1997, the Company's board of directors granted options to
purchase 30,063 shares of the Company's Class A Common Stock at $7.20 per
share under the Stock Option Plan.

Merger with ITC Holding

Effective on October 20, 1997, as part of a reorganization of the ITC
Holding group of companies, ITC Holding transferred all of its assets, other
than its stock in the Company, and all of its liabilities to another entity

F-10
<PAGE>

ITC/\DELTACOM, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

and then merged with and into the Company (the "Merger"). The Company is the
surviving corporation in the Merger. In connection with the Merger, holders of
ITC Holding common stock and convertible preferred stock received shares of
the Company's Common Stock and Series A Convertible Preferred Stock.

In contemplation of the Merger, on October 16, 1997, the Company's board of
directors and its stockholder adopted resolutions approving amendment and
restatement of the Company's certificate of incorporation, effective upon
consummation of the Merger, to designate the Company's Series A Convertible
Preferred Stock, par value $.01 per share, with a liquidation preference of
$6.96 per share (subject to adjustment), to authorize a single class of common
stock to be designated as Common Stock and to eliminate authorization of Class
A Common Stock and Class B Common Stock.

Immediately prior to the Merger, the Company had 15,000,000 shares of Class
B Common Stock issued and outstanding. Immediately following the Merger, the
Company had issued and outstanding 19,126,731 shares of Common Stock.

Amendment of Stock Option Plans

The Company's board of directors and its stockholder also approved the
following amendments to the Company's stock option plans on October 16, 1997:

a. Amendments to the Stock Option Plan and the Director Plan that reflected
the proposed authorization of Common Stock in lieu of Class A Common Stock.

b. An amendment to the Stock Option Plan that increased from 1,500,000 to
2,407,500 the number of shares authorized for issuance and from 500,000 to
802,500 the maximum number of shares subject to options that may be awarded
under the Stock Option Plan to any person.

c. An amendment to the Director Plan that increased from 150,000 to 240,750
the number of shares authorized for issuance and from 10,000 to 16,050 the
number of shares subject to the option granted to each Eligible Director
upon such person's initial election or appointment to serve as a director.

d. Amendments to the Stock Option Plan and the Director Plan that adjusted the
number and kind of shares for which options were outstanding and the option
price per share to reflect the changes to the Company's capitalization
resulting from the Merger.

Proposed Equity Offering

The Company plans to offer 5,000,000 shares of its Common Stock (5,750,000
shares if the underwriters' overallotment option is exercised in full) for
sale to the public at a proposed offering price range of $14.50 to $16.50 per
share during the fourth quarter of 1997 (the "Equity Offering"). There can be
no assurance that the Equity Offering will be completed at a per share price
within the estimated range, or at all. There are significant potential risks
associated with the Equity Offering as well as with the Company's ability to
compete profitably in the telecommunications industry.

F-11
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Interstate FiberNet, Inc. (formerly ITC Transmission Systems, Inc.),
ITC Transmission Systems II, Inc.,
Gulf States Transmission Systems, Inc.,
Eastern Telecom, Inc., d.b.a. InterQuest, and
DeltaCom, Inc.:

We have audited the accompanying combined balance sheets of INTERSTATE
FIBERNET, INC., (FORMERLY ITC TRANSMISSION SYSTEMS, INC.) (a Delaware
corporation), ITC TRANSMISSION SYSTEMS II, INC. (a Delaware corporation), GULF
STATES TRANSMISSION SYSTEMS, INC. (a Delaware corporation), EASTERN TELECOM,
INC., D.B.A. INTERQUEST (a Georgia corporation), AND DELTACOM, INC. (an
Alabama corporation) (collectively referred to as the "Companies" and
contributed to ITC/\DeltaCom, Inc. in connection with the reorganization as
discussed in Notes 1 and 16) as of December 31, 1995 and 1996 and the related
combined statements of operations, stockholder's equity, and cash flows for
each of the three years in the period ended December 31, 1996. These combined
financial statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Companies as of December 31, 1995 and 1996 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1996 in conformity with generally accepted accounting principles.

Arthur Andersen LLP

Atlanta, Georgia

March 27, 1997 (except with respect
to Note 16, as to which the date is
October 20, 1997)

F-12
<PAGE>

ITC/\DELTACOM, INC.

INTERSTATE FIBERNET, INC. (FORMERLY ITC TRANSMISSION SYSTEMS, INC.)

ITC TRANSMISSION SYSTEMS II, INC.,

GULF STATES TRANSMISSION SYSTEMS, INC.,

EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND

DELTACOM, INC.

(REORGANIZED AS ITC/\DELTACOM, INC.)

COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1995 1996 1997
----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............ $ 656,096 $ 1,301,415 $ 5,478,614
Restricted assets.................... 0 0 194,775,128
Accounts receivable:
Customer, net of allowance for
uncollectible accounts of $35,787,
$856,858 and $1,019,606 in 1995,
1996 and 1997, respectively......... 1,577,037 11,029,037 17,308,908
Affiliate............................ 84,796 1,227,661 178,360
Inventory............................ 0 543,447 630,431
Prepaid expenses..................... 220,022 1,191,287 1,348,767
Federal income tax refunds receivable
from Parent (Note 8)................ 523,782 2,546,534 663,200
Deferred income taxes (Note 8)....... 85,357 525,660 364,302
----------- ------------ ------------
Total current assets............... 3,147,090 18,365,041 220,747,710
----------- ------------ ------------
PROPERTY, PLANT, AND EQUIPMENT, NET
(NOTE 3)............................. 9,386,444 31,880,556 115,852,080
OTHER LONG-TERM ASSETS:
Intangible assets, net of accumulated
amortization of $58,695, $1,431,753
and $1,973,562 in 1995, 1996 and
1997, respectively (Note 4)......... 1,721,871 55,517,575 65,397,003
Investments (Note 5)................. 6,653,079 7,424,797 5,000
Other long-term assets............... 13,853 20,010 13,928
----------- ------------ ------------
Total assets....................... $20,922,337 $113,207,979 $402,015,721
=========== ============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable:
Trade................................ $ 376,799 $ 4,192,927 $ 7,130,290
Construction......................... 1,020,904 972,215 3,664,666
Affiliate (Note 12).................. 577,439 658,990 0
Accrued interest expense payable to
Parent.............................. 0 5,830,716 9,011,106
Accrued compensation................. 275,856 1,189,395 1,391,633
Unearned revenue..................... 248,459 762,829 3,178,367
Other accrued liabilities............ 214,769 983,270 3,871,230
Advances from Parent................. 0 0 79,886,220
Current portion of long-term debt
(Note 6)............................ 675,000 290,140 43,875,381
Current portion of capital lease
obligations (Note 6)................ 0 69,471 563,153
----------- ------------ ------------
Total current liabilities.......... 3,389,226 14,949,953 152,572,046
----------- ------------ ------------
LONG-TERM LIABILITIES:
Advance from Parent (Note 7)......... 1,456,477 74,227,827 0
Deferred income taxes (Note 8)....... 757,098 3,918,140 4,402,511
Long-term debt (Note 6).............. 1,012,500 640,112 208,611,385
Capital lease obligations (Note 6)... 0 215,421 2,979,207
----------- ------------ ------------
Total long-term liabilities........ 3,226,075 79,001,500 215,993,103
----------- ------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTES
6, 7, 10, AND 16)
STOCKHOLDER'S EQUITY:
Common stock (Note 9)................ 26 826 150,826
Additional paid-in capital........... 14,633,723 23,492,162 40,814,227
Accumulated deficit.................. (326,713) (4,236,462) (7,514,481)
----------- ------------ ------------
Total stockholder's equity......... 14,307,036 19,256,526 33,450,572
----------- ------------ ------------
Total liabilities and stockholder's
equity............................ $20,922,337 $113,207,979 $402,015,721
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.

F-13
<PAGE>

ITC/\DELTACOM, INC.,

INTERSTATE FIBERNET, INC. (FORMERLY ITC TRANSMISSION SYSTEMS, INC.),

ITC TRANSMISSION SYSTEMS II, INC.,

GULF STATES TRANSMISSION SYSTEMS, INC.,

EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND

DELTACOM, INC.

(REORGANIZED AS ITC/\DELTACOM, INC.)

COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------- --------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES...... $ 4,945,902 $ 5,750,587 $66,518,585 $ 28,574,799 $ 53,365,061
COST OF SERVICES........ 2,484,744 3,149,231 38,756,287 16,129,463 25,302,747
----------- ----------- ----------- ------------ ------------
GROSS MARGIN............ 2,461,158 2,601,356 27,762,298 12,445,336 28,062,314
----------- ----------- ----------- ------------ ------------
OPERATING EXPENSES:
Selling, operations,
and administration... 948,230 1,626,678 18,876,572 8,206,621 16,961,324
Depreciation and
amortization......... 738,052 1,267,882 6,438,074 2,832,017 8,273,232
----------- ----------- ----------- ------------ ------------
Total operating
expenses........... 1,686,282 2,894,560 25,314,646 11,038,638 25,234,556
----------- ----------- ----------- ------------ ------------
OPERATING INCOME
(LOSS)................. 774,876 (293,204) 2,447,652 1,406,698 2,827,758
----------- ----------- ----------- ------------ ------------
OTHER INCOME (EXPENSE):
Equity in losses of
unconsolidated
subsidiary (Note 5).. (96,920) (258,242) (1,589,812) (1,088,404) 0
Interest expense...... (273,759) (297,228) (6,172,421) (2,762,757) (7,561,591)
Interest and other
income (other
expense)............. 82,348 41,734 171,514 107,216 883,388
----------- ----------- ----------- ------------ ------------
Total other
expense............ (288,331) (513,736) (7,590,719) (3,743,945) (6,678,203)
----------- ----------- ----------- ------------ ------------
INCOME (LOSS) BEFORE
INCOME TAXES,
PREACQUISITION EARNINGS
(LOSSES)
AND EXTRAORDINARY
ITEM................... 486,545 (806,940) (5,143,067) (2,337,247) (3,850,445)
INCOME TAX PROVISION
(BENEFIT).............. 113,248 (302,567) (1,233,318) 671,467 1,005,809
----------- ----------- ----------- ------------ ------------
INCOME (LOSS) BEFORE
PREACQUISITION EARNINGS
(LOSSES) AND
EXTRAORDINARY ITEM..... 373,297 (504,373) (3,909,749) (1,665,780) (2,844,636)
PREACQUISITION EARNINGS
(LOSSES) (NOTE 1)...... 236,300 0 0 0 74,132
----------- ----------- ----------- ------------ ------------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM..... 136,997 (504,373) (3,909,749) (1,665,780) (2,770,504)
EXTRAORDINARY ITEM--
LOSS ON EXTINGUISHMENT
OF DEBT (LESS
RELATED INCOME TAX
BENEFITS OF $311,057).. 0 0 0 0 (507,515)
----------- ----------- ----------- ------------ ------------
NET INCOME (LOSS)....... $ 136,997 $ (504,373) $(3,909,749) $ (1,665,780) $ (3,278,019)
=========== =========== =========== ============ ============
PRO FORMA NET INCOME
(LOSS) PER SHARE (NOTE
2).....................
Before extraordinary
loss................. $ 0.01 $ (0.02) $ (0.18) $ (0.08) $ (0.13)
Extraordinary loss.... 0 0 0 0 (0.02)
----------- ----------- ----------- ------------ ------------
Net income (loss)... $ 0.01 $ (0.02) $ (0.18) $ (0.08) $ (0.15)
=========== =========== =========== ============ ============
Pro forma weighted
average common and
common equivalent
shares outstanding... 21,381,209 21,382,477 21,456,340 21,450,102 21,462,477
=========== =========== =========== ============ ============
</TABLE>

The accompanying notes are an integral part of these combined statements.

F-14
<PAGE>

ITC/\DELTACOM, INC.

INTERSTATE FIBERNET, INC. (FORMERLY ITC TRANSMISSION SYSTEMS, INC.)

ITC TRANSMISSION SYSTEMS II, INC.,

GULF STATES TRANSMISSION SYSTEMS, INC.,

EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND

DELTACOM, INC.

(REORGANIZED AS ITC/\DELTACOM, INC.)

COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
RETAINED
COMMON STOCK PAID-IN EARNINGS TOTAL
------------------- CAPITAL (ACCUMULATED STOCKHOLDER'S
SHARES AMOUNT (DEFICIT) DEFICIT) EQUITY
---------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1993................... 630 $ 6 $ 2,131,494 $ 40,663 $ 2,172,163
Capital contribution
from Parent for
formation of ITC
Transmission
Systems II, Inc. and
acquisition of
51% interest in
Interstate FiberNet
(Note 5)............. 1,000 10 4,567,407 0 4,567,417
Capital contribution
from Parent for
formation of Gulf
States Transmission
Systems, Inc......... 1,000 10 6,999,990 0 7,000,000
Return of capital
contribution to
Parent............... 0 0 (115,168) 0 (115,168)
Net income............ 0 0 0 136,997 136,997
---------- -------- ----------- ----------- -----------
BALANCE, DECEMBER 31,
1994................... 2,630 26 13,583,723 177,660 13,761,409
Capital contributions
from Parent, net..... 0 0 1,050,000 0 1,050,000
Net loss.............. 0 0 0 (504,373) (504,373)
---------- -------- ----------- ----------- -----------
BALANCE, DECEMBER 31,
1995................... 2,630 26 14,633,723 (326,713) 14,307,036
Acquisition of
DeltaCom, Inc.
(Note 13)............ 80,000 800 5,999,200 0 6,000,000
Capital contributions
from Parent, net..... 0 0 2,859,239 0 2,859,239
Net loss.............. 0 0 0 (3,909,749) (3,909,749)
---------- -------- ----------- ----------- -----------
BALANCE, DECEMBER 31,
1996................... 82,630 826 23,492,162 (4,236,462) 19,256,526
Capital contributions
from Parent, net..... 0 0 17,322,065 0 17,322,065
Initial capitalization
of ITC/\DeltaCom (Note
16).................. 15,000,000 150,000 0 0 150,000
Net loss.............. 0 0 0 (3,278,019) (3,278,019)
---------- -------- ----------- ----------- -----------
BALANCE, JUNE 30, 1997
(UNAUDITED)............ 15,082,630 $150,826 $40,814,227 $(7,514,481) $33,450,572
========== ======== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these combined statements.

F-15
<PAGE>

ITC/\DELTACOM, INC.,

INTERSTATE FIBERNET, INC. (FORMERLY ITC TRANSMISSION SYSTEMS, INC.),

ITC TRANSMISSION SYSTEMS II, INC.,

GULF STATES TRANSMISSION SYSTEMS, INC.,

EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND

DELTACOM, INC.

(REORGANIZED AS ITC/\DELTACOM, INC.)

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------- ---------------------------
1994 1995 1996 1996 1997
------------ ----------- ------------ ------------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss)...... $ 136,997 $ (504,373) $ (3,909,749) $ (1,665,780) $ (3,278,019)
------------ ----------- ------------ ------------ -------------
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities (excluding
the effects of
acquisitions):
Depreciation and
amortization......... 738,052 1,267,882 6,438,074 2,832,017 8,334,065
Deferred income
taxes................ 165,195 368,998 611,530 0 104,330
Equity in losses of
investee............. 96,920 258,242 1,589,812 1,088,404 0
Loss on sale of
assets............... 0 73,967 0 0 0
Preacquisition
earnings............. 236,300 0 0 0 (74,132)
Extraordinary item--
Loss on
extinguishment of
debt, net of income
tax benefit.......... 0 0 0 0 507,515
Other................. 48,794 14,326 13,853 13,265 73,369
Changes in current
operating assets and
liabilities:
Accounts receivable.. (1,321,852) 471,988 (2,646,760) (2,110,448) (3,055,995)
Inventory............ 0 0 (182,853) (228,299) (86,984)
Prepaid expenses..... (14,390) (93,563) (246,159) (536,620) (101,682)
Income tax refunds
receivable from
Parent.............. (52,609) (471,619) (2,022,752) 0 (663,200)
Accounts payable..... 491,656 15,083 1,506,728 1,616,103 (505,512)
Accrued interest..... 0 0 5,830,716 2,650,325 3,180,390
Unearned revenue..... 240,234 4,225 514,370 388,927 2,415,538
Accrued compensation
and other accrued
liabilities......... 227,855 31,718 698,290 (1,505,644) 2,563,342
Other, net........... (14,377) 443 (6,482) (93,552) (3,246)
------------ ----------- ------------ ------------ -------------
Total adjustments... 841,778 1,941,690 12,098,367 4,114,478 12,687,798
------------ ----------- ------------ ------------ -------------
Net cash provided by
operating
activities......... 978,775 1,437,317 8,188,618 2,448,698 9,409,779
------------ ----------- ------------ ------------ -------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures... (4,003,835) (2,526,646) (6,003,971) (1,855,798) (14,069,380)
Change in accrued
construction costs.... 300,000 720,904 (168,689) (424,115) 1,711,909
Purchase of
Investments........... 0 0 0 (394,923) 0
Proceeds from sales of
property to
affiliate............. 0 326,984 0 0 0
Investment in Gulf
States FiberNet....... (7,000,000) 0 (2,361,530) (501,595) 0
Purchase of DeltaCom,
net of cash received
(Note 13)............. 0 0 (63,534,092) (63,534,092) 0
Purchase of assets of
Viper Computer
Systems, Inc. (Note
14)................... 0 0 (625,000) 0 0
Purchase of Gulf States
FiberNet, net of cash
received.............. 0 0 0 0 574,600
Purchase of restricted
assets................ 0 0 0 0 194,775,128
------------ ----------- ------------ ------------ -------------
Net cash used in
investing
activities......... (10,703,835) (1,478,758) (72,693,282) (66,710,523) (206,557,999)
------------ ----------- ------------ ------------ -------------
</TABLE>

The accompanying notes are an integral part of these combined statements.

F-16
<PAGE>

ITC/\DELTACOM, INC.

INTERSTATE FIBERNET, INC. (FORMERLY ITC TRANSMISSION SYSTEMS, INC.)

ITC TRANSMISSION SYSTEMS II, INC.,

GULF STATES TRANSMISSION SYSTEMS, INC.,

EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND

DELTACOM, INC.

(REORGANIZED AS ITC/\DELTACOM, INC.)

COMBINED STATEMENTS OF CASH FLOWS--(CONTINUED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ------------- ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from Senior
Notes................. $ 0 $ 0 $ 0 $ 0 $194,250,000
Proceeds from other
long-term debt........ 2,700,000 0 0 0 41,095,061
Repayment of other
long-term debt and
capital lease obliga-
tions................. (337,500) (675,000) (10,619,682) (10,327,884) (41,562,500)
Proceeds from advance
from Parent........... 854,190 0 74,005,598 74,741,047 8,243,990
Repayment of advance
from Parent........... 0 (195,000) (1,234,248) (1,194,806) (48,329)
Proceeds from common
stock................. 0 0 0 0 150,000
Capital contributions
from Parent, net...... 6,884,832 1,050,000 2,859,239 1,810,412 (624,465)
Repayment of capital
lease obligations..... 0 0 0 (6,000) (184,420)
Proceeds from note re-
ceivable.............. 0 0 139,076 0 6,082
----------- ----------- ------------- ----------- ------------
Net cash provided by
financing activities.. 10,101,522 180,000 65,149,983 65,022,769 201,325,419
----------- ----------- ------------- ----------- ------------
INCREASE IN CASH AND
CASH EQUIVALENTS....... 376,462 138,559 645,319 760,944 4,177,199
----------- ----------- ------------- ----------- ------------
CASH AND CASH EQUIVA-
LENTS AT BEGINNING OF
YEAR................... 141,075 517,537 656,096 656,096 1,301,415
----------- ----------- ------------- ----------- ------------
CASH AND CASH EQUIVA-
LENTS AT END OF YEAR... $ 517,537 $ 656,096 $ 1,301,415 $ 1,417,040 $ 5,478,614
=========== =========== ============= =========== ============
SUPPLEMENTAL CASH FLOW
DISCLOSURES:
Cash paid for inter-
est................... $ 143,762 $ 174,513 $ 280,791 $ 1,217,972 $ 1,034,980
=========== =========== ============= =========== ============
Cash paid for income
taxes, net of refunds
received.............. $ 7,000 $ 11,558 $ 546,501 $ 362,764 $ (621,319)
=========== =========== ============= =========== ============
NONCASH TRANSACTIONS:
Equity portion of ac-
quisition of DeltaCom
(Note 13)............. $ 0 $ 0 $ 6,000,000 $ 6,000,000 $ 0
=========== =========== ============= =========== ============
Assumption of capital
leases related to
acquisition of assets
of Viper Computer
Systems, Inc.
(Note 14)............. $ 0 $ 0 $ 171,683 $ 0 $ 0
=========== =========== ============= =========== ============
Equity portion of
acquisition of 64%
interest in Gulf State
FiberNet and Georgia
Fiber Assets.......... $ 0 $ 0 $ 0 $ 0 $ 17,896,665
=========== =========== ============= =========== ============
Assumption of long-term
debt related to
acquisition of Georgia
Fiber Assets.......... $ 0 $ 0 $ 0 $ 0 $ 9,964,091
=========== =========== ============= =========== ============
Offset of Advances to
Parent as a reduction
to related advances
from Parent........... $ 0 $ 0 $ 0 $ 0 $ 2,546,534
=========== =========== ============= =========== ============
Accrued debt issuance
costs related to
Notes................. $ 0 $ 0 $ 0 $ 0 $ 289,220
=========== =========== ============= =========== ============
</TABLE>

The accompanying notes are an integral part of these combined statements.

F-17
<PAGE>

ITC/\DELTACOM, INC.

INTERSTATE FIBERNET, INC. (FORMERLY ITC TRANSMISSION SYSTEMS, INC.)

ITC TRANSMISSION SYSTEMS II, INC.,

GULF STATES TRANSMISSION SYSTEMS, INC.,

EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND

DELTACOM, INC.

(REORGANIZED AS ITC/\DELTACOM, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

1. ORGANIZATION, BASIS OF PRESENTATION, AND NATURE OF BUSINESS

Organization

InterState FiberNet, Inc. (formerly ITC Transmission Systems, Inc.)
("FiberNet"), ITC Transmission Systems II, Inc. ("Transmission II"), Gulf
States Transmission Systems, Inc. ("GSTS"), and Eastern Telecom, Inc. d.b.a.
InterQuest ("InterQuest") (collectively, the "Fiber Companies"), as well as
DeltaCom, Inc. ("DeltaCom"), are all wholly owned subsidiaries of ITC Holding
Company, Inc. (the "Parent"). ITC/\DeltaCom, Inc. ("ITC/\DeltaCom") was
incorporated on March 24, 1997 under the laws of the State of Delaware, as a
wholly owned subsidiary of the Parent, to acquire and operate the Fiber
Companies and DeltaCom. Upon receipt of certain regulatory approvals and
certain other consents, on July 25, 1997 the Parent completed the
reorganization of such subsidiaries (the "Reorganization"), as follows:

a. InterQuest and Transmission II were merged with and into FiberNet.

b. The Parent contributed all of the outstanding capital stock of
FiberNet, DeltaCom and GSTS to ITC/\DeltaCom Inc.

c. ITC/\DeltaCom contributed all of the outstanding capital stock of
DeltaCom and GSTS to FiberNet.

As a result of the Reorganization, ITC/\DeltaCom became the sole stockholder
of FiberNet and FiberNet became the sole stockholder of both GSTS and
DeltaCom. ITC/\DeltaCom, FiberNet, Transmission II, GSTS, InterQuest, and
DeltaCom are collectively referred to herein as the "Companies." See Note 16
for a discussion of the subsequent merger of the Parent with and into
ITC/\DeltaCom (the "Merger").

At December 31, 1996, FiberNet and Transmission II together held 100% of the
ownership interests in Interstate FiberNet ("Interstate"), a Georgia general
partnership (Note 5). Effective with the Reorganization, Interstate was
absorbed by law into FiberNet. GSTS held a 36% ownership in and is the
managing partner of Gulf States FiberNet ("Gulf States"), a Georgia general
partnership (Note 5). Subsequent to year-end, the Parent agreed to purchase
the remaining 64% interest in Gulf States (Note 16).

Basis of Accounting and Financial Statement Presentation

The accompanying combined financial statements of the Companies are prepared
on the accrual basis of accounting and present their combined assets,
liabilities, revenues, expenses, and cash flows as if they existed as a
separate corporation during the periods presented. ITC/\DeltaCom's results of
operations, changes in stockholder's equity, and cash flow have been included
in the combined statements for the period from inception (March 24, 1997)
through June 30, 1997.

The financial information included herein may not necessarily reflect the
financial position, results of operations, or cash flows of the Companies in
the future or what the financial position, results of operations or cash flows
of the Companies would have been if they were combined as a separate stand
alone company during the periods presented.

F-18
<PAGE>

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The combined balance sheet as of June 30, 1997 and the combined statements
of operations and cash flows for the six months ended June 30, 1996 and 1997
are unaudited and have been prepared by management of the Companies in
accordance with the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, the statements contain all
adjustments (consisting of only normal recurring items) necessary for the fair
presentation of the financial position and results of operations for the
interim period. The results of operations for the six months ended June 30,
1997 are not necessarily indicative of the results to be expected for the
entire year.

Investments in affiliated entities in which the Companies have at least 20%
ownership and do not have management control are accounted for using the
equity method. All material intercompany accounts and transactions have been
eliminated in the accompanying combined financial statements.

Interstate was initially formed in 1992 as a partnership between FiberNet,
which held a 49% ownership interest, and SCANA Communications, Inc. ("SCANA"),
which held the remaining 51% interest. FiberNet accounted for this investment
using the equity method. On August 17, 1994, the Parent formed Transmission II
and purchased SCANA's 51% interest in Interstate (Note 5). To reflect this
step acquisition, the revenues and expenses of Interstate have been included
in the accompanying statements of operations for the full year ended December
31, 1994, with the preacquisition earnings attributable to SCANA prior to
August 17, 1994 deducted to determine combined net income of the Companies.

On January 29, 1996, the Parent acquired 100% of the common stock of
DeltaCom (Note 13). The acquisition was accounted for using the purchase
method of accounting. The results of operations of DeltaCom have been included
in the accompanying statements of operations since the date of acquisition.

Gulf States was initially formed in 1994 as a partnership between GSTS,
which held a 36% ownership interest, and SCANA, which held the remaining 64%
interest. GSTS accounted for this investment using the equity method. On March
27, 1997, GSTS purchased SCANA's 64% interest in Gulf States (Note 16). To
reflect this step acquisition, the revenues and expenses of Gulf States have
been included in the statement of operations for the six months ended June 30,
1997, with the preacquisition losses attributable to SCANA prior to March 27,
1997 deducted to determine the combined net loss of the Companies.

Nature of Business

The Companies operate primarily in two business segments. DeltaCom is a
regional long-distance company operating primarily in the State of Alabama.
DeltaCom is engaged in the retail sale of long-distance services such as
traditional switched and dedicated long distance; 800/888 calling; calling
card and operator services; ATM and frame relay; high-capacity broadband
private line services, as well as Intranet, Internet, and Web page hosting and
development services; and customer premises equipment installation and repair.
DeltaCom primarily serves midsized and major regional businesses in the
southern United States (the "Retail Services").

The Fiber Companies are engaged in the sale of long-haul private-line
services on a wholesale basis to other telecommunications companies using
their owned and managed fiber optic network which extends throughout ten
southern states (Arkansas, Texas, Tennessee, Mississippi, Louisiana, Alabama,
Georgia, North Carolina, South Carolina, and Florida) (the "Carriers' Carrier
Services"). The Fiber Companies have been providing Carriers' Carrier Services
since 1992 through their ownership interests in Interstate and, later, Gulf
States (Note 5).

Certain of the Companies have experienced operating losses as a result of
efforts to build their network infrastructure and internal staffing, develop
their systems, and expand into new markets. Assuming financing is available,
all of the Companies expect to continue to focus on increasing their customer
base and expanding their network operations. Accordingly, the Companies expect
that their cost of services, selling, operations, and administration expenses
and capital expenditures will continue to increase significantly, all of which
will have a

F-19
<PAGE>

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

negative impact on short-term operating results. In addition, the Companies
may change their pricing policies to respond to a changing competitive
environment. FiberNet has obtained a five-year, $100 million secured credit
facility with NationsBank of Texas, N.A. (Note 16) and ITC/\DeltaCom has issued
Senior Notes (Note 16) to refinance certain existing indebtedness of the
Companies and to provide additional funds for the Companies' expansion plans.
In the opinion of management, the Companies' cash flows from operations and
existing credit position will be sufficient to meet the capital and operating
needs of the Companies through at least 1997. However, there can be no
assurance that growth in the Companies' revenue or customer base will continue
or that the Companies will be able to achieve or sustain profitability and/or
positive cash flow.

Sources of Supplies

The Companies voluntarily use a single vendor for transmission equipment
used in the Companies' network. However, if this vendor were unable to meet
the Companies' needs, management believes that other sources for this
equipment exist on commensurate terms and that operating results would not be
adversely affected.

Credit Risk and Significant Customers

The Companies' accounts receivable potentially subject the Companies to
credit risk, as collateral is generally not required. The Companies' risk of
loss is limited due to advance billings to certain customers for services and
the ability to terminate access on delinquent accounts. The concentration of
credit risk is mitigated by the large number of customers comprising the
customer base. In 1996 and 1994, no customer represented more than 10% of the
Companies' combined operating revenues. However, in 1995, one customer
represented approximately 30% of the Companies' combined operating revenues.

Regulation

The Companies are subject to certain regulations and requirements of the
Federal Communications Commission and various state public service
commissions.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Companies consider all short term highly liquid investments with an
original maturity date of three months or less to be cash equivalents.

Inventory

Inventory is held only by DeltaCom and consists primarily of customer
premise equipment held for resale.

Inventory is valued at the lower of cost or market, with cost determined
using the first in, first out method.

F-20
<PAGE>

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Property and Equipment

Property and equipment are recorded at cost or fair market value at the
acquisition date (Note 3). Depreciation of property and equipment is provided
using the composite or straight line method over the following estimated
useful lives:

<TABLE>
<CAPTION>
YEARS
-------
<S> <C>
Buildings and towers................................................. 30
Office furniture, fixtures, and equipment............................ 3 to 15
Vehicles............................................................. 5
Telecommunications equipment......................................... 5 to 20
</TABLE>

Intangible Assets

Intangible assets include the excess of the purchase price of acquisitions
over the fair value of net assets acquired, as well as various other acquired
intangibles. Intangible assets are amortized over the following estimated
useful lives:

<TABLE>
<CAPTION>
YEARS
-------
<S> <C>
Goodwill............................................................. 40
Trademark............................................................ 40
Customer base........................................................ 5 to 12
Noncompete agreements................................................ 5
</TABLE>

At June 30, 1997, intangible assets also include debt issuance costs
associated with ITC/\DeltaCom's offering of Senior Notes (Note 16) as well as
the Bridge Facility (Note 16), which will be amortized over the life of the
related debt.

Long-Lived Assets

The Companies adopted Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of," on January 1, 1996. SFAS No. 121 establishes
accounting standards for the impairment of long lived assets and goodwill
related to those assets to be held and used and for long-lived assets and
certain identifiable intangible assets to be disposed of. The effect of
adopting SFAS No. 121 was not material to the Companies' combined financial
statements.

The Companies review their intangible assets for impairment at each balance
sheet date or whenever events or changes in circumstances indicate that the
carrying amount of an asset should be assessed. Management evaluates the
intangible assets related to each acquisition individually to determine
whether an impairment has occurred. An impairment is recognized when the
discounted future cash flows estimated to be generated by the acquired
business are insufficient to recover the current unamortized balance of the
intangible asset, with the amount of any such deficiency charged to income in
the current year. Estimates of future cash flows are based on many factors,
including current operating results, expected market trends, and competitive
influences.

Unearned Revenue

Unearned revenue represents the liability for advanced billings to customers
for use of the Companies' fiber- optic network. Customers are billed in
advance for fixed monthly charges.

Unbilled Revenue

DeltaCom records unbilled revenue for long-distance services provided to
customers but not yet billed. Approximately $3.4 million in unbilled revenue
is included in accounts receivable in the accompanying balance sheet at
December 31, 1996.

F-21
<PAGE>

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Income Taxes

The Companies utilize the liability method of accounting for income taxes.
Under the liability method, deferred taxes are determined based on the
difference between the financial and tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the differences are expected
to reverse.

The Internal Revenue Code and applicable state statutes provide that the
income and expenses of a partnership are not separately taxable to the
partnership but rather accrue directly to the partners. Accordingly, the
accompanying financial statements include provisions for federal and state
income taxes related to partnership interests in Interstate and Gulf States
held by FiberNet, Transmission II, and GSTS.

The Companies are included in the consolidated federal income tax return of
the Parent. Under a tax-sharing arrangement, the Companies are paid for the
utilization of net operating losses included in the consolidated tax return,
even if such losses could not have been used if the Companies were to have
filed on a separate return basis.

Revenue Recognition

Revenues are recognized as services are provided and consist primarily of
charges for use of long-distance services and for use of the Companies' fiber-
optic network.

Fair Value of Financial Instruments

The carrying values of the Companies' financial instruments, other than the
portion of their advance from the Parent related to the DeltaCom acquisition,
approximate their fair values. See Note 7 for the terms of the advance from
the Parent and the related interest swap agreements under which DeltaCom would
receive $285,308 if the agreements were terminated at December 31, 1996.

Advertising Costs

The Companies expense all advertising costs as incurred.

Pro Forma Net Loss Per Share

Pro forma net loss per share is computed using the weighted average number
of shares of common stock and dilutive common stock equivalent shares ("CSEs")
from stock options (using the treasury stock method). Pursuant to the
Securities and Exchange Commission Staff Accounting Bulletins, shares of
Common Stock and CSEs issued at prices below the expected initial public
offering of common stock by ITC/\DeltaCom (Note 16) have been included in the
calculation as if they were outstanding for all periods prior to such
offering, regardless of whether they are dilutive. Accordingly (based on an
anticipated effective date of the initial public offering of November 1,
1997), all Parent stock options originally granted since October 30, 1996 by
the Parent and assumed by ITC/\DeltaCom in the Merger (Note 16) and all
ITC/\DeltaCom stock options granted since ITC/\DeltaCom's inception on March 24,
1997 are included in the loss per share calculation for all periods presented,
even though the effect on net loss per share is anti-dilutive.

F-22
<PAGE>

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

3. PROPERTY AND EQUIPMENT

Balances of major classes of assets and the related accumulated depreciation
as of December 31, 1995 and 1996 are as follows:

<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Land................................................. $ 0 $ 140,695
Buildings and towers................................. 788,107 1,293,495
Furniture and fixtures............................... 1,219,792 4,140,188
Vehicles............................................. 31,610 287,219
Telecommunications equipment......................... 7,598,308 32,321,553
---------- -----------
9,637,817 38,183,150
Less accumulated depreciation........................ 1,511,374 6,569,908
---------- -----------
Net property, plant, and equipment in service........ 8,126,443 31,613,242
Assets under construction............................ 1,260,001 267,314
---------- -----------
Property, plant, and equipment, net.................. $9,386,444 $31,880,556
========== ===========
</TABLE>

4. INTANGIBLE ASSETS

Goodwill and other intangible assets and the related amortization as of
December 31, 1995 and 1996 are as follows:

<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Goodwill............................................ $1,780,566 $50,961,123
Customer base....................................... 0 5,846,371
Noncompete agreements............................... 0 102,000
Trademark........................................... 0 39,834
---------- -----------
1,780,566 56,949,328
Less accumulated amortization....................... (58,695) (1,431,753)
---------- -----------
Intangibles, net.................................... $1,721,871 $55,517,575
========== ===========
</TABLE>

At December 31, 1995, all goodwill related to the acquisition of Interstate
in 1994 (Note 5). See Notes 14 and 15 for a discussion of additional
intangible assets recorded in 1996 related to the acquisitions of DeltaCom and
the assets of Viper Computer Systems, Inc. ("ViperNet").

5. INVESTMENTS

Gulf States

At December 31, 1995 and 1996, investments represent GSTS's 36% ownership
interest in Gulf States, which was formed as a partnership between GSTS and
SCANA in 1994. Gulf States provides digital communications transport services
to communications common carriers in the states of Georgia, Texas, Alabama,
Mississippi, and Louisiana. GSTS is the managing partner and is responsible
for managing and operating Gulf States. Subsequent to year-end, the Parent
agreed to purchase the remaining 64% interest in Gulf States previously owned
by SCANA (Note 16). The following table summarizes various financial data of
Gulf States

F-23
<PAGE>

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

for the period from inception (August 17, 1994) to December 31, 1994 and for
the years ended December 31, 1995 and 1996:

<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Operating revenues.................... $ 127,569 $ 7,587,713 $10,056,544
Operating (loss) income............... (280,718) 1,214,409 (216,992)
Net loss.............................. (269,222) (717,340) (4,416,142)
Current assets........................ 590,040 6,557,741 2,751,101
Noncurrent assets..................... 42,950,641 64,206,522 63,820,143
Current liabilities................... 10,753,346 9,831,768 9,432,588
Noncurrent liabilities................ 12,700,000 41,562,500 35,625,000
</TABLE>

Interstate

FiberNet owned a 49% interest in Interstate. On August 17, 1994, the Parent
exchanged 250,000 shares of its common stock, valued at $4,435,000, for
SCANA's 51% interest in Interstate and paid $132,417 in related expenses.
Simultaneously, the Parent formed Transmission II, transferred the 51%
ownership interest in Interstate to Transmission II, and made an equity
contribution to Transmission II equal to the value of the net assets acquired.
Goodwill of $1,780,566 related to this transaction has been "pushed down" to
the accounts of Transmission II. The goodwill represents the excess of the
purchase price paid for the 51% ownership interest in Interstate over the fair
market value of the net assets acquired.

To reflect this step acquisition, the revenues and expenses of Interstate
for the year ended December 31, 1994 have been included in the accompanying
statements of operations, with the preacquisition earnings attributable to
SCANA deducted to determine combined net income of the Companies. In addition,
the statement of cash flows for the year ended December 31, 1994 reflects all
cash flows of Interstate during the year. The statement of stockholder's
equity reflects the step acquisition as a capital contribution to FiberNet
during 1994.

As discussed in Note 1, effective with the Reorganization, the partners of
Interstate merged and the partnership was absorbed by law into FiberNet.

6. FINANCING OBLIGATIONS

Long-Term Debt

Long-term debt at December 31, 1995 and 1996 consists of the following:

<TABLE>
<CAPTION>
1995 1996
---------- ---------
<S> <C> <C>
Borrowings under NationsBank of Georgia, N.A. credit
agreement (up to $2,700,000), 8% interest; due in
quarterly installments of $168,750 through September
1998; secured by the assets of Interstate; all
outstanding amounts were repaid during 1996............ $1,687,500 $ 0
Installment payments on equipment due to Northern
Telecom, payable in annual installments of $351,370;
due June 1, 1999; interest rate imputed at 8.6%........ 0 930,252
---------- ---------
1,687,500 930,252
Less current maturities................................. (675,000) (290,140)
---------- ---------
Long-term debt, net of current portion.................. $1,012,500 $ 640,112
========== =========
</TABLE>

F-24
<PAGE>

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Maturities of long term debt at December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997................................................................ $290,140
1998................................................................ 306,862
1999................................................................ 333,250
2000................................................................ 0
2001................................................................ 0
Thereafter.......................................................... 0
--------
$930,252
========
</TABLE>

Long term debt at June 30, 1997 consisted of the following (unaudited):

<TABLE>
<S> <C>
11% Senior Notes due 2007 (Note 16)............................ $200,000,000
$41.6 million bridge facility, interest payable at LIBOR plus
2.25% (8.25% at June 30, 1997), paid in full on July 25, 1997
(Note 16)..................................................... 41,600,000
$10.0 million term facility, interest payable at 11%, maturing
on March 31, 2002............................................. 9,964,091
Other.......................................................... 922,675
------------
Total long-term debt .......................................... 252,486,766
Less: current maturities....................................... 43,875,381
------------
Total.......................................................... $208,611,385
============
</TABLE>

LEASE OBLIGATIONS

The Companies have entered into various operating and capital leases for
facilities and equipment used in their operations. Aggregate future minimum
rental commitments under noncancelable operating leases with original or
remaining periods in excess of one year and maturities of capital lease
obligations as of December 31, 1996 are as follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
----------- --------
<S> <C> <C>
1997................................................. $ 2,156,464 $ 90,139
1998................................................. 2,694,668 89,678
1999................................................. 2,583,231 45,643
2000................................................. 1,937,701 21,981
2001................................................. 1,769,097 19,004
Thereafter........................................... 7,987,843 99,797
----------- --------
$19,129,004 366,242
===========
Less amounts representing interest................... (81,350)
--------
Present value of net minimum lease payments.......... 284,892
Less current portion................................. (69,471)
--------
Obligations under capital lease, net of current por-
tion................................................ $215,421
========
</TABLE>

Rental expense charged to operations for the years ended December 31, 1994,
1995, and 1996 was $63,251, $74,534, and $1,272,389, respectively.

F-25
<PAGE>

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

7. ADVANCE FROM PARENT

The advance from Parent reflected on the Companies' balance sheets includes
the following at December 31, 1995 and 1996.

<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
DeltaCom advance from Parent related to acquisi-
tion............................................. $ 0 $74,005,598
Cash advance from Parent to InterQuest............ 1,456,477 1,267,143
Cash advance to Parent from DeltaCom.............. 0 (1,044,914)
---------- -----------
Total advance from Parent......................... $1,456,477 $74,227,827
========== ===========
</TABLE>

DeltaCom Advance From Parent Related to Acquisition

As discussed in Note 12, the Parent funded the acquisition of DeltaCom and
the related refinancing of DeltaCom's outstanding debt through borrowings of
$74,005,598 on its own credit facility (the "Parent Credit Facility") with
First Union National Bank of North Carolina ("First Union") and CoBank, ACB
("CoBank"). These borrowings have been pushed down to the accounts of DeltaCom
through the advance from Parent account under terms substantially identical to
those of the Parent Credit Facility.

The Parent Credit Facility is a two year line of credit providing for
borrowings of up to $127.5 million on a two year revolving basis. The
available credit was initially split equally between CoBank ("Tranche A") and
First Union ("Tranche B"); however, First Union subsequently syndicated
Tranche B to several other lenders. On January 19, 1998, the Parent may elect
to convert all outstanding balances to a five year term loan with quarterly
principal payments through December 31, 2002. Loans made under the Parent
Credit Facility may, at any time or from time to time, be repaid in whole or
in part, upon certain notices to the administrative agent. As of December 31,
1996, the Parent had $86 million outstanding under this agreement.

Interest on the Parent Credit Facility is calculated on a 360 day year, at
the option of the Parent, as follows:

. Tranche A--"Margin" plus either (a) prime, (b) 1-, 2-, 3-, or 6-month
LIBOR, or (c) one year Treasury

. Tranche B--"Margin" plus either (a) prime or (b) 1-, 2-, 3-, or 6-month
LIBOR

The applicable "Margin" varies based on the Parent's leverage ratio and is
adjusted quarterly. At December 31, 1996, the interest rate for both tranches
was calculated based on the applicable margin (2.25%) plus the 3 month LIBOR
rate (5.53125%).

The Parent has also entered into a forward starting interest rate swap
agreement with First Union to hedge its interest rate exposure under the
Parent Credit Facility. The agreement swaps notional amounts of $50 million
and $41 million under the Parent Credit Facility with fixed rates of 8.66% and
8.53%, respectively. As of December 31, 1996, DeltaCom's proportionate share
of the fee the Parent would receive upon termination of the swap agreement was
$285,308. Upon the Reorganization (Note 16), DeltaCom repaid its portion of
these borrowings at an interest rate of 8.595%, which approximates the
Parent's average interest rate under these interest rate swap agreements. At
December 31, 1996, the balance sheet reflects approximately $5.8 million of
accrued interest related to DeltaCom's advance from Parent.

The Parent Credit Facility includes certain financial covenants and ratios.
At December 31, 1996, the Parent was in compliance with these requirements.
The Parent Credit Facility is jointly and severally guaranteed by the Parent,
the Companies, and other wholly owned or majority owned subsidiaries of the
Parent. The Parent Credit Facility is also secured by substantially all of the
assets of the Parent and the Companies, as well as the assets of other wholly
owned or majority owned subsidiaries of the Parent. See Note 16.

F-26
<PAGE>

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Cash Advance to Parent From DeltaCom

Amounts reflected as cash advance to Parent from DeltaCom represent excess
funds from operations which are loaned to the Parent at an annual interest
rate of 8.25%. DeltaCom recorded interest income of $77,868 during 1996. The
advance is repayable on demand.

Cash Advance From Parent to InterQuest

Amounts reflected as cash advance from Parent to InterQuest represent
borrowings for operating purposes. Interest is payable at a rate equal to the
interest rate on the Parent Credit Facility plus .5%. InterQuest recorded
interest expense of $122,696 and $96,665 in 1995 and 1996, respectively.

8. INCOME TAXES

Details of the income tax provision (benefit) for the years ended December
31, 1994, 1995, and 1996 are as follows:

<TABLE>
<CAPTION>
1994 1995 1996
-------- --------- -----------
<S> <C> <C> <C>
Current:
Federal................................. $ 3,040 $(628,795) $(1,804,786)
State................................... (1,453) (42,770) (48,829)
-------- --------- -----------
Total current......................... 1,587 (671,565) (1,853,615)
-------- --------- -----------
Deferred:
Federal................................. 95,812 385,742 660,033
State................................... 15,849 (16,744) (39,736)
-------- --------- -----------
Total deferred........................ 111,661 368,998 620,297
-------- --------- -----------
Total provision (benefit)............. $113,248 $(302,567) $(1,233,318)
======== ========= ===========
</TABLE>

The tax effects of temporary differences between the carrying amounts of
assets and liabilities in the financial statements and their respective tax
bases, which give rise to deferred tax assets and liabilities, as of December
31, 1995 and 1996 are as follows:

<TABLE>
<CAPTION>
1995 1996
--------- -----------
<S> <C> <C>
Noncurrent deferred tax (liabilities) assets:
Property, plant, and equipment basis differ-
ences........................................... $(784,435) $(3,903,605)
Intangible assets................................ (48,109) (57,849)
Other............................................ 75,446 43,314
--------- -----------
(757,098) (3,918,140)
--------- -----------
Current deferred tax assets:
Accrued expenses................................. 0 80,245
Net operating loss carryforwards................. 77,526 130,912
Reserves for uncollectible accounts.............. 7,831 314,503
--------- -----------
85,357 525,660
--------- -----------
Net deferred income tax liabilities................ $(671,741) $(3,392,480)
========= ===========
</TABLE>

The Companies are included in the Parent's consolidated federal income tax
return. Prior to January 29, 1996, DeltaCom filed a separate federal income
tax return. The Companies each file separate state income tax returns.

F-27
<PAGE>

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Under a tax-sharing arrangement, the Companies receive payment for net
operating losses generated for federal income tax purposes and used by the
Parent in the Parent's consolidated income tax return. Amounts receivable from
the Parent under this tax-sharing agreement are $523,782 and $2,546,534 at
December 31, 1995 and 1996, respectively. Additionally, certain of the
Companies have generated net operating losses for state income tax purposes.
At December 31, 1995 and 1996, $77,526 and $130,912, respectively, have been
included in current assets in the Companies' balance sheets. Loss
carryforwards of approximately $11,000, $67,000, and $53,000 will expire in
2009, 2010, and 2011, respectively. In management's opinion, the Companies
will generate operating income sufficient to utilize all of the remaining
state net operating loss carryforwards in 1997.

A reconciliation of the federal statutory income tax rate to the effective
income tax rate for the periods presented is as follows:

<TABLE>
<CAPTION>
1994 1995 1996
----- ------ -----
<S> <C> <C> <C>
Federal statutory rate............................... 34.0% (34.0)% (34.0)%
Increase (reduction) in taxes resulting from:
State income taxes, net of federal benefit......... 5.5 (5.2) (2.0)
Nondeductible amortization of goodwill............. 0.0 0.0 9.0
Preacquisition earnings............................ (16.5) 0.0 0.0
Other................................................ 0.3 1.7 3.0
----- ------ -----
Effective income tax rate............................ 23.3% (37.5)% (24.0)%
===== ====== =====
</TABLE>

9. EQUITY INTERESTS

Capital Stock

The common stock authorized, issued, and outstanding at December 31, 1995
and 1996 for each of the Companies is as follows:

<TABLE>
<CAPTION>
SHARES
SHARES ISSUED AND PAR VALUE
AUTHORIZED OUTSTANDING PER SHARE
---------- ----------- ---------
<S> <C> <C> <C>
FiberNet.................................... 1,000 100 0.01
Transmission II............................. 10,000 1,000 0.01
GSTS........................................ 10,000 1,000 0.01
InterQuest.................................. 100,000 530 0.01
DeltaCom.................................... 80,000 80,000 0.01
</TABLE>

ITC/\DeltaCom has two classes of common stock authorized. Holders of
ITC/\DeltaCom's Class A Common Stock have one vote per share, while holders of
Class B Common Stock have ten votes per share. Upon the formation of
ITC/\DeltaCom (Note 1), 15,000,000 shares of Class B Common Stock were
outstanding. See Note 16 for a description of ITC/\Deltacom's Series A
Convertible Preferred Stock issued in connection with the Merger.

Parent Stock Option Plan

The Parent sponsors a stock option plan which provides for the granting of
stock options to substantially all employees of the Parent and its wholly
owned and majority owned subsidiaries, including the Companies. Options are
generally granted at a price (established by the Parent's board of directors
based on equity transactions and other analyses) equal to at least 100% of the
fair market value of the Parent's common stock on the option grant date.
Options granted generally become exercisable 40% after two years and 20% per
annum for the next three years and remain exercisable for ten years after the
option grant date. At December 31, 1996, employees of the Companies held
outstanding options for a total of 314,768 of the Parent's shares at option
prices ranging from $7.60 to $30.50 per share.

F-28
<PAGE>

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Statement of Financial Accounting Standards No. 123

During 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock- Based Compensation," which defines a fair value-based
method of accounting for an employee stock option or similar equity instrument
and encourages all entities to adopt that method of accounting for all of
their employee stock compensation plans. However, it also allows an entity to
continue to measure compensation cost for those plans using the method of
accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees." Entities electing to remain with
the accounting methodology required by APB Opinion No. 25 must make pro forma
disclosures of net income and, if presented, earnings per share as if the fair
value-based method of accounting defined in SFAS No. 123 had been applied.

The Parent has elected to account for its stock based compensation plans
under APB Opinion No. 25, under which no compensation cost has been recognized
by either the Parent or the Companies. However, the Companies have computed,
for pro forma disclosure purposes, the value of all options for shares of the
Parent's common stock granted since December 15, 1994 to employees of the
Companies using the Black-Scholes option pricing model prescribed by SFAS No.
123 and the following weighted average assumptions:

<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Risk-free interest rate................................ 5.53% 6.29%
Expected dividend yield................................ 0% 0%
Expected lives......................................... Ten years TEN YEARS
Expected volatility.................................... 50% 50%
</TABLE>

The weighted average fair value of options for the Parent's stock granted to
employees of the Companies in 1995 and 1996 was $16.14 and $19.65 per share,
respectively. The total value of options for the Parent's stock granted to
employees of the Companies during 1995 and 1996 was computed as approximately
$257,000 and $4,116,000, respectively, which would be amortized on a pro forma
basis over the five-year vesting period of the options. If the Companies had
accounted for these plans in accordance with SFAS No. 123, the Companies' net
loss for the years ended December 31, 1995 and 1996 would have increased as
follows:

<TABLE>
<CAPTION>
AS REPORTED PRO FORMA
----------- -----------
<S> <C> <C>
Net loss for the year ended December 31, 1995.... $ (504,373) $ (595,987)
Net loss for the year ended December 31, 1996.... (3,909,749) (5,469,440)
</TABLE>

Because SFAS No. 123 has not been applied to options granted prior to
December 15, 1994, the resulting pro forma compensation cost may not be
representative of that expected in future years.

A summary of the status of the Companies' portion of the Parent's stock
option plan at December 31, 1995 and 1996 and changes during the years then
ended is presented in the following table:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
PRICE
SHARES PER SHARE
------- ---------
<S> <C> <C>
Outstanding at December 31, 1994.......................... 94,925 $13.92
Granted................................................. 14,252 21.17
Forfeited............................................... (750) 14.35
-------
Outstanding at December 31, 1995.......................... 108,427 14.87
Granted................................................. 223,081 25.87
Exercised............................................... (840) 16.86
Forfeited............................................... (15,900) 24.55
-------
Outstanding at December 31, 1996.......................... 314,768 22.17
=======
</TABLE>

F-29
<PAGE>

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The following table sets forth the exercise price range, number of shares,
weighted average exercise price, and remaining contractual lives by groups of
similar price and grant date:

<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE
EXERCISE NUMBER AVERAGE CONTRACTUAL
PRICE RANGE OF SHARES PRICE LIFE
----------- --------- -------- -----------
(IN YEARS)
<S> <C> <C> <C>
$ 7.60-$ 7.99 25,000 $ 7.68 4.95
$14.35 31,300 14.35 7.27
$17.74 38,962 17.74 7.89
$20.00 5,300 20.00 8.43
$24.75-$24.78 170,406 24.78 9.87
$30.02-$30.50 43,800 30.08 9.31
</TABLE>

At December 31, 1996, 51,750 options for the Parent's stock with a weighted
average exercise price of $12.06 per share were exercisable by employees of
the Companies. At December 31, 1995, 26,260 options for the Parent's stock
with a weighted average exercise price of $9.27 per share were exercisable by
employees of the Companies.

10. COMMITMENTS AND CONTINGENCIES

Purchase Commitments

At December 31, 1996, the Companies had entered into agreements with vendors
to purchase approximately $5.6 million of equipment related to the
installation of a switch in Columbia, South Carolina, improvements to a switch
in Birmingham, Alabama, and other network expansion efforts.

At June 30, 1997, the Companies had entered into agreements with vendors to
purchase approximately $11.5 million of equipment related to the improvement
and installation of switches, other network expansion efforts and certain
services (unaudited).

Legal Proceedings

In the normal course of business, the Companies are subject to various
litigation; however, in management's opinion and the opinion of counsel, there
are no legal proceedings pending against the Companies which would have a
material adverse effect on the financial position, results of operations, or
liquidity of the Companies.

11. EMPLOYEE BENEFIT PLANS

The Fiber Companies' employees are participants in the Parent's defined
benefit plan. Effective January 31, 1995, the Parent elected to freeze all
future benefit accruals under the plan. The plan provided retirement,
disability, and survivor benefits to eligible employees. The Fiber Companies
funded pension cost in accordance with applicable regulations. Total pension
cost charged to expense in 1994, 1995, and 1996 was $17,805, $8,721, and
$9,600, respectively.

The net assets available for benefits under the plan are maintained by the
Parent on behalf of its subsidiaries. As of December 31, 1995 and 1996, the
plan's net assets available for benefits were $1,878,498 and $1,646,892,
respectively, and the projected benefit obligations were $2,370,391 and
$2,442,917, respectively, as computed under SFAS No. 87.

Employees of the Fiber Companies participate in the Parent's 401(k) defined
contribution plan. This plan, which became effective February 1, 1995, covers
all employees of the participating entities who have one year of service and
are at least 18 years of age. The Parent contributes a discretionary amount of
the employees'

F-30
<PAGE>

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

earnings based on the plan's earnings. The discretionary contribution
percentages per employee for the years ended December 31, 1995 and 1996 were
2.53% (limited to a total for all participants of $100,000) and 2.66% (limited
to a total for all participants of $150,000), respectively, and were fully
funded by the Parent. In addition, the Fiber Companies offer a partial
matching of employee contributions at a rate of 1/2% for each 1% of the
employee earnings contributed to a maximum match of 4% of employee earnings.
Total matching contributions made to the plan and charged to expense by the
Fiber Companies for the years ended December 31, 1995 and 1996 were $26,520
and $54,098, respectively.

Employees of DeltaCom may participate in a separately administered 401(k)
defined contribution plan. The plan covers substantially all DeltaCom
employees with at least one year of service. Participants may elect to defer
15% of compensation up to a maximum amount determined annually pursuant to
Internal Revenue Service regulations. DeltaCom has elected to provide matching
employer contributions equal to the lesser of 3% of compensation or the
maximum amount annually for each participant. DeltaCom's policy is to fund
contributions as earned. Company contributions made to the plan and charged to
expense by DeltaCom for the 11 months ended December 31, 1996 were $123,854.

12. RELATED PARTY TRANSACTIONS

The Parent occasionally provides certain administrative services, such as
legal and tax planning services for its subsidiaries, including the Companies.
In addition, for the period from January through July 1994, the Parent
provided FiberNet and InterQuest with additional administrative services,
including marketing, management, and financial services. The costs of these
services are charged to the Companies based primarily on the salaries and
related expenses for certain of the Parent's executives and an estimate of
their time spent on projects specific to the Companies. For the years ended
December 31, 1994, 1995, and 1996, the Companies recorded $148,140, $5,270,
and $19,150, respectively, in selling, operations, and administration expenses
related to these services. In the opinion of management, the methodology used
to calculate the amounts charged to the Companies is reasonable.

The Parent also leases office space and transportation to the Companies.
Amounts charged to the Companies related to these leases for the years ended
December 31, 1995 and 1996 were $21,669, and $62,762, respectively, and are
reflected as selling, operations, and administration expenses in the
Companies' statements of operations. No such leases were in place in 1994. See
Notes 7 and 11 for discussion of certain other financial arrangements between
the Parent and the Companies.

Certain of the Parent's other wholly owned or majority-owned subsidiaries
provide the Companies with various services and/or receive services provided
by the Companies. These entities include Interstate Telephone Company and
Valley Telephone Company, which provide local and long-distance telephone
services; InterCall, Inc. ("InterCall"), which provides conference calling
services; and InterServ Services Corporation, which provides operator services
for "800" customer service numbers and full-service marketing research in the
telecommunications industry and other industries. The Parent also holds equity
investments in the following entities which do business with the Companies:
Powertel, Inc., formerly InterCel, Inc., which provides cellular services;
KNOLOGY Holdings, Inc., formerly CyberNet Holding, Inc. ("KNOLOGY"), which
provides cable television services; and MindSpring Enterprises, Inc.
("MindSpring"), which is a regional provider of Internet access. In
management's opinion, the Companies' transactions with these affiliated
entities are generally representative of arm's-length transactions.

For the years ended December 31, 1994, 1995, and 1996, the Companies
received services from these affiliated entities in the amounts of $89,149,
$465,167, and $180,400, respectively, which are reflected in selling,
operations, and administration expenses in the Companies' statements of
operations. In addition, in 1996, the Companies received services from these
affiliated entities in the amount of $762,173, which is reflected in cost of
services in the Companies' statements of operations. At December 31, 1995 and
1996, amounts payable for these services of $577,439 and $658,990,
respectively, are recorded in the Companies' balance sheets as affiliate
accounts payable.

F-31
<PAGE>

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The Fiber Companies provide operator and directory assistance services and
lease capacity on certain of their fiber routes to affiliated entities.
Beginning in 1996, DeltaCom also provides long-distance and related services
to the Parent and all of its wholly owned and majority-owned subsidiaries.
Also beginning in 1996, DeltaCom acts as an agent for InterCall and MindSpring
in contracting with major interexchange carriers to provide origination and
termination services. Under these agreements, DeltaCom contracts with the
interexchange carrier and rebills the appropriate access charges plus a margin
to InterCall and MindSpring, such that only the margin impacts the Companies'
combined revenues. Total affiliated revenues included in the Companies'
statements of operations for the years ended December 31, 1994, 1995, and 1996
were $458,302, $486,246, and $2,863,389, respectively. At December 31, 1995
and 1996, amounts receivable for these services were $84,796 and $1,227,661,
respectively, and are recorded in the Companies' balance sheets as affiliate
accounts receivable.

In 1995, the Fiber Companies constructed a fiber route on behalf of KNOLOGY.
Construction expenses reimbursed by KNOLOGY totaled $62,830. The Companies
also provided certain engineering and construction- related management
services to KNOLOGY in 1995. The Fiber Companies did not bill KNOLOGY for
these services, which are estimated by the Fiber Companies to have a value of
approximately $50,000.

DeltaCom has a contract with a former stockholder to provide management
services to DeltaCom through 1997 for $300,000 annually. In addition, DeltaCom
leases real properties from former stockholders and other related parties.
Total rental expense related to these leases was approximately $235,000 in
1996. DeltaCom is obligated to pay rentals to a former stockholder totaling
approximately $181,000 annually from 1997 through 2005 under leases which are
cancelable by either of the parties with 24 months' notice. DeltaCom is also
obligated through 1999 to pay annual rentals ranging from approximately
$74,000 to $81,000 to an officer of a former stockholder.

Relatives of stockholders of the Parent are stockholders and employees of
the Companies' insurance provider. The costs charged to the Companies for
insurance services from this provider were $40,351, $63,836, and $156,523 for
the years ended December 31, 1994, 1995, and 1996, respectively.

The chief executive officer of the Fiber Companies, who has been named as
chief executive officer of ITC/\DeltaCom, has also served since July 15, 1996
as president and chief executive officer and as a director of KNOLOGY. He has
served in his capacity as chief executive officer and president of KNOLOGY at
the request of KNOLOGY and the Parent and received no compensation from
KNOLOGY for the year ended December 31, 1996. He resigned as chief executive
officer and president of KNOLOGY effective February 20, 1997. The value of
services provided through February 20, 1997 is estimated to total
approximately $20,000.

13. ACQUISITION OF DELTACOM

On January 29, 1996 (the "Acquisition Date"), DeltaCom was purchased by the
Parent for total consideration of $71,362,213, including cash acquired of
$1,828,121 (the "Acquisition"). The consideration included $65,362,213 in cash
and $6,000,000 in common stock of the Parent. Simultaneously, the Parent
refinanced $8,643,384 of DeltaCom's outstanding debt by borrowing against its
own line of credit and contributing the proceeds to DeltaCom, which then
repaid all of its outstanding debt. The Acquisition was accounted for under
the purchase method of accounting, and the purchase accounting entries were
"pushed down" to DeltaCom's financial statements. The purchase price has been
allocated to the underlying assets purchased and liabilities assumed based on
their estimated fair values at the Acquisition Date. The acquisition costs
exceeded the fair market value of net tangible assets acquired by $54,645,063,
of which $5,464,506 has been allocated to identifiable intangible assets and
the remainder has been recorded as goodwill in the accompanying balance
sheets. Amounts recorded in connection with the "pushdown" include the
$49,180,557 in goodwill, $5,464,506 in customer base, $74,005,598 in debt
related to the Acquisition and debt refinancing, and $6,000,000 in paid-in
capital. The operating results of DeltaCom have been included in the
Companies' financial statements since the Acquisition Date.

F-32
<PAGE>

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The following table summarizes the net assets purchased in connection with
the Acquisition and the amount attributable to cost in excess of net assets
acquired:

<TABLE>
<S> <C>
Working capital, net of $1,828,121 cash acquired............... $ 5,155,221
Property, plant, and equipment................................. 21,357,357
Other assets................................................... 198,920
Noncurrent liabilities......................................... (11,822,469)
Customer base.................................................. 5,464,506
Goodwill....................................................... 49,180,557
------------
Purchase price, net of cash acquired........................... $ 69,534,092
============
</TABLE>

The common stock portion of the Acquisition has been accounted for as a
noncash transaction for purposes of the statements of cash flows.

The following pro forma information has been prepared assuming that the
Acquisition occurred at the beginning of the respective periods. This
information includes pro forma adjustments related to the amortization of
goodwill resulting from the excess of the purchase price over the fair value
of the net assets acquired and interest expense related to the debt financing
used to acquire DeltaCom. The pro forma information is presented for
informational purposes only and may not be indicative of the results of
operations as they would have been had the Acquisition occurred at the
beginning of the respective periods, nor is the information necessarily
indicative of the results of operations which may occur in the future.

<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1995 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Combined operating revenues........................ $62,021,598 $71,775,516
Combined net loss.................................. (1,826,756) (4,024,866)
</TABLE>

14. ACQUISITION OF VIPERNET

In July 1996, DeltaCom purchased certain assets of ViperNet, which provides
business Internet services, for cash of $625,000 and assumption of capital
lease obligations in the amount of $171,683 (Note 6).

The following table summarizes the net assets purchased by DeltaCom in
connection with its acquisition of ViperNet:

<TABLE>
<S> <C>
Working capital................................................... $ 121,500
Property and equipment............................................ 191,318
Noncompete agreement.............................................. 102,000
Customer base..................................................... 381,865
Liabilities assumed............................................... (171,683)
---------
Cash paid for ViperNet, net assets................................ $ 625,000
=========
</TABLE>

The assumption of the capital lease obligations has been treated as a
noncash transaction for purposes of the statements of cash flows.

15. SEGMENT REPORTING

Upon the acquisition of DeltaCom in January 1996 (Note 13), the Companies
began operating in two business segments: Carriers' Carrier Services and
Retail Services. Retail Services are provided by DeltaCom and

F-33
<PAGE>

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

include the retail sale of long-distance, data, and Internet services,
including the sale and installation of customer premises equipment primarily
to midsized and major regional business customers. Carriers' Carrier Services
are provided by the Fiber Companies. Carriers' Carrier Services include the
sale of long-haul private line services on a wholesale basis using the Fiber
Companies' owned and managed fiber-optic network. Summarized financial data by
business segment for the year ended December 31, 1996 and as of December 31,
1996 are as follows:

<TABLE>
<CAPTION>
CARRIERS'
CARRIER RETAIL
SEGMENT SEGMENT ELIMINATIONS COMBINED
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Sales to external custom-
ers..................... $ 6,598,709 $59,919,876 $ 0 $ 66,518,585
Intersegment sales....... 558,312 1,553,445 (2,111,757) 0
----------- ----------- ----------- ------------
Total operating reve-
nues.................. $ 7,157,021 $61,473,321 $(2,111,757) $ 66,518,585
----------- ----------- ----------- ------------
Gross margin............. $ 3,256,596 $24,325,559 $ 180,143 $ 27,762,298
Selling, operations, and
administration expense.. 1,646,277 17,050,152 180,143 18,876,572
Depreciation and amorti-
zation.................. 1,656,685 4,781,389 0 6,438,074
Equity in losses of Gulf
States.................. (1,589,812) 0 0 (1,589,812)
Other income (expense),
net..................... 171,514
Interest expense, net.... (6,172,421)
------------
Loss before income tax-
es...................... $ (5,143,067)
============
Identifiable assets...... 14,597,073 91,592,697 (406,588) $105,783,182
Investment in net assets
of Gulf States.......... 7,424,797 0 0 7,424,797
----------- ----------- ----------- ------------
Total assets............. $22,021,870 $91,592,697 $ (406,588) $113,207,979
=========== =========== =========== ============
Capital expenditures..... $ 1,101,181 $ 5,071,479 $ 0 $ 6,172,660
=========== =========== =========== ============
</TABLE>

16. SUBSEQUENT EVENTS

Acquisition

On March 27, 1997, the Parent purchased the 64% interest in Gulf States
owned by SCANA, along with certain of SCANA's other fiber and fiber-related
assets, including a significant long-term customer contract (the "Georgia
Fiber Assets"), for approximately $28 million payable at closing, plus certain
contingent consideration. The purchase price included 588,411 shares of the
Parent's Series A Convertible Preferred Stock valued at approximately $17.9
million and an unsecured purchase money note for approximately $10 million
(the "SCANA Note"). The purchase price was allocated as follows: $17 million
to the 64% interest in Gulf States and $10.9 million to the Georgia Fiber
Assets. The note, which bears interest at 11%, is payable in ten semiannual
principal payments of approximately $1 million plus accrued interest,
beginning September 30, 1997. The contingent consideration is due no later
than April 30, 1998, at which time the Parent will be obligated to deliver
additional preferred stock to SCANA equal to 35.7% of (a) 64%, multiplied by
(b)(i) 6, multiplied by (ii) the amount, if any, by which the earnings before
interest, taxes, depreciation, and amortization of Gulf States for the year
ended December 31, 1997 exceed $11,265,696. In October 1997, the Parent issued
to SCANA 56,742 shares of its Series A Convertible Preferred Stock in
connection with this earn-out provision. In connection with the Merger (Note
16), all shares of Series A Convertible Preferred Stock of the Parent issued
to SCANA were converted into shares of ITC/\DeltaCom's Series A Convertible
Preferred Stock. Any additional payment under this earn-out provision will be
made in shares of ITC/\DeltaCom's Series A Convertible Preferred Stock.

Upon the closing of these acquisitions, the Parent contributed the 64%
ownership interest in Gulf States to GSTS and the Georgia Fiber Assets to
FiberNet. The Gulf States partnership has been dissolved. The SCANA Note was
assumed by FiberNet and the Parent was released from its obligations
thereunder.

F-34
<PAGE>

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

GSTS Bridge Facility

In connection with the acquisition of the remaining 64% interest in Gulf
States, GSTS refinanced Gulf States' outstanding indebtedness of approximately
$41.6 million. In connection with the refinancing, GSTS wrote off $818,572
($507,515 net of tax benefits) in unamortized debt issuance costs, which is
reflected on the accompanying statement of operations as an extraordinary loss
on extinguishment of debt. The GSTS Bridge Facility matured on the date the
proceeds from ITC/\DeltaCom's debt offering described below were released (July
25, 1997). The GSTS Bridge Facility bore interest at LIBOR plus 2.25%.

ITC/\DeltaCom Employee Stock Option Plan

Upon the Reorganization, all employees of the Companies became eligible to
receive stock options under ITC/\DeltaCom's 1997 Stock Option Plan (the "Stock
Option Plan"), which was adopted by ITC/\DeltaCom and approved by its sole
stockholder on March 24, 1997.

The Stock Option Plan provides for the grant of options that are intended to
qualify as "incentive stock options" under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") to employees of ITC/\DeltaCom, its
subsidiaries obtained in the Reorganization, and the Parent, as well as the
grant of non-qualifying options to any other individual whose participation in
the Stock Option Plan is determined to be in the best interests of
ITC/\DeltaCom. The Stock Option Plan authorizes the issuance of up to 1,500,000
shares of Class A Common Stock pursuant to options granted under the Stock
Option Plan (subject to anti-dilution adjustments in the event of a stock
split, recapitalization or similar transaction). The maximum number of shares
subject to options that can be awarded under the Stock Option Plan to any
person is 500,000 shares. The Compensation Committee of ITC/\DeltaCom's board
of directors will administer the Stock Option Plan and will grant options to
purchase Class A Common Stock.

The option exercise price for incentive stock options granted under the
Stock Option Plan may not be less than 100% of the fair market value of the
Class A Common Stock on the date of grant of the option (or 110% in the case
of an incentive stock option granted to an optionee beneficially owning more
than 10% of the outstanding Class A Common Stock). The option exercise price
for non-incentive stock options granted under the Stock Option Plan may not be
less than the par value of the Class A Common Stock on the date of grant of
the option. The maximum option term is 10 years (or five years in the case of
an incentive stock option granted to an optionee beneficially owning more than
10% of the outstanding Class A Common Stock). There is also a $100,000 limit
on the value of Class A Common Stock (determined at the time of grant) covered
by incentive stock options that become exercisable by an optionee in any year.
Options granted will become exercisable with respect to 50% of the shares
subject to the options on the second anniversary of the date of grant and with
respect to 25% of the shares subject to the options on each of the third and
fourth anniversaries of the date of grant.

