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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
ITC/\DeltaCom Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
PRELIMINARY COPY
- ----------------
ITC/\DELTACOM, INC.
1791 O.G. Skinner Drive
West Point, Georgia 31833
__________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 11, 2000
__________________________
To our stockholders:
On behalf of the board of directors of ITC/\DeltaCom, Inc., it is my pleasure
to invite you to the Company's 2000 annual meeting of stockholders. The annual
meeting will be held on Thursday, May 11, 2000, at 11:00 a.m., local time, at
the New Horizons Community Theatre, 411 West 8th Street, West Point, Georgia.
The annual meeting has been called for the following purposes:
1. to consider and vote upon a proposal to elect four directors of
ITC/\DeltaCom;
2. to consider and vote upon a proposal to amend ITC/\DeltaCom's restated
certificate of incorporation to increase the number of authorized
shares of capital stock from 95,000,000 shares to 205,000,000 shares
and to increase the number of authorized shares of common stock from
90,000,000 shares to 200,000,000 shares, with the number of authorized
shares of preferred stock remaining at 5,000,000 shares;
3. to consider and vote upon an amendment to the ITC/\DeltaCom, Inc. 1997
Stock Option Plan to increase the number of shares of common stock
that may be issued under the plan; and
4. to transact such other business as may properly come before the annual
meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on March 29, 2000 will be
entitled to notice of, and to vote at, the annual meeting or any adjournment or
postponement thereof.
By Order of the Board of Directors,
[facsimile signature]
Campbell B. Lanier, III
Chairman of the Board of Directors
Dated: April ___, 2000
- --------------------------------------------------------------------------------
| YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING,|
| PLEASE SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE POSTAGE- |
| PAID ENVELOPE PROVIDED. |
- --------------------------------------------------------------------------------
<PAGE>
PRELIMINARY COPY
- ----------------
ITC/\DELTACOM, INC.
1791 O.G. Skinner Drive
West Point, Georgia 31833
Annual Meeting of Stockholders
May 11, 2000
_______________________
PROXY STATEMENT
_______________________
GENERAL INFORMATION
Proxy Solicitation
This proxy statement is furnished in connection with the solicitation of
proxies by the board of directors of ITC/\DeltaCom, Inc. for use at the
Company's 2000 annual meeting of stockholders to be held on Thursday, May 11,
2000, at 11:00 a.m., local time, at the New Horizons Community Theatre, 411 West
8th Street, West Point, Georgia. The purpose of the annual meeting and the
matters to be acted upon are set forth in the accompanying notice of annual
meeting.
ITC/\DeltaCom will pay the cost of all proxy solicitation. In addition to
the solicitation of proxies by use of the mails, officers and other employees of
the Company and its subsidiaries may solicit proxies by personal interview,
telephone, facsimile and telegram. None of these individuals will receive
compensation for such services, which will be performed in addition to their
regular duties. The Company may also make arrangements with brokerage firms,
banks, custodians, nominees and other fiduciaries to forward proxy solicitation
material for shares held of record by them to the beneficial owners of such
shares. The Company will reimburse such persons for their reasonable out-of-
pocket expenses in forwarding such material.
This proxy statement and the enclosed proxy are first being mailed to the
Company's stockholders on or about April __, 2000.
Voting and Revocability of Proxies
A proxy for use at the annual meeting and a return envelope are enclosed.
Shares of ITC/\DeltaCom's common stock represented by a properly executed proxy,
if such proxy is received in time and not revoked, will be voted at the annual
meeting according to the instructions indicated in the proxy. If no
instructions are indicated, the shares will be voted "FOR" approval of each
proposal considered at the annual meeting. Discretionary authority is provided
in the proxy as to any matters not specifically referred to in the proxy.
Management is not aware of any other matters which are likely to be brought
before the annual meeting. If any other matter is properly presented at the
annual meeting for action, the persons named in the accompanying proxy will vote
on such matter in their own discretion.
A stockholder who has given a proxy may revoke it at any time before its
exercise at the annual meeting by (1) giving written notice of revocation to the
Secretary of the Company, (2) properly submitting to the Company a duly executed
proxy bearing a later date or (3) voting in person at the annual meeting.
Unless revoked, the shares represented by each such proxy will be voted at the
meeting and any adjournment or postponement of the meeting. Presence at the
meeting of a stockholder who has signed a proxy but does not provide a notice of
revocation or request to vote in person does not revoke that proxy. All written
notices of revocation or other communications with respect to revocation of
proxies should be addressed as follows: ITC/\DeltaCom, Inc., 1791 O.G. Skinner
Drive, West Point, Georgia 31833, Attention: Secretary.
<PAGE>
Voting Procedure
All holders of record of the Company's common stock at the close of
business on March 29, 2000 will be eligible to vote at the annual meeting. Each
holder of common stock is entitled to one vote at the annual meeting for each
share held by such stockholder. As of March 29, 2000, there were shares of
common stock outstanding.
The holders of a majority of the shares of common stock issued and
outstanding and entitled to vote at the annual meeting, present in person or by
proxy, will constitute a quorum at the annual meeting. Abstentions and any
broker non-votes, which are described below, will be counted for purposes of
determining the presence of a quorum at the annual meeting.
Votes cast in person or by proxy at the annual meeting will be tabulated by
the inspector of election appointed for the annual meeting, who will determine
whether or not a quorum is present. Votes may be cast for, against or as
abstentions. Abstentions will be counted for purposes of determining the shares
present or represented at the annual meeting and entitled to vote. Accordingly,
abstentions will have the same effect as a vote against the proposal to approve
an amendment to the Company's restated certificate of incorporation and the
proposal to approve an amendment to the ITC/\DeltaCom, Inc. 1997 Stock Option
Plan.
Broker-dealers who hold their customers' shares in street name may, under
the applicable rules of the exchange and other self-regulatory organizations of
which the broker-dealers are members, sign and submit proxies for such shares
and may vote such shares on routine matters, which under such rules, typically
include the election of directors. Broker-dealers may not vote such shares on
other matters without specific instructions from the customers who beneficially
own such shares. Proxies signed and submitted by broker-dealers which have not
been voted on matters described in the previous sentence are referred to as
broker non-votes. Broker non-votes on a particular matter are not deemed to be
shares present and entitled to vote on such matters and, assuming the presence
of a quorum, will not affect whether the proposal for election of directors or
the proposal to approve an amendment to the ITC/\DeltaCom, Inc. 1997 Stock
Option Plan is approved at the annual meeting. Broker non-votes will have the
same effect as a vote against the proposal to approve the amendment to the
Company's restated certificate of incorporation, which will require approval by
the affirmative vote of holders of a majority of the shares of common stock
outstanding on the record date for the annual meeting.
SECURITY OWNERSHIP
The information presented below regarding beneficial ownership of the common
stock has been presented in accordance with the rules of the SEC and is not
necessarily indicative of beneficial ownership for any other purpose. Under
these rules, beneficial ownership of common stock includes any shares as to
which a person, directly or indirectly, has or shares voting power or investment
power and also any shares as to which a person has the right to acquire such
voting or investment power within 60 days through the exercise of any stock
option or other right.
As of February 29, 2000, there were 59,844,872 shares of common stock
outstanding.
2
<PAGE>
Principal Stockholders
The following table presents, as of February 29, 2000, information based upon
the Company's records and filings with the SEC regarding each person, other than
a director, director nominee or executive officer of the Company, known to the
Company to be the beneficial owner of more than 5% of the common stock:
<TABLE>
<CAPTION>
Amount of
Name and Address of Beneficial Percent
Beneficial Owner Ownership of Class
------------------- ---------- --------
<S> <C> <C>
SCANA Corporation (1)............................................... 5,105,833 8.5%
American Water Works Company, Inc.(2)............................... 4,017,264 6.7
J. Smith Lanier (3)................................................. 3,641,964 6.1
</TABLE>
_________________
(1) Based upon a Schedule 13G filed with the SEC on February 14, 2000. SCANA
Corporation reports that it shares voting power and dispositive power with
respect to all of the shares shown with its subsidiaries, SCANA
Communications, Inc. and SCANA Communications Holdings, Inc. SCANA
Communications Holdings, Inc. is the record owner of all of the shares
shown. The address of SCANA Corporation is 1426 Main Street, Columbia,
South Carolina 29201.