ITC/\DeltaCom's board of directors may amend or terminate the Stock Option
Plan with respect to shares of Class A Common Stock as to which options have
not been granted.

On March 24, 1997 and July 29, 1997, ITC/\Deltacom granted options to
purchase 789,000 shares and 105,254 shares, respectively, of Class A Common
Stock under the Stock Option Plan. All options were granted at a price at
least equal to the estimated fair value of the common stock on the date of
grant ($7.20) as determined by ITC/\DeltaCom's board of directors based on
equity transactions and other analyses. Options to purchase an additional
30,063 shares of Common Stock at $7.20 per share were granted on October 1,
1997.

Director Stock Option Plan

On March 24, 1997, ITC/\DeltaCom adopted and its stockholders approved the
Director Stock Option Plan (the "Director Plan"). The Director Plan provides
for the "formula" grant of options that are not intended to qualify as
"incentive stock options" under Section 422 of the Code to directors of
ITC/\Deltacom who are not officers or employees of the Company, the Parent, or
any subsidiary of ITC/\DeltaCom (each an "Eligible

F-35
<PAGE>

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Director"). The Director Plan authorizes the issuance of up to 150,000 shares
of Class A Common Stock pursuant to options granted under the Director Plan
(subject to anti-dilution adjustments in the event of a stock split,
recapitalization or similar transaction). The option exercise price for
options granted under the Director Plan will be at least 100% of the fair
market value of the shares of Class A Common Stock on the date of grant of the
option. Under the Director Plan, each Eligible Director will be granted an
option to purchase 10,000 shares of Class A Common Stock upon such person's
initial election or appointment to serve as director. Options granted will
become exercisable with respect to 50% of the shares subject to the options on
the second anniversary of the date of grant and with respect to 25% of the
shares subject to the options on each of the third and fourth anniversaries of
the date of grant. The options will expire ten years and 30 days after the
date of grant.

On March 24, 1997, ITC/\DeltaCom granted options to purchase 10,000 shares of
ITC/\DeltaCom's Class A Common Stock to each of its six nonemployee directors.
All options were granted at a price equal to the estimated fair value of the
common stock on the date of grant ($7.20) as determined by the ITC/\DeltaCom's
board of directors based on equity transactions and other analyses.

Credit Agreement

Borrowings under the Credit Agreement are guaranteed by the Companies and
are secured by a first priority lien on substantially all current and future
assets and properties of FiberNet and its subsidiaries and a first priority
pledge of the stock of FiberNet and its subsidiaries. The Credit Agreement
contains covenants limiting the Companies ability of FiberNet, its
subsidiaries, and ITC/\DeltaCom to incur debt or make guaranties, create liens,
pay dividends, make distributions or stock repurchases, make investments or
capital expenditures, issue capital stock, engage in transactions with
affiliates, sell assets, and engage in mergers and acquisitions. The Credit
Agreement also requires FiberNet to comply with certain financial tests and to
maintain certain financial ratios on a consolidated basis.

Debt Offering

On June 3, 1997, ITC/\DeltaCom completed the issuance of 11% Senior Notes due
2007 (the "Offering").

Proceeds from the Offering were held by the trustee until all regulatory
approvals related to the Reorganization described in Note 1 were received.
Upon their release, a portion of the proceeds was used to repay approximately
$48.0 million of the Companies' advances from Parent and approximately $41.6
million under the GSTS Bridge Facility as well as accrued interest.
Approximately $62.7 million of such proceeds are held by the Trustee as
security for and to fund the first six interest payments on the Senior Notes.
Also in connection with the Reorganization, FiberNet undertook to repay (and
DeltaCom agreed to reimburse to FiberNet) the remaining $31.0 million of
DeltaCom's advance from Parent; the Parent then forgave this indebtedness and
contributed it to FiberNet as additional equity. Upon the settlement of
DeltaCom's advance from Parent related to the acquisition (and accrued
interest), the Parent Credit Facility was amended to release the Companies as
guarantors and to terminate the related security interests in the assets of
the Companies (Note 7). The Parent effected the Reorganization on July 25,
1997.

F-36
<PAGE>

Merger Between ITC/\DeltaCom and the Parent

Effective on October 20, 1997, as part of a reorganization of the Parent,
the Parent transferred all of its assets, other than its stock in
ITC/\DeltaCom, and all of its liabilities to another entity and then merged
with and into ITC/\DeltaCom (the "Merger"). ITC/\DeltaCom is the surviving
corporation in the Merger. In connection with the Merger, holders of the
Parent's common stock and convertible preferred stock received shares of
ITC/\DeltaCom's Common Stock and Series A Convertible Preferred Stock.

In contemplation of the Merger, on October 16, 1997, ITC/\DeltaCom's board of
directors and its stockholder adopted resolutions approving amendment and
restatement of ITC/\DeltaCom's certificate of incorporation, effective upon
consummation of the Merger, to designate ITC/\DeltaCom's Series A Convertible
Preferred Stock, par value $.01 per share, with a liquidation preference of
$6.96 per share (subject to adjustment), to authorize a single class of common
stock to be designated as Common Stock and to eliminate authorization of Class
A Common Stock and Class B Common Stock.

Immediately prior to the Merger, ITC/\DeltaCom had 15,000,000 shares of Class
B Common Stock issued and outstanding. Immediately following the Merger,
ITC/\DeltaCom had issued and outstanding 19,126,731 shares of Common Stock.

Amendment of Stock Option Plans

ITC/\DeltaCom's board of directors and its stockholder also approved the
following amendments to ITC/\DeltaCom's stock option plans on October 16, 1997:

a. Amendments to the Stock Option Plan and the Director Plan that reflected
the proposed authorization of Common Stock in lieu of Class A Common Stock.

Proposed Initial Public Offering of ITC/\DeltaCom's Common Stock

ITC/\DeltaCom plans to offer 5,000,000 shares of its Common Stock (5,750,000
shares if the underwriters' overallotment option is exercised in full) for
sale to the public at a proposed offering price range of $14.50 to $16.50 per
share during the fourth quarter of 1997 (the "Equity Offering"). There can be
no assurance that the Equity Offering will be completed at a per share price
within the estimated range, or at all. There are significant potential risks
associated with the Equity Offering, as well as with the Companies' ability to
compete profitably in the telecommunications industry.

F-37
<PAGE>

INDEPENDENT AUDITORS' REPORT

To DeltaCom, Inc.:

We have audited the accompanying statements of operations, stockholders'
equity, and cash flows of DELTACOM, INC. for the year ended December 31, 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of
DeltaCom, Inc. for the year ended December 31, 1994 in conformity with
generally accepted accounting principles.

MARTIN STUEDEMAN & ASSOCIATES P.C.

Birmingham, Alabama
March 19, 1997

F-38
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To DeltaCom, Inc.:

We have audited the accompanying statements of operations, stockholders'
equity, and cash flows of DELTACOM, INC. (an Alabama corporation) for the year
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The December 31, 1994 financial
statements were audited by other auditors, whose report dated March 19, 1997
expressed an unqualified opinion on those statements.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of
DeltaCom, Inc. for the year ended December 31, 1995 in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Atlanta, Georgia
March 27, 1997

F-39
<PAGE>

DELTACOM, INC.

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
AND FOR THE ONE MONTH ENDED JANUARY 29, 1996

<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING REVENUES....................... $53,777,565 $56,271,011 $5,256,931
COST OF SERVICES......................... 33,168,780 32,355,358 2,963,383
----------- ----------- ----------
Gross margin......................... 20,608,785 23,915,653 2,293,548
----------- ----------- ----------
OPERATING EXPENSES:
Selling, general, and administrative... 10,608,998 13,845,867 1,343,761
Depreciation and amortization.......... 2,982,325 3,241,869 290,226
----------- ----------- ----------
Total operating expenses............. 13,591,323 17,087,736 1,633,987
----------- ----------- ----------
OPERATING INCOME......................... 7,017,462 6,827,917 659,561
OTHER INCOME (EXPENSE):
Interest income........................ 56,474 105,477 12,334
Interest expense....................... (1,068,140) (1,025,571) (143,883)
----------- ----------- ----------
INCOME BEFORE INCOME TAXES............... 6,005,796 5,907,823 528,012
PROVISION FOR INCOME TAXES............... 2,239,613 2,211,115 200,645
----------- ----------- ----------
NET INCOME............................... $ 3,766,183 $ 3,696,708 $ 327,367
=========== =========== ==========
</TABLE>

The accompanying notes are an integral part of these statements.

F-40
<PAGE>

DELTACOM, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
AND FOR THE ONE MONTH ENDED JANUARY 29, 1996

<TABLE>
<CAPTION>
COMMON STOCK
------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993... 80,000 $800 $5,145,715 $ 3,780,377 $ 8,926,892
Net income................. 0 0 0 3,766,183 3,766,183
------ ---- ---------- ----------- -----------
BALANCE, December 31, 1994... 80,000 800 5,145,715 7,546,560 12,693,075
Net income................. 0 0 0 3,696,708 3,696,708
------ ---- ---------- ----------- -----------
BALANCE, December 31, 1995... 80,000 800 5,145,715 11,243,268 16,389,783
Net income (unaudited)..... 0 0 0 327,367 327,367
------ ---- ---------- ----------- -----------
BALANCE, January 29, 1996
(Unaudited)................. 80,000 $800 $5,145,715 $11,570,635 $16,717,150
====== ==== ========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-41
<PAGE>

DELTACOM, INC.

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
AND FOR THE ONE MONTH ENDED JANUARY 29, 1996

<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................. $ 3,766,183 $ 3,696,708 $ 327,367
----------- ----------- -----------
Adjustments to reconcile net income to
net cash provided by operating activi-
ties:
Depreciation and amortization......... 2,982,325 3,241,869 290,226
Deferred income taxes................. 605,427 37,185 (8,767)
Changes in current operating assets
and liabilities:
Accounts receivable.................. (347,863) (832,551) (360,594)
Due from related parties............. 0 (26,397) 26,397
Prepayments.......................... (401,052) (137,876) 748,471
Inventories.......................... 28,081 (55,333) (82,217)
Notes receivable..................... 0 (167,481) 8,395
Accounts payable..................... (1,819,564) (863,902) 174,476
Accrued liabilities.................. 89,740 (20,027) 298,047
Income taxes payable................. 326,238 249,670 189,956
Other, net........................... 0 1,075 89,278
----------- ----------- -----------
Total adjustments................... 1,463,332 1,426,232 1,373,668
----------- ----------- -----------
Net cash provided by operating ac-
tivities........................... 5,229,515 5,122,940 1,701,035
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.... (2,596,331) (4,431,552) (171,036)
Proceeds from sale of equipment........ 0 175,389 0
Increase in accrued construction
payables.............................. 0 144,720 (144,720)
----------- ----------- -----------
Net cash used in investing activi-
ties............................... (2,596,331) (4,111,443) (315,756)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt... $(1,410,155) $(2,127,651) $(1,244,759)
Proceeds from financing agreement...... 0 1,388,859 0
----------- ----------- -----------
Net cash used in financing activi-
ties............................... (1,410,155) (738,792) (1,244,759)
----------- ----------- -----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS............................ 1,223,029 272,705 140,520
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD.............................. 191,867 1,414,896 1,687,601
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD................................. $ 1,414,896 $ 1,687,601 $ 1,828,121
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest.............................. $ 1,068,140 $ 1,005,827 $ 17,210
=========== =========== ===========
Income taxes.......................... $ 1,302,388 $ 2,016,860 $ 0
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-42
<PAGE>

DELTACOM, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1994 AND 1995 AND JANUARY 29, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DeltaCom, Inc. (the "Company") was incorporated in the state of Alabama on
April 7, 1982. The Company is a provider of telecommunications services and
products in Alabama and surrounding states. Prior to January 29, 1996, the
Company's common stock was owned 50% by SCI Systems (Alabama), Inc., 14% by
Brindlee Mountain Telephone Company ("BMTC"), and 36% by the majority
stockholder of BMTC. ITC Holding Company, Inc. acquired all of the stock of
the Company on January 29, 1996 (Note 7).

Basis of Accounting

The accompanying financial statements are prepared on the accrual basis of
accounting. Revenues are recognized as services are performed. Costs and
expenses are recognized when incurred. The financial statements are prepared
in conformity with generally accepted accounting principles, which require the
use of estimates. Actual results may differ from those estimates.

Accounting Estimates

Depreciation

Depreciation of property and equipment is generally provided on a composite
or straight-line basis over the assets' estimated useful lives, which are 40
years for buildings, 5 to 20 years for telecommunications equipment, 3 to 15
years for office furniture and equipment, and 5 years for vehicles.

Expenditures for maintenance and repairs are expensed currently, while
renewals and betterments that materially extend the life of an asset are
capitalized. The cost of assets sold, retired, or otherwise disposed of and
the related accumulated depreciation are eliminated from the accounts, and any
resulting gain or loss is included in the results of operations.

Income Taxes

Deferred income taxes are determined in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." This
approach results in the recognition of deferred tax assets and liabilities for
the expected future tax consequences of temporary differences between the book
carrying amounts and the tax basis of assets and liabilities.

Advertising Costs

The Company expenses all advertising costs as incurred.

F-43
<PAGE>

DELTACOM, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. INCOME TAXES

The components of the provision for income taxes for the years ended
December 31, 1994 and 1995 and the one month ended January 29, 1996 are as
follows:

<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current:
Federal.................................. $1,780,968 $1,970,891 $190,360
State.................................... 164,427 203,039 19,052
<CAPTION>
<S> <C> <C> <C>
Deferred................................... 294,218 37,185 (8,767)
---------- ---------- --------
$2,239,613 $2,211,115 $200,645
========== ========== ========
</TABLE>

A reconciliation of the federal statutory rate to the effective income tax
rate for the periods presented for the years ended December 31, 1994 and 1995
and the one month ended January 29, 1996 is as follows:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Federal statutory rate............................... 34.0% 34.0% 34.0%
State income taxes................................... 3.6 3.6 4.0
Other................................................ (0.3) (0.2) 0.0
---- ---- ----
Effective income tax rate............................ 37.3% 37.4% 38.0%
==== ==== ====
</TABLE>

3. RELATED-PARTY TRANSACTIONS

During 1994, the Company recorded revenues from two affiliates, BMTC and
Valley Telephone Services, for approximately $401,000 and $141,000,
respectively. The Company recorded expenses to BMTC in the amount of
approximately $1,650,000 in 1994.

During 1995, the Company recorded revenues of approximately $88,000 in the
accompanying statements of operations for long distance services provided to
BMTC. These services were discontinued in March 1995. The Company also
recorded revenues of approximately $168,000 during the year ended December 31,
1995 for long-distance services provided to Marshall Cellular, an affiliate of
BMTC.

During January 1996, the Company recorded revenues from BMTC, Marshall
Cellular, and another affiliate, SCI, of approximately $27,500, $13,200, and
$33,400, respectively. The Company also recorded expenses of $30,200 and
$2,000 for telephone services provided by BMTC and Marshall Cellular,
respectively.

The Company paid approximately $770,000 to BMTC for electronic data
information services, including billing and rating services, through July
1995. In August 1995, the Company terminated its contract for such services,
hired the information services personnel from BMTC, and assumed BMTC's
operating lease obligations, totaling approximately $419,000 annually, for
electronic data processing equipment. The Company contracted to furnish
electronic data processing services to BMTC annually for $300,000. The Company
recorded revenues of $125,000 in the accompanying statements of operations
related to these services for the year ended December 31, 1995 and $27,500 for
the one month ended January 29, 1996.

The Company paid $405,000 to BMTC for management services in 1995. These
services were terminated in January 1996. During 1995, the Company also paid
$600,000 in management fees to its stockholders. The

F-44
<PAGE>

DELTACOM, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Company has a contract with a former stockholder to provide management
services to the Company through 1997 for $300,000 annually. The Company
recorded expenses of $25,000 in the accompanying statements of operations
related to those services for the one month ended January 29, 1996.

The Company leases real properties from stockholders and other related
parties. Total rental expense related to these leases was approximately
$133,000, $145,000, and $30,000 for the years ended December 31, 1994 and 1995
and the month ended January 29, 1996, respectively. The Company is obligated
to pay rentals totaling approximately $150,000 to BMTC in 1996 and future
years under leases which are cancelable by either of the parties with 24
months' notice. The Company is also obligated through 1999 to pay annual
rentals ranging from approximately $74,000 to $81,000 to an officer of a
former stockholder.

4. DEFERRED COMPENSATION PLAN

The Company has a 401(k) deferred compensation plan covering substantially
all employees with at least one year of service. Participants may elect to
defer 15% of compensation up to a maximum amount determined annually pursuant
to IRS regulations. The Company has elected to provide matching employer
contributions equal to the lesser of 3% of compensation or the maximum amount
annually for each participant. The Company's policy is to fund contributions
as earned. Company contributions made to the plan and charged to expense for
the years ended December 31, 1994 and 1995 and the one month ended January 29,
1996 were $111,561, $138,697, and $12,588, respectively.

5. COMMITMENTS

Minimum future rental commitments under noncancelable operating leases
having an initial or remaining term in excess of one year as of December 31,
1995 are as follows:

<TABLE>
<S> <C>
December 31:
1996............................................................ $ 988,523
1997............................................................ 831,657
1998............................................................ 754,481
1999............................................................ 407,300
2000............................................................ 279,755
Thereafter...................................................... 726,330
----------
$3,988,046
==========
</TABLE>

Total rental expense charged to operations for the years ended December 31,
1994 and 1995 and the one month ended January 29, 1996 was $287,425, $615,734,
and $105,578, respectively.

At January 29, 1996, the Company had agreed to purchase telecommunications
equipment at a price totaling approximately $365,000.

6. CONTINGENT MATTERS

The Company is subject to various legal proceedings and claims which arise
in the ordinary course of its business. In the opinion of management, the
amount or ultimate liability with respect to these actions will not materially
affect the Company's financial position or results of operations.

7. ACQUISITION OF THE COMPANY

On January 29, 1996, the Company was purchased by ITC Holding Company, Inc.
for total consideration of $71,362,213.

F-45
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Gulf States FiberNet:

We have audited the accompanying balance sheets of GULF STATES FIBERNET (a
Georgia general partnership) as of December 31, 1995 and 1996 and the related
statements of operations, partners' capital, and cash flows for period from
inception (August 17, 1994) through December 31, 1994 and for the years ended
December 31, 1995 and 1996. These financial statements are the responsibility
of the Partnership's management. Our responsibility is to express an opinion
on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Gulf States FiberNet as of
December 31, 1995 and 1996 and the results of its operations and its cash
flows for the period from inception (August 17, 1994) through December 31,
1994 and for the years ended December 31, 1995 and 1996 in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Atlanta, Georgia
March 27, 1997 (except with
respect to the Debt Refinancing,
Parent's Reorganization of
Subsidiaries, and ITC/\DeltaCom
Debt Offering discussions in
Note 8, as to which the date
is July 25, 1997)

F-46
<PAGE>

GULF STATES FIBERNET

BALANCE SHEETS

DECEMBER 31, 1995 AND 1996
AND MARCH 27, 1997

<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................ $ 5,561,737 $ 1,130,668 $ 574,600
Accounts receivable:
Affiliates............................. 496,286 476,102 280,866
Customer accounts receivable, net of
allowance for uncollectible accounts
of $15,000, $24,000 and $39,006 in
1995, 1996 and 1997, respectively..... 428,775 1,127,788 1,923,592
Other.................................... 70,943 16,543 55,799
----------- ----------- -----------
6,557,741 2,751,101 2,834,857
----------- ----------- -----------
PROPERTY AND EQUIPMENT, NET (NOTE 2)....... 62,756,563 62,444,185 66,112,272
----------- ----------- -----------
OTHER NONCURRENT ASSETS:
Goodwill, net of accumulated amortization
of $14,226, $27,358 and $30,640 in 1995,
1996, and 1997 respectively............. 511,034 497,902 494,620
Debt issuance costs, net of accumulated
amortization of $47,251, $188,505 and
$231,321 in 1995, 1996 and 1997, respec-
tively.................................. 938,925 878,056 974,572
----------- ----------- -----------
1,449,959 1,375,958 1,469,192
----------- ----------- -----------
$70,764,263 $66,571,244 $70,416,321
=========== =========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Current maturities of long-term debt..... $ 5,937,500 $ 5,937,500 $42,068,969
Accounts payable:
Affiliates............................. 25,263 0 2,431
Other.................................. 136,604 104,208 1,290,172
Accrued construction costs............... 2,664,051 1,712,272 980,542
Other accrued liabilities................ 860,477 680,941 540,270
Unearned revenue......................... 207,873 997,667 1,185,206
----------- ----------- -----------
Total current liabilities............ 9,831,768 9,432,588 46,067,590
LONG-TERM DEBT (NOTE 4).................... 41,562,500 35,625,000 2,950,906
COMMITMENTS AND CONTINGENCIES (NOTES 4, 5,
AND 7)
PARTNERS' CAPITAL.......................... 19,369,995 21,513,656 21,397,825
----------- ----------- -----------
$70,764,263 $66,571,244 $70,416,321
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these balance sheets.

F-47
<PAGE>

GULF STATES FIBERNET

STATEMENTS OF OPERATIONS

FOR THE PERIOD FROM INCEPTION (AUGUST 17, 1994)
THROUGH DECEMBER 31, 1994,
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996AND FOR THE PERIODS ENDED MARCH
31, 1996 AND MARCH 27, 1997

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------- March 31, March 27,
1994 1995 1996 1996 1997
--------- ----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES................ $ 127,569 $ 7,587,713 $10,056,544 $ 1,832,487 $ 4,085,039
COST OF SERVICES........ 41,838 82,680 867,558 47,368 418,472
--------- ----------- ----------- ----------- -----------
Gross margin........ 85,731 7,505,033 9,188,986 1,785,119 3,666,567
--------- ----------- ----------- ----------- -----------
OPERATING EXPENSES:
Selling, general, and
administrative....... 318,685 2,455,159 2,785,596 733,135 871,566
Depreciation and
amortization......... 47,764 3,835,465 6,620,382 1,574,627 1,897,826
--------- ----------- ----------- ----------- -----------
Total operating
expenses........... 366,449 6,290,624 9,405,978 2,307,762 2,769,392
--------- ----------- ----------- ----------- -----------
OPERATING (LOSS)
INCOME................. (280,718) 1,214,409 (216,992) (522,643) 897,175
--------- ----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense...... 0 (2,172,373) (4,345,001) (1,085,287) (1,031,546)
Other................. 11,496 240,624 145,851 62,834 18,540
--------- ----------- ----------- ----------- -----------
Total other income
(expense).......... 11,496 (1,931,749) (4,199,150) (1,022,453) (1,013,006)
--------- ----------- ----------- ----------- -----------
NET LOSS................ $(269,222) $ (717,340) $(4,416,142) $(1,545,096) $ (115,831)
========= =========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-48
<PAGE>

GULF STATES FIBERNET

STATEMENTS OF PARTNERS' CAPITAL

FOR THE PERIOD FROM INCEPTION (AUGUST 17, 1994)
THROUGH DECEMBER 31, 1994,
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
AND FOR THE PERIOD ENDED MARCH 27, 1997

<TABLE>
<CAPTION>
PARTNERS' CAPITAL TOTAL
------------------------ PARTNERS'
SCANA GSTS CAPITAL
----------- ----------- -----------
<S> <C> <C> <C>
BALANCE AT INCEPTION
(AUGUST 17, 1994)........ $ 5,449,670 $ 0 $ 5,449,670
Partnership contribu-
tions.................. 7,906,887 7,000,000 14,906,887
Net loss................ (172,302) (96,920) (269,222)
----------- ----------- -----------
BALANCE, DECEMBER 31,
1994..................... 13,184,255 6,903,080 20,087,335
Net loss................ (459,098) (258,242) (717,340)
----------- ----------- -----------
BALANCE, DECEMBER 31,
1995..................... 12,725,157 6,644,838 19,369,995
Partnership contribu-
tions.................. 4,198,274 2,361,529 6,559,803
Net loss................ (2,826,331) (1,589,811) (4,416,142)
----------- ----------- -----------
BALANCE, DECEMBER 31,
1996..................... 14,097,100 7,416,556 21,513,656
Net loss................ (74,132) (41,699) (115,831)
----------- ----------- -----------
BALANCE, MARCH 27, 1997
(UNAUDITED).............. $14,022,968 $ 7,374,857 $21,397,825
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-49
<PAGE>

GULF STATES FIBERNET

STATEMENTS OF CASH FLOWS

FOR THE PERIOD FROM INCEPTION (AUGUST 17, 1994)
THROUGH DECEMBER 31, 1994 AND
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
AND FOR THE PERIODS ENDED MARCH 31, 1996 AND MARCH 27, 1997

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------- MARCH 31, MARCH 27,
1994 1995 1996 1996 1997
------------ ------------ ----------- ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss.............. $ (269,222) $ (717,340) $(4,416,142) $ (1,545,096) $ (115,831)
------------ ------------ ----------- ------------ -----------
Adjustments to recon-
cile net loss to net
cash provided by op-
erating activities:
Depreciation and
amortization....... 47,764 3,835,465 6,620,382 1,574,627 1,897,826
Changes in operating
assets and liabili-
ties:
Accounts
receivable....... (64,004) (861,057) (678,829) (157,231) (600,569)
Other current as-
sets............. (12,600) (58,343) 54,400 (33,821) 49,215
Accounts payable.. 430,873 (269,004) (57,659) (131,172) 1,188,426
Accrued liabili-
ties............. 106,985 753,492 (179,536) (117,742) (140,671)
Unearned revenue.. 36,868 171,005 789,794 38,419 99,068
------------ ------------ ----------- ------------ -----------
Total adjust-
ments.......... 545,886 3,571,558 6,548,552 1,173,080 2,493,295
------------ ------------ ----------- ------------ -----------
Net cash
provided by
(used in)
operating
activities..... 276,664 2,854,218 2,132,410 (372,016) 2,377,464
------------ ------------ ----------- ------------ -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures.. (37,548,729) (24,105,172) (6,153,618) (1,216,962) (2,062,470)
Accrued construction
costs................ 10,178,620 (7,514,569) (951,779) (1,921,170) (731,730)
------------ ------------ ----------- ------------ -----------
Net cash used in
investing
activities..... (27,370,109) (31,619,741) (7,105,397) (3,138,132) (2,794,200)
------------ ------------ ----------- ------------ -----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from interim
construction loan.... 12,700,000 24,000,000 0 0 0
Payments on interim
construction loan.... 0 (36,700,000) 0 0 0
Proceeds from long-
term note............ 0 47,500,000 0 0 0
Payments on long-term
note................. 0 0 (5,937,500) 0 0
Payment of debt issu-
ance costs........... 0 (986,176) (80,385) (22,072) (139,332)
Capital contribu-
tions................ 14,906,881 0 6,559,803 1,393,320 0
------------ ------------ ----------- ------------ -----------
Net cash
provided by
(used in)
financing
activities..... 27,606,881 33,813,824 541,918 1,371,248 (139,332)
------------ ------------ ----------- ------------ -----------
INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS............ 513,436 5,048,301 (4,431,069) (2,138,900) (556,068)
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF PERIOD.... 0 513,436 5,561,737 5,561,737 1,130,668
------------ ------------ ----------- ------------ -----------
CASH AND CASH
EQUIVALENTS AT END OF
PERIOD................. $ 513,436 $ 5,561,737 $ 1,130,668 $ 3,422,837 $ 574,600
============ ============ =========== ============ ===========
SUPPLEMENTAL CASH FLOW
DISCLOSURES:
Cash paid for inter-
est.................. $ 45,907 $ 2,909,056 $ 4,689,477 $ 991,318 $ 1,410,816
============ ============ =========== ============ ===========
Noncash financing
activities:
Assets contributed by
SCANA................ $ 5,449,670 $ 0 $ 0 $ 0 $ 0
============ ============ =========== ============ ===========
Capital lease
obligation for fiber
route................ $ 0 $ 0 $ 0 $ 0 $ 3,457,345
============ ============ =========== ============ ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-50
<PAGE>

GULF STATES FIBERNET

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1994, 1995, AND 1996

1. ORGANIZATION AND BUSINESS OPERATIONS

General

Gulf States FiberNet (the "Partnership") was formed on August 17, 1994
pursuant to the provisions of the Georgia Uniform Partnership Act. The
Partnership provides digital communications transport to communications common
carriers in the states of Georgia, Texas, Alabama, Mississippi, and Louisiana.
The Partnership is a facilities-based entity with an existing fiber optic
transmission facility between Atlanta, Georgia, and Birmingham, Alabama. The
Partnership has also constructed a redundant route from Atlanta to Birmingham
which continues on to Longview, Texas, through such cities as Tuscaloosa,
Alabama; Meridian, Jackson, and Vicksburg, Mississippi; and Monroe and
Shreveport, Louisiana. The Partnership has also constructed a spur from
Meridian to Gulfport, Mississippi. These additional routes became operational
during May 1995. In September 1996, an extension to Longview, Texas, was
completed. The Partnership has also constructed a route from Atlanta to
Gainesville, Georgia, where it connects to the network of another
nonaffiliated entity that provides transit into the networks of several other
nonaffiliated entities in the states of North Carolina and South Carolina. The
Atlanta to Gainesville route was completed in January 1996.

The general partners and their respective ownership percentages as of
December 31, 1996 were as follows:

<TABLE>
<S> <C>
SCANA Communications, Inc. ("SCANA").......... 64%
Gulf States Transmission Systems, Inc.
("GSTS")..................................... 36
</TABLE>

GSTS is the managing partner and is responsible for managing and operating
the Partnership. The partners make capital contributions to share in the
operating results of, and receive distributions from, the Partnership in
accordance with their respective ownership percentages.

The Partnership's revenues are derived from sales to a relatively small
number of customers. The loss of a major customer would have a significant
impact on the partnership's results of operations and financial position. This
risk is mitigated by take-or-pay contracts whereby the customers are
contractually obligated to pay periodic specified amounts, even if they do not
take delivery of the contracted services.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and Presentation

The Partnership's financial statements are prepared on the accrual basis of
accounting. The balance sheet as of March 27, 1997 and the statements of
operations and cash flows for the periods ending March 31, 1996 and March 27,
1996 are unaudited and, in the opinion of management, contain all adjustments
(consisting of only normal recurring items) necessary for the fair
presentation of the financial position and results of operations for the
interim periods. The results of operations for the period ended March 27, 1997
are not necessarily indicative of the results to be expected for the entire
year.

Use of Estimates

Cash and Cash Equivalents

For purposes of the statements of cash flows, temporary investments
represent securities with maturities of 90 days or less and are considered
cash equivalents.

F-51
<PAGE>

GULF STATES FIBERNET

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Revenue Recognition

Revenues are recognized as the Partnership performs services in accordance
with contract or tariff terms.

Property and Equipment

Property and equipment are carried at cost or fair market value of
contributed property at the time of the contribution. Depreciation and
amortization of property and equipment are provided using the straight-line
method over estimated useful lives (3 to 20 years). Balances of major classes
of assets and the related accumulated depreciation as of December 31, 1995 and
1996 are as follows:

<TABLE>
<CAPTION>
1995 1996
----------- ------------
<S> <C> <C>
Land............................................... $ 2,500 $ 2,500
Vehicles and work equipment........................ 357,994 459,906
Office furniture, fixtures, equipment, and lease-
hold improvements................................. 79,939 80,628
Electronic equipment............................... 8,935,670 13,730,134
Buildings and POP extensions....................... 3,608,294 4,297,142
Cable and installation costs....................... 42,412,149 45,612,729
Other depreciable assets........................... 8,370,033 8,572,664
Less accumulated depreciation...................... (4,006,455) (10,472,469)
----------- ------------
Net property and equipment in service............ 59,760,124 62,283,234
Property and equipment under construction.......... 2,996,439 160,951
----------- ------------
Net property and equipment......................... $62,756,563 $ 62,444,185
=========== ============
</TABLE>

Long-Lived Assets

In 1995, the Partnership adopted Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." SFAS No. 121 establishes accounting
standards for the impairment of long-lived assets and goodwill related to
those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. The effect of adopting SFAS No.
121 was not material.

The Partnership periodically reviews the values assigned to long-lived
assets, such as property and equipment, and cost in excess of net assets
acquired to determine whether any impairments are other than temporary.
Management believes that the long-lived assets in the accompanying balance
sheets are appropriately valued.

Income Taxes

The Internal Revenue Code and applicable state statutes provide that the
income and expenses of a partnership are not separately taxable to the
partnership but rather accrue directly to the partners. Accordingly, no
provision for federal or state income taxes has been made in the accompanying
financial statements.

Interest Expense

All interest incurred during 1994, 1995, and 1996 is attributable to the
construction of the routes detailed in Note 1. Interest was capitalized until
the completion of the construction of a specific route segment. The amount of
interest capitalized in 1994, 1995, and 1996 totaled $45,907, $1,020,204, and
$40,365, respectively.

F-52
<PAGE>

GULF STATES FIBERNET

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Other Noncurrent Assets

The excess of cost over the fair market value of assets acquired
("goodwill") is being amortized to income on a straight-line basis over a
period of 40 years.

In connection with the issuance of its long-term debt, the Partnership
incurred debt issuance costs of approximately $986,000 and $80,000 in 1995 and
1996, respectively. These costs were recorded as other assets and are being
amortized on a straight-line basis over 7 to 8.5 years, the term of the
related debt facilities.

Presentation

Certain prior year amounts have been reclassified to conform with the
current year presentation.

3. SCANA ASSET CONTRIBUTION

Effective November 1, 1994, SCANA contributed an existing Atlanta to
Birmingham fiber optic route to the Partnership as part of its capital
contribution. The tangible assets associated with this route were recorded at
their estimated appraised value of $4,924,410. This route was valued at
$5,449,670 for purposes of determining a portion of SCANA's capital
contribution. The $525,260 difference between the estimated appraised value of
the tangible assets and the fair market value of the route is reflected as
goodwill in the accompanying balance sheets.

4. INTERIM CONSTRUCTION LOAN AND LONG-TERM DEBT

Interim Construction Loan

On December 8, 1994, the Partnership completed a $40,000,000 construction
loan commitment ("Loan") with NationsBank of North Carolina ("NationsBank").
The Loan provided the Partnership the ability to draw amounts as needed to
finance the construction of a new route. The interest rates paid on amounts
outstanding under the Loan ranged from 6.75% to 7.25% in 1995. Any unused
portion of the Loan was subject to a commitment fee equal to .25% per annum.
The Partnership borrowed $36,700,000 under the Loan prior to its repayment in
full in August 1995. The Partnership utilized funds realized from the
$47,500,000 nonrecourse project financing discussed below to repay the Loan.

Long-Term Debt

Long-term debt consisted of the following at December 31, 1996 and March 27,
1997:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 27,
1996 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
$41.6 million bridge facility, interest payable
at LIBOR plus 2.25% (8.25% at June 30, 1997).. $41,562,500 $ 41,600,000
Other.......................................... 0 3,419,875
----------- ------------
41,562,500 45,019,875
Less: Current maturities....................... 5,937,500 (42,068,969)
----------- ------------
Total long-term debt........................... $35,625,000 $ 2,950,906
=========== ============
</TABLE>

On July 25, 1995, the Partnership completed a $47,500,000 nonrecourse
project financing (the "Financing") with NationsBank. The Financing is to be
repaid in 16 equal semiannual installments of $2,968,750 beginning on June 30,
1996 and ending on December 31, 2003. The Financing bears

F-53
<PAGE>

GULF STATES FIBERNET

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

interest on outstanding amounts at various floating rate options plus an
applicable credit spread, which varies throughout the term of the Financing.
The Partnership is contractually obligated to select the three-month LIBOR
option as a direct result of the interest rate swap agreement discussed below.
The Financing is secured by substantially all of the Partnership's assets.

Concurrently with the closing of the Financing, the parent companies of GSTS
and SCANA, ITC Holding Company, Inc. ("ITC") and SCANA, Inc., respectively,
have entered into the Telecommunications System Capacity Agreement ("TSCA")
with NationsBank. The TSCA requires ITC and SCANA to make additional equity
contributions to the Partnership. These required equity contributions are
calculated on a quarterly basis throughout the term of the Financing based on
a contractually determined amount, less the Partnership's quarterly revenue,
excluding the nonrecurring revenue discussed in Note 7. The contractually
determined amounts discussed above are fixed amounts and are not contingent
upon the results of operations of the Partnership.

On January 24, 1995, the Partnership entered into a forward starting
interest rate swap agreement with a $47,500,000 principal amount with
NationsBank. This agreement is accounted for as a hedge of an anticipated
transaction. The agreement swaps the applicable three-month LIBOR selected
under the Financing with a fixed rate of 8.25%. As of December 31, 1996, the
Partnership would be required to pay $2,962,000 to terminate the interest rate
swap with NationsBank. The Partnership made payments totaling $1,261,000 and
$553,320 to NationsBank in 1995 and 1996, respectively, in connection with
this interest rate swap. These payments are included in interest expense in
the accompanying statements of operations.

As a result of this interest rate swap, the Financing will bear an effective
interest rate as follows:

<TABLE>
<S> <C>
Years 1-3......................................................... 9.375%
Years 4-6......................................................... 9.500
Years 7-8.5....................................................... 9.625
</TABLE>

Maturities of long-term debt as of December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997......................................................... $ 5,937,500
1998......................................................... 5,937,500
1999......................................................... 5,937,500
2000......................................................... 5,937,500
2001......................................................... 5,937,500
Thereafter................................................... 11,875,000
-----------
$41,562,500
===========
</TABLE>

5. LEASE OBLIGATIONS

The Partnership has entered into various operating leases for facilities and
equipment used in its operations. Aggregate future minimum rental commitments
under noncancelable operating leases as of December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997.......................................................... $ 682,902
1998.......................................................... 636,037
1999.......................................................... 620,405
2000.......................................................... 601,135
2001.......................................................... 580,585
Thereafter.................................................... 2,310,260
----------
$5,431,324
==========
</TABLE>

F-54
<PAGE>

GULF STATES FIBERNET

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Rent expense charged to operations for the years ended December 31, 1994,
1995, and 1996 was $6,437, $153,003, and $953,713, respectively.

6. RELATED-PARTY TRANSACTIONS

ITC provides certain administrative services and leases office space to the
Partnership. In addition, certain of ITC's other wholly owned or majority-
owned subsidiaries provide the Partnership with various services and/or
receive services provided by the Partnership. These entities include
Interstate Telephone Company and Valley Telephone Company, which provide local
and long distance telephone services; Interstate FiberNet, which provides
digital communications transport; and InterQuest, which provides operator
assistance services. ITC also holds equity investments in the following
entities which do business with the Partnership: Powertel, Inc., formerly
InterCel, Inc., which provides cellular services, and MindSpring Enterprises,
Inc., which is a regional provider of Internet access.

The Company received services from ITC and other affiliated entities of
approximately $279,000, $1,162,000, and $1,477,000, for the period from
inception through December 31, 1994 and the years ended December 31, 1995 and
1996, respectively, which are reflected in selling, general, and
administrative expenses in the Partnership's statements of operations. In
addition, the Partnership received services from ITC and other affiliated
entities of approximately $70,000 for the year ended December 31, 1996, which
is reflected in cost of services in the Partnership's statement of operations.
At December 31, 1995 and 1996, amounts payable for these services of $0 and
$25,263, respectively, are recorded in the Partnership's balance sheets as
affiliate accounts payable. In management's opinion, the Partnership's
transactions with these affiliated entities are representative of arm's-length
transactions.

Relatives of stockholders of ITC are stockholders and employees of the
Partnership's insurance provider. The costs charged to the Partnership for
insurance services were approximately $1,300, $33,000, and $54,000 for the
years ended December 31, 1994, 1995, and 1996, respectively.

7. SIGNIFICANT CUSTOMERS

No customer was responsible for greater than 10% of the Partnership's
revenues for the period from inception through December 31, 1994. However, two
customers made up greater than 10% of the Partnership's revenues for the years
ended December 31, 1995 and 1996, as follows:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Customer A................................................... 82.5% 43.2%
Customer B................................................... 8.6 21.0
</TABLE>

During 1995, the Partnership received nonrecurring revenue of $3,250,000, or
approximately 43% of net sales to Customer A, related to the cancellation of
an existing lease agreement.

The Partnership entered into an agreement with Customer A to lease certain
fiber optic lines whereby Customer A is contractually obligated to pay
$4,338,996 per annum for 11 years beginning June 1995.

8. SUBSEQUENT EVENTS

Capital Lease

In January 1997, the Partnership entered into a capital lease agreement with
Southern Telecom 1, Inc. ("STI") to construct and lease a fiber optic facility
and related equipment from Birmingham to Montgomery, Alabama. In total, STI
constructed a 24 fiber optic strand facility, 12 strands of which it leased to
the Partnership and 12 strands of which it granted the Partnership a revocable
right to use. STI has the option to lease to the

F-55
<PAGE>

GULF STATES FIBERNET

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Partnership any of the additional 12 licensed fibers for a monthly payment of
$2,000 per fiber after the ninth anniversary of the lease. To the extent STI
does not lease the Partnership at least six of the licensed fibers under its
option, the Partnership will have the right to lease from STI up to a total of
six of the licensed fibers. Construction was completed and lease payments
began in February 1997. Payments under the lease are as follows:

<TABLE>
<CAPTION>
MONTHS MONTHLY
OF TERM PAYMENT
------- -------
<S> <C>
1 through 48.................................................... $75,000
49 through 108.................................................. 25,000
109 through 240................................................. 1,000
</TABLE>

Dissolution of the Partnership

On March 27, 1997, GSTS's parent, ITC, purchased the 64% interest in the
Partnership owned by SCANA for approximately $17 million, payable at closing
in shares of ITC's nonvoting convertible preferred stock, plus certain
contingent consideration. The contingent consideration is due no later than
April 30, 1998, at which time ITC must deliver additional nonvoting
convertible preferred stock to SCANA equal to 35.7% of (a) 64%, multiplied by
(b) (i) 6, multiplied by (ii) the amount, if any, by which the earnings before
interest, taxes, depreciation, and amortization of the Partnership for the
year ended December 31, 1997 exceed $11,265,696.

Upon the closing of the acquisition, ITC contributed the 64% ownership
interest in the Partnership to GSTS and the Partnership was dissolved.

Debt Refinancing

In connection with the acquisition of the remaining 64% interest in the
Partnership, GSTS signed an agreement with NationsBank of Texas, N.A. for a
$41.6 million bridge financing facility (the "Bridge Facility"). The Bridge
Facility finances the Partnership's existing Financing described in Note 4 and
is secured by the assets of the Partnership. The Bridge Facility bore interest
on outstanding amounts at various floating rate options plus an applicable
credit margin. The Bridge Facility matured and was repaid on the date the
proceeds from ITC/\DeltaCom's debt offering discussed below were released.

Parent's Reorganization of Subsidiaries

In March 1997, ITC formed a new wholly owned subsidiary, ITC/\DeltaCom, Inc.
("ITC/\DeltaCom"). Upon completion of the debt offering and the related
transactions described below, ITC reorganized several of its wholly owned
subsidiaries as follows:

. Eastern Telecom, Inc. (d.b.a. InterQuest) and ITC Transmission Systems
II, Inc. merged with and into Interstate FiberNet, Inc., formerly ITC
Transmission Systems, Inc. ("FiberNet").

. ITC contributed all of the outstanding capital stock of FiberNet,
DeltaCom, Inc. and GSTS to ITC/\DeltaCom.

. ITC/\DeltaCom contributed all of the outstanding capital stock of
DeltaCom and GSTS to FiberNet.

These transactions are collectively referred to as the "Reorganization."

ITC/\DeltaCom Debt Offering

On June 3, 1997, ITC/\DeltaCom issued senior notes with a principal value of
$200 million (the "Offering"). Proceeds from the Offering were held by the
trustee until all required regulatory approvals related to the Reorganization
were received. Upon consummation of the Reorganization on July 25, 1997, a
portion of the proceeds was used to repay the Bridge Facility described above
as well as certain advances from the Parent outstanding at DeltaCom, Inc.

F-56
<PAGE>

INDEPENDENT AUDITORS' REPORT

SCANA Communications, Inc.

We have audited the accompanying balance sheets of Georgia Fiber (a business
unit of SCANA Communications, Inc. (SCI) as of December 31, 1996 and 1995, and
the related statements of income and net equity and of cash flows for the
years then ended. These financial statements are the responsibility of SCI's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Georgia Fiber at December 31, 1996 and
1995 and the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared from the separate
records of Georgia Fiber (a business unit of SCANA Communications, Inc.) and
may not necessarily be indicative of the conditions that would have existed or
the results of operations that would have occurred had Georgia Fiber been
operated as an unaffiliated company.

As discussed in Note 1 to the financial statements, on March 27, 1997, the
assets of Georgia Fiber were sold.

DELOITTE & TOUCHE LLP

Columbia, South Carolina
May 23, 1997

F-57
<PAGE>

GEORGIA FIBER
(A BUSINESS UNIT OF SCANA COMMUNICATIONS, INC.)

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- MARCH 27, MARCH 31,
1996 1995 1997 1996
----------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Accounts receivable.......... $ 89 $ 332,426 $ 300,311 $ 302,854
Prepaid expenses............. 18,790 17,761 -- 15,039
----------- ---------- ----------- ----------
Total current assets....... 18,879 350,187 300,311 317,893
FIBER OPTIC TRANSMISSION CAPAC-
ITY, NET (Notes 1 and 2)...... 10,484,324 7,980,616 10,352,258 8,007,715
----------- ---------- ----------- ----------
TOTAL ASSETS................... $10,503,203 $8,330,803 $10,652,569 $8,325,608
=========== ========== =========== ==========
LIABILITIES AND NET EQUITY
CURRENT LIABILITIES--Accounts
payable and accrued
liabilities................... $ 339,644 $ 139,740 $ 596,958 $ 131,135
NET EQUITY..................... 10,163,559 8,191,063 10,055,611 8,194,473
----------- ---------- ----------- ----------
TOTAL LIABILITIES AND NET
EQUITY.................... $10,503,203 $8,330,803 $10,652,569 $8,325,608
=========== ========== =========== ==========
</TABLE>

See notes to financial statements.

F-58
<PAGE>

GEORGIA FIBER
(A BUSINESS UNIT OF SCANA COMMUNICATIONS, INC.)

STATEMENTS OF INCOME AND NET EQUITY

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------- MARCH 27, MARCH 31,
1996 1995 1997 1996
----------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
NET REVENUES (Note 1)........ $ 3,542,302 $3,499,606 $ 885,450 $ 885,950
----------- ---------- ----------- ----------
OPERATING COSTS AND EXPENSES:
Depreciation and
amortization.............. 1,063,408 778,817 334,034 219,662
Selling, general and
administrative expenses... 431,394 432,517 69,921 156,659
Maintenance................ 288,085 122,770 135,286 16,298
Other operating costs and
expenses.................. 140,761 231,446 43,018 29,484
----------- ---------- ----------- ----------
Total costs and
expenses................ 1,923,648 1,565,550 582,259 422,103
----------- ---------- ----------- ----------
OPERATING INCOME............. 1,618,654 1,934,056 303,191 463,847
NET EQUITY, BEGINNING OF
YEAR........................ 8,191,063 6,300,078 10,163,559 8,191,063
NET CASH PROVIDED FROM (TO)
SCANA COMMUNICATIONS, INC... 353,842 (43,071) (411,139) (460,436)
----------- ---------- ----------- ----------
NET EQUITY, END OF YEAR...... $10,163,559 $8,191,063 $10,055,611 $8,194,474
=========== ========== =========== ==========
</TABLE>

See notes to financial statements.

F-59
<PAGE>

GEORGIA FIBER
(A BUSINESS UNIT OF SCANA COMMUNICATIONS, INC.)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------ MARCH 27, MARCH 31,
1996 1995 1997 1996
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Operating income............ $ 1,618,654 $ 1,934,056 $ 303,191 $ 463,847
Adjustments to reconcile
operating income to net
cash provided by operating
activities:
Depreciation and
amortization.............. 1,063,408 778,817 334,034 219,662
Changes in operating assets
and liabilities:
Decrease in receivables... 332,337 181,416 (300,222) 29,572
(Increase) decrease in
prepaid expenses......... (1,029) 1,995 18,790 2,722
Increase (decrease) in
accounts payable and
accrued expenses......... 199,904 (169,780) 257,314 (8,605)
----------- ----------- --------- ---------
Net cash provided by
operating activities.... 3,213,274 2,726,504 613,107 707,198
----------- ----------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES--Additions to
fiber optic transmission
capacity.................... (3,567,116) (2,683,433) (201,968) (246,762)
----------- ----------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES--Net cash
provided from (to) SCANA
Communications, Inc......... 353,842 (43,071) (411,139) (460,436)
----------- ----------- --------- ---------
NET CHANGE IN CASH........... -- -- -- --
CASH, BEGINNING OF THE YEAR.. -- -- -- --
----------- ----------- --------- ---------
CASH, END OF THE YEAR........ $ -- $ -- $ -- $ --
=========== =========== ========= =========
</TABLE>

See notes to financial statements.

F-60
<PAGE>

GEORGIA FIBER
(A BUSINESS UNIT OF SCANA COMMUNICATIONS, INC.)

NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General--Georgia Fiber is a business unit of SCANA Communications, Inc.
("SCI"). This business unit consists of certain fiber optic capacity in the
State of Georgia. Such assets were sold to a third party on March 27, 1997.
The accompanying financial statements include the historical cost basis assets
and related operations of the business unit. No effects of the asset sale are
included in the financial statements.

All revenues were derived from fiber optic service provided to one customer.
Revenues are recognized as earned on a monthly basis in accordance with an
agreement with such customer.

Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Fiber Optic Transmission Capacity--Pursuant to certain agreements, SCI
(formerly MPX Systems, Inc.) obtained fiber optic transmission capacity along
specified routes in Georgia. Such agreements obligated SCI to reimburse the
counterparty for costs incurred in construction of the capacity and to pay for
operation and maintenance costs applicable to the capacity. In addition, SCI
pays an amount equal to 2.8% of operating income from operations to the
counterparty. Since inception, additional costs have been incurred to upgrade
and extend the life of the capacity. Costs of obtaining, constructing,
upgrading and extending the life of the capacity are capitalized. Of the
capitalized cost at December 31, 1996, approximately $6,231,000 is being
amortized over a useful life of 25 years and approximately $9,308,000 is
amortized over a life of 8 years. Costs of operating and maintaining the
capacity are expensed as incurred. These agreements expire in 2015 with two
ten-year renewal options.

Cost and Expenses--The accompanying financial statements reflect costs and
expenses that are applicable to the business unit and selling, general and
administrative expenses of SCI which were allocated to the business unit based
on revenues. Management believes that the method used to allocate such
expenses is reasonable (see Note 3).

Fair Value of Financial Instruments--The carrying values of the Company's
financial instruments (receivables and payables) approximate fair value.

Income Taxes--SCI is a wholly owned subsidiary of SCANA Corporation. As a
business unit of SCI, Georgia Fiber does not incur income tax expense. On a
pro forma separate return basis, for the year ended December 31, 1996,
management estimates that Georgia Fiber would have incurred an income tax
provision of approximately $615,000.

F-61
<PAGE>

GEORGIA FIBER

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. FIBER OPTIC TRANSMISSION CAPACITY

Fiber optic transmission capacity consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
Fiber optic transmission capacity.................. $15,538,718 $11,971,958
Accumulated amortization........................... (5,054,394) (3,991,342)
----------- -----------
Net fiber optic transmission capacity.............. $10,484,324 $ 7,980,616
=========== ===========
</TABLE>

3. RELATED PARTY TRANSACTIONS

Expenses allocated by SCI to the business unit during the years ended
December 31, 1996 and 1995 are as follows:

<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Selling, general and administrative expenses.............. $383,824 $383,929
======== ========
</TABLE>

* * * * * * * *

F-62
<PAGE>

[LOGO OF ITC/\DELTACOM APPEARS HERE]

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses in connection with the
issuance and distribution of the securities being registered hereby, other
than underwriting discounts and commissions. All amounts except the SEC
Registration Fee and the NASD Filing Fee are estimated. All of such expenses
are being borne by the Company.

<TABLE>
<S> <C>
SEC Registration Fee............................................ $28,750.00
NASD Filing Fee................................................. 9,987.50
Nasdaq National Market Listing Fee.............................. 50,000.00
Blue Sky Fees and Expenses...................................... 10,000.00
Accounting Fees and Expenses.................................... 150,000.00
Legal Fees and Expenses......................................... 250,000.00
Printing and Engraving Expenses................................. 245,000.00
Transfer Agent Fees and Expenses................................ 5,500.00
Miscellaneous................................................... 762.50
-----------
Total......................................................... $750,000.00
===========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Under Section 145 of the General Corporation Law of the State of Delaware
(the "Delaware Corporation Law"), a corporation may indemnify its directors,
officers, employees and agents and its former directors, officers, employees
and agents and those who serve, at the corporation's request, in such
capacities with another enterprise, against expenses (including attorneys'
fees), as well as judgments, fines and settlements in nonderivative lawsuits,
actually and reasonably incurred in connection with the defense of any action,
suit or proceeding in which they or any of them were or are made parties or
are threatened to be made parties by reason of their serving or having served
in such capacity. The Delaware Corporation Law provides, however, that such
person must have acted in good faith and in a manner such person reasonably
believed to be in (or not opposed to) the best interests of the corporation
and, in the case of a criminal action, such person must have had no reasonable
cause to believe his or her conduct was unlawful. In addition, the Delaware
Corporation Law does not permit indemnification in an action or suit by or in
the right of the corporation, where such person has been adjudged liable to
the corporation, unless, and only to the extent that, a court determines that
such person fairly and reasonably is entitled to indemnity for costs the court
deems proper in light of liability adjudication. Indemnity is mandatory to the
extent a claim, issue or matter has been successfully defended.

The Company's Certificate of Incorporation contains provisions that provide
that no director of the Company shall be liable for breach of fiduciary duty
as a director except for (i) any breach of the directors' duty of loyalty to
the Company or its stockholders; (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law; (iii)
liability under Section 174 of the Delaware Corporation Law; or (iv) any
transaction from which the director derived an improper personal benefit.
Under the Bylaws of the Company, the Company is required to advance expenses
incurred by an officer or director in defending or participating in any action
which such director or officer is made a party to or is threatened to be made
a party to by reason of such person's serving or having served as an officer
or director if the director or officer undertakes to repay such amount if it
is determined that the director or officer is not entitled to indemnification.

In addition, the Company has entered into indemnity agreements with each of
its directors and certain of its officers pursuant to which the Company has
agreed to indemnify its directors and such officers as permitted by

II-1
<PAGE>

the Delaware Corporation Law. The Company also has obtained directors and
officers liability insurance against certain liabilities, including
liabilities under the Securities Act.

The Underwriting Agreement provides for indemnification by the Underwriters
of the directors of the Company, the officers of the Company who signed this
Registration Statement and the controlling persons of the Company against
certain liabilities, including liabilities under the Securities Act, under
certain circumstances.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

From the Company's inception on March 24, 1997 through October 20, 1997, the
Company has issued and sold the securities described below in the following
unregistered transactions. All share, per share and purchase price amounts
stated in clauses (2), (3), (5), (6) and (7) below give effect to the merger
of ITC Holding Company, Inc. ("ITC Holding") with and into the Company on
October 20, 1997 (the "Merger").

(1) In March 1997, the Company issued to ITC Holding, its sole
stockholder, 15,000,000 shares of Class B Common Stock. The price per share
was $.01, for an aggregate consideration of $150,000.

(2) In March 1997, the Company granted to 29 employees of the Company and
ITC Holding, pursuant to the Stock Option Plan, stock options to purchase
an aggregate of 1,266,345 shares of Common Stock at an exercise price of
$4.49 per share.

(3) In March 1997, the Company granted to six of its directors, pursuant
to the Director Stock Option Plan, stock options to purchase an aggregate
of 96,300 shares of Common Stock at an exercise price of $4.49 per share.

(4) In June 1997, the Company issued $200.0 million principal amount of
its 11% Senior Notes due June 2007, the net proceeds of which totaled
$192.7 million.

(5) In July 1997, the Company granted to 127 of its employees, pursuant
to the Stock Option Plan, stock options to purchase an aggregate of 168,933
shares of Common Stock at an exercise price of $4.49 per share.

(6) In October 1997, the Company granted to 51 of its employees, pursuant
to the Stock Option Plan, stock options to purchase an aggregate of 48,251
shares of Common Stock at an exercise price of $4.49 per share.

(7) In October 1997, in connection with the Merger, the Company issued
(i) 19,126,731 shares of Common Stock to 242 former stockholders of ITC
Holding in exchange for the outstanding common stock of ITC Holding and
(ii) 1,486,440 shares of Series A Convertible Preferred Stock to one former
stockholder of ITC Holding in exchange for the outstanding preferred stock
of ITC Holding.

Each issuance of securities described above was made in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act as
a transaction by an issuer not involving any public offering. The recipients
of securities in each such transaction under Section 4(2) represented their
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof and appropriate
legends were affixed to the share certificates or debt securities issued in
such transactions. All such recipients had adequate access, through their
relationships with the Company, to information about the Company or were
furnished with information substantially similar to the information that would
be provided in a registration statement filed under the Securities Act.

II-2
<PAGE>

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
*1.1 Form of Underwriting Agreement among ITC/\DeltaCom, Inc. and the
Underwriters.
**3.1 Certificate of Incorporation of ITC/\DeltaCom, Inc.
**3.2 Amended and Restated Bylaws of ITC/\DeltaCom, Inc.
**4.1 Form of Common Stock Certificate of ITC/\DeltaCom, Inc.
**5.1 Opinion of Hogan & Hartson L.L.P.
10.1 Capacity Agreement dated as of February 1, 1997 between Interstate
FiberNet and Entergy Technology Company (filed as Exhibit 10.1 to
Registration Statement on Form S-4, as amended, File No. 333-31361
("Form S-4") and incorporated herein by reference).
10.2 License Agreement dated February 1, 1997 between Interstate FiberNet
and Metropolitan Atlanta Rapid Transit Authority (filed as Exhibit
10.2 to Form S-4 and incorporated herein by reference).
10.3 Supply Agreement for Transmission Equipment dated March 26, 1993
between Interstate FiberNet and Northern Telecom, Inc. (filed as
Exhibit 10.3 to Form S-4 and incorporated herein by reference).
10.4 First Amendment to Supply Agreement for Transmission Equipment dated
as of September 9, 1993 between Interstate FiberNet and Northern
Telecom, Inc. (filed as Exhibit 10.4 to Form S-4 and incorporated
herein by reference).
10.5 Second Amendment to Supply Agreement for Transmission Equipment
dated as of January 19, 1994 between Interstate FiberNet and
Northern Telecom, Inc. (filed as Exhibit 10.5 to Form S-4 and
incorporated herein by reference).
10.6 Sixth Amendment to Supply Agreement for Transmission Equipment dated
as of November 21, 1996 between Interstate FiberNet and Northern
Telecom, Inc. (which supersedes the Third and the Fourth Amendment
to this Agreement) (filed as Exhibit 10.6 to Form S-4 and
incorporated herein by reference).
10.7 Seventh Amendment to Supply Agreement for Transmission Equipment
dated as of April 15, 1997 between Interstate FiberNet and Northern
Telecom, Inc. (which supersedes the Fifth Amendment to this
Agreement) (filed as Exhibit 10.7 to Form S-4 and incorporated
herein by reference).
10.8 Master Capacity Lease dated July 22, 1996 between Interstate
FiberNet and Intercel PCS Services, Inc. (filed as Exhibit 10.8 to
Form S-4 and incorporated herein by reference).
10.9 First Amendment to Master Capacity Lease dated as of August 22, 1996
between Interstate FiberNet and InterCel PCS Services, Inc. (filed
as Exhibit 10.9 to Form S-4 and incorporated herein by reference).
10.10 Amended and Restated Loan Agreement dated as of March 27, 1997 by
and among Gulf States Transmission Systems, Inc., the Lenders
parties thereto and NationsBank, N.A. (filed as Exhibit 10.10 to
Form S-4 and incorporated herein by reference).
10.11 Promissory Note dated March 27, 1997 between Gulf States
Transmission Systems, Inc. and NationsBank, N.A. (filed as Exhibit
10.11 to Form S-4 and incorporated herein by reference).
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
10.12 Amended and Restated Security Agreement dated as of March 27, 1997
between Gulf States FiberNet and Gulf States Transmission Systems,
Inc. and NationsBank, N.A. (filed as Exhibit 10.12 to Form S-4 and
incorporated herein by reference).
10.13 Assignment and Assumption Agreement dated as of March 27, 1997
between Gulf States FiberNet and Gulf States Transmission Systems,
Inc. (filed as Exhibit 10.13 to Form S-4 and incorporated herein by
reference).
10.14 Term Agreement dated as of August 11, 1994 between Gulf States
FiberNet and Illinois Central Railroad Company (filed as Exhibit
10.14 to Form S-4 and incorporated herein by reference).
10.15 Revised and Restated Fiber Optic Facilities and Services Agreement
dated as of June 9, 1995 among Southern Development and Investment
Group, Inc., on behalf of itself and as agent for Alabama Power
Company, Georgia Power Company, Gulf Power Company, Mississippi
Power Company, Savannah Electric and Power Company, Southern
Electric Generating Company and Southern Company Services, Inc. and
MPX Systems, Inc., which was assigned in part by MPX Systems, Inc.
to Gulf States FiberNet pursuant to an Assignment dated as of July
25, 1995 (filed as Exhibit 10.15 to Form S-4 and incorporated herein
by reference).
10.16 First Amendment to Revised and Restated Fiber Optic Facilities and
Services Agreement dated as of July 24, 1995 between Southern
Development and Investment Group, Inc. on behalf of itself and as
agent for others and MPX Systems, Inc. (filed as Exhibit 10.16 to
Form S-4 and incorporated herein by reference).
10.17 Partial Assignment and Assumption of Revised and Restated Fiber
Optic Facilities and Services Agreement dated July 25, 1995 between
MPX Systems, Inc. and Gulf States FiberNet (filed as Exhibit 10.17
to Form S-4 and incorporated herein by reference).
+10.17.1 Amendment to Revised and Restated Fiber Optic Facilities and
Services Agreement, dated July 15, 1997, by and among Southern
Development and Investment Group, Inc., on behalf of itself and its
agent for Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power
Company, Southern Electric Generating Company and Southern Company
Services, Inc. (collectively "SES"), ITC Transmission Systems, Inc.
(as managing partner of Interstate Fibernet) and Gulf States
Transmission Systems, Inc. (filed as Exhibit 10.17.1 to Form S-4 and
incorporated herein by reference).
10.18 Consent for Assignment of Interest dated February 20, 1997 among
SCANA Communications, Inc., Gulf States FiberNet, Gulf States
Transmission Systems, Inc. and Southern Development and Investment
Groups, Inc. (filed as Exhibit 10.18 to Form S-4 and incorporated
herein by reference).
10.19 Second Partial Assignment and Assumption of Revised and Restated
Fiber Optic Facilities and Services Agreement dated March 27, 1997
between SCANA Communications, Inc. and ITC Holding Company, Inc.
(filed as Exhibit 10.19 to Form S-4 and incorporated herein by
reference).
10.20 Fiber System Lease Agreement dated January 30, 1996 between CSW
Communications, Inc. and Gulf States FiberNet (filed as Exhibit
10.20 to Form S-4 and incorporated herein by reference).
10.21 Consent for Acquisition and Assignment dated January 13, 1997
between CSW Communications, Inc. and Gulf States FiberNet (filed as
Exhibit 10.21 to Form S-4 and incorporated herein by reference).
10.22 Agreement for the Provision of Fiber Optic Services and Facilities
dated April 21, 1986 between SouthernNet, Inc. and MPX Systems, Inc.
(filed as Exhibit 10.22 to Form S-4 and incorporated herein by
reference).
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
10.23 First Amendment to Agreement for the Provision of Fiber Optic
Services and Facilities dated May 8, 1992 between MPX Systems, Inc.
and MCI Telecommunications Corporation (filed as Exhibit 10.23 to
Form S-4 and incorporated herein by reference).
10.24 Second Amendment to Agreement for the Provision of Fiber Optic
Services and Facilities dated January 30, 1996 between MPX Systems,
Inc. and MCI Telecommunications Corporation (filed as Exhibit 10.24
to Form S-4 and incorporated herein by reference).
10.25 Network Operating Agreement dated March 25, 1996 among Gulf States
FiberNet, TriNet, Inc., Hart Communications, Inc. and SCANA
Communications, Inc. (f/k/a MPX Systems, Inc.) (filed as Exhibit
10.25 to Form S-4 and incorporated herein by reference).
10.26 Agreement for the Provision of Fiber Optic Facilities and Services
dated March 29, 1990 between Alabama Power Company and Southern
Interexchange Facilities, Inc. (filed as Exhibit 10.26 to Form S-4
and incorporated herein by reference).
10.27 Amendment to the Agreement for Provision of Fiber Optic Facilities
and Services dated March 29, 1990 between Alabama Power Company and
Southern Interexchange Facilities, Inc. (filed as Exhibit 10.27 to
Form S-4 and incorporated herein by reference).
10.28 First Amendment to the Agreement for the Provision of Fiber Optic
Facilities and Services dated March 22, 1991 between Alabama Power
Company and Southern Interexchange Facilities, Inc. (filed as
Exhibit 10.28 to Form S-4 and incorporated herein by reference).
10.29 Second Amendment to the Agreement for the Provision of Fiber Optic
Facilities and Services dated December 1, 1991 between Alabama
Power Company and Southern Interexchange Facilities, Inc. (filed as
Exhibit 10.29 to Form S-4 and incorporated herein by reference).
10.30 Third Amendment to the Agreement for the Provision of Fiber Optic
Facilities and Services dated September 23, 1992 between Alabama
Power Company and Southern Interexchange Facilities, Inc. (filed as
Exhibit 10.30 to Form S-4 and incorporated herein by reference).
10.31 Fourth Amendment to the Agreement for the Provision of Fiber Optic
Facilities and Services dated January 1, 1994 between Alabama Power
Company and Southern Interexchange Facilities, Inc. (filed as
Exhibit 10.31 to Form S-4 and incorporated herein by reference).
10.32 Agreement dated March 6, 1990 between Tennessee Valley Authority
and Consolidated Communications Corporation (predecessor to
DeltaCom, Inc.) (filed as Exhibit 10.32 to Form S-4 and
incorporated herein by reference).
10.33 Interconnection Agreement signed March 12, 1997 between DeltaCom,
Inc. and BellSouth Telecommunications, Inc. (filed as Exhibit 10.33
to Form S-4 and incorporated herein by reference).
10.34 Amendment to Interconnection Agreement relating to BellSouth loops
dated March 12, 1997 between DeltaCom, Inc. and BellSouth
Telecommunications, Inc. (filed as Exhibit 10.34 to Form S-4 and
incorporated herein by reference).
10.35 Amendment to Interconnection Agreement relating to resale of
BellSouth services dated March 12, 1997 between DeltaCom, Inc. and
BellSouth Telecommunications, Inc. (filed as Exhibit 10.35 to Form
S-4 and incorporated herein by reference).
10.35.1 Third Amendment to Interconnection Agreement, dated March 12, 1997,
by and between DeltaCom, Inc. and BellSouth Telecommunications,
Inc. (filed as Exhibit 10.35.1 to Form S-4 and incorporated herein
by reference).
10.35.2 Fourth Amendment to Interconnection Agreement, dated August 22,
1997, by and between DeltaCom, Inc. and BellSouth
Telecommunications, Inc. (filed as Exhibit 10.35.2 to Form S-4 and
incorporated herein by reference).
**10.35.3 Amendment to Interconnection Agreement, dated October 3, 1997, by
and between DeltaCom, Inc. and BellSouth Telecommunications, Inc.
</TABLE>

II-5
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
10.36 Master Equipment Lease Agreement dated October 30, 1995 between AT&T
Systems Leasing Co. and DeltaCom, Inc. (filed as Exhibit 10.36 to Form
S-4 and incorporated herein by reference).
10.37 Network Products Purchase Agreement dated January 24, 1996, as amended
through March 4, 1997, between DeltaCom, Inc. and Northern Telecom,
Inc. (filed as Exhibit 10.37 to Form S-4 and incorporated herein by
reference).
10.38 First Amendment to Product Attachment Carrier Network Products, dated
May 20, 1997 (filed as Exhibit 10.38 to Form S-4 and incorporated
herein by reference).
10.39 Agreement for Use of Optical Fiber System, Microwave Radio Tower Site
and Associated Facilities dated January 2, 1996 between DeltaCom, Inc.
and SCI Systems, Inc. (filed as Exhibit 10.39 to Form S-4 and
incorporated herein by reference).
10.40 Collocate Agreement dated January 7, 1991 between Williams
Telecommunications Services, Inc., and Southern Interexchange
Facilities, Inc. (including consent for change of control) (filed as
Exhibit 10.40 to Form S-4 and incorporated herein by reference).
10.41 Agreement dated January 14, 1997 between DeltaCom, Inc. and SCANA
Communications, Inc., for switch location in Columbia, South Carolina
(filed as Exhibit 10.41 to Form S-4 and incorporated herein by
reference).
10.42 Lease Agreement dated January 1, 1996 between Brindlee Mountain
Telephone Company and DeltaCom, Inc. for, among other purposes, switch
location in Arab, Alabama (filed as Exhibit 10.42 to Form S-4 and
incorporated herein by reference).
10.43 Promissory Note dated March 27, 1997 between ITC Holding Company, Inc.
and SCANA Communications, Inc. (filed as Exhibit 10.43 to Form S-4 and
incorporated herein by reference).
+10.44 Agreement for the Provision of Telecommunications Services and
Facilities, dated January 27, 1996, by and between Interstate FiberNet
and Carolinas FiberNet, LLC. (filed as Exhibit 10.44 to Form S-4 and
incorporated herein by reference).
+10.45 Fiber Optic Facilities Agreement, dated November 15, 1996, by and
between Interstate FiberNet and Florida Power Corporation (filed as
Exhibit 10.45 to Form S-4 and incorporated herein by reference).
+10.46 Fiber Optic Capacity Marketing and Operating Agreement, dated March
21, 1996, by and between Interstate FiberNet and Florida Power & Light
Company (filed as Exhibit 10.46 to Form S-4 and incorporated herein by
reference).
+10.47 Addendum to Fiber Optic Capacity Marketing and Operating Agreement,
dated July 10, 1997, by and between Interstate FiberNet and Florida
Power & Light Company (filed as Exhibit 10.47 to Form S-4 and
incorporated herein by reference).
+10.48 Master Service Agreement, dated May 6, 1996, by and between Interstate
FiberNet and MCI Telecommunications Corporation (filed as Exhibit
10.48 to Form S-4 and incorporated herein by reference).
+10.49 Telecommunications System Maintenance Agreement, dated as of January
26, 1995, by and between Interstate FiberNet and Sprint Communications
Company L.P. (filed as Exhibit 10.49 to Form S-4 and incorporated
herein by reference).
+10.50 Sprint Communications Company Facilities and Services Agreement, dated
January 26, 1995, by and between Interstate FiberNet and Sprint
Communications Company L.P. (filed as Exhibit 10.50 to Form S-4 and
incorporated herein by reference).
</TABLE>

II-6
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
+10.51 Fiber Optic Facility Lease Agreement, dated as of January 31, 1997, by
and between Interstate FiberNet and Southern Telecom 1, Inc. (filed as
Exhibit 10.51 to Form S-4 and incorporated herein by reference).
10.52 First Assignment and Assumption of Fiber Optic Facility Lease
Agreement, dated February 1, 1997, by and between Interstate FiberNet
and Gulf States FiberNet (filed as Exhibit 10.52 to Form S-4 and
incorporated herein by reference).
+10.53 Telecommunications System Agreement, dated January 26, 1995, by and
between Interstate FiberNet and Sprint Communications Company L.P.
(filed as Exhibit 10.53 to Form S-4 and incorporated herein by
reference).
10.54 Amendment to Telecommunications System Agreement, dated July 25, 1995,
by and between Gulf States FiberNet and Sprint Communications Company
L.P. (filed as Exhibit 10.54 to Form S-4 and incorporated herein by
reference).
+10.55 Amendment No. 2 to Telecommunications System Agreement, dated August
8, 1996, by and between Gulf States FiberNet and Sprint Communications
Company L.P. (filed as Exhibit 10.55 to Form S-4 and incorporated
herein by reference).
+10.56 Assignment of the Telecommunications System Agreement, dated July 25,
1995, between Interstate FiberNet, Gulf States FiberNet and Sprint
Communications Company L.P. (filed as Exhibit 10.56 to Form S-4 and
incorporated herein by reference).
+10.57 Assignment of the Telecommunications System Agreement, dated February
27, 1997, between Sprint Communications Company L.P., Gulf States
FiberNet and Gulf States Transmission Systems, Inc. (filed as Exhibit
10.57 to Form S-4 and incorporated herein by reference).
10.58 Fixed Fee Agreement for Exchange of Use and Maintenance of Six (6)
Fiber Optic Fibers with an Option of Two (2) Additional Fiber Optic
Fibers, dated July 25, 1997, by and between Interstate FiberNet, Gulf
States Transmission Systems, Inc. and ALLTEL Telephone Services
Corporation. (filed as Exhibit 10.58 to Form S-4 and incorporated
herein by reference).
+10.59 MCI Carrier Agreement, effective August 1, 1995, by and between MCI
Telecommunications Corporation and Associated Communications Companies
of America (ACCA) (filed as Exhibit 10.59 to Form S-4 and incorporated
herein by reference).
+10.60 First Amendment to MCI Carrier Agreement, dated as of March 20, 1996,
by and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA) (filed as Exhibit 10.60 to
Form S-4 and incorporated herein by reference).
+10.61 Third Amendment to MCI Carrier Agreement, dated as of August 1, 1996,
by and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA) (filed as Exhibit 10.61 to
Form S-4 and incorporated herein by reference).
10.62 Fourth Amendment to MCI Carrier Agreement dated as of May 1, 1996, by
and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA) (filed as Exhibit 10.62 to
Form S-4 and incorporated herein by reference).
+10.63 Fifth Amendment to MCI Carrier Agreement, dated as of April 10, 1996,
by and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA) (filed as Exhibit 10.63 to
Form S-4 and incorporated herein by reference).
+10.64 Sixth Amendment to MCI Carrier Agreement, dated as of September 11,
1996, by and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA) (filed as Exhibit 10.64 to
Form S-4 and incorporated herein by reference).
</TABLE>

II-7
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
+10.65 Seventh Amendment to MCI Carrier Agreement, dated as of August 1,
1996, by and between MCI Telecommunications Corporation and
Associated Communications Companies of America (ACCA) (filed as
Exhibit 10.65 to Form S-4 and incorporated herein by reference).
+10.66 Eighth Amendment to MCI Carrier Agreement, effective March 1,
1997, by and between MCI Telecommunications Corporation and
Associated Communications Companies of America (ACCA) (filed as
Exhibit 10.66 to Form S-4 and incorporated herein by reference).
+10.67 Ninth Amendment to MCI Carrier Agreement, dated as of May 15,
1997, by and between MCI Telecommunications Corporation and
Associated Communications Companies of America (ACCA) (filed as
Exhibit 10.67 to Form S-4 and incorporated herein by reference).
10.68 Tenth Amendment to MCI Carrier Agreement, dated July 11, 1997, by
and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA) (filed as Exhibit
10.68 to Form S-4 and incorporated herein by reference).
+10.69 Switched Reseller Services Agreement, dated January 25, 1994, by
and between DeltaCom, Inc. and Allnet Communication Services,
Inc. (filed as Exhibit 10.69 to Form S-4 and incorporated herein
by reference).
+10.70 WilTel, Inc. Carrier Digital Services Agreement, dated September
1, 1995, by and between WorldCom Network Services, Inc. d/b/a
WilTel, Associated Communications Companies of America (ACCA) and
the individual members of ACCA referenced therein (filed as
Exhibit 10.70 to Form S-4 and incorporated herein by reference).
+10.71 Amendment to WilTel, Inc. Carrier Digital Services Agreement,
dated April 1, 1996, by and between WorldCom Network Services,
Inc. d/b/a/ WilTel, Associated Communications Companies of
America (ACCA) and the individual members of ACCA referenced
therein (filed as Exhibit 10.71 to Form S-4 and incorporated
herein by reference).
+10.72 Amendment No. 2 to WilTel, Inc. Carrier Digital Services
Agreement, dated June 1, 1996, by and between WorldCom Network
Services, Inc. d/b/a/ WilTel, Associated Communications Companies
of America (ACCA) and the individual members of ACCA referenced
therein (filed as Exhibit 10.72 to Form S-4 and incorporated
herein by reference).
+10.73 Amendment No. 3 to WilTel, Inc. Carrier Digital Services
Agreement, dated May 1, 1997, by and between WorldCom Network
Services, Inc. d/b/a/ WilTel, Associated Communications Companies
of America (ACCA) and the individual members of ACCA referenced
therein (filed as Exhibit 10.73 to Form S-4 and incorporated
herein by reference).
+10.74 Marketing and Operating Agreement, dated as of October 6, 1994,
by and between Interstate FiberNet and DukeNet Communications,
Inc. (filed as Exhibit 10.74 to Form S-4 and incorporated herein
by reference).
+10.75 Reseller Agreement, dated June 25, 1997, by and between DeltaCom,
Inc. and Total Network Services, a division of Cable & Wireless,
Inc. (filed as Exhibit 10.75 to Form S-4 and incorporated herein
by reference).
10.76 Sublease Agreement, dated as of January 1, 1995, by and between
ITC Holding Company, Inc. and ITC Transmission Systems, Inc.
(filed as Exhibit 10.76 to Form S-4 and incorporated herein by
reference).
10.77.1 $100,000,000 Credit Agreement, dated as of September 17, 1997,
among Interstate FiberNet, Inc., NationsBank of Texas, N.A. as
Administrative Lender, and certain other Lenders identified
therein (the "IFN Credit Agreement") (filed as Exhibit 10.77 to
Form S-4 and incorporated herein by reference).
**10.77.2 First Amendment to Credit Agreement, dated as of October 20,
1997, among Interstate FiberNet, Inc., NationsBank of Texas, N.A.
as Administrative Lender, and certain other Lenders identified
therein.
</TABLE>

II-8
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
10.78.1 $8,750,000 Revolving Promissory Note, dated as of September 17,
1997, made by Interstate FiberNet, Inc. payable to the order of
NationsBank of Texas, N.A. (filed as Exhibit 10.78.1 to Form S-4 and
incorporated herein by reference).
10.78.2 $3,750,000 Revolving Promissory Note, dated as of September 17,
1997, made by Interstate FiberNet, Inc. payable to the order of
Amsouth Bank (filed as Exhibit 10.78.2 to Form S-4 and incorporated
herein by reference).
10.78.3 $5,000,000 Revolving Promissory Note, dated as of September 17,
1997, made by Interstate FiberNet, Inc. payable to the order of
Creditanstalt-Bankverein (filed as Exhibit 10.78.3 to Form S-4 and
incorporated herein by reference).
10.78.4 $5,000,000 Revolving Promissory Note, dated as of September 17,
1997, made by Interstate FiberNet, Inc. payable to the order of
Meespierson Capital Corp. (filed as Exhibit 10.78.4 to Form S-4 and
incorporated herein by reference).
10.78.5 $5,000,000 Revolving Promissory Note, dated as of September 17,
1997, made by Interstate FiberNet, Inc. payable to the order of
State Street Bank and Trust Company (filed as Exhibit 10.78.5 to
Form S-4 and incorporated herein by reference).
10.78.6 $7,500,000 Revolving Promissory Note, dated as of September 17,
1997, made by Interstate FiberNet, Inc. payable to the order of
Corestates Bank, N.A. (filed as Exhibit 10.78.6 to Form S-4 and
incorporated herein by reference).
10.78.7 $2,500,000 Revolving Promissory Note, dated as of September 17,
1997, made by Interstate FiberNet, Inc. payable to the order of
First Union National Bank (filed as Exhibit 10.78.7 to Form S-4 and
incorporated herein by reference).
10.78.8 $5,000,000 Revolving Promissory Note, dated as of September 17,
1997, made by Interstate FiberNet, Inc. payable to the order of
Regions Bank (filed as Exhibit 10.78.8 to Form S-4 and incorporated
herein by reference).
10.78.9 $7,500,000 Revolving Promissory Note, dated as of September 17,
1997, made by Interstate FiberNet, Inc. payable to the order of
Toronto Dominion (Texas), Inc. (filed as Exhibit 10.78.9 to Form S-4
and incorporated herein by reference).
10.79.1 $8,750,000 Term Promissory Note, dated as of September 17, 1997,
made by Interstate FiberNet, Inc. payable to the order of
NationsBank of Texas, N.A. (filed as Exhibit 10.79.1 to Form S-4 and
incorporated herein by reference).
10.79.2 $5,000,000 Term Promissory Note, dated as of September 17, 1997,
made by Interstate FiberNet, Inc. payable to the order of
Creditanstalt-Bankverein (filed as Exhibit 10.79.2 to Form S-4 and
incorporated herein by reference).
10.79.3 $5,000,000 Term Promissory Note, dated as of September 17, 1997,
made by Interstate FiberNet, Inc. payable to the order of
Meespierson Capital Corp. (filed as Exhibit 10.79.3 to Form S-4 and
incorporated herein by reference).
10.79.4 $5,000,000 Term Promissory Note, dated as of September 17, 1997,
made by Interstate FiberNet, Inc. payable to the order of State
Street Bank and Trust Company (filed as Exhibit 10.79.4 to Form S-4
and incorporated herein by reference).
10.79.5 $7,500,000 Term Promissory Note, dated as of September 17, 1997,
made by Interstate FiberNet, Inc. payable to the order of Corestates
Bank, N.A. (filed as Exhibit 10.79.5 to Form S-4 and incorporated
herein by reference).
10.79.6 $2,500,000 Term Promissory Note, dated as of September 17, 1997,
made by Interstate FiberNet, Inc. payable to the order of First
Union National Bank (filed as Exhibit 10.79.6 to Form S-4 and
incorporated herein by reference).
</TABLE>

II-9
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
10.79.7 $5,000,000 Term Promissory Note, dated as of September 17, 1997,
made by Interstate FiberNet, Inc. payable to the order of Regions
Bank (filed as Exhibit 10.79.7 to Form S-4 and incorporated
herein by reference).
10.79.8 $7,500,000 Term Promissory Note, dated as of September 17, 1997,
made by Interstate FiberNet, Inc. payable to the order of Toronto
Dominion (Texas), Inc. (filed as Exhibit 10.79.8 to Form S-4 and
incorporated herein by reference).
10.79.9 $3,750,000 Term Promissory Note, dated as of September 17, 1997,
made by Interstate FiberNet, Inc. payable to the order of Amsouth
Bank (filed as Exhibit 10.79.9 to Form S-4 and incorporated
herein by reference).
10.80.1 Security Agreement, dated as of September 17, 1997, made by
Interstate FiberNet, Inc. in favor of NationsBank of Texas, N.A.,
as Administrative Lender, and each other lender party to the IFN
Credit Agreement (filed as Exhibit 10.80.1 to Form S-4 and
incorporated herein by reference).
10.80.2 Security Agreement, dated as of September 17, 1997, made by
DeltaCom, Inc. in favor of NationsBank of Texas, N.A., as
Administrative Lender, and each other lender party to the IFN
Credit Agreement (filed as Exhibit 10.80.2 to Form S-4 and
incorporated herein by reference).
10.80.3 Security Agreement, dated as of September 17, 1997, made by Gulf
States Transmission Systems, Inc. in favor of NationsBank of
Texas, N.A., as Administrative Lender, and each other lender
party to the IFN Credit Agreement (filed as Exhibit 10.80.3 to
Form S-4 and incorporated herein by reference).
10.81 Placement Agreement, dated as of May 29, 1997, among
ITC/\DeltaCom, Inc. and Morgan Stanley & Co. Incorporated, Merrill
Lynch, Pierce, Fenner & Smith Incorporated, First Union Capital
Markets Corp. and NationsBanc Capital Markets, Inc. (filed as
Exhibit 1.1 to Form S-4 and incorporated herein by reference).
10.82.1 Indenture, dated as of June 3, 1997, between ITC/\DeltaCom, Inc.
and United States Trust Company of New York, as Trustee, relating
to the 11% Senior Notes due 2007 of ITC/\DeltaCom, Inc. (filed as
Exhibit 4.1 to Form S-4 and incorporated herein by reference).
**10.82.2 Supplemental Indenture, dated as of October 17, 1997, between
ITC/\DeltaCom, Inc. and United States Trust Company of New York,
as Trustee.
10.83 Registration Rights Agreement, dated June 3, 1997, among
ITC/\DeltaCom, Inc. and Morgan Stanley & Co. Incorporated, Merrill
Lynch & Co., First Union Capital Markets Corp. and NationsBanc
Capital Markets, Inc. (filed as Exhibit 4.2 to Form S-4 and
incorporated herein by reference).
10.84 Pledge and Security Agreement dated as of June 3, 1997 from
ITC/\DeltaCom, Inc. as Pledgor to United States Trust Company of
New York as Trustee (filed as Exhibit 4.3 to Form S-4 and
incorporated herein by reference).
10.85 Form of Exchange Note (contained in Indenture filed as Exhibit
10.82).
10.86 Assignment and Contribution Agreement Pursuant to Pledge and
Security Agreement dated as of July 25, 1997, by and among
ITC/\DeltaCom, Inc., Interstate FiberNet, Inc. and United States
Trust Company of New York, as Trustee filed herewith (filed as
Exhibit 4.5 to Form S-4 and incorporated herein by reference).
*+10.87 MCI Carrier Agreement, effective September 1, 1997, by and
between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA).
**10.88 ITC/\DeltaCom, Inc. 1997 Stock Option Plan.
**10.89 ITC/\DeltaCom, Inc. 1997 Director Stock Option Plan.
</TABLE>

II-10
<PAGE>

**10.95 First Amendment to Sale and Purchase Agreement. Among SCANA
Corporation, SCANA Communications, Inc., and ITC Holding Company,
Inc., dated as of October 16, 1997, among SCANA Corporation, SCANA
Communications, Inc., ITC Holding Company, Inc. and ITC/\DeltaCom,
Inc.
**11.1 Statement regarding Computation of Per Share Earnings.
21.1 Subsidiaries of ITC/\DeltaCom, Inc. (filed as Exhibit 21.1 to Form S-
4 and incorporated herein by reference).
**23.1 Consents of Arthur Andersen LLP.
**23.2 Consent of Martin Stuedeman & Associates P.C.
**23.3 Consent of Deloitte & Touch LLP.
**23.4 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1).
24.1 Power of attorney (included on signature page).
27.1 Financial Data Schedule for the year ended December 31, 1996 (filed
as Exhibit 27.1 to
Form S-4 and incorporated herein by reference).
27.2 Financial Data Schedule for the six-month period ended June 30, 1997
(filed as Exhibit 27.2 to Form S-4 and incorporated herein by
reference).
</TABLE>
- --------

*Previously filed.

**Filed herewith.

+ Confidential treatment has been granted for this exhibit. The copy filed as
an exhibit omits the information subject to the confidential treatment
request.

(b) Financial Statement Schedules.

The following financial statement schedule is filed herewith:

Schedule II--Valuation and Qualifying Accounts

Schedules not listed above have been omitted because the information required
to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.

II-11
<PAGE>

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby further undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-12
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY HAS
DULY CAUSED THIS AMENDMENT NO. 3 TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF WEST
POINT, GEORGIA, ON THIS 22ND DAY OF OCTOBER, 1997.

ITC/\DELTACOM, INC.

By: /s/ Andrew M. Walker
----------------------------------

ANDREW M. WALKER, CHIEF EXECUTIVE
OFFICER

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 3 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS,
IN THE CAPACITIES INDICATED BELOW, ON THIS 22ND DAY OF OCTOBER, 1997.

SIGNATURE TITLE
--------- -----
<S> <C>
* Chairman, Director
- -------------------------------------
CAMPBELL B. LANIER, III

/s/ Andrew M. Walker Chief Executive Officer and Director
- ------------------------------------- (Principal executive officer)
ANDREW M. WALKER

/s/ Douglas A. Shumate Senior Vice President and Chief
- ------------------------------------- Financial Officer (Principal
DOUGLAS A. SHUMATE financial officer and principal
accounting officer)

* Director
- -------------------------------------
DONALD W. BURTON

Director
- -------------------------------------
MALCOLM C. DAVENPORT

* Director
- -------------------------------------
ROBERT A. DOLSON

</TABLE>

II-13
<PAGE>

SIGNATURE TITLE

* Director
- -------------------------------------
O. GENE GABBARD

* Director
- -------------------------------------
WILLIAM T. PARR

* Director
- -------------------------------------
WILLIAM H. SCOTT, III

* Director
- -------------------------------------
WILLIAM B. TIMMERMAN

*By:
/s/ Andrew M. Walker
---------------------------------

ANDREW M. WALKER ATTORNEY-IN-FACT

II-14
<PAGE>

INDEX TO THE FINANCIAL STATEMENT SCHEDULE

INTERSTATE FIBERNET, INC. (FORMERLY ITC TRANSMISSION SYSTEMS, INC.)
ITC TRANSMISSION SYSTEMS II, INC.
GULF STATES TRANSMISSION SYSTEMS, INC.
EASTERN TELECOM, INC., d.b.a. INTERQUEST
DELTACOM, INC. (REORGANIZED AS ITC/\DELTACOM, INC.)

Report of Independent Public Accountants
Schedule II--Valuation and Qualifying Accounts

S-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
AS TO SCHEDULE

To Interstate FiberNet, Inc. (formerly ITC Transmission Systems, Inc.),
ITC Transmission Systems II, Inc.,
Gulf States Transmission Systems, Inc.,
Eastern Telecom, Inc. d.b.a. InterQuest, and
DeltaCom, Inc.

We have audited in accordance with generally accepted auditing standards,
the combined financial statements of Interstate FiberNet, Inc. (formerly ITC
Transmission Systems, Inc.), ITC Transmission Systems II, Inc., Gulf States
Transmission Systems, Inc., Eastern Telecom, Inc., d.b.a. InterQuest, and
DeltaCom, Inc. included in this Registration Statement, and have issued our
report thereon dated March 27, 1997 (except with respect to the Credit
Facility and Debt Offering discussions in Note 16, as to which the date is
October 20, 1997). Our audits were made for the purpose of forming an opinion
on those statements taken as a whole. The Schedule listed in the accompanying
index is the responsibility of the Companies' management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and
is not part of the basic combined financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
combined financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic combined financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Atlanta, Georgia

March 27, 1997

S-2
<PAGE>

INTERSTATE FIBERNET, INC. (FORMERLY ITC TRANSMISSION SYSTEMS, INC.),
ITC TRANSMISSION SYSTEMS II, INC.,
GULF STATES TRANSMISSION SYSTEMS, INC.,
EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND
DELTACOM, INC.
(REORGANIZED AS ITC/\DELTACOM, INC.)

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996

ADDITIONS
BALANCE AT ------------------------- BALANCE AT
BEGINNING CHARGED TO CHARGED TO END OF
DESCRIPTION OF PERIOD INCOME OTHER ACCOUNTS DEDUCTIONS PERIOD
- ----------- ---------- ---------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Provision for uncollect-
ible accounts
1994.................. $ 8,423 $412,030 $ 0 $339,042(2) $ 81,411
1995.................. 81,411 377,116 0 422,740(2) 35,787
1996.................. 35,787 458,210 1,209,329(1) 846,468(2) 856,858
</TABLE>
- --------
Notes:
(1) Represents a purchased reserve related to the acquisition of DeltaCom, Inc.
(2) Represents write-off of accounts considered to be uncollectible, less
recoveries of amounts previously written off.

S-3
<PAGE>

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
*1.1 Form of Underwriting Agreement among ITC/\DeltaCom, Inc. and the
Underwriters.
**3.1 Certificate of Incorporation of ITC/\DeltaCom, Inc.
**3.2 Amended and Restated Bylaws of ITC/\DeltaCom, Inc.
**4.1 Form of Common Stock Certificate of ITC/\DeltaCom, Inc.
**5.1 Opinion of Hogan & Hartson L.L.P.
10.1 Capacity Agreement dated as of February 1, 1997 between Interstate
FiberNet and Entergy Technology Company (filed as Exhibit 10.1 to
Registration Statement on Form S-4, as amended,
File No. 333-31361 ("Form S-4"), and incorporated herein by
reference).
10.2 License Agreement dated February 1, 1997 between Interstate FiberNet
and Metropolitan Atlanta Rapid Transit Authority (filed as Exhibit
10.2 to Form S-4 and incorporated herein by reference).
10.3 Supply Agreement for Transmission Equipment dated March 26, 1993
between Interstate FiberNet and Northern Telecom, Inc. (filed as
Exhibit 10.3 to Form S-4 and incorporated herein by reference).
10.4 First Amendment to Supply Agreement for Transmission Equipment dated
as of September 9, 1993 between Interstate FiberNet and Northern
Telecom, Inc. (filed as Exhibit 10.4 to Form S-4 and incorporated
herein by reference).
10.5 Second Amendment to Supply Agreement for Transmission Equipment dated
as of January 19, 1994 between Interstate FiberNet and Northern
Telecom, Inc. (filed as Exhibit 10.5 to Form S-4 and incorporated
herein by reference).
10.6 Sixth Amendment to Supply Agreement for Transmission Equipment dated
as of November 21, 1996 between Interstate FiberNet and Northern
Telecom, Inc. (which supercedes the Third and the Fourth Amendment to
this Agreement) (filed as Exhibit 10.6 to Form S-4 and incorporated
herein by reference).
10.7 Seventh Amendment to Supply Agreement for Transmission Equipment dated
as of April 15, 1997 between Interstate FiberNet and Northern Telecom,
Inc. (which supersedes the Fifth Amendment to this Agreement) (filed
as Exhibit 10.7 to Form S-4 and incorporated herein by reference).
10.8 Master Capacity Lease dated July 22, 1996 between Interstate FiberNet
and Intercel PCS Services, Inc. (filed as Exhibit 10.8 to Form S-4 and
incorporated herein by reference).
10.9 First Amendment to Master Capacity Lease dated as of August 22, 1996
between Interstate FiberNet and InterCel PCS Services, Inc. (filed as
Exhibit 10.9 to Form S-4 and incorporated herein by reference).
10.10 Amended and Restated Loan Agreement dated as of March 27, 1997 by and
among Gulf States Transmission Systems, Inc., the Lenders parties
thereto and NationsBank, N.A. (filed as Exhibit 10.10 to Form S-4 and
incorporated herein by reference).
10.11 Promissory Note dated March 27, 1997 between Gulf States Transmission
Systems, Inc. and NationsBank, N.A. (filed as Exhibit 10.11 to Form S-
4 and incorporated herein by reference).
10.12 Amended and Restated Security Agreement dated as of March 27, 1997
between Gulf States FiberNet and Gulf States Transmission Systems,
Inc. and NationsBank, N.A. (filed as Exhibit 10.12 to Form S-4 and
incorporated herein by reference).
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
10.13 Assignment and Assumption Agreement dated as of March 27, 1997
between Gulf States FiberNet and Gulf States Transmission Systems,
Inc. (filed as Exhibit 10.13 to Form S-4 and incorporated herein by
reference).
10.14 Term Agreement dated as of August 11, 1994 between Gulf States
FiberNet and Illinois Central Railroad Company (filed as Exhibit
10.14 to Form S-4 and incorporated herein by reference).
10.15 Revised and Restated Fiber Optic Facilities and Services Agreement
dated as of June 9, 1995 among Southern Development and Investment
Group, Inc., on behalf of itself and as agent for Alabama Power
Company, Georgia Power Company, Gulf Power Company, Mississippi
Power Company, Savannah Electric and Power Company, Southern
Electric Generating Company and Southern Company Services, Inc. and
MPX Systems, Inc., which was assigned in part by MPX Systems, Inc.
to Gulf States FiberNet pursuant to an Assignment dated as of July
25, 1995 (filed as Exhibit 10.15 to Form S-4 and incorporated herein
by reference).
10.16 First Amendment to Revised and Restated Fiber Optic Facilities and
Services Agreement dated as of July 24, 1995 between Southern
Development and Investment Group, Inc. on behalf of itself and as
agent for others and MPX Systems, Inc. (filed as Exhibit 10.16 to
Form S-4 and incorporated herein by reference).
10.17 Partial Assignment and Assumption of Revised and Restated Fiber
Optic Facilities and Services Agreement dated July 25, 1995 between
MPX Systems, Inc. and Gulf States FiberNet (filed as Exhibit 10.17
to Form S-4 and incorporated herein by reference).
+10.17.1 Amendment to Revised and Restated Fiber Optic Facilities and
Services Agreement, dated July 15, 1997, by and among Southern
Development and Investment Group, Inc., on behalf of itself and its
agent for Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power
Company, Southern Electric Generating Company and Southern Company
Services, Inc. (collectively "SES"), ITC Transmission Systems, Inc.
(as managing partner of Interstate Fibernet) and Gulf States
Transmission Systems, Inc. (filed as Exhibit 10.17.1 to Form S-4 and
incorporated herein by reference).
10.18 Consent for Assignment of Interest dated February 20, 1997 among
SCANA Communications, Inc., Gulf States FiberNet, Gulf States
Transmission Systems, Inc. and Southern Development and Investment
Groups, Inc. (filed as Exhibit 10.18 to Form S-4 and incorporated
herein by reference).
10.19 Second Partial Assignment and Assumption of Revised and Restated
Fiber Optic Facilities and Services Agreement dated March 27, 1997
between SCANA Communications, Inc. and ITC Holding Company, Inc.
(filed as Exhibit 10.19 to Form S-4 and incorporated herein by
reference).
10.20 Fiber System Lease Agreement dated January 30, 1996 between CSW
Communications, Inc. and Gulf States FiberNet (filed as Exhibit
10.20 to Form S-4 and incorporated herein by reference).
10.21 Consent for Acquisition and Assignment dated January 13, 1997
between CSW Communications, Inc. and Gulf States FiberNet (filed as
Exhibit 10.21 to Form S-4 and incorporated herein by reference).
10.22 Agreement for the Provision of Fiber Optic Services and Facilities
dated April 21, 1986 between SouthernNet, Inc. and MPX Systems, Inc.
(filed as Exhibit 10.22 to Form S-4 and incorporated herein by
reference).
10.23 First Amendment to Agreement for the Provision of Fiber Optic
Services and Facilities dated May 8, 1992 between MPX Systems, Inc.
and MCI Telecommunications Corporation (filed as Exhibit 10.23 to
Form S-4 and incorporated herein by reference).
</TABLE>

2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
10.24 Second Amendment to Agreement for the Provision of Fiber Optic
Services and Facilities dated January 30, 1996 between MPX Systems,
Inc. and MCI Telecommunications Corporation (filed as Exhibit 10.24
to Form S-4 and incorporated herein by reference).
10.25 Network Operating Agreement dated March 25, 1996 among Gulf States
FiberNet, TriNet, Inc., Hart Communications, Inc. and SCANA
Communications, Inc. (f/k/a MPX Systems, Inc.) (filed as Exhibit
10.25 to Form S-4 and incorporated herein by reference).
10.26 Agreement for the Provision of Fiber Optic Facilities and Services
dated March 29, 1990 between Alabama Power Company and Southern
Interexchange Facilities, Inc. (filed as Exhibit 10.26 to Form S-4
and incorporated herein by reference).
10.27 Amendment to the Agreement for Provision of Fiber Optic Facilities
and Services dated March 29, 1990 between Alabama Power Company and
Southern Interexchange Facilities, Inc. (filed as Exhibit 10.27 to
Form S-4 and incorporated herein by reference).
10.28 First Amendment to the Agreement for the Provision of Fiber Optic
Facilities and Services dated March 22, 1991 between Alabama Power
Company and Southern Interexchange Facilities, Inc. (filed as
Exhibit 10.28 to Form S-4 and incorporated herein by reference).
10.29 Second Amendment to the Agreement for the Provision of Fiber Optic
Facilities and Services dated December 1, 1991 between Alabama Power
Company and Southern Interexchange Facilities, Inc. (filed as
Exhibit 10.29 to Form S-4 and incorporated herein by reference).
10.30 Third Amendment to the Agreement for the Provision of Fiber Optic
Facilities and Services dated September 23, 1992 between Alabama
Power Company and Southern Interexchange Facilities, Inc. (filed as
Exhibit 10.30 to Form S-4 and incorporated herein by reference).
10.31 Fourth Amendment to the Agreement for the Provision of Fiber Optic
Facilities and Services dated January 1, 1994 between Alabama Power
Company and Southern Interexchange Facilities, Inc. (filed as
Exhibit 10.31 to Form S-4 and incorporated herein by reference).
10.32 Agreement dated March 6, 1990 between Tennessee Valley Authority and
Consolidated Communications Corporation (predecessor to DeltaCom,
Inc.) (filed as Exhibit 10.32 to Form S-4 and incorporated herein by
reference).
10.33 Interconnection Agreement signed March 12, 1997 between DeltaCom,
Inc. and BellSouth Telecommunications, Inc. (filed as Exhibit 10.33
to Form S-4 and incorporated herein by reference).
10.34 Amendment to Interconnection Agreement relating to BellSouth loops
dated March 12, 1997 between DeltaCom, Inc. and BellSouth
Telecommunications, Inc. (filed as Exhibit 10.34 to Form S-4 and
incorporated herein by reference).
10.35 Amendment to Interconnection Agreement relating to resale of
BellSouth services dated March 12, 1997 between DeltaCom, Inc. and
BellSouth Telecommunications, Inc. (filed as Exhibit 10.35 to Form
S-4 and incorporated herein by reference).
10.35.1 Third Amendment to Interconnection Agreement, dated March 12, 1997,
by and between DeltaCom, Inc. and BellSouth Telecommunications, Inc.
(filed as Exhibit 10.35.1 to Form S-4 and incorporated herein by
reference).
10.35.2 Fourth Amendment to Interconnection Agreement, dated August 22,
1997, by and between DeltaCom, Inc. and BellSouth
Telecommunications, Inc. (filed as Exhibit 10.35.2 to Form S-4 and
incorporated herein by reference).
**10.35.3 Amendment to Interconnection Agreement, dated October 3, 1997, by
and between DeltaCom, Inc. and BellSouth Telecommunications, Inc.
10.36 Master Equipment Lease Agreement dated October 30, 1995 between AT&T
Systems Leasing Co. and DeltaCom, Inc. (filed as Exhibit 10.36 to
Form S-4 and incorporated herein by reference).
</TABLE>

3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
10.37 Network Products Purchase Agreement dated January 24, 1996, as
amended through March 4, 1997, between DeltaCom, Inc. and Northern
Telecom, Inc. (filed as Exhibit 10.37 to Form S-4 and incorporated
herein by reference).
10.38 First Amendment to Product Attachment Carrier Network Products, dated
May 20, 1997 (filed as Exhibit 10.38 to Form S-4 and incorporated
herein by reference).
10.39 Agreement for Use of Optical Fiber System, Microwave Radio Tower Site
and Associated Facilities dated January 2, 1996 between DeltaCom,
Inc. and SCI Systems, Inc. (filed as Exhibit 10.39 to Form S-4 and
incorporated herein by reference).
10.40 Collocate Agreement dated January 7, 1991 between Williams
Telecommunications Services, Inc., and Southern Interexchange
Facilities, Inc. (including consent for change of control) (filed as
Exhibit 10.40 to Form S-4 and incorporated herein by reference).
10.41 Agreement dated January 14, 1997 between DeltaCom, Inc. and SCANA
Communications, Inc., for switch location in Columbia, South Carolina
(filed as Exhibit 10.41 to Form S-4 and incorporated herein by
reference).
10.42 Lease Agreement dated January 1, 1996 between Brindlee Mountain
Telephone Company and DeltaCom, Inc. for, among other purposes,
switch location in Arab, Alabama (filed as Exhibit 10.42 to Form S-4
and incorporated herein by reference).
10.43 Promissory Note dated March 27, 1997 between ITC Holding Company,
Inc. and SCANA Communications, Inc. (filed as Exhibit 10.43 to Form
S-4 and incorporated herein by reference).
+10.44 Agreement for the Provision of Telecommunications Services and
Facilities, dated January 27, 1996, by and between Interstate
FiberNet and Carolinas FiberNet, LLC. (filed as Exhibit 10.44 to Form
S-4 and incorporated herein by reference).
+10.45 Fiber Optic Facilities Agreement, dated November 15, 1996, by and
between Interstate FiberNet and Florida Power Corporation (filed as
Exhibit 10.45 to Form S-4 and incorporated herein by reference).
+10.46 Fiber Optic Capacity Marketing and Operating Agreement, dated March
21, 1996, by and between Interstate FiberNet and Florida Power &
Light Company (filed as Exhibit 10.46 to Form S-4 and incorporated
herein by reference).
+10.47 Addendum to Fiber Optic Capacity Marketing and Operating Agreement,
dated July 10, 1997, by and between Interstate FiberNet and Florida
Power & Light Company (filed as Exhibit 10.47 to Form S-4 and
incorporated herein by reference).
+10.48 Master Service Agreement, dated May 6, 1996, by and between
Interstate FiberNet and MCI Telecommunications Corporation (filed as
Exhibit 10.48 to Form S-4 and incorporated herein by reference).
+10.49 Telecommunications System Maintenance Agreement, dated as of January
26, 1995, by and between Interstate FiberNet and Sprint
Communications Company L.P. (filed as Exhibit 10.49 to Form S-4 and
incorporated herein by reference).
+10.50 Sprint Communications Company Facilities and Services Agreement,
dated January 26, 1995, by and between Interstate FiberNet and Sprint
Communications Company L.P. (filed as Exhibit 10.50 to Form S-4 and
incorporated herein by reference).
+10.51 Fiber Optic Facility Lease Agreement, dated as of January 31, 1997,
by and between Interstate FiberNet and Southern Telecom 1, Inc.
(filed as Exhibit 10.51 to Form S-4 and incorporated herein by
reference).
</TABLE>

4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
10.52 First Assignment and Assumption of Fiber Optic Facility Lease
Agreement, dated February 1, 1997, by and between Interstate FiberNet
and Gulf States FiberNet (filed as Exhibit 10.52 to Form S-4 and
incorporated herein by reference).
+10.53 Telecommunications System Agreement, dated January 26, 1995, by and
between Interstate FiberNet and Sprint Communications Company L.P.
(filed as Exhibit 10.53 to Form S-4 and incorporated herein by
reference).
10.54 Amendment to Telecommunications System Agreement, dated July 25,
1995, by and between Gulf States FiberNet and Sprint Communications
Company L.P. (filed as Exhibit 10.54 to Form S-4 and incorporated
herein by reference).
+10.55 Amendment No. 2 to Telecommunications System Agreement, dated August
8, 1996, by and between Gulf States FiberNet and Sprint
Communications Company L.P. (filed as Exhibit 10.55 to Form S-4 and
incorporated herein by reference).
+10.56 Assignment of the Telecommunications System Agreement, dated July 25,
1995, between Interstate FiberNet, Gulf States FiberNet and Sprint
Communications Company L.P. (filed as Exhibit 10.56 to Form S-4 and
incorporated herein by reference).
+10.57 Assignment of the Telecommunications System Agreement, dated February
27, 1997, between Sprint Communications Company L.P., Gulf States
FiberNet and Gulf States Transmission Systems, Inc. (filed as Exhibit
10.57 to Form S-4 and incorporated herein by reference).
10.58 Fixed Fee Agreement for Exchange of Use and Maintenance of Six (6)
Fiber Optic Fibers with an Option of Two (2) Additional Fiber Optic
Fibers, dated July 25, 1997, by and between Interstate FiberNet, Gulf
States Transmission Systems, Inc. and ALLTEL Telephone Services
Corporation (filed as Exhibit 10.58 to Form S-4 and incorporated
herein by reference).
+10.59 MCI Carrier Agreement, effective August 1, 1995, by and between MCI
Telecommunications Corporation and Associated Communications
Companies of America (ACCA) (filed as Exhibit 10.59 to Form S-4 and
incorporated herein by reference).
+10.60 First Amendment to MCI Carrier Agreement, dated as of March 20, 1996,
by and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA) (filed as Exhibit 10.60 to
Form S-4 and incorporated herein by reference).
+10.61 Third Amendment to MCI Carrier Agreement, dated as of August 1, 1996,
by and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA) (filed as Exhibit 10.61 to
Form S-4 and incorporated herein by reference).
10.62 Fourth Amendment to MCI Carrier Agreement dated as of May 1, 1996, by
and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA) (filed as Exhibit 10.62 to
Form S-4 and incorporated herein by reference).
+10.63 Fifth Amendment to MCI Carrier Agreement, dated as of April 10, 1996,
by and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA) (filed as Exhibit 10.63 to
Form S-4 and incorporated herein by reference).
+10.64 Sixth Amendment to MCI Carrier Agreement, dated as of September 11,
1996, by and between MCI Telecommunications Corporation and
Associated Communications Companies of America (ACCA) (filed as
Exhibit 10.64 to Form S-4 and incorporated herein by reference).
+10.65 Seventh Amendment to MCI Carrier Agreement, dated as of August 1,
1996, by and between MCI Telecommunications Corporation and
Associated Communications Companies of America (ACCA) (filed as
Exhibit 10.65 to Form S-4 and incorporated herein by reference).
</TABLE>

5
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
+10.66 Eighth Amendment to MCI Carrier Agreement, effective March 1, 1997,
by and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA) (filed as Exhibit 10.66
to Form S-4 and incorporated herein by reference).
+10.67 Ninth Amendment to MCI Carrier Agreement, dated as of May 15, 1997,
by and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA) (filed as Exhibit 10.67
to Form S-4 and incorporated herein by reference).
10.68 Tenth Amendment to MCI Carrier Agreement, dated July 11, 1997, by
and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA) (filed as Exhibit 10.68
to Form S-4 and incorporated herein by reference).
+10.69 Switched Reseller Services Agreement, dated January 25, 1994, by and
between DeltaCom, Inc.
and Allnet Communication Services, Inc. (filed as Exhibit 10.69 to
Form S-4 and incorporated
herein by reference).
+10.70 WilTel, Inc. Carrier Digital Services Agreement, dated September 1,
1995, by and between WorldCom Network Services, Inc. d/b/a WilTel,
Associated Communications Companies of America (ACCA) and the
individual members of ACCA referenced therein (filed as Exhibit
10.70 to Form S-4 and incorporated herein by reference).
+10.71 Amendment to WilTel, Inc. Carrier Digital Services Agreement, dated
April 1, 1996, by and between WorldCom Network Services, Inc. d/b/a/
WilTel, Associated Communications Companies of America (ACCA) and
the individual members of ACCA referenced therein (filed as Exhibit
10.71 to Form S-4 and incorporated herein by reference).
+10.72 Amendment No. 2 to WilTel, Inc. Carrier Digital Services Agreement,
dated June 1, 1996, by and between WorldCom Network Services, Inc.
d/b/a/ WilTel, Associated Communications Companies of America (ACCA)
and the individual members of ACCA referenced therein (filed as
Exhibit 10.72 to Form S-4 and incorporated herein by reference).
+10.73 Amendment No. 3 to WilTel, Inc. Carrier Digital Services Agreement,
dated May 1, 1997, by and between WorldCom Network Services, Inc.
d/b/a/ WilTel, Associated Communications Companies of America (ACCA)
and the individual members of ACCA referenced therein (filed as
Exhibit 10.73 to Form S-4 and incorporated herein by reference).
+10.74 Marketing and Operating Agreement, dated as of October 6, 1994, by
and between Interstate FiberNet and DukeNet Communications, Inc.
(filed as Exhibit 10.74 to Form S-4 and incorporated herein by
reference).
+10.75 Reseller Agreement, dated June 25, 1997, by and between DeltaCom,
Inc. and Total Network Services, a division of Cable & Wireless,
Inc. (filed as Exhibit 10.75 to Form S-4 and incorporated herein by
reference).
10.76 Sublease Agreement, dated as of January 1, 1995, by and between ITC
Holding Company, Inc. and ITC Transmission Systems, Inc. (filed as
Exhibit 10.76 to Form S-4 and incorporated herein by reference).
10.77.1 $100,000,000 Credit Agreement, dated as of September 17, 1997, among
Interstate FiberNet, Inc., NationsBank of Texas, N.A. as
Administrative Lender, and certain other Lenders identified therein
(the "IFN Credit Agreement") (filed as Exhibit 10.77 to Form S-4 and
incorporated herein by reference).
**10.77.2 First Amendment to Credit Agreement, dated as of October 20, 1997,
among Interstate FiberNet, Inc., NationsBank of Texas, N.A. as
Administrative Lender, and certain other Lenders identified therein.
10.78.1 $8,750,000 Revolving Promissory Note, dated as of September 17,
1997, made by Interstate FiberNet, Inc. payable to the order of
NationsBank of Texas, N.A. (filed as Exhibit 10.78.1 to Form S-4 and
incorporated herein by reference).
</TABLE>

6
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
10.78.2 $3,750,000 Revolving Promissory Note, dated as of September 17, 1997,
made by Interstate FiberNet, Inc. payable to the order of Amsouth
Bank (filed as Exhibit 10.78.2 to Form S-4 and incorporated herein by
reference).
10.78.3 $5,000,000 Revolving Promissory Note, dated as of September 17, 1997,
made by Interstate FiberNet, Inc. payable to the order of
Creditanstalt-Bankverein (filed as Exhibit 10.78.3 to Form S-4 and
incorporated herein by reference).
10.78.4 $5,000,000 Revolving Promissory Note, dated as of September 17, 1997,
made by Interstate FiberNet, Inc. payable to the order of Meespierson
Capital Corp. (filed as Exhibit 10.78.4 to Form S-4 and incorporated
herein by reference).
10.78.5 $5,000,000 Revolving Promissory Note, dated as of September 17, 1997,
made by Interstate FiberNet, Inc. payable to the order of State
Street Bank and Trust Company (filed as Exhibit 10.78.5 to Form S-4
and incorporated herein by reference).
10.78.6 $7,500,000 Revolving Promissory Note, dated as of September 17, 1997,
made by Interstate FiberNet, Inc. payable to the order of Corestates
Bank, N.A. (filed as Exhibit 10.78.6 to Form S-4 and incorporated
herein by reference).
10.78.7 $2,500,000 Revolving Promissory Note, dated as of September 17, 1997,
made by Interstate FiberNet, Inc. payable to the order of First Union
National Bank (filed as Exhibit 10.78.7 to Form S-4 and incorporated
herein by reference).
10.78.8 $5,000,000 Revolving Promissory Note, dated as of September 17, 1997,
made by Interstate FiberNet, Inc. payable to the order of Regions
Bank (filed as Exhibit 10.78.8 to Form S-4 and incorporated herein by
reference).
10.78.9 $7,500,000 Revolving Promissory Note, dated as of September 17, 1997,
made by Interstate FiberNet, Inc. payable to the order of Toronto
Dominion (Texas), Inc. (filed as Exhibit 10.78.9 to Form S-4 and
incorporated herein by reference).
10.79.1 $8,750,000 Term Promissory Note, dated as of September 17, 1997, made
by Interstate FiberNet, Inc. payable to the order of NationsBank of
Texas, N.A. (filed as Exhibit 10.79.1 to Form S-4 and incorporated
herein by reference).
10.79.2 $5,000,000 Term Promissory Note, dated as of September 17, 1997, made
by Interstate FiberNet, Inc. payable to the order of Creditanstalt-
Bankverein (filed as Exhibit 10.79.2 to Form S-4 and incorporated
herein by reference).
10.79.3 $5,000,000 Term Promissory Note, dated as of September 17, 1997, made
by Interstate FiberNet, Inc. payable to the order of Meespierson
Capital Corp. (filed as Exhibit 10.79.3 to Form S-4 and incorporated
herein by reference).
10.79.4 $5,000,000 Term Promissory Note, dated as of September 17, 1997, made
by Interstate FiberNet, Inc. payable to the order of State Street
Bank and Trust Company (filed as Exhibit 10.79.4 to Form S-4 and
incorporated herein by reference).
10.79.5 $7,500,000 Term Promissory Note, dated as of September 17, 1997, made
by Interstate FiberNet, Inc. payable to the order of Corestates Bank,
N.A. (filed as Exhibit 10.79.5 to Form S-4 and incorporated herein by
reference).
10.79.6 $2,500,000 Term Promissory Note, dated as of September 17, 1997, made
by Interstate FiberNet, Inc. payable to the order of First Union
National Bank (filed as Exhibit 10.79.6 to Form S-4 and incorporated
herein by reference).
</TABLE>

7
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
10.79.7 $5,000,000 Term Promissory Note, dated as of September 17, 1997,
made by Interstate FiberNet, Inc. payable to the order of Regions
Bank (filed as Exhibit 10.79.7 to Form S-4 and incorporated herein
by reference).
10.79.8 $7,500,000 Term Promissory Note, dated as of September 17, 1997,
made by Interstate FiberNet, Inc. payable to the order of Toronto
Dominion (Texas), Inc. (filed as Exhibit 10.79.8 to Form S-4 and
incorporated herein by reference).
10.79.9 $3,750,000 Term Promissory Note, dated as of September 17, 1997,
made by Interstate FiberNet, Inc. payable to the order of Amsouth
Bank (filed as Exhibit 10.79.9 to Form S-4 and incorporated herein
by reference).
10.80.1 Security Agreement, dated as of September 17, 1997, made by
Interstate FiberNet, Inc. in favor of NationsBank of Texas, N.A., as
Administrative Lender, and each other lender party to the IFN Credit
Agreement (filed as Exhibit 10.80.1 to Form S-4 and incorporated
herein by reference).
10.80.2 Security Agreement, dated as of September 17, 1997, made by
DeltaCom, Inc. in favor of NationsBank of Texas, N.A., as
Administrative Lender, and each other lender party to the IFN Credit
Agreement (filed as Exhibit 10.80.2 to Form S-4 and incorporated
herein by reference).
10.80.3 Security Agreement, dated as of September 17, 1997, made by Gulf
States Transmission Systems, Inc. in favor of NationsBank of Texas,
N.A., as Administrative Lender, and each other lender party to the
IFN Credit Agreement (filed as Exhibit 10.80.3 to Form S-4 and
incorporated herein by reference).
10.81 Placement Agreement, dated as of May 29, 1997, among ITC/\DeltaCom,
Inc. and Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, First Union Capital Markets Corp. and
NationsBanc Capital Markets, Inc. (filed as Exhibit 1.1 to Form S-4
and incorporated herein by reference).
10.82.1 Indenture, dated as of June 3, 1997, between ITC/\DeltaCom, Inc. and
United States Trust Company of New York, as Trustee, relating to the
11% Senior Notes due 2007 of ITC/\DeltaCom, Inc. (filed as Exhibit
4.1 to Form S-4 and incorporated herein by reference).
**10.82.2 Supplemental Indenture, dated as of October 17, 1997, between
ITC/\DeltaCom, Inc. and United States Trust Company of New York, as
Trustee.
10.83 Registration Rights Agreement, dated June 3, 1997, among
ITC/\DeltaCom, Inc. and Morgan Stanley & Co. Incorporated, Merrill
Lynch & Co., First Union Capital Markets Corp. and NationsBanc
Capital Markets, Inc. (filed as Exhibit 4.2 to Form S-4 and
incorporated herein by reference).
10.84 Pledge and Security Agreement dated as of June 3, 1997 from
ITC/\DeltaCom, Inc. as Pledgor to United States Trust Company of New
York as Trustee (filed as Exhibit 4.3 to Form S-4 and incorporated
herein by reference).
10.85 Form of Exchange Note (contained in Indenture filed as Exhibit
10.82).
10.86 Assignment and Assumption Agreement Pursuant to Pledge and Security
Agreement dated as of July 25, 1997, by and among ITC/\DeltaCom,
Inc., Interstate FiberNet, Inc. and United States Trust Company of
New York, as Trustee (filed as Exhibit 4.5 to Form S-4 and
incorporated herein by reference).
*+10.87 MCI Carrier Agreement, effective September 1, 1997, by and between
MCI Telecommunications Corporation and Associated Communications
Companies of America (ACCA).
**10.88 ITC/\DeltaCom, Inc. 1997 Stock Option Plan.
**10.89 ITC/\DeltaCom, Inc. 1997 Director Stock Option Plan.
</TABLE>

8
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
**10.90 ITC Holding Company, Inc. Amended and Restated Stock Option Plan.
**10.91 ITC Holding Company, Inc. Nonemployee Director Stock Option Plan.
**10.92 Description of ITC/\DeltaCom, Inc. Bonus Plan.
**10.93 Form of Indemnity Agreement between ITC/\DeltaCom, Inc. and its Directors and Certain Officers.
**10.94 Sale and Purchase Agreement, dated as of March 11, 1997, by and
between SCANA Corporation and ITC Holding Company, Inc.
**10.95 First Amendment to Sale and Purchase Agreement. Among SCANA
Corporation, SCANA Communications, Inc., and ITC Holding Company,
Inc., dated as of October 16, 1997, among SCANA Corporation, SCANA
Communications, Inc., ITC Holding Company, Inc. and ITC/\DeltaCom,
Inc.
**11.1 Statement regarding Computation of Per Share Earnings.
21.1 Subsidiaries of ITC/\DeltaCom, Inc. (filed as Exhibit 21.1 to Form S-4
and incorporated herein by reference).
**23.1 Consents of Arthur Andersen LLP.
**23.2 Consent of Martin Stuedeman & Associates P.C.
**23.3 Consent of Deloitte & Touch LLP.
**23.4 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1).
24.1 Power of attorney (included on signature page).
27.1 Financial Data Schedule for the year ended December 31, 1996 (filed as
Exhibit 27.1 to Form S-4 and incorporated herein by reference).
27.2 Financial Data Schedule for the six-month period ended June 30, 1997
(filed as Exhibit 27.2 to Form S-4 and incorporated herein by
reference).
</TABLE>
- --------

* Previously filed.

** Filed herewith.

+ Confidential treatment has been granted for this exhibit. The copy filed as
an exhibit omits the information subject to the confidential treatment
request.

<PAGE>

Exhibit 3.1

CERTIFICATE OF OWNERSHIP AND MERGER OF

ITC HOLDING COMPANY, INC., A DELAWARE CORPORATION,

WITH AND INTO

ITC/\DELTACOM, INC., A DELAWARE CORPORATION

Pursuant to Section 253 of the General Corporation Law of the State of
Delaware, as amended (the "DGCL"), ITC HOLDING COMPANY, INC. ("ITC HOLDING")
hereby certifies that:

1. ITC Holding was incorporated in the State of Delaware on August 25, 1994.

2. ITC Holding is the sole owner of 100% of the outstanding shares of capital
stock of ITC/\DeltaCom, Inc. ("ITC/\DELTACOM"), consisting of 15 million
shares of Class B Common Stock, par value $.01 per share.

3. ITC/\DeltaCom was incorporated in the State of Delaware on March 24, 1997.

4. At a meeting duly held on October 14, 1997, the Board of Directors of ITC
Holding duly adopted the resolutions attached as Appendix A hereto,
----------
incorporated by reference herein and made an integral part hereof (the
"MERGER RESOLUTIONS"), authorizing the merger of ITC Holding with and into
ITC/\DeltaCom (the "MERGER") pursuant to Section 253 of the DGCL, such
Merger to be effective at such time and on such date as provided in the
Merger Resolutions and in this Certificate of Ownership and Merger (the
"EFFECTIVE TIME"), subject to the further terms and conditions specified
in the Merger Resolutions.

5. The Merger, on the terms and conditions set forth herein, has been
approved by holders of a majority of the outstanding shares of common
stock of ITC Holding entitled to vote thereon, and by the sole stockholder
of the outstanding shares of preferred stock of ITC Holding, in each case
by written consent without a meeting in accordance Section 228 of the
DGCL.

6. The name of the surviving corporation shall be "ITC/\DeltaCom, Inc." and
the Certificate of Incorporation of ITC/\DeltaCom (including the
Certificate of Designations for the Series A Convertible Preferred Stock,
par value $.01 per share, of ITC/\DeltaCom set forth in Attachment 1
------------
thereto) shall be amended in the Merger to read in its entirety as set
forth in Exhibit A to the Merger Resolutions and, as so amended, shall be
---------
the certificate of incorporation of the surviving corporation.

7. The Effective Time shall be 11:00 p.m., Eastern Daylight Time, on October
20, 1997.
<PAGE>

IN WITNESS WHEREOF, ITC Holding Company, Inc. has caused this Certificate
of Ownership and Merger to be executed by William H. Scott, III, its President
and Dabsey M. Gray, its Vice President, Controller and Assistant Secretary, this
20th day of October, 1997.

ITC HOLDING COMPANY, INC.,
a Delaware corporation

BY: /s/ William H. Scott, III
-------------------------
NAME: William H. Scott, III
TITLE: President

ATTEST

By: /s/ Dabsey M. Gray
----------------------------
Name: Dabsey M. Gray
Title: Vice President, Controller and Assistant Secretary

2
<PAGE>

APPENDIX A
----------

MERGER RESOLUTIONS OF THE BOARD OF DIRECTORS OF ITC HOLDING COMPANY, INC.

[INCLUDING IN EXHIBIT A, THE CERTIFICATE OF INCORPORATION OF
---------
ITC/\DELTACOM, INC. (INCLUDING THE
SERIES A PREFERRED CERTIFICATE OF DESIGNATIONS)]
<PAGE>

Appendix A

ITC HOLDING COMPANY, INC., A DELAWARE CORPORATION

RESOLUTIONS OF THE BOARD OF DIRECTORS
ADOPTED AT A MEETING HELD
OCTOBER 14, 1997

MERGER OF THE CORPORATION INTO ITS SUBSIDIARY, ITC/\DELTACOM, INC.

WHEREAS, on September 30, 1997, the Corporation's subsidiary,
ITC/\DeltaCom, filed a registration statement with the Securities and Exchange
Commission with respect to a proposed underwritten initial public offering of
common stock (the "ITC/\DELTACOM PUBLIC EQUITY OFFERING"), which registration
statement has not yet become effective;

WHEREAS, in order to facilitate the ITC/\DeltaCom Public Equity Offering,
the Corporation is undertaking the Reorganization, including, among other
things, the Reorganization Transfer to ITC West Point;

WHEREAS, as part of the Reorganization, the Board of Directors believes
that it is advisable and in the best interests of the Corporation and its
stockholders that, subsequent to completion of the Reorganization Transfer, the
Corporation be merged with and into ITC/\DeltaCom (the "MERGER") pursuant to the
provisions of Section 253 of the Delaware General Corporation Law, substantially
on the terms and conditions set forth in these resolutions (the "MERGER
RESOLUTIONS");

WHEREAS, the Merger is intended to qualify for federal income tax purposes
as a "reorganization" under the provisions of Section 368(a) of the Internal
Revenue Code of 1986, as amended;

WHEREAS, as part of the Reorganization, the Board of Directors believes
that it is desirable and in the best interests of the Corporation to convert the
outstanding but unexercised options to purchase ITC Holding capital stock (the
"ITC HOLDING OPTIONS"), into separately exercisable options to acquire (i)
common stock of ITC/\DeltaCom (the "ITC/\DELTACOM OPTIONS") and (ii) common
stock of ITC West Point (the "ITC WEST POINT COMMON" and the "ITC WEST POINT
OPTIONS");

MERGER; EFFECTIVE TIME; PREPARATION, EXECUTION AND FILING OF
CERTIFICATE OF OWNERSHIP AND MERGER

NOW THEREFORE BE IT

RESOLVED FURTHER, that it is advisable and in the best interests of the
Corporation and its stockholders that the Corporation consummate the Merger;
<PAGE>

RESOLVED FURTHER, that the Corporation merge with and into ITC/\DeltaCom;

RESOLVED FURTHER, that the Merger shall be effective (the "EFFECTIVE TIME")
on the date and at the time specified in, and subject to the filing with the
Secretary of State of the State of Delaware of, an appropriate Certificate of
Ownership and Merger incorporating these Merger Resolutions, and further subject
to the approval of the Merger by holders of a majority of the outstanding shares
of the Corporation's common stock, par value $.01 per share ("ITC HOLDING
COMMON") and by the sole holder of the outstanding shares of the Corporation's
Series A Convertible Preferred Stock, par value $.01 per share ("ITC HOLDING
PREFERRED"), and to the further terms and conditions set forth in these Merger
Resolutions;

RESOLVED FURTHER, that each of the Chairman, President or any Senior Vice
President of this Corporation hereby is authorized to prepare or cause to be
prepared, and to execute, and each of the Secretary or any Assistant Secretary
hereby is authorized to attest, a Certificate of Ownership and Merger complying
with the requirements of Section 253 of the Delaware General Corporation Law,
setting forth a copy and the date of adoption of these Merger Resolution, and
specifying the Effective Time, and to cause such Certificate of Ownership and
Merger to be filed with the Secretary of State of the State of Delaware, and to
do all acts and things, whether within or without the State of Delaware, that,
in the determination of such officer, may be in any way necessary or appropriate
to effect the Merger (such determination to be conclusively, but not
exclusively, evidenced by the execution of such certificate or certificates by
any such officer);

RESOLVED FURTHER, that, at the Effective Time, the separate corporate
existence of ITC Holding shall cease and ITC/\DeltaCom shall assume all
obligations of the Corporation outstanding at such time that have not otherwise
been assigned to and assumed by another entity or person;

CERTIFICATE OF INCORPORATION, BYLAWS, OFFICERS AND DIRECTORS
OF SURVIVING CORPORATION

RESOLVED FURTHER, that at the Effective Time, the name of the surviving
corporation shall be "ITC/\DeltaCom, Inc." and, by virtue of the Merger, the
Certificate of Incorporation of ITC/\DeltaCom shall be amended in its entirety
to read in the form presented to the Board of Directors for this meeting and
attached to the minutes thereof as EXHIBIT 2 (including as an integral part
---------
thereof and incorporated by reference therein, the Certificate of Designations
for the Series A Convertible Preferred Stock, $.01 per share, of ITC/\DeltaCom
set forth in ATTACHMENT 1 to such Certificate of Incorporation (the "CERTIFICATE
------------
OF DESIGNATIONS")), and, as so amended, shall be, collectively, the certificate
of incorporation of the surviving corporation (the "ITC/\DELTACOM CHARTER");
<PAGE>

RESOLVED FURTHER, that the Bylaws of ITC/\DeltaCom as in effect immediately
prior to the Effective Time shall be the Bylaws of the surviving corporation as
of the Effective Time, without change or amendment until thereafter amended in
accordance with the provisions thereof and applicable law;

RESOLVED FURTHER, that the persons who are officers and directors of
ITC/\DeltaCom immediately prior to the Effective Time shall, after the Effective
Time, be the officers and directors of the surviving corporation, without change
until their successors have been duly elected and qualified;

EFFECT ON CAPITAL STOCK AND STOCK OPTIONS

EFFECT ON CAPITAL STOCK
RESOLVED FURTHER, that at the Effective Time:

(i) each outstanding share of ITC/\DeltaCom Class B Common Stock owned
of record by ITC Holding shall cease to be outstanding, without any payment
being made in respect thereof;

(ii) each share of ITC Holding Common shall be converted into 2.304012
(assuming that there are 24,075,000 shares of capital stock of ITC/\DeltaCom
outstanding immediately after such conversion) fully paid and nonassessable
shares of common stock, par value $.01 per share, of ITC/\DeltaCom, having such
rights, terms, and preferences as set forth in the ITC/\DeltaCom Charter (the
"ITC/\DELTACOM COMMON") (the "COMMON STOCK CONVERSION RATIO"); provided,
however, that no fractional shares of ITC/\DeltaCom Common shall be issued
pursuant to such conversion, and in lieu of fractional shares of ITC/\DeltaCom
Common resulting from such conversion, there shall be paid, upon surrender of
certificates formerly representing shares of ITC Holding Common, to each holder
of ITC Holding Common who otherwise would be entitled to receive a fractional
share of ITC/\DeltaCom Common an amount of cash (without interest) determined by
multiplying such fraction by the initial public offering price per share of
ITC/\DeltaCom's common stock;

(iii) each share of ITC Holding Preferred shall be converted into
2.304012 (assuming that there are 24,075,000 shares of capital stock of
ITC/\DeltaCom outstanding immediately after such conversion) fully paid and
nonassessable shares of Series A Convertible Preferred Stock, par value $.01 per
share, of ITC/\DeltaCom, having such rights, terms, and preferences, as are set
forth in the Certificate of Designations attached as Attachment 1 to the
------------
ITC/\DeltaCom Charter (the "ITC/\DELTACOM PREFERRED"); provided, however, that
no fractional shares of ITC/\DeltaCom Preferred shall be issued pursuant to such
conversion, and in lieu of fractional shares of ITC/\DeltaCom Preferred
resulting from such conversion, there shall be paid, upon surrender of
certificates formerly representing shares of ITC Holding Preferred, to each
holder of ITC Holding
<PAGE>

Preferred who otherwise would be entitled to receive a fractional share of
ITC/\DeltaCom Preferred an amount of cash (without interest) determined by
multiplying such fraction by the Initial Conversion Price for the ITC/\DeltaCom
Preferred (as such term is defined in the Certificate of Designations for the
ITC/\DeltaCom Preferred);

(iv) certificates for the ITC/\DeltaCom Common shall be issued (and
cash in lieu of fractional shares shall be paid) to each former holder of ITC
Holding Common upon surrender to ITC/\DeltaCom of such stockholder's
certificates representing its shares of ITC Holding Common outstanding
immediately prior to the Effective Time, and certificates for the ITC/\DeltaCom
Preferred shall be issued (and cash in lieu of fractional shares shall be paid)
to each holder of ITC Holding Preferred upon surrender to ITC/\DeltaCom of such
stockholder's certificates representing its shares of ITC Holding Preferred
outstanding immediately prior to the Effective Time;

RESOLVED FURTHER, that all certificates representing shares of
ITC/\DeltaCom stock distributed in connection with the Merger shall bear legends
restricting transfer as required under applicable corporate and securities laws;

EFFECT ON ITC HOLDING STOCK OPTIONS

RESOLVED FURTHER, that at the Effective Time, each outstanding ITC Holding
Option will convert into (i) ITC/\DeltaCom Options representing the option to
acquire the number of shares of ITC/\DeltaCom Common obtained by multiplying the
Common Stock Conversion Ratio by the number of shares of ITC Holding common that
were subject to the ITC Holding Option, minus any fractional shares and (ii) one
ITC West Point Option (such that, including any fractional shares, the number of
shares that may be obtained upon exercise equals the number of shares of
ITC/\DeltaCom Common or ITC West Point, as the case may be, that the option
holder would have received had he or she been the holder at the Effective Time
of the shares of ITC Holding Common that would have been received upon exercise
of the ITC Holding Option);

RESOLVED FURTHER, that, promptly after the initial public offering price
per share of the ITC/\DeltaCom Common is established (the "VALUATION TIME"), the
relative fair market values of ITC/\DeltaCom and ITC West Point will be
established for purposes of determining the option exercise price for the
replacement options. The fair market value of ITC/\DeltaCom will be a function
of the initial public offering price per share of ITC/\DeltaCom Common, and the
fair market value of ITC West Point will be established by the Board of
Directors of ITC West Point (or a committee thereof), using a methodology
consistent with past practices of the Corporation for determining fair market
values for purposes of granting incentive stock options of the Corporation;
<PAGE>

RESOLVED FURTHER, that the aggregate option exercise price payable by a
holder of ITC Holding Stock Options with respect to shares subject to
unexercised ITC Holding Stock Options shall be allocated between the
ITC/\DeltaCom Options and the ITC West Point Options based on the relative fair
market values of ITC/\DeltaCom and ITC West Point at the Valuation Time;

RESOLVED FURTHER, that each holder of ITC Holding Options shall be paid as
compensation a cash amount equal to the fair market value as of the Valuation
Time of any fractional share resulting from the conversion of the ITC Holding
Options into ITC/\DeltaCom Options in connection with the Merger;

EFFECT ON OUTSTANDING ITC/\DELTACOM OPTIONS

RESOLVED FURTHER, that each holder of options to purchase shares of
ITC/\DeltaCom Common under the ITC/\DeltaCom 1997 Stock Option Plan or the
ITC/\DeltaCom Director Stock Option Plan, shall be paid as compensation a cash
amount equal to the fair market value as of the Valuation Time of any fractional
share(s) resulting from adjustment of such stock options in connection with the
Merger.

RESOLVED FURTHER, that the ITC/\DeltaCom Options and the ITC West Point
Options will otherwise have substantially the same terms as the ITC Holding
Stock Options being converted with respect to vesting, methods of exercise,
forfeiture and effect of termination of employment (adjusted as required
(including, without limitation, adjustments to vesting, plan administration, and
incentive/non-incentive option status) to give effect to the post-Reorganization
structures of ITC/\DeltaCom and ITC West Point); and

CONDITIONS TO EFFECTIVENESS OF THE MERGER

RESOLVED FURTHER, that the following shall be conditions to the
effectiveness of the Merger and the transactions contemplated thereby:

(i) the Merger shall have been approved by holders of a majority of
the outstanding ITC Holding Common entitled to vote thereon and by holders of at
least two-thirds of the outstanding ITC Holding Preferred entitled to vote
thereon;

(ii) all regulatory approvals necessary or desirable in connection
with the consummation of the Merger and the transactions contemplated thereby
shall have been obtained or waived by the Corporation;

(iii) the Reorganization Transfer shall have been completed; and

(iv) no suit, action, proceeding or other litigation shall have been
commenced or threatened to be commenced which, in the opinion of the Corporation
or ITC/\DeltaCom, would pose a material restriction on or impair consummation of
<PAGE>

the Merger, or the conduct of the business of or ITC/\DeltaCom after the
Effective Time, or create a risk of subjecting the Corporation or ITC/\DeltaCom,
or their respective stockholders, officers, or directors, to material damages,
costs, liability or other relief in connection with the Merger;

RECOMMENDATION TO ITC HOLDING STOCKHOLDERS

RESOLVED FURTHER, that the proposed Merger hereby is determined to be
advisable and in the best interests of the stockholders of ITC Holding, and the
Board of Directors hereby recommends approval of the Merger by the stockholders
of the Corporation;

RESOLVED FURTHER, that the officers of the Corporation (or any one or more
of them), in the name and on behalf of the Corporation, hereby are authorized to
submit the terms of the proposed Merger to the stockholders of the Corporation
for approval;

INFORMATION STATEMENT

RESOLVED FURTHER, that the Information Statement prepared in connection
with the Merger hereby is approved and adopted (including, specifically and
without limitation, the valuations as of September 30, 1997 of the Corporation's
subsidiary businesses set forth therein and the valuations as of August 31, 1997
of certain assets of the Corporation set forth in Attachment F thereto);
------------

RESOLVED FURTHER, that the officers of the Corporation (or any one or more
of them), in the name and on behalf of the Corporation, hereby are authorized to
provide the Information Statement to the stockholders of the Corporation in
substantially the form provided to the Board of Directions in connection with
this meeting (a copy of which is attached to the Minutes), with such changes,
additions, and deletions as any such officer may determine to be necessary or
appropriate (such determination to be conclusively but not exclusively evidenced
by such officer's supplying the Information Statement to the stockholders of the
Corporation);

NOTIFICATION OF EFFECTIVENESS OF MERGER

RESOLVED FURTHER, that if the Merger is approved by less than unanimous
consent of the stockholders of ITC Holding, the Corporation shall provide prompt
notice of the approval of the Merger to those stockholders who have not
consented thereto in writing and who, if the action had been taken at a meeting,
would have been entitled to notice of the meeting if the record date for such
meeting had been the date that written consents signed by a sufficient number of
holders to take the action pursuant to the Section 228 of the Delaware General
Corporation Law were received by the Corporation;
<PAGE>

RESOLVED FURTHER, that after the Merger is effective, ITC/\DeltaCom shall
provide written notice thereof to each holder of ITC Holding Common, ITC Holding
Preferred, and ITC Holding Stock Options of record immediately prior the
effectiveness of the Merger, which notice shall include instructions for
obtaining new certificates representing shares of ITC/\DeltaCom Common and
ITC/\DeltaCom Preferred issuable pursuant to these resolutions;

AMENDMENT OR TERMINATION OF MERGER

RESOLVED FURTHER, that, subject to applicable law and subject to the rights
of the stockholders of the Corporation further to approve any amendment which
would have a material adverse effect on such stockholders, the Certificate of
Ownership and Merger may be amended, modified or supplemented by duly adopted
resolution of the Board of Directors at any time prior to the Effective Time
(including after approval by the stockholders of the Corporation) with respect
to any of the terms contained herein;

RESOLVED FURTHER, that at any time prior to the Effective Time, the
Certificate of Ownership and Merger may be terminated and the Merger may be
abandoned or the time of consummation of the Merger may be deferred for a
reasonable time by the Board of Directors of the Corporation, notwithstanding
approval of the Merger by the stockholders of the Corporation, if circumstances
arise which, in the opinion of the Board of Directors of the Corporation, make
the Merger inadvisable or such deferral of the time of consummation advisable;

SECURITIES LAWS MATTERS

RESOLVED FURTHER, that it is desirable and in the best interest of the
Corporation that the shares of capital stock of ITC West Point and of
ITC/\DeltaCom being distributed to stockholders of the Corporation in connection
with the Reorganization (including the Merger) (the "SECURITIES") be qualified
or registered for sale for purposes of the offering and sale in various states;
that the officers of the Corporation, or any one or more of them, are hereby
authorized, in the name and on behalf of the Corporation, to determine the
states in which appropriate action shall be taken to qualify or register for
sale all or such part of the Securities as any of them may determine to be
necessary or appropriate (such determination to be conclusively, but not
exclusively, evidenced by the action taken by such officers or officer); that
such officers, or any one or more of them, are hereby authorized, in the name
and on behalf of the Corporation, to perform any and all such acts as any of
them may determine to be necessary or appropriate (such determination to be
conclusively, but not exclusively, evidenced by the action taken by such
officers or officer) in order to comply with the applicable laws of any such
states, and in connection therewith to execute (by power of attorney or
otherwise) and file all documents, including but not limited to applications,
reports, surety bonds, irrevocable consents, and appointments of attorneys of
service of process, in
<PAGE>

connection therewith; and that the execution (by power of attorney or otherwise)
by such officers or officer of any such document or the doing by any of them of
any act in connection with the foregoing matters shall conclusively, but not
exclusively, establish their or his or her authority therefor from the
Corporation and the approval and ratification by the Corporation of the
documents so executed and the action so taken;

RESOLVED FURTHER, that the officers of the Corporation, or any one or
more of them, are hereby authorized, in the name and on behalf of the
Corporation, to take any and all action that any of them may determine to be
necessary or appropriate (such determination to be conclusively, but not
exclusively, evidenced by the action taken by such officers or officer) in order
to obtain a permit with respect to the Securities, to register or qualify the
Securities for issuance and sale, to request and obtain an exemption from
registration of the Securities, or to register or obtain a license for the
Corporation as a dealer or broker under the securities laws of such states, and
in connection with such registration, permits, licenses, qualifications and
exemptions, to execute (by power of attorney or otherwise), acknowledge, verify,
deliver, file, and publish all such applications, reports, issuer's covenants,
resolutions, irrevocable consents to service of process, powers of attorney, and
other documents as may be required under such laws or as such officers or
officer may determine to be necessary or appropriate to be filed thereunder
(such determination to be conclusively, but not exclusively, evidenced by the
action taken or execution by such officers or officer), and to take any and all
such other actions as any one or more them shall determine to be necessary or
appropriate (such determination to be conclusively, but not exclusively,
evidenced by the action taken by such officers or officer) in order to maintain
such registration, exemption, or license in effect for as long as any of them
may determine it to be in the best interests of the Corporation;

RESOLVED FURTHER, that any and all resolutions required by any such
state or other jurisdictional authority in connection therewith or determined by
such officers or officer to be necessary or appropriate and which are consistent
with the foregoing are hereby adopted, and the Secretary is directed to attach
copies of all such resolutions to these resolutions;

RESOLVED FURTHER, that the officers of the Corporation, and each of
them, in the name and on behalf of the Corporation, are hereby authorized to
take all other actions and to execute, deliver and file all documents and
instruments, as may be determined by such officer to be necessary or desirable
to carry out the foregoing resolutions and the transactions contemplated thereby
(such determination to be conclusively, but not exclusively, evidenced by such
actions or execution of such documents);

RESOLVED FURTHER, that all actions heretofore taken by the officers of
the Corporation in connection with the foregoing resolutions and the
<PAGE>

transactions contemplated thereby are hereby ratified, approved and confirmed in
all respects;

APPOINTMENT OF REORGANIZATION COMMITTEE

RESOLVED FURTHER, that Campbell B. Lanier III and William H. Scott, III are
appointed as the sole members of a newly constituted Reorganization Committee of
the Board of Directors with the power and authority in the name and on behalf of
the Corporation to (i) make any determinations regarding implementation of the
Reorganization (including, without limitation, the Merger) with respect to ITC
Holding Stock Options and the plan pursuant to which such options were granted
and (ii) execute such written consents in the name and on behalf of the
Corporation as the sole stockholder of each of ITC/\DeltaCom, ITC West Point,
and any other subsidiary of the Corporation as such Committee shall determine to
be necessary or appropriate to approve any and all matters relating to the
Reorganization (including, without limitation, the Merger) (such determination
to be conclusively, but not exclusively, evidenced by any such action by such
Committee);

GENERAL AUTHORIZATION AND RATIFICATION

RESOLVED FURTHER, that the officers of the Corporation, or any of them,
hereby are authorized, in the name and on behalf of the Corporation, to take all
such actions and to prepare, execute, deliver, file or record all such documents
as they (or any of them) may determine to be necessary or appropriate in
connection with effecting the foregoing resolutions and the transactions
contemplated thereunder (such determination to be conclusively, but not
exclusively, evidenced by the execution, delivery, filing or recordation thereof
by such officer(s)), and all such actions heretofore taken by any such officer
hereby are authorized, approved, ratified, and confirmed in all respects.
<PAGE>

Exhibit A

CERTIFICATE OF INCORPORATION

ITC/\DELTACOM, INC.