(2) The address of American Water Works Company, Inc. is 1025 Laurel Oak Road,
Vorhees, New Jersey 08043.
(3) Based upon a Schedule 13G filed with the SEC on February 14, 2000. Mr.
Lanier reports that he has sole voting power and sole dispositive power
with respect to 2,120,239 of the shares shown, and shared voting power and
shared dispositive power with respect to 1,521,725 of the shares shown.
Shares for which Mr. Lanier has sole voting and dispositive power include
options to purchase 34,428 shares that are currently vested and exercisable
or will vest and become exercisable within 60 days of February 29, 2000 and
27,542 shares held in Mr. Lanier's Individual Retirement Account. Shares
for which Mr. Lanier shares voting and dispositive power include 648,798
shares held of record by Mr. Lanier's wife; 158,167 shares held of record
by the Lanier Family Foundation, of which Mr. Lanier is co-trustee; 600,000
shares held of record by the J. Smith Lanier Charitable Remainder Trust, of
which Mr. Lanier is the trustee; and 114,760 shares held of record by the
Campbell B. Lanier, Jr. Irrevocable Life Insurance Trust, of which Mr.
Lanier is co-trustee. Mr. Lanier's address is c/o ITC/\DeltaCom, Inc., 1791
O. G. Skinner Drive, West Point, Georgia 31833.
3
<PAGE>
Security Ownership of Directors, Director Nominees and Executive Officers
The following table presents, as of February 29, 2000, information regarding
the beneficial ownership of the common stock by each director and each nominee
to the board of directors, each executive officer of the Company named in the
summary compensation table under the "Executive Compensation" section of this
proxy statement and all directors and executive officers of the Company as a
group:
<TABLE>
<CAPTION>
Amount and
Nature of
Name of Beneficial Percent
Beneficial Owner Ownership(1)(2) of Class
---------------- ---------- --------
<S> <C> <C>
James H. Black, Jr. (3)....................................... 128,176 *
Donald W. Burton (4).......................................... 560,167 *
Malcolm C. Davenport, V (5)................................... 422,778 *
Robert A. Dolson.............................................. 60,503 *
O. Gene Gabbard (6)........................................... 79,028 *
Campbell B. Lanier, III (7)................................... 6,744,807 11.3%
Foster O. McDonald (8)........................................ 613,494 1.0
Steven D. Moses (9)........................................... 198,371 *
J. Thomas Mullis.............................................. 179,264 *
William T. Parr (10).......................................... 317,717 *
Sara L. Plunkett.............................................. 153,102 *
William H. Scott, III (11).................................... 2,264,544 3.8
Douglas A. Shumate (12)....................................... 292,995 *
William B. Timmerman (13)..................................... 5,036,311 8.4
Andrew M. Walker (14)......................................... 539,082 *
Roger F. Woodward............................................. 175,566 *
All executive officers and directors as a group (16 persons).. 17,426,998 29.1
</TABLE>
- --------
* Less than one percent.
(1) The percentage of beneficial ownership as to any person as of a particular
date is calculated by dividing the number of shares beneficially owned by
such person by the sum of the number of shares outstanding as of such date
and the number of shares as to which such person has the right to acquire
voting or investment power within 60 days. 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. Except as
noted, each stockholder listed has sole voting and investment power with
respect to the shares shown as beneficially owned by such stockholder.
(2) Includes the following shares that the individuals named below have the
right to purchase within 60 days of February 29, 2000 pursuant to options:
<TABLE>
<S> <C>
Donald W. Burton............................................................................... 51,485
Malcolm C. Davenport, V........................................................................ 58,503
Robert A. Dolson............................................................................... 58,503
O. Gene Gabbard................................................................................ 67,555
Campbell B. Lanier, III........................................................................ 772,421
Foster O. McDonald............................................................................. 273,940
Steven D. Moses................................................................................ 145,886
J. Thomas Mullis............................................................................... 168,012
William T. Parr................................................................................ 58,503
Sara L. Plunkett............................................................................... 145,574
William H. Scott, III.......................................................................... 770,022
Douglas A. Shumate............................................................................. 219,611
William B. Timmerman........................................................................... 58,503
Andrew M. Walker............................................................................... 410,696
Roger F. Woodward.............................................................................. 169,626
---------
Total...................................................................................... 3,428,840
=========
</TABLE>
4
<PAGE>
(3) Includes 42,788 shares owned jointly with Mr. Black's wife; 316 shares held
of record by Mr. Black's minor daughter; and 316 shares held of record by
Mr. Black's minor son.
(4) Includes 30,787 shares held of record by South Atlantic Venture Fund, L.P.,
of which Mr. Burton is the managing general partner; 123,838 shares held of
record by The Burton Partnership, Limited Partnership, of which Mr. Burton
is the sole general partner; 698 shares held of record by South Atlantic
Capital Corporation, of which Mr. Burton is a director and sole
shareholder; and 70 shares held of record by Mr. Burton's son. Also
includes 10,724 unexercised but vested options held of record by South
Atlantic Venture Fund II, Limited Partnership, 8,884 unexercised but vested
options held of record by South Atlantic Venture Fund III, Limited
Partnership, 2,783 unexercised but vested options held of record by South
Atlantic Private Equity Fund IV, and 4,285 unexercised but vested options
held of record by South Atlantic Private Equity Fund IV (QP). Mr. Burton
either is or controls the general partner of each of the entities
identified in the preceding sentence.
(5) Includes 296,622 shares held of record by the Malcolm C. Davenport, V
Family Trust, of which Mr. Davenport is co-trustee.
(6) Includes 6,667 shares held of record by Treelodge Limited Partnership of
which Mr. Gabbard is a general partner.
(7) Includes 2,412 shares held of record by Mr. Lanier's wife; 158,167
shares held of record by the Lanier Family Foundation, of which
Mr. Lanier is co-trustee; 114,760 shares held of record by the Campbell
Lanier, Jr. Irrevocable Life Insurance Trust, of which Mr. Lanier
is co-trustee; and 8,803 shares held of record by C. B. Lanier, Jr.,
Marital Trust of which Mr. Lanier is co-trustee.
(8) Includes 114,760 shares held of record by Wesley L. McDonald Irrevocable
Trust of 1989, of which Mr. McDonald is trustee, and 228 shares held of
record by Mr. McDonald's wife.
(9) Includes 275 shares held of record by Mr. Moses' wife.
(10) Includes 2,000 shares held of record by Mr. Parr's wife.
(11) Includes 2,524 shares held of record by Mr. Scott's wife; 458 shares held
of record by Mr. Scott's minor daughter; 158,167 shares held of record by
the Lanier Family Foundation, of which Mr. Scott is co-trustee; 114,760
shares held by the Campbell Lanier, Jr. Irrevocable Life Insurance Trust,
of which Mr. Scott is co-trustee; 831,428 shares held of record by Campbell
B. Lanier, III Charitable Remainder Trust, of which Mr. Scott is trustee
and 47,162 shares held in trust for Mr. Scott's minor daughter, of which
Mr. Scott's wife is co-trustee.
(12) Includes 2,422 shares held of record by Mr. Shumate's wife; 10 shares held
of record by Mr. Shumate's minor daughter; and 54 shares held of record by
Mr. Shumate's minor son.