1. NAME.

The name of the corporation is ITC/\DeltaCom, Inc. (the
"Corporation").

2. REGISTERED OFFICE AND AGENT.

The registered office of the Corporation shall be located at 1013
Centre Road, Wilmington, Delaware 19805 in the County of New Castle. The
registered agent of the Corporation at such address shall be Corporation Service
Company.

3. PURPOSE AND POWERS.

The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware as from time to time amended (the "Delaware General
Corporation Law"). The Corporation shall have all power necessary or helpful to
engage in such acts and activities.

4. INCORPORATOR; INITIAL DIRECTORS.

4.1. Incorporator.

The name and mailing address of the incorporator (the "Incorporator")
are ITC Holding Company, Inc., 1239 O.G. Skinner Drive, West Point, Georgia
31833. The powers of the Incorporator shall terminate upon the filing of this
Certificate of Incorporation.
<PAGE>

4.2. Initial Directors.

The following persons, having the following mailing addresses, shall
serve as the directors of the Corporation until the first annual meeting of the
stockholders of the Corporation or until their successors are elected and
qualified:

<TABLE>
<CAPTION>
NAME CLASS MAILING ADDRESS
---- ----- ---------------

<S> <C> <C>
Campbell B. Lanier, III I 206 West 9th Street
West Point, Georgia 31833

Andrew M. Walker I 206 West 9th Street
West Point, Georgia 31833

William B. Timmerman I 206 West 9th Street
West Point, Georgia 31833

Robert A. Dolson II 206 West 9th Street
West Point, Georgia 31833

O. Gene Gabbard II 206 West 9th Street
West Point, Georgia 31833

William H. Scott, III II 206 West 9th Street
West Point, Georgia 31833

Donald W. Burton III 206 West 9th Street
West Point, Georgia 31833

Malcolm C. Davenport, V III 206 West 9th Street
West Point, Georgia 31833

William T. Parr III 206 West 9th Street
West Point, Georgia 31833
</TABLE>

5. CAPITAL STOCK.

5.1. Authorized Shares; Increase in Authorized Shares.

The total number of shares of all classes of stock that the
Corporation shall have the authority to issue is 95,000,000 shares, of which
90,000,000 shares shall be classified as shares of Common Stock, with a par
value of $0.01 per share ("Common Stock"), and 5,000,000 shares shall be
classified as shares of Preferred Stock, with a par value of $0.01 per share
("Preferred Stock"). The Board of Directors expressly is authorized to provide
for the issuance of shares of Preferred Stock in one or more series without the
approval of the stockholders of the Corporation. The number of authorized shares
of any class of stock of the Corporation may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the capital stock of the Corporation entitled to
vote (irrespective of the right to vote thereupon as a class that

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<PAGE>

the holders of the shares of any such class would otherwise be entitled to under
Section 242(b)(2) of the Delaware General Corporation Law).

5.2. Common Stock.

5.2.1. Relative Rights.

The Common Stock shall be subject to all of the rights, privileges,
preferences and priorities of the Preferred Stock as set forth in the
certificates of designations filed to establish the respective series of
Preferred Stock. Each share of Common Stock shall have the same relative rights
as, and be identical in all respects to, all the other shares of Common Stock.

5.2.2. Voting Rights.

Each holder of record of shares of Common Stock shall be entitled to
attend all special and annual meetings of the stockholders of the Corporation
and, share for share and without regard to class, together with the holders of
all other classes of stock entitled to attend such meetings and to vote (except
any class or series of stock having special voting rights), to cast one vote in
person or by proxy for each outstanding share of Common Stock so held upon any
matter or thing (including, without limitation, the election of one or more
directors) properly considered and acted upon by the stockholders.

5.2.3. Dividends.

Subject to the rights, if any, of the holders of shares of Preferred
Stock, the holders of record of the Common Stock, and any class or series of
stock entitled to participate therewith as to dividends, shall be entitled to
receive dividends, when, as and if declared by the Board of Directors, out of
any assets legally available for the payment of dividends thereon.

5.2.4. Dissolution, Liquidation, Winding Up.

In the event of any dissolution, liquidation or winding up of the
Corporation (whether voluntary or involuntary), the holders of record of the
Common Stock then outstanding, and all holders of any class or series of stock
entitled to participate (in whole or in part) therewith as to distribution of
assets, shall become entitled to participate equally on a per-share basis in the
distribution of any assets of the Corporation remaining after the Corporation
shall have paid or provided for payment of all debts and liabilities of the
Corporation, and shall have paid (or set aside for payment) to the holders of
any class or series of stock having preference over the Common Stock in the
event of dissolution, liquidation or winding up, the full preferential amounts
(if any) to which they are entitled.

-3-
<PAGE>

5.3. Preferred Stock.

5.3.1. Issuance, Designations, Powers, Etc.

The Board of Directors expressly is authorized, subject to limitations
prescribed by the Delaware General Corporation Law and the provisions of this
Certificate of Incorporation, to provide (by resolution and by filing a
certificate of designations pursuant to the Delaware General Corporation Law)
for the issuance from time to time of the shares of Preferred Stock in one or
more series, to establish from time to time the number of shares to be included
in each such series, and to fix the designation, powers, preferences and other
rights of the shares of each such series and to fix the qualifications,
limitations and restrictions thereon, including, but without limiting the
generality of the foregoing, the following:

(i) the number of shares constituting that series and the
distinctive designation of that series;

(ii) the dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of that
series;

(iii) whether that series shall have voting rights, in addition to
the voting rights provided by law, and, if so, the terms of such voting rights;

(iv) whether that series shall have conversion privileges, and, if
so, the terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the Board of Directors shall
determine;

(v) whether or not the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption, including the dates
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and at
different redemption dates;

(vi) whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund;

(vii) the rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of shares
of that series; and

(viii) any other relative powers, preferences, and rights of that
series, and qualifications, limitations or restrictions on that series.

-4-
<PAGE>

rights, powers and preferences for which are set forth in Attachment 1 hereto
------------
and incorporated by reference herein and made an integral part hereof.

5.3.2. Dissolution, Liquidation, Winding Up.

In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of Preferred Stock of
each series shall be entitled to receive only such amount or amounts as shall
have been fixed by the certificate of designations or by the resolution or
resolutions of the Board of Directors providing for the issuance of such series.

5.4. Redemption.

Notwithstanding any other provision of this Certificate of
Incorporation to the contrary, outstanding shares of stock of the Corporation
shall always be subject to redemption by the Corporation, by action of the Board
of Directors, if in the judgment of the Board of Directors such action should be
taken, pursuant to Section 151(b) of the Delaware General Corporation Law or any
other applicable provision of law, to the extent necessary to prevent the loss
or secure the reinstatement of any license or franchise from any governmental
agency held by the Corporation or any of its subsidiaries to conduct any portion
of the business of the Corporation or any of its subsidiaries, which license or
franchise is conditioned upon some or all of the holders of the Corporation's
stock possessing prescribed qualifications. The terms and conditions of such
redemption shall be as follows:

(a) The redemption price of the shares to be redeemed pursuant to
this Section 5.4 shall be determined by the Board of Directors and shall be
equal to the Fair Market Value (as defined herein) of such shares or, if such
shares were purchased by one or more Disqualified Holders (as defined herein)
within one year of the Redemption Date (as defined herein), the lesser of (i)
the Fair Market Value of such shares and (ii) the purchase price paid by such
Disqualified Holder for such shares.

(b) At the election of the Corporation, the redemption price of such
shares may be paid in cash, Redemption Securities (as defined herein) or any
combination thereof.

(c) If fewer than all shares held by Disqualified Holders are to be
redeemed, the shares to be redeemed shall be selected in such manner as shall be
determined by the Board of Directors, which may include selection first of the
most recently purchased shares thereof, selection by lot or selection in any
other manner determined by the Board of Directors.

(d) At least 30 days' prior written notice of the Redemption Date
shall be given to any Disqualified Holder of shares selected to be redeemed
(unless waived in writing by any such holder), provided that the Redemption Date
may be the date on which written notice shall be given to such holder if the
cash or Redemption Securities

-5-
<PAGE>

necessary to effect the redemption shall have been deposited in trust for the
benefit of such holder and subject to immediate withdrawal by it upon surrender
of the stock certificates formerly representing the shares redeemed.

(e) From and after the Redemption Date, any and all rights of
whatever nature that any Disqualified Holder may have with respect to any shares
selected for redemption (including, without limitation, any rights to vote or
participate in dividends declared on stock of the same class or series as such
shares) shall cease and terminate, and such Disqualified Holder shall
thenceforth be entitled only to receive, with respect to such shares, the cash
or Redemption Securities payable upon redemption.

(f) The Board of Directors may also impose additional terms and
conditions.

(g) For purposes of this Section 5.4:

(i) "Disqualified Holder" shall mean any holder of shares of stock
of the Corporation whose holding of such stock, either
individually or when taken together with the holding of shares
of stock of the Corporation by any other holders, may result,
in the judgment of the Board of Directors, in the loss of, or
the failure to secure the reinstatement of, any license or
franchise from any governmental agency held by the Corporation
or any of its subsidiaries to conduct any portion of the
business of the Corporation or any of its subsidiaries.

(ii) "Fair Market Value" of a share of the Corporation's stock of
any class or series shall mean the average Closing Price (as
defined herein) for such a share for each of the 45 most
recent days on which shares of stock of such class or series
shall have been traded preceding the day on which notice of
redemption shall be given pursuant to paragraph (d) of this
Section 5.4; provided, however, that if shares of stock of
such class or series are not traded on any securities exchange
or in the over-the-counter market, "Fair Market Value" shall
be determined by the Board of Directors in good faith.
"Closing Price" on any day means the reported closing sales
price or, in case no such sale takes place, the average of the
reported closing bid and asked prices on the principal United
States securities exchange registered under the Securities
Exchange Act of 1934 on which such stock is listed, or, if
such stock is not listed on any such exchange, the highest
closing sales price or bid quotation for such stock on the
Nasdaq National Market of The Nasdaq Stock Market, Inc. or any
system then in use, or if no such prices or quotations are
available, the fair market value on the day in question as
determined by the Board of Directors in good faith.

-6-
<PAGE>

(iii) "Redemption Date" shall mean the date fixed by the Board of
Directors for the redemption of any shares of stock of the
Corporation pursuant to this Section 5.4.

(iv) "Redemption Securities" shall mean any debt or equity
securities of the Corporation, any of its subsidiaries or any
other corporations, or any combination thereof, having such
terms and conditions as shall be approved by the Board of
Directors and which, together with any cash to be paid as
part of the redemption price, in the opinion of any
investment banking firm selected by the Board of Directors
(which may be a firm which provides other investment banking,
brokerage or other services to the Corporation), has a value,
at the time notice of redemption is given pursuant to
paragraph (d) of this Section 5.4, at least equal to the
price required to be paid pursuant to paragraph (a) of this
Section 5.4 (assuming for purposes of such valuation, in the
case of Redemption Securities to be publicly traded, such
Redemption Securities were fully distributed and trading
under normal conditions).

6. BOARD OF DIRECTORS.

6.1. Classification.

Except as otherwise provided in this Certificate of Incorporation or a
certificate of designations relating to the rights of the holders of any series
of Preferred Stock, voting separately by series, to elect additional directors
under specified circumstances, the number of directors of the Corporation shall
be as fixed from time to time by the Board of Directors of the Corporation. The
directors, other than those who may be elected by the holders of any series of
Preferred Stock voting separately by series, shall be classified, with respect
to the time for which they severally hold office, into three classes, Class I,
Class II and Class III, which shall be as nearly equal in number as possible,
and shall be adjusted from time to time by the Board of Directors to maintain
such proportionality. Each initial director in Class I shall hold office for a
term expiring at the 2000 annual meeting of stockholders, each initial director
in Class II shall hold office for a term expiring at the 1999 annual meeting of
stockholders, and each initial director in Class III shall hold office for a
term expiring at the 1998 annual meeting of stockholders. Elections of
directors need not be by written ballot.

Notwithstanding the foregoing provisions of this Section 6.1, each
director shall serve until such director's successor is duly elected and
qualified or until such director's earlier death, resignation or removal. At
each annual meeting of stockholders, the successors to the class of directors
whose term expires at that meeting shall be elected to hold office for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election and until their successors have been duly elected and
qualified or until any such director's earlier death,

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<PAGE>

resignation or removal. Except as set forth below with respect to vacancies and
newly created directorships, directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors.

6.2. Removal.

Except as otherwise provided pursuant to the provisions of this
Certificate of Incorporation or a certificate of designations relating to the
rights of the holders of any series of Preferred Stock, voting separately by
series, to elect directors under specified circumstances, any director or
directors may be removed from office at any time, but only for cause and only by
the affirmative vote of not less than 66-2/3% of the total number of votes of
the then outstanding shares of stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, and
only if notice of such proposal was contained in the notice of such meeting. At
least 30 days prior to any meeting of stockholders where the removal of
directors prior to expiration of their term in office will be considered,
written notice shall be sent to the director or directors whose removal will be
considered at such meeting. Any vacancy in the Board of Directors resulting
from any such removal or otherwise shall be filled in accordance with Section
6.3 hereof.

6.3. Vacancies and Change of Authorized Number.

Vacancies and newly created directorships resulting from any increase
in the authorized number of directors elected by all of the stockholders having
the right to vote as a single class may only be filled by a majority of the
directors then in office, although fewer than a quorum, or by a sole remaining
director. In the event that one or more directors resign from the board,
effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have the power to fill such vacancy
or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective. Notwithstanding the foregoing, whenever
the holders of any class or classes of stock or series thereof are entitled to
elect one or more directors by the provisions of this Certificate of
Incorporation, vacancies and newly created directorships of such class or
classes or series may only be filled by a majority of the directors elected by
such class or classes or series thereof in office, or by a sole remaining
director so elected. Each director chosen in accordance with this Section 6.3
shall hold office until the next election of the class for which such director
shall have been chosen, and until such director's successor is elected and
qualified, or until the director's earlier death, resignation or removal.

6.4. Directors Elected by Holders of Preferred Stock.

Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies, removal and other features

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<PAGE>

of such directorships shall be governed by the terms of the certificate of
designations applicable thereto, and such directors so elected shall not be
divided into classes pursuant to this Section 6 unless expressly provided by the
certificate of designations.

6.5. Limitation of Liability.

No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty as a
director; provided, however, that this provision shall not eliminate or limit
the liability of a director: (a) for any breach of the director's duty of
loyalty to the Corporation or its stockholders; (b) for acts or omissions that
are not in good faith or that involve intentional misconduct or a knowing
violation of law; (c) for liability under Section 174 of the Delaware General
Corporation Law; or (d) for any transaction from which the director received any
improper personal benefit. Any repeal or modification of this Section 6.5 shall
be prospective only, and shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification
with respect to acts or omissions occurring prior to such repeal or
modification.

7. ACTIONS BY STOCKHOLDERS.

7.1. Action at Meetings or By Unanimous Consent.

Except as otherwise provided in this Certificate of Incorporation or a
certificate of designations relating to the rights of the holders of any series
of Preferred Stock, any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of stockholders, and may not be effected by any consent in
writing by such stockholders, unless such consent is unanimous.

7.2. Special Meetings of Stockholders.

Special meetings of the stockholders may be called at any time but
only by (a) the chairman of the board of the Corporation or (b) a majority of
the directors in office, although less than a quorum.

8. AMENDMENT OF CERTIFICATE OF INCORPORATION.

Notwithstanding any other provisions of this Certificate of
Incorporation or the Bylaws of the Corporation (and notwithstanding the fact
that a lesser percentage may be specified by law, this Certificate of
Incorporation or the Bylaws of the Corporation), the affirmative vote of 66-2/3%
of the total number of votes of the then outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to amend or repeal, or to adopt
any provision inconsistent with the purpose or intent of, Section 6

-9-
<PAGE>

or Section 7 hereof, and this Section 8. Notice of any such proposed amendment,
repeal or adoption shall be contained in the notice of the meeting at which it
is to be considered. Subject to the provisions set forth herein, the Corporation
reserves the right to amend, alter, repeal or rescind any provision contained in
this Certificate of Incorporation in the manner now or hereafter prescribed by
law.

9. AMENDMENT OF BYLAWS.

In furtherance and not in limitation of the powers conferred by the
Delaware General Corporation Law, the Board of Directors is expressly authorized
and empowered to adopt, amend and repeal the Bylaws of the Corporation.
Notwithstanding any other provisions of this Certificate of Incorporation or the
Bylaws of the Corporation (and notwithstanding the fact that a lesser percentage
may be specified by law, this Certificate of Incorporation or the Bylaws of the
Corporation), in order for the stockholders of the Corporation to amend or
repeal the Bylaws of the Corporation, the affirmative vote of 66-2/3% of the
total number of votes of the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required.

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<PAGE>
Attachment 1

CERTIFICATE OF DESIGNATIONS OF THE POWERS, PREFERENCES
AND RELATIVE, PARTICIPATING OR OTHER RIGHTS, AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF, OF

SERIES A CONVERTIBLE PREFERRED STOCK
($0.01 Par Value)

OF
ITC/\DELTACOM, INC.

-----------------

Pursuant to Section 151 of the General Corporation Law
of the State of Delaware

-----------------

ITC/\DELTACOM, INC., a Delaware corporation (the "Corporation"), does
hereby certify that the following resolutions were duly adopted by the Board of
Directors of the Corporation pursuant to authority conferred upon the Board of
Directors by Article 5.3 of the Certificate of Incorporation of the Corporation,
which authorizes the issuance of up to 5,000,000 shares of preferred stock, at a
meeting of the Board of Directors:

RESOLVED, that the issue of a series of preferred stock, $0.01 par
value, of the Corporation is hereby authorized and the designation, powers,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, in addition to those set
forth in the Certificate of Incorporation of the Corporation, are hereby fixed
as follows:

1. NUMBER OF SHARES AND DESIGNATION

1,750,000 shares of the preferred stock, $0.01 par value, of the
Corporation are hereby constituted as a series of the preferred stock
designated as Series A Convertible Preferred Stock (the "Series A Preferred
Stock"). Without the consent of the then current holders of shares of
Series A Preferred Stock as provided for herein, the number of authorized
shares of Series A Preferred Stock may not be increased or decreased below
the number of then currently outstanding shares of Series A Preferred
Stock.

2. DEFINITIONS

For purposes of the Series A Preferred Stock, the following terms
shall have the meanings indicated:

"Acceptance Notice" shall have the meaning set forth in Section
9.3.
<PAGE>

"Board of Directors" shall mean the board of directors of the
Corporation or any committee authorized by such Board of Directors to
perform any of its responsibilities with respect to the Series A
Preferred Stock.

"Business Day" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in the State of Georgia are
authorized or obligated by law or executive order to close.

"Common Stock" shall mean the Common Stock of the Corporation,
par value $0.01 per share.

"Conversion Date" shall mean March 14, 2002.

"Conversion Price" shall mean the conversion price per share of
Common Stock into which the Series A Preferred Stock is convertible,
as such Conversion Price may be adjusted pursuant to Section 6. The
"Initial Conversion Price" shall be obtained by multiplying $13.2378
by the Relative Fair Market Valuation of the Corporation (equivalent
to the rate of one share of Common Stock for each share of Series A
Preferred Stock).

"Current Market Price" shall mean, as of a particular date, the
average of the high bid and low asked prices per share of Common Stock
in the over-the-counter market, as reported by The Nasdaq Stock Market
or such other system then in use, or such other exchange or inter-
dealer quotation system on which the Common Stock is principally
traded or authorized to be quoted; or, if the Common Stock is not so
traded or authorized to be quoted on any such exchange or inter-dealer
quotation system, then the price per share of Common Stock most
recently designated by the Board of Directors as the "fair market
value" thereof for purposes of granting incentive stock options.

"Issue Date" shall mean the first date on which shares of Series
A Preferred Stock are issued.

"Notice" shall have the meaning set forth in Section 9.2.

"Person" shall mean any individual, firm, partnership,
corporation or other entity, and shall include any successor (by
merger or otherwise) of such entity.

"Relative Fair Market Valuation of the Corporation" shall mean
the fair market value of the Corporation expressed as a percentage of
the ITC Holding Fair Market Value, determined as of the date the
initial public offering price per share of the common stock of the
Corporation (the "IPO Price") is established. The "ITC Holding Fair
Market Value" shall be determined by the Board of

2
<PAGE>

Directors (or a committee thereof) of ITC West Point, Inc., by
reference to the business and operations of ITC Holding Company, Inc.
immediately prior to the transfer of assets and liabilities to ITC
West Point, Inc. to be undertaken in connection with a corporate
reorganization by ITC Holding Company, Inc. The fair market value of
the Corporation will be determined by the Board of Directors of the
Corporation (or a committee thereof), by reference to the IPO Price.

"Securities" shall have the meaning set forth in Section 6.4.2.

"Series A Preferred Liquidation Distribution" shall have the
meaning set forth in Section 4.

"Series A Preferred Stock" shall mean the series of preferred
stock, $0.01 par value, of the Corporation designated as Series A
Convertible Preferred Stock.

"Shares" shall have the meaning set forth in Section 9.1.

"Stockholder" shall have the meaning set forth in Section 9.1.

"Subsidiaries" shall mean any and all corporations, partnerships,
limited liability companies, joint ventures, associations and other
entities controlled by the Corporation directly or indirectly through
one or more intermediaries.

"The Nasdaq Stock Market" shall mean the National Market System
of The Nasdaq Stock Market, Inc.

"Trading Day" means a day on which any exchange or inter-dealer
quotation system on which the Common Stock is principally traded or
authorized to be quoted is open for the transaction of business.

"Transaction" shall have the meaning set forth in Section 6.5.

"Transfer" shall have the meaning set forth in Section 9.1.

"Transfer Agent" means such agent or agents, if any, of the
Corporation as may be designated by the Board of Directors of the
Corporation as the transfer agent for the Series A Preferred Stock.

"Transferring Stockholder" shall have the meaning set forth in
Section 9.2.

3
<PAGE>

3. DIVIDENDS

3.1. Right to Receive Dividends

The holders of shares of the Series A Preferred Stock shall be
entitled to receive, when and if declared by the Board of Directors out of
funds legally available therefor, dividends in an amount per share of
Series A Preferred Stock equal to the dividends payable on the number of
shares of Common Stock into which one share of Series A Preferred Stock is
then convertible (assuming that the Conversion Date has already occurred),
determined as of the date fixed for determining holders of shares of
Common Stock entitled to receive such dividends. Each such dividend shall
be payable in arrears to the holders of record of shares of the Series A
Preferred Stock, as they appear on the stock records of the Corporation at
the close of business on such record dates, not more than 60 days
preceding the payment dates thereof, as shall be fixed by the Board of
Directors.

3.2. Dividends on Other Stock

So long as any shares of the Series A Preferred Stock are
outstanding, no dividends shall be declared or paid or set apart for
payment on any class or series of stock of the Corporation ranking, as to
dividends, on a parity with the Series A Preferred Stock, for any period,
nor shall any shares ranking on a parity with the Series A Preferred Stock
be redeemed or purchased by the Corporation or any Subsidiary, unless
dividends have been or contemporaneously are declared and paid (or are
declared and a sum sufficient for the payment thereof set apart for such
payment) on the Series A Preferred Stock in an amount per share of Series
A Preferred Stock equal to dividends declared and paid or payable on the
number of shares of Common Stock into which one share of Series A
Preferred Stock is then convertible (assuming that the Conversion Date has
already occurred), in accordance with Section 3.1.

4. LIQUIDATION PREFERENCE

In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, before any payment or
distribution of the assets of the Corporation (whether capital or surplus)
shall be made to or set apart for the holders of Common Stock or any other
series or class or classes of stock of the Corporation ranking junior to
the Series A Preferred Stock, upon liquidation, dissolution or winding up,
the holders of the shares of Series A Preferred Stock shall be entitled to
receive the Initial Conversion Price per share plus an amount equal to all
dividends declared and unpaid thereon to the date of final distribution to
such holders (the "Series A Preferred Liquidation Distribution"). After
the Series A Preferred Liquidation Distribution has been made and after
the holders of shares of any other class or series of stock having
preference over the Common Stock in the event of liquidation, dissolution
or winding up have received the full preferential amounts to which they
are entitled, the holders of shares of Common Stock and any other class or
series of stock entitled to participate with the Common Stock in the event
of liquidation, dissolution or winding up shall be entitled to receive out
of the assets of the Corporation legally available for distribution to

4
<PAGE>

stockholders (whether capital or surplus) cash in amount per share equal
to the amount of the Series A Preferred Liquidation Distribution.
Thereafter, the holders of the Series A Preferred Stock shall be entitled
to share ratably with the holders of the shares of Common Stock and any
other class or series of stock entitled to participate with the Common
Stock in the event of liquidation, dissolution or winding up, in any and
all assets remaining to be paid or distributed, such that distributions
shall be made in respect of each share of Series A Preferred Stock in an
amount equal to the distributions made in respect of the number of shares
of Common Stock into which such share of Series A Preferred Stock is then
convertible. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof,
distributable among the holders of the shares of Series A Preferred Stock
and any other shares of stock ranking, as to liquidation, dissolution or
winding up, on a parity with the Series A Preferred Stock, shall be
insufficient to pay in full the preferential amount aforesaid and
liquidating payments in respect thereof, then such assets, or the proceeds
thereof, shall be distributed among the holders of shares of Series A
Preferred Stock and any such other stock ratably in accordance with the
respective amounts which would be payable on such shares of Series A
Preferred Stock and any such other stock if all amounts payable thereon
were paid in full. For the purposes of this Section 4, (i) a consolidation
or merger of the Corporation with one or more corporations, (ii) a sale or
transfer of all or substantially all of the Corporation's assets, (iii) a
statutory share exchange or (iv) a spin-off of assets of the Corporation
to its stockholders shall not be deemed to be a liquidation, dissolution
or winding up, voluntary or involuntary.

5. SHARES TO BE RETIRED

All shares of Series A Preferred Stock purchased by the Corporation
or converted shall be retired and canceled and shall be restored to the
status of authorized but unissued shares of preferred stock, without
designation as to series.

6. CONVERSION

Holders of shares of Series A Preferred Stock shall have the right
to convert all or a portion of such shares into shares of Common Stock, as
follows:

6.1. Right of Conversion

Subject to and upon compliance with the provisions of this Section
6, a holder of shares of Series A Preferred Stock shall have the right, at
his, her or its option, at any time after March 14, 2002, to convert any
or all of such shares into the number of fully paid and nonassessable
shares of Common Stock (calculated as to each conversion to the nearest
1/100th of a share) obtained by dividing the aggregate liquidation
preference of such shares by the Conversion Price and by surrender of such
shares so to be converted by the holder thereof, such surrender to be made
in the manner provided in Section 6.2. No shares of Series A Preferred
Stock may be converted into fractional shares of Common Stock. Any
fractional interest in respect of a share of Common Stock arising upon
such conversion shall be settled as provided in Section 6.3.

5
<PAGE>

6.2. Exercise of Conversion Right

In order to exercise the conversion right, the holder of each share
of Series A Preferred Stock to be converted shall surrender the
certificate representing such share, duly endorsed or assigned to the
Corporation or in blank, at the office of the Transfer Agent or, if no
Transfer Agent has been appointed by the Corporation, at the principal
office of the Corporation, accompanied by written notice to the
Corporation that the holder thereof elects to convert its shares of Series
A Preferred Stock or a specified portion thereof. Unless the shares
issuable on conversion are to be issued in the same name as the name in
which such share of Series A Preferred Stock is registered, each share
surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Corporation, duly executed by the
holder or such holder's duly authorized attorney and an amount sufficient
to pay any transfer or similar tax (or evidence reasonably satisfactory to
the Corporation demonstrating that such taxes have been paid).

Holders of shares of Series A Preferred Stock at the close of
business on a dividend payment record date shall be entitled to receive
the dividend payable on such shares on the corresponding dividend payment
date notwithstanding the conversion thereof following such dividend
payment record date and prior to such dividend payment date.

As promptly as practicable after the surrender of certificates for
shares of Series A Preferred Stock as aforesaid, the Corporation shall
issue and shall deliver at such office to such holder, or on his, her or
its written order, (i) a certificate or certificates for the number of
full shares of Common Stock issuable upon the conversion of such shares in
accordance with the provisions of this Section 6, (ii) if less than the
full number of shares of Series A Preferred Stock evidenced by the
surrendered certificates is being converted, a new certificate or
certificates, of like tenor, for the number of shares evidenced by such
surrendered certificates less the number of shares being converted, and
(iii) any fractional interest in respect of a share of Common Stock
arising upon such conversion shall be settled as provided in Section 6.3.

Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the certificates for
shares of Series A Preferred Stock shall have been surrendered and such
notice received by the Corporation as aforesaid, and the person or persons
in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to
have become the holder or holders of record of the shares represented
thereby at such time on such date and such conversion shall be at the
Conversion Price in effect at such time on such date, unless the stock
transfer books of the Corporation shall be closed on that date, in which
event such person or persons shall be deemed to have become such holder or
holders of record at the close of business on the next succeeding day on
which such stock transfer books are open, but such conversion shall be at
the Conversion Price in effect on the date upon which such shares shall
have been surrendered and such notice

6
<PAGE>

received by the Corporation. All shares of Common Stock delivered upon
conversion of the Series A Preferred Stock shall upon delivery be duly and
validly issued and fully paid and nonassessable.

6.3. No Fractional Shares Upon Conversion

No fractional shares or scrip representing fractions of shares of
Common Stock shall be issued upon conversion of the Series A Preferred
Stock. Instead of any fractional interest in a share of Common Stock which
would otherwise be deliverable upon the conversion of a share of Series A
Preferred Stock, the Corporation shall pay to the holder of such share an
amount in cash (computed to the nearest cent) equal to such fraction of a
share multiplied by the Current Market Price of one share of Common Stock
as of the date of conversion. If more than one share shall be surrendered
for conversion at one time by the same holder, the number of full shares
of Common Stock issuable upon conversion thereof shall be computed on the
basis of the aggregate number of shares of Series A Preferred Stock so
surrendered.

6.4. Adjustment of Conversion Price

The Conversion Price shall be adjusted from time to time as follows:

6.4.1. Stock Dividends, Reorganizations, Reclassifications

In case the Corporation shall after the Issue Date (A) pay a
dividend or make a distribution on its Common Stock in shares of its
Common Stock, (B) subdivide its outstanding Common Stock into a greater
number of shares, (C) combine its outstanding Common Stock into a smaller
number of shares or (D) issue any shares of capital stock by
reclassification of its Common Stock, the Conversion Price in effect
immediately prior thereto shall be adjusted so that the holder of any
share of Series A Preferred Stock thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock of the
Corporation which such holder would have owned or have been entitled to
receive after the happening of any of the events described above had such
share of Series A Preferred Stock been converted immediately prior to the
happening of such event or the record date therefor, whichever is earlier.
An adjustment made pursuant to this Section 6.4.1 shall become effective
immediately after the close of business on the record date in the case of
a dividend or distribution (except as provided in Section 6.8 below) and
shall become effective immediately after the close of business on the
record date in the case of a subdivision, combination or reclassification.

6.4.2. Certain Other Distributions to Holders of Common Stock

In case the Corporation shall distribute to all holders of its
Common Stock any shares of capital stock of the Corporation (other than
Common Stock) or evidences of its indebtedness or assets (other than a
regular cash dividend that the Board of Directors determines, in good
faith, can be maintained by the Corporation for at least four consecutive
periods covering not less than one year and that the Board of Directors
intends to maintain for at least four consecutive periods covering not
less than one year, out of profits or surplus) or rights or warrants to
subscribe for or purchase any of its

7
<PAGE>

securities (any of the foregoing being hereinafter in this Section 6.4.2
called the "Securities"), then in each such case, unless the Corporation
elects to reserve shares or other units of such Securities for
distribution to the holders of the Series A Preferred Stock upon the
conversion of the shares of Series A Preferred Stock so that any such
holder converting shares of Series A Preferred Stock will receive upon
such conversion, in addition to the shares of the Common Stock to which
such holder is entitled, the amount and kind of such Securities which such
holder would have received if such holder had, immediately prior to the
record date for the distribution of the Securities, converted his or her
shares of Series A Preferred Stock into Common Stock (such election to be
based upon a determination by the Board of Directors that such reservation
will not materially adversely affect the interests of any holder of Series
A Preferred Stock in any such reserved Securities), the Conversion Price
shall be adjusted so that the same shall equal the price determined by
multiplying (I) the Conversion Price in effect immediately prior to the
date of such distribution by (II) a fraction, the numerator of which shall
be the Current Market Price per share of the Common Stock on the record
date mentioned below less the fair market value (as determined by the
Board of Directors, whose determination shall, if made in good faith, be
conclusive) of the portion of the capital stock or assets or evidences of
indebtedness so distributed or of such rights or warrants applicable to
one share of Common Stock, and the denominator of which shall be the
Current Market Price per share of the Common Stock. Such adjustment shall
become effective immediately, except as provided in Section 6.8 below,
after the record date for the determination of stockholders entitled to
receive such distribution.

6.4.3. No De Minimis Adjustments

No adjustment in the Conversion Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such
price; provided, however, that any adjustments which by reason of this
Section 6.4.3 are not required to be made shall be carried forward and
taken into account in any subsequent adjustment; and provided further that
any adjustment shall be required and made in accordance with the
provisions of this Section 6 (other than this Section 6.4.3) not later
than such time as may be required in order to preserve the tax-free nature
of a distribution to the holders of shares of Common Stock. All
calculations under this Section 6 shall be made to the nearest cent (with
$.005 being rounded upward) or to the nearest 1/100 of a share (with .005
of a share being rounded upward), as the case may be. Anything in this
Section 6.4.3 to the contrary notwithstanding, the Corporation shall be
entitled, to the extent permitted by law, to make such reductions in the
Conversion Price, in addition to those required by Section 6.4.3, as it in
its discretion shall determine to be advisable in order that any stock
dividends, subdivision of shares, distribution of rights or warrants to
purchase stock or securities, or a distribution of other assets (other
than cash dividends) hereafter made by the Corporation to its stockholders
shall not be taxable.

8
<PAGE>

6.4.4. No Adjustment Where Similar Dividend, Distribution, or
Issuance With Respect to Preferred Stock

No adjustment in the Conversion Price shall be required in the event
of any dividend, distribution or issuance to holders of shares of Common
Stock pursuant to Sections 6.4.1 or 6.4.2 above if holders of shares of
Series A Preferred Stock have received the same dividend, distribution or
issuance in accordance with Section 3.

6.5. Certain Transactions

In case the Corporation shall be a party to any transaction
(including without limitation a merger, consolidation, sale of all or
substantially all of the Corporation's assets or recapitalization of the
Common Stock and excluding any transaction as to which Section 6.4.1
applies) (each of the foregoing being referred to as a "Transaction"), in
each case as a result of which shares of Common Stock shall be converted
into the right to receive stock, securities or other property (including
cash or any combination thereof), each share of Series A Preferred Stock
which is not converted into the right to receive stock, securities or other
property in connection with such Transaction shall thereafter be
convertible into the kind and amount of shares of stock and other
securities and property receivable (including cash) upon the consummation
of such Transaction by a holder of that number of shares or fraction
thereof of Common Stock into which one share of Series A Preferred Stock
was convertible immediately prior to such Transaction. The Corporation
shall not be a party to any Transaction unless the terms of such
Transaction are consistent with the provisions of this Section 6.5, and it
shall not consent or agree to the occurrence of any Transaction until the
Corporation has entered into an agreement with the successor or purchasing
entity, as the case may be, for the benefit of the holders of the Series A
Preferred Stock which will contain provisions enabling the holders of the
Series A Preferred Stock which remains outstanding after such Transaction
to convert into the consideration received by holders of Common Stock at
the Conversion Price immediately after such Transaction. The provisions of
this Section 6.5 shall similarly apply to successive Transactions.

6.6. Notice of Certain Events

If:

(i) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock (other than a regular cash dividend that
the Board of Directors determines can be maintained by the Corporation for
at least four consecutive periods covering at least one year and that the
Board of Directors intends to maintain for at least four consecutive
periods covering at least one year out of profits or surplus); or

(ii) the Corporation shall authorize the granting to the
holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of any class or any other rights or warrants; or

9
<PAGE>

(iii) there shall be any reclassification of the Common
Stock (other than an event to which Section 6.4.1 applies) or any
consolidation or merger to which the Corporation is a party and for which
approval of any stockholders of the Corporation is required, or the sale or
transfer of all or substantially all of the assets of the Corporation;

then in each such case the Corporation shall cause to be filed with
the Transfer Agent, if any, and shall cause to be mailed to the holders of
shares of the Series A Preferred Stock at their addresses as shown on the
stock records of the Corporation, as promptly as possible, but at least 15
days prior to the applicable date specified in clauses (A) and (B) below, a
notice stating (A) the date on which a record is to be taken for the
purpose of such dividend, distribution or rights or warrants, or, if a
record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution or rights or
warrants are to be determined or (B) the date on which such
reclassification, consolidation, merger, sale or transfer is expected, that
holders of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale or transfer. Failure to
give such notice or any defect therein shall not affect the legality or
validity of the proceedings described in this Section 6.

6.7. Notice of Adjustment in Conversion Price

Whenever the Conversion Price is adjusted as herein provided, the
Corporation shall prepare a notice of such adjustment of the Conversion
Price setting forth the adjusted Conversion Price and the date on which
such adjustment becomes effective and shall promptly mail such notice of
such adjustment of the Conversion Price to the holder of each share of
Series A Preferred Stock at his, her or its last address as shown on the
stock records of the Corporation.

6.8. Adjustment in Conversion Price and Record Dates

In any case in which Section 6.4 provides that an adjustment shall
become effective immediately after a record date for an event, the
Corporation may defer until the occurrence of such event (A) issuing to the
holder of any share of Series A Preferred Stock converted after such record
date and before the occurrence of such event the additional shares of
Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon such
conversion before giving effect to such adjustment and (B) paying to such
holder any amount in cash in lieu of any fraction pursuant to Section 6.3.

6.9. Determination of Number of Outstanding Shares of Common Stock

For purposes of this Section 6, the number of shares of Common Stock
at any time outstanding shall not include any shares of Common Stock then
owned or held by or for the account of the Corporation.

10
<PAGE>

6.10. Adjustments Required by Multiple Sections

If any action or transaction would require adjustment of the
Conversion Price pursuant to more than one paragraph of this Section 6,
only one adjustment shall be made and such adjustment shall be the amount
of adjustment which has the highest absolute value.

6.11. Other Actions Affecting Conversion Rights

In case the Corporation shall take any action affecting the Common
Stock, other than action described in this Section 6, that in the opinion
of the Board of Directors would materially adversely affect the conversion
rights of the holders of the shares of Series A Preferred Stock, the
Conversion Price for the Series A Preferred Stock may be adjusted, to the
extent permitted by law, in such manner, if any, and at such time, as the
Board of Directors may determine to be equitable in the circumstances.

6.12. Reservation of Common Stock for Issuance Upon Conversion

The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its
authorized but unissued shares of Common Stock or its issued shares of
Common Stock held in its treasury, or both, for the purpose of effecting
conversion of the Series A Preferred Stock, the full number of shares of
Common Stock deliverable upon the conversion of all outstanding shares of
Series A Preferred Stock not theretofore converted. For purposes of this
Section 6.12, the number of shares of Common Stock which shall be
deliverable upon the conversion of all outstanding shares of Series A
Preferred Stock shall be computed as if at the time of computation all such
outstanding shares were held by a single holder.

6.13. Fully Paid and Nonassessable Shares Upon Conversion

Before taking any action which would cause an adjustment reducing
the Conversion Price below the then par value of the shares of Common Stock
deliverable upon conversion of the Series A Preferred Stock, the
Corporation shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Corporation may validly and
legally issue fully paid and nonassessable shares of Common Stock at such
adjusted Conversion Price.

6.14. Listing of Shares Issuable Upon Conversion

The Corporation shall use all reasonable efforts to list the shares
of Common Stock required to be delivered upon conversion of the Series A
Preferred Stock, prior to such delivery, on any exchange or inter-dealer
quotation system on which the Common Stock is principally traded or
authorized to be quoted at such time.

6.15. Compliance with Laws and Regulatory Requirements

Prior to the delivery of any securities that the Corporation shall
be obligated to deliver upon conversion of the Series A Preferred Stock,
the Corporation shall use all reasonable efforts to comply with all federal
and state laws and regulations thereunder requiring the registration of
such securities with, or any approval of or consent to the

11
<PAGE>

delivery thereof by, any governmental authority, and any such conversion or
delivery shall be subject to any applicable requirements of law or
regulation.

6.16. Payment of Issue or Transfer Taxes

The Corporation shall pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of
shares of Common Stock on conversion of the Series A Preferred Stock
pursuant hereto; provided, however, that the Corporation shall not be
required to pay any tax that may be payable in respect of any transfer
involved in the issue or delivery of shares of Common Stock in a name other
than that of the holder of the Series A Preferred Stock to be converted,
and no such issue or delivery shall be made unless and until the person
requesting such issue or delivery has paid to the Corporation the amount of
any such tax or has established, to the reasonable satisfaction of the
Corporation, that such tax has been paid.

7. RANKING

Any class or classes of stock of the Corporation shall be deemed to
rank:

(a) prior to the Series A Preferred Stock, as to dividends or as to
distribution of assets upon liquidation, dissolution or winding up, if the
holders of such class shall be entitled to the receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up, as the
case may be, in preference or priority to the holders of Series A Preferred
Stock;

(b) on a parity with the Series A Preferred Stock, (A) as to
dividends, if such stock shall be Common Stock or if the holders of such
class of stock and the Series A Preferred Stock shall be entitled to the
receipt of dividends in proportion to their respective amounts of declared
and unpaid dividends per share, without preference or priority one over the
other, or (B) as to distribution of assets upon liquidation, dissolution or
winding up, whether or not the liquidation price per share thereof be
different from that of the Series A Preferred Stock, if the holders of such
class of stock and the Series A Preferred Stock shall be entitled to the
receipt of amounts distributable upon liquidation, dissolution or winding
up in proportion to their respective amounts of liquidation prices, without
preference or priority one over the other: and

(c) junior to the Series A Preferred Stock, (A) as to dividends, if
the holders of Series A Preferred Stock shall be entitled to the receipt of
dividends in preference or priority to the holders of shares of such stock,
or (B) as to distribution of assets upon liquidation, dissolution or
winding up, if such stock shall be Common Stock or if the holders of Series
A Preferred Stock shall be entitled to receipt of amounts distributable
upon liquidation, dissolution or winding up in preference or priority to
the holders of shares of such stock.

12
<PAGE>

8. VOTING

(a) Except as herein provided or as otherwise from time to time
required by law, holders of Series A Preferred Stock shall have no voting
rights.

(b) So long as any shares of the Series A Preferred Stock remain
outstanding, the consent of the holders of at least two-thirds of the
shares of Series A Preferred Stock outstanding at the time given in person
or by proxy, either in writing or at any special or annual meeting, shall
be necessary to permit, effect or validate any one or more of the
following:

(i) The authorization, creation or issuance, or any
increase in the authorized or issued amount, of any class or series
of stock ranking prior to Series A Preferred Stock as to dividends
or the distribution of assets upon liquidation, dissolution or
winding up;

(ii) The increase in the authorized or issued amount of
Series A Preferred Stock: or

(iii) The amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the
Certificate of Incorporation of the Corporation (including any of
the provisions hereof) that would affect any right, preference or
voting power of Series A Preferred Stock or of the holders thereof;
provided, however, that any increase in the amount of authorized
preferred stock or the creation and issuance of other series of
preferred stock, or any increase in the amount of authorized shares
of such series or of any other series of preferred stock, in each
case ranking on a parity with or junior to the Series A Preferred
Stock with respect to the payment of dividends and the distribution
of assets upon liquidation, dissolution or winding up, shall not be
deemed to affect such rights, preferences or voting powers.

9. RESTRICTIONS ON TRANSFER; RIGHTS OF FIRST REFUSAL

9.1. Restrictions on Transfers

Except as hereinafter provided, no holder of Series A Preferred
Stock (a "Stockholder") shall sell, assign, transfer, give (whether by
inter vivos transfer or, upon the death of any Stockholder, by testamentary
disposition or pursuant to the laws of intestate succession), pledge,
encumber or otherwise dispose of ("Transfer") all or any part of such
Stockholder's shares of Series A Preferred Stock of the Corporation (the
"Shares") to any person, trust, association, partnership, firm, corporation
or other legal entity without the prior written consent of the Corporation.

13
<PAGE>

9.2. Notice of Proposed Transfer

Except for Transfers pursuant to Section 9.1 or 9.6, any Stockholder
desiring to Transfer any of the Shares (the "Transferring Stockholder")
prior to making a Transfer must give written notice to the Corporation of
the portion of the Transferring Stockholder's Shares which the Transferring
Stockholder desires to Transfer and all the proposed material terms and
conditions of such Transfer (such notice is hereinafter referred to as the
"Notice"). Such Notice shall constitute an offer by the Transferring
Stockholder to sell to the Corporation, all, but not less than all, of the
Shares which the Transferring Stockholder proposes to dispose of, upon the
terms set forth in the Notice.

9.3. Acceptance of Offer by the Corporation or the Stockholders

The Corporation may accept the offer of the Transferring Stockholder
as set forth in the Notice, in whole or in part, by giving written notice
of such acceptance (the "Acceptance Notice") at any time within 45 days
following the date the Notice was delivered to the Corporation by the
Transferring Stockholder.

9.4. Closing

If the Offer of the Transferring Stockholder is accepted by the
Corporation pursuant to Section 9.3 hereof, the closing of the purchase by
the Corporation of the Shares being sold by the Transferring Stockholder
shall be held at the main office of the Corporation within 30 days after
the acceptance of the offer by the Corporation, on the date and at the time
specified by the Corporation. At each such closing, (a) the Transferring
Stockholder shall deliver (i) certificates representing the shares of stock
to be transferred, endorsed in blank or accompanied by duly executed blank
stock powers and (ii) appropriate representations that the Transferring
Stockholder has good, valid and unencumbered title to the Shares being
transferred and has transferred free and clear title thereto to the
Corporation, and (b) the Corporation shall deliver the full amount of the
purchase price set forth in the Notice by check or wire transfer of
immediately available federal funds to an account designated by the
Transferring Stockholder.

9.5. Sale of Series A Preferred Stock if Offered is Rejected

If the Corporation does not accept the offer of the Transferring
Stockholder in the manner herein provided, then the Transferring
Stockholder shall be permitted to Transfer all of the Shares proposed to be
Transferred; provided; however, that (i) such Transfer must be made to the
transferee in strict accordance with the terms as described in the Notice;
and (ii) such transfer must be consummated within 90 days following the
delivery of the Notice to the Corporation on a date and at a time and place
of which the Transferring Stockholder shall give the Corporation at least
ten days' notice. The Corporation may designate an individual whom the
Transferring Stockholder shall permit to attend the closing of such
Transfer and to examine the documents implementing such Transfer. In the
event the Transferring Stockholder fails to consummate such proposed
Transfer prior to the expiration of such 90-day period, then prior to any
subsequent Transfer of all or any portion of the Transferring Stockholder's
Shares, the Transferring Stockholder shall be required to give the notice
contemplated by Section 9.2, and the

14
<PAGE>

restrictions on Transfer and rights of first refusal contained herein shall
again be applicable with respect thereto.

9.6. Permitted Transfers

Notwithstanding the foregoing provisions of this Article 9, a
Stockholder may at any time Transfer the Shares owned by it, to (i) any
spouse or lineal descendant of such Stockholder, (ii) a parent,
grandparent, brother or sister of such Stockholder, (iii) any trust
established for the benefit of such Stockholder or any spouse or lineal
descendent thereof, or (iv) any corporation in which such Stockholder owns
all of the issued and outstanding capital stock. Any transfer specified in
this Section 9.6 shall not be subject to any of the restrictions on
transfer or rights of first refusal set forth in this Article 9.

9.7. Applicability of Restrictions on Transfer

(a) The restrictions on Transfer and the right of first refusal with
respect to the Shares shall terminate upon the date the Corporation becomes
subject to the reporting requirements of Sections 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended.

(b) The rights of first refusal set forth in this Article 9 shall
not apply to any proposed exchange to be effected pursuant to a merger or
consolidation approved by the Stockholders or any proposed pledge by any
Stockholder of any of the Shares to any financial institution as security
for indebtedness of such Stockholder to such financial institution.
However, any financial institution which accepts the pledge of Shares shall
be subject to these restrictions on Transfer and the right of first refusal
in the event of foreclosure on such Shares.

10. RECORD HOLDERS

The Corporation and any Transfer Agent may deem and treat the record
holder of any shares of Series A Preferred Stock as the true and lawful
owner thereof for all purposes, and neither the Corporation nor any
Transfer Agent shall be affected by any notice to the contrary.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to
be made under the seal of the Corporation and signed by J. Thomas Mullis, its
Senior Vice President, General Counsel and Secretary, this 17th day of October,
1997.

ITC/\DELTACOM, INC.

By: /s/ J. Thomas Mullis
------------------------------
J. Thomas Mullis
Senior Vice President, General
Counsel and Secretary

15
<PAGE>

CERTIFICATE OF CORRECTION
TO THE
CERTIFICATE OF OWNERSHIP AND MERGER
OF ITC HOLDING COMPANY, INC., WITH AND INTO
ITC/\DELTACOM, INC.

ITC Holding Company, Inc. (the "Corporation"), a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:

1. The name of the Corporation is ITC Holding Company, Inc.

2. A Certificate of Ownership and Merger of ITC Holding Company, Inc.
was filed with the Secretary of State of the State of Delaware on October 20,
1997 and said Certificate of Ownership and Merger requires correction as
permitted by subsection (f) of Section 103 of the General Corporation Law of the
State of Delaware.

3. The inaccuracies or defects of said Certificate of Ownership and
Merger to be corrected are, among other things, that (i) the language "or
issuable upon exercise of converted ITC Holding Options or upon conversion of
shares of the ITC/\DeltaCom Preferred (as defined herein)" was omitted from
paragraph (ii) of the third resolution on page 3 of Appendix A of said
----------
Certificate of Ownership and Merger, (ii) the language "or issuable upon
exercise of converted ITC Holding Options or upon conversion of shares of the
ITC/\DeltaCom Preferred" was omitted from paragraph (iii ) of the third
resolution on page 3 of Appendix A of said Certificate of Ownership and Merger,
----------
and (iii) the last paragraph of Section 5.3.1 of Exhibit A to Appendix A of said
--------- ----------
Certificate of Ownership and Merger contained a typographical error.

4. Paragraphs (ii) and (iii) of the third resolution on page 3 of
Appendix A of the Certificate of Ownership and Merger are corrected to read in
- ----------
their entirety as follows:

(ii) each share of ITC Holding Common shall be converted into 2.304012
(assuming that there are 24,075,000 shares of common stock of ITC/\DeltaCom
outstanding or issuable upon exercise of converted ITC Holding Options or upon
conversion of shares of the ITC/\DeltaCom Preferred (as defined herein)
immediately after such conversion) fully paid and nonassessable shares of common
stock, par value $.01 per share, of ITC/\DeltaCom, having such rights, terms,
and preferences as set forth in the ITC/\DeltaCom Charter (the "ITC/\DELTACOM
COMMON") (the "COMMON STOCK CONVERSION RATIO"); provided, however, that no
fractional shares of ITC/\DeltaCom Common shall be issued pursuant to such
conversion, and in lieu of fractional shares of ITC/\DeltaCom Common resulting
from such conversion, there shall be paid, upon surrender of certificates
formerly

<PAGE>

representing shares of ITC Holding Common, to each holder of ITC Holding Common
who otherwise would be entitled to receive a fractional share of ITC/\DeltaCom
Common an amount of cash (without interest) determined by multiplying such
fraction by the initial public offering price per share of ITC/\DeltaCom's
common stock;

(iii) each share of ITC Holding Preferred shall be converted into
2.304012 (assuming that there are 24,075,000 shares of ITC/\DeltaCom Common
outstanding or issuable upon exercise of converted ITC Holding Options or upon
conversion of shares of ITC/\DeltaCom Preferred immediately after such
conversion) fully paid and nonassessable shares of Series A Convertible
Preferred Stock, par value $.01 per share, of ITC/\DeltaCom, having such rights,
terms, and preferences, as are set forth in the Certificate of Designations
attached as Attachment 1 to the ITC/\DeltaCom Charter (the "ITC/\DELTACOM
------------
PREFERRED"); provided, however, that no fractional shares of ITC/\DeltaCom
Preferred shall be issued pursuant to such conversion, and in lieu of fractional
shares of ITC/\DeltaCom Preferred resulting from such conversion, there shall be
paid, upon surrender of certificates formerly representing shares of ITC Holding
Preferred, to each holder of ITC Holding Preferred who otherwise would be
entitled to receive a fractional share of ITC/\DeltaCom Preferred an amount of
cash (without interest) determined by multiplying such fraction by the Initial
Conversion Price for the ITC/\DeltaCom Preferred (as such term is defined in the
Certificate of Designations for the ITC/\DeltaCom Preferred);

5. The last paragraph of Section 5.3.1 of Exhibit A to Appendix A of
--------- ----------
said Certificate of Ownership and Merger is corrected to read in its entirety as
follows:

Pursuant to authority granted to the Board of Directors of the
Corporation in the Corporation's original Certificate of Incorporation, on
October 16, 1997, the Board of Directors of the Corporation duly adopted
resolutions creating the Series A Convertible Preferred Stock, par value $.01
per share, of the Corporation, the rights, powers and preferences for which are
set forth in Attachment 1 hereto and incorporated by reference herein and made
------------
an integral part hereof.

<PAGE>

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
made under the seal of the Corporation and signed by Dabsey M. Gray, its Vice
President, Controller and Assistant Secretary, this 21st day of October, 1997.

ITC HOLDING COMPANY, INC.

By: /s/ Dabsey M. Gray
------------------------------
Dabsey M. Gray
Vice President, Controller and
Assistant Secretary

<PAGE>

Exhibit 3.2

AMENDED AND RESTATED BYLAWS

ITC/\DELTACOM, INC.

1. OFFICES

1.1. Registered Office

The initial registered office of the Corporation shall be in
Wilmington, Delaware, and the initial registered agent in charge thereof shall
be Corporation Service Company.

1.2. Other Offices

The Corporation may also have offices at such other places, both
within and without the State of Delaware, as the Board of Directors may from
time to time determine or as may be necessary or useful in connection with the
business of the Corporation.

2. MEETINGS OF STOCKHOLDERS

2.1. Place of Meetings

All meetings of the stockholders shall be held at such place as may
be fixed from time to time by the Board of Directors, the Chairperson, the Chief
Executive Officer or the President.

2.2. Annual Meetings

The Corporation shall hold annual meetings of stockholders,
commencing with the year 1998, on such date and at such time as shall be
designated from time to time by the Board of Directors, the Chairperson, the
Chief Executive Officer or the President, at which stockholders shall elect
successors to that class of directors whose terms shall have expired and
transact such other business as may properly be brought before the meeting.

2.3. Special Meetings

Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute, may be called at any time by (a) the
Chairperson or (b) a majority of the directors in office, although less than a
quorum.
<PAGE>

2.4. Notice of Meetings

Notice of any meeting of stockholders, stating the place, date and
hour of the meeting, and (if it is a special meeting) the purpose or purposes
for which the meeting is called, shall be given to each stockholder entitled to
vote at such meeting not less than ten nor more than sixty days before the date
of the meeting (except to the extent that such notice is waived or is not
required as provided in the General Corporation Law of the State of Delaware
(the "Delaware General Corporation Law") or these Amended and Restated Bylaws
(the "Bylaws")). Such notice shall be given in accordance with, and shall be
deemed effective as set forth in, Section 222 (or any successor section) of the
Delaware General Corporation Law.

2.5. Waivers of Notice

Whenever the giving of any notice is required by statute, the
Certificate of Incorporation of the Corporation (which shall include any
amendments thereto and shall be hereinafter referred to as so amended as the
"Certificate of Incorporation") or these Bylaws, a waiver thereof, in writing
and delivered to the Corporation, signed by the person or persons entitled to
such notice, whether before or after the event as to which such notice is
required, shall be deemed equivalent to notice. Attendance of a stockholder at
a meeting shall constitute a waiver of notice (1) of such meeting, except when
the stockholder at the beginning of the meeting objects to holding the meeting
or transacting business at the meeting, and (2) (if it is a special meeting) of
consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice, unless the stockholder
objects to considering the matter at the beginning of the meeting.

2.6. Business at Special Meetings

Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice (except to the extent that such
notice is waived or is not required as provided in the Delaware General
Corporation Law or these Bylaws).

2.7. List of Stockholders

After the record date for a meeting of stockholders has been fixed,
at least ten days before such meeting, the officer who has charge of the stock
ledger of the Corporation shall make a list of all stockholders entitled to vote
at the meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place in the city where the meeting
is to be held, which place is to be specified in the notice of the meeting, or
at the place where the meeting is to be held. Such list shall also, for the
duration of the meeting, be produced and kept open to the examination of any
stockholder who is present at the time and place of the meeting.

2.8. Quorum at Meetings

Stockholders may take action on a matter at a meeting only if a
quorum exists with respect to that matter. Except as otherwise provided by
statute or by the Certificate of
<PAGE>

Incorporation, the holders of a majority of the shares entitled to vote at the
meeting, and who are present in person or represented by proxy, shall constitute
a quorum at all meetings of the stockholders for the transaction of business.
Where a separate vote by a class or classes is required, a majority of the
outstanding shares of such class or classes, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter. Once a share is represented for any purpose at a meeting
(other than solely to object (1) to holding the meeting or transacting business
at the meeting, or (2) (if it is a special meeting) to consideration of a
particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice), it is deemed present for quorum purposes for
the remainder of the meeting and for any adjournment of that meeting unless a
new record date is or must be set for the adjourned meeting. The holders of a
majority of the voting shares represented at a meeting, whether or not a quorum
is present, may adjourn such meeting from time to time.

2.9. Voting and Proxies

Unless otherwise provided in the Delaware General Corporation Law or
in the Certificate of Incorporation, and subject to the other provisions of
these Bylaws, each stockholder shall be entitled to one vote on each matter, in
person or by proxy, for each share of the Corporation's capital stock that has
voting power and that is held by such stockholder. No proxy shall be voted or
acted upon after three years from its date, unless the proxy provides for a
longer period. A duly executed appointment of proxy shall be irrevocable if the
appointment form states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power.

2.10. Required Vote

When a quorum is present at any meeting of stockholders, all matters
(other than the election of directors) shall be determined, adopted and approved
by the affirmative vote (which need not be by ballot) of a majority of the votes
of the shares present in person or represented by proxy at the meeting and
entitled to vote with respect to the matter, unless the proposed action is one
upon which, by express provision of the Delaware General Corporation Law or of
the Certificate of Incorporation, a different vote is specified and required, in
which case such express provision shall govern and control with respect to that
vote on that matter. Where a separate vote by a class or classes is required,
the affirmative vote of the holders of a majority of the shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class, unless the proposed action is one upon which, by express
provision of the Delaware General Corporation Law or of the Certificate of
Incorporation, a different vote is specified and required, in which case such
express provision shall govern and control with respect to that vote on that
matter. Notwithstanding the foregoing, directors shall be elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of directors.

2.11. Action Without a Meeting

Except as otherwise provided by the Certificate of Incorporation,
any action required or permitted to be taken by the stockholders of the
Corporation at a duly called annual or special meeting of stockholders may be
effected without
<PAGE>

a meeting, without prior notice and without a vote, but only if the action is
effected by one or more unanimous written consents of the stockholders entitled
to take such action, and the writing or writings are delivered to the
Corporation within sixty days of the delivery to the Corporation of the earliest
dated consent. All such consents shall be included in the Minute Book of the
Corporation.

3. DIRECTORS

3.1. Powers

The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, which may exercise all such
powers of the Corporation and do all such lawful acts and things, subject to any
limitation set forth in the Certificate of Incorporation or as otherwise may be
provided in the Delaware General Corporation Law.

3.2. Number and Election; Classes

The number of directors which shall constitute the whole Board of
Directors shall not be fewer than five nor more than fifteen. The first Board of
Directors shall consist of 9 members. Thereafter, within the limits above
specified, the number of directors shall be determined by resolution of the
Board of Directors. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 3.4 hereof, and each director
elected shall hold office until such director's successor is elected and
qualified or until the director's earlier death, resignation or removal.
Directors need not be stockholders. Unless otherwise provided in the Certificate
of Incorporation, the Board of Directors shall divide the directors into three
classes; and, when the number of directors is changed, shall determine the class
or classes to which the increased or decreased number of directors shall be
apportioned; provided, however, that no decrease in the number of directors
-------- -------
shall affect the term of any director then in office. At each annual meeting of
stockholders, directors elected to succeed those whose terms are expiring shall
be elected for a term of office expiring at the annual meeting of stockholders
held in the third year following their election and until their respective
successors are elected and qualified, or until such director's earlier death,
resignation or removal.

3.3. Nomination of Directors

Only persons who are nominated in accordance with the procedures set
forth in this Section 3.3 shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the Corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the Corporation entitled to vote for the
election of directors at the meeting who complies with the notice procedures set
forth in this Section 3.3. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a stockholder notice
shall be delivered to or mailed and received at the principal executive office
of the Corporation not less than sixty days prior to the meeting; provided,
however, that in the event that less than seventy-five days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the fifteenth day
<PAGE>

following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. Such stockholder's notice shall set forth (a)
as to each person whom the stockholder proposes to nominate for election or re-
election as a director, (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of the Corporation's stock which
are beneficially owned by such person, and (iv) any other information relating
to such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
without limitation such person's written consent to be named in the proxy
statement as a nominee and to serving as a director if elected); and (b) as to
the stockholder giving the notice, (i) the name and address, as they appear on
the Corporation's books, of such stockholder and (ii) the class and number of
shares of the Corporation's stock which are beneficially owned by such
stockholder. At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish to the Secretary
of the Corporation that information required to be set forth in the
stockholder's notice of nomination which pertains to the nominee. No later than
the tenth day following the date of receipt of a stockholder nomination
submitted pursuant to this Section 3.3, the Chairman of the Board of Directors
of the Corporation shall, if the facts warrant, determine and notify in writing
the stockholder making such nomination that such nomination was not made in
accordance with the time limits and/or other procedures prescribed by the
bylaws. If no such notification is mailed to such stockholder within such ten-
day period, such nomination shall be deemed to have been made in accordance with
the provisions of this Section 3.3. No person shall be eligible for election as
a director of the Corporation unless nominated in accordance with the procedures
set forth in this Section 3.3.

3.4. Vacancies

Vacancies and newly created directorships resulting from any increase
in the authorized number of directors elected by all of the stockholders having
the right to vote as a single class may be filled by a majority of the directors
then in office, although fewer than a quorum, or by a sole remaining director.
Whenever the holders of any class or classes of stock or series thereof are
entitled to elect one or more directors by the provisions of the Certificate of
Incorporation, vacancies and newly created directorships of such class or
classes or series may be filled by a majority of the directors elected by such
class or classes or series thereof in office, or by a sole remaining director so
elected. Each director so chosen shall hold office until the next election of
the class for which such director shall have been chosen, and until such
director's successor is elected and qualified, or until the director's earlier
death, resignation or removal. In the event that one or more directors resigns
from the Board of Directors, effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office until the next election of the class for which such director
shall have been chosen, and until such director's successor is elected and
qualified, or until the director's earlier death, resignation or removal.

<PAGE>

3.5. Meetings

3.5.1. Regular Meetings

Regular meetings of the Board of Directors may be held without notice
at such time and at such place as shall from time to time be determined by the
Board of Directors.

3.5.2. Special Meetings

Special meetings of the Board of Directors may be called by the
Chairperson, the Chief Executive Officer or the President on one day's notice.
At least one day's notice of special meetings of the Board of Directors shall be
provided to each director, either personally or by telephone, express delivery
service (so that the scheduled delivery date of the notice is at least one day
in advance of the meeting), telegram or facsimile transmission. At least five
days' notice of special meetings of the Board of Directors shall be provided by
first-class mail (effective upon deposit of such notice in the mail). The
notice need not describe the purpose of a special meeting.

3.5.3. Telephone Meetings

Members of the Board of Directors may participate in a meeting of the
Board of Directors by any communication by means of which all participating
directors can simultaneously hear each other during the meeting. A director
participating in a meeting by this means is deemed to be present in person at
the meeting.

3.5.4. Action Without Meeting

Any action required or permitted to be taken at any meeting of the
Board of Directors may be taken without a meeting if the action is taken by all
members of the Board of Directors. The action must be evidenced by one or more
written consents describing the action taken, signed by each director, and
delivered to the Corporation for inclusion in the Minute Book of the
Corporation.

3.5.5. Waiver of Notice of Meeting

A director may waive any notice required by statute, the Certificate
of Incorporation or these Bylaws before or after the date and time stated in the
notice. Except as set forth below, the waiver must be in writing, signed by the
director entitled to the notice, and delivered to the Corporation for inclusion
in the Minute Book of the Corporation. Notwithstanding the foregoing, a
director's attendance at or participation in a meeting waives any required
notice to the director of the meeting unless the director at the beginning of
the meeting objects to holding the meeting or transacting business at the
meeting and does not thereafter vote for or assent to action taken at the
meeting.

3.6. Quorum and Vote at Meetings

At all meetings of the Board of Directors, a quorum of the Board
of Directors consists of a majority of the total number of directors prescribed
pursuant to Section 3.2 of these Bylaws. The vote of a majority of the directors
present at any meeting at which there is a quorum shall

<PAGE>

be the act of the Board of Directors, except as may be otherwise specifically
provided by statute or by the Certificate of Incorporation or by these Bylaws.

3.7. Committees of Directors

The Board of Directors may by resolution create one or more
committees and appoint members of the Board of Directors to serve on the
committees at the pleasure of the Board of Directors. The Board may designate
one or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. If a member of a
committee shall be absent from any meeting, or disqualified from voting thereat,
the remaining member or members present and not disqualified from voting,
whether or not such member or members constitute a quorum, may, by unanimous
vote, appoint another member of the Board of Directors to act at the meeting in
the place of such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors pursuant to Section 151(a) of the
Delaware General Corporation Law, fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the Corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
Corporation or fix the number of shares of stock or authorize the increase or
decrease of the shares of any series), adopting an agreement of merger or
consolidation pursuant to Section 251 or 252 of the Delaware General Corporation
Law, recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the Bylaws; and unless the Board resolution appointing the
Committee, these Bylaws or the Certificate of Incorporation expressly so
provide, no such committee shall have the power or authority to declare a
dividend, to authorize the issuance of stock, or to adopt a certificate of
ownership and merger pursuant to Section 253 of the Delaware General Corporation
Law. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and report the same to
the Board of Directors, when required. Unless otherwise specified in the board
resolution appointing the Committee, all provisions of the Delaware General
Corporation Law and these Bylaws relating to meetings, action without meetings,
notice (and waiver thereof), and quorum and voting requirements of the Board of
Directors apply, as well, to such committees and their member s.

3.8. Compensation of Directors

The Board of Directors shall have the authority to fix the
compensation of directors. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
<PAGE>

4. OFFICERS

4.1. Positions

The officers of the Corporation shall be a President, a Secretary and
a Treasurer, and such other officers as the Board of Directors (or an officer
authorized by the Board of Directors) from time to time may appoint, including a
Chairperson, a Chief Executive Officer, a Chief Financial Officer and one or
more Vice Chairmen, Senior Vice Presidents, Vice Presidents, Assistant
Secretaries and Assistant Treasurers. Each such officer shall exercise such
powers and perform such duties as shall be set forth below and such other powers
and duties as from time to time may be specified by the Board of Directors or by
any officer(s) authorized by the Board of Directors to prescribe the duties of
such other officers. Any number of offices may be held by the same person,
except that in no event shall the President and the Secretary be the same
person. Each of the Chairperson, Chief Executive Officer, Chief Financial
Officer, President, and/or any Vice President may execute bonds, mortgages and
other documents under the seal of the Corporation, except where required or
permitted by law to be otherwise executed and except where the execution thereof
shall be expressly delegated by the Board of Directors to some other officer or
agent of the Corporation.