(13) Includes 5,105,833 shares held of record by SCANA Communications Holdings,
Inc. and options held of record by SCANA Communications Holdings, Inc., to
purchase 58,503 shares that are currently vested and exercisable or will
vest and become exercisable within 60 days of February 29, 2000. Mr.
Timmerman is the Chief Executive Officer of SCANA Communications, Inc., the
parent of SCANA Communications Holdings, Inc. Mr. Timmerman disclaims any
beneficial ownership in any shares held by SCANA Communication Holdings,
Inc. and disclaims any beneficial ownership in the stock options held by
SCANA Communications Holdings, Inc.
(14) Includes 228 shares held of record by Mr. Walker's wife.
5
<PAGE>
ELECTION OF DIRECTORS
(Proposal 1)
Nominees for Election as Directors
ITC/\DeltaCom's restated certificate of incorporation provides that the board
of directors is to be divided into three classes of directors, with the classes
to be as nearly equal in number as possible. The terms of office of the three
current classes of directors expire at this annual meeting, at the annual
meeting of stockholders in the year 2001 and at the annual meeting of
stockholders in the year 2002, respectively. Upon the expiration of the term of
office of each class, the nominees for such class will be elected for a term of
three years to succeed the directors whose terms of office expire.
Campbell B. Lanier, III, Andrew M. Walker, William B. Timmerman and James H.
Black, Jr. have been nominated for election to the class with a three-year term
which will expire at the annual meeting of stockholders in the year 2003. Each
of the nominees is an incumbent director.
Approval of Nominees
Approval of the nominees requires the affirmative vote of a plurality of the
votes cast at the annual meeting. Unless authority to do so is withheld, it is
the intention of the persons named in the proxy to vote such proxy for the
election of each of the nominees. In the event that any nominee should become
unable or unwilling to serve as a director, the persons named in the proxy
intend to vote for the election of such substitute nominee for director as the
board of directors may recommend. It is not anticipated that any nominee will be
unable or unwilling to serve as a director.
The board of directors recommends that the stockholders of ITC/\DeltaCom vote
"FOR" the election of the nominees to serve as directors.
Biographical information concerning each of the nominees and each of the
directors continuing in office is presented below.
Nominees for Election for Three-Year Terms
<TABLE>
<CAPTION>
Name Age Director Since
- ---- ----- --------------
<S> <C> <C>
Campbell B. Lanier, III .................................................. 49 1997
Andrew M. Walker ......................................................... 58 1997
William B. Timmerman ..................................................... 53 1997
James H. Black, Jr........................................................ 52 1999
</TABLE>
Campbell B. Lanier, III has been Chairman of the Company since March 1997.
Mr. Lanier has served as Chairman of the Board and Chief Executive Officer of
ITC Holding Company, Inc., or its predecessors, since its inception in 1985. ITC
Holding is a diversified telecommunications company. In addition, Mr. Lanier is
an officer and director of several ITC Holding subsidiaries. He is also a
director of KNOLOGY Holdings, Inc., a broadband telecommunications services
company, EarthLink, Inc., a nationwide Internet service provider, and Vista
Eyecare, Inc., a full service optical retailer, and serves as Chairman of the
Board of Powertel, Inc., a wireless telecommunications services company. He 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 and Vice Chairman of the board of directors of the Company since April
1998. He served as President and Chief Executive Officer of the managing partner
of each of Interstate FiberNet and Gulf States FiberNet, predecessors to
Interstate FiberNet, Inc., a wholly-owned subsidiary of the Company, from
November 1994 until March 1997. Mr. Walker has served as a director of KNOLOGY
Holdings,
6
<PAGE>
Inc. since July 1996, and served as Chief Executive Officer and President of
KNOLOGY from July 1996 to February 1997.
William B. Timmerman has served since 1978 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, Inc. and Liberty Corporation, a life insurance company,
and has served as a director of ITC Holding Company, Inc. since 1996.
James H. Black, Jr. has been Senior Vice President of the Company since July
1999. He was Chairman and Chief Executive Officer of AvData Systems, Inc., a
provider of wide area data networks, from 1990 until the company was acquired by
ITC/\DeltaCom in July 1999. Mr. Black serves as a director of several privately
held corporations including Business Television International, d.b.a. Knowledge
Networks, a training applications service provider, Air Quality Sciences, an
indoor environmental testing and product certification business, Betherenow.com,
a 3-D virtual realization provider, and Norelli & Company, a strategic
consulting firm.
Directors Whose Terms Expire in 2001
<TABLE>
<CAPTION>
Name Age Director Since
- ---- ----- --------------
<S> <C> <C>
Donald W. Burton............................................................ 56 1997
Malcolm C. Davenport, V..................................................... 46 1997
William T. Parr............................................................. 63 1997
</TABLE>
Donald W. Burton 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 a director of Powertel, Inc.,
MTL, Inc., a bulk transportation service company, the Heritage Group of Mutual
Funds and several private companies.
Malcolm C. Davenport, V. has operated his own C.P.A. and law practices since
1979 and 1983, respectively. Mr. Davenport has also served as a director of ITC
Holding Company, Inc. since 1989 and serves as a director of several of its
former subsidiaries. He is a director of Spintek Gaming Technologies, Inc., a
gaming technology provider, American Artists Film Corporation, a motion picture
production company, and a number of private companies.
William T. Parr has served as Vice Chairman of J. Smith Lanier & Co., an
insurance placement company, since 1980. He has served as a director of ITC
Holding Company, Inc. since 1989. He also serves as a director of J. Smith
Lanier & Co. and Industrial Distribution Group, Inc., a supplier of maintenance,
repair, operating and production products.
Directors Whose Terms Expire in 2002
<TABLE>
<CAPTION>
Name Age Director Since
- ---- ----- --------------
<S> <C> <C>
Robert A. Dolson............................................................ 54 1997
O. Gene Gabbard............................................................. 59 1997
William H. Scott, III....................................................... 52 1997
</TABLE>
Robert A. Dolson 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
7
<PAGE>
Continental Water Company, since 1984 and 1989, respectively. He has served as a
director of ITC Holding Company, Inc. since December 1993. He also serves as a
director of several private companies.
O. Gene Gabbard has worked independently as an entrepreneur and consultant
since February 1993. Mr. Gabbard currently serves as a director of ITC Holding
Company, Inc. and several of its subsidiaries, as well as Powertel, Inc. and
ClearSource, Inc., a provider of broadband telecommunications services. From
August 1990 through January 1993, Mr. Gabbard served as Executive Vice President
and Chief Financial Officer of MCI Communications Corporation. Mr. Gabbard has
served as a Managing Director of South Atlantic Private Equity Fund IV, Limited
Partnership since 1997.
William H. Scott, III has served as President of ITC Holding Company, Inc., or
its predecessors, since December 1991 and as a director of ITC Holding, or its
predecessors, since May 1989. He is also an officer and director of several ITC
Holding subsidiaries. Mr. Scott is a director of Powertel, Inc.; KNOLOGY
Holdings, Inc.; EarthLink, Inc.; Innotrac, a provider of marketing support
services; Headhunter.net, an on-line recruiting service; and nFront, a provider
of Internet banking services to financial institutions.
Board of Directors and Committees of the Board
The board of directors held nine meetings during the Company's 1999 fiscal
year, which ended on December 31, 1999. During 1999, each director other than
Messrs. Dolson and Timmerman attended at least 75% of the aggregate of the total
number of meetings of the board of directors held during the period he served as
a director and the total number of meetings held by each committee of the board
of directors on which he served during the period for which he served. Messrs.
Dolson and Timmerman each attended at least 50% of the aggregate of the total
number of meetings of the board of directors held during the period he served as
a director and the total number of meetings held by each committee of the board
of directors on which he served during the period for which he served.
The board of directors acts as a nominating committee for selecting candidates
to stand for election as directors. Pursuant to the Company's bylaws, other
candidates may also be nominated by any stockholder, provided each such other
nomination is submitted in writing and received by the Secretary of the Company
at the principal executive offices of the Company not less than 60 days prior to
the annual meeting or, in the event less than 75 days' notice or prior public
disclosure of the date of the annual meeting is given or made to stockholders,
received not later than the close of business on the fifteenth day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made. The notice must include the following information: (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 Company'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
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 Company's books, of
such stockholder and (ii) the class and number of shares of the Company's stock
which are beneficially owned by such stockholder.
The board of directors currently has standing audit and compensation
committees.
The audit committee, which held one meeting during 1999, currently consists
of Messrs. Burton, Dolson and Gabbard. This committee is responsible for
recommending to the full board of directors the selection of the Company's
independent auditors, reviewing the scope of the audit plan and the results of
each audit with management and the independent auditors, reviewing the adequacy
of the Company's system of internal accounting controls in consultation with the
independent auditors and reviewing generally the activities and recommendations
of the independent auditors.
The compensation committee, which held five meetings during 1999, currently
consists of Messrs. Gabbard, Parr and Scott. This committee is responsible for
establishing the compensation and benefits of the executive officers of the
Company, monitoring compensation arrangements for management employees for
consistency with corporate objectives and stockholders' interests, and
administering the Company's stock option plans.
Director Compensation
Fees. Directors who are not employees of ITC/\DeltaCom receive $750 for each
board meeting attended in person, $200 for each board meeting attended by
conference telephone and $200 for each committee meeting
8
<PAGE>
attended, whether in person or by conference telephone. Directors of the
Company who are also employees of the Company receive no directors fees. All
directors are entitled to reimbursement for their reasonable out-of-pocket
travel expenditures.
Stock Option Grants. The Company's Director Stock Option Plan generally
provides that each non-employee director will receive options to purchase 32,100
shares of common stock upon the director's initial election or appointment to
the board of directors. The option exercise price for options granted under the
Director Stock Option Plan will be 100% of the fair market value of the shares
of common stock at the close of business on the date of grant of the option.
Options granted will generally become exercisable with respect to 50% of the
shares subject to the options on the second anniversary of the date of grant and
with respect to 25% of the shares subject to the options on each of the third
and fourth anniversaries of the date of grant. The options will expire ten years
and 30 days after the date of grant. The board of directors may amend or
terminate the Director Stock Option Plan with respect to shares of common stock
as to which options have not been granted.
At December 31, 1999, stock options to purchase 192,600 shares of common stock
were outstanding pursuant to the Director Stock Option Plan.
9
<PAGE>
Executive Compensation
The following table sets forth the compensation paid to the Chief Executive
Officer of ITC/\DeltaCom and to each of ITC/\DeltaCom's other four most highly
compensated executive officers for 1999, referred to collectively as the Named
Executive Officers:
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation
---------------------- ---------------
Securities
Underlying All Other
Name and Principal Position Year(1) Salary($) Bonus($) Options($)(2) Compensation($)
- --------------------------- -------- --------- ----------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Andrew M. Walker............................ 1999 163,255 85,334 14,073 15,200(3)
Vice Chairman, Chief Executive Officer, 1998 158,308 101,314 23,302 18,134(4)
Director 1997 147,063 115,348 401,250 12,838(5)
Foster O. McDonald.......................... 1999 147,520 71,499 8,444 48,753(6)
President 1998 139,880 84,429 13,982 22,059(7)
1997 133,606 96,123 240,750 32,912(8)
Douglas A. Shumate.......................... 1999 129,383 63,468 6,462 22,861(9)
Senior Vice President-Chief Financial 1998 116,385 55,461 9,322 17,772(10)
Officer 1997 94,131 51,266 168,376 9,795(11)
Roger F. Woodward........................... 1999 136,708 44,943 7,036 16,124(12)
Senior Vice President-Sales and Account 1998 129,519 46,885 10,372 18,483(13)
Services 1997 123,708 56,716 160,500 32,474(14)
Steven D. Moses............................. 1999 119,720 57,943 6,863 8,981(15)
Senior Vice President-Network Services 1998 116,092 68,794 11,392 7,155(16)
1997 103,444 78,323 160,500 6,971(17)
</TABLE>
(1) Information provided is for the full fiscal year. For the period prior to
the Company's formation on March 24, 1997, the Named Executive Officers
were compensated by entities that became subsidiaries of ITC/\DeltaCom.
(2) Excludes options granted by ITC Holding Company, Inc., the entity from
which the Company was spun-off, prior to the formation of the Company on
March 24, 1997.
(3) Represents $1,951 in life insurance premiums paid by ITC/\DeltaCom on
behalf of Mr. Walker, $6,400 in matching contributions made by
ITC/\DeltaCom to the Company's 401(k) Plan on behalf of Mr. Walker, $2,049
in travel allowances and an automobile allowance of $4,800 paid to Mr.
Walker by ITC/\DeltaCom.
(4) Represents $2,394 in life insurance premiums paid by ITC/\DeltaCom on
behalf of Mr. Walker, $6,400 in matching contributions made by
ITC/\DeltaCom to the Company's 401(k) Plan on behalf of Mr. Walker, $4,448
in travel allowances and an automobile allowance of $4,892 paid to Mr.
Walker by ITC/\DeltaCom.
(5) Represents $3,288 in life insurance premiums paid by ITC/\DeltaCom on
behalf of Mr. Walker, $4,750 in matching contributions made by
ITC/\DeltaCom to the Company's 401(k) Plan on behalf of Mr. Walker, and an
automobile allowance of $4,800 paid to Mr. Walker by ITC/\DeltaCom.
(6) Represents $304 in life insurance premiums paid by ITC/\DeltaCom on behalf
of Mr. McDonald, $6,400 in matching contributions made by ITC/\DeltaCom on
behalf of Mr. McDonald to the Company's 401(k) Plan, the
10
<PAGE>
reimbursement by ITC/\DeltaCom of $35,008 in moving expenses incurred by
Mr. McDonald during 1999, $1,756 in travel allowances and an automobile
allowance of $5,285 paid to Mr. McDonald by ITC/\DeltaCom.
(7) Represents $546 in life insurance premiums paid by ITC/\DeltaCom on behalf
of Mr. McDonald, $6,400 in matching contributions made by ITC/\DeltaCom on
behalf of Mr. McDonald to the Company's 401(k) Plan, $8,513 in travel
allowances and an automobile allowance of $6,600 paid to Mr. McDonald by
ITC/\DeltaCom.
(8) Represents $4,653 in matching contributions made by ITC/\DeltaCom on behalf
of Mr. McDonald to the Company's 401(k) Plan, an automobile allowance of
$6,600 paid to Mr. McDonald by ITC/\DeltaCom and the reimbursement by
ITC/\DeltaCom of $21,659 in moving expenses incurred during 1997 by Mr.
McDonald.
(9) Represents $213 in life insurance premiums paid by ITC/\DeltaCom on behalf
of Mr. Shumate, $6,400 in matching contributions made by ITC/\DeltaCom on
behalf of Mr. Shumate to the Company's 401(k) Plan, $11,448 in travel
allowances and an automobile allowance of $4,800 paid to Mr. Shumate by
ITC/\DeltaCom.
(10) Represents $207 in life insurance premiums paid by ITC/\DeltaCom on behalf
of Mr. Shumate, $6,285 in matching contributions made by ITC/\DeltaCom on
behalf of Mr. Shumate to the Company's 401(k) Plan, $6,388 in travel
allowances and an automobile allowance of $4,892 paid to Mr. Shumate by
ITC/\DeltaCom.