4.2. Chairperson

The Chairperson shall (when present) preside at all meetings of the
Board of Directors and stockholders, and shall ensure that all orders and
resolutions of the Board of Directors and stockholders are carried into effect.
The Chairperson may execute bonds, mortgages and other contracts, under the seal
of the Corporation, if required, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution thereof
shall be expressly delegated by the Board of Directors to some other officer or
agent of the Corporation.

4.3. Chief Executive Officer

In the absence of the Chairperson, or if no Chairperson shall have
been appointed, the Chief Executive Officer shall (when present) preside at all
meetings of the Board of Directors and stockholders, and shall ensure that all
orders and resolutions of the Board of Directors and stockholders are carried
into effect. The Chief Executive Officer may execute bonds, mortgages and other
contracts, under the seal of the Corporation, if required, except where required
or permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation.

4.4. President

The President shall have overall responsibility and authority for
management of the operations of the Corporation, subject to the authority of the
Chief Executive Officer and the Board of Directors. The President may execute
bonds, mortgages and other contracts, under the seal of the Corporation, if
required, except where required or permitted by law to be otherwise signed and
executed and except where the signing and execution thereof shall be expressly
delegated by the Board of Directors to some other officer or agent of the
Corporation.
<PAGE>

4.5. Chief Financial Officer

The Chief Financial Officer shall have overall responsibility and
authority for management of the financial operations of the Corporation, subject
to the authority of the Chief Executive Officer and the Board of Directors. The
Chief Financial Officer may execute bonds, mortgages and other contracts, under
the seal of the Corporation, if required, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of Directors to some
other officer or agent of the Corporation.

4.6. Vice President

In the absence of the President or in the event of the President's
inability or refusal to act, the Vice President (or in the event there be more
than one Vice President, the Vice Presidents in the order designated, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the President, and when so acting shall have all the powers of,
and be subject to all the restrictions upon, the President.

4.7. Secretary

The Secretary shall have responsibility for preparation of minutes of
meetings of the Board of Directors and of the stockholders and for
authenticating records of the Corporation. The Secretary shall give, or cause
to be given, notice of all meetings of the stockholders and special meetings of
the Board of Directors. The Secretary or an Assistant Secretary may also attest
all instruments signed by any other officer of the Corporation.

4.8. Assistant Secretary

The Assistant Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the Board of Directors (or if there shall
have been no such determination, then in the order of their election), shall, in
the absence of the Secretary or in the event of the Secretary's inability or
refusal to act, perform the duties and exercise the powers of the Secretary.

4.9. Treasurer

The Treasurer shall have responsibility for the custody of the
corporate funds and securities and shall see to it that full and accurate
accounts of receipts and disbursements are kept in books belonging to the
Corporation. The Treasurer shall render to the Chairperson, the Chief Executive
Officer, the President, the Chief Financial Officer and the Board of Directors,
upon request, an account of all financial transactions and of the financial
condition of the Corporation.

4.10. Assistant Treasurer

The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors (or if
there shall have been no
<PAGE>

such determination, then in the order of their election), shall, in the absence
of the Treasurer or in the event of the Treasurer's inability or refusal to act,
perform the duties and exercise the powers of the Treasurer.

4.11. Term of Office

The officers of the Corporation shall hold office until their
successors are chosen and qualify or until their earlier resignation or removal.
Any officer may resign at any time upon written notice to the Corporation. Any
officer elected or appointed by the Board of Directors may be removed at any
time, with or without cause, by the affirmative vote of a majority of the Board
of Directors.

4.12. Compensation

The compensation of officers of the Corporation shall be fixed by the
Board of Directors or by any officer(s) authorized by the Board of Directors to
prescribe the compensation of such other officers.

4.13. Fidelity Bonds

The Corporation may secure the fidelity of any or all of its officers
or agents by bond or otherwise.

5. CAPITAL STOCK

5.1. Certificates of Stock; Uncertificated Shares

The shares of the Corporation shall be represented by certificates,
provided that the Board of Directors may provide by resolution that some or all
of any or all classes or series of the Corporation's stock shall be
uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates, and upon request
every holder of uncertificated shares, shall be entitled to have a certificate
(representing the number of shares registered in certificate form) signed in the
name of the Corporation by the Chairperson, President or any Vice President, and
by the Treasurer, Secretary or any Assistant Treasurer or Assistant Secretary of
the Corporation. Any or all the signatures on the certificate may be facsimile.
In case any officer, transfer agent or registrar whose signature or facsimile
signature appears on a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if such person were such officer,
transfer agent or registrar at the date of issue.
<PAGE>

5.2. Lost Certificates

The Board of Directors, Chairperson, Chief Executive Officer,
President or Secretary may direct a new certificate of stock to be issued in
place of any certificate theretofore issued by the Corporation and alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming that the certificate of stock has been lost, stolen
or destroyed. When authorizing such issuance of a new certificate, the Board of
Directors or any such officer may, as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or such owner's legal representative, to advertise the same in
such manner as the Board of Directors or such officer shall require and/or to
give the Corporation a bond or indemnity, in such sum or on such terms and
conditions as the Board of Directors or such officer may direct, as indemnity
against any claim that may be made against the Corporation on account of the
certificate alleged to have been lost, stolen or destroyed or on account of the
issuance of such new certificate or uncertificated shares.

5.3. Record Date

5.3.1. Actions by Stockholders

In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders, the Board of Directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than sixty days nor less than ten days
before the date of such meeting. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be the close of business on the day
next preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting,
unless the Board of Directors fixes a new record date for the adjourned meeting.

In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than ten days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by the Delaware General Corporation Law, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the Corporation in the manner prescribed by Section 213(b)
of the Delaware General Corporation Law. If no record date has been fixed by
the Board of Directors and prior action by the Board of Directors is required by
the Delaware General Corporation Law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
<PAGE>

5.3.2. Payments

In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.

5.4. Stockholders of Record

The Corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to receive dividends, to
receive notifications, to vote as such owner, and to exercise all the rights and
powers of an owner. The Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise may be provided by the Delaware General Corporation Law.

6. INDEMNIFICATION

6.1. Authorization of Indemnification

Each person who was or is a party or is threatened to be made a party
to or is involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative and whether
by or in the right of the Corporation or otherwise (a "proceeding"), by reason
of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee,
partner (limited or general) or agent of another corporation or of a
partnership, joint venture, limited liability company, trust or other
enterprise, including service with respect to an employee benefit plan, shall be
(and shall be deemed to have a contractual right to be) indemnified and held
harmless by the Corporation (and any successor to the Corporation by merger or
otherwise) to the fullest extent authorized by, and subject to the conditions
and (except as provided herein) procedures set forth in the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but any such
amendment shall not be deemed to limit or prohibit the rights of indemnification
hereunder for past acts or omissions of any such person insofar as such
amendment limits or prohibits the indemnification rights that such law permitted
the Corporation to provide prior to such amendment), against all expenses,
liabilities and losses (including attorneys' fees, judgments, fines, ERISA taxes
or penalties and amounts paid or to be paid in settlement) reasonably incurred
or suffered by such person in connection therewith; provided, however, that the
--------- --------
Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person (except
for a suit or action pursuant to Section 6.2 hereof) only if such proceeding (or
part thereof) was authorized by the Board of Directors of the Corporation.
Persons who are not directors or officers of the Corporation may be similarly
indemnified in respect of such service
<PAGE>

to the extent authorized at any time by the Board of Directors of the
Corporation. The indemnification conferred in this Section 6.1 also shall
include the right to be paid by the Corporation (and such successor) the
expenses (including attorneys' fees) incurred in the defense of or other
involvement in any such proceeding in advance of its final disposition;
provided, however, that, if and to the extent the Delaware General Corporation
- --------- --------
Law requires, the payment of such expenses (including attorneys' fees) incurred
by a director or officer in advance of the final disposition of a proceeding
shall be made only upon delivery to the Corporation of an undertaking by or on
behalf of such director or officer to repay all amounts so paid in advance if it
shall ultimately be determined that such director or officer is not entitled to
be indemnified under this Section 6.1 or otherwise; and provided further, that,
-------- --------
such expenses incurred by other employees and agents may be so paid in advance
upon such terms and conditions, if any, as the Board of Directors deems
appropriate.

6.2. Right of Claimant to Bring Action Against the Corporation

If a claim under Section 6.1 is not paid in full by the Corporation
within sixty days after a written claim has been received by the Corporation,
the claimant may at any time thereafter bring an action against the Corporation
to recover the unpaid amount of the claim and, if successful in whole or in
part, the claimant shall be entitled to be paid also the expense of prosecuting
such action. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in connection with any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed or is otherwise not entitled to indemnification under Section
6.1, but the burden of proving such defense shall be on the Corporation. The
failure of the Corporation (in the manner provided under the Delaware General
Corporation Law) to have made a determination prior to or after the commencement
of such action that indemnification of the claimant is proper in the
circumstances because he or she has met the applicable standard of conduct set
forth in the Delaware General Corporation Law shall not be a defense to the
action or create a presumption that the claimant has not met the applicable
standard of conduct. Unless otherwise specified in an agreement with the
claimant, an actual determination by the Corporation (in the manner provided
under the Delaware General Corporation Law) after the commencement of such
action that the claimant has not met such applicable standard of conduct shall
not be a defense to the action, but shall create a presumption that the claimant
has not met the applicable standard of conduct.

6.3. Non-exclusivity

The rights to indemnification and advance payment of expenses provided
by Section 6.1 hereof shall not be deemed exclusive of any other rights to which
those seeking indemnification and advance payment of expenses may be entitled
under any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office.
<PAGE>

6.4. Survival of Indemnification

The indemnification and advance payment of expenses and rights thereto
provided by, or granted pursuant to, Section 6.1 hereof shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee, partner or agent and shall inure to the
benefit of the personal representatives, heirs, executors and administrators of
such person.

6.5. Insurance

The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, partner (limited or general) or agent of another
corporation or of a partnership, joint venture, limited liability company, trust
or other enterprise, against any liability asserted against such person or
incurred by such person in any such capacity, or arising out of such person's
status as such, and related expenses, whether or not the Corporation would have
the power to indemnify such person against such liability under the provisions
of the Delaware General Corporation Law.

7. GENERAL PROVISIONS

7.1. Inspection of Books and Records

Any stockholder, in person or by attorney or other agent, shall, upon
written demand under oath stating the purpose thereof, have the right during the
usual hours for business to inspect for any proper purpose the Corporation's
stock ledger, a list of its stockholders, and its other books and records, and
to make copies or extracts therefrom. A proper purpose shall mean a purpose
reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent shall be the person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing which authorizes the attorney or other agent to
so act on behalf of the stockholder. The demand under oath shall be directed to
the Corporation at its registered office or at its principal place of business.

7.2. Dividends

The Board of Directors may declare dividends upon the capital stock of
the Corporation, subject to the provisions of the Certificate of Incorporation
and the laws of the State of Delaware.

7.3. Reserves

The directors of the Corporation may set apart, out of the funds of
the Corporation available for dividends, a reserve or reserves for any proper
purpose and may abolish any such reserve.
<PAGE>

7.4. Execution of Instruments

All checks, drafts or other orders for the payment of money, and
promissory notes of the Corporation shall be signed by such officer or officers
or such other person or persons as the Board of Directors may from time to time
designate.

7.5. Fiscal Year

The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.

7.6. Seal

The corporate seal shall be in such form as the Board of Directors
shall approve. The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.

7.7. Amendments

The Board of Directors or the stockholders may from time to time
adopt, amend or repeal the Bylaws of the Corporation. Such action by the Board
of Directors shall require the affirmative vote of at least a majority of the
directors then in office. Such action by the stockholders shall require the
affirmative vote of 66-2/3% of the total number of votes of the then outstanding
shares of capital stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class thereon.

* * * * *

The foregoing Amended and Restated Bylaws were adopted by the Board of
Directors on October 16, 1997.

/s/ J. Thomas Mullis
----------------------------------------
J. Thomas Mullis, Secretary

<PAGE>
Exhibit 4.1

ITC/\DELTACOM

COMMON STOCK COMMON STOCK

NUMBER SHARES
---------------- ----------------

---------------- ----------------
INCORPORATED UNDER THE LAWS OF SEE REVERSE FOR
THE STATE OF DELAWARE CERTAIN DEFINITIONS

CUSIP 45031T 10 4

- --------------------------------------------------------------------------------
This certifies that

is the owner of
- --------------------------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE OF $.01 PER
SHARE, OF
ITC/\DeltaCom, Inc.

(hereinafter, the "Corporation") transferable on the books of the
Corporation by the holder hereof in person or by duly authorized attorney upon
surrender of this certificate properly endorsed.
This certificate and the shares represented hereby are issued and shall
be held subject to all of the provisions of the Certificate of Incorporation and
by-laws of the Corporation and all amendments thereto, copies of which are on
file with the Transfer Agent to all of which the holder of this certificate by
acceptance hereof assents. This certificate is not valid unless countersigned
and registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of the duly authorized officers of the Corporation.

Dated:

Countersigned and Registered:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(New York, New York) Transfer Agent
and Registrar

Authorized Signature

-------------------------- --------------------------
THE FACSIMILE SIGNATURE OF THE FACSIMILE SIGNATURE OF

[CORPORATE SEAL APPEARS HERE]

-------------------------- --------------------------
TO APPEAR HERE TO APPEAR HERE
-------------------------- --------------------------
SECRETARY PRESIDENT
<PAGE>

ITC/\DeltaCom, Inc.

THE CORPORATION IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OR SERIES OF
STOCK. IN ADDITION, THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
REDEMPTION BY THE CORPORATION IN CERTAIN LIMITED CIRCUMSTANCES. THE CORPORATION
WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS A STATEMENT OF
THE TERMS AND CONDITIONS OF SUCH REDEMPTION PROVISIONS AND THE POWER,
DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. ANY SUCH REQUEST
SHOULD BE ADDRESSED TO THE SECRETARY OF THE CORPORATION.

The following abbreviations, when used in the inscription on the face of
the certificate, shall be construed as though they were written out in full
according to applicable terms or regulations:

TEN COM - as tenants in common UNIF GIFT MIN ACT - ______________
TEN ENT - as tenants by the entireties (Cust)
JT TEN - as joint tenants with right Custodian ________________________
of survivorship and not as (Minor)
tenants in common
under Uniform Gifts to Minors

Act ______________________________
(State)

Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, _________________________ hereby sells, assigns and
transfers unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ----------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE

- --------------------------------------------------------------------------------

Shares
- ------------------------------------------------------------------------

of the capital stock represented by this Certificate, and does hereby
irrevocably constitute and appoint

Attorney
- ----------------------------------------------------------------------

to transfer the said stock on the books of the Corporation with full power of
substitution in the premises.

Dated ____________________

X
---------------------------------------------------------

X
---------------------------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF
THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.

SIGNATURE(S) GUARANTEED;

- --------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.

<PAGE>

Hogan & Hartson L.L.P.
Columbia Square
555 13th Street, N.W.
Washington, D.C. 20004-1109

Exhibit 5.1
-----------

October 22, 1997

Board of Directors
ITC/\DeltaCom, Inc.
206 West Ninth Street
West Point, Georgia, 31833

Gentlemen:

This firm has acted as counsel to ITC/\DeltaCom, Inc. (the
"Company"), a Delaware corporation, in connection with its registration,
pursuant to a registration statement on Form S-1, of 5,750,000 shares (the
"Shares") of common stock, par value $.01 per share, of the Company. This letter
is furnished to you pursuant to the requirements of Item 601(b)(5) of Regulation
S-K, 17 C.F.R. (S)229.601(b)(5), in connection with such registration.

For purposes of this opinion letter, we have examined copies of the
following documents:

1. The Registration Statement on Form S-1 (No. 333-36683) as filed
with the Securities and Exchange Commission (the "Commission") on
September 30, 1997, Amendment No. 1 thereto as filed with the
Commission on October 3, 1997, Amendment No. 2 thereto as filed
with the Commission on October 16, 1997 and Amendment No. 3
thereto as filed with the Commission on or about October 22, 1997
(such Registration Statement, the "Registration Statement").

2. The form of Underwriting Agreement (the "Underwriting Agreement")
among Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, J.C. Bradford & Co. and Wheat, First
Securities, Inc., as Representatives of the Underwriters, and the
Company.

3. The Certificate of Incorporation of the Company, as certified by
the Secretary of the Company on the date hereof as then being
complete, accurate and in effect.

4. The Amended and Restated Bylaws of the Company, as certified by
the Secretary of the Company on the date hereof as then being
complete, accurate and in effect.

5. Resolutions of the Board of Directors of the Company adopted on
September 26, 1997 and October 16, 1997, as certified by the
Secretary of the Company on the date hereof as then being
complete, accurate and in effect.

<PAGE>

Board of Directors
ITC/\DeltaCom, Inc.
October 22, 1997
Page 2

In our examination of the aforesaid documents, we have assumed the genuineness
of all signatures, the legal capacity of natural persons, the authenticity,
accuracy and completeness of all documents submitted to us as originals, and the
conformity with the original documents of all documents submitted to us as
certified, telecopied, photostatic, or reproduced copies. This opinion letter is
given, and all statements herein are made, in the context of the foregoing.

This opinion letter is based as to matters of law solely on the
General Corporation Law of the State of Delaware. We express no opinion herein
as to any other laws, statutes, regulations, or ordinances.

Based upon, subject to and limited by the foregoing, we are of the
opinion that following (i) final action of the Board of Directors of the Company
(or a duly appointed pricing committee thereof) approving the price of the
Shares, (ii) execution and delivery by the Company of the Underwriting
Agreement, (iii) effectiveness of the Registration Statement, (iv) issuance of
the Shares pursuant to the terms of the Underwriting Agreement and (v) receipt
by the Company of the consideration for the Shares to be sold by the Company
specified in the resolutions of the Board of Directors, the Shares to be sold by
the Company will be validly issued, fully paid and nonassessable under the
General Corporation Law of the State of Delaware.

We assume no obligation to advise you of any changes in the foregoing
subsequent to the delivery of this opinion letter. This opinion letter has been
prepared solely for your use in connection with the filing of the Registration
Statement on the date of this opinion letter, and should not be quoted in
whole or in part or otherwise be referred to, nor be filed with or furnished to
any governmental agency or other person or entity, without the prior written
consent of this firm.

We hereby consent to the filing of this opinion letter as Exhibit 5.1
to the Registration Statement. In giving this consent, we do not thereby admit
that we are an "expert" within the meaning of the Securities Act of 1933, as
amended.

Very truly yours,

/s/ HOGAN & HARTSON L.L.P.

HOGAN & HARTSON L.L.P.

<PAGE>
Exhibit 10.35.3

COLLOCATION AGREEMENT

By and Between

BellSouth Telecommunications, Inc.

and

DeltaCom, Inc.
<PAGE>

BellSouth Telecommunications, Inc. & DeltaCom, Inc.
- --------------------------------------------------------------------------------

Amendment to
The Interconnection Agreement
BETWEEN DELTACOM, INC.
and BellSouth Telecommunications, Inc.
Dated March 12, 1997

Pursuant to this Agreement (the "Amendment") DeltaCom, Inc. ("Interconnector")
and BellSouth Telecommunications, Inc., ("BellSouth") hereinafter referred to
collectively as the "Parties" hereby agree to amend that certain Interconnection
Agreement between the Parties dated March 12, 1997 ("Interconnection
Agreement").

I. SCOPE OF AMENDMENT

A. BellSouth hereby grants to Interconnector a right to occupy that
certain enclosed area designated by BellSouth within a BellSouth Central Office,
of a size and dimension which is specified by Interconnector and agreed to by
BellSouth (hereinafter "Collocation Space"). BellSouth will design and
construct at Interconnector's agreed upon expense, a wall or other delineation
to establish a clear division between the Collocation Space and other areas of
the Central Office dedicated to BellSouth's use.

B. Interconnector shall use the Collocation Space for the purposes of
providing services to Interconnector's customers, installing, maintaining and
operating Interconnector's equipment (to include testing and monitoring
equipment) which is used to interconnect with telecommunications services and
facilities provided by BellSouth. Pursuant to Article III, following,
Interconnector may place Interconnector-owned fiber entrance facilities to the
Collocation Space, in which case the arrangement is designated "Expanded
Interconnection." Placement of equipment in the Collocation Space without the
use of Interconnector-owned entrance facilities is designated "Service
Interconnection." In addition to, and not in lieu of, interconnection to
BellSouth services and facilities, Interconnector may connect to other
interconnectors within the designated Central Office. The Collocation Space may
be used for no other purposes except as specifically described herein or
authorized in writing by BellSouth.

C. Interconnector may not provide or make available space within the
Collocation Space to any third party. Notwithstanding the foregoing, any wholly
owned affiliate of Interconnector (i.e., Interconnector's Parent, subsidiary or
any entity under common ownership and control with Interconnector) who elects to
be made a party to this Amendment may collocate within any Central Office in a
separate Collocation Space pursuant to this Amendment by completing the
Application/Inquiry process provided for in this Amendment. Any violation of
this provision shall be deemed a material breach of this Amendment.

D. Interconnector agrees to pay the rates and charges identified at
Exhibit A attached hereto.

E. A Collocation Space will be provided to Interconnector at each Central
Office identified at Exhibit B attached hereto, which Exhibit shall be updated
from time to time as additional Central Offices are made subject to the terms of
this Amendment.

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BellSouth Telecommunications, Inc. & DeltaCom, Inc.
- --------------------------------------------------------------------------------

II. TERM OF AMENDMENT

A. Term. The term of this Amendment shall be for an initial period of two
----
(2) years, beginning on the Interconnection Agreement date stated above and
ending two (2) years later on the month and day corresponding to such date. The
Parties agree that any renegotiation of this Amendment upon expiration of the
term shall be pursuant to 47 U.S.C. (S)252. Until the revised agreement becomes
effective, the Parties shall continue to abide by the rates, terms and
conditions of this Amendment.

B. Upon expiration of the initial term, those service arrangements made
available under this Amendment and existing at the time of termination shall
continue without interruption under one of the following as agreed to by the
Parties: (a) a new agreement executed by the Parties, (b) standard
Interconnection terms and conditions approved and made generally effective by
the appropriate regulatory agency in each of BellSouth's nine State regions, (c)
Tariff terms and conditions generally available to interconnecting companies, or
(d) if none of the above is available, under the terms of this Amendment on a
month-to-month basis until an arbitration proceeding has been concluded by the
Parties.

C. Commencement Date. The "Commencement Date" shall be the first day
-----------------
after Interconnector's equipment becomes operational as described in Article
II.D, following.

D. Occupancy. BellSouth will notify Interconnector when the Collocation
---------
Space is ready for occupancy. Interconnector must place operational
telecommunications equipment in the Collocation Space and connect with
BellSouth's network within one hundred eighty (180) days after receipt of such
notice. BellSouth may consent to an extension beyond 180 days upon a
demonstration by Interconnector that circumstances beyond its reasonable control
prevented Interconnector from completing installation by the prescribed date.
If Interconnector fails to place operational telecommunications equipment in the
Collocation Space within 180 days and such failure continues for a period of
thirty (30) days after receipt of written notice from BellSouth, then and in
that event Interconnector's right to occupy the Collocation Space terminates and
BellSouth shall have no further obligations to Interconnector with respect to
said Collocation Space. Termination of Interconnector's rights to the
Collocation Space pursuant to this paragraph shall not operate to release
Interconnector from its obligation to reimburse BellSouth for all costs
reasonably incurred by BellSouth in preparing the Collocation Space, but rather
such obligation shall survive this Amendment. For purposes of this paragraph,
Interconnector's telecommunications equipment will be deemed operational when
cross-connected to BellSouth's network for the purpose of service provision.

E. Termination. Interconnector may terminate occupancy in a particular
-----------
Collocation Space upon thirty (30) days prior written notice to BellSouth. Upon
termination of such occupancy, Interconnector at its expense shall remove its
equipment and other property from the Collocation Space. Interconnector shall
have thirty (30) days from the termination date to complete such removal;
provided, however, that Interconnector shall continue payment of monthly fees to
BellSouth until such date as Interconnector has fully vacated the Collocation
Space. Should Interconnector fail to vacate the Collocation Space within thirty
(30) days from the termination date, BellSouth shall have the right to remove
the equipment and other property of Interconnector at Interconnector's expense
and with no liability for damage or injury to Interconnector's property unless
caused by the negligence or intentional misconduct of BellSouth.

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<PAGE>

BellSouth Telecommunications, Inc. & DeltaCom, Inc.
- --------------------------------------------------------------------------------

III. USE OF COLLOCATION SPACE

A. Nature of Use. BellSouth shall permit Interconnector to place,
-------------
maintain and operate in the Collocation Space any equipment that Interconnector
is authorized, as described herein, by BellSouth and by Federal or State
regulators to place, maintain and operate in collocation space and that is used
by Interconnector to provide services which Interconnector has the legal
authority to provide. The equipment must at a minimum comply with the BellCore
Network Equipment Building System (NEBS) General Equipment Requirements (TR-NWT-
000063) and National Electric Code standards. Interconnector may elect to
enclose the Collocation Space. Interconnector shall not use the Collocation
Space for marketing purposes. Interconnector shall place no signs or marking of
any kind (except for a plaque or other identification affixed to
Interconnector's equipment and reasonably necessary to identify Interconnector's
equipment, and which shall include a list of emergency contacts with telephone
numbers), in the area surrounding the Collocation Space or on the grounds of the
Central Office housing the Collocation Space.

B. Entrance Facilities. Interconnector may elect to place
-------------------
Interconnector-owned entrance facilities into the Collocation Space. BellSouth
will designate the point of interconnection in proximity to the central office
building housing the Collocation Space, such as an entrance manhole or a cable
vault. Interconnector will provide and place cable at the point of
interconnection of sufficient length to be pulled through conduit and into the
splice location. No splicing will be permitted in the entrance manhole.
Interconnector will provide a sufficient length of fire retardant riser cable,
to which the entrance cable will be spliced, which will extend from the splice
location to the Interconnector's equipment in the Collocation Space.
Interconnector must contact BellSouth for instructions prior to placing the
entrance facility cable in the manhole. Interconnector is responsible for
maintenance of the entrance facilities. Dual entrance will be permitted where
capacity exists. The interconnection point for entrance facilities extending
from a rooftop antenna will be designated by BellSouth on the
Application/Inquiry response.

C. Demarcation Point. A point-of-termination bay(s) will designate the
-----------------
point(s) of interconnection between Interconnector's equipment and/or network
and BellSouth's network. Each party will be responsible for maintenance and
operation of all equipment/facilities on its side of the demarcation point.
Interconnector may, at its option, provide its own point-of-termination bay(s)
in accordance with BellSouth's guidelines and specifications, which BellSouth
will provide upon request.

D. Interconnector's Equipment and Facilities. Interconnector is solely
-----------------------------------------
responsible for the design, engineering, testing, performance, monitoring,
maintenance, and repair of the equipment and facilities used by Interconnector
in the Collocation Space. Without limitation of the foregoing provisions,
Interconnector will be responsible for servicing, supplying, repairing,
installing and maintaining the following on its side of the demarcation point:
(l) cable(s); (2) equipment; (3) point-of-termination cross-connects; (4) point
of termination maintenance, including replacement fuses and circuit breaker
restoration, if not performed by BellSouth; and (5) connection cable(s) and
associated equipment which may be required within the Collocation Space to the
points of interconnection.

E. Easement Space. From time to time BellSouth may require access to the
--------------
Collocation Space. BellSouth retains the right to access such space for the
purpose of making equipment and building modifications (e.g., running, altering
or removing racking, ducts, electrical wiring, HVAC, and cables). BellSouth
will give reasonable notice to Interconnector when access to the Collocation
Space is required. Interconnector may elect to be present whenever BellSouth
performs work in the Collocation Space. The Parties agree that Interconnector
will not bear any of the expense associated with this work.

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(9/29/97) Page 4
<PAGE>

BellSouth Telecommunications, Inc. & DeltaCom, Inc.
- --------------------------------------------------------------------------------

F. Access and Administration. Interconnector shall have access to the
-------------------------
Collocation Space twenty-four (24) hours a day, seven (7) days a week. A
security escort will be required at Central Offices where separate, secured
ingress and egress are not available and access would require Interconnector to
traverse restricted areas. All employees, agents and contractors of
Interconnector having access to the Collocation Space shall comply with
BellSouth's policies and practices pertaining to fire, safety and security, and
each such employee, agent or contractor shall display an identification badge
issued by Interconnector or certified vendor which contains a current photo, the
individual's name and company name/logo. Interconnector agrees to comply with
all laws, ordinances and regulations affecting the use of the Collocation Space.
Upon expiration of this Amendment, Interconnector shall surrender the
Collocation Space to BellSouth in the same condition as when first occupied by
the Interconnector except for ordinary wear and tear.

G. Interference or Impairment. Notwithstanding any other provisions of
--------------------------
this Amendment, equipment and facilities placed in the Collocation Space shall
not interfere with or impair service provided by BellSouth or by any other
interconnector located in the Central Office; shall not endanger or damage the
facilities of BellSouth or of any other interconnector, the Collocation Space,
or the Central Office; shall not compromise the privacy of any communications
carried in, from, or through the Central Office; and shall not create an
unreasonable risk of injury or death to any individual or to the public. If
BellSouth reasonably determines that any equipment or facilities of
Interconnector violate the provisions of this paragraph, BellSouth shall give
written notice to Interconnector, which notice shall direct Interconnector to
cure the violation within twenty-four (24) hours or, at a minimum, to commence
curative measures within 24 hours and to exercise reasonable diligence to
complete such measures as soon as possible thereafter. If Interconnector fails
to take curative action within 24 hours or if the violation is of a character
which poses an immediate and substantial threat of damage to property, injury or
death to any person, or interference/impairment of the services provided by
BellSouth, then and only in that event BellSouth may take such action as it
deems appropriate to correct the violation, including without limitation the
interruption of electrical power to Interconnector's equipment. BellSouth will
endeavor, but is not required, to provide notice to Interconnector prior to
taking such action and shall have no liability to Interconnector for any damages
arising from such action, except to the extent that such action by BellSouth
constitutes gross negligence or willful misconduct.

H. Personalty and its Removal. Subject to requirements of this Amendment,
--------------------------
Interconnector may place or install in or on the Collocation Space such
facilities and equipment as it deems desirable for the conduct of business.
Personal property, facilities and equipment placed by Interconnector in the
Collocation Space shall not become a part of the Collocation Space, even if
nailed, screwed or otherwise fastened to the Collocation Space, but shall retain
their status as personalty and may be removed by Interconnector at any time. Any
damage caused to the Collocation Space by Interconnector's employees, agents or
representatives during the removal of such property shall be promptly repaired
by Interconnector at its expense.

I. Alterations. In no case shall Interconnector or any person acting on
-----------
behalf of Interconnector make any rearrangement, modification, improvement,
addition, repair, or other alteration to the Collocation Space or the BellSouth
Central Office without the written consent of BellSouth, which consent shall not
be unreasonably withheld. The cost of any such specialized alterations shall be
paid by Interconnector.

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(9/29/97) Page 5

<PAGE>

BellSouth Telecommunications, Inc. & DeltaCom, Inc.
- --------------------------------------------------------------------------------

IV. ORDERING AND PREPARE OF COLLOCATION SPACE

A. Application for Space. Interconnector shall submit to BellSouth a
---------------------
complete and accurate Application and Inquiry document, together with payment of
the Application Fee as stated in Exhibit A. The Application shall contain a
detailed description and schematic drawing of the equipment to be placed in
Interconnector's Collocation Space(s) and an estimate of the amount of square
footage required. BellSouth will respond to Interconnector's Application in
writing following the completion of review, planning and design activities.
Such response will include estimates on space availability, space preparation
costs and space availability dates.

B. Bona Fide Firm Order. Interconnector shall indicate its intent to
--------------------
proceed with equipment installation in a BellSouth Central Office by submitting
a Bona Fide Firm Order to BellSouth. A Bona Fide Firm Order requires
Interconnector to complete the Application/Inquiry process described in Article
IV.A preceding, submit an updated Application document based on the outcome of
the Application/Inquiry process, and pay all applicable fees referenced in
Article V, following. The Bona Fide Firm Order must be received by BellSouth no
later than thirty (30) days after BellSouth's response to Interconnector's
Application/Inquiry. Space preparation for the Collocation Space will not begin
until BellSouth receives the Bona Fide Firm Order and all applicable fees.

C. Use of Certified Vendor. Interconnector shall select an equipment
-----------------------
installation vendor which has been approved as a BellSouth Certified Vendor to
perform all engineering and installation work required in the Collocation Space.
BellSouth shall provide Interconnector a list of Certified Vendors upon request.
The Certified Vendor shall be responsible for installing Interconnector's
equipment and components, extending power cabling to the BellSouth power
distribution frame, performing operational tests after installation is complete,
and notifying BellSouth's equipment engineers and Interconnector upon successful
completion of installation. The Certified Vendor shall bill Interconnector
directly for all work performed for Interconnector pursuant to this Amendment
and BellSouth shall have no liability for nor responsibility to pay such charges
imposed by the Certified Vendor.

D. Alarm and Monitoring. BellSouth shall place environmental alarms in
--------------------
the Central Office for the protection of BellSouth equipment and facilities.
Interconnector shall be responsible for placement, monitoring and removal of
environmental and equipment alarms used to service the Collocation Space, if
such equipment is desired by Interconnector for the protection of its own
equipment and facilities. Upon request, BellSouth will provide Interconnector
with applicable tariffed service(s) to facilitate remote monitoring of
collocated equipment by Interconnector.

E. Basic Telephone Service. Upon request of Interconnector, BellSouth
-----------------------
will provide basic telephone service to the Collocation Space under the rates,
terms and conditions of the then current tariff offering for the service
requested.

F. Space Preparation. BellSouth shall pro rate the costs of any
-----------------
renovation or upgrade to Central Office space or support mechanisms which is
required to accommodate physical collocation. Interconnector's pro rated share
will be calculated by multiplying such cost by a percentage equal to the amount
of square footage occupied by Interconnector divided by the total Central Office
square footage receiving renovation or upgrade. For this section, support
mechanisms provided by BellSouth may include, but not be limited to
heating/ventilation/air conditioning (HVAC) equipment, HVAC duct work, cable
support structure, fire wall(s), mechanical upgrade, asbestos abatement, ground
plane addition, or separate ingress/egress construction. Such renovation or
upgrade will be evaluated and the charges assessed on a

- --------------------------------------------------------------------------------
(9/29/97) Page 6
<PAGE>

BellSouth Telecommunications, Inc. & DeltaCom, Inc.
- --------------------------------------------------------------------------------

per Central Office basis. BellSouth will make best efforts to provide for
occupancy of the Collocation Space on the negotiated date and will advise
Interconnector of delays. Interconnector agrees BellSouth shall not be liable to
Interconnector for delays in providing possession of the Collocation Space.

G. Space Enclosure. Upon request of Interconnector, BellSouth shall
---------------
construct an equipment arrangement enclosure of a size and dimension jointly
agreed upon by the Parties. Interconnector may request enclosed floor space in
increments of one hundred (100) square feet, with a minimum of one hundred (100)
square feet. Interconnector may, at its option, arrange with a BellSouth
certified contractor to construct the space enclosure in accordance with
BellSouth's guidelines and specifications. Such contractor shall directly bill
Interconnector for activities associated with the space enclosure construction.

H. Cancellation. If Interconnector cancels its order for the Collocation
------------
Space(s), Interconnector will reimburse BellSouth for any expenses incurred up
to the date that written notice of the cancellation is received. In no event
will the level of reimbursement under this paragraph exceed the maximum amount
Interconnector would have otherwise paid for work undertaken by BellSouth if no
cancellation of the order had occurred.

V. RATES AND CHARGES

Interconnector shall pay for Collocation Space(s) according to the rates
contained in Exhibit A attached hereto and pursuant to the following:

A. Non-recurring Fees. In addition to the Application Fee referenced in
------------------
Article IV preceding, Interconnector shall remit payment of a Cable Installation
Fee, Space Construction Fee, as applicable, and one-half (1/2) of the estimated
Space Preparation Fee coincident with submission of a Bona Fide Firm Order. The
outstanding balance of the actual Space Preparation Fee shall be due thirty (30)
days following Interconnector's receipt of a bill or invoice from BellSouth.
BellSouth shall provide documentation to establish the actual Space Preparation
Fee. Cable Installation Fee(s) are assessed per entrance fiber placed. No
Cable Installation Fee is required for Service Interconnection. The Space
Preparation Fee will be pro rated as prescribed in Article IV.F preceding. The
Space Enclosure Construction Fee will be assessed for the materials and
installation cost of the equipment enclosure. BellSouth's engineering and other
labor time associated with establishing the Physical Collocation Arrangement
will be assessed as Additional Engineering charges, under provisions in
BellSouth's F.C.C. Number I Tariff, Sections 13.1 and 13.2. An estimate of the
Additional Engineering charges will be provided by BellSouth to Interconnector
in the Application Response.

B. Floor Space. The floor space charge includes charges for lighting,
-----------
heat, air conditioning, ventilation and other allocated expenses associated with
maintenance of the Central Office but does not include amperage necessary to
power Interconnector's equipment. When the Collocation Space is enclosed by
walls or other divider, Interconnector shall pay floor space charges based upon
the number of square feet so enclosed. When the Collocation Space is not
enclosed, Interconnector shall pay floor space charges based upon the number of
square feet contained in a shadow print of Interconnector's equipment racks and
POT bay, plus a factor of 2.50 multiplied by the shadow print, which represents
Interconnector's share of wiring and provisioning aisle space for provisioning
and maintenance activities. Floor space charges are due beginning with the date
on which BellSouth releases the Collocation Space for occupancy or on the date
Interconnector first occupies the Collocation Space, whichever is sooner.

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(9/27/97) Page 7
<PAGE>

BellSouth Telecommunications, Inc. & DeltaCom, Inc.
- --------------------------------------------------------------------------------

C. Power. Charges for -48V DC power will be assessed per ampere per month
-----
based upon the certified vendor engineered and installed power feed fused ampere
capacity. Rates include redundant feeder fuse positions (A&B) and cable rack to
Interconnector's equipment or space enclosure. Fuses and power feed cables
(A&B) must be engineered (sized), furnished and installed by Interconnector's
certified vendor. The Interconnector's certified vendor must also provide a
copy of the engineering power specification prior to the Commencement Date. In
the event BellSouth shall be required to construct additional DC power plant or
upgrade the existing DC power plant in a central office as a result of
Interconnector's request to collocate in that central office ("Power Plant
Construction"), Interconnector shall pay all costs associated with the Power
Plant Construction. The determination of whether Power Plant Construction is
necessary shall be within BellSouth's sole, but reasonable, discretion.
BellSouth will notify Interconnector of the need for the Power Plant
Construction and will estimate the costs associated with the Power Plant
Construction if BellSouth were to perform the Power Plant Construction.
Interconnector shall pay BellSouth one-half of the estimated Power Plant
Construction costs prior to commencement of the work. Interconnector shall pay
BellSouth the balance due (actual cost less one-half of the estimated cost)
within thirty (30) days of completion of the Power Plant Construction.
Interconnector has the option to perform the Power Plant Construction itself;
provided, however, that such work shall be performed by a BellSouth certified
contractor and such contractor shall comply with BellSouth's guidelines and
specifications. Where the Power Plant Construction results in construction of a
new power plant room, upon termination of this Amendment, Interconnector shall
have the right to remove its equipment from the power plant room, but shall
otherwise leave the room intact. Where the Power Plant Construction results in
an upgrade to BellSouth's existing power plant, upon termination of this
Amendment, such upgrades shall become the property of BellSouth.

D. Security Escort. A security escort will be required whenever
---------------
Interconnector or its approved agent desires access to the entrance manhole or
must traverse a restricted area within BellSouth's central office. Rates for a
BellSouth security escort are assessed in one-half (1/2) hour increments
according to the schedule appended hereto as Exhibit A.

E. Rate "True-Up". The Parties agree that the interim prices reflected
--------------
herein shall be "trued-up" (up or down) based on final prices either determined
by further agreement or by final order, including any appeals, in a proceeding
involving BellSouth before the regulatory authority for the State in which the
services are being performed or any other body having jurisdiction over this
Amendment (hereinafter "Commission"). Under the "true-up" process, the interim
price for each service shall be multiplied by the volume of that service
purchased to arrive at the total interim amount paid for that service ("Total
Interim Price"). The final price for that service shall be multiplied by the
volume purchased to arrive at the total final amount due ("Total Final Price').
The Total Interim Price shall be compared with the Total Final Price. If the
Total Final Price is more than the Total Interim Price, Interconnector shall pay
the difference to BellSouth. If the Total Final Price is less than the Total
Interim Price, BellSouth shall pay the difference to Interconnector. Each party
shall keep its own records upon which a "true-up" can be based and any final
payment from one party to the other shall be in an amount agreed upon by the
Parties based on such records. In the event of any disagreement as between the
records or the Parties regarding the amount of such "'true-up," the Parties
agree that the Commission shall be called upon to resolve such differences.

F. Other. Payment of all other charges under this Amendment shall be due
-----
thirty (30) days after receipt of the bill (payment due date). Interconnector
will pay a late payment charge of one and one-half percent (1-1/2%) assessed
monthly on any balance which remains unpaid after the payment due date.

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<PAGE>

BellSouth Telecommunications, Inc. & DeltaCom, Inc.
- --------------------------------------------------------------------------------

VI. INSURANCE

A. Interconnector shall, at its sole cost and expense, procure, maintain
and keep in force insurance as specified in this Article VI and underwritten by
insurance companies licensed to do business in the states contained in Exhibit B
attached hereto and having a BEST Insurance Rating of B ++ X (B ++ ten).

B. Interconnector shall maintain the following specific coverages:

1. Commercial General Liability coverage in the amount of ten million
dollars ($10,000,000.00) or a combination of Commercial General Liability and
Excess/Umbrella coverage totaling not less than ten million dollars
($10,000,000.00). BellSouth shall be named as an ADDITIONAL INSURED on ALL
applicable policies as specified herein.

2. Statutory Workers Compensation coverage and Employers Liability
coverage in the amount of one hundred thousand dollars ($100,000.00) each
accident, one hundred thousand dollars ($100,000.00) each employee by disease,
and five hundred thousand dollars ($500,000.00) policy limit by disease.

3. Interconnector may elect to purchase business interruption and
contingent business interruption insurance, having been advised that BellSouth
assumes no liability for loss of profit or revenues should an interruption of
service occur.

C. The limits set forth in Article VI.B above may be increased by
BellSouth from time to time during the term of this Amendment upon thirty (30)
days notice to Interconnector to at least such minimum limits as shall then be
customary with respect to comparable occupancy of BellSouth structures.

D. All policies purchased by Interconnector shall be deemed to be primary
and not contributing to or in excess of any similar coverage purchased by
BellSouth. All insurance must be in effect on or before the date equipment is
delivered to BellSouth's Central Office and shall remain in effect for the term
of this Amendment or until all Interconnector's property has been removed from
BellSouth's Central Office, whichever period is longer. If Interconnector fails
to maintain required coverages, BellSouth may pay the premiums thereon and seek
reimbursement of same from Interconnector.

E. Interconnector shall submit certificates of insurance reflecting the
coverages required pursuant to this Section a minimum of ten (10) days prior to
the commencement of any work in the Collocation Space. Interconnector shall
arrange for BellSouth to receive thirty (30) days advance notice of cancellation
from Interconnector's insurance company. Interconnector shall forward a
certificate of insurance and notice of cancellation to BellSouth at the
following address:

BellSouth Telecommunications, Inc.
Attn: Risk Management Coordinator
3535 Colonnade Parkway, S9AI
Birmingham, Alabama 35243

F. Interconnector must conform to recommendations made by BellSouth's fire
insurance company to the extent BellSouth has agreed to, or shall hereafter
agree to, such recommendations.

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<PAGE>

BellSouth Telecommunications, Inc. & DeltaCom, Inc.
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G. Failure to comply with the provisions of this Section will be deemed a
material breach of this Amendment.

VII. MECHANICS LIENS

If any mechanics lien or other liens shall be filed against property of
BellSouth, or any improvement thereon by reason of or arising out of any labor
or materials furnished or alleged to have been furnished or to be furnished to
or for Interconnector or by reason of any changes, or additions to BellSouth
property made at the request or under the direction of the Interconnector,
Interconnector shall, within thirty (30) days after receipt of written notice
from BellSouth either pay such lien or cause the same to be bonded off
BellSouth's property in the manner provided by law. Interconnector shall also
defend on behalf of BellSouth, at Interconnector's sole cost and expense, any
action suit or proceeding which may be brought for the enforcement of such liens
and Interconnector shall pay any damage and discharge any judgment entered
thereon.

VIII. INSPECTIONS

BellSouth shall conduct an inspection of Interconnector's equipment and
facilities in the Collocation Space(s) prior to the activation of facilities
between Interconnector's equipment and equipment of BellSouth. BellSouth may
conduct an inspection if Interconnector adds equipment and may otherwise conduct
routine inspections at reasonable intervals mutually agreed upon by the Parties.
BellSouth shall provide Interconnector with a minimum of forty-eight (48) hours
or two (2) business days, whichever is greater, advance notice of all such
inspections.

IX. SECURITY

Only BellSouth employees, BellSouth certified vendors and authorized employees
or agents of Interconnector will be permitted in the BellSouth Central Of rice.
Interconnector shall provide its employees and agents with picture
identification which must be worn and visible at all times while in the
Collocation Space or other areas in or around the Central Office. BellSouth may
refuse entry to any person who fails to display the identification required by
this section.

X. INDEMNITY/LIMITATION OF LIABILITY

A. Liability Cap.
-------------
1. With respect to any claim or suit, whether based in contract,
tort or any other theory of legal liability, by Interconnector, any
Interconnector customer or by any other person or entity, for damages associated
with any of the services provided by BellSouth pursuant to or in connection with
this Amendment, including but not limited to the installation, provision,
preemption, termination, maintenance, repair or restoration of service, and
subject to the provisions of the remainder of this Article,

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<PAGE>

BellSouth Telecommunications, Inc. & DeltaCom, Inc.
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BellSouth's liability shall be limited to an amount equal to the proportionate
charge for the service provided pursuant to this Amendment, for the period
during which the service was affected. Notwithstanding the foregoing, claims for
damages by Interconnector, by any Interconnector customer or by any other person
or entity resulting from the gross negligence or willful misconduct of BellSouth
and claims for damages by Interconnector resulting from the failure of BellSouth
to honor in one or more material respects any one or more of the material
provisions of this Amendment shall not be subject to such limitation of
liability.

2. With respect to any claim or suit, whether based in contract, tort
or any other theory of legal liability, by BellSouth, any BellSouth customer or
by any other person or entity, for damages associated with any of the services
provided by Interconnector pursuant to or in connection with this Amendment,
including but not limited to the installation, provision, preemption,
termination, maintenance, repair or restoration of service, and subject to the
provisions of the remainder of this Article, Interconnector's liability shall be
limited to an amount equal to the proportionate charge for the service provided
pursuant to this Amendment for the period during which the service was affected.
Notwithstanding the foregoing, claims for damages by BellSouth, any BellSouth
customer or any other person or entity resulting from the gross negligence or
willful misconduct of Interconnector and claims for damages by BellSouth
resulting from the failure of Interconnector to honor in one or more material
respects any one or more of the material provisions of this Amendment shall not
be subject to such limitation of liability.

B. Neither Party shall be liable for any act or omission of any other
telecommunications company to the extent such other telecommunications company
provides a portion of a service provided by Interconnector to its customers.

C. Neither Party shall be liable for damages to the other Party's terminal
location, point of interconnection, or the other Party's customers' premises
resulting from the furnishing of a service, including but not limited to the
installation and removal of equipment and associated wiring, except to the
extent the damage is caused by such Party's gross negligence or willful
misconduct.

D. No Consequential Damages - Except as otherwise provided in this Article
X, neither Party shall be liable to the other Party for any indirect,
incidental, consequential, reliance, or special damages suffered by such other
Party (including without limitation damages for harm to business, lost revenues,
lost savings, or lost profits suffered by such other Party), regardless of the
form of action, whether in contract, warranty, strict liability, or tort,
including without limitation negligence of any kind whether active or passive,
and regardless of whether the Parties knew of the possibility that such damages
could result. Each Party hereby agrees to hold harmless the other Party and
such other Party's affiliates, and their respective officers, directors,
employees and agents from all such damages. Provided, however, nothing
contained in this Article X shall limit a Party's liability to the other for (i)
willful or intentional misconduct, gross negligence, or failure to honor one or
more of the material provisions of this Amendment in one or more material
respects; (ii) bodily injury, death or damage to tangible real or tangible
personal property proximately caused by a Party's negligent act or omission or
that of its agents, subcontractors or employees, nor shall anything contained in
this Article X limit the Parties' indemnification obligations as specified
herein.

E. Obligation to Indemnify.
-----------------------
1. Each Party (the "Indemnifying Party") shall, and hereby agrees to,
defend at the other Party's request, indemnify and hold harmless the other Party
and each of its officers, directors, employees and agents (each, an
"Indemnitee") against and in respect of any loss, debt, liability, damage,

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BellSouth Telecommunications, Inc. & DeltaCom, Inc.
- --------------------------------------------------------------------------------

obligation, claim, demand, judgment or settlement of any nature or kind, known
or unknown, liquidated or unliquidated, including without limitation all
reasonable costs and expenses incurred (legal, accounting or otherwise)
(collectively, "Damages") arising out of, resulting from or based upon any
pending or threatened claim, action, proceeding or suit by any third party (a
"Claim") (i) arising from any breach of any representation, warranty or covenant
made by such indemnifying party in this Amendment, or (ii) based upon injuries
or damage to any person or property arising out of or in connection with this
Amendment that are the result of the Indemnifying Party's actions, breach of
Applicable Law, or the actions of the Indemnifying Party's employees, agents and
subcontractors.

2. Promptly after receipt of notice of any Claim or the commencement
of any action for which a Party may seek indemnification pursuant to this
Article X, the Indemnitee shall promptly give written notice clearly referencing
this Article X to the Indemnifying Party of such Claim or action; provided,
however, the Indemnitee's failure to so notify the Indemnifying Party will not
relieve the latter from any liability it may have to the Indemnitee except to
the extent the Indemnifying Party is actually prejudiced by such failure. The
Indemnitee shall cooperate, at the indemnifying Party's expense, with all
reasonable requests made by the Indemnifying Party for assistance or information
relating to such Claim or action. The Indemnitee will have the right to
participate in the investigation, defense and settlement of such Claim or
action, with separate counsel chosen and paid for by the Indemnitee. However,
the Indemnifying Party will have the right to control the defense and settlement
of such Claim or action.

F. Each Party's failure to perform under this Amendment shall be excused
by labor strikes, civil commotion, criminal actions taken against them, acts of
God, and other circumstances beyond their reasonable control.

G. The obligations of the Parties contained within this Article X shall
survive the expiration of this Amendment.

XI. PUBLICITY

Either Party agrees to submit to the other Party all advertising, sales
promotion, press releases, and other publicity matters relating to this
Amendment or mentioning or implying the tradenames, logos, trademarks or service
marks (hereinafter "Marks") of the other Party and/or any of its affiliated
companies or language from which the connection of said Marks therewith may be
inferred or implied, or mentioning or implying the names of any personnel of the
other Party and/or any of its affiliated companies, and each Party further
agrees not to publish or use such advertising, sales promotions, press releases,
or publicity matters without the other Party's prior written consent.

XII. DESTRUCTION OF COLLOCATION SPACE

In the event a Collocation Space is wholly or partially damaged by fire,
windstorm, tornado, flood or by similar causes to such an extent as to be
rendered wholly unsuitable for Interconnector's permitted use hereunder, then
either party may elect within ten (10) days after such damage, to terminate this
Amendment, and if either party shall so elect, by giving the other written
notice of termination, both parties shall stand released of and from further
liability under the terms hereof. If the Collocation Space shall suffer only
armor damage and shall not be rendered wholly unsuitable for Interconnector's
permitted use, or

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<PAGE>

BellSouth Telecommunications, Inc. & DeltaCom, Inc.
- --------------------------------------------------------------------------------

is damaged and the option to terminate is not exercised by either party,
BellSouth covenants and agrees to proceed promptly without expense to
Interconnector, except for improvements not the property of BellSouth, to repair
the damage. BellSouth shall have a reasonable time within which to rebuild or
make any repairs, and such rebuilding and repairing shall be subject to delays
caused by storms, shortages of labor and materials, government regulations,
strikes, walkouts, and causes beyond the control of BellSouth, which causes
shall not be construed as limiting factors, but as exemplary only. Where allowed
and where practical in the sole judgment of BellSouth, Interconnector may erect
a temporary facility while BellSouth rebuilds or makes repairs. In all cases
where the Collocation Space shall be rebuilt or repaired, Interconnector shall
be entitled to an equitable abatement of rent and other charges, depending upon
the unsuitability of the Collocation Space for Interconnector's permitted use,
until such Collocation Space is fully repaired and restored and Interconnector's
equipment installed therein (but in no event later than thirty (30) days after
the Collocation Space is fully repaired and restored).

XIII. EMINENT DOMAIN

If the whole of a Collocation Space shall be taken by any public authority under
the power of eminent domain, then this Amendment shall terminate as of the day
possession shall be taken by such public authority and rent and other charges
for the Collocation Space shall be paid up to that day with proportionate refund
by BellSouth of such rent and charges as may have been paid in advance for a
period subsequent to the date of the taking. If any part of the Collocation
Space shall be taken under eminent domain, BellSouth and Interconnector shall
each have the right to terminate this Amendment and declare the same null and
void, by written notice of such intention to the other party within ten (10)
days after such taking.

XIV. FORCE MAJEURE

Neither party shall be in default by reason of any failure in performance of
this Amendment, in accordance with its terms and conditions, if such failure
arises out of causes beyond the control of the nonperforming party including,
but not restricted to, acts of God, acts of government, insurrections, fires,
floods, accidents, epidemics, quarantines, restrictions, strikes, freight
embargoes, inability to secure raw materials or transportation facilities, acts
or omissions of carriers or any and all other causes beyond the party's control.

XV. ASSIGNMENT

Interconnector acknowledges that this Amendment does not convey any right, title
or interest in the Central Office to Interconnector. Interconnector may not
sublet its rights under this Amendment, nor shall it allow a third party to use
or occupy the Collocation Space at any time or from time to time without the
prior written consent, and at the sole discretion, of BellSouth. This Amendment
is not assignable by either party without the prior written consent of the other
party, and any attempt to assign any of the rights, duties or obligations of
this Amendment without such consent is void. Notwithstanding the foregoing,
either party may assign any rights, duties or obligations of this Amendment to a
parent, subsidiary or affiliate without the consent of the other party.

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<PAGE>

BellSouth Telecommunications, Inc. & DeltaCom, Inc.
- --------------------------------------------------------------------------------

XVI. NONEXCLUSIVITY

Interconnector understands that this Amendment is not exclusive and that
BellSouth may enter into similar agreements with other parties. Assignment of
space pursuant to all such agreements shall be determined by space availability
and made on a first come, first served basis.

XVII. NO IMPLIED WAIVER

No consent or waiver by either party to or of any breach of any covenant, term,
condition, provision or duty of the other party under this Amendment shall be
construed as a consent to or waiver of any other breach of the same, or any
other covenant, term, condition, provision or duty. No such consent or waiver
shall be valid unless in writing and signed by the party granting such consent
or waiver.

XVIII. NOTICES

Except as otherwise provided herein, any notices or demands that are required by
law or under the terms of this Amendment shall be given or made by
Interconnector or BellSouth in writing and shall be given by hand delivery, or
by certified or registered mail, and addressed to the Parties as follows:

To BellSouth: To Interconnector:
------------ ------------------

BellSouth Telecommunications, Inc. DeltaCom, Inc.
3535 Colonnade Parkway, South E4E1 206 West 9th Street
Birmingham, Alabama 35243 West Point, Georgia 31833
Attn: Nancy Nelson Attn: Janine Kemp

With copy to:
-------------

DeltaCom, Inc.
700 Boulevard South, Suite 101
Huntsville, Alabama 35802
Attn: General Counsel

Such notices shall be deemed to have been given in the case of certified or
registered mail when deposited in the United States mail with postage prepaid.

XIX. RESOLUTION OF DISPUTES

Except as otherwise stated in this Amendment, the Parties agree that if any
dispute arises as to the interpretation of any provision of this Amendment or as
to the proper implementation of this Amendment, the parties will petition the
Commission in the state where the services are provided pursuant to this
Amendment for a resolution of the dispute. However, each party reserves any
rights it may have to seek judicial review of any ruling made by the Public
Service Commission concerning this Amendment.

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<PAGE>

BellSouth Telecommunications, Inc. & DeltaCom, Inc.
- --------------------------------------------------------------------------------

XX. SECTION HEADINGS

The section headings used herein are for convenience only, and shall not be
deemed to constitute integral provisions of this Amendment.

XXI. AUTHORITY

Each of the parties hereto warrants to the other that the person or persons
executing this Amendment on behalf of such party has the full right, power and
authority to enter into and execute this Amendment on such party's behalf and
that no consent from any other person or entity is required as a condition
precedent to the legal effect of this Amendment.

XXII. REVIEW OF AMENDMENT

The parties acknowledge that each has had an opportunity to review and negotiate
this Amendment and has executed this Amendment only after such review and
negotiation. The parties further agree that this Amendment shall be deemed to
have been drafted by both Licensor and Licensee and the terms and conditions
contained herein shall not be construed any more strictly against one party or
the other. This Amendment is entered without prejudice to any positions which
either Party has taken, or may take in the future, before any legislative,
regulatory, judicial or other governmental body.

The Parties agree that all of the other provisions of the Interconnection
Agreement dated March 12, 1997, including any amendments thereto, shall remain
in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Amendment by their duly
authorized representatives in one or more counterparts, each of which shall
constitute an original, on the date indicated below.

BELLSOUTH TELECOMMUNICATIONS, DELTACOM, INC.
INC.

/s/ Jerry Hendrix /s/ Tom Mullis
- ----------------------------- -----------------------------
Authorized Signature Authorized Signature

Jerry D. Hendrix Tom Mullis
- ----------------------------- -----------------------------
Print or Type Name Print or Type Name

Director Sr. Vice President
- ----------------------------- -----------------------------
Title Title

10/3/97 10/2/97
- ----------------------------- -----------------------------
Date Date

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(9/29/97) Page 15
<PAGE>

BellSouth Telecommunications, Inc. & DeltaCom, Inc.
- --------------------------------------------------------------------------------

EXHIBIT A
Page 1 of 3

SCHEDULE OF RATES AND CHARGES

Rate Element Description Type of Charge Charge
- ------------------------ -------------- ------

<S> <C> <C>
Application Fee NRC (per Arrangement, per C.O.) $3,850.00
Subsequent Application Fee (Note 1) NRC (per Arrangement, per C.O.) $1,600.00

Space Preparation Fee (Note 2) NRC (per Arrangement, per C.O.) ICB
Space Enclosure Construction Fee (Note 2) NRC (per 100 square feet) $4,500.00
Space Preparation and Construction
Reimbursement for ATHNGAMA NRC (see Note 3) $26,000.00

Additional Engineering Fee (Note 4) NRC ICB
Cable Installation NRC (per entrance cable) $2,750.00
Floor Space Zone A RC (per square foot) $7.50
Zone B RC (per square foot) $6.75

Power RC (per amp) $5.00

Cable Support structure RC (per entrance cable) $13.35

Cross-Connects 2-wire RC (per cross-connect) $0.30
4-wire RC (per cross-connect) $0.50
DS1 RC (per cross-connect) $8.00
DS3 RC (per cross-connect) $72.00

2-wire NRC (first cross-connect) $19.20
4-wire NRC (first cross-connect) $19.20
DS1 NRC (first cross-connect) $155.00
DS3 NRC (first cross-connect) $155.00

2-wire NRC (each additional cross-connect) $19.20
4-wire NRC (each additional cross-connect) $19.20
DS1 NRC (each additional cross-connect) $27.00
DS3 NRC (each additional cross-connect) $27.00

POT Bay 2-wire RC (per cross-connect) $0.40
4-wire RC (per cross-connect) $1.20
DS1 RC (per cross-connect) $1.20
DS3 RC (per cross-connect) $8.00

Additional Security Access Cards NRC-ICB (each) $10.00
</TABLE>

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(9/29/97) Page 16
<PAGE>

BellSouth Telecommunications, Inc. & DeltaCom, Inc.
- --------------------------------------------------------------------------------

EXHIBIT A
Page 2 of 3

SCHEDULE OF RATES AND CHARGES (CONT.)

Rate Element Description Type of Charge Charge
- ------------------------ -------------- ------

<S> <C> <C>
Direct Connection (Note 5)
(1) Fiber Arrangement RC (per cable, per linear foot) $0.06
-with Initial Application NRC (per arrangement) n/a
-Subsequent to Application NRC (per Arrangement) $246.00

(2) Copper or Coaxial Arrangement RC (per cable, per linear foot) $0.03
-with Initial Application NRC (per Arrangement) n/a
-Subsequent to Application NRC (per Arrangement) $246.00

Security Escort
Basic - first half hour NRC-ICB $41.00
Overtime - first half hour NRC-ICB $48.00
Premium - first half hour NRC-ICB $55.00

Basic - additional half hour NRC-ICB $25.00
Overtime - additional half hour NRC-ICB $30.00
Premium - additional half hour NRC-ICB $35.00
</TABLE>

Notes
- -----

NRC: Non-recurring Charge - one-time charge
RC: Recurring Charge - charged monthly
ICB: Individual Case Basis - one-time charge

(1) Subsequent Application Fee. BellSouth requires the submission of an
--------------------------
Application Fee for modifications to an existing arrangement. However, when
the modifications do not require BellSouth to expend capital (e.g.,
additional space or power requirements, BST termination/cross-connect
equipment, etc.), BellSouth will assess the Subsequent Application Fee in
lieu of the Application Fee.

(2) Space Preparation Fee. The Space Preparation Fee is a one-time fee,
---------------------
assessed per arrangement, per location. It recovers costs associated with
the shared physical collocation area within a central office, which include
survey, engineering, design and building modification costs. BellSouth will
pro rate the total shared space preparation costs among the collocators at
each location based on the amount of square footage occupied by each
collocator. This charge may vary depending on the location and the type of
arrangement requested.

Space Enclosure Construction Fee. The Space Enclosure Construction Fee is a
--------------------------------
one-time fee, assessed per enclosure, per location. It recovers costs
associated with providing an optional equipment arrangement enclosure,
which include architectural and engineering fees, materials, and

- --------------------------------------------------------------------------------
(9/29/97) Page 17

<PAGE>

BellSouth Telecommunications, Inc. & DeltaCom, Inc.
- --------------------------------------------------------------------------------

EXHIBIT A
Page 3 of 3

SCHEDULE OF RATES AND CHARGES (CONT.)

Notes (cont.)
- -------------

(2) (cont.)

installation costs. This fee is assessed in 50 square-foot increments, with
a minimum space enclosure size of 100 square feet. Interconnector may, at
its option, arrange with a BellSouth certified contractor to construct the
space enclosure in accordance with BellSouth s guidelines and
specifications. In this event, the contractor shall directly bill
Interconnector for the space enclosure, and this fee shall not be
applicable.

(3) A one-time fee of twenty-six thousand dollars ($26,000) shall be charged
for the one hundred (100) square-foot fire-walled enclosure currently
occupied by Interconnector in the ATHNGAMA Central Office when
Interconnector elects to convert such arrangement in place from Virtual
Collocation to Physical Collocation. Should additional construction work
be required to either "make-ready" the space per Interconnector's request
or to enclose additional square footage, BellSouth shall assess
construction charges on an individual ease basis. Such construction
charges will be provided by BellSouth in the Application Response.

(4) Additional Engineering Fee. BellSouth's engineering and other labor costs
--------------------------
associated with establishing the Physical Collocation Arrangement shall be
recovered as Additional Engineering charges, under provisions in
BellSouth's F.C.C. Number 1 Tariff, Sections 13.1 and 13.2. An estimate of
the Additional Engineering charges shall be provided by BellSouth in the
Application Response.

(5) Direct Connection. As stated in Article I.B of the Collocation Agreement,
-----------------
Interconnector may connect to other interconnectors within the designated
Central Office in addition to, and not in lieu of, interconnection to
BellSouth services and facilities. Interconnector must use its Certified
Vendor to place the direct connection. The Direct Connection NRC is
assessed when direct connection is the only work requested by
Interconnector. If any other work in addition to the direct connection is
being requested, whether for an initial installation of a Collocation Space
or for an augmentation to an existing Collocation Space, an Application Fee
or a Subsequent Application Fee will be assessed in lieu of the Direct
Connection NRC. Construction charges may also apply; BellSouth shall
provide an estimate of these charges in the Application Response.

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(9/29/97) Page 18
<PAGE>

BellSouth Telecommunications, Inc. & DeltaCom, Inc.
- --------------------------------------------------------------------------------

EXHIBIT B

BONA FIDE PHYSICAL COLLOCATION ARRANGEMENTS

CENTRAL OFFICE NAME:
CENTRAL OFFICE CLLI CODE:
CITY:
STATE:
DATE OF BONA FIDE FIRM ORDER:

- --------------------------------------------------------------------------------
(9/29/97) Page 19

<PAGE>

Exhibit 10.77.2

FIRST AMENDMENT
TO
CREDIT AGREEMENT

THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment") is dated
as of the 20th day of October 1997, and entered into among INTERSTATE FIBERNET,
INC., a Delaware corporation (the "Borrower"), the Lenders signatory thereto,
and NATIONSBANK OF TEXAS, N.A., a national banking association, individually and
as Administrative Lender (in such latter capacity, the "Administrative Lender").

WITNESSETH:
-----------

WHEREAS, the Borrower, the Lenders, and the Administrative Lender entered
into a Credit Agreement, dated as of September 17, 1997 for a loan facility in
the amount of $100,000,000 (as amended, restated, waived or otherwise modified
from time to time, the "Credit Agreement"); and

WHEREAS, the Lenders, the Administrative Lender, and the Borrower have
agreed to amend the Credit Agreement to make certain changes to the terms
therein upon the terms and conditions set forth below;

NOW, THEREFORE, for valuable consideration hereby acknowledged, the
Borrower, the Lenders and the Administrative Lender agree as follows:

SECTION 1. Definitions.

(a) Unless specifically defined or redefined below, capitalized
terms used herein shall have the meanings ascribed thereto in the Credit
Agreement.

(b) Definition of Fractional Share Cash Payments. The definition of
"Fractional Share Cash Payments" is hereby added to Article 1 of the Credit
Agreement in alphabetical order on page 8 as follows:

"Fractional Share Cash Payments" means payments of cash by the
Parent, in an aggregate amount not to exceed $50,000, in connection with
the merger of ITC Holding with and into the Parent, to holders of Capital
Stock issued by the Parent, and to holders of options to purchase Capital
Stock assumed by the Parent, or otherwise outstanding at the time of such
merger, in lieu of the issuance by the Parent of fractional shares of
Capital Stock.

<PAGE>

SECTION 2. Amendment to Section 2.05(b) of the Credit Agreement. Section
2.05(b) on page 24 of the Credit Agreement shall be deleted in its entirety and
the following Section 2.05(b) shall be substituted in its stead:

(b) Public or Private Insurance of Equity. To the extent that the
Parent, the Borrower or any of its Subsidiaries consummates any public or
private issuance of equity (this provision in and of itself not
constituting permission to do so), then the Parent, the Borrower and its
Subsidiaries shall, (i) to the extent that any net proceeds from any such
transaction are received within 12 months of the Closing Date and such net
proceeds are in excess of $125,000,000, immediately use 50% of such net
proceeds in excess of $125,000,000 to repay the Obligations under the
Revolving Loan and the Term Loan, pro rata, or (ii) to the extent that
clause (i) above is not applicable but the net proceeds from any such
transaction are in excess of $50,000,000, immediately use 50% of such net
proceeds in excess of $50,000,000 to repay the Obligations under the
Revolving Loan and the Term Loan, pro rata.

SECTION 3. Amendment to Section 8.07 of the Credit Agreement. Section 8.07
on pages 61 through 63 of the Credit Agreement shall be amended to delete the
period at the end of subpart (e) and insert"; and" in lieu thereof and to add
the following as new subpart (f) thereto:

(f) The Parent may make Fractional Share Cash Payments in connection
with the merger of ITC Holding with and into the Parent.

SECTION 4. Amendment to Section 8.10 of the Credit Agreement. Section 8.10
on pages 63 and 64 of the Credit Agreement shall be deleted in its entirety and
the following Section 8.10 shall be substituted in its stead:

8.10. Capital Stock. The Borrower shall not, and shall not permit the
Parent or any Subsidiary of the Borrower to (a) make or permit any
transfer, assignment, distribution, mortgage, pledge or gift of any shares
of Pledged Stock, except to another wholly owned direct or indirect
Subsidiary of the Borrower that has executed an Unlimited Guaranty of the
Obligations and (b) issue any Capital Stock other than (i) up to
$125,000,000 in common stock of the Parent; (ii) stock options and common
stock (issued pursuant to the exercise of any such stock options) pursuant
to the 1997 Directors Stock Option Plan and the 1997 Stock Option Plan of
the Parent (as both such Plans may be amended in connection with the merger
referred to in the next clause (iii)); (iii) common and preferred stock of
the Parent (and the common stock into which such preferred stock will be
convertible pursuant to the terms thereof) in exchange for common and
preferred stock of ITC Holding (in connection with the merger of ITC
Holding with and into the Parent) and common stock of the Parent upon the
exercise of outstanding options issued by ITC Holding; and (iv) preferred
stock of the Parent (and the common stock into which such preferred stock
will be convertible pursuant to the

<PAGE>

terms thereof) of SCANA Communications, Inc. pursuant to an earn-out
agreement described in the Offering Memorandum of the Parent dated May
29, 1997.

SECTION 5. Amendment to Section 8.14 of the Credit Agreement. Section
8.14 on page 64 of the Credit Agreement shall be deleted in its entirety and the
following Section 8.14 shall be substituted in its stead:

8.14. Amendment of Senior Notes. The Borrower shall not, and
shall not permit the Parent or any Subsidiary of the Borrower to, amend,
waive or consent to any deviation from any term or provision of any
documentation or agreements relating to the Senior Notes other than the
Supplemental Indenture dated as of October 17, 1997 providing for
Fractional Share Cash Payments.

SECTION 6. Affirmation. The Borrower hereby acknowledges and agrees that
nothing in this First Amendment shall affect the Borrower's obligations under
the Credit Agreement or the other Loan Papers executed in connection therewith
(except as specifically provided in this First Amendment), which remain valid,
binding and enforceable, and except as amended hereby, unamended, or shall
constitute a waiver by the Lenders of any of their rights or remedies, now or at
any time in the future, with respect to any requirement under the Credit
Agreement or the other Loan Papers or with respect to an Event of Default or
Default, occurring now or at any time in the future.

SECTION 7. Conditions Precedent. This First Amendment shall not be
effective until

(a) all proceedings of the Borrower and the Guarantors taken in
connection with this First Amendment and the transactions contemplated
hereby shall be satisfactory in form and substance to the Administrative
Lender and Lenders signatory hereto, and the Administrative Lender
shall have received copies of resolutions or other authorizing
documentation for the Borrower and each of the Guarantors,

(b) affirmation of those certain guaranties executed by each
Guarantor, affirming the guaranties executed and delivered in connection
with the Credit Agreement, and

(c) the Administrative Lender and Lenders shall have each
received such documents, instruments, and certificates, etc., each in
form and substance satisfactory to the Lenders, as the Lenders shall
deem necessary or appropriate in connection with this First Amendment
and the transactions contemplated hereby.