(11) Represents $245 in life insurance premiums paid by ITC/\DeltaCom on behalf
of Mr. Shumate, $4,750 in matching contributions made by ITC/\DeltaCom on
behalf of Mr. Shumate to the Company's 401(k) Plan and an automobile
allowance of $4,800 paid to Mr. Shumate by ITC/\DeltaCom.
(12) Represents $602 in life insurance premiums paid by ITC/\DeltaCom on behalf
of Mr. Woodward, $6,400 in matching contributions made by ITC/\DeltaCom on
behalf of Mr. Woodward to the Company's 401(k) Plan and $3,837 in travel
allowances and $5,285 in an automobile allowance paid to Mr. Woodward by
ITC/\DeltaCom.
(13) Represents $995 in life insurance premiums paid by ITC/\DeltaCom on behalf
of Mr. Woodward, $6,208 in matching contributions made by ITC/\DeltaCom on
behalf of Mr. Woodward to the Company's 401(k) Plan and $4,680 in travel
allowances and $6,600 in an automobile allowance paid to Mr. Woodward by
ITC/\DeltaCom.
(14) Represents an automobile allowance of $6,600 paid to Mr. Woodward by
ITC/\DeltaCom as well as the reimbursement by ITC/\DeltaCom of $25,874 in
moving expenses incurred during 1997 by Mr. Woodward.
(15) Represents $498 in life insurance premiums paid by ITC/\DeltaCom on behalf
of Mr. Moses, $5,000 in matching contributions made by ITC/\DeltaCom to the
Company's 401(k) Plan on behalf of Mr. Moses, $3,356 in travel allowances
paid to Mr. Moses by ITC/\DeltaCom and the value of the personal use of a
Company vehicle calculated under Internal Revenue Service regulations to be
$127.
(16) Represents $633 in life insurance premiums paid by ITC/\DeltaCom on behalf
of Mr. Moses, $5,000 in matching contributions made by ITC/\DeltaCom to the
Company's 401(k) Plan on behalf of Mr. Moses, $1,151 in travel allowances
paid to Mr. Moses by ITC/\DeltaCom and the value of the personal use of a
Company vehicle calculated under Internal Revenue Service regulations to be
$371.
(17) Represents $925 in life insurance premiums paid by ITC/\DeltaCom on behalf
of Mr. Moses, $4,750 in matching contributions made by ITC/\DeltaCom to the
Company's 401(k) Plan on behalf of Mr. Moses, and the value of the personal
use of a Company vehicle calculated under Internal Revenue Service
regulations to be $1,296.
11
<PAGE>
Stock Option Grants in 1999
The following table sets forth information concerning all stock options
granted during 1999 to the Named Executive Officers:
Option Grants in 1999
Individual Grants(1)
<TABLE>
<CAPTION>
Percent Potential Realizable
Number of of Total Value at
Shares Options Assumed Annual
Underlying Granted to Exercise Rates of Stock
Options Employees in Price Expiration Price Appreciation
Name Granted(1) Fiscal Year ($/Share) Date(2) for Option Term(3)
- ---- ---------- ------------- -------- ---------- --------------------
5%($) 10%($)
-------- --------
<S> <C> <C> <C> <C> <C> <C>
Andrew M. Walker......... 11,073 0.6 14.75 3/10/09 102,715 260,301
3,000 0.2 24.19 10/25/09 45,634 115,646
Foster O. McDonald....... 6,644 0.3 14.75 3/10/09 61,631 156,185
1,800 0.1 24.19 10/25/09 27,381 69,388
Douglas A. Shumate....... 5,062 0.3 14.75 3/10/09 46,956 118,996
1,400 0.1 24.19 10/25/09 21,296 53,968
Roger F. Woodward........ 5,536 0.3 14.75 3/10/09 51,353 130,139
1,500 0.1 24.19 10/25/09 22,817 57,823
Steven D. Moses.......... 5,413 0.3 14.75 3/10/09 50,212 127,247
1,450 0.1 24.19 10/25/09 22,056 55,896
</TABLE>
(1) All options granted to the Named Executive Officers were granted under
the ITC/\DeltaCom, Inc. 1997 Stock Option Plan and are exercisable
for shares of common stock. These options will generally become exercisable
with respect to 50% of the shares subject to such options on the second
anniversary of the date of grant and with respect to 25% of the shares
subject to such options on each of the third and fourth anniversaries of the
date of grant.
(2) The term of each option generally may not exceed ten years.
(3) The potential realizable value is calculated based on the fair market value
on the date of grant, which is equal to the exercise price of the option,
assuming that the shares appreciate in value from the option grant date
compounded annually until the end of the option term at the rate specified,
5% or 10%, and that the option is exercised and sold on the last day of the
option term for the appreciated share price. Potential realizable value is
net of the option exercise price. The assumed rates of appreciation are
specified in the rules and regulations of the SEC and do not represent the
Company's estimate or projection of future prices of the shares. There is no
assurance provided to any Named Executive Officer or any other holder of
common stock that the actual stock price appreciation over the term of the
applicable options will be at the assumed 5% and 10% levels or at any other
defined level.
Stock Option Exercises in Fiscal 1999
The following table sets forth information concerning all stock options
exercised during fiscal 1999 and unexercised stock options held at the end of
that fiscal year by the Named Executive Officers:
Aggregate Option Exercises in 1999
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at Fiscal Year-End(#) at Fiscal Year-End $ (1)
Acquired on Value -------------------------- --------------------------
Exercise $ Realized $ Exercisable Unexercisable Exercisable Unexercisable
----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Andrew M. Walker......... 75,000 827,022 292,566 290,103 7,332,697 6,820,833
Foster O. McDonald....... -- -- 184,392 190,632 4,625,385 4,511,075
Douglas A. Shumate....... 45,904 578,602 169,639 106,029 4,351,619 2,480,431
Roger F. Woodward........ -- -- 124,316 127,038 3,093,121 2,962,104
Steven D. Moses.......... 35,904 929,444 145,418 109,543 3,705,361 2,538,107
</TABLE>
(1) Represents the difference between the exercise price and the closing price
of the common stock on The Nasdaq National Market on December 31, 1999, the
last trading day in fiscal 1999.
12
<PAGE>
Transactions with Related Parties
The following is a summary of some transactions and relationships among
ITC/\DeltaCom and its directors, executive officers and significant
stockholders with respect to fiscal 1999.
Acquisition of AvData Systems, Inc. During fiscal 1999, the Company acquired
AvData Systems, Inc. by merger under a merger agreement entered into in April
1999 by the Company, AvData and Interstate Fiber Net, Inc. At the closing of the
merger, 983,511 shares of the Company, including 171,898 shares which are being
held in a two-year escrow account to protect against certain contingencies, and
39,915 options for shares of the Company valued at approximately $29.2 million
in the aggregate were issued to the former shareholders of AvData. The merger
agreement also provided that AvData's shareholders would be entitled to receive
additional shares of the Company, referred to as "earnout shares," if the
surviving corporation achieved specified performance goals in fiscal 1999. The
Company expects to make an earnout payment of an additional 123,757 shares and
6,163 options for shares in March 2000 valued at approximately $4.3 million. In
determining revenues for purposes of the earnout formula, the Company agreed to
include revenues from a sale of services that would have been made in 1999 but
was not made because the Company determined that making such sale would have
disrupted existing customer relationships.
<TABLE>
<CAPTION>
Relationship Number of Initial Number of Total Value of
Name to the Company Merger Shares Earnout Shares Shares Received
------ ---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
1. James H. Black, Jr (2) Director and Sr. V.P. 107,005 13,470 $ 3,488,510
2. Donald W. Burton (3) Director 176,102 23,171 $ 5,741,252
3. O. Gene Gabbard Director 4,806 605 $ 156,683
4. J. Smith Lanier, II Principal Stockholder 9,019 1,135 $ 294,022
5. William T. Parr Director 6,102 768 $ 198,930
6. SCANA Corporation (4) Principal Stockholder 49,995 6,294 $ 1,629,921
</TABLE>
(1) Based upon a stock conversion determination price of $28.9563 per share.
(2) Includes 48,175 shares owned jointly with Mr. Black's wife, 355 owned by
Mr. Black's minor daughters and 355 shares owned by Mr. Black's minor son.
(3) Includes 198,273 shares owned by South Atlantic Venture Fund, L.P., of which
Mr. Burton is the managing general partner.
(4) Includes 56,289 shares owned by SCANA Communications Holdings, Inc., a
wholly-owned subsidiary of SCANA Corporation.
Real Property Leases. The Company leases real property from entities
controlled by Mr. Sidney L. McDonald, a stockholder of ITC/\DeltaCom
Communications, Inc.'s predecessor and the father of Foster McDonald, who served
as President of the Company in fiscal 1999. Under the lease agreements, the
Company paid approximately $176,000 in 1999 and is obligated to pay
approximately $169,000 annually from 2000 through April 2005. The lease
agreements are cancelable by either of the parties upon 24 months' notice.
Transactions with ITC Holding Affiliates. Messrs. Lanier, Davenport, Parr,
Dolson, Gabbard, Timmerman and Scott, all of whom are directors of the Company,
are also directors of ITC Holding Company, Inc., the entity from which the
Company was spun-off in 1997. The Company has entered into the business
relationships with subsidiaries or affiliates of ITC Holding described below.
The Company, through its subsidiary Interstate FiberNet, Inc., sells capacity
on its fiber optic network to several ITC Holding subsidiaries and affiliates,
including Powertel, Inc., Powertel PCS, Inc. and KNOLOGY Holdings, Inc.
Together, these entities paid Interstate FiberNet, Inc. approximately $1.6
million for such capacity for fiscal 1999.
The Company, through its subsidiary ITC/\DeltaCom Communications, Inc.,
provides long distance and carrier switched long distance service to several ITC
Holding subsidiaries and affiliates, including KNOLOGY, InterCall, Inc.,
Interstate Telephone Company, Valley Telephone Company, Powertel and EarthLink,
Inc. Together, these
13
<PAGE>
entities paid approximately $11.4 million for fiscal 1999. The Company also
earns commissions by serving as agent for certain interexchange carriers doing
business with InterCall and EarthLink. Under these agreements, the Company
contracts with the interexchange carrier and rebills the appropriate access
charges plus a margin to InterCall and EarthLink. Together, InterCall and
MindSpring paid the Company commissions totaling approximately $1.2 million for
fiscal 1999.
The Company, through Interstate FiberNet, Inc., provides directory assistance
and operator service to Powertel, Interstate Telephone, Valley Telephone, Globe
Telecommunications, Inc. and KNOLOGY. Revenues recorded by the Company for these
services were approximately $1.5 million for fiscal 1999.
The Company entered into an arrangement in January 1998 to lease its executive
offices in West Point, Georgia from KNOLOGY for approximately $11,000 per month.
The Company paid KNOLOGY $55,000 in connection with this lease for fiscal 1999.
This lease terminated April 1999. For fiscal 1999, the Company paid
approximately $46,000 to Interstate Telephone for space leased on a month-to-
month basis.
The Company purchased feature group access and other services from Interstate
Telephone, Valley Telephone, Globe Telecommunications and KNOLOGY totaling
approximately $610,000 for fiscal 1999.
InterCall provides conference calling services to the Company. The Company
paid approximately $62,000 for such services for fiscal 1999.
ITC Holding, through some of its subsidiaries, provides the Company and
its subsidiaries with air travel services. The Company paid $497,000 to ITC
Holding and its affiliates for air travel services during fiscal 1999.
14
<PAGE>
Report of the Compensation Committee of the
Board of Directors of ITC/\DeltaCom
on Executive Compensation
The Compensation Committee of the board of directors has prepared the
following report on the Company's policies with respect to the compensation of
executive officers for the fiscal year ended December 31, 1999. This report, as
well as the performance graph on page 17, are not soliciting materials, are not
deemed filed with the SEC and are not incorporated by reference in any filing of
the Company under the Securities Act of 1933 or the Securities Exchange Act of
1934, whether made before or after the date of this proxy statement and
irrespective of any general incorporation language in any such filing.
The Compensation Committee is charged with making decisions with respect to
the compensation of the Company's executive officers and administering the
Company's stock option plans and stock purchase plan. No member of the
Compensation Committee is an employee of the Company. During 1999, the
Compensation Committee consisted of Messrs. Gabbard, Parr and Scott.
Compensation Policies Toward Executive Officers
The compensation policies of the Company are designed to:
(1) attract, motivate and retain experienced and qualified executives,
(2) increase the overall performance of the Company,
(3) increase stockholder value, and
(4) increase the performance of individual executives.
The Compensation Committee seeks to provide competitive salaries based
upon individual performance together with annual cash bonuses awarded based on
the Company's overall performance relative to corporate objectives, taking into
account individual contributions, teamwork and performance levels. In addition,
it is the policy of the Company to grant stock options to executives upon their
commencement of employment with the Company and annually thereafter in order to
strengthen the alliance of interest between such executives and the Company's
stockholders and to give executives the opportunity to reach the top
compensation levels of the competitive market depending on the Company's
performance, as reflected in the market price of the common stock.
The following describes in more specific terms the elements of compensation
that implement the Compensation Committee's compensation policies, with specific
reference to compensation reported for 1999.
Base Salaries. Base salaries of executives are initially determined by
evaluating the responsibilities of the position, the experience and knowledge of
the individual, and the competitive marketplace for executive talent, including
a comparison to base salaries for comparable positions at peer public companies
in the Company's geographic region. Base salaries for executive officers are
reviewed annually by the Compensation Committee based upon, among other things,
individual performance and responsibilities.
Annual salary adjustments are recommended by the Chief Executive Officer and
President by evaluating the performance of each executive officer after
considering new responsibilities and the previous year's performance. The
Compensation Committee performs the same review of the performance of
the Chief Executive Officer and the President. Individual performance ratings
take into account such factors as achievement of specific goals that are driven
by the Company's strategic plan and attainment of specific individual
objectives. The factors affecting base salary levels are not assigned specific
weights but are subject to adjustments by the Compensation Committee.
Bonuses. The Company's annual bonuses to its executive officers are based on
both corporate and individual performance, as measured by reference to factors
which reflect objective performance criteria over which management generally has
the ability to exert some degree of control. These corporate performance factors
consist of revenue and earnings targets established in the Company's annual
budget. Bonuses for 1999, which were paid in 2000, are based upon the
achievement of such financial and operating factors.
Stock Options. A third component of executive officers' compensation consists
of awards under the ITC/\DeltaCom, Inc. 1997 Stock Option Plan, pursuant
15
<PAGE>
to which the Company grants executive officers and other key employees options
to purchase shares of common stock.
The Compensation Committee grants stock options to the Company's executives in
order to align their interests with the interests of the stockholders. Stock
options are considered by the Compensation Committee to be an effective long-
term incentive because the executives' gains are linked to increases in the
value of the common stock, which in turn provides stockholder gains. The
Compensation Committee generally grants options to new executive officers and
other key employees upon their commencement of employment with the Company and
annually thereafter. The options generally are granted at an exercise price
equal to the closing market price of the common stock at the date of the grant.
Options granted to executive officers typically vest over a period of two to
four years following the date of grant. The maximum option term is ten years.
The full benefit of the options is realized upon appreciation of the stock price
in future periods, thus providing an incentive to create value for the Company's
stockholders through appreciation of stock price. Management of the Company
believes that stock options have been helpful in attracting and retaining
skilled executive personnel.