SECTION 8. Representations and Warranties. The Borrower represents and
warrants to the Lenders and the Administrative Lender that (a) this First
Amendment constitutes its legal, valid, and binding obligations, enforceable in
accordance with the terms hereof (subject as to enforcement of remedies to any
applicable bankruptcy, reorganization, moratorium, or

<PAGE>

other laws or principles of equity affecting the enforcement of creditors'
rights generally), (b) there exists no Event of Default or Default under the
Credit Agreement after giving effect to this First Amendment, (c) its
representations and warranties set forth in the Credit Agreement and other Loan
Papers are true and correct on the date hereof after giving effect to this First
Amendment, (d) it has complied with all agreements and conditions to be complied
with by it under the Credit Agreement and the other Loan Papers by the date
hereof, (e) the Credit Agreement, as amended hereby, and the other Loan Papers
remain in full force and effect, and (f) no notice to, or consent of, any Person
is required under the terms of any agreement of the Borrower in connection with
the execution of this First Amendment.

SECTION. 9. Further Assurances. The Borrower shall execute and deliver such
further agreements, documents, instruments, and certificates in form an
substance satisfactory to the Administrative Lender, as the Administrative
Lender or any Lender may deem reasonably necessary or appropriate in connection
with this First Amendment.

SECTION. 10. Counterparts. This First Amendment and the other Loan Papers
may be executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument. In making proof of any such agreement,
it shall not be necessary to produce or account for any counterpart other than
one signed by the party against which enforcement is sought.

SECTION 11. GOVERNING LAW: WAIVER OF JURY TRIAL.

(a) THIS AGREEMENT AND ALL OTHER LOAN PAPERS SHALL BE DEEMED TO BE
CONTRACTS MADE IN DALLAS, TEXAS, AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE TEXAS (WITHOUT GIVING EFFECT TO CONFLICTS
OF LAWS) AND THE UNITED STATES OF AMERICA. WITHOUT EXCLUDING ANY OTHER
JURISDICTION, THE BORROWER AGREES THAT THE FEDERAL COURTS OF TEXAS LOCATED IN
DALLAS, TEXAS, WILL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION HEREWITH.
TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE BORROWER HEREBY WAIVES ANY RIGHT
THAT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE (WHETHER, A CLAIM IN TORT,
CONTRACT, EQUITY, OR OTHERWISE) ARISING UNDER OR RELATING TO THIS AGREEMENT, THE
OTHER LOAN PAPERS, OR ANY RELATED MATTERS, AND AGREES THAT ANY SUCH DISPUTE
SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.

(b) THE BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY LEGAL PROCESS UPON
IT. THE BORROWER AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY
REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO THE BORROWER AT ITS
ADDRESS DESIGNATED FOR NOTICE UNDER THIS AGREEMENT AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED FIVE DAYS AFTER DEPOSIT IN THE UNITED STATES MAIL.
NOTHING IN THIS SECTION

4
<PAGE>

SHALL AFFECT THE RIGHT OF ADMINISTRATIVE LENDER OR ANY LENDER TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

SECTION 12. ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN PAPERS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENT OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK

<PAGE>

IN WITNESS WHEREOF, this First Amendment to Credit Agreement is executed as
of the date first set forth above.

THE BORROWER:

INTERSTATE FIBERNET, INC.

/s/ Douglas A. Shumate
------------------------------------
By: Douglas A. Shumate
Its: Senior Vice President -- Chief
Financial Officer

ADMINISTRATIVE LENDER:

NATIONSBANK OF TEXAS, N.A., as
Administrative Lender

/s/ Keith Wilson
------------------------------
By: Keith Wilson
Its: Vice President

LENDERS:

NATIONSBANK OF TEXAS, N.A.,
individually as a Lender

/s/ Keith Wilson
------------------------------
By: Keith Wilson
Its: Vice President

AMSOUTH BANK

------------------------------------
By:
---------------------------------
Its:
--------------------------------

<PAGE>

CREDITANSTALT-BANKVEREIN

------------------------------------
By:
---------------------------------
Its:
--------------------------------

MEESPIERSON CAPITAL CORP.

------------------------------------
By:
---------------------------------
Its:
--------------------------------

STATE STREET BANK AND TRUST
COMPANY

/s/ Andrew N. Sween
--------------------------
By: Andrew N. Sween
-----------------------
Its: Loan Officer
----------------------

CORESTATES BANK, N.A.

/s/ Christopher Waltrich
--------------------------
By: Christopher Waltrich
-----------------------
Its: Commercial Officer
----------------------

<PAGE>

FIRST UNION NATIONAL BANK

/s/ James Rodman
-----------------------------
By: James Rodman
--------------------------
Its: Senior Vice President
-------------------------

REGIONS BANK

/s/ Edwin P. Wilson
-----------------------------
By: Edwin P. Wilson
--------------------------
Its: Senior Vice President
-------------------------

TORONTO DOMINION (TEXAS), INC.

/s/ Neva Nesbitt
-----------------------------
By: Neva Nesbitt
--------------------------
Its: Vice President
-------------------------

<PAGE>

The terms and conditions set forth above are acceptable and agreed to by
each of the following Guarantors, and each such Guarantor hereby affirms it
obligations under its Guaranty of the Obligations:

ITC/\DELTACOM, INC.

/s/ Douglas A. Shumate
------------------------------------
By: Douglas A. Shumate
Its: Senior Vice President -- Chief
Financial Officer

DELTACOM, INC.

/s/ Douglas A. Shumate
------------------------------------
By: Douglas A. Shumate
Its: Senior Vice President -- Chief
Financial Officer

GULF STATES TRANSMISSION SYSTEMS, INC.

/s/ Douglas A. Shumate
--------------------------------------
By: Douglas A. Shumate
Its: Senior Vice President -- Chief
Financial Officer

<PAGE>

Exhibit 10.82.2

SUPPLEMENTAL INDENTURE
----------------------

This Supplemental Indenture, dated as October 17, 1997, is by and
between ITC/\DeltaCom, Inc., a Delaware corporation (the "Company"), and United
-------
States Trust Company of New York, a bank and trust company organized under the
New York banking law (the "Trustee").
-------

RECITALS
--------

WHEREAS, the Company and the Trustee have entered into an Indenture
dated as of June 3, 1997 (the "Indenture"), pursuant to which the Company has
---------
issued and has outstanding on the date hereof its 11% Senior Notes due 2007 (the
"Notes");
-----

WHEREAS, ITC Holding proposes to merge with and into the Company (the
"Merger");
------

WHEREAS, the Company wishes to make Fractional Share Cash Payments (as
defined in this Supplemental Indenture) in connection with the Merger;

WHEREAS, the Company has requested the Trustee to enter into this
Supplemental Indenture to authorize the making of Fractional Share Cash Payments
in connection with the Merger;

WHEREAS, Section 9.01(5) of the Indenture permits the Company and the
Trustee to amend or supplement the Indenture or the Notes without notice to or
the consent of any Holder, provided, that, in the good faith opinion of the
Board of Directors as evidenced by a Board Resolution, such change does not
materially and adversely affect the rights of any Holder;

WHEREAS, in the good faith opinion of the Board of Directors as
evidenced by a Board Resolution delivered to the Trustee on the date hereof, the
making of Fractional Share Cash Payments in connection with the Merger does not
materially and adversely affect the rights of any Holder;

NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth herein, the parties hereto agree as follows:
<PAGE>

1. DEFINED TERMS. All capitalized terms used but not otherwise
-------------
defined herein shall have the meanings ascribed to them in the Indenture.

2. EFFECTIVENESS. This Supplemental Indenture shall be effective as
-------------
of October 17, 1997.

3. AMENDMENT OF SECTION 1.01. Section 1.01 of the Indenture is
-------------------------
hereby amended by adding the following definition thereto between "fair market
value" and "GAAP," which shall read in its entirety as follows:

"Fractional Share Cash Payments" means payments of
cash by the Company or any Restricted Subsidiary, in an
aggregate amount not to exceed $50,000, in connection
with or related to the merger of ITC Holding with and
into the Company to holders of Common Stock and Preferred
Stock issued by the Company, and to holders of options to
purchase Common Stock assumed by the Company or out-
standing at the time of such merger, in connection with
or related to such merger in lieu of the issuance by the
Company of fractional shares of Common Stock or Preferred
Stock, as the case may be.

4. AMENDMENT OF SECTION 4.04. The second paragraph of Section 4.04
-------------------------
of the Indenture is hereby amended by adding the following provision after
clause (ix) thereof:

or (x) the payment by the Company or any Restricted
Subsidiary of Fractional Share Cash Payments;

5. AMENDMENT OF SECTION 5.01. Clause (A) following the second
-------------------------
proviso of clause (iv) of Section 5.01 is hereby amended in its entirety to read
as follows:

(A) in connection with any such merger or consolidation,
no consideration (except Capital Stock (other than
Redeemable Stock) in the surviving Person or the Company
(or a Person that owns directly or indirectly all of the
Capital Stock of the surviving Person or the Company
immediately following such transaction) and

-2-
<PAGE>

Fractional Share Cash Payments) shall be issued or
distributed to the stockholders of the Company

5. MISCELLANEOUS.
-------------

(a) The parties hereto shall do and perform or cause to be done
and performed all such further acts and things and shall execute and deliver all
such other agreements, certificates, instruments and documents as any other
party hereto may reasonably request in order to carry out the intent and
accomplish the purposes of this Supplemental Indenture and the consummation of
the transactions contemplated hereby.

(b) This Supplemental Indenture is executed and shall be
construed as an indenture supplemental to the Indenture and shall form a part
thereof.

(c) This Supplemental Indenture shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New York.

(d) Except as expressly amended hereby, all terms and provisions
of the Indenture shall continue to be and shall remain in full force and effect
and the Holders shall be entitled to all of the benefits thereof.

(e) The section headings contained herein are for reference
purposes only and shall not be deemed to be a part hereof or to affect the
meaning or interpretation hereof.

(f) This Supplemental Indenture may be executed in one or more
counterparts, all of which taken together shall be deemed to constitute one and
the same instrument.

-3-
<PAGE>

IN WITNESS WHEREOF, the Company and the Trustee have caused this
Supplemental Indenture to be duly executed as of the day and year first above
written.

ITC/\DELTACOM, INC.

By: /s/ Douglas A. Shumate
------------------------------------
Name: Douglas A. Shumate
Title: Senior Vice President-Chief
Financial Officer

UNITED STATES TRUST COMPANY
OF NEW YORK

By: /s/ Louis P. Young
------------------------------------
Name: Louis P. Young
-------------------------------

Title: Vice President
------------------------------

<PAGE>

Exhibit 10.88

ITC/\DELTACOM, INC.

1997 STOCK OPTION PLAN

AS AMENDED AS OF

OCTOBER 20, 1997
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
1. PURPOSE ................................................................. 1
2. DEFINITIONS ............................................................. 1
3. ADMINISTRATION .......................................................... 3
3.1. Committee ......................................................... 3
3.2. No Liability ...................................................... 3
4. STOCK ................................................................... 4
5. ELIGIBILITY ............................................................. 4
6. EFFECTIVE DATE AND TERM ................................................. 4
6.1. Effective Date .................................................... 4
6.2. Term .............................................................. 5
7. GRANT OF OPTIONS ........................................................ 5
8. LIMITATION ON INCENTIVE STOCK OPTIONS ................................... 5
9. OPTION AGREEMENTS ....................................................... 5
10. OPTION PRICE ............................................................ 6
11. TERM AND EXERCISE OF OPTIONS ............................................ 6
11.1. Term ............................................................. 6
11.2. Exercise by Optionee ............................................. 6
11.3. Option Period and Limitations on Exercise ........................ 6
11.4. Method of Exercise ............................................... 7
11.5. Parachute Limitations ............................................ 8
12. TRANSFERABILITY OF OPTIONS .............................................. 9
12.1. Transferability of Options ....................................... 9
12.2. Family Transfers ................................................. 9
13. TERMINATION OF SERVICE RELATIONSHIP ..................................... 9
14. RIGHTS IN THE EVENT OF DEATH OR DISABILITY .............................. 10
14.1. Death ............................................................ 10
14.2. Disability ....................................................... 11
15. USE OF PROCEEDS ......................................................... 11
16. SECURITIES LAWS ......................................................... 12
17. EXCHANGE ACT: RULE 16b-3 ................................................ 12
17.1. General .......................................................... 12
17.2. Compensation Committee ........................................... 13
17.3. Restriction on Transfer of Stock ................................. 13
18. AMENDMENT AND TERMINATION ............................................... 13
19. EFFECT OF CHANGES IN CAPITALIZATION ..................................... 13
19.1. Changes in Stock ................................................. 13
19.2. Reorganization With Corporation Surviving ........................ 14
19.3. Other Reorganizations; Sale of Assets or Stock ................... 14
19.4. Adjustments ...................................................... 15
19.5. No Limitations on Corporation .................................... 15
</TABLE>

-1-
<PAGE>

<TABLE>
<S> <C>
20. WITHHOLDING ............................................................. 15
21. DISCLAIMER OF RIGHTS .................................................... 15
22. NONEXCLUSIVITY .......................................................... 16
23. GOVERNING LAW ........................................................... 16
</TABLE>

-2-
<PAGE>

ITC/\DELTACOM, INC.
1997 STOCK OPTION PLAN

ITC/\DELTACOM, INC., a Delaware corporation (the "Corporation"), sets
forth herein the terms of the 1997 Stock Option Plan (the "Plan") as follows:

1. PURPOSE

The Plan is intended to advance the interests of the Corporation by
providing eligible individuals (as designated pursuant to Section 5 hereof) an
opportunity to acquire or increase a proprietary interest in the Corporation,
which thereby will create a stronger incentive to expend maximum effort for the
growth and success of the Corporation and its subsidiaries and will encourage
such eligible individuals to continue to service the Corporation.

2. DEFINITIONS

For purposes of interpreting the Plan and related documents (including
Option Agreements), the following definitions shall apply:

2.1 "Affiliate" means any company or other trade or business that is
controlled by or under common control with the Corporation, (determined in
accordance with the principles of Section 414(b) and 414(c) of the Code and the
regulations thereunder) or is an affiliate of the Corporation within the meaning
of Rule 405 of Regulation C under the 1933 Act.

2.2 "Board" means the Board of Directors of the Corporation.

2.3 "Cause" means, unless otherwise defined in an Option Agreement,
(i) gross negligence or willful misconduct in connection with the performance of
duties; (ii) conviction of a criminal offense (other than minor traffic
offenses); or (iii) material breach of any term of any employment, consulting or
other services, confidentiality, intellectual property or non-competition
agreements, if any, between Optionee and the Corporation or any of its
Subsidiaries or Affiliates.

2.4 "Code" means the Internal Revenue Code of 1986, as now in effect
or as hereafter amended.

2.5 "Committee" means the Compensation Committee of the Board which
must consist of no fewer than two members of the Board and shall be appointed by
the Board.

2.6 "Corporation" means ITC/\DELTACOM, Inc..
<PAGE>

2.7 "Effective Date" means the date of adoption of the Plan by the
Board.

2.8 "Employer" means ITC/\DELTACOM, Inc. or the Subsidiary,
Affiliate or majority stockholder of the Corporation which employs the
designated recipient of an Option.

2.9 "Exchange Act" means the Securities Exchange Act of 1934, as now
in effect or as hereafter amended.

2.10 "Fair Market Value" means the value of each share of Stock
subject to the Plan determined as follows: if on the Grant Date or other
determination date the shares of Stock are listed on an established national or
regional stock exchange, are admitted to quotation on the National Association
of Securities Dealers Automated Quotation System, or are publicly traded on an
established securities market, the Fair Market Value of the shares of Stock
shall be the closing price of the shares of Stock on such exchange or in such
market (the highest such closing price if there is more than one such exchange
or market) on the trading day immediately preceding the Grant Date (or on the
Grant Date, if so specified by the Committee or the Board) or such other
determination date (or if there is no such reported closing price, the Fair
Market Value shall be the mean between the highest bid and lowest asked prices
or between the high and low sale prices on such trading day) or, if no sale of
the shares of Stock is reported for such trading day, on the next preceding day
on which any sale shall have been reported. If the shares of Stock are not
listed on such an exchange, quoted on such System or traded on such a market,
Fair Market Value shall be determined by the Board in good faith.

2.11 "Grant Date" means the later of (i) the date as of which the
Committee approves the grant and (ii) the date as of which the Optionee and the
Corporation, Subsidiary, Affiliate or majority stockholder of the Corporation
enter the relationship resulting in the Optionee being eligible for grants.

2.12 "Immediate Family Members" means the spouse, children and
grandchildren of the Optionee.

2.13 "Incentive Stock Option" means an "incentive stock option"
within the meaning of section 422 of the Code.

2.14 "Option" means an option to purchase one or more shares of Stock
pursuant to the Plan.

2.15 "Option Agreement" means the written agreement evidencing the
grant of an Option hereunder.

-2-
<PAGE>

2.16 "Optionee" means a person who holds an Option under the Plan.

2.17 "Option Period" means the period during which Options may be
exercised as defined in Section 11.

2.18 "Option Price" means the purchase price for each share of Stock
subject to an Option.

2.19 "Plan" means the ITC/\DELTACOM, Inc. 1997 Stock Option Plan.

2.20 "1933 Act" means the Securities Act of 1933, as now in effect or
as hereafter amended.

2.21 "Service Relationship" means the provision of bona fide services
to the Corporation, a Subsidiary, an Affiliate or the majority stockholder as an
employee, director, advisor or consultant.

2.22 "Stock" mean the shares of Common Stock, par value $.01 per
share, of the Corporation.

2.23 "Subsidiary" means any "subsidiary corporation" of the
Corporation within the meaning of Section 425(f) of the Code.

3. ADMINISTRATION

3.1. Committee

The Plan shall be administered by the Committee appointed by the Board,
which shall have the full power and authority to take all actions and to make
all determinations required or provided for under the Plan or any Option granted
or Option Agreement entered into hereunder and all such other actions and
determinations not inconsistent with the specific terms and provisions of the
Plan deemed by the Committee to be necessary or appropriate to the
administration of the Plan or any Option granted or Option Agreement entered
into hereunder. The interpretation and construction by the Committee of any
provision of the Plan or of any Option granted or Option Agreement entered into
hereunder shall be final and conclusive.

3.2. No Liability

No member of the Board or of the Committee shall be liable for any action
or determination made, or any failure to take or make an action or

-3-
<PAGE>

determination, in good faith with respect to the Plan or any Option granted or
Option Agreement entered into hereunder.

4. STOCK

The stock that may be issued pursuant to Options granted under the Plan
shall be Stock, which shares may be treasury shares or authorized but unissued
shares. The number of shares of Stock that may be issued pursuant to Options
granted under the Plan shall not exceed in the aggregate 2,407,500 shares of
Stock, which number of shares is subject to adjustment as provided in Section 19
hereof. If any Option expires, terminates or is terminated for any reason prior
to exercise in full, the shares of Stock that were subject to the unexercised
portion of such Option shall be available for future Options granted under the
Plan.

5. ELIGIBILITY

Options may be granted under the Plan to (i) any officer or key employee
of the Corporation, any Subsidiary, any Affiliate or the majority stockholder of
the Corporation (including any such officer or key employee who is also a
director of the Corporation, any Subsidiary, any Affiliate or the majority
stockholder of the Corporation) or (ii) any other individual whose participation
in the Plan is determined to be in the best interests of the Corporation by the
Committee. An individual may hold more than one Option, subject to such
restrictions as are provided herein.

6. EFFECTIVE DATE AND TERM

6.1. Effective Date

The Plan shall become effective as of the date of adoption by the Board,
subject to stockholders' approval of the Plan within one year of such effective
date by a majority of the votes cast at a duly held meeting of the stockholders
of the Corporation at which a quorum representing a majority of all outstanding
stock is present, either in person or by proxy, and voting on the matter, or by
written consent in accordance with applicable state law and the Certificate of
Incorporation and By-Laws of the Corporation; provided, however, that upon
-------- -------
approval of the Plan by the stockholders of the Corporation, all Options granted
under the Plan on or after the effective date shall be fully effective as if the
stockholders of the Corporation had approved the Plan on the effective date. If
the stockholders fail to approve the Plan within one year of such effective
date, any Options granted hereunder shall be null, void and of no effect.

-4-
<PAGE>

6.2. Term

The Plan shall terminate on the date 10 years after the effective date.

7. GRANT OF OPTIONS

Subject to the terms and conditions of the Plan, the Committee may, at
any time and from time to time prior to the date of termination of the Plan,
grant to such eligible individuals as the Committee may determine Options to
purchase such number of shares of Stock on such terms and conditions as the
Committee may determine, including any terms or conditions which may be
necessary to qualify such Options as Incentive Stock Options. Without limiting
the foregoing, the Committee may at any time, with the consent of the Optionee,
amend the terms of outstanding Options or issue new Options in exchange for the
surrender and cancellation of outstanding Options. The date on which the
Committee approves the grant of an Option (or such later date as is specified by
the Committee) shall be considered the date on which such Option is granted. The
maximum number of shares of Stock subject to Options that can be awarded under
the Plan to any person is 802,500 shares.

8. LIMITATION ON INCENTIVE STOCK OPTIONS

An Option shall constitute an Incentive Stock Option only to the extent
that (i) it is designated an Incentive Stock Option and (ii) the aggregate fair
market value (determined at the time the Option is granted) of the Stock with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionee during any calendar year (under the Plan and all other plans of the
Optionee's employer corporation and its parent and subsidiary corporations
within the meaning of Section 422(d) of the Code) does not exceed $100,000. This
limitation shall be applied by taking Options into account in the order in which
such Options were granted.

9. OPTION AGREEMENTS

All Options granted pursuant to the Plan shall be evidenced by written
agreements to be executed by the Corporation and the Optionee, in such form or
forms as the Committee shall from time to time determine. Option Agreements
covering Options granted from time to time or at the same time need not contain
similar provisions; provided, however, that all such Option Agreements shall
-------- -------
comply with all terms of the Plan.

-5-
<PAGE>

10. OPTION PRICE

The purchase price of each share of Stock subject to an Option shall be
fixed by the Committee and stated in each Option Agreement. In the case of an
Option that is intended to constitute an Incentive Stock Option, the Option
Price shall be not less than the greater of par value or 100 percent of the fair
market value of a share of the Stock covered by the Option on the date the
Option is granted (as determined in good faith by the Committee); provided,
--------
however, that in the event the Optionee would otherwise be ineligible to receive
- -------
an Incentive Stock Option by reason of the provisions of Sections 422(b)(6) and
424(d) of the Code (relating to stock ownership of more than 10 percent), the
Option Price of an Option which is intended to be an Incentive Stock Option
shall be not less than the greater of par value or 110 percent of the fair
market value of a share of the Stock covered by the Option at the time such
Option is granted. In the case of an Option not intended to constitute an
Incentive Stock Option, the Option Price shall be not less than the par value of
a share of the Stock covered by the Option on the date the Option is granted.

11. TERM AND EXERCISE OF OPTIONS

11.1. Term

Each Option granted under the Plan shall terminate and all rights to
purchase shares thereunder shall cease upon the expiration of 10 years from the
date such Option is granted, or on such date prior thereto as may be fixed by
the Committee and stated in the Option Agreement relating to such Option;
provided, however, that in the event the Optionee would otherwise be ineligible
- -------- -------
to receive an Incentive Stock Option by reason of the provisions of Sections
422(b)(6) and 424(d) of the Code (relating to stock ownership of more than 10
percent), an Option granted to such Optionee which is intended to be an
Incentive Stock Option shall in no event be exercisable after the expiration of
five years from the date it is granted.

11.2. Exercise by Optionee

Only the Optionee receiving an Option or a transferee of an Option
pursuant to Section 12 (or, in the event of the Optionee's legal incapacity or
incompetency, the Optionee's guardian or legal representative, and in the case
of the Optionee's death, the Optionee's estate) may exercise the Option.

11.3. Option Period and Limitations on Exercise

Each Option granted under the Plan shall be exercisable in whole or in
part at any time and from time to time over a period commencing on or after the
date of grant of the Option and ending upon the expiration or termination of the

-6-
<PAGE>

Option, as the Committee shall determine and set forth in the Option Agreement
relating to such Option. Without limitation of the foregoing, the Committee,
subject to the terms and conditions of the Plan, may in its sole discretion
provide that an Option may not be exercised in whole or in part for any period
or periods of time during which such Option is outstanding as the Committee
shall determine and set forth in the Option Agreement relating to such Option.
Any such limitation on the exercise of an Option contained in any Option
Agreement may be rescinded, modified or waived by the Committee, in its sole
discretion, at any time and from time to time after the date of grant of such
Option. Notwithstanding any other provisions of the Plan, no Option shall be
exercisable in whole or in part prior to the date the Plan is approved by the
stockholders of the Corporation as provided in Section 6.1 hereof.

11.4. Method of Exercise

An Option that is exercisable hereunder may be exercised by delivery to
the Corporation on any business day, at its principal office addressed to the
attention of the Committee, of written notice of exercise, which notice shall
specify the number of shares for which the Option is being exercised, and shall
be accompanied by payment in full of the Option Price of the shares for which
the Option is being exercised. Payment of the Option Price for the shares of
Stock purchased pursuant to the exercise of an Option shall be made, as
determined by the Committee and set forth in the Option Agreement pertaining to
an Option, (a) in cash or by certified check payable to the order of the
Corporation; (b) through the tender to the Corporation of shares of Stock which,
if acquired from the Company, have been owned by the Optionee no less than six
(6) months and which shares shall be valued, for purposes of determining the
extent to which the Option Price has been paid thereby, at their Fair Market
Value on the date of exercise; (c) to the extent permitted by applicable law and
under the terms of the Option Agreement with respect to such Option, by causing
the Corporation to withhold shares of Stock otherwise issuable pursuant to the
exercise of an Option equal in value to the Option Price or portion thereof to
be satisfied pursuant to this clause (c) or (d) by a combination of the methods
described in Sections 11.4(a), 11.4(b) and 11.4(c) hereof; provided, however,
-------- -------
that the Committee may in its discretion impose and set forth in the Option
Agreement pertaining to an Option such limitations or prohibitions on the use of
shares of Stock to exercise Options as it deems appropriate. Payment in full of
the Option Price need not accompany the written notice of exercise provided the
notice directs that the Stock certificate or certificates for the shares for
which the Option is exercised be delivered to a licensed broker acceptable to
the Corporation as the agent for the individual exercising the Option and, at
the time such Stock certificate or certificates are delivered, the broker
tenders to the Corporation cash (or cash equivalents acceptable to the
Corporation) equal to the Option Price plus the amount (if any) of federal
and/or other taxes which the Corporation may, in its judgment, be required to
withhold with respect to the

-7-
<PAGE>

exercise of the Option. An attempt to exercise any Option granted hereunder
other than as set forth above shall be invalid and of no force and effect.
Promptly after the exercise of an Option and the payment in full of the Option
Price of the shares of Stock covered thereby, the individual exercising the
Option shall be entitled to the issuance of a Stock certificate or certificates
evidencing such individual's ownership of such shares. A separate Stock
certificate or certificates shall be issued for any shares purchased pursuant to
the exercise of an Option which is an Incentive Stock Option, which certificate
or certificates shall not include any shares which were purchased pursuant to
the exercise of an Option which is not an Incentive Stock Option. An individual
holding or exercising an Option shall have none of the rights of a stockholder
until the shares of Stock covered thereby are fully paid and issued to such
individual and, except as provided in Section 19 hereof, no adjustment shall be
made for dividends or other rights for which the record date is prior to the
date of such issuance.

11.5. Parachute Limitations

Notwithstanding any other provision of this Plan or of any other
agreement, contract, or understanding heretofore or hereafter entered into by
the Optionee with the Corporation or any Subsidiary, except an agreement,
contract, or understanding hereafter entered into that expressly modifies or
excludes application of this paragraph (an "Other Agreement"), and
notwithstanding any formal or informal plan or other arrangement heretofore or
hereafter adopted by the Corporation (or any such Subsidiary) for the direct or
indirect provision of compensation to the Optionee (including groups or classes
of participants or beneficiaries of which the Optionee is a member), whether or
not such compensation is deferred, is in cash, or is in the form of a benefit to
or for the Optionee (a "Benefit Arrangement"), if the Optionee is a
"disqualified individual," as defined in Section 280G(c) of the Code, any Option
held by that Optionee and any right to receive any payment or other benefit
under this Plan shall not become exercisable or vested (i) to the extent that
such right to exercise, vesting, payment, or benefit, taking into account all
other rights, payments, or benefits to or for the Optionee under this Plan, all
Other Agreements, and all Benefit Arrangements, would cause any payment or
benefit to the Optionee under this Plan to be considered a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code as then in effect (a
"Parachute Payment") and (ii) if, as a result of receiving a Parachute Payment,
---
the aggregate after-tax amounts received by the Optionee from the Corporation
under this Plan, all Other Agreements, and all Benefit Arrangements would be
less than the maximum after-tax amount that could be received by Optionee
without causing any such payment or benefit to be considered a Parachute
Payment. In the event that the receipt of any such right to exercise, vesting,
payment, or benefit under this Plan, in conjunction with all other rights,
payments, or benefits to or for the Optionee under any Other Agreement or any

-8-
<PAGE>

Benefit Arrangement would cause the Optionee to be considered to have received a
Parachute Payment under this Plan that would have the effect of decreasing the
after-tax amount received by the Optionee as described in clause (ii) of the
preceding sentence, then the Optionee shall have the right, in the Optionee's
sole discretion, to designate those rights, payments, or benefits under this
Plan, any Other Agreements, and any Benefit Arrangements that should be reduced
or eliminated so as to avoid having the payment or benefit to the Optionee under
this Plan be deemed to be a Parachute Payment.

12. TRANSFERABILITY OF OPTIONS

12.1. Transferability of Options

Except as provided in Section 12.2, during the lifetime of an Optionee,
only the Optionee (or, in the event of legal incapacity or incompetency, the
Optionee's guardian or legal representative) may exercise an Option. Except as
provided in Section 12.2, no Option shall be assignable or transferable by the
Optionee to whom it is granted, other than by will or the laws of descent and
distribution.

12.2. Family Transfers.

Subject to the terms of the applicable Option Agreement, an Optionee may
transfer all or part of an Option which is not an Incentive Stock Option to (i)
any Immediate Family Member, (ii) a trust or trusts for the exclusive benefit of
any Immediate Family Member, or (iii) a partnership in which Immediate Family
Members are the only partners, provided that (x) there may be no consideration
for any such transfer, and (y) subsequent transfers of transferred Options are
prohibited except those in accordance with this Section 12.2 or by will or the
laws of descent and distribution. Following transfer, any such Option shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of Section 12.2 hereof
the term "Optionee" shall be deemed to refer the transferee. The events of
termination of the Service Relationship of Sections 13 and 14 hereof shall
continue to be applied with respect to the original Optionee, following which
the Option shall be exercisable by the transferee only to the extent, and for
the periods specified in Section 11.3.

13. TERMINATION OF SERVICE RELATIONSHIP

Upon the termination of the Service Relationship of an Optionee with the
Corporation, a Subsidiary or an Affiliate, other than by reason of the death or
"permanent and total disability" (within the meaning of Section 22(e)(3) of the
Code) of such Optionee or for Cause, any Option granted to an Optionee pursuant
to the Plan shall continue to be exercisable only to the extent that it was
exercisable immediately before such termination; provided, however, such Option
-------- -------
shall terminate thirty (30) days after the date of such termination of Service

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<PAGE>

Relationship, unless earlier terminated pursuant to Section 11.1 hereof, and
such Optionee shall have no further right to purchase shares of Stock pursuant
to such Option; and provided further, that the Committee may provide, by
-------- -------
inclusion of appropriate language in any Option Agreement, that an Optionee may
(subject to the general limitations on exercise set forth in Section 11.3
hereof), in the event of termination of the Service Relationship of the Optionee
with the Corporation, a Subsidiary or an Affiliate, exercise an Option, in whole
or in part, at any time subsequent to such termination of Service Relationship
and prior to termination of the Option pursuant to Section 11.1 hereof, either
subject to or without regard to any installment limitation on exercise imposed
pursuant to Section 11.3 hereof, as the Committee, in its sole and absolute
discretion, shall determine and set forth in the Option Agreement. Upon the
termination of the Service Relationship of an Optionee with the Corporation, a
Subsidiary or an Affiliate for Cause, any Option granted to an Optionee pursuant
to the Plan shall terminate and such Optionee shall have no further right to
purchase shares of Stock pursuant to such Option; and provided however, that the
-------- -------
Committee may provide, by inclusion of appropriate language in any Option
Agreement, that an Optionee may (subject to the general limitations on exercise
set forth in Section 11.3 hereof), in the event of termination of the Service
Relationship of the Optionee with the Corporation, a Subsidiary or an Affiliate
for Cause, exercise an Option, in whole or in part, at any time subsequent to
such termination of Service Relationship and prior to termination of the Option
pursuant to Section 11.1 hereof, either subject to or without regard to any
installment limitation on exercise imposed pursuant to Section 11.3 hereof, as
the Committee, in its sole and absolute discretion, shall determine and set
forth in the Option Agreement. Whether a leave of absence or leave on military
or government service shall constitute a termination of Service Relationship for
purposes of the Plan shall be determined by the Committee, which determination
shall be final and conclusive. For purposes of the Plan, including without
limitation this Section 13 and Section 14, unless otherwise provided in an
Option Agreement, a termination of Service Relationship with the Corporation, a
Subsidiary or an Affiliate shall not be deemed to occur if the Optionee
immediately thereafter has a Service Relationship with the Corporation, any
other Subsidiary or any other Affiliate.

14. RIGHTS IN THE EVENT OF DEATH OR DISABILITY

14.1. Death

If an Optionee dies while in a Service Relationship with the
Corporation, a Subsidiary or an Affiliate or within the period following the
termination of such Service Relationship during which the Option is exercisable
under Section 13 or 14.2 hereof, the executors, administrators, legatees or
distributees of such Optionee's estate shall have the right (subject to the
general limitations on exercise set forth in Section 11.3 hereof), at any time
within one year after the date of such Optionee's death and prior to termination
of the Option

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<PAGE>

pursuant to Section 11.1 hereof, to exercise, in whole or in part, any Option
held by such Optionee at the date of such Optionee's death, whether or not such
Option was exercisable immediately prior to such Optionee's death; provided,
however, that the Committee may provide by inclusion of appropriate language in
any Option Agreement that, in the event of the death of an Optionee, the
executors, administrators, legatees or distributees of such Optionee's estate
may exercise an Option (subject to the general limitations on exercise set forth
in Section 11.3 hereof), in whole or in part, at any time subsequent to such
Optionee's death and prior to termination of the Option pursuant to Section 11.1
hereof, either subject to or without regard to any installment limitation on
exercise imposed pursuant to Section 11.3 hereof, as the Committee, in its sole
and absolute discretion, shall determine and set forth in the Option Agreement.

14.2. Disability

If an Optionee terminates a Service Relationship with the Corporation, a
Subsidiary or an Affiliate by reason of the "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code) of such Optionee, then such
Optionee shall have the right (subject to the general limitations on exercise
set forth in Section 11.3 hereof), at any time within one year after such
termination of Service Relationship and prior to termination of the Option
pursuant to Section 11.1 hereof, to exercise, in whole or in part, any Option
held by such Optionee at the date of such termination of Service Relationship,
whether or not such Option was exercisable immediately prior to such termination
of Service Relationship; provided, however, that the Committee may provide, by
-------- -------
inclusion of appropriate language in any Option Agreement, that an Optionee may
(subject to the general limitations on exercise set forth in Section 11.3
hereof), in the event of the termination of the Service Relationship of the
Optionee with the Corporation or a Subsidiary by reason of the "permanent and
total disability" (within the meaning of Section 22(e)(3) of the Code) of such
Optionee, exercise an Option, in whole or in part, at any time subsequent to
such termination of Service Relationship and prior to termination of the Option
pursuant to Section 11.1 hereof, either subject to or without regard to any
installment limitation on exercise imposed pursuant to Section 11.3 hereof, as
the Committee, in its sole and absolute discretion, shall determine and set
forth in the Option Agreement. Whether a termination of a Service Relationship
is to be considered by reason of "permanent and total disability" for purposes
of the Plan shall be determined by the Committee, which determination shall be
final and conclusive.

15. USE OF PROCEEDS

The proceeds received by the Corporation from the sale of Stock pursuant
to Options granted under the Plan shall constitute general funds of the
Corporation.

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<PAGE>

16. SECURITIES LAWS

The Corporation shall not be required to sell or issue any shares of
Stock under any Option if the sale or issuance of such shares would constitute a
violation by the individual exercising the Option or by the Corporation of any
provisions of any law or regulation of any governmental authority, including,
without limitation, any federal or state securities laws or regulations. If at
any time the Corporation shall determine, in its discretion, that the listing,
registration or qualification of any shares subject to the Option upon any
securities exchange or under any state or federal law, or the consent of any
government regulatory body, is necessary or desirable as a condition of, or in
connection with, the issuance or purchase of shares, the Option may not be
exercised in whole or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Corporation, and any delay caused thereby shall in no way
affect the date of termination of the Option. Specifically in connection with
the Securities Act, upon exercise of any Option, unless a registration statement
under the Securities Act is in effect with respect to the shares of Stock
covered by such Option, the Corporation shall not be required to sell or issue
such shares unless the Corporation has received evidence satisfactory to the
Corporation that the Optionee may acquire such shares pursuant to an exemption
from registration under the Securities Act. Any determination in this connection
by the Corporation shall be final and conclusive. The Corporation may, but shall
in no event be obligated to, register any securities covered hereby pursuant to
the Securities Act. The Corporation shall not be obligated to take any
affirmative action in order to cause the exercise of an Option or the issuance
of shares pursuant thereto to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the
requirement that an Option shall not be exercisable unless and until the shares
of Stock covered by such Option are registered or are subject to an available
exemption from registration, the exercise of such Option (under circumstances in
which the laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.

17. EXCHANGE ACT: RULE 16b-3

17.1. General

The Plan is intended to comply with Rule 16b-3 ("Rule 16b-3")
(and any successor thereto) under the Exchange Act. Any provision inconsistent
with Rule 16b-3 shall, to the extent permitted by law and determined to be
advisable by the Committee (constituted in accordance with Section 17.2 hereof),
be inoperative and void.

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<PAGE>

17.2. Compensation Committee

The Committee appointed in accordance with Section 3.1 hereof shall
consist of not fewer than two members of the Board each of whom shall qualify
(at the time of appointment to the Committee and during all periods of service
on the Committee) in all respects as a "non-employee director" as defined in
Rule 16b-3.

17.3. Restriction on Transfer of Stock

No director, officer or other "insider" of the Corporation subject to
Section 16 of the Exchange Act shall be permitted to sell Stock (which such
"insider" had received upon exercise of an Option) during the six months
immediately following the grant of such Option.

18. AMENDMENT AND TERMINATION

The Board may, at any time and from time to time, amend, suspend or
terminate the Plan as to any shares of Stock as to which Options have not been
granted. The Corporation also may retain the right in an Option Agreement to
cause a forfeiture of the shares or gain realized by an Optionee on account of
the Optionee taking actions in "competition with the Corporation," as defined in
the applicable Option Agreement. Furthermore, the Corporation may, in the Option
Agreement, retain the right to annul the grant of an Option if the holder of
such grant had a Service Relationship with the Corporation, a Subsidiary, or an
Affiliate and is terminated "for cause," as defined in the applicable Option
Agreement. Except as permitted under Section 19 hereof, no amendment, suspension
or termination of the Plan shall, without the consent of the Optionee, alter or
impair rights or obligations under any Option theretofore granted under the
Plan.

19. EFFECT OF CHANGES IN CAPITALIZATION

19.1. Changes in Stock

If the number of outstanding shares of Stock is increased or decreased
or changed into or exchanged for a different number or kind of shares or other
securities of the Corporation by reason of any recapitalization,
reclassification, stock split-up, combination of shares, exchange of shares,
stock dividend or other distribution payable in capital stock, or other increase
or decrease in such shares effected without receipt of consideration by the
Corporation, occurring after the effective date of the Plan, a proportionate and
appropriate adjustment shall be made by the Corporation in the number and kind
of shares for which Options are outstanding, so that the proportionate interest
of the Optionee immediately following such event shall, to the extent
practicable, be the same as immediately

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<PAGE>

prior to such event. Any such adjustment in outstanding Options shall not change
the aggregate Option Price payable with respect to shares subject to the
unexercised portion of the Option outstanding but shall include a corresponding
proportionate adjustment in the Option Price per share.

19.2. Reorganization With Corporation Surviving

Subject to Section 19.3 hereof, if the Corporation shall be the
surviving entity in any reorganization, merger or consolidation of the
Corporation with one or more other entities, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger or consolidation,
with a corresponding proportionate adjustment of the Option Price per share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior to
such reorganization, merger or consolidation.

19.3. Other Reorganizations; Sale of Assets or Stock

Upon the dissolution or liquidation of the Corporation, or upon a
merger, consolidation or reorganization of the Corporation with one or more
other entities in which the Corporation is not the surviving entity, or upon a
sale of substantially all of the assets of the Corporation to another person or
entity, or upon any transaction (including, without limitation, a merger or
reorganization in which the Corporation is the surviving entity) approved by the
Board that results in any person or entity (other than persons who are holders
of stock of the Corporation at the time the Plan is approved by the Stockholders
and other than an Affiliate) owning 80 percent or more of the combined voting
power of all classes of stock of the Corporation, the Plan and all Options
outstanding hereunder shall terminate, except to the extent provision is made in
connection with such transaction for the continuation of the Plan and/or the
assumption of the Options theretofore granted, or for the substitution for such
Options of new options covering the stock of a successor entity, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kinds of
shares and exercise prices, in which event the Plan and Options theretofore
granted shall continue in the manner and under the terms so provided. In the
event of any such termination of the Plan, each Optionee shall have the right
(subject to the general limitations on exercise set forth in Section 11.3 hereof
and except as otherwise specifically provided in the Option Agreement relating
to such Option), immediately prior to the occurrence of such termination and
during such period occurring prior to such termination as the Committee in its
sole discretion shall designate, to exercise such Option in whole or in part, to
the extent such Option was otherwise exercisable at the time such termination
occurs, but subject to any additional provisions that the Committee may, in its
sole

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<PAGE>

discretion, include in any Option Agreement. The Committee shall send written
notice of an event that will result in such a termination to all Optionees not
later than the time at which the Corporation gives notice thereof to its
stockholders.

19.4. Adjustments

Adjustments under this Section 19 relating to stock or securities of the
Corporation shall be made by the Committee, whose determination in that respect
shall be final and conclusive. No fractional shares of Stock or units of other
securities shall be issued pursuant to any such adjustment, and any fractions
resulting from any such adjustment shall be eliminated in each case by rounding
downward to the nearest whole share or unit.

19.5. No Limitations on Corporation

The grant of an Option pursuant to the Plan shall not affect or limit in
any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or to sell or
transfer all or any part of its business or assets.

20. WITHHOLDING

The Corporation or a Subsidiary may be obligated to withhold federal and
local income taxes and Social Security taxes to the extent that an Optionee
realizes ordinary income in connection with the exercise of an Option. The
Corporation or a Subsidiary may withhold amounts needed to cover such taxes from
payments otherwise due and owing to an Optionee, and upon demand the Optionee
will promptly pay to the Corporation or a Subsidiary having such obligation any
additional amounts as may be necessary to satisfy such withholding tax
obligation. Such payment shall be made in cash or cash equivalents.

21. DISCLAIMER OF RIGHTS

No provision in the Plan or in any Option granted or Option Agreement
entered into pursuant to the Plan shall be construed to confer upon any
individual the right to remain in the employ of the Corporation, any Subsidiary
or any Affiliate, or to interfere in any way with the right and authority of the
Corporation, any Subsidiary or any Affiliate either to increase or decrease the
compensation of any individual at any time, or to terminate any employment or
other relationship between any individual and the Corporation, any Subsidiary or
any Affiliate. The obligation of the Corporation to pay any benefits pursuant to
the Plan shall be interpreted as a contractual obligation to pay only those
amounts described herein, in the manner and under the conditions prescribed
herein. The

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<PAGE>

Plan shall in no way be interpreted to require the Corporation to transfer any
amounts to a third party trustee or otherwise hold any amounts in trust or
escrow for payment to any participant or beneficiary under the terms of the
Plan.

22. NONEXCLUSIVITY

Neither the adoption of the Plan nor the submission of the Plan to the
stockholders of the Corporation for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or individuals) as the Board in its discretion determines desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan.

23. GOVERNING LAW.

This Plan and all Options to be granted hereunder shall be governed by
the laws of the State of Delaware (but not including the choice of law rules
thereof).

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<PAGE>

Exhibit 10.89

ITC/\DELTACOM, INC.

DIRECTOR STOCK OPTION PLAN

AS AMENDED AS OF

OCTOBER 20, 1997
<PAGE>

<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
1. PURPOSE .................................................................. 1
2. ADMINISTRATION ........................................................... 1
2.1. Board ............................................................ 1
2.2. No Liability ..................................................... 1
3. STOCK .................................................................... 2
4. ELIGIBILITY .............................................................. 2
5. EFFECTIVE DATE AND TERM OF THE PLAN ...................................... 2
6. GRANT OF OPTIONS ......................................................... 2
7. OPTION AGREEMENTS ........................................................ 2
8. OPTION PRICE ............................................................. 2
9. TERM AND EXERCISE OF OPTIONS ............................................. 3
9.1. Term ............................................................. 3
9.2. Option Period and Limitations on Exercise ........................ 3
9.3. Method of Exercise ............................................... 3
10. TRANSFERABILITY OF OPTIONS .............................................. 4
10.1. Transferability of Options ...................................... 4
10.2. Family Transfers ................................................ 4
11. SERVICE TERMINATION ..................................................... 5
12. RIGHTS IN THE EVENT OF DEATH OR DISABILITY .............................. 5
12.1. Death ........................................................... 5
12.2. Disability ...................................................... 5
13. USE OF PROCEEDS ......................................................... 6
14. SECURITIES ACT OF 1933 .................................................. 6
15. SECURITIES EXCHANGE ACT OF 1934: RULE 16B-3 ............................. 6
15.1. General ......................................................... 6
15.2. Additional Restriction on Transfer of Stock ..................... 7
16. AMENDMENT AND TERMINATION OF THE PLAN ................................... 7
17. EFFECT OF CHANGES IN CAPITALIZATION ..................................... 7
17.1. Changes in Stock ................................................ 7
17.2. Reorganization With Corporation Surviving ....................... 7
17.3. Other Reorganizations; Sale of Assets/Stock ..................... 8
17.4. Adjustments ..................................................... 8
17.5. No Limitations on Corporation ................................... 9
18. DISCLAIMER OF RIGHTS .................................................... 9
19. NONEXCLUSIVITY OF THE PLAN .............................................. 9
</TABLE>
<PAGE>

ITC/\DELTACOM, INC.

DIRECTOR STOCK OPTION PLAN

ITC/\DELTACOM, Inc., a Delaware corporation (the "Corporation"), sets
forth herein the terms of this Director Stock Option Plan (the "Plan") as
follows:

1. PURPOSE

The Plan is intended to advance the interests of the Corporation by
providing eligible individuals (as designated pursuant to Section 4. below) an
opportunity to acquire (or increase) a proprietary interest in the Corporation,
which thereby will create a stronger incentive to expend maximum effort for the
growth and success of the Corporation and its subsidiaries and will encourage
such eligible individuals to remain in the employ or service of the Corporation
or that of one or more of its affiliates. No stock option granted under the Plan
(an "Option") is intended to be an "incentive stock option" ("Incentive Stock
Option") within the meaning of Section 422 of the Internal Revenue Code of 1986,
or the corresponding provision of any subsequently enacted tax statute, as
amended from time to time (the "Code").

2. ADMINISTRATION

2.1. Board

The Plan shall be administered by the Board of Directors of the
Corporation (the "Board"), which shall have the full power and authority to take
all actions and to make all determinations required or provided for under the
Plan or any Option granted or Option Agreement (as defined in Section 7 below)
entered into hereunder and all such other actions and determinations not
inconsistent with the specific terms and provisions of the Plan deemed by the
Board to be necessary or appropriate to the administration of the Plan or any
Option granted or Option Agreement entered into hereunder. The interpretation
and construction by the Board of any provision of the Plan or of any Option
granted or Option Agreement entered into hereunder shall be final and
conclusive.

2.2. No Liability

No member of the Board shall be liable for any action or
determination made, or any failure to take or make an action or determination,
in good faith with respect to the Plan or any Option granted or Option Agreement
entered into hereunder.
<PAGE>

3. STOCK

The stock that may be issued pursuant to Options granted under the
Plan shall be shares of Common Stock of the Corporation (such shares of Common
Stock being referred to herein as the "Stock"), which shares may be treasury
shares or authorized but unissued shares. The number of shares of Stock that may
be issued pursuant to Options granted under the Plan shall not exceed in the
aggregate 240,750 shares of Stock, which number of shares is subject to
adjustment as provided in Section 17.4. below. If any Option expires, terminates
or is terminated for any reason prior to exercise in full, the shares of Stock
that were subject to the unexercised portion of such Option shall be available
for future Options granted under the Plan.

4. ELIGIBILITY

Options will be granted under the Plan to non-employee directors of
the Corporation.

5. EFFECTIVE DATE AND TERM OF THE PLAN

The Plan became effective as of March 24, 1997 and shall terminate on
the date ten years after the effective date.

6. GRANT OF OPTIONS

The Board shall grant to each nonemployee director of the
Corporation, upon such person's initial election or appointment to serve as such
a director, Options to purchase 16,050 shares of Common Stock of the
Corporation.

7. OPTION AGREEMENTS

All Options granted pursuant to the Plan shall be evidenced by
written agreements ("Option Agreements") executed by the Corporation and by the
Optionee, in such form or forms as the Board shall from time to time determine.

8. OPTION PRICE

The purchase price of each share of the Stock subject to an Option
(the "Option Price") shall be the fair market value of the Stock (the "Fair
Market Value"). Fair Market Value means the value of each share of Stock subject
to the Plan determined as follows: if on the date of grant or other
determination date the shares of Stock are listed on an established national or
regional stock exchange, are admitted to quotation on the National Association
of Securities Dealers Automated Quotation System, or are publicly traded on an
established securities market, the Fair Market Value of the shares of Stock
shall be the closing price of the shares of Stock on such exchange or in such
market (the highest such closing price if there is

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<PAGE>

more than one such exchange or market) on the trading day immediately preceding
the date of grant (or on the date of grant, if so specified by the Committee or
the Board) or such other determination date (or if there is no such reported
closing price, the Fair Market Value shall be the mean between the highest bid
and lowest asked prices or between the high and low sale prices on such trading
day) or, if no sale of the shares of Stock is reported for such trading day, on
the next preceding day on which any sale shall have been reported. If the shares
of Stock are not listed on such an exchange, quoted on such System or traded on
such a market, Fair Market Value shall be determined by the Board in good faith.

9. TERM AND EXERCISE OF OPTIONS

9.1. Term

Each Option granted under the Plan shall terminate and all rights to
purchase shares thereunder shall cease upon the expiration of ten years and 30
days from the date such Option is granted.

9.2. Option Period and Limitations on Exercise

The Optionee may exercise the Option (subject to the limitations on
exercise set forth in this Plan or in the Option Agreement relating to such
Option), in installments as follows: on the second anniversary of the date of
grant of the Option, as set forth in Section 6. above, the Option shall be
exercisable in respect of 50 percent of the number of shares specified in
Section 6. above, and the Option shall be exercisable in respect of an
additional 25 percent of the number of shares specified in Section 6. above on
each of the third and fourth anniversaries of the date of grant, as set forth in
Section 6. above. The foregoing installments, to the extent not exercised, shall
accumulate and be exercisable, in whole or in part, at any time and from time to
time, after becoming exercisable and prior to the termination of the Option;
provided, that no single exercise of the Option shall be for less than 100
- --------
shares, unless the number of shares purchased is the total number at the time
available for purchase under this Option.

9.3. Method of Exercise

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<PAGE>

have been owned by the Optionee no less than six (6) months and which shares
shall be valued, for purposes of determining the extent to which the Option
Price has been paid thereby, at their Fair Market Value on the date of exercise;
or (c) by a combination of the methods described in Sections 9.3(a) and 9.3(b)
hereof; provided, however, that the Committee may in its discretion impose and
-------- -------
set forth in the Option Agreement pertaining to an Option such limitations or
prohibitions on the use of shares of Stock to exercise Options as it deems
appropriate. Payment in full of the Option Price need not accompany the written
notice of exercise provided the notice directs that the Stock certificate or
certificates for the shares for which the Option is exercised be delivered to a
licensed broker acceptable to the Corporation as the agent for the individual
exercising the Option and, at the time such Stock certificate or certificates
are delivered, the broker tenders to the Corporation cash (or cash equivalents
acceptable to the Corporation) equal to the Option Price plus the amount (if
any) of federal and/or other taxes which the Corporation may, in its judgment,
be required to withhold with respect to the exercise of the Option. An attempt
to exercise any Option granted hereunder other than as set forth above shall be
invalid and of no force and effect. Promptly after the exercise of an Option and
the payment in full of the Option Price of the shares of Stock covered thereby,
the individual exercising the Option shall be entitled to the issuance of a
Stock certificate or certificates evidencing such individual's ownership of such
shares. An individual holding or exercising an Option shall have none of the
rights of a stockholder until the shares of Stock covered thereby are fully paid
and issued to such individual and, except as provided in Section 17. hereof, no
adjustment shall be made for dividends or other rights for which the record date
is prior to the date of such issuance.

10. TRANSFERABILITY OF OPTIONS

10.1. Transferability of Options

Except as provided in Section 10.2., during the lifetime of an
Optionee, only the Optionee (or, in the event of legal incapacity or
incompetency, the Optionee's guardian or legal representative) may exercise an
Option. Except as provided in Section 10.2., no Option shall be assignable or
transferable by the Optionee to whom it is granted, other than by will or the
laws of descent and distribution.

10.2. Family Transfers.

Subject to the terms of the applicable Option Agreement, an Optionee
may transfer all or part of an Option to (i) any to the spouse, children and
grandchildren of the Optionee (an "Immediate Family Member"), (ii) a trust or
trusts for the exclusive benefit of any Immediate Family Member, or (iii) a
partnership in which Immediate Family Members are the only partners, provided
that (x) there may be no consideration for any such transfer, and (y) subsequent

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<PAGE>

transfers of transferred Options are prohibited except those in accordance with
this Section 10.2. or by will or the laws of descent and distribution. Following
transfer, any such Option shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided that for
purposes of Section 10.2. hereof the term "Optionee" shall be deemed to refer
the transferee. The events of termination of the Service Relationship of
Sections 11. hereof shall continue to be applied with respect to the original
Optionee, following which the Option shall be exercisable by the transferee only
to the extent, and for the periods specified in Sections 9.1. and 9.2.

11. SERVICE TERMINATION

Upon the termination of service (a "Service Termination") of the
Optionee in all capacities as an employee and/or director of (a) the Corporation
and all of its affiliated companies, and (b) ITC Holding Company, Inc. and all
of its affiliated companies (collectively, including the Corporation, the "ITC
Companies") other than by reason of the death or permanent and total disability
of such Optionee, any Option granted to an Optionee pursuant to the Plan shall
terminate, and such Optionee shall have no further right to purchase shares of
Stock pursuant to such Option.

12. RIGHTS IN THE EVENT OF DEATH OR DISABILITY

12.1. Death

If an Optionee dies while in the service as a director of the
Corporation, the executors or administrators or legatees or distributees of such
Optionee's estate shall have the right (subject to the general limitations on
exercise set forth in Section 9.2. above), at any time within one year after the
date of such Optionee's death and prior to termination of the Option pursuant to
Section 9.1. above, to exercise any Option held by such Optionee at the date of
such Optionee's death, whether or not such Option was exercisable immediately
prior to such Optionee's death.

12.2. Disability

If there is a Service Termination by reason of the permanent and
total disability of the Optionee, then such Optionee shall have the right
(subject to the general limitations on exercise set forth in Section 9.2.
above), at any time within one year after such Service Termination and prior to
termination of the Option pursuant to Section 9.1. above, to exercise, in whole
or in part, any Option held by such Optionee at the date of such Service
Termination, whether or not such Option was exercisable immediately prior to
such Service Termination. Whether a Service Termination is to be considered by
reason of permanent and total disability for purposes of this Plan shall be
determined by the Board, which determination shall be final and conclusive.

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<PAGE>

13. USE OF PROCEEDS

The proceeds received by the Corporation from the sale of Stock
pursuant to Options granted under the Plan shall constitute general funds of the
Corporation.

14. SECURITIES ACT OF 1933

The Corporation shall not be required to sell or issue any shares of
Stock under any Option if the sale or issuance of such shares would constitute a
violation by the individual exercising the Option or the Corporation of any
provisions of any law or regulation of any governmental authority, including
without limitation any federal or state securities laws or regulations.
Specifically in connection with the Securities Act of 1933, as amended (the
"Securities Act"), upon exercise of any Option, unless a registration statement
under such Act is in effect with respect to the shares of Stock covered by such
Option, the Corporation shall not be required to sell or issue such shares
unless the Corporation has received evidence satisfactory to it that the holder
of such Option may acquire such shares pursuant to an exemption from
registration under such Act. Any determination in this connection by the
Corporation shall be final, binding, and conclusive. The Corporation may, but
shall in no event be obligated to, register any securities covered hereby
pursuant to the Securities Act. The Corporation shall not be obligated to take
any affirmative action in order to cause the exercise of an Option or the
issuance of shares pursuant thereto to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the
requirement that an Option shall not be exercisable unless and until the shares
of Stock covered by such Option are registered or are subject to an available
exemption from registration, the exercise of such Option (under circumstances in
which the laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.

15. SECURITIES EXCHANGE ACT OF 1934: RULE 16B-3

15.1. General

The Plan is intended to comply with Rule 16b-3 ("Rule 16b-3") under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
after the date on which the Corporation first registers a class of equity
security under Section 12 of the Exchange Act (the "Registration Date"). From
and after the Registration Date, any provision inconsistent with Rule 16b-3 (as
in effect on the Registration Date) shall, to the extent permitted by law and
determined to be advisable by the Board (acting pursuant to Section 2.1.), be
inoperative and void. Moreover, in the event the Plan does not include a
provision required by Rule 16b-3 to be stated therein, such provision (other
than one relating to eligibility

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<PAGE>

requirements and the amount and timing of awards) shall be deemed automatically
to be incorporated into the Plan insofar as participant is subject to Section 16
are concerned. In addition, from and after the Registration Date the provisions
set forth in Sections 15.2 shall apply.

15.2. Additional Restriction on Transfer of Stock

From and after the Registration Date, no director, officer or other
"insider" of the Corporation subject to Section 16 of the Exchange Act shall be
permitted to sell Stock (which such "insider" had received upon exercise of an
Option) during the six months immediately following the grant of such Option.

16. AMENDMENT AND TERMINATION OF THE PLAN

The Board may, at any time and from time to time, amend, suspend or
terminate the Plan as to any shares of Stock as to which Options have not been
granted. Except as permitted under Section 17. hereof, no amendment, suspension
or termination of the Plan shall, without the consent of the holder of the
Option, alter or impair rights or obligations under any Option theretofore
granted under the Plan.

17. EFFECT OF CHANGES IN CAPITALIZATION

17.1. Changes in Stock

If the outstanding shares of Stock are increased or decreased or
changed into or exchanged for a different number or kind of shares or other
securities of the Corporation by reason of any recapitalization,
reclassification, stock split-up, combination of shares, exchange of shares,
stock dividend or other distribution payable in capital stock, or other increase
or decrease in such shares effected without receipt of consideration by the
Corporation, occurring after the effective date of the Plan, the number and
kinds of shares for the purchase of which Options may be granted under the Plan
shall be adjusted proportionately and accordingly by the Corporation. In
addition, the number and kind of shares for which Options are outstanding shall
be adjusted proportionately and accordingly, so that the proportionate interest
of the holder of the Option immediately following such event shall, to the
extent practicable, be the same as immediately prior to such event. Any such
adjustment in outstanding Options shall not change the aggregate Option Price
payable with respect to shares subject to the unexercised portion of the Option
outstanding but shall include a corresponding proportionate adjustment in the
Option Price per share.

17.2. Reorganization With Corporation Surviving

Subject to Section 17.3. hereof, if the Corporation shall be the
surviving corporation in any reorganization, merger or consolidation of the

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<PAGE>

Corporation with one or more other corporations, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger or consolidation,
with a corresponding proportionate adjustment of the Option Price per share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior to
such reorganization, merger or consolidation.

17.3. Other Reorganizations; Sale of Assets/Stock

Upon the dissolution or liquidation of the Corporation, or upon a
merger, consolidation or reorganization of the Corporation with one or more
other corporations in which the Corporation is not the surviving corporation, or
upon a sale of substantially all of the assets of the Corporation to another
corporation, or upon any transaction (including, without limitation, a merger or
reorganization in which the Corporation is the surviving corporation) approved
by the Board which results in any person or entity owning 80 percent or more of
the combined voting power of all classes of stock of the Corporation, the Plan
and all Options outstanding hereunder shall terminate, except to the extent
provision is made in writing in connection with such transaction for the
continuation of the Plan and/or the assumption of the Options theretofore
granted, or for the substitution for such Options of new options covering the
stock of a successor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kinds of shares and exercise
prices, in which event the Plan and Options theretofore granted shall continue
in the manner and under the terms so provided. In the event of any such
termination of the Plan, each individual holding an Option shall have the right
(subject to the general limitations on exercise set forth in Section 9.2.
above), immediately prior to the occurrence of such termination and during such
period occurring prior to such termination as the Board in its sole discretion
shall designate, to exercise such Option in whole or in part, whether or not
such Option was otherwise exercisable at the time such termination occurs and
without regard to any installment limitation on exercise imposed pursuant to
Section 9.2. above, but subject to any additional limitations that the Board
may, in its sole discretion, include in any Option Agreement. The Board shall
send written notice of an event that will result in such a termination to all
individuals who hold Options not later than the time at which the Corporation
gives notice thereof to its stockholders.

17.4. Adjustments

Adjustments under this Section 17. related to stock or securities of
the Corporation shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. No fractional shares of Stock or units
of other securities shall be issued pursuant to any such adjustment, and any
fractions resulting from any such adjustment shall be eliminated in each case by
rounding downward to the nearest whole share or unit.

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<PAGE>

17.5. No Limitations on Corporation

The grant of an Option pursuant to the Plan shall not affect or
limit in any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or to sell or
transfer all or any part of its business or assets.

18. DISCLAIMER OF RIGHTS

No provision in the Plan or in any Option granted or Option
Agreement entered into pursuant to the Plan shall be construed to confer upon
any individual the right to remain in the employ or service of the Corporation
or any affiliate or Subsidiary, or to interfere in any way with the right and
authority of the Corporation or any affiliate or Subsidiary either to increase
or decrease the compensation of any individual at any time, or to terminate any
employment or other relationship between any individual and the Corporation or
any affiliate or Subsidiary.

19. NONEXCLUSIVITY OF THE PLAN

Neither the adoption of the Plan nor the submission of the Plan to
the stockholders of the Corporation for approval shall be construed as creating
any limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or individuals) as the Board in its discretion determines desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan.

* * * *

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<PAGE>

Exhibit 10.90

ITC HOLDING COMPANY, INC.

AMENDED AND RESTATED STOCK OPTION PLAN
<PAGE>

TABLE OF CONTENTS

Page
<S> <C>
1. PURPOSE.....................................................................1

2. DEFINITIONS.................................................................1
2.1. Board...............................................................1
2.2. Code................................................................1
2.3. Company.............................................................1
2.4. Employee............................................................1
2.5. Exchange Act........................................................1
2.6. Fair Market Value ..................................................2
2.7. ISO.................................................................2
2.8. Non-ISO.............................................................2
2.9. Option..............................................................2
2.10. Optionee...........................................................2
2.11. Option Certificate.................................................2
2.12. Option Price.......................................................2
2.13. Parent Corporation.................................................2
2.14. Plan...............................................................3
2.15. Rule 16b-3.........................................................3
2.16. Stock..............................................................3
2.17. Subsidiary.........................................................3
2.18. Surrendered Shares.................................................3
2.19. Ten Percent Shareholder............................................3

3. SHARES SUBJECT TO OPTIONS...................................................3

4. EFFECTIVE DATE..............................................................4

5. ADMINISTRATION..............................................................4

6. ELIGIBILITY.................................................................4

7. GRANT OF OPTIONS............................................................4
7.1. Board Action........................................................4
7.2. $100,000 Limit......................................................5

8. OPTION PRICE................................................................5

9. EXERCISE PERIOD.............................................................5

10. NONTRANSFERABILITY.........................................................6

11. SURRENDER OF OPTIONS.......................................................6
11.1. General Rule.........................................................6
</TABLE>

<PAGE>

<TABLE>

<S> <C>
11.2. Procedure...........................................................6
11.3. Payment.............................................................7
11.4. Restrictions........................................................7

12. SECURITIES REGISTRATION...................................................7

13. LIFE OF PLAN..............................................................8

14. ADJUSTMENT................................................................8

15. SALE OR MERGER............................................................8

16. AMENDMENT OR TERMINATION..................................................9

17. MISCELLANEOUS.............................................................9
17.1. No Shareholder Rights...............................................9
17.2. No Contract of Employment...........................................10
17.3. Withholding.........................................................10
17.4. Other Conditions....................................................10
17.5. Transfer............................................................10
17.6. Construction........................................................10
</TABLE>

<PAGE>

ITC HOLDING COMPANY, INC.

AMENDED AND RESTATED STOCK OPTION PLAN

1. PURPOSE

The purpose of this Plan is to promote the interests of the Company
and its Subsidiaries by granting Options to purchase Stock to Optionees in order
(1) to attract and retain Employees, (2) to provide an additional incentive to
each Optionee to work to increase the value of Stock and (3) to provide each
Optionee with a stake in the future of the Company which corresponds to the
stake of each of the Company's shareholders.

2. DEFINITIONS

Each term set forth in this (S)2 shall have the meaning set forth
opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular.

2.1. BOARD

"Board" means the Board of Directors of the Company.

2.2. CODE

"Code" means the Internal Revenue Code of 1986, as amended.

2.3. COMPANY

"Company" means ITC Holding Company, Inc. and any successor to such
corporation.

2.4. EMPLOYEE

"Employee" means (for purposes of granting ISOs) any full-time
employee of the Company or any Subsidiary and (for purposes of granting Non-
ISOs) any officer, director or full-time employee of the Company or any
Subsidiary.

2.5. EXCHANGE ACT

"Exchange Act: means the Securities Exchange Act of 1934, as amended.
<PAGE>

2.6. FAIR MARKET VALUE

"Fair Market Value" means the price which the Board acting in good
faith determines through any reasonable valuation method that a share of stock
might change hands between a willing buyer and a willing seller, neither being
under any compulsion to buy or to sell and both having reasonable knowledge of
the relevant facts.

2.7. ISO

"ISO" means an option granted under this Plan to purchase stock which
is intended by the Company to satisfy the requirements of Code (S)422A.

2.8. NON-ISO

"Non-ISO" means an option granted under this Plan to purchase Stock
which is not intended by the Company to satisfy the requirements of Code
(S)422A.

2.9. OPTION

"Option" means an ISO or a Non-ISO.

2.10. OPTIONEE

"Optionee" means any Employee, consultant or adviser of the Company or
any Subsidiary.

2.11. OPTION CERTIFICATE

"Option Certificate" means the written certificate or instrument which
sets forth the terms of an Option granted to an Employee under this Plan.

2.12. OPTION PRICE

"Option Price" means the price which shall be paid to purchase one
share of Stock upon the exercise of an Option granted under this Plan.

2.13. PARENT CORPORATION

"Parent Corporation" means any corporation which is a parent of the
Company within the meaning of Code (S)425(e).

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<PAGE>

2.14. PLAN

"Plan" means this ITC Holding Company, Inc. Stock Option Plan, as
amended from time to time.

2.15. RULE 16b-3

"Rule 16b-3" means the exemption under Rule 16b-3 to Section 16(b) of
the Exchange Act or any successor to such rule.

2.16. STOCK

"Stock" means the common stock of the Company.

2.17. SUBSIDIARY

"Subsidiary" means any corporation which is a subsidiary corporation
of the Company within the meaning of Code (S)425(f).

2.18. SURRENDERED SHARES

"Surrendered Shares" means the shares of Stock described in (S)11 as
to which an Optionee has surrendered his or her Option in accordance with (S)11.

2.19. TEN PERCENT SHAREHOLDER

"Ten Percent Shareholder" means a person who owns (after taking into
account the attribution rules of Code (S)425(d)) more than ten percent (10%) of
the total combined voting power of all classes of stock of either the Company, a
Subsidiary or a Parent Corporation.

3. SHARES SUBJECT TO OPTIONS

There shall be 2,500,000 shares of Stock reserved for use under this
Plan, and such shares of Stock shall be reserved to the extent that the Company
deems appropriate from authorized but unissued shares of Stock. Furthermore,
any shares of Stock subject to an Option which remain after the cancellation,
expiration or exchange of such Option thereafter shall again become available
for use under this Plan, but any Surrendered Shares which remain after the
surrender of an Option under (S)11 and any shares of stock used to satisfy a
withholding obligation under (S)17.3 shall not again become available for use
under this Plan.

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<PAGE>

4. EFFECTIVE DATE

The effective date of this Plan shall be the date it is adopted by the
Board, provided that, to the extent this Plan provides for the issuance of ISOs,
the shareholders of the Company (acting at a duly called meeting of such
shareholders) approve those portions of this Plan related to the granting of
ISOs within twelve (12) months after the date of adoption. If any ISOs are
granted under this Plan before the date of such shareholder approval, these ISOs
automatically shall be granted subject to such approval. However, any
requirement of shareholder approval shall not apply to the extent this Plan
provides for the issuance of Non-ISOs unless such approval is necessary to
comply with (S)16(b) of the Exchange Act.

5. ADMINISTRATION

This Plan shall be administered by the Board. The Board acting in its
absolute discretion shall exercise such powers and take such action as expressly
called for under this Plan and, further, the Board shall have the power to
interpret this Plan and (subject to (S)16) to take such other action in the
administration and operation of this Plan as the Board deems equitable under the
circumstances, which action shall be binding on the Company, on each affected
Optionee and on each other person directly or indirectly affected by such
action. However, at such time as the Company becomes subject to the reporting
requirements under (S)16(b) of the Exchange Act, no member of the Board shall
serve as such under this Plan unless such person is a "disinterested person"
within the meaning of Rule 16b-3 of the Exchange Act.

6. ELIGIBILITY

Only Optionees shall be eligible for the grant of Options under this
Plan.

7. GRANT OF OPTIONS

7.1. BOARD ACTION.

The Board acting in its absolute discretion shall grant Options to
Optionees under this Plan from time to time to purchase shares of Stock and,
further, shall have the right to grant new Options in exchange for outstanding
Options. Each grant of an Option shall be evidenced by an Option Certificate,
and each Option Certificate shall (1) specify whether the Option is an ISO or
Non-ISO, and (2) incorporate such other terms and conditions as the Board acting
in its absolute discretion deems consistent with the terms of this Plan,
including (without limitation) a restriction on the number of shares of Stock
subject to the Option which first become exercisable or subject to surrender
during any calendar year. If

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<PAGE>

the Board grants an ISO and a Non-ISO to an Optionee on the same date, the right
of the Optionee to exercise or surrender one such Option shall not be
conditioned on his or her failure to exercise or surrender the other such
Option.

7.2. $100,000 LIMIT.

To the extent that the aggregate Fair Market Value of Stock
(determined as of the date the ISO is granted) with respect to which ISOs first
become exercisable in any calendar year exceeds $100,000, such Options shall be
treated as Non-ISOs. The Fair Market Value of the Stock subject to any other
option (determined as of the date such option was granted) which (1) satisfies
the requirements of (S)422A of the Code and (2) is granted to an Optionee under
a plan maintained by the Company, a Subsidiary, or a Parent Corporation shall be
treated (for purposes of this $100,000 limitation) as if granted under this
Plan. Finally, this $100,000 limitation shall be administered in accordance
with the rules under (S)422A(d) of the Code.

8. OPTION PRICE

The Option Price for each share of Stock subject to an ISO shall be no
less than the Fair Market Value of a share of Stock on the date the ISO is
granted; provided, however, if the Option is an ISO granted to Ten Percent
Shareholder, the Option Price for each share of Stock subject to such ISO shall
be no less than 110% of the Fair Market Value of a share of Stock on the date
such ISO is granted. The Option Price for each share of Stock subject to a Non-
ISO may be less than the Fair Market Value of a share of Stock on the date the
Non-ISO is granted but shall not be less than adequate consideration (as
determined by the Board) for such share. The Option Price shall be payable in
full upon the exercise of any Option, and an Option Certificate at the
discretion of the Board can provide for the payment of the Option Price either
in cash, check or in Stock acceptable to the Board or in any combination of
cash, check and Stock acceptable to the Board. Any payment made in Stock shall
be treated as equal to the Fair Market Value of such Stock on the date the
properly endorsed certificate for such Stock is delivered to the Board (or to
its delegate).

9. EXERCISE PERIOD

Each Option granted under this Plan shall be exercisable in whole or
in part at such time or times as set forth in the related Option Certificate,
but no Option Certificate shall

(1) make an Option exercisable before the date such Option is granted
or
(2) make an Option exercisable after the earlier of

- 5 -
<PAGE>

(a) the date such Option is exercised in full,
(b) the date which is the tenth anniversary of the date such
Option is granted, if such Option is an ISO granted to a
non-Ten Percent Shareholder, or the date which is the fifth
anniversary of the date such Option is granted, if such
Option is an ISO granted to a Ten Percent Shareholder, or
(c) the date which is one day after the tenth anniversary of the
date such Option is granted, if such Option is a Non-ISO.

An Option Certificate may provide for the exercise of an Option after the
employment of an Employee has terminated for any reason whatsoever, including
death or disability.

10. NONTRANSFERABILITY

No Option granted under this Plan shall be transferable by an Optionee
and such Option shall be exercisable during an Optionee's lifetime only by the
Optionee. If the Option Certificate provides for the exercise of an Option
after the death of an Optionee, the personal representative of the Optionee's
estate thereafter shall be treated as the Optionee.

11. SURRENDER OF OPTIONS

11.1. GENERAL RULE

The Board acting in its absolute discretion may incorporate a
provision in an Option Certificate to allow an Optionee to surrender his or her
Option in whole or in part in lieu of the exercise in whole or in part of that
Option on any date that

(1) the Fair Market Value of the Stock subject to such Option exceeds
the Option Price for such Stock and

(2) the Option to purchase such Stock is otherwise exercisable.

11.2. PROCEDURE

The surrender of an Option in whole or in part shall be effected by
the delivery of the Option Certificate to the Board (or to its delegate)
together with a statement signed by the Optionee which specifies the number of
shares of Stock as to which the Optionee surrenders his or her Option and how he
or she desires payment be made for such Surrendered Shares.

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<PAGE>

11.3. PAYMENT

An Optionee in exchange for his or her Surrendered Shares shall
receive payment in cash or in Stock, or in a combination of cash and Stock,
equal in amount on the date such surrender is effected to the excess of the Fair
Market Value of the Surrendered Shares on such date over the Option Price for
the Surrendered Shares. The Board acting in its absolute discretion can approve
or disapprove an Optionee's request for payment in whole or in part in cash and
can make that payment in cash or in such combination of cash and Stock as the
Board deems appropriate. A request for payment only in Stock shall be approved
and made in Stock to the extent payment can be made in whole shares of Stock and
(at the Board's discretion) in cash in lieu of any fractional share of Stock.

11.4. RESTRICTIONS

Any Option Certificate which incorporates a provision to allow an
Optionee to surrender his or her Option in whole or in part also shall
incorporate such additional restrictions on the exercise or surrender of such
Option as the Board deems necessary to satisfy the conditions to the exemption
under Rule 16b-3.

12. SECURITIES REGISTRATION

Each Option Certificate may provide that, upon the receipt of shares
of Stock as a result of the surrender or exercise of an Option, the Optionee
shall, if so requested by the Company, hold such shares of Stock for
reinvestment and not with a view to resale or distribution to the public and, if
so requested by the Company, shall deliver to the Company a written statement
satisfactory to the Company to that effect. Each Option Certificate also may
provide that, if so requested by the Company, the Optionee shall make a written
representation to the Company that he or she will not sell or offer to sell any
of such Stock unless a registration statement shall be in effect with respect to
such Stock under the Securities Act of 1933, as amended ("1933 Act"), and any
applicable state securities law or unless he or she shall have furnished to the
Company an opinion, in form and substance satisfactory to the Company, of legal
counsel acceptable to the Company, that such registration is not required.
Certificates representing the Stock transferred upon the exercise or surrender
of an Option granted under this Plan may at the discretion of the Company bear a
legend to the effect that such Stock has not been registered under the 1933 Act
or any applicable state securities law and that such Stock may not be sold or
offered for sale in the absence of an effective registration statement as to
such Stock under the 1933 Act and any applicable state securities law or an
opinion, in form and substance satisfactory to the Company, of legal counsel
acceptable to the Company, that such registration is not required.

- 7 -
<PAGE>

13. LIFE OF PLAN

No Option shall be granted under this Plan on or after the earlier of

(1) the tenth anniversary of the effective date of this Plan (as
determined under (S)4 of this Plan), in which event this Plan
thereafter shall continue in effect until all outstanding Options
have been surrendered or exercised in full or no longer are
exercisable, or

(2) the date on which all of the Stock reserved under (S)3 of this
Plan has (as a result of the surrender or exercise of Options
granted under this Plan) been issued or no longer is available
for use under this Plan, in which event this Plan also shall
terminate on such date.

14. ADJUSTMENT

The number of shares of Stock reserved under (S)3 of this Plan and
the number of shares of Stock subject to Options granted under this Plan and the
Option Price of such Options shall be adjusted by the Board in an equitable
manner to reflect any change in the capitalization of the Company, including,
but not limited to, such changes as stock dividends or stock splits.
Furthermore, the Board shall have the right to adjust (in a manner which
satisfies the requirements of (S)425(a) of the Code) the number of shares
subject to Options granted under this Plan and the Option Price of such Options
and to issue options under this Plan in the event of any corporate transaction
described in (S)425(a) of the Code which provides for the substitution or
assumption of such Options. If any adjustment under this (S)14 would create a
fractional share of Stock or a right to acquire a fractional share of Stock,
such fractional share shall be disregarded and the number of shares of Stock
reserved under this Plan and the number subject to any Options granted under
this Plan shall be the next lower number of shares of Stock, rounding all
fractions downward. An adjustment made under this (S)14 by the Board shall be
conclusive and binding on all affected persons and, further, shall not
constitute an increase in "the number of shares reserved under (S)3" within the
meaning of (S)16(a) of this Plan.

15. SALE OR MERGER

If the Company agrees to sell substantially all of its assets for cash
or property or for a combination of cash and property or agrees to any merger,
consolidation, reorganization, division or other corporate transaction in which
Stock is converted into another security or into the right to receive securities
or property and such agreement does not provide for the assumption or
substitution of the Options granted under this Plan, each then outstanding
Option at the direction and

- 8 -
<PAGE>

discretion of the Board may be cancelled unilaterally by the Company as of any
date before the effective date of such transaction in exchange for the same
consideration which each Optionee otherwise would receive as a shareholder of
the Company in connection with such transaction if he or she had
(notwithstanding the terms of his or her Option Certificate) the right to
surrender his or her Option (to the extent then outstanding) under (S)11 of
this Plan and he or she exercised that right exclusively for Stock on such date.

16. AMENDMENT OR TERMINATION

This Plan may be amended by the Board from time to time to the extent
that the Board deems necessary or appropriate; provided, however, in accordance
with (S)422A of the Code, no such amendment shall be made absent the approval
of the shareholders of the Company (a) to increase the number of shares reserved
under (S)3, or (b) to change the class of Optionees eligible for Options under
(S)6. In the event the Company becomes subject to the reporting requirements
under (S)16(b) of the Exchange Act, the Board shall not amend the Plan absent
the approval of the shareholders of the Company (a) to materially modify (within
the meaning of Rule 16b-3) the requirements as to eligibility for participation
in this Plan, (b) to extend the maximum life of the Plan under (S)13 or the
maximum exercise period under (S)9, (c) to decrease the minimum Option Price
under (S)8, or (d) to otherwise materially increase (within the meaning of Rule
16b-3) the benefits accruing to Optionees under this Plan. Any amendment,
however, which specifically applies to Non-ISOs shall not require shareholder
approval unless such approval is necessary to comply with (S)16(b) of the
Exchange Act. The Board also may suspend the granting of Options under this
Plan at any time and may terminate this Plan at any time; provided, however, the
Company shall not have the right unilaterally to modify, amend or cancel any
Option granted before such suspension or termination unless (1) the Optionee
consents in writing to such modification, amendment or cancellation or (2) there
is a dissolution or liquidation of the Company or a transaction described in
(S)14 or (S)15 of this Plan.

17. MISCELLANEOUS

17.1. NO SHAREHOLDER RIGHTS

No Optionee shall have any rights as a shareholder of the Company as a
result of the grant of an Option to him or to her under this Plan or his or her
exercise or surrender of such Option pending the actual delivery of Stock
subject to such Option to such Optionee.

- 9 -
<PAGE>

17.2. NO CONTRACT OF EMPLOYMENT

The grant of an Option to an Optionee under this Plan shall not
constitute a contract of employment and shall not confer on an Optionee any
rights upon his or her termination of employment in addition to those rights, if
any, expressly set forth in the Option Certificate which evidences his or her
Option.

17.3. WITHHOLDING

The exercise or surrender of any Option granted under this Plan shall
constitute an Employee's full and complete consent to whatever action the Board
directs to satisfy the federal and state tax withholding requirements, if any,
which the Board in its discretion deems applicable to such exercise or
surrender. The Board also shall have the right to provide in an Option
Certificate that an Employee may elect to satisfy federal and state withholding
requirements through a reduction in the number of shares of Stock actually
transferred to him or her under this Plan, and if the Company is subject to the
reporting requirements under (S)16(b) of the Exchange Act, any such election
and any such reduction shall be effected so as to satisfy the conditions to the
exemption under Rule 16b-3.

17.4. OTHER CONDITIONS

Each Option Certificate may require that Optionees (as a condition to
the exercise or surrender of an Option) enter into any agreement or make such
representations prepared by the Company, including any agreement which restricts
the transfer of Stock acquired pursuant to the exercise or surrender of such
Option and provides for the repurchase of such Stock by the Company under
certain circumstances.

17.5. TRANSFER

The transfer of an Employee between or among the Company, a
Subsidiary, or a Parent Corporation shall not be treated as a termination of
employment under this Plan.

17.6. CONSTRUCTION

This Plan shall be construed under the laws of the State of Delaware.

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<PAGE>

IN WITNESS WHEREOF, the Company caused its duly authorized officer to
execute this Plan as of the 17th day of January, 1991 to evidence its adoption
of this Plan, and the Company has caused its duly authorized officer to execute
this Amended and Restated Plan as of April 30, 1997.

ITC HOLDING COMPANY, INC.

By:
--------------------------------------

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<PAGE>

Exhibit 10.91

ITC HOLDING COMPANY, INC.

NONEMPLOYEE DIRECTOR STOCK OPTION PLAN

<PAGE>

TABLE OF CONTENTS

1. PURPOSE...........................................................1
2. ADMINISTRATION....................................................1
2.1. Board.....................................................1
2.2. Indemnity.................................................1
2.3. Reliance..................................................2
2.4. Governing Law.............................................2
3. STOCK.............................................................2
4. ELIGIBILITY.......................................................2
5. EFFECTIVE DATE AND TERM OF THE PLAN...............................2
5.1. Effective Date............................................2
5.2. Suspension or Termination of the Plan.....................3
5.3. Termination of the Plan...................................3
6. GRANT OF OPTIONS..................................................3
7. OPTION AGREEMENTS.................................................3
8. OPTION PRICE......................................................3
9. TERM AND EXERCISE OF OPTIONS......................................4
9.1. Term......................................................4
9.2. Option Period and Limitations on Exercise.................4
9.3. Method of Exercise........................................4
10. SURRENDER OF OPTIONS.............................................5
10.1. General Rule.............................................5
10.2. Procedure................................................5
10.3 Payment..................................................5
10.4. Restrictions.............................................5
11. TRANSFERABILITY OF OPTIONS.......................................6
11.1. Transferability of Options...............................6
11.2. Family Transfers.........................................6
12. SERVICE TERMINATION..............................................6
13. RIGHTS IN THE EVENT OF DEATH OR DISABILITY.......................6
13.1. Death....................................................6
13.2. Disability...............................................6
14. USE OF PROCEEDS..................................................7
15. SECURITIES ACT OF 1933...........................................7
16. SECURITIES EXCHANGE ACT OF 1934: RULE 16B-3......................7
17. AMENDMENT AND TERMINATION OF THE PLAN............................8
18. EFFECT OF CHANGES IN CAPITALIZATION..............................8
18.1. Changes in Stock.........................................8
18.2. Reorganization With Corporation Surviving................8
18.3. Other Reorganizations; Sale of Assets/Stock..............9
18.4. Adjustments..............................................9
18.5. No Limitations on Corporation............................9
19. DISCLAIMER OF RIGHTS.............................................9
20. NONEXCLUSIVITY OF THE PLAN.......................................10
<PAGE>

ITC HOLDING COMPANY, INC.
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN

ITC Holding Company, Inc., a Delaware corporation (the "CORPORATION"),
sets forth herein the terms of this Nonemployee Director Stock Option Plan (the
"PLAN") as follows:

1. PURPOSE

The Plan is intended to facilitate the attraction and retention of the
best possible directors of the Corporation and to provide additional incentives
to those Directors to promote the success of the Corporation. No stock option
granted under the Plan (an "OPTION") is intended to be an "incentive stock
option" (an "INCENTIVE STOCK OPTION") within the meaning of Section 422 of the
Internal Revenue Code of 1986, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time (the "CODE"). The
Plan is intended to constitute a "formula plan," and non-employee directors are
intended to be "disinterested administrators" of other plans maintained by the
Corporation, for purposes of Rule 16b-3 under the Exchange Act.

2. ADMINISTRATION

2.1. BOARD

The Plan shall be administered by the Board of Directors of the
Corporation (the "BOARD"), which shall have the full power and authority to take
all actions and to make all determinations required or provided for under the
Plan or any Option granted or Option Agreement (as defined in SECTION 7 below)
entered into hereunder and all such other actions and determinations not
inconsistent with the specific terms and provisions of the Plan deemed by the
Board to be necessary or appropriate to the administration of the Plan or any
Option granted or Option Agreement entered into hereunder. The interpretation
and construction by the Board of any provision of the Plan or of any Option
granted or Option Agreement entered into hereunder shall be final and
conclusive.

2.2. INDEMNITY

To the extent permitted by applicable law, each member of the Board
shall be indemnified and held harmless by the Corporation against and from any
and all loss, cost, liability or expense that may be imposed upon or reasonably
incurred by such Board member in connection with or resulting from any claim,
action, suit or proceeding to which such Board member may be a party or in which
such Board member may be involved by reason of any action taken or failure to
act under the Plan, and against and from any and all amounts paid by such Board
member (with the Corporation's written approval) in the settlement thereof, or
paid by such Board member in satisfaction of a judgment in any such action, suit
or proceeding except a judgment in favor of the Corporation; subject, however,
to the condition that upon the institution of any claim, action, suit or
proceeding against such Board member, such Board member shall give the
Corporation an opportunity in writing, at its own expense, to handle and defend
the same before such Board member undertakes to handle and defend it on his or
her own behalf. The foregoing right of indemnification shall not be exclusive of
any other right to which such person
<PAGE>

may be entitled as a matter of law or otherwise, or any power the Corporation
may have to indemnify such Board member or hold him or her harmless.

2.3. RELIANCE

The Board and each officer and employee of the Corporation shall be
fully justified in reasonably relying or acting upon any information furnished
in connection with the administration of the Plan by the Corporation or any
employee of the Corporation. In no event shall any Board member, or an officer
or employee of the Corporation, be liable for any determination made or other
action taken or any omission to act in reliance upon any such information, or
for any action (including furnishing of information) taken or any failure to
act, if in good faith.

2.4. GOVERNING LAW

The validity, interpretation, and effect of the Plan, and the rights
of all persons hereunder, shall be governed by and determined in accordance with
the laws of Delaware, other than the choice-of-law rules thereof.

3. STOCK

The stock that may be issued pursuant to Options granted under the
Plan shall be shares of Common Stock of the Corporation (such shares of Common
Stock being referred to herein as the "STOCK"), which shares may be treasury
shares or authorized but unissued shares. The number of shares of Stock that may
be issued pursuant to Options granted under the Plan shall not exceed in the
aggregate 100,000 shares of Stock, which number of shares is subject to
adjustment as provided in SECTION 18 below. If any Option expires, terminates or
is terminated for any reason prior to exercise in full, the shares of Stock that
were subject to the unexercised portion of such Option shall be available for
future Options granted under the Plan.

4. ELIGIBILITY

Options will be granted under the Plan to non-employee directors of
the Corporation.

5. EFFECTIVE DATE AND TERM OF THE PLAN

5.1. EFFECTIVE DATE

The Plan shall be effective as of the date of adoption by the Board
(the "EFFECTIVE DATE"), subject to stockholder approval of the Plan within one
year of the Effective Date by a majority of the votes cast at a duly held
meeting of the stockholders of the Corporation at which a quorum representing a
majority of all outstanding stock is present, either in person or by proxy, and
voting on the matter, or by written consent in accordance with applicable state
law and the Certificate of Incorporation and Bylaws of the Corporation and in a
manner that satisfies the requirements of Rule 16b-3(b) of the Exchange Act;
provided, however, that upon approval of the Plan by the stockholders of the
- -------- -------
Corporation, all Options granted under the Plan on or after the Effective Date
shall be fully effective as if the stockholders of the Corporation had approved

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<PAGE>

the Plan on the Effective Date. If the stockholders fail to approve the Plan
within one year of the Effective Date, any Options granted hereunder shall be
null, void and of no effect.

5.2. SUSPENSION OR TERMINATION OF THE PLAN

The Board may at any time suspend or terminate the Plan, and may
amend it from time to time in such respects as the Board may deem advisable,
which approval may be made subject to approval by the Corporation's
stockholders. No Option may be granted during any suspension or after the
termination of the Plan, and no amendment, suspension or termination of the Plan
shall, without the Optionee's consent, alter or impair any rights or obligations
under any Stock Option Agreement previously entered into under the Plan.

5.3. TERMINATION OF THE PLAN

The Plan shall terminate ten years after the Effective Date unless
previously terminated pursuant to SECTION 5.2 of the Plan.

6. GRANT OF OPTIONS

The Board shall grant to each nonemployee director of the
Corporation, upon such person's initial election or appointment to serve as such
a director, Options to purchase 10,000 shares of Common Stock of the
Corporation. In addition, the Board shall grant Options to purchase 10,000
shares of Common Stock of the Corporation to each nonemployee director of the
Corporation serving as of the Effective Date.

7. OPTION AGREEMENTS

All Options granted pursuant to the Plan shall be evidenced by
written agreements ("OPTION AGREEMENTS") executed by the Corporation and by the
Optionee, in such form or forms as the Board shall from time to time determine.

8. OPTION PRICE

The purchase price of each share of the Stock subject to an Option
(the "OPTION PRICE") shall be the Fair Market Value (as defined below) of a
share of Stock on the date the Option is granted. For purposes of this SECTION
8, "FAIR MARKET VALUE" shall mean the price at which a share of Stock might
change hands between a willing buyer and a willing seller (neither being under
any compulsion to buy or to sell and both having reasonable knowledge of the
relevant facts), as determined by the Board in good faith through any reasonable
valuation method; provided, however, that if, on the date of such determination,
-----------------
the Stock is listed on an established national or regional stock exchange, is
admitted to quotation on Nasdaq, or otherwise is publicly traded on an
established securities market, the Fair Market Value shall be the closing price
of the Stock on such exchange or in such market (the highest such closing price
if there is more than one such exchange or market) on the trading day
immediately preceding such determination date (or, if there is no such reported
closing price, the Fair Market Value shall be the mean between the highest bid
and lowest asked prices or between the high and low sale prices

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<PAGE>

on such trading day) or, if no sale of the Stock is reported on such trading
day, on the next preceding day on which any sale shall have been reported.

9. TERM AND EXERCISE OF OPTIONS

9.1. TERM

Each Option granted under the Plan shall terminate and all rights to
purchase shares thereunder shall cease upon the expiration of ten years and 30
days from the date such Option is granted.

9.2. OPTION PERIOD AND LIMITATIONS ON EXERCISE

The Optionee may exercise the Option (subject to the limitations on
exercise set forth in this Plan or in the Option Agreement relating to such
Option), in installments as follows: on the second anniversary of the date of
grant of the Option, as set forth in SECTION 6 above, the Option shall be
exercisable in respect of 50 percent of the number of shares granted pursuant to
SECTION 6 above, and the Option shall be exercisable in respect of an additional
25 percent of the number of shares granted pursuant to SECTION 6 above on each
of the third and fourth anniversaries of the date of grant. The foregoing
installments, to the extent not exercised, shall accumulate and be exercisable,
in whole or in part, at any time and from time to time, after becoming
exercisable and prior to the termination of the Option; provided, that no single
--------
exercise of the Option shall be for less than 100 shares, unless the number of
shares purchased is the total number at the time available for purchase under
this Option.

9.3. METHOD OF EXERCISE

An Option that is exercisable hereunder may be exercised by delivery
to the Corporation on any business day, at its principal office addressed to the
attention of the President, of written notice of exercise, which notice shall
specify the number of shares with respect to which the Option is being
exercised. The minimum number of shares of Stock with respect to which an Option
may be exercised, in whole or in part, at any time shall be the lesser of 100
shares or the maximum number of shares available for purchase under the Option
at the time of exercise. Payment of the Option Price for the shares of Stock
purchased pursuant to the exercise of an Option shall be made, as determined by
the Board and set forth in the Option Agreement pertaining to an Option, either
(i) in cash or by check payable to the order of the Corporation (which check
may, in the discretion of the Corporation, be required to be certified); (ii)
through the tender to the Corporation of shares of Stock, which shares shall be
valued, for purposes of determining the extent to which the Option Price has
been paid thereby, at their Fair Market Value (determined by the Board in the
manner specified in SECTION 8) on the date of exercise; or (iii) by a
combination of the methods described in (i) and (ii). Payment in full of the
Option Price need not accompany the written notice of exercise provided the
notice directs that the Stock certificate or certificates for the shares for
which the Option is exercised be delivered to a licensed broker acceptable to
the Corporation as the agent for the individual exercising the Option and, at
the time such Stock certificate or certificates are delivered, the broker
tenders to the Corporation cash (or cash equivalents acceptable to the
Corporation) equal to the Option Price plus the amount (if any) of federal
and/or other taxes which the Corporation may, in its judgment, be required to
withhold with respect to the exercise of the Option. An attempt to exercise any

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<PAGE>

Option granted hereunder other than as set forth above shall be invalid and of
no force and effect. Promptly after the exercise of an Option and the payment in
full of the Option Price of the shares of Stock covered thereby, the individual
exercising the Option shall be entitled to the issuance of a Stock certificate
or certificates evidencing his ownership of such shares. An individual holding
or exercising an Option shall have none of the rights of a stockholder until the
shares of Stock covered thereby are fully paid and issued to him, and, except as
provided in SECTION 18 below, no adjustment shall be made for dividends or other
rights for which the record date is prior to the date of such issuance.

10. SURRENDER OF OPTIONS

10.1. GENERAL RULE

Notwithstanding any other provision of this Plan, an Optionee may
surrender his or her Option in whole or in part in lieu of the exercise in whole
or in part of that Option on any date that

(1) the Fair Market Value of the Stock subject to such Option
exceeds the Option Price for such Stock, and

(2) the Option to purchase such Stock is otherwise exercisable.

10.2. PROCEDURE

The surrender of an Option in whole or in part shall be effected by
the delivery of the Option Agreement to the Board (or to its delegate) together
with a statement signed by the Optionee which specifies the number of shares of
Stock as to which the Optionee surrenders his or her Option (the "SURRENDERED
SHARES") and how he or she desires payment be made for such Surrendered Shares.

10.3. PAYMENT

An Optionee in exchange for his or her Surrendered Shares shall
receive payment in cash or in Stock, or in a combination of cash and Stock,
equal in amount on the date such surrender is effected to the excess of the Fair
Market Value of the Surrendered Shares on such date over the Option Price for
the Surrendered Shares. The Board acting in its absolute discretion may approve
or disapprove an Optionee's request for payment in whole or in part in cash and
may make that payment in cash or in such combination of cash and Stock as the
Board deems appropriate.

10.4. RESTRICTIONS

Any Option Agreement that incorporates a provision to allow an
Optionee to surrender his or her Option in whole or in part also shall
incorporate such additional restrictions on the exercise or surrender of such
Option as the Board deems necessary to satisfy the conditions to the exemption
under Rule 16b-3.

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<PAGE>

11. TRANSFERABILITY OF OPTIONS

11.1. TRANSFERABILITY OF OPTIONS

Except as provided in SECTION 11.2, during the lifetime of an
Optionee, only the Optionee (or, in the event of legal incapacity or
incompetence, the Optionee's guardian or legal representative) may exercise an
Option. Except as provided in SECTION 11.2, no Option shall be assignable or
transferable by the Optionee to whom it is granted, other than by will or the
laws of descent and distribution.

11.2. FAMILY TRANSFERS

An Optionee may transfer all or part of an Option to (i) any
Immediate Family Member, (ii) a trust or trusts for the exclusive benefit of any
Immediate Family Member, or (iii) a partnership in which Immediate Family
Members are the only partners, provided that (x) there may be no consideration
for any such transfer, and (y) subsequent transfers of transferred Options are
prohibited except those in accordance with this SECTION 11.2 or by will or the
laws of descent and distribution. Following transfer, any such Option shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of SECTION 11.2 hereof
the term "Optionee" shall be deemed to refer the transferee. The events of
termination of the Service Relationship of SECTIONS 12 AND 13 hereof shall
continue to be applied with respect to the original Optionee, following which
the Option shall be exercisable by the transferee only to the extent, and for
the periods specified in SECTION 9.2.

12. SERVICE TERMINATION

Upon the termination of service (a "SERVICE TERMINATION") of the
Optionee in all capacities as an employee and/or director of the Corporation and
all of its affiliated companies (collectively, including the Corporation, the
"ITC COMPANIES") other than by reason of the death or permanent and total
disability of such Optionee, any Option granted to an Optionee pursuant to the
Plan shall terminate, and such Optionee shall have no further right to purchase
shares of Stock pursuant to such Option.

13. RIGHTS IN THE EVENT OF DEATH OR DISABILITY

13.1. DEATH

If an Optionee dies while serving as an employee and/or director of
the Corporation or one of the other ITC Companies, the executors or
administrators or legatees or distributees of such Optionee's estate shall have
the right (subject to the general limitations on exercise set forth in SECTION 9
above), at any time within one year after the date of such Optionee's death and
prior to termination of the Option pursuant to SECTION 9.1 above, to exercise
any Option held by such Optionee at the date of such Optionee's death, whether
or not such Option was exercisable immediately prior to such Optionee's death.

13.2. DISABILITY

If there is a Service Termination by reason of the permanent and
total disability of the Optionee, then such Optionee shall have the right
(subject to the general limitations on

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<PAGE>

exercise set forth in SECTION 9 above), at any time within one year after such
Service Termination and prior to termination of the Option pursuant to SECTION
9.1 above, to exercise, in whole or in part, any Option held by such Optionee at
the date of such Service Termination, whether or not such Option was exercisable
immediately prior to such Service Termination. Whether a Service Termination is
to be considered by reason of permanent and total disability for purposes of
this Plan shall be determined by the Board, which determination shall be final
and conclusive.

14. USE OF PROCEEDS

The proceeds received by the Corporation from the sale of Stock
pursuant to Options granted under the Plan shall constitute general funds of the
Corporation.

15. SECURITIES ACT OF 1933

The Corporation shall not be required to sell or issue any shares
of Stock under any Option if the sale or issuance of such shares would
constitute a violation by the individual exercising the Option or the
Corporation of any provisions of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or
regulations. Specifically in connection with the Securities Act of 1933, as
amended (the "SECURITIES ACT"), upon exercise of any Option, unless a
registration statement under such Act is in effect with respect to the shares of
Stock covered by such Option, the Corporation shall not be required to sell or
issue such shares unless the Corporation has received evidence satisfactory to
it that the holder of such Option may acquire such shares pursuant to an
exemption from registration under such Act. Any determination in this connection
by the Corporation shall be final, binding, and conclusive. The Corporation may,
but shall in no event be obligated to, register any securities covered hereby
pursuant to the Securities Act. The Corporation shall not be obligated to take
any affirmative action in order to cause the exercise of an Option or the
issuance of shares pursuant thereto to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the
requirement that an Option shall not be exercisable unless and until the shares
of Stock covered by such Option are registered or are subject to an available
exemption from registration, the exercise of such Option (under circumstances in
which the laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.

16. SECURITIES EXCHANGE ACT OF 1934: RULE 16B-3

The Plan is intended to comply with Rule 16b-3 ("RULE 16B-3") under
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), from and
after the date on which the Corporation first registers a class of equity
security under Section 12 of the Exchange Act (the "REGISTRATION DATE"). From
and after the Registration Date, any provision inconsistent with Rule 16b-3 (as
in effect on the Registration Date) shall, to the extent permitted by law and
determined to be advisable by the Board (acting pursuant to SECTION 2.1), be
inoperative and void. Moreover, in the event the Plan does not include a
provision required by Rule 16b-3 to be stated therein, such provision (other
than one relating to eligibility requirements and the amount and timing of
awards) shall be deemed automatically to be incorporated into the Plan insofar
as participant is subject to Section 16 are concerned.

-7-
<PAGE>

17. AMENDMENT AND TERMINATION OF THE PLAN

The Board may, at any time and from time to time, amend, suspend or
terminate the Plan as to any shares of Stock as to which Options have not been
granted; provided, however, that no amendment by the Board shall, without
-------- -------
approval by a majority of the votes cast at a duly held meeting of the
stockholders of the Corporation at which a quorum representing a majority of all
outstanding stock is present, either in person or by proxy, and voting on the
amendment, or by written consent in accordance with applicable state law and the
articles of incorporation and by-laws of the Corporation, materially change the
requirements as to eligibility to receive Options or increase the maximum number
of shares of Stock in the aggregate that may be sold pursuant to Options granted
under the Plan (except as permitted under SECTION 18 hereof). Except as
permitted under SECTION 18 hereof, no amendment, suspension or termination of
the Plan shall, without the consent of the holder of the Option, alter or impair
rights or obligations under any Option theretofore granted under the Plan.

18. EFFECT OF CHANGES IN CAPITALIZATION

18.1. CHANGES IN STOCK

If the outstanding shares of Stock are increased or decreased or
changed into or exchanged for a different number or kind of shares or other
securities of the Corporation by reason of the conversion of outstanding shares
of Preferred Stock to shares of Common Stock of the Corporation, or by reason of
any recapitalization, reclassification, stock split-up, combination of shares,
exchange of shares, stock dividend or other distribution payable in capital
stock, or other increase or decrease in such shares effected without receipt of
consideration by the Corporation, occurring after the effective date of the
Plan, the number and kinds of shares for the purchase of which Options may be
granted under the Plan shall be adjusted proportionately and accordingly by the
Corporation. In addition, the number and kind of shares for which Options are
outstanding shall be adjusted proportionately and accordingly, so that the
proportionate interest of the holder of the Option immediately following such
event shall, to the extent practicable, be the same as immediately prior to such
event. Any such adjustment in outstanding Options shall not change the aggregate
Option Price payable with respect to shares subject to the unexercised portion
of the Option outstanding but shall include a corresponding proportionate
adjustment in the Option Price per share.

18.2. REORGANIZATION WITH CORPORATION SURVIVING

Subject to SECTION 18.3 hereof, if the Corporation shall be the
surviving corporation in any reorganization, merger or consolidation of the
Corporation with one or more other corporations, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger or consolidation,
with a corresponding proportionate adjustment of the Option Price per share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior to
such reorganization, merger or consolidation.

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<PAGE>

18.3 OTHER REORGANIZATIONS; SALE OF ASSETS/STOCK

Upon the dissolution or liquidation of the Corporation, or upon a
merger, consolidation or reorganization of the Corporation with one or more
other corporations in which the Corporation is not the surviving corporation, or
upon a sale of substantially all of the assets of the Corporation to another
corporation, or upon any transaction (including, without limitation, a merger or
reorganization in which the Corporation is the surviving corporation) approved
by the Board which results in any person or entity owning 80 percent or more of
the combined voting power of all classes of stock of the Corporation, the Plan
and all Options outstanding hereunder shall terminate, except to the extent
provision is made in writing in connection with such transaction for the
continuation of the Plan and/or the assumption of the Options theretofore
granted, or for the substitution for such Options of new options covering the
stock of a successor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kinds of shares and exercise
prices, in which event the Plan and Options theretofore granted shall continue
in the manner and under the terms so provided. In the event of any such
termination of the Plan, each individual holding an Option shall have the right
(subject to the general limitations on exercise set forth in SECTION 9 above),
immediately prior to the occurrence of such termination and during such period
occurring prior to such termination as the Board in its sole discretion shall
designate, to exercise such Option in whole or in part, whether or not such
Option was otherwise exercisable at the time such termination occurs and without
regard to any installment limitation on exercise imposed pursuant to SECTION 9.2
above, but subject to any additional limitations that the Board may, in its sole
discretion, include in any Option Agreement. The Board shall send written notice
of an event that will result in such a termination to all individuals who hold
Options not later than the time at which the Corporation gives notice thereof to
its stockholders.

18.4. ADJUSTMENTS

Adjustments under this SECTION 18 related to stock or securities of
the Corporation shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Among other things, the Board may
determine whether fractional shares of Stock or units of other securities will
be issued pursuant to any such adjustment.

18.5. NO LIMITATIONS ON CORPORATION

The grant of an Option pursuant to the Plan shall not affect or
limit in any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or to sell or
transfer all or any part of its business or assets.

19. DISCLAIMER OF RIGHTS

No provision in the Plan or in any Option granted or Option
Agreement entered into pursuant to the Plan shall be construed to confer upon
any individual the right to remain in the employ or service of the Corporation
or any of the other ITC Companies, or to interfere in any way with the right and
authority thereof either to increase or decrease the compensation of any
individual at any time, or to terminate any employment or other relationship
between any individual and the Corporation or any of the Other ITC Companies.

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<PAGE>

20. NONEXCLUSIVITY OF THE PLAN

Neither the adoption of the Plan nor the submission of the Plan to
the stockholders of the Corporation for approval shall be construed as creating
any limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or individuals) as the Board in its discretion determines desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan.

* * * *

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<PAGE>

EXHIBIT 10.92

DESCRIPTION OF ITC/\DELTACOM, INC. ANNUAL BONUS PLAN

ITC/\DeltaCom, Inc. (the "Company") maintains an annual bonus plan for
the benefit of its corporate officers and certain other employees of the
Company and its subsidiaries. Bonuses are specified as a percentage of the
employee's annual base salary. Bonus percentages generally are set by
organizational level within the Company, except that bonus percentages for the
most senior executive officers of the Company are established by the
Compensation Committee of the Board of Directors.

The Compensation Committee establishes annual target bonus awards based
on the achievement of the financial and operating objectives set by the
Compensation Committee for the Company. Typically, 100% of annual bonuses
payable to senior executives under the business plan are tied to the Company's
achievement of revenue, EBITDA (cash flow) and capital budget targets. Bonuses
for other executives and employees are determined based on varying percentages
of annual base salary, a portion of which is tied to overall Company performance
(measured against targets set for senior executives) and a portion to individual
and departmental performance. The Compensation Committee has the discretion to
modify the foregoing percentage for senior executive officers as it deems
appropriate.

<PAGE>
Exhibit 10.93

INDEMNITY AGREEMENT

BETWEEN

ITC/\DELTACOM, INC.

AND

[ ]

Dated as of

October 17, 1997

<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
1. CERTAIN DEFINITIONS.................................................. 2
1.1. Change in Control............................................... 2
1.2. Claim........................................................... 2
1.3. Expenses........................................................ 2
1.4. Indemnifiable Event............................................. 3
1.5. Reviewing Party................................................. 3
1.6. Voting Securities............................................... 3
1.7. Special Independent Counsel..................................... 3
2. BASIC INDEMNIFICATION ARRANGEMENT.................................... 3
3. CHANGE IN CONTROL.................................................... 5
4. INDEMNIFICATION FOR ADDITIONAL EXPENSES.............................. 5
5. LIMITATIONS ON SETTLEMENT AUTHORITY IN SOME CASES.................... 6
6. PARTIAL INDEMNITY, ETC............................................... 6
7. NO PRESUMPTION....................................................... 7
8. NON-EXCLUSIVITY, ETC................................................. 7
9. LIABILITY INSURANCE.................................................. 7
10. PERIOD OF LIMITATIONS................................................ 7
11. AMENDMENTS, ETC...................................................... 8
12. SUBROGATION.......................................................... 8
13. NO DUPLICATION OF PAYMENTS........................................... 8
14. BINDING EFFECT, ETC.................................................. 8
15. TERMINATION.......................................................... 8
16. SEVERABILITY......................................................... 9
17. GOVERNING LAW........................................................ 9
</TABLE>
<PAGE>

INDEMNITY AGREEMENT

This Agreement is entered into as of ______________, between
ITC/\ DeltaCom, Inc., a Delaware corporation (the "Corporation"), and
____________________ ("Director"), a director or officer of the Corporation.

WHEREAS, both the Corporation and Director recognize the increased
risk of litigation and other claims being asserted against public companies in
today's environment;

WHEREAS, basic protection against undue risk of personal liability of
the Corporation officers heretofore has been provided through insurance coverage
providing reasonable protection at reasonable cost, and Director has relied on
the availability of such coverage;

WHEREAS, the Corporation's Certificate of Incorporation requires the
Corporation to indemnify and advance expenses to its directors and officers to
the full extent permitted by law, and Director has been serving as a director or
executive officer of the Corporation in part in reliance on such provisions;

WHEREAS, in recognition of Director's need for substantial protection
against personal liability in order to insure and enhance Director's continued
service to the Corporation in an effective manner, and Director's reliance on
the aforesaid provision in the Corporation's Certificate of Incorporation, and
in part to provide Director with specific contractual assurance that the
protection promised by such provision will be available to Director (regardless
of, among other things, any amendment to or revocation of such provision of the
Certificate of Incorporation, any change in the composition of the Corporation's
board of directors or the occurrence of any acquisition transaction relating to
the Corporation); and

WHEREAS, the Corporation wishes to provide in this Agreement for the
effective indemnification of and the advancing of expenses to Director to the
fullest extent (whether partial or complete) permitted by law and as set forth
in this Agreement, and, to the extent insurance is maintained, for the continued
coverage of Director under the Corporation's director and officer liability
insurance policies;

NOW THEREFORE, in consideration of the premises, and intending to be
legally bound hereby, the parties hereto agree as follows:
<PAGE>

1. CERTAIN DEFINITIONS

1.1. Change in Control

A "Change in Control" shall be deemed to have occurred if (i) during
any period of two consecutive years, individuals who at the beginning of such
period constitute the board of directors of the Corporation and any new director
whose election by the board of directors or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof, or (ii) the stockholders
of the Corporation approve a merger or consolidation of the Corporation with any
other corporation, other than a merger or consolidation which would result in
the Voting Securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least 80% of the total voting
power represented by the Voting Securities of the Corporation or such surviving
entity outstanding immediately after such merger or consolidation, or the
stockholders of the Corporation approve a plan of complete liquidation and
dissolution of the Corporation or an agreement for the sale or disposition by
the Corporation of all or substantially all the Corporation's assets; provided,
however, that a would-be Change in Control under (ii) herein which is approved
and recommended in advance by the Corporation's board of directors shall not be
deemed a Change in Control.

1.2. Claim

A "Claim" is any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation (whether conducted by the
Corporation or any other party), that Director in good faith believes might lead
to the institution of any such action, suit or proceeding, whether civil,
criminal, administrative, investigative or other.

1.3. Expenses

"Expenses" include attorneys' fees and all other costs, expenses and
obligations paid or incurred by or on behalf of Director (other than amounts
paid or payable directly or indirectly to Director or any person or entity
controlled by Director) in connection with investigating, defending, being a
witness in or participating in (including on appeal), or preparing to defend, be
a witness in or participate in any Claim relating to any Indemnifiable Event.

- 2 -
<PAGE>

1.4. Indemnifiable Event

An "Indemnifiable Event" shall be any event or occurrence related to
the fact that Director is or was a director, officer, employee, agent or
fiduciary of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, trustee, agent or fiduciary of
another corporation, partnership, joint venture, employee benefit plan, trust or
other enterprise, or by reason of anything done or not done by Director in any
such capacity.

1.5. Reviewing Party

A "Reviewing Party" shall be any appropriate person or body consisting
of a member or members of the Corporation's board or directors or any other
person or body selected hereunder (including Special Independent Counsel, as
defined below) who is not a party to the particular Claim for which Director is
seeking indemnification. If there has not been Change in Control, the Reviewing
Party shall be selected by the Corporation's board of directors. If there has
been such a Change in Control, the Reviewing Party shall be Special Independent
Counsel.

1.6. Voting Securities

"Voting Securities" are any securities of the Corporation which vote
generally in the election of directors.

1.7. Special Independent Counsel

"Special Independent Counsel" is counsel selected by Director and
approved by the Corporation (which approval shall not be unreasonably withheld)
and who has not, unless waived by the Corporation and Director, otherwise
performed services for the Corporation or Director within the last ten years.

2. BASIC INDEMNIFICATION ARRANGEMENT

(a) In the event Director was, is or becomes a party to or witness or
other participant in, or is threatened to be made a party to or witness or other
participant in, a Claim by reason of (or arising in part out of) an
Indemnifiable Event, the Corporation shall indemnify Director to the fullest
extent permitted by law as soon as practicable but in any event no later than
thirty days after written demand is presented to the Corporation, against any
and all Expenses, judgments, fines, penalties and amounts paid or owing in
settlement (including all interest, assessments and other charges paid or
payable in connection with or in respect of such Expenses, judgments, fines,
penalties or amounts paid in settlement) paid or incurred by or on behalf of
Director in connection with such Claim. Director shall

- 3 -
<PAGE>

give the Corporation written notice of all such Claims and the particulars
thereof as soon as practicable.

(b) If so requested by Director, the Corporation shall advance (within
ten business days of such request) any and all Expenses to Director (an "Expense
Advance"). If required by applicable law, such request shall be preceded or
accompanied by an undertaking by or on behalf of Director to repay any Expenses
so advanced if it shall ultimately be determined that Director is not entitled
to be indemnified by the Corporation. In the event that any person (including,
without limitation, the Corporation) challenges the reasonableness of any
Expense Advance requested by Director, an affidavit provided to the Corporation
by Special Independent Counsel certifying that, in the view of such Special
Independent Counsel, the Expenses in question were reasonably incurred shall
finally and conclusively (but not exclusively) establish the reasonableness of
such Expenses for purposes of determining Director's entitlement to Expense
Advances, but not for purposes of later determining Director's entitlement to
indemnification pursuant to this Agreement at the conclusion of the underlying
action.

(c) Notwithstanding anything in this Agreement to the contrary, (i)
prior to a Change in Control, Director shall not be entitled to indemnification
pursuant to this Agreement in connection with any Claim (other than a claim for
indemnification (including, without limitation, indemnification pursuant to
Section 4 of this Agreement), Expense Advances, or expenses advanced pursuant to
Section 4 of this Agreement) initiated by Director against the Corporation or
any director or officer of the Corporation unless the Corporation has joined in
or consented to the initiation of such Claim; (ii) the obligations of the
Corporation under Section 2(a) shall be subject to the condition that the
Reviewing Party shall not have determined in a writing stating the reasons
therefor that Director would not be permitted to be indemnified under applicable
law; and (iii) the obligation of the Corporation to make an Expense Advance
pursuant to Section 2(b) shall be subject to the condition that, if, when and to
the extent that the Reviewing Party determines that Director would not be
permitted to be so indemnified under applicable law, the Corporation shall be
entitled to be reimbursed by Director (who hereby agrees to reimburse the
Corporation) for all such amounts theretofore paid; provided, however, that if
Director has commenced legal proceedings in a court of competent jurisdiction to
secure a determination that Director should be indemnified under applicable law,
any determination made by the Reviewing Party that Director would not be
permitted to be indemnified under applicable law shall not be binding and
Director shall not be required to reimburse the Corporation for any Expense
Advance until a final judicial determination is made with respect thereto (as to
which all rights of appeal therefrom have been exhausted or lapsed).

(d) If the Reviewing Party determines that Director would not be
permitted to be indemnified in whole or in part under applicable law (such

- 4 -
<PAGE>

determination to be made by the Reviewing Party independent of any position of
the Corporation on any aspect of the indemnification, including without
limitation the appropriateness of the amount of any settlement), Director shall
have the right to commence litigation in any court in the State of Delaware or
in the State(s) of Director's residence or employment, having subject matter
jurisdiction thereof, and in which venue is proper, seeking an initial
determination by the court or challenging any such determination by the
Reviewing Party or any aspect thereof, and the Corporation hereby consents to
service of process and to appear in any such proceeding. The Corporation and
Director hereby agree that Director's remedies at law are inadequate in the
event Director commences litigation to recover indemnification, Expense
Advances, or expenses to be advanced pursuant to Section 4 of this Agreement, in
each case withheld by the Corporation. Any determination by the Reviewing Party
otherwise shall be conclusive and binding on the Corporation and Director.

3. CHANGE IN CONTROL

If there is a Change in Control of the Corporation, then with respect
to all matters thereafter arising concerning the rights of Director to indemnity
payments and Expense Advances under this Agreement or any other agreement, or
under the Corporation's Certificate of Incorporation or Bylaws now or hereafter
in effect, relating to Claims for Indemnifiable Events, the Corporation shall
seek legal advice only from Special Independent Counsel. Such counsel, among
other things, shall render its written opinion to the Corporation and Director
as to whether and to what extent Director would be permitted to be indemnified
under applicable law. The Corporation agrees to pay the reasonable fees of the
Special Independent Counsel referred to above and to fully indemnify such
counsel against any and all expenses (including attorneys' fees), claims,
liabilities and damages arising out of or relating to this Agreement or its
engagement pursuant hereto.

4. INDEMNIFICATION FOR ADDITIONAL EXPENSES.

The Corporation shall indemnify Director against any and all expenses
(including attorneys' fees) and, if requested by Director, shall, within ten
business days of such request, advance such expenses to Director, which are
incurred by or on behalf of Director (other than amounts paid or payable
directly or indirectly to Director or any person or entity controlled by
Director) in connection with any claim asserted against or action brought by
Director for (i) indemnification hereunder or advance payment of Expenses by the
Corporation under this Agreement (or any other agreement or the Corporation's
Certificate of Incorporation or by-laws now or hereafter in effect) relating to
Claims for Indemnifiable Events, and/or (ii) recovery under any director and
officer liability insurance policies maintained by the Corporation, regardless
of whether Director ultimately is determined to be entitled

- 5 -

<PAGE>

to such indemnification, advance expense payment or insurance recovery, as the
case may be.

5. LIMITATIONS ON SETTLEMENT AUTHORITY IN SOME CASES

(a) If no Change in Control has occurred, Director shall not
independently negotiate settlement without first giving the Reviewing Party and
the Corporation twenty business days' notice. Thereafter, Director may engage
in such negotiations and may settle the case unless the Reviewing Party and
trial counsel for the Corporation handling the case (and in cases where outside
counsel is used, such outside counsel) advise Director that they have
investigated the Director's involvement in the event and have determined that
the matter is appropriate and legal for indemnity and all judgments, expenses
and costs will, if lawful, be paid by the Corporation; provided, however, that
such limitation on settlement negotiations shall not apply to actions by or in
the right of the Corporation against Director. The Reviewing Party and such
counsel shall also promptly give Director notice of any subsequent change or
reversal of any such prior determination of the Reviewing Party and such
counsel, stating the reasons for such change or reversal, after which notice
Director may independently negotiate and settle the case.

(b) In any case, the Corporation shall not unreasonably withhold its
consent to any proposed settlement.

6. PARTIAL INDEMNITY, ETC.

If Director is entitled under any provision of this Agreement to
indemnification by the Corporation for some or a portion of Expenses, judgments,
fines, penalties and amounts paid in settlement of a Claim but not, however, for
all of the total amount thereof, the Corporation shall nevertheless indemnify
Director for the portion thereof to which Director is entitled. Moreover,
notwithstanding any other provision of this Agreement, to the extent that
Director has been successful on the merits or otherwise in defense of any or all
Claims relating in whole or in part to an Indemnifiable Event or in defense of
any issue or matter therein, including dismissal without prejudice, Director
shall be indemnified against all Expenses incurred in connection therewith. In
connection with any determination by the Reviewing Party as to whether Director
is entitled to be indemnified hereunder, the burden of proof shall be on the
Corporation to establish that Director is not so entitled.

- 6 -
<PAGE>

7. NO PRESUMPTION

For purposes of this Agreement, the termination of any claim, action,
suit or proceeding, by judgment, order, settlement (whether with or without
court approval) or conviction, or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that Director did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by applicable law. The
termination of a suit by settlement shall be presumed to be a disposition
favorable to Director and in the best interests of the Corporation.

8. NON-EXCLUSIVITY, ETC.

The rights of Director hereunder shall be in addition to any other
rights Director may have under the Corporation's Certificate of Incorporation,
its Bylaws, the Delaware General Corporation Law or any other law or agreement.
To the extent that a change in applicable law (whether by statute or judicial
decision) permits greater indemnification by agreement than would be afforded
currently, it is the intent of the parties hereto that Director shall enjoy by
this Agreement the greater benefits so afforded by such change.

9. LIABILITY INSURANCE

To the extent the Corporation maintains an insurance policy or
policies providing director and officer liability insurance, Director shall be
covered by such policy or policies, in accordance with its or their terms, to
the maximum extent of the coverage available for any the Corporation director or
officer.

10. PERIOD OF LIMITATIONS

No legal action shall be brought and no cause of action shall be
asserted by or on behalf of the Corporation or any affiliate of the Corporation
against Director, Director's spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Corporation or its
affiliate shall be extinguished and deemed released unless asserted by the
timely filing of a legal action within such two-year period; provided, however,
that if any shorter period of limitations is otherwise applicable to any such
cause of action, such shorter period shall govern.

- 7 -
<PAGE>

11. AMENDMENTS, ETC.

No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both the parties hereto. No waiver of any
of the provisions of this Agreement shall be deemed or shall constitute a waiver
of any other provisions hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.

12. SUBROGATION

In the event of payment under this Agreement, the Corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of
Director, who shall execute all papers required and shall do everything that may
be necessary to secure such rights, including the execution of such documents
necessary to enable the Corporation effectively to bring suit to enforce such
rights.

13. NO DUPLICATION OF PAYMENTS

The Corporation shall not be liable under this Agreement to make any
payment in connection with any claim made against Director to the extent
Director has otherwise actually received payment (under any insurance policy,
the Corporation's Certificate of Incorporation or Bylaws or otherwise) of the
amounts otherwise Indemnifiable hereunder.

14. BINDING EFFECT, ETC.

This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors (including
any direct or indirect successor by purchase, merger, consolidation or otherwise
to all or substantially all of the business and/or assets of the Corporation),
assigns, spouses, heirs, and personal and legal representatives.

15. TERMINATION

This Agreement may be terminated by either party by giving the other
three months' written notice; provided, however, that the Corporation may not
terminate this Agreement unless the Corporation is concurrently terminating all
like Indemnity Agreements then in force. No termination of this Agreement,
automatic or otherwise, shall nullify any of the rights and obligations of
either Director or the Corporation hereunder in respect of any matter occurring
prior to the effective date of termination.

- 8 -
<PAGE>

16. SEVERABILITY

The provisions of this Agreement shall be severable in the event that
any of the provisions hereof (including any provision within a single section,
paragraph or sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the fullest extent permitted by law.

17. GOVERNING LAW

This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed in such state, without giving effect to the principles of
conflicts of laws.

ITC/\DELTACOM, INC.

By:
--------------------------------------
Name:
---------------------------
Title:
--------------------------

DIRECTOR

-----------------------------------------

<PAGE>
EXHIBIT 10.94

SALE AND PURCHASE AGREEMENT

AMONG

SCANA CORPORATION,

SCANA COMMUNICATIONS, INC.,

AND

ITC HOLDING COMPANY, INC.

Dated as of March 11, 1997

SECURITIES TRANSFERRED PURSUANT HERETO ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS
SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
1. DEFINITIONS AND REFERENCES.................................................1
2. SALE AND PURCHASE OF ASSETS................................................2
2.1. Asset Sale..........................................................2
2.2. Purchase Price......................................................2
2.3. No Assumption of Liabilities........................................2
3. ADDITIONAL AGREEMENTS......................................................3
3.1. Initial Hart-Scott-Rodino Filing....................................3
3.2. Restated Certificate of Incorporation and Certificate of
Designation........................................................3
3.3. Consents and Approvals..............................................3
3.4. Notice of Developments..............................................4
3.5. Registration Rights.................................................4
3.5.1. Piggyback Registration Right.................................4
3.5.2. ITC Obligations..............................................4
3.5.3. SCANA Holders Obligations....................................5
3.5.4. Indemnification by ITC.......................................5
3.5.5. Indemnification by the SCANA Holders.........................6
3.5.6. Indemnification Procedures...................................6
3.5.7. Contribution in lieu of Indemnification......................7
3.5.8. Limit on Indemnification.....................................8
3.6. Allocation of Purchase Price........................................8
3.7. Transfer Tax........................................................8
3.8. Treatment of Shares as Equity.......................................8
3.9. Resale Restrictions.................................................8
3.10. ITC Stockholders' Meeting..........................................8
3.11. Conduct of Business of ITC.........................................9
3.12. Further Action.....................................................9
3.13. Risk of Loss.......................................................9
3.14. Hart-Scott-Rodino Filing Upon Conversion...........................10
3.15. Subordination of Note..............................................10
3.16. Release............................................................10
4. REPRESENTATIONS AND WARRANTIES OF SCANA AND SCANA COMMUNICATIONS...........11
4.1. Organization and Standing...........................................11
4.2. Authorization.......................................................11
4.3. Binding Obligation..................................................11
4.4. Restrictions and Consents...........................................12
4.5. Absence of Violation................................................12
4.6. Assets..............................................................12
4.6.1. Title to the Assets..........................................12
4.6.2. Condition of Tangible Assets.................................12
</TABLE>

- i -
<PAGE>

<TABLE>
<S> <C>
4.6.3. Free Transferability.........................................13
4.7. Litigation; Disputes................................................13
4.7.1. No Litigation; Compliance with Law...........................13
4.7.2. No Disputes..................................................13
4.8. Disclosure..........................................................13
4.9. Investment Purpose..................................................13
4.10. Accredited Investor................................................13
4.11. Access to Information..............................................14
4.12. Brokers............................................................14
5. REPRESENTATIONS AND WARRANTIES OF ITC......................................14
5.1. Organization and Standing...........................................14
5.2. Authorization.......................................................14
5.3. Binding Obligation..................................................15
5.4. Restrictions and Consents...........................................15
5.5. Capital Stock.......................................................15
5.6. Absence of Violation................................................16
5.7. Litigation; Disputes................................................16
5.7.1. No Litigation; Compliance with Law...........................16
5.7.2. No Disputes..................................................16
5.8. Disclosure..........................................................16
5.8.1. General......................................................16
5.8.2. Financial Statements.........................................16
5.9. No Undisclosed Liabilities..........................................17
5.10. Conduct in the Ordinary Course.....................................17
5.11. Brokers............................................................17
6. CONDITIONS TO CLOSING......................................................17
6.1. Conditions to Obligations of SCANA and SCANA COMMUNICATIONS.........17
6.1.1. Representations, Warranties, and Covenants...................17
6.1.2. No Proceeding or Litigation..................................18
6.1.3. Resolutions of ITC...........................................18
6.1.4. Legal Opinion................................................18
6.1.5. Consents and Approvals.......................................18
6.1.6. ITC Stockholder Approval.....................................19
6.1.7. Elimination of Guaranty Agreement............................19
6.1.8. No Material Adverse Effect...................................19
6.2. Conditions to Obligations of ITC....................................19
6.2.1. Representations, Warranties, and Covenants...................19
6.2.2. No Proceeding or Litigation..................................20
6.2.3. Resolutions of SCANA COMMUNICATIONS..........................20
6.2.4. Legal Opinion................................................20
6.2.5. Consents and Approvals.......................................20
6.2.6. ITC Stockholder Approval.....................................20
6.2.7. Elimination of Guaranty Agreement............................21
6.2.8. No Material Adverse Effect...................................21
</TABLE>

- ii -
<PAGE>

<TABLE>
<S> <C>
7. SURVIVAL; INDEMNIFICATION..................................................21
7.1. Survival of Representations and Warranties..........................21
7.2. Indemnification.....................................................21
7.2.1. Indemnification by SCANA and SCANA COMMUNICATIONS............21
7.2.2. Indemnification by ITC.......................................22
7.2.3. Contribution.................................................22
7.2.4. Conditions of Indemnification................................22
7.2.5. Limitations on Indemnification...............................23
8. TERMINATION AND WAIVER.....................................................23
8.1. Termination.........................................................23
8.2. Effect of Termination...............................................24
8.3. Waiver..............................................................24
9. MISCELLANEOUS..............................................................25
9.1. Expenses............................................................25
9.2. Notices.............................................................25
9.3. Public Announcements................................................26
9.4. Headings............................................................26
9.5. Severability........................................................26
9.6. Entire Agreement....................................................27
9.7. Assignment..........................................................27
9.8. No Third Party Beneficiaries........................................27
9.9. Amendment...........................................................27
9.10. Governing Law......................................................27
9.11. Counterparts.......................................................27
9.12. Specific Performance...............................................27
</TABLE>

EXHIBITS

Exhibit Number Section Number Exhibit
<S> <C> <C>

Exhibit 1 1 Definitions
Exhibit 2 2.1; 2.3 Assets
Exhibit 3 2.2(a); 3.2 Restated Certificate of Incorporation and
Preferred Stock Certificate of Designation
Exhibit 4 2.2(b) Promissory Note
Exhibit 5 3.6 Allocation of Purchase Price
Exhibit 6 3.15 Subordination Agreement
</TABLE>

- iii -
<PAGE>

SALE AND PURCHASE AGREEMENT

THIS SALE AND PURCHASE AGREEMENT is entered into as of March 11, 1997
by and among SCANA Corporation, a South Carolina corporation ("SCANA"), SCANA
COMMUNICATIONS, INC., A SOUTH CAROLINA CORPORATION AND WHOLLY OWNED SUBSIDIARY
OF SCANA ("SCANA COMMUNICATIONS"), AND ITC HOLDING COMPANY, INC., A DELAWARE
CORPORATION ("ITC").

WHEREAS, SCANA COMMUNICATIONS OWNS, HOLDS, AND USES CERTAIN TANGIBLE
AND INTANGIBLE ASSETS AND RIGHTS; AND

WHEREAS, SCANA COMMUNICATIONS DESIRES TO SELL CERTAIN OF SUCH ASSETS
TO ITC, AND ITC DESIRES TO PURCHASE SUCH ASSETS (INCLUDING, AMONG OTHER THINGS,
SCANA COMMUNICATIONS' 64% PARTNERSHIP INTEREST IN GULF STATES FIBERNET, A
GEORGIA GENERAL PARTNERSHIP ("GULF STATES")), FROM SCANA COMMUNICATIONS, ALL IN
ACCORDANCE WITH AND SUBJECT TO THE TERMS AND CONDITIONS HEREINAFTER SET FORTH;
AND

WHEREAS, GULFSTATES TRANSMISSION SYSTEMS, INC. ("GULFSTATES
TRANSMISSIONS"), A WHOLLY OWNED SUBSIDIARY OF ITC, OWNS THE REMAINING
OUTSTANDING PARTNERSHIP INTERESTS IN GULF STATES, AND THE PARTIES CONTEMPLATE
THAT, AFTER THE CONSUMMATION OF THE SALE AND PURCHASE OF ASSETS CONTEMPLATED
HEREBY, ITC SHALL CONTRIBUTE THE GULF STATES PARTNERSHIP INTEREST IT ACQUIRES
PURSUANT HERETO TO GULFSTATES TRANSMISSIONS AND THAT, AS A CONSEQUENCE THEREOF,
THE GULF STATES PARTNERSHIP SHALL DISSOLVE BY OPERATION OF LAW AND ALL OF ITS
ASSETS AND OPERATIONS SHALL BECOME ASSETS AND OPERATIONS OF GULFSTATES
TRANSMISSIONS;

NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING AND OF THE MUTUAL
COVENANTS AND AGREEMENTS HEREINAFTER SET FORTH, THE PARTIES HERETO HEREBY AGREE
AS FOLLOWS:

1. DEFINITIONS AND REFERENCES.

Unless the context otherwise requires, the capitalized terms used
herein shall have the respective meanings specified in Exhibit 1 for all
purposes hereof (such definitions to be equally applicable to both the singular
and plural forms of the terms defined). All references to clauses, Sections,
Exhibits and Schedules are to clauses and Sections of, and Exhibits and
Schedules to, this Agreement.
<PAGE>

2. SALE AND PURCHASE OF ASSETS.

2.1. Asset Sale.

In reliance upon the representations, warranties, covenants and
agreements contained herein, and subject to the terms and conditions hereof, at
the Closing SCANA COMMUNICATIONS shall sell, assign, transfer, convey and
deliver to ITC, and ITC shall purchase from SCANA COMMUNICATIONS, the tangible
and intangible assets specified on Exhibit 2 hereto (the "Assets").

2.2. Purchase Price.

For and in consideration of the conveyances and assignment described
herein, ITC agrees to pay to SCANA COMMUNICATIONS, and SCANA COMMUNICATIONS
agrees to accept from ITC, the purchase price (the "Purchase Price") specified
in this Section 2.2, which shall be allocated among the Assets in accordance
with Section 3.6. The Purchase Price shall consist of the consideration
specified in, and shall be payable as set forth below in, Sections 2.2(a), (b),
and (c):

(a) at the Closing ITC shall issue and deliver to SCANA COMMUNICATIONS
stock certificates evidencing Five Hundred Eighty-eight Thousand, Four Hundred
Eleven (588,411) shares (the "Shares") of a new series of convertible preferred
stock of ITC designated Series A Convertible Preferred Stock (the "Preferred
Stock"), par value $0.01 per share, the terms of which Preferred Stock are set
forth in Exhibit 3 hereto; and

(b) at the Closing, ITC shall deliver to SCANA COMMUNICATIONS a
promissory note (the "Note") in the principal amount of Nine Million, Nine
Hundred Sixty-four Thousand, Ninety-one Dollars ($9,964,091.00), substantially
in the form set forth in Exhibit 4 hereto; and

(c) no later than April 30, 1998, ITC shall deliver to SCANA
COMMUNICATIONS stock certificates evidencing that number of shares, rounded to
the nearest whole share (the "Additional Shares"), of Preferred Stock that in
aggregate value (valued on a per-share basis for this purpose at the Current
Market Price per share of ITC's Common Stock) is equal to 35.7% of the product
of (a) 64%, multiplied times (b)(i) six (6), multiplied times (ii) the amount
(if any) by which (A) the earnings before interest, taxes, depreciation and
amortization (as each such term is defined by U.S. GAAP) of the assets and
operations of Gulf States as of the Closing (regardless of whether such assets
and operations, or any portion thereof, continue to be held by Gulf States for
the applicable period) for the fiscal year ended December 31, 1997 exceeds (B)
Eleven Million, Two Hundred Sixty-five Thousand, Six Hundred Ninety-six Dollars
($11,265,696.00) (the "Earn Out").

2.3. No Assumption of Liabilities.

ITC shall not assume or be deemed to assume any debts, Liabilities or
obligations of SCANA or SCANA COMMUNICATIONS other than such Liabilities or
obligations as

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SCANA COMMUNICATIONS may have as a general partner of Gulf States (other than
those incurred by SCANA COMMUNICATIONS as a general partner of Gulf States
without the knowledge of Gulf States Transmission Systems, Inc., a wholly owned
subsidiary of ITC and the managing partner of Gulf States), which liabilities
and obligations shall at Closing be expressly assumed by ITC, and such
liabilities and obligations as ITC is assuming pursuant to the terms of this
Agreement under the contracts comprising a part of the Assets described in
Exhibit 2.

3. ADDITIONAL AGREEMENTS.

ITC, SCANA, and SCANA COMMUNICATIONS hereby covenant and agree with
each other as follows:

3.1. Initial Hart-Scott-Rodino Filing.

As promptly as practicable following the execution of this Agreement,
SCANA, SCANA COMMUNICATIONS, and ITC shall complete any filing that may be
required pursuant to Hart-Scott-Rodino in connection with the sale and purchase
contemplated hereby, or such parties shall mutually agree that no such filing is
required. SCANA, SCANA COMMUNICATIONS, and ITC shall diligently take, or fully
cooperate in the taking of, all necessary and proper steps, and provide any
additional information reasonably requested in order to comply with the
requirements of such Act. ITC shall pay any filing fee required pursuant to
Hart-Scott-Rodino in connection with the sale and purchase contemplated hereby.

3.2. Restated Certificate of Incorporation and Certificate of Designation.

ITC covenants and agrees that, as promptly as practicable after the
stockholder approval referred to in Section 3.10 is obtained and, in any event,
prior to the Closing, ITC will file the Restated Certificate of Incorporation
and Certificate of Designation, substantially in the forms set forth in Exhibit
3 with the Secretary of State of the State of Delaware in accordance with the
Delaware General Corporation Law.

3.3. Consents and Approvals.

ITC, SCANA, and SCANA COMMUNICATIONS shall take, and each shall cause
each of its respective Subsidiaries to take, all measures reasonably necessary
or advisable to secure any consents, authorizations, and approvals of
Governmental Authorities and of private persons or entities with respect to the
transactions contemplated by this Agreement, and to the performance of all other
obligations of such parties hereunder, as may be required by any applicable Law
of the United States or any of country, state or other jurisdiction or by any
agreement of any kind whatsoever to which ITC, SCANA, or SCANA COMMUNICATIONS is
a party or by which ITC, SCANA, or SCANA COMMUNICATIONS is bound.

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<PAGE>

3.4. Notice of Developments.

(a) Prior to the Closing, SCANA COMMUNICATIONS shall promptly notify
ITC in writing of any events, circumstances, facts and occurrences arising
subsequent to the date of this Agreement that could reasonably be expected to
result in any breach of a representation or warranty or covenant of SCANA
COMMUNICATIONS in this Agreement or that could reasonably be expected to have
the effect of making any representation or warranty of SCANA or SCANA
COMMUNICATIONS in this Agreement untrue or incorrect in any respect.

(b) Prior to the Closing, ITC shall promptly notify SCANA and SCANA
COMMUNICATIONS in writing of (i) any events, circumstances, facts and
occurrences arising subsequent to the date of this Agreement that could
reasonably be expected to result in any breach of a representation or warranty
or covenant of ITC in this Agreement or that could reasonably be expected to
have the effect of making any representation or warranty of ITC in this
Agreement untrue or incorrect in any respect, and (ii) all other developments
material to ITC and its subsidiaries, taken as a whole, affecting the assets,
Liabilities, business, financial condition, operations, results of operations or
prospects of ITC and its subsidiaries, taken as a whole.

3.5. Registration Rights.

3.5.1. Piggyback Registration Right.

At any time after the Closing, if ITC proposes to file a registration
statement under the Securities Act with respect to an offering of its equity
securities (i) for its own account (other than a registration statement on Form
S-4 or S-8 (or any substitute form that may be adopted by the Securities and
Exchange Commission)) or (ii) for the account of any holders of its securities
(including pursuant to a demand registration), then ITC shall give written
notice of such proposed filing to all SCANA Holders (as defined below) as soon
as practicable (but in any event not less than five business days before the
anticipated filing date), and such notice shall offer the SCANA Holders the
opportunity to register such number of Shares or Additional Shares
(collectively, "Securities") as the SCANA Holders request. Such registration
shall be on the same terms and conditions as the registration of ITC's or such
other holders' securities (a "Piggyback Registration"). Notwithstanding
anything contained herein, if the lead underwriter of an offering involving a
Piggyback Registration delivers a written opinion to ITC that the success of
such offering would be materially and adversely affected by inclusion of all the
securities requested to be included, then the number of Securities to be
registered by the SCANA Holders shall be reduced, pro rata on the basis of the
number of Securities requested to be included by each such SCANA Holder, prior
to any reduction in the number of Securities originally requested by them;
provided, however, that ITC must provide prompt written notice of such written
- -------- -------
opinion to the SCANA Holders participating in such registration. For purposes
of this Section 3.5, "SCANA Holder" shall mean SCANA COMMUNICATIONS, SCANA AND
ANY WHOLLY OWNED SUBSIDIARY OF SCANA, SO LONG AS SUCH ENTITY IS A HOLDER OF
SECURITIES.

3.5.2. ITC Obligations.

In connection with any offering of shares of Securities registered
pursuant to this Section 3.5, ITC (i) shall furnish to the participating SCANA
Holders such number of copies of

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<PAGE>

any prospectus (including any preliminary prospectus) as they may reasonably
request in order to effect the offering and sale of the Securities to be offered
and sold, but only while ITC shall be required under the provisions hereof to
cause the registration statement to remain current, and (ii) take such action as
shall be necessary to qualify the shares covered by such registration statement
under such "blue sky" or other state securities laws for offer and sale as such
SCANA Holders shall reasonably request; provided, however, that ITC shall not be
-------- -------
obligated to qualify as a foreign corporation to do business under the laws of
any jurisdiction which it shall not then be qualified or to file any general
consent service of process in any jurisdiction in which such a consent has not
been previously filed. If applicable, ITC shall enter into an underwriting
agreement with a managing underwriter or underwriters selected by SCANA Holders
holding 70% of the Securities requested to be included in such registration
(which underwriter or underwriters are reasonably satisfactory to ITC)
containing representations, warranties, indemnities and agreements then
customarily included by an issuer in underwriting agreements with respect to
secondary distributions; provided, however, that such underwriter or
-------- -------
underwriters shall agree to use their best efforts to ensure that the offering
results in a distribution of the Securities sold in accordance with the terms of
this Agreement. In connection with any offering of Securities registered
pursuant to this Section 3.5, ITC shall (x) furnish to the underwriter, at ITC's
expense, unlegended certificates representing ownership of the Securities being
sold in such denominations as reasonably requested and (y) instruct any transfer
agent and registrar of the Securities to release any stop transfer orders with
respect to such Securities. Upon any registration becoming effective pursuant
to this Section 3.5, ITC shall use all reasonable efforts to keep such
registration statement current for such period as shall be required for the
disposition of all of said Securities; provided, however, that such period need
-------- -------
not exceed three months.