Stock option grants made to executive officers in 1999 reflect significant
individual contributions relating to the Company's operations and implementation
of the Company's development and growth programs. Certain newly hired executive
officers also received stock option grants at the time of their employment with
the Company. During 1999, the Company granted stock options to purchase an
aggregate of 1,997,393 shares of common stock to approximately 950 employees,
including options to purchase an aggregate of 42,878 shares of common stock to
the Company's five most highly compensated executive officers. The per share
option exercise prices of such options ranged from $14.75 to $29.375, which
generally equaled the fair market value of a share of common stock on the
respective dates of grant.
Other. The Company has adopted a contributory retirement plan, referred to as
the "401(k) Plan", for all of its employees, including executive officers, age
21 and over with at least 6 months and 500 hours of service to the Company. The
401(k) Plan provides that each participant may contribute up to 15% of the
participant's salary, but not to exceed the annual statutory limit. The Company
generally makes matching contributions to each participant's account equal to
100% of the first 2% and 50% of the next 4% of such participant's annual
contribution by salary and/or bonus deferral to the 401(k) Plan.
Chief Executive Officer Compensation
The executive compensation policy described above is applied in setting Mr.
Walker's compensation. Mr. Walker generally participates in the same executive
compensation plans and arrangements available to the other senior executives.
Accordingly, his compensation also consists of annual base salary, annual bonus,
and long-term equity-linked compensation. The Compensation Committee's general
approach in establishing Mr. Walker's compensation is to be competitive with
peer companies, but to have a large percentage of his target compensation based
upon the long-term performance of the Company, as reflected in part in the
market price of the common stock.
Mr. Walker's compensation for the year ended December 31, 1999 included
$163,255 in base salary and a $101,314 cash bonus. Mr. Walker's salary and bonus
payments for 1999 were based on, among other factors, the Company's performance
and the 1998 compensation of chief executive officers of comparable companies,
although his compensation was not linked to any particular group of these
companies.
Compensation Deductibility Policy
Under Section 162(m) of the Internal Revenue Code, and applicable Treasury
regulations, no tax deduction is allowed for annual compensation in excess of $1
million paid to any of the Company's five most highly compensated executive
officers. However, performance-based compensation that has been approved by
stockholders is excluded from the $1 million limit if, among other requirements,
the compensation is payable only upon attainment of pre-established, objective
performance goals and the board committee that establishes such goals consists
only of "outside directors" as defined for purposes of Section 162(m). All of
the members of the Compensation Committee
16
<PAGE>
qualify as "outside directors." The Compensation Committee intends to maximize
the extent of tax deductibility of executive compensation under the provisions
of Section 162(m) so long as doing so is compatible with its determinations as
to the most appropriate methods and approaches for the design and delivery of
compensation to the Company's executive officers.
Respectfully submitted,
Compensation Committee
O. Gene Gabbard
William T. Parr
William H. Scott, III
Compensation Committee Interlocks and Insider Participation
The current members of the Compensation Committee are Messrs. Gabbard, Parr
and Scott.
There are no interlock relationships as defined in the applicable SEC rules.
For a description of certain transactions between such individuals and the
Company, see "Transactions with Related Parties" in this proxy statement.
Stockholder Return Performance Graph
The following graph and table show the cumulative total stockholder return on
the Company's common stock compared to the Standard & Poor's 500 Stock Index and
the Nasdaq Telecommunications Index, composed of publicly traded companies
which are principally in the telecommunications business, for the periods
between October 24, 1997, the date the common stock began trading on The Nasdaq
National Market, and December 31, 1999. The graph assumes $100 was invested on
October 24, 1997 in (1) the Company's common stock, (2) the Standard & Poor's
500 Stock Index and (3) the Nasdaq Telecommunications Index. Total stockholder
return is measured by dividing total dividends, assuming dividend reinvestment,
plus share price change for a period by the share price at the beginning of the
measurement period.
[Stockholder Return Performance Graph appears here]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
INDEXED RETURNS
- -------------------------------------------------------------------------------------------------------------------------------
Base Years Ended
- -------------------------------------------------------------------------------------------------------------------------------
Period
- -------------------------------------------------------------------------------------------------------------------------------
Company / Index October 24, 1997 December 1997 December 1998 December 1999
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ITC/\DELTACOM INC 100 100.00 184.84 334.84
- -------------------------------------------------------------------------------------------------------------------------------
S&P 500 INDEX 100 104.37 134.20 162.44
- -------------------------------------------------------------------------------------------------------------------------------
NASDAQ TELECOM 100 102.60 168.93 294.19
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
CHARTER AMENDMENT PROPOSAL
(Proposal 2)
ITC/\DeltaCom's restated certificate of incorporation currently authorizes the
issuance of a total of 90,000,000 shares of ITC/\DeltaCom common stock, par
value $.01 per share, and 5,000,000 shares of preferred stock, par value $.01
per share, for a total authorized capital stock of 95,000,000 shares. The
stockholders are asked to consider and vote upon a proposal to amend the
restated certificate of incorporation to increase the number of authorized
shares of ITC/\DeltaCom capital stock from 95,000,000 to 205,000,000 shares and
to increase the number of authorized shares of common stock from 90,000,000 to
200,000,000 shares. The number of authorized shares of preferred stock will
remain fixed at 5,000,000 shares. The board of directors approved the proposed
amendment to the restated certificate of incorporation at a meeting held on
January 25, 2000.
Of the presently authorized 90,000,000 shares of common stock, 59,844,872
shares were issued and outstanding as of February 29, 2000 and an additional
18,886,051 shares, referred to as reserved shares, were reserved for issuance
under ITC/\DeltaCom's benefit plans and its convertible securities. If the
charter amendment proposal is approved, ITC/\DeltaCom would have available for
future issuance, excluding the reserved shares, approximately 121,279,077 shares
of common stock. If the charter amendment proposal is not approved,
ITC/\DeltaCom would have available for future issuance, excluding the reserved
shares, approximately 11,279,077 shares of common stock.
Although ITC/\DeltaCom has no present plans or commitments to issue the
proposed additional authorized shares of common stock, the additional shares
would be available for issuance without further action by the Company's
stockholders except as required by law or regulation, including requirements of
the Nasdaq Stock Market. The board of directors believes that the authorization
of the additional shares is desirable so that there will be sufficient shares
available for issuance for purposes that the board of directors may hereafter
determine to be in the best interests of ITC/\DeltaCom and its stockholders.
These purposes could include additional offers of shares for cash and
acquisitions of complementary businesses, as well as the declaration of stock
splits and stock dividends and other general corporate purposes. In its last
two fiscal years, ITC/\DeltaCom has consummated acquisitions of several
complementary businesses, the consideration for which consisted entirely or
partially of common stock, and completed public offerings of additional common
stock and debt securities convertible into common stock. In many situations,
prompt action may be required which would not permit ITC/\DeltaCom to seek
stockholder approval to authorize additional shares for a specific transaction
on a timely basis. The board of directors believes it should have the
flexibility to act promptly in the best interests of ITC/\DeltaCom and its
stockholders. The terms of any future issuance of common stock will be dependent
largely on market and financial conditions and other factors existing at the
time of issuance.
The proposed increase in the authorized shares of common stock is designed to
provide flexibility to the board of directors. However, these additional shares,
if issued, could be used to create impediments to, or otherwise discourage,
persons attempting to gain control of ITC/\DeltaCom, and would have a dilutive
effect on stockholders.
If the stockholders approve the proposal to increase the number of authorized
shares of common stock, the additional authorized shares will be part of the
existing class of common stock and will increase the number of shares of common
stock available for issuance by the Company, but will have no effect upon the
terms of the common stock or the rights of the holders of such shares. If and
when issued, the proposed additional authorized shares of common stock will have
the same rights and privileges as the shares of common stock currently
outstanding. Holders of the proposed additional shares of common stock will not
have preemptive rights to purchase additional shares of common stock.