3.5.3. SCANA Holders Obligations.

The SCANA Holders participating in such registration shall pay all
underwriting discounts and commissions related to shares of Securities being
sold by such SCANA Holders and the fees and disbursements of counsel and other
advisors to such SCANA Holders. All other fees and expenses in connection with
the Piggyback Registration, including, without limitation, all registration and
filing fees, all fees and expenses of complying with securities or "blue sky"
laws, fees and disbursements of ITC's counsel and accountants (including the
expenses of "cold comfort" letters required by or incident to such performance
and compliance) and any fees and disbursements of underwriters customarily paid
by issuers in secondary offerings shall be paid by ITC.

3.5.4. Indemnification by ITC.

In the case of any offering registered pursuant to this Section 3.5,
ITC agrees to indemnify and hold each SCANA Holder, each underwriter of
Securities under such registration and each person who controls any of the
foregoing within the meaning of Section 15 of the Securities Act and the
directors and officers of each SCANA Holder, harmless against any and all
losses, claims, damages, liabilities or action to which they or any of them may
become subject under the Securities Act or any other statute or common law or
otherwise, and to reimburse them for any legal or other expenses reasonably
incurred by them in connection with investigating any claims and defending any
actions, insofar as any such losses, claims, damages, or actions shall

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<PAGE>

arise out of or shall be based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in the registration statement relating to
the sale of such Securities, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus (as amended or
supplemented if ITC shall have filed with the Securities and Exchange Commission
any amendment thereof or supplement thereto), if used prior to the effective
date of such registration statement, or contained in the prospectus (as amended
or supplemented if ITC shall have filed with the Securities and Exchange
Commission any amendment thereof or supplement thereto), or the omission or
alleged omission to state therein a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the indemnification agreement contained
-------- -------
in this Section 3.5.4 shall not apply to such losses, claims, damages,
liabilities or actions which shall arise from the sale of Securities by any
SCANA Holder if such losses, claims, damages, liabilities or actions shall arise
out of or shall be based upon any such untrue statement or alleged untrue
statement, or any such omission or alleged omission made in reliance upon and in
conformity with information furnished in writing to ITC by such SCANA Holder or
any such underwriter specifically for use in connection with the preparation of
the registration statement or any preliminary prospectus or prospectus contained
in the registration statement or any such amendment thereof or supplement
thereto.

3.5.5. Indemnification by the SCANA Holders.

In the case of each offering registered pursuant to this Section 3.5,
each SCANA Holder and each underwriter participating therein shall agree, in the
same manner and to the same extent as set forth in Section 3.5.4, severally to
indemnify and hold harmless ITC and each person, if any, who controls ITC within
the meaning of Section 15 of the Securities Act, and the directors and officers
of ITC, and in the case of each such underwriter, each such SCANA Holder, each
person, if any, who controls each such SCANA Holder within the meaning of the
Securities Act and the directors, officers and partners of each such SCANA
Holder, with respect to any untrue statement or alleged untrue statement of a
material fact contained in the registration statement or any preliminary
prospectus (as amended or as supplemented, if amended or supplemented as
aforesaid) or prospectus contained in such registration statement (as amended or
as supplemented, if amended or supplemented as aforesaid) or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading if such statement or omission shall have
been made in reliance upon and in conformity with information furnished in
writing to ITC by such SCANA Holder or such underwriter specifically for use in
connection with the preparation of such registration statement or any
preliminary prospectus or prospectus contained in such registration statement or
any such amendment thereof or supplement thereto.

3.5.6. Indemnification Procedures.

Each party indemnified under Section 3.5.4 or 3.5.5 shall, promptly
after receipt of notice of the commencement of any action against such
indemnified party in respect of which

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<PAGE>

indemnity may be sought hereunder, notify the indemnifying party in writing of
the commencement thereof. The omission of any indemnified party to so notify an
indemnifying party of any such action shall not relieve the indemnifying party
from any liability in respect of such action which it may have to such
indemnified party on account of the indemnity agreement contained in Section
3.5.4 or 3.5.5, unless the indemnifying party was prejudiced by such omission,
and in no event shall relieve the indemnifying party from any other liability
which it may have to such indemnified party. In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it may desire, jointly with any
other indemnifying party similarly notified to assume the defense thereof, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under Section 3.5.4 or 3.5.5 for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof, other than reasonable costs of investigation;
provided, however, that if there exists or is reasonably likely to exist a
- -------- -------
conflict of interest that would make it inappropriate in the judgment of the
indemnified party, in its sole and absolute discretion, for the same counsel to
represent both the indemnified parry and the indemnifying party then the
indemnified party shall be entitled to retain its own counsel, in each
jurisdiction for which the indemnified party determines counsel is required, at
the expense of the indemnifying party. No such third party claim may be settled
by the indemnifying party or the indemnified party without the prior written
consent of the other, which consent shall not be unreasonably withheld.

3.5.7. Contribution in lieu of Indemnification.

If the indemnification provided for under Section 3.5.4 or 3.5.5 shall
for any reason be held by a court to be unavailable to an indemnified party
under Section 3.5.4 or 3.5.5 hereof in respect of any loss, claim, damage or
liability, or any action in respect thereof then each applicable indemnifying
party, in lieu of the amount paid or payable under Section 3.5.4 or 3.5.5 to
such indemnified party, shall have a joint and several obligation to contribute
to the amount paid or payable by such indemnified party as a result of such
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same), in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party, on the one hand, and such indemnified party, on the other hand, with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as shall be appropriate
to reflect the relative benefits received by ITC, on the one hand, and the
SCANA Holders, on the other hand, from the offering of the securities covered by
such registration statement. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. In addition, no Person shall obligated to contribute
hereunder any amounts in payment for any settlement of any action or claim
effected without such Person's consent, which consent shall not be unreasonably
withheld.

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<PAGE>

3.5.8. Limit on Indemnification.

Notwithstanding anything to the contrary contained in this Agreement,
the maximum amount of indemnifiable losses which may be recovered from an
indemnifying party arising out of or resulting from the causes enumerated in
Section 3.5.4 or 3.5.5 shall be an amount equal to the Purchase Price.

3.6. Allocation of Purchase Price.

SCANA, SCANA COMMUNICATIONS and ITC each represent, warrant, covenant,
and agree with each other that the Purchase Price shall be allocated among the
Assets as set forth in Exhibit 5 hereto. SCANA, SCANA COMMUNICATIONS and ITC
agree, pursuant to Section 1060 of the Code, that the Purchase Price shall be
allocated in accordance with this Section 3.6, and that all income tax returns
and reports shall be filed consistent with such allocation.

3.7. Transfer Tax.

SCANA COMMUNICATIONS shall take all action necessary or appropriate to
provide for the payment of applicable state sales, transfer, or use taxes in
connection with the transactions contemplated by this Agreement.

3.8. Treatment of Shares as Equity.

ITC covenants and agrees that it will treat the Shares and any
Additional Shares as equity, and not as debt, for accounting and tax purposes
and further covenants and agrees that it will not take any action or position
that is inconsistent with such treatment.

3.9. Resale Restrictions.

SCANA COMMUNICATIONS acknowledges that the Shares and any Additional
Shares, and the shares of Common Stock into which such Shares and Additional
Shares are convertible, have not been registered under the Securities Act or any
state securities law, and hereby agrees not to offer, sell, or otherwise
transfer, pledge, or hypothecate such Shares or Additional Shares unless and
until they are registered under the Securities Act and any applicable state
securities law or unless such offer, sale, transfer, pledge, or hypothecation is
exempt from registration or is otherwise in compliance with the Securities Act
and such laws.

3.10. ITC Stockholders' Meeting.

ITC shall call and hold a meeting of its stockholders as promptly as
practicable after the execution of this Agreement to consider and vote upon (i)
a proposal to increase the authorized number of shares of Common Stock, and (ii)
a proposal to authorize the Preferred Stock and to approve the issuance and
terms of the Shares and the Additional Shares. The Board of Directors of ITC
shall recommend approval of such matters, and ITC shall take all lawful action
to solicit such approval.

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<PAGE>

3.11. Conduct of Business of ITC.

ITC shall not, prior to the Closing, take or permit to be taken any
action (i) that would result in an adjustment to the Conversion Price (as
defined in the Certificate of Designation) pursuant to Section 6.4 of the
Certificate of Designation if the Shares or Additional Shares were issued and
outstanding at the time of such action; or (ii) in respect of which holders of
Shares would be entitled to vote pursuant to Section 6.4 of the Certificate of
Designation if the Shares were outstanding at the time of such action.

3.12. Further Action.

Each of the parties hereto shall use all reasonable efforts to take,
or cause to be taken, all appropriate action, do or cause to be done all things
necessary, proper, or advisable under applicable Law, and execute and deliver
such documents and other papers, as may be required to carry out the provisions
of this Agreement and consummate and make effective the transactions
contemplated by this Agreement.

3.13. Risk of Loss.

The risk of loss or damage by fire or other casualty or cause to the
Assets until the Closing Date shall be upon SCANA COMMUNICATIONS. In the event
of such loss or damage prior to the Closing Date, SCANA COMMUNICATIONS shall
have the option either (i) to take commercially reasonable prompt steps to
restore, replace, or repair the damaged Assets to their previous condition at
SCANA COMMUNICATIONS' sole cost and expense or (ii) to decline to take such
steps. In either case SCANA COMMUNICATIONS shall give prompt written notice of
its election to ITC. In the event that SCANA COMMUNICATIONS provides notice to
ITC of its intent not to cause the damaged Assets to be restored, replaced or
repaired, then, ITC shall, at ITC's option, either:

(a) proceed with the Closing and receive at Closing, any third party
insurance proceeds to which SCANA COMMUNICATIONS otherwise would be entitled
with respect to such loss or damage; or

(b) terminate this Agreement by written notice to SCANA
COMMUNICATIONS, whereupon no party to this Agreement shall have any liability to
any other party to this Agreement, and this Agreement in its entirety, except
for the provisions set forth in Section 9.1 (which shall survive such
termination), shall be deemed null, void, and of no further force and effect.

In the event SCANA COMMUNICATIONS elects to cause the damaged Assets to be
restored, replaced or repaired in accordance with this Section 3.13, and such
loss or damage shall not be restored, replaced or repaired as of the Closing
Date, ITC shall at its option either (i) defer the Closing Date until such
restorations, replacements or repairs are made or terminate this Agreement by
written notice to SCANA COMMUNICATIONS, whereupon no party to this Agreement
shall have any liability to any other party to this Agreement, and this
Agreement in

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<PAGE>

its entirety, except for the provisions set forth in Section 9.1 (which shall
survive such termination), shall be deemed null, void, and of no further force
and effect.

3.14. Hart-Scott-Rodino Filing Upon Conversion.

Each party hereto agrees to make any appropriate filing that may be
required pursuant to Hart-Scott-Rodino with respect to the conversion of the
Shares and/or any Additional Shares at such times as SCANA COMMUNICATIONS may
reasonably request and to supply as promptly as practicable to the appropriate
governmental authorities any additional information that may be requested
pursuant to the Hart-Scott-Rodino, and SCANA COMMUNICATIONS shall pay all filing
fees that may be required pursuant thereto.

3.15. Subordination of Note

Each party hereto agrees that the Note shall be subordinated in right
of payment and otherwise, to the extent and in the manner provided in the
Subordination Agreement, substantially in the form set forth in Exhibit 6 (the
"Subordination Agreement"), to the payment in full of all of ITC's obligations
under the Credit Agreement dated January 29, 1996 by and among ITC and certain
subsidiaries of ITC, as borrowers, First Union National Bank of North Carolina,
as Administrative Agent, CoBank, ACB, as Documentation Agent, and the Lenders
identified therein, together with all amendments and other modifications, if
any, from time to time made thereto (the "Credit Agreement") and under the Loan
Documents (as defined in the Credit Agreement).

3.16. Release

ITC agrees to use its commercially reasonable best efforts to obtain,
prior to the Closing, the release (the "Release"), in a form reasonably
satisfactory to SCANA COMMUNICATIONS, of SCANA COMMUNICATIONS from that certain
Revised and Restated Fiber Optic Facilities and Services Agreement dated June 9,
1995 by and among MPX Systems, Inc. (now known as SCANA Communications, Inc.)
and Southern Development and Investment Group, Inc., on behalf of and as agent
for Alabama Power Company, Georgia Power Company, Gulf Power Company,
Mississippi Power Company, Savannah Electric and Power Company, Southern
Electric Generating Company and Southern Company Services, Inc. (the "SES
Agreement"), which Release shall be effective as of the time of the Closing. In
the event that ITC fails to obtain the Release as described in the preceding
sentence, ITC shall indemnify and hold harmless SCANA COMMUNICATIONS for any and
all Losses actually suffered or incurred by SCANA COMMUNICATIONS to the extent
any such Loss is asserted against, results from, is imposed upon or is incurred
by SCANA COMMUNICATIONS, directly or indirectly, pursuant to or in connection
with the SES Agreement with respect to the period from and after the time of the
Closing.

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<PAGE>

4. REPRESENTATIONS AND WARRANTIES OF SCANA AND SCANA COMMUNICATIONS.

SCANA and SCANA COMMUNICATIONS jointly and severally represent and
warrant to ITC as follows (SCANA and SCANA COMMUNICATIONS acknowledging that
disclosure with respect to a Section of this Agreement contained in an Exhibit
or Schedule attached hereto shall require a specific reference in such Exhibit
or Schedule to the Section of this Agreement to which each such disclosure
applies, and no disclosure to be deemed to apply with respect to any Section to
which a specific reference is not so made):

4.1. Organization and Standing.

Each of SCANA and SCANA COMMUNICATIONS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
South Carolina, and each such corporation has the full and unrestricted
corporate power and authority to own, operate, lease and otherwise to hold the
Assets, to execute, deliver, and perform this Agreement, and to carry out the
transactions contemplated hereby. Each of SCANA and SCANA COMMUNICATIONS is
licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing or qualification necessary, except where
failure to be so licensed or qualified would not have a Material Adverse Effect
with respect to SCANA and its Subsidiaries (taken as a whole), SCANA
COMMUNICATIONS, OR THE ASSETS.

4.2. Authorization.

The execution, delivery and performance by SCANA and SCANA
COMMUNICATIONS of this Agreement, the fulfillment of and compliance with the
respective terms and provisions hereof, and the consummation by SCANA and SCANA
COMMUNICATIONS of the transactions contemplated hereby, do not and will not,
except as set forth in Exhibit 4.2: (a) violate, conflict with, or result in
the breach of any provision of the articles of incorporation or by-laws (or
similar organizational documents) of such corporation; (b) violate or conflict
with (or cause an event that could have a Material Adverse Effect as a result
of) any Law or Governmental Order having applicability to SCANA or SCANA
COMMUNICATIONS or any of the Assets which violation or conflict may have a
Material Adverse Effect on SCANA and its Subsidiaries (taken as a whole), SCANA
COMMUNICATIONS OR ANY OF THE ASSETS; (C) CONFLICT WITH, RESULT IN ANY BREACH OF,
OR CONSTITUTE A DEFAULT UNDER, ANY MATERIAL AGREEMENT TO WHICH SCANA OR SCANA
COMMUNICATIONS IS A PARTY OR BY WHICH IT OR ANY OF THE ASSETS MAY BE BOUND; OR
(D) RESULT IN OR REQUIRE THE CREATION OR IMPOSITION OF OR RESULT IN THE
ACCELERATION OF ANY INDEBTEDNESS, OR OF ANY ENCUMBRANCE OF ANY NATURE UPON, OR
WITH RESPECT TO, SCANA, SCANA COMMUNICATIONS, OR ANY OF THE ASSETS.

4.3. Binding Obligation.

This Agreement has been duly executed and delivered by each of SCANA
and SCANA COMMUNICATIONS, and (assuming due authorization, execution, and
delivery by

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<PAGE>

ITC) this Agreement constitutes a valid and binding obligation of each of SCANA
and SCANA COMMUNICATIONS, enforceable against each of SCANA and SCANA
COMMUNICATIONS in accordance with its terms.

4.4. Restrictions and Consents.

Except as set forth on Schedule 4.4, there are no agreements, Laws or
other restrictions of any kind to which SCANA or SCANA COMMUNICATIONS or any
Asset is party or subject that would prevent or restrict, or require consent of
a third party with respect to, the execution, delivery, or performance of this
Agreement or result in any penalty, forfeiture, agreement termination, or
restriction on business operations of ITC, SCANA, or SCANA COMMUNICATIONS as a
result of the execution, delivery, or performance of this Agreement.

4.5. Absence of Violation.

Neither SCANA nor SCANA COMMUNICATIONS is in violation of or default
under, nor has either such corporation breached in any material respect, any
material term or provision of its articles of incorporation or by-laws or any
agreement or restriction to which such corporation is a party or by which such
corporation or any Asset is bound or affected, except as set forth in Exhibit
4.5. Each of SCANA and SCANA COMMUNICATIONS has complied and is in compliance
in all material respects with all applicable Laws and Governmental Orders,
except as set forth in Exhibit 4.5.

4.6. Assets.

4.6.1. Title to the Assets.

Except as set forth on Schedule 4.6.1, SCANA COMMUNICATIONS is the
sole and exclusive legal and equitable owner of, and has, good, marketable, and
insurable (at standard rates) title to, the Assets free and clear of any
Encumbrances. Pursuant to this Agreement, ITC is acquiring good, marketable
and, as to those Assets title to which is commonly insurable, insurable (at
standard rates) title to, and all right, title and interest in, the Assets, free
and clear of all Encumbrances, except as set forth on Schedule 4.6.1.

4.6.2. Condition of Tangible Assets.

The tangible Assets are in good operating condition and repair
(reasonable wear and tear excepted), to the best knowledge and belief of SCANA
and SCANA COMMUNICATIONS are free of defects, latent or patent, and are, to the
best knowledge and belief of SCANA and SCANA COMMUNICATIONS, suitable, adequate
and fit for the uses for which they are intended or are being used.

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4.6.3. Free Transferability.

Except as set forth in Schedule 4.6.3, all of the Assets being sold
hereunder are transferable by SCANA COMMUNICATIONS by SCANA COMMUNICATIONS' sole
act and deed, and no consent (other than valid consents that have already been
obtained) on the part of any other person is necessary to validate, or otherwise
with respect to, the transfer to ITC.

4.7. Litigation; Disputes.

4.7.1. No Litigation; Compliance with Law.

Except as set forth on Schedule 4.7.1, there are no actions, suits,
claims, arbitrations, proceedings or investigations pending, threatened or
reasonably anticipated against, affecting or involving SCANA, SCANA
COMMUNICATIONS, any of the Assets, or the transactions contemplated by this
Agreement, at law or in equity, or before or by any court, arbitrator or
governmental authority, domestic or foreign. Neither SCANA nor SCANA
COMMUNICATIONS is operating under, subject to, or in default with respect to any
order, award, writ, injunction, decree, or judgment of any court, arbitrator, or
governmental authority which may adversely affect in any material respect the
transactions contemplated by this Agreement, the Assets or ITC's use or
operation of the Assets.

4.7.2. No Disputes.

Neither SCANA nor SCANA COMMUNICATIONS knows of any actual or alleged
basis for, nor does either such corporation reasonably anticipate, and neither
such corporation is currently involved in, any dispute that might reasonably be
expected to affect adversely in any material respect any of the Assets or the
transactions contemplated by this Agreement.

4.8. Disclosure.

Neither SCANA nor SCANA COMMUNICATIONS is aware of any facts
pertaining to SCANA, SCANA COMMUNICATIONS, or any of the Assets that could have
a Material Adverse Effect with respect to the Assets or the transactions
contemplated by this Agreement and that have not been disclosed to ITC (in this
Agreement or otherwise).

4.9. Investment Purpose.

SCANA COMMUNICATIONS is acquiring the Shares and any Additional Shares
solely for the purpose of investment and not with a view to, or for offer or
sale in connection with, any distribution thereof.

4.10. Accredited Investor.

SCANA COMMUNICATIONS is an "accredited investor" within the meaning of
Rule 501 under the Securities Act.

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<PAGE>

4.11. Access to Information.

SCANA and SCANA COMMUNICATIONS hereby acknowledge that they have had
the opportunity to ask questions of the officers of ITC concerning ITC and an
investment in the Shares and Additional Shares. ITC has made available to SCANA
and SCANA COMMUNICATIONS all documents that SCANA and SCANA COMMUNICATIONS have
requested and has provided answers to all of such questions. SCANA and SCANA
COMMUNICATIONS understand and acknowledge that ITC cannot provide assurances
with respect to any projections or predictions as to the future business or
financial performance of ITC or any of its Subsidiaries.

4.12. Brokers.

No broker, finder, or investment banker is entitled to any brokerage,
finder's, or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
SCANA or SCANA COMMUNICATIONS.

5. REPRESENTATIONS AND WARRANTIES OF ITC.

ITC hereby represents and warrants to SCANA and SCANA COMMUNICATIONS
as follows (ITC acknowledging that disclosure with respect to a Section of this
Agreement contained in an Exhibit or Schedule attached hereto shall require a
specific reference in such Exhibit or Schedule to the Section of this Agreement
to which each such disclosure applies, and no disclosure to be deemed to apply
with respect to any Section to which a specific reference is not so made):

5.1. Organization and Standing.

ITC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has the full and
unrestricted corporate power and authority to own, operate, lease, and otherwise
to hold its assets, to execute, deliver, and perform this Agreement, and to
carry out the transactions contemplated hereby. ITC is licensed or qualified to
do business and is in good standing in each jurisdiction in which the properties
owned or leased by it or the operation of its business makes such licensing or
qualification necessary, except where failure to be so licensed or qualified
would not have a Material Adverse Effect with respect to ITC and its
Subsidiaries (taken as a whole).

5.2. Authorization.

The execution, delivery and performance by ITC of this Agreement, the
fulfillment of and compliance with the respective terms and provisions hereof,
and the consummation by ITC of the transactions contemplated hereby, do not and
will not: (a) violate, conflict with, or result in the breach of any provision
of the certificate of incorporation or by-laws (or similar organizational
documents) of ITC; (b) violate or conflict with (or cause an event that could
have a Material Adverse Effect as a result of) any Law or Governmental Order
having applicability to ITC or any of its assets which violation or conflict may
have a Material Adverse

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<PAGE>

Effect on ITC and its Subsidiaries (taken as a whole); or (c) conflict with,
result in any breach of, or constitute a default under, any agreement to which
ITC is a party or by which it or any of the Assets may be bound.

5.3. Binding Obligation.

This Agreement has been duly executed and delivered by ITC, and
(assuming due authorization, execution, and delivery by SCANA and SCANA
COMMUNICATIONS) this Agreement constitutes a valid and binding obligation of
ITC, enforceable against ITC in accordance with its terms.

5.4. Restrictions and Consents.

Except as set forth on Schedule 5, there are no agreements, Laws, or
other restrictions of any kind to which ITC is party or subject that would
prevent or restrict, or require consent of a third party with respect to, the
execution, delivery, or performance of this Agreement or result in any penalty,
forfeiture, agreement termination, or restriction on business operations of ITC,
SCANA, or SCANA COMMUNICATIONS as a result of the execution, delivery, or
performance of this Agreement.

5.5. Capital Stock.

The authorized capital stock of ITC consists of 10,000,000 shares of
Common Stock. By the Closing Date, ITC will increase its authorized capital
stock to consist of 15,000,000 shares of Common Stock and 3,000,000 shares of
Preferred Stock. As of the date hereof, (i) 8,469,326.30 shares of Common Stock
are issued and outstanding, all of which are validly issued, fully paid, and
nonassessable, and (ii) no shares of Preferred Stock are issued and outstanding.
None of the issued and outstanding shares of Common Stock were issued in
violation of any preemptive rights. Except as disclosed in Schedule 5, there
are no options, warrants, convertible securities or other rights, agreements,
arrangements, or commitments of any character to which ITC is a party relating
to the issuance or sale of capital stock of ITC or obligating ITC to issue or
sell any shares of capital stock of, or any other equity interest in, ITC.
Except as disclosed in Schedule 5, there are no outstanding contractual
obligations of ITC to repurchase, redeem, or otherwise acquire any shares of
Common Stock. Upon issuance of the Shares and any Additional Shares to SCANA
COMMUNICATIONS and payment therefor pursuant to this Agreement and the
Certificate of Designation, the Shares and Additional Shares will be validly
issued, fully paid and nonassessable and free of preemptive rights. By the
Closing Date, at least 1,000,000 shares of Common Stock will be duly authorized
and reserved for issuance upon conversion of the Shares and Additional Shares,
and, upon such issuance in accordance with the terms of this Agreement and the
Certificate of Designation, such shares of Common Stock will be validly issued,
fully paid and nonassessable, and free of preemptive rights. Upon consummation
of the transactions contemplated by this Agreement, including the issuance of
the Shares and any Additional Shares and registration thereof in the name of
SCANA COMMUNICATIONS in the stock records of ITC, SCANA COMMUNICATIONS will own
the Shares and any such Additional Shares free and clear of all Encumbrances,
other than

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<PAGE>

Encumbrances resulting from any action, or failure to take action, by SCANA or
SCANA COMMUNICATIONS.

5.6. Absence of Violation.

ITC is not in violation of or default under, nor has it breached in
any material respect, any material term or provision of its certificate of
incorporation or by-laws or any agreement or restriction to which ITC is a party
or by which ITC is bound or affected. ITC has complied and is in compliance in
all material respects with all applicable Laws and Governmental Orders.

5.7. Litigation; Disputes.

5.7.1. No Litigation; Compliance with Law.

Except as disclosed in Schedule 5, there are no actions, suits,
claims, arbitrations, proceedings, or investigations pending, threatened, or
reasonably anticipated against, affecting, or involving ITC or the transactions
contemplated by this Agreement, at law or in equity, or before or by any court,
arbitrator, or governmental authority, domestic or foreign. ITC is not
operating under, subject to or in default with respect to any order, award,
writ, injunction, decree, or judgment of any court, arbitrator or governmental
authority which may adversely affect in any material respect the transactions
contemplated by this Agreement or any of its assets.

5.7.2. No Disputes.

ITC does not know of any actual or alleged basis for, does not
reasonably anticipate, and is not currently involved in, any dispute that might
reasonably be expected to affect adversely in any material respect any of its
assets or the transactions contemplated by this Agreement.

5.8. Disclosure.

5.8.1. General.

ITC is not aware of any facts pertaining to ITC or any of its Assets
that could have a Material Adverse Effect with respect to ITC and its
Subsidiaries (taken as a whole) or the transactions contemplated by this
Agreement and that have not been disclosed to SCANA COMMUNICATIONS (in this
Agreement or otherwise).

5.8.2. Financial Statements.

The financial statements (including, in each case, any notes thereto)
as of December 31, 1996 delivered to SCANA and SCANA COMMUNICATIONS were
prepared in accordance with U.S. GAAP applied on a consistent basis throughout
the periods indicated (except as may be indicated in the notes thereto) and each
fairly presented the financial position,

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results of operations and cash flows of ITC and its consolidated subsidiaries as
at the respective dates thereof and for the respective periods indicated therein
(subject, in the case of unaudited statements, to normal and recurring year-end
adjustments, which were not and are not expected, individually or in the
aggregate, to be material in amount).

5.9. No Undisclosed Liabilities.

There are no Liabilities of ITC or any consolidated Subsidiary
thereof, other than Liabilities (i) as disclosed in Schedule 5, (ii) not
required to be reflected in a consolidated balance sheet of ITC and its
Subsidiaries or in the notes thereto prepared in accordance with U.S. GAAP, or
(iii) incurred since December 31, 1996 in the ordinary course of business and
which, individually and in the aggregate, are not material to ITC and its
Subsidiaries (taken as a whole).

5.10. Conduct in the Ordinary Course.

Since December 31, 1996, except as disclosed in Schedule 5 or as
contemplated by this Agreement, the businesses of ITC and its Subsidiaries have
been conducted in the ordinary course, and ITC has not suffered any Material
Adverse Effect.

5.11. Brokers.

6. CONDITIONS TO CLOSING.

6.1. Conditions to Obligations of SCANA and SCANA COMMUNICATIONS.

The obligations of SCANA and SCANA COMMUNICATIONS to consummate the
transactions contemplated by this Agreement shall be subject to the satisfaction
(or waiver by SCANA and SCANA COMMUNICATIONS, in their sole discretion), at or
prior to the Closing, of each of the following conditions:

6.1.1. Representations, Warranties, and Covenants.

The representations and warranties of ITC in this Agreement shall
have been true and correct in all material respects when made and shall be true
and correct in all material respects as of the Closing, with the same force and
effect as if made as of the Closing, other than such representations and
warranties as are made as of another date, which shall be true and correct as of
such date (provided, however, that if any portion of any representation or
warranty is already qualified by materiality, for purposes of determining
whether this Section 6.1.1 has been satisfied with respect to such portion of
such representation or warranty, such portion of such representation or warranty
as so qualified must be true and correct in all respects), and the covenants and
agreements contained in this Agreement to be complied with by ITC at or before

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<PAGE>

the Closing shall have been complied with in all material respects, and SCANA
and SCANA COMMUNICATIONS shall have received a certificate from ITC to such
effect signed by a duly authorized officer thereof.

6.1.2. No Proceeding or Litigation.

No Action shall have been commenced by or before any Governmental
Authority against SCANA, SCANA COMMUNICATIONS, or ITC, seeking to restrain or
materially and adversely alter the transactions contemplated by this Agreement
that, in the reasonable good faith determination of SCANA and SCANA
COMMUNICATIONS, is likely to render it impossible or unlawful to consummate such
transactions; provided, however, that the provisions of this Section 6.1.2 shall
not apply if either SCANA or SCANA COMMUNICATIONS has directly or indirectly
solicited or encouraged any such Action.

6.1.3. Resolutions of ITC.

SCANA and SCANA COMMUNICATIONS shall have received a true and
complete copy, certified by the Secretary or an Assistant Secretary of ITC, of
the resolutions duly and validly adopted by the Board of Directors of ITC
evidencing its authorization, if required by law, of the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby.

6.1.4. Legal Opinion.

SCANA and SCANA COMMUNICATIONS shall have received from Kimberley E.
Thompson, Vice President and General Counsel of ITC, a legal opinion, addressed
to SCANA and SCANA COMMUNICATIONS and dated the Closing Date, in form and
substance reasonably satisfactory to SCANA and SCANA COMMUNICATIONS, as to (i)
the due authorization, execution, and delivery by ITC of this Agreement, (ii)
the Shares being duly authorized, validly issued, fully paid and nonassessable,
free and clear of preemptive rights and, to her knowledge, free and clear of
adverse claims, and (iii) the incorporation and valid existence of ITC under the
laws of Delaware.

6.1.5. Consents and Approvals.

ITC, SCANA, and SCANA COMMUNICATIONS shall have received, each in
form and substance reasonably satisfactory to SCANA and SCANA COMMUNICATIONS,
all authorizations, consents, orders, and approvals of all Governmental
Authorities and officials and all third party consents necessary or desirable
for the consummation of the transactions contemplated by this Agreement, and
SCANA Communications shall have been released (or shall be released effective as
of the time of the Closing) from its obligations under (i) the Network Operating
Agreement among Gulf States, Trinet, Inc., Hart Communications, Inc. and MPX
Systems, Inc. (now known as SCANA Communications, Inc.), (ii) the
Telecommunications System Capacity Agreement dated as of July 25, 1995 among MPX
Systems, Inc., Gulf States Transmission Systems, Inc. and Gulf States, (iii) the
Agreement for

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Provision of Fiber Optic Services and Facilities effective as of April 21, 1996
between SouthernNet, Inc. and MPX Systems, Inc., as amended and (iv) the
Interconnect Agreement effective as of May 13, 1994 between MCI
Telecommunications Corporation and MPX Systems, Inc.

6.1.6. ITC Stockholder Approval.

The stockholders of ITC shall have approved (i) the increase in the
authorized number of shares of Common Stock, and (ii) the authorization of the
Preferred Stock and the issuance and terms of the Shares and the Additional
Shares.

6.1.7. Elimination of Guaranty Agreement.

ITC and Gulf States shall have refinanced or eliminated the Gulf
States credit facility so that the Guaranty Agreement, dated as of July 25, 1995
from SCANA to NationsBank, N.A. (Carolinas) and SCANA to Gulf States, the
Guaranty Agreements dated as of June 25, 1995 from SCANA Communications to Gulf
States and the Pledge and Security Agreement dated as of July 25, 1995 from
SCANA Communications to NationsBank, N.A. (Carolinas) shall have terminated (or
shall terminate effective as of the time of the Closing).

6.1.8. No Material Adverse Effect.

No event or events shall have occurred since the date of this
Agreement that, individually or in the aggregate, have, or reasonably would be
expected to have, a Material Adverse Effect with respect to ITC and its
Subsidiaries (taken as a whole).

6.2. Conditions to Obligations of ITC.

The obligations of ITC to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction (or waiver by ITC, in its
sole discretion), at or prior to the Closing, of each of the following
conditions:

6.2.1. Representations, Warranties, and Covenants.

The representations and warranties of each of SCANA and SCANA
COMMUNICATIONS in this Agreement shall have been true and correct in all
material respects when made and shall be true and correct in all material
respects as of the Closing, with the same force and effect as if made as of the
Closing, other than such representations and warranties as are made as of
another date, which shall be true and correct in all material respects as of
such date (provided, however, that if any portion of any representation or
warranty is already qualified by materiality, for purposes of determining
whether this Section 6.2.1 has been satisfied with respect to such portion of
such representation or warranty, such portion of such representation or warranty
as so qualified must be true and correct in all respects), and the covenants and
agreements contained in this Agreement to be complied with by SCANA and/or SCANA
COMMUNICATIONS at or before the Closing shall have been complied with in all
material

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respects, and ITC shall have received a certificate from each of SCANA
and SCANA COMMUNICATIONS to such effect signed by a duly authorized officer
thereof.

6.2.2. No Proceeding or Litigation.

No Action shall have been commenced by or before any Governmental
Authority against SCANA, SCANA COMMUNICATIONS, or ITC, seeking to restrain or
materially and adversely alter the transactions contemplated by this Agreement
that, in the reasonable good faith determination of ITC, is likely to render it
impossible or unlawful to consummate such transactions; provided, however, that
the provisions of this Section 6.2.2 shall not apply if ITC has directly or
indirectly solicited or encouraged any such Action.

6.2.3. Resolutions of SCANA COMMUNICATIONS.

ITC shall have received true and complete copies, certified by the
Secretary or an Assistant Secretary of each of SCANA and SCANA COMMUNICATIONS,
of the resolutions duly and validly adopted by the Board of Directors of each of
SCANA and SCANA COMMUNICATIONS evidencing such Board's authorization, if
required by law, of the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.

6.2.4. Legal Opinion.

ITC shall have received from McNair Law Firm, P.A., counsel to SCANA
and SCANA COMMUNICATIONS, a legal opinion, addressed to ITC and dated the
Closing Date, in form and substance reasonably satisfactory to ITC, as to (i)
the due authorization, execution, and delivery by SCANA and SCANA COMMUNICATIONS
of this Agreement and (ii) the incorporation and valid existence of SCANA and
SCANA COMMUNICATIONS under the laws of South Carolina.

6.2.5. Consents and Approvals.

ITC, SCANA, and SCANA COMMUNICATIONS shall have received, each in
form and substance reasonably satisfactory to ITC, all authorizations, consents,
orders, and approvals of all Governmental Authorities and officials and all
third party consents necessary or desirable for the consummation of the
transactions contemplated by this Agreement.

6.2.6. ITC Stockholder Approval.

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<PAGE>

6.2.7. Elimination of Guaranty Agreement.

ITC and Gulf States shall have refinanced or eliminated the Gulf
States credit facility so that the Guaranty Agreement, dated as of July 25,
1995, pursuant to which SCANA has guaranteed the obligations of SCANA
COMMUNICATIONS UNDER ITS TELECOMMUNICATIONS SYSTEM CAPACITY AGREEMENT (WHICH
AGREEMENT ALSO IS DATED AS OF JULY 25, 1995) SHALL HAVE TERMINATED (OR SHALL
TERMINATE EFFECTIVE AS OF THE TIME OF THE CLOSING).

6.2.8. No Material Adverse Effect.

7. SURVIVAL; INDEMNIFICATION.

7.1. Survival of Representations and Warranties.

(a) The representations and warranties of SCANA and SCANA
COMMUNICATIONS contained in this Agreement (including the Exhibits and Schedules
hereto) shall survive the Closing until the second anniversary of the Closing
Date. Neither the period of survival nor the liability of SCANA or SCANA
COMMUNICATIONS with respect to such representations and warranties shall be
reduced by any investigation made at any time by or on behalf of ITC. If written
notice of a claim has been given prior to the expiration of the applicable
representations and warranties by ITC to SCANA and/or SCANA COMMUNICATIONS, then
the relevant representations and warranties shall survive as to such claim,
until such claim has been finally resolved.

(b) The representations and warranties of ITC contained in this
Agreement (including the Exhibits and Schedules hereto) shall survive the
Closing until the second anniversary of the Closing Date. Neither the period of
survival nor the liability of ITC with respect to ITC's representations and
warranties shall be reduced by any investigation made at any time by or on
behalf of SCANA or SCANA COMMUNICATIONS. If written notice of a claim has been
given prior to the expiration of the applicable representations and warranties
by SCANA or SCANA COMMUNICATIONS to ITC, then the relevant representations and
warranties shall survive as to such claim, until such claim has been finally
resolved.

7.2. Indemnification.

7.2.1. Indemnification by SCANA and SCANA COMMUNICATIONS.

ITC, its successors and assigns, and the stockholders, officers,
directors, employees, Affiliates and agents of ITC and its successors and
assigns shall be indemnified and held harmless by SCANA and SCANA COMMUNICATIONS
for any and all Liabilities, losses, damages, claims, costs and expenses,
interest, awards, judgments, and penalties (including, without limitation,
attorneys' and consultants' fees and expenses) actually suffered or incurred

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by them (including, without limitation, any Action brought or otherwise
initiated by any of them), (hereinafter, individually, a "Loss" and,
collectively "Losses"), arising out of or resulting from (i) the breach of any
representation or warranty made by SCANA or SCANA COMMUNICATIONS contained in
the Agreement, or (ii) the breach of any covenant or agreement by SCANA or SCANA
COMMUNICATIONS contained in the Agreement.

7.2.2. Indemnification by ITC.

SCANA and SCANA COMMUNICATIONS, and their respective successors and
assigns, and the stockholders, officers, directors, employees, Affiliates and
agents of SCANA, SCANA COMMUNICATIONS, and their respective successors and
assigns shall be indemnified and held harmless by ITC for any and all Losses
actually suffered or incurred by them, arising out of or resulting from (i) the
breach of any representation or warranty made by ITC contained in the Agreement,
or (ii) the breach of any covenant or agreement by ITC contained in the
Agreement.

7.2.3. Contribution.

To the extent that the undertakings set forth in this Section 7.2 may
be unenforceable, each party, as the case may be, shall contribute the maximum
amount that it is permitted to contribute under applicable law to the payment
and satisfaction of all Losses incurred by the other party or parties, as
applicable.

7.2.4. Conditions of Indemnification.

(a) An indemnified party shall give the party from whom
indemnification is sought notice of any matter that an indemnified party has
determined has given or could give rise to a right of indemnification under this
Agreement, within 60 days of such determination, stating the amount of the Loss,
if known, and method of computation thereof, and containing a reference to the
provisions of this Agreement in respect of which such right of indemnification
is claimed or arises; provided, however, that the failure to provide such notice
shall not release the indemnifying party from any of its obligations under this
Section 7.2 except to the extent the indemnifying party is materially prejudiced
by such failure and shall not relieve the indemnifying party from any other
obligation or Liability that it may have to any indemnified party otherwise than
under this Section 7.2.

(b) The obligations and Liabilities of an indemnifying party under
this Section 7.2 with respect to Losses arising from claims of any third party
that are subject to the indemnification provided for in this Section 7.2 ("Third
Party Claims") shall be governed by and contingent upon the following additional
terms and conditions: If an indemnified party shall receive notice of any Third
Party Claim, the indemnified party shall give the indemnifying party notice of
such Third Party Claim within 30 days of the receipt by the indemnified party of
such notice; provided, however, that the failure to provide such notice shall
not release the indemnifying party from any of its obligations under this
Section 7.2 except to the extent the indemnifying party is materially prejudiced
by such failure and shall not relieve the indemnifying

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party from any other obligation or Liability that it may have to any indemnified
party otherwise than under this Section 7.2. If the indemnifying party
acknowledges in writing its obligation to indemnify the indemnified party
hereunder against any Losses that may result from such Third Party Claim, then
the indemnifying party shall be entitled to assume and control the defense of
such Third Party Claim at its expense and through counsel of its choice if it
gives notice of its intention to do so to the indemnified party within five days
of the receipt of such notice from the indemnified party; provided, however,
that if there exists or is reasonably likely to exist a conflict of interest
that would make it inappropriate in the judgment of the indemnified party, in
its reasonable discretion, for the same counsel to represent both the
indemnified party and the indemnifying party, then the indemnified party shall
be entitled to retain its own counsel, in each jurisdiction for which the
indemnified party determines counsel is required, at the expense of the
indemnifying party. In the event the indemnifying party exercises the right to
undertake any such defense against any such Third Party Claim as provided above,
the indemnified party shall cooperate with the indemnifying party in such
defense and make available to the indemnifying party, at the indemnifying
party's expense, all witnesses, pertinent records, materials, and information in
the indemnified party's possession or under the indemnified party's control
relating thereto as is reasonably required by the indemnifying party. Similarly,
in the event the indemnified party is, directly or indirectly, conducting the
defense against any such Third Party Claim, the indemnifying party shall
cooperate with the indemnified party in such defense and make available to the
indemnified party, at the indemnifying party's expense, all such witnesses,
pertinent records, materials, and information in the indemnifying party's
possession or under the indemnifying party's control relating thereto as is
reasonably required by the indemnified party. No such Third Party Claim may be
settled by the indemnifying party or the indemnified party without the prior
written consent of the other.

7.2.5. Limitations on Indemnification.

Notwithstanding anything to the contrary contained in this Agreement,
the maximum amount of indemnifiable Losses that may be recovered from an
indemnifying party arising out of or resulting from the causes enumerated in
this Section 7.2 shall be an amount equal to the Purchase Price.

8. TERMINATION AND WAIVER.

8.1. Termination.

This Agreement may be terminated at any time prior to the Closing:

(a) by ITC if, between the date hereof and the time scheduled for
the Closing: (i) an event or condition occurs that has resulted in a Material
Adverse Effect with respect to SCANA and its Subsidiaries (taken as a whole),
SCANA COMMUNICATIONS, or the Assets; (ii) any representation or warranty of
SCANA or SCANA COMMUNICATIONS contained in this Agreement shall not have been
true and correct in all material respects when made; (iii) SCANA or SCANA
COMMUNICATIONS shall not have complied in all material respects with any
covenant or agreement to be complied with by it and contained in this Agreement;
or

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<PAGE>

(iv) SCANA or SCANA COMMUNICATIONS makes a general assignment for the benefit
of creditors, or any proceeding shall be instituted by or against SCANA or SCANA
COMMUNICATIONS seeking to adjudicate any of the a bankrupt or insolvent, or
seeking liquidation, winding up, or reorganization, arrangement, adjustment,
protection, relief, or composition of its debts under any Law relating to
bankruptcy, insolvency, or reorganization; or

(b) by SCANA or SCANA COMMUNICATIONS, if between the date hereof and
the time scheduled for the Closing: (i) an event or condition occurs that has
resulted in a Material Adverse Effect with respect to ITC and its Subsidiaries
(taken as a whole); (ii) any representation or warranty of ITC contained in this
Agreement shall not have been true and correct in all material respects when
made; (iii) ITC shall not have complied in all material respects with any
covenant or agreement to be complied with by it and contained in this Agreement;
or (iv) ITC makes a general assignment for the benefit of creditors, or any
proceeding shall be instituted by or against ITC seeking to adjudicate any of
the a bankrupt or insolvent, or seeking liquidation, winding up, or
reorganization, arrangement, adjustment, protection, relief, or composition of
its debts under any Law relating to bankruptcy, insolvency, or reorganization;
or

(d) by SCANA, SCANA COMMUNICATIONS, or ITC in the event that any
Governmental Authority shall have issued an order, decree, or ruling or taken
any other action restraining, enjoining, or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling, or
other action shall have become final and nonappealable; or

(e) by the mutual written consent of SCANA, SCANA COMMUNICATIONS and
ITC.

8.2. Effect of Termination.

In the event of termination of this Agreement as provided in Section
8.1, this Agreement shall forthwith become void, and there shall be no liability
on the part of any party hereto, except that nothing herein shall relieve either
party from liability for any breach of this Agreement.

8.3. Waiver.

Either party to this Agreement may (a) extend the time for the
performance of any of the obligations or other acts of any other party, (b)
waive any inaccuracies in the representations and warranties of any other party
contained herein or in any document delivered by any other party pursuant
hereto, or (c) waive compliance with any of the agreements or conditions of any
other party contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party to be bound
thereby. Any waiver of any term or condition shall not be construed as a waiver
of any subsequent breach or a subsequent waiver of the same term or condition,
or a waiver of any other term or condition, of

-24-
<PAGE>

this Agreement. The failure of any party to assert any of its rights hereunder
shall not constitute a waiver of any of such rights.

9. MISCELLANEOUS.

9.1. Expenses.

Except as otherwise specified in this Agreement, all costs and
expenses, including, without limitation, fees and disbursements of counsel,
financial advisors, and accountants, incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses, whether or not the Closing shall have occurred.

9.2. Notices.

All notices, requests, claims, demands, and other communications
hereunder shall be in writing and shall be given or made (and shall be deemed to
have been duly given or made upon receipt) by delivery in person, by courier
service, by telecopy, or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 9.2):

if to ITC:
----------

ITC Holding Company, Inc.
1239 O. G. Skinner Drive
West Point, Georgia 31833
Telecopy: 706/643-5067
Attention: William H. Scott, III
President

with a copy (which shall not constitute notice) to:

ITC Holding Company, Inc.
4717 Dolphin Lane
Alexandria, Virginia 22309
Telecopy: 703/619-9720
Attention: Kimberley E. Thompson
Vice President and General Counsel

if to SCANA or SCANA COMMUNICATIONS:
------------------------------------

-25-
<PAGE>

SCANA Corporation
1426 Main Street
Columbia, South Carolina 29201
Telecopy: 803/748-3336
Attention: Kevin Marsh

with a copy (which shall not constitute notice) to:

SCANA Corporation
1426 Main Street
Columbia, South Carolina 29201
Telecopy: 803/748-3336
Attention: H. T. Arthur, II

9.3. Public Announcements.

No party to this Agreement shall make, or cause to be made, a press
release or public announcement or otherwise communicate with any news media in
respect of this Agreement or the transactions contemplated hereby without the
prior written consent of the other party (which shall not be unreasonably
withheld or delayed), and the parties shall cooperate as to the timing and
contents of any press release or public announcement; provided, however, that
with respect to any disclosure required by Law or by a listing agreement with
Nasdaq or any national securities exchange to which ITC, SCANA, or SCANA
COMMUNICATIONS is a party, the party required to make such disclosure shall use
its best efforts to consult with the other party as to the timing and contents
of such disclosure and to obtain such consent prior to the time such disclosure
is required to be made.

9.4. Headings.

The descriptive headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.

9.5. Severability.

If any term or other provision of this Agreement is invalid, illegal,
or incapable of being enforced by any Law or public policy, all other terms and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic and legal substance of the transactions contemplated
hereby are not affected in any manner materially adverse to any party. Upon
such determination that any term or other provision is invalid, illegal, or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.

-26-
<PAGE>

9.6. Entire Agreement.

This Agreement constitutes the entire agreement of the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements
and undertakings, both written and oral, among ITC, SCANA, and SCANA
COMMUNICATIONS with respect to the subject matter hereof.

9.7. Assignment.

This Agreement may not be assigned by operation of Law or otherwise
without the express written consent of SCANA, SCANA COMMUNICATIONS and ITC
(which consent may be granted or withheld in the sole discretion of SCANA, SCANA
COMMUNICATIONS or ITC).

9.8. No Third Party Beneficiaries.

Except for the provisions of Section 3.5 (relating to piggyback
registration rights) and Section 7 (relating to indemnified parties), this
Agreement shall be binding upon and inure solely to the benefit of the parties
hereto and their successors and permitted assigns, and nothing herein, express
or implied, is intended to or shall confer upon any other Person any legal or
equitable right, benefit, or remedy of any nature whatsoever under or by reason
of this Agreement.

9.9. Amendment.

This Agreement may not be amended or modified except (a) by an
instrument in writing signed by, or on behalf of, SCANA, SCANA COMMUNICATIONS
and ITC, or (b) by a waiver in accordance with Section 8.3.

9.10. Governing Law.

This Agreement shall be governed by the laws of the State of South
Carolina (excluding the choice of law provisions thereof).

9.11. Counterparts.

This Agreement may be executed in one or more counterparts and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which, taken together, shall
constitute one and the same agreement.

9.12. Specific Performance.

The parties hereto agree that irreparable damage would occur in the
event that any provision of this Agreement was not performed in accordance with
the terms hereof and that the parties shall be entitled to specific performance
of the terms hereof, in addition to any other remedy at law or in equity.

- 27 -
<PAGE>

IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or has caused this Agreement to be duly executed and delivered in its
name on its behalf, all as of the day and year first above written.

SCANA:
-----

SCANA CORPORATION

By: /s/ K. B. Marsh
----------------------------------------------
Name: K. B. Marsh
--------------------------------------------
Title: Vice President and Chief Financial Officer
-------------------------------------------

SCANA COMMUNICATIONS:
--------------------

SCANA COMMUNICATIONS, INC.

ITC:
---

ITC HOLDING COMPANY, INC.

By: /s/ William H. Scott, III
-------------------------------------
Name: William H. Scott, III
-----------------------------------
Title: President
----------------------------------

- 28 -
<PAGE>

EXHIBIT 1

DEFINITIONS

"Action" means any claim, action, suit, arbitration, inquiry,
------
proceeding, or investigation by or before any Governmental Authority.

"Additional Shares" shall have the meaning specified in Section 2.2(c)
-----------------
of the Agreement.

"Affiliate" means, with respect to any Person, any other Person that
---------
directly, or indirectly through one or more intermediaries, Controls, is
Controlled by, or is under common Control with, such specified Person.

"Agreement" shall mean this Sale and Purchase Agreement among SCANA
---------
Corporation, SCANA COMMUNICATIONS, Inc., and ITC Holding Company, Inc.,
including all Schedules and Exhibits hereto.

"Assets" shall have the meaning specified in Section 2.1 of the
------
Agreement.

"Certificate of Designation" means the ITC Holding Company, Inc.
--------------------------
Certificate of Designation setting forth the terms of the Preferred Stock,
substantially in the form of Exhibit 3 to the Agreement.

"Closing" means the closing of the transactions contemplated by the
-------
Agreement.

"Closing Date" means the date on which the Closing takes place.
------------

"Common Stock" means the Common Stock of ITC Holding Company, Inc.
------------

"Control" (including the terms "Controlled by" and "under common
-------
Control with"), with respect to the relationship between or among two or more
Persons, means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the affairs or management of a
Person, whether through the ownership of voting securities, as trustee or
executor, by contract or otherwise (including, without limitation, the
ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
Person).

"Current Market Price" shall mean, as of a particular date, the average
--------------------
of the high bid and low asked prices per share of ITC's Common Stock in the
over-the-counter market, as reported by the NASDAQ Stock Market or such other
system then in use, or such other exchange or inter-dealer quotation system on
which ITC's Common Stock is principally traded or authorized to be quoted, or,
if ITC's Common Stock is not so traded or authorized to be quoted on any such
exchange or inter-dealer quotation system, then

-1-
<PAGE>

the price per share of ITC's Common Stock most recently designated by the Board
of Directors as the "fair market value" thereof for purposes of granting
incentive stock options.

"Earn Out" shall have the meaning specified in Section 2.2(c) of the
--------
Agreement.

"Encumbrances" mean any mortgage, pledge, lien, claim, security
------------
interest, agreement, restriction, defect in title, easement, encumbrance, or
charge.

"Governmental Authority" means any agency, board, bureau, court,
----------------------
commission, department, instrumentality or administration of the United States
government, any state government, or any local or other governmental body in a
state, territory, or possession of the United States or the District of
Columbia.

"Governmental Order" means any order, writ, judgment, injunction,
------------------
decree, stipulation, determination, or award entered by or with any Governmental
Authority.

"Gulf States" means Gulf States FiberNet, a Georgia general partnership
-----------

"Gulfstates Transmissions" means Gulfstates Transmission Systems,
------------------------
Inc., a Delaware corporation.

"Hart-Scott-Rodino" means the Hart-Scott-Rodino Antitrust Improvements
-----------------
Act of 1976, as amended, and the rules and regulations promulgated thereunder.

"ITC" means ITC Holding Company, Inc., a Delaware corporation.
---

"Laws" means all foreign, federal, state and local statutes, laws,
----
ordinances, regulations, rules, orders, determinations, writs, injunctions,
awards (including, without limitation, awards of any arbitrator), judgments and
decrees applicable to the specified persons or entities and to the businesses
and assets thereof (including, without limitation, Laws relating to the sale,
leasing, ownership or management of real property; employment practices, terms
and conditions, and wages and hours; building standards, land use and zoning;
safety, health and fire prevention; and environmental protection, including,
without limitation, environmental laws).

"Liabilities" means any and all debts, liabilities, and obligations,
-----------
whether accrued or fixed, absolute or contingent, matured or unmatured, or
determined or determinable, including, without limitation, those arising under
any Law, Governmental Order, Action, contract, agreement, arrangement,
commitment, or undertaking.

"Loss" shall have the meaning specified in Section 7.2.1 of the
----
Agreement.

"Material Adverse Effect" means any circumstance, change in, or effect
-----------------------
on the specified company (together with any Subsidiaries thereof) that,
individually or in the aggregate with any other circumstances, changes therein,
or effects thereon: (a) is, or would reasonably be expected to be, materially
adverse to the business, operations, assets

-2-
<PAGE>

or Liabilities, prospects, results of operations, or financial condition of such
company (together with any Subsidiaries thereof), taken as a whole, or (b) would
reasonably be expected to materially adversely affect the ability of such
company, together with any Subsidiaries thereof (taken as a whole), to operate
or conduct the business(es) thereof in the manner in which it is (they are)
currently operated or conducted or contemplated to be operated or conducted.

"Note" shall have the meaning specified in Section 2.2 of the Agreement
----

"Person" means any individual, partnership, limited liability company,
------
firm, corporation, association, trust, unincorporated organization, or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.

"Piggyback Registration" shall have the meaning specified in Section
----------------------
3.5.1 of the Agreement.

"Preferred Stock" shall have the meaning specified in Section 2.2(a)
---------------
of the Agreement.

"Purchase Price" shall have the meaning specified in Section 2.2 of
--------------
the Agreement.

"Release" shall have the meaning specified in Section 3.16 of the
-------
Agreement.

"Restated Certificate of Incorporation" means the ITC Holding Company,
-------------------------------------
Inc. Restated Certificate of Incorporation, substantially in the form of Exhibit
3 to the Agreement.

"SCANA" means SCANA Corporation, a South Carolina corporation.
-----

"SCANA COMMUNICATIONS" means SCANA COMMUNICATIONS, Inc., a South
--------------------
Carolina corporation.

"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------

"Securities" shall have the meaning specified in Section 3.5.1 of the
----------
Agreement.

"Shares" shall have the meaning specified in Section 2.2(a) of the
------
Agreement.

"Subsidiary" means an entity of which at least a majority of either the
----------
outstanding equity interests or the outstanding voting securities, are owned,
directly or indirectly, by another corporation or other entity.

"Third Party Claims" shall have the meaning specified in Section
------------------
7.2.4(b) of the Agreement.

-3-
<PAGE>

"U.S. GAAP" means the United States generally accepted accounting
---------
principles and practices as in effect from time to time and applied consistently
throughout the periods involved.

-4-
<PAGE>

EXHIBIT 2

ASSETS

- 5 -
<PAGE>

EXHIBIT 5

PURCHASE PRICE ALLOCATION

Summary of Purchase Price

<TABLE>
<S> <C>
ITC Holding Company Preferred Equity $17,946,529
Purchase Money Note $ 9,964,091
Earn Out ?

Total Purchase Price $27,910,620 + Earn Out
-----------

Purchase Price Allocation

GSFN Partnership Interest $16,960,100 + Earn Out
Georgia Fiber Assets $10,950,520
-----------

Total Purchase Price $27,910,620 + Earn Out
-----------
</TABLE>

- 6 -

<PAGE>

Exhibit 10.95

FIRST AMENDMENT TO
SALE AND PURCHASE AGREEMENT
AMONG SCANA CORPORATION, SCANA COMMUNICATIONS, INC.,
AND ITC HOLDING COMPANY, INC.

THIS FIRST AMENDMENT ("AMENDMENT") is entered into as of October 16,
--
1997, among SCANA Corporation, a South Carolina corporation ("SCANA");SCANA
Communications, Inc., a South Carolina corporation and wholly owned subsidiary
of SCANA ("SCANA COMMUNICATIONS"); ITC Holding Company, Inc., a Delaware
corporation ("ITC"); and ITC/\DeltaCom, Inc., a Delaware corporation and
currently a wholly owned subsidiary of ITC ("ITC/\DELTACOM").

WHEREAS, SCANA, SCANA COMMUNICATIONS and ITC entered a "Sale and
Purchase Agreement" dated as of March 11, 1997, ("AGREEMENT") whereby ITC agreed
to purchase certain tangible and intangible assets and rights of SCANA
COMMUNICATIONS (including, among other things, SCANA COMMUNICATIONS' 64%
partnership interest in Gulf States FiberNet, a Georgia general partnership
("GULF STATES")); and

WHEREAS, ITC/\DeltaCom agrees to certain limited obligations pursuant
to this Amendment and SCANA, SCANA COMMUNICATIONS and ITC hereby accept
ITC/\DeltaCom's certain limited obligations as further described herein; and

WHEREAS, the parties to the Agreement hereby desire to modify certain terms
and conditions of the Agreement.

NOW, THEREFORE, for and in consideration of the foregoing and the mutual
promises and covenants contained herein and in the Agreement, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:

1. DEFINITIONS.

All capitalized words used in this Amendment shall have the same
meaning as defined in the Agreement, unless otherwise defined in this Amendment.
The definition of "CURRENT MARKET PRICE" set forth in EXHIBIT 1 of the Agreement
---------
hereby is amended to read in its entirety as set forth below:

" "CURRENT MARKET PRICE" shall mean, as of a particular date and with
--------------------
respect to a particular company, the average of the high bid and low asked
prices per share of Common Stock of such company in the over-the-counter
market, as reported by the NASDAQ Stock Market or such other system then in
use, or such other exchange or inter-dealer quotation system on which such
company's Common Stock is principally traded or authorized to be quoted,
or, if such company's Common Stock is not so traded or authorized to be
quoted on any such exchange or inter-dealer quotation system, then the
price per share of such company's Common Stock most recently designated by
such company's Board of
<PAGE>

Directors as the "fair market value" thereof for purposes of granting
incentive stock options."

2. AMENDMENT OF SECTION 2.2(B) OF THE AGREEMENT.

Section 2.2(b) of the Agreement hereby is amended by deleting the last word
thereof (which is "and") and replacing the semicolon (";") immediately preceding
such deleted word with a period (".").

AMENDMENT OF SECTION 2.2(C) OF THE AGREEMENT.

Section 2.2(c) of the Agreement hereby is amended to read in its entirety
as follows:

"(c)(i) ISSUANCE OF ADDITIONAL SHARES FOR EARN OUT. Additional stock
-------------------------------------------
consideration (including the Estimated Additional Shares and the Additional
Shares Adjustments (as defined below), the "ADDITIONAL SHARES") may be issued to
SCANA COMMUNICATIONS pursuant to this Section 2.2(c) based on whether the
earnings before interest, taxes, depreciation and amortization (as each term is
defined by U.S. GAAP) of the assets and operations of Gulf States as of the
Closing (regardless of whether such assets and operations, or any portion
thereof, continue to be held by Gulf States for the applicable period) for the
fiscal year ended December 31, 1997 ("GULF STATES EBITDA") exceeds Eleven
Million, Two Hundred Sixty-five Thousand, Six Hundred Ninety-six Dollars
($11,265,696.00) (the "EARN OUT").

(c)(ii) ITC REORGANIZATION. The parties hereto acknowledge that ITC
-------------------
proposes to effect a corporate reorganization (the "REORGANIZATION") pursuant to
which, among other things, (x) ITC would transfer to ITC West Point, Inc. ("ITC
WEST POINT") or other wholly owned subsidiaries substantially all of its assets
other than its equity in ITC/\DeltaCom, and (y) ITC would merge into
ITC/\DeltaCom, with ITC/\DeltaCom being the surviving corporation in such
merger. SCANA and SCANA Communications hereby consent to such Reorganization,
and to the assumption in connection therewith by ITC/\DeltaCom of ITC's
obligations under the Agreement, to the extent that such consent may be required
pursuant to Section 9.7 of the Agreement.

(c)(iii) ISSUANCE OF ADDITIONAL SHARES BASED ON ESTIMATED EARN OUT. In the
----------------------------------------------------------
event that the Reorganization is effected prior to April 30, 1998, then no later
than the earlier of any record date established with respect to the
Reorganization or immediately prior to the closing of the Reorganization, ITC
shall deliver to SCANA COMMUNICATIONS 56,742 shares of ITC Preferred Stock (the
"ESTIMATED ADDITIONAL SHARES"). The parties hereto acknowledge and agree that
such number of shares of ITC Preferred Stock represents that number of shares,
rounded to the nearest whole share, of ITC Preferred Stock that in aggregate
value (valued for this purpose at $66.06 per share) is equal to an "earn out"
amount of Three Million, Seven Hundred Forty-eight Thousand, Four Hundred Three
Dollars ($3,748,403.00) (the "ESTIMATED EARN OUT") (which is 35.7% of the
product of (a) 64%, multiplied times (b)(i) six (6),
<PAGE>

multiplied times (ii) the amount (if any) by which (A) Fourteen Million Dollars
($14,000,000.00) (which is the estimated Gulf States EBITDA), exceeds (B) Eleven
Million, Two Hundred Sixty-five Thousand, Six Hundred Ninety-six Dollars
($11,265,696.00)).

(iv) ADJUSTMENT FOR HIGHER ACTUAL EARN OUT. In the event that ITC delivers
--------------------------------------
the Additional Shares as required in Section 2.2(c)(iii) above and the Actual
Earn Out, as defined below, is greater than the Estimated Earn Out then, no
later than April 30, 1998, ITC/\DeltaCom shall deliver to SCANA COMMUNICATIONS
that number of shares, rounded to the nearest whole share, of ITC/\DeltaCom
Preferred Stock (an "ADDITIONAL SHARES ADJUSTMENT") that in aggregate value
(valued on a per-share basis at the then Current Market Price of ITC/\DeltaCom's
Common Stock) is equal to the difference between the Estimated Earn Out and the
Actual Earn Out. The "ACTUAL EARN OUT" shall be an amount equal to 35.7% of the
product of (a) 64%, multiplied times (b)(i) six (6), multiplied times (ii) the
amount by which the actual Gulf States EBITDA exceeds Eleven Million, Two
Hundred Sixty-five Thousand, Six Hundred Ninety-six Dollars ($11,265,696.00).

(v) ADJUSTMENT FOR LOWER CURRENT MARKET PRICE. In the event that ITC
------------------------------------------
delivers the Additional Shares as required in Section 2.2(c)(iii) above and the
sum of (a) the Current Market Price of one share of Common Stock of ITC West
Point plus (b) the Current Market Price of one share of ITC/\DeltaCom, in each
case as of the date of delivery of such Additional Shares (the "AGGREGATE PER-
SHARE CURRENT MARKET PRICE"), is less than $66.06, then, no later than April 30,
1998, ITC/\DeltaCom shall deliver to SCANA COMMUNICATIONS that number of shares,
rounded to the nearest whole share, of ITC/\DeltaCom Preferred Stock (an
"ADDITIONAL SHARES ADJUSTMENT") that in aggregate value (valued on a per-share
basis at the then Current Market Price of ITC/\DeltaCom's Common Stock) is equal
to the difference between (a) $3,748,403, and (b) the product of the Aggregate
Per-share Current Market Price multiplied by 56,742 (which is the number of
Estimated Additional Shares).

(vi) EARN OUT IF REORGANIZATION IS NOT CONSUMMATED. In the event that the
----------------------------------------------
Reorganization does not occur on or before April 30, 1998, then ITC shall
deliver Additional Shares to SCANA COMMUNICATIONS no later than April 30, 1998
that in aggregate value (valued on a per-share basis for this purpose at the
Current Market Price per share of ITC) is equal to 35.7% of the product of (a)
64%, multiplied times (b)(i) six (6), multiplied times (ii) the amount (if any)
by which (A) Gulf States EBITDA exceeds (B) Eleven Million, Two Hundred Sixty-
five Thousand, Six Hundred Ninety-six Dollars ($11,265,696.00)."

4. ITC WEST POINT NAME CHANGE.

SCANA, SCANA COMMUNICATIONS and ITC/\DeltaCom hereby acknowledge ITC
West Point's intention to change its name to "ITC Holding Company, Inc." upon
consummation of the Reorganization.
<PAGE>

5. EFFECTIVE DATE.

The terms and conditions of this Amendment shall become effective as of the
date of this Amendment (as first set forth herein).

6. OTHER TERMS AND CONDITIONS.

Except as expressly stated in this Amendment, all other terms and
conditions of the Agreement shall remain in full force and effect, as if fully
stated herein.

7. CONFLICT.

If there are any conflicting terms or conditions between the terms and
conditions of this Amendment and the terms and conditions of the Agreement, the
terms and conditions of this Amendment shall control.

IN WITNESS WHEREOF, the parties hereto have executed this First Amendment,
by their duly authorized representatives, as of the day and year first indicated
above.

SCANA:
-----

SCANA CORPORATION

By: /s/
---------------------------------
Name:
-------------------------------
Title:
------------------------------

SCANA COMMUNICATIONS:
--------------------

SCANA COMMUNICATIONS, INC.

By: /s/
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE>

ITC:
---

ITC HOLDING COMPANY, INC.

By: /s/
---------------------------------
Name:
-------------------------------
Title:
------------------------------

ITC/\DELTACOM:
-------------

ITC/\DELTACOM, INC.

By: /s/
---------------------------------
Name:
-------------------------------
Title:
------------------------------

<PAGE>

EXHIBIT 11.1

ITC/\DELTACOM, INC.
EARNINGS PER SHARE CALCULATIONS

For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
1992 1993 1994 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Weighted Average Shares Outstanding 19,126,831 19,127,231 19,128,093 19,129,362
Common Stock Equivalents:
Series A Convertible Preferred Stock 0 0 0 0
Stock Options: Employee and Director Plans 682,470 682,470 682,470 682,470
Stock Options: Assumed ITC Holding Company Plan 1,570,646 1,570,646 1,570,646 1,570,646
------------ ------------ ------------ ------------
Total Shares for Pro Forma Primary Earnings Per Share 21,379,947 21,380,347 21,381,209 21,382,477
Net Income (Loss) (10,147) 80,861 136,997 (304,373)
------------ ------------ ------------ ------------

Pro Forma Primary Earnings Per Share ($0.00) $0.00 $0.01 ($0.02)
============ ============ ============ ============

<CAPTION>
For the Year For the Six Months For the Six Months
Ended Ended Ended
December 31, June 30, June 30,
1996 1996 1997
------------ ------------------ ------------------
<S> <C> <C> <C>
Weighted Average Shares Outstanding 19,203,225 19,196,986 19,209,362
Common Stock Equivalents:
Series A Convertible Preferred Stock 0 0 0
Stock Options: Employee and Director Plans 682,470 682,470 682,470
Stock Options: Assumed ITC Holding Company Plan 1,570,646 1,570,646 1,570,646
------------ ------------------ ------------------
Total Shares for Pro Forma Primary Earnings Per Share 21,456,340 21,450,102 21,462,477
Net Income (Loss) (3,909,749) (1,665,780) (3,278,019)
------------ ------------------ ------------------

Pro Forma Primary Earnings Per Share ($0.18) ($0.08) ($0.15)
============ ================== ==================
</TABLE>

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the inclusion in
Amendment No. 3 to this Registration Statement on Form S-1 of our report on the
financial statements of ITC/\DeltaCom, Inc. as of June 30, 1997 and for the
period from inception (March 24,1997) to June 30, 1997 dated July 31, 1997
(except with respect to Note 5, as to which the date is September 26, 1997); our
report on the combined financial statements of ITC/\DeltaCom, Inc., Interstate
FiberNet, Inc. (formerly ITC Transmission Systems, Inc.), ITC Transmission
Systems II, Inc., Gulf States Transmission Systems, Inc., Eastern Telecom, Inc.,
d.b.a. InterQuest, and DeltaCom, Inc. (reorganized as ITC/\DeltaCom, Inc.) as of
December 31, 1995 and 1996 and for each of the three years in the period ended
December 31, 1996 dated March 27, 1997 (except with respect to Note 16, as to
which the date is September 26, 1997); our report on the statements of
operations, stockholders' equity, and cash flows of DeltaCom, Inc. for the year
ended December 31, 1995 dated March 27, 1997; and our report on the financial
statements of Gulf States FiberNet as of December 31, 1995 and 1996 and for the
period from inception (August 17, 1994) through December 31, 1994 and for the
two years in the Period ended December 31, 1996, dated March 27, 1997 (except
with respect to the ITC/\DeltaCom Debt Offering discussion in Note 8, as to
which the date is July 25, 1997), and to all references to our Firm included in
or made a part of this Registration Statement.

ARTHUR ANDERSEN LLP

Atlanta, Georgia
October 20, 1997

<PAGE>

EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report
dated March 19, 1997 related to DeltaCom, Inc. (and to all references to our
Firm) included in or made a part of this Amendment Number 3 to the Registration
Statement on Form S-1.

MARTIN STUEDEMAN & ASSOCIATES, P.C.

Birmingham, Alabama

October 20, 1997

<PAGE>

EXHIBIT 23.3

INDEPENDENT AUDITORS' CONSENT

We consent to the use in Amendment No. 3 to the Registration Statement of
ITC DeltaCom, Inc. on Form S-1 of our report dated May 23, 1997 relating to the
financial statements of Georgia Fiber (a business unit of SCANA Communications,
Inc.), appearing in the Prospectus, which is part of this Registration
Statement.

We also consent to the reference to us under the headings "Experts" in such
Prospectus.

DELOITTE & TOUCHE LLP

Columbia, South Carolina

October 20, 1997