If the charter amendment proposal is approved by the stockholders, Article 4.1
of the restated certificate of incorporation would read in its entirety as
follows:
4.1 Authorized Shares; Increase in Authorized Shares
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<PAGE>
The total number of shares of all classes of stock that the Corporation
shall have the authority to issue is 205,000,000 shares, of which
200,000,000 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 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).
If the proposal is approved by the stockholders, the proposed amendment to the
restated certificate of incorporation will become effective upon the filing of a
certificate of amendment with the Secretary of State of the State of Delaware
after the annual meeting.
Approval of Proposal
Approval of the charter amendment proposal will require the affirmative vote
of holders of a majority of the shares of common stock outstanding on the record
date for the annual meeting.
The board of directors recommends that the stockholders of ITC/\DeltaCom vote
"FOR" the charter amendment proposal.
19
<PAGE>
ITC/\DELTACOM, INC. 1997 STOCK OPTION PLAN PROPOSAL
(Proposal 3)
The ITC/\DeltaCom, Inc. 1997 Stock Option Plan currently authorizes the
issuance of a total of 7,815,000 shares of ITC/\DeltaCom, pursuant to the plan.
The stockholders are asked to consider and vote upon a proposal to amend the
ITC/\DeltaCom, Inc. 1997 Stock Option Plan to increase the number of shares of
ITC/\DeltaCom common stock that may be issued pursuant to the plan from
7,815,000 shares to 9,815,000 shares. The board of directors approved the
proposed amendment to the restated certificate of incorporation at a meeting
held on January 25, 2000.
The purpose of the ITC/\DeltaCom, Inc. 1997 Stock Option Plan is to advance
the interests of the Company by providing eligible individuals an opportunity to
acquire or increase a proprietary interest in the Company, which thereby will
create a stronger incentive to expend maximum effort for the growth and success
of the Company and will encourage such eligible individuals to remain in the
employ of the Company. The board of directors believes that it is important to
increase the number of shares available under the ITC/\DeltaCom, Inc. 1997 Stock
Option Plan in order to maintain and improve the Company's ability to attract
and retain key personnel, and to serve as an incentive to such personnel to make
extra efforts to contribute to the success of the Company's operations. There
were 1,486,864 shares of common stock authorized for issuance under the
ITC/\DeltaCom, Inc. 1997 Stock Option Plan and not subject to outstanding
awards, as of December 31, 1999. The board of directors believes that this
number of shares is insufficienct to meet the Company's needs for long-term
incentive compensation in the form of stock options.
The only change proposed by the amendment is an increase in the number of
shares of common stock that may be issued under the ITC/\DeltaCom, Inc. 1997
Stock Option Plan. The amendment does not alter the considerations of the
Compensation Committee with respect to grants under the ITC/\DeltaCom, Inc. 1997
Stock Option Plan. Because the award of options is completely within the
discretion of the Compensation Committee, it is not possible to determine at
this time the awards that may be made to officers or other employees.
The following is a summary description of the ITC/\DeltaCom, Inc. 1997 Stock
Option Plan, which was originally approved by the stockholders of the Company on
October 17, 1997 and most recently amended August 5, 1999.
Description of the ITC/\DeltaCom, Inc. 1997 Stock Option Plan
Under the ITC/\DeltaCom, Inc. 1997 Stock Option Plan, the Company may grant
options to purchase up to an aggregate of 7,815,000 shares of common stock,
subject to adjustment under certain circumstances, to employees of the Company,
or other individuals whose participation is determined to be in the best
interests of the Company by the Compensation Committee. As of the December 31,
1999, options to purchase 6,328,136 shares of common stock had been granted
under the ITC/\DeltaCom, Inc. 1997 Stock Option Plan, at exercise prices ranging
from $2.2429 to $29.375 per share.
The ITC/\DeltaCom, Inc. 1997 Stock Option Plan provides for the grant of
options that are intended to qualify as incentive stock options, or ISOs, under
Section 422 of the Internal Revenue Code to employees of the Company, as well as
the grant of non-qualifying options, or NSOs, to officers, directors or key
employees of the Company or other individuals whose participation in the 1997
ITC/\DeltaCom, Inc. Stock Option Plan is determined to be in the best interest
of the Company by the Compensation Committee.
The ITC/\DeltaCom, Inc. 1997 Stock Option Plan is administered by the
Compensation Committee. The Compensation Committee selects the optionees and
determines the number of shares of common stock covered by each option and the
terms of the option agreement to be executed by the Company and the optionee.
The option exercise price for ISOs granted under the ITC/\DeltaCom, Inc. 1997
Stock Option Plan may not be less than 100% of the fair market value of the
common stock on the date of grant, or 110% in the case of an ISO granted to an
optionee beneficially owning more than 10% of the outstanding common stock. The
option exercise price for NSOs granted under the ITC/\DeltaCom, Inc. 1997 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
20
<PAGE>
of an ISO 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 determined by the Compensation Committee and provided in the
particular option agreement. Options covering no more than 1,605,000 shares of
common stock may be granted to an optionee during the term of the ITC/\DeltaCom,
Inc. 1997 Stock Option Plan. There is also a $100,000 limit on the value of
common stock (determined at the time of grant) covered by ISOs that first become
exercisable by an optionee in any calendar year. No option may be granted more
than ten years after the effective date of the ITC/\DeltaCom, Inc. 1997 Stock
Option Plan. ISOs are non-transferable. Subject to the terms of the optionee's
stock option agreement, non-NSOs may be transferable in certain circumstances
for the benefit of the optionee's immediate family members.
Options granted under the ITC/\DeltaCom, Inc. 1997 Stock Option Plan generally
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.
Payment for shares purchased under the ITC/\DeltaCom, Inc. 1997 Stock Option
Plan may be made either in cash or, if permitted by the particular option
agreement, by exchanging shares of common stock of the Company with a fair
market value equal to the total option exercise price plus cash for any
difference. If permitted by the particular option agreement, options may be
exercised by directing that certificates for the shares purchased be delivered
to a licensed broker as agent for the optionee, provided that the broker tenders
to the Company cash or cash equivalents equal to the option exercise price plus
the amount of any taxes that the Company may be required to withhold in
connection with the exercise of the option.
If an employee's employment with the Company terminates by reason of death or
permanent and total disability, the employee's options, to the extent
exercisable, may be exercised within three months after such death or disability
unless a later date is otherwise provided in the particular option agreement,
but not later than the date the option would otherwise expire. If the employee's
employment terminates for any reason other than death or disability, options
held by such optionee terminate on the date of such termination unless a later
date is otherwise provided in the particular option agreement, but not later
than the date the option would otherwise expire.
The board of directors at any time may terminate or suspend the ITC/\DeltaCom,
Inc. 1997 Stock Option Plan. Unless previously terminated, the ITC/\DeltaCom,
Inc. 1997 Stock Option Plan will terminate automatically on March 24, 2007, the
tenth anniversary of the date of adoption of the ITC/\DeltaCom, Inc. 1997 Stock
Option Plan by the board of directors.
Federal Income Tax Consequences
The grant of an option is not a taxable event for the optionee or the Company.
Incentive Stock Options. An optionee will not recognize taxable income upon
exercise of an ISO, except that the alternative minimum tax may apply, and any
gain realized upon a disposition of shares of common stock received pursuant to
the exercise of an ISO will be taxed as long-term capital gain if the optionee
holds the shares of common stock for at least two years after the date of grant
and for one year after the date of exercise referred to as the "holding period
requirement". The Company will not be entitled to any business expense deduction
with respect to the exercise of an ISO, except as discussed below.
For the exercise of an ISO to qualify for the foregoing tax treatment, the
optionee generally must be an employee of the Company from the date the option
is granted through a date within 30 days before the date of exercise of the
option. In the case of an optionee who is disabled, the 30 day period is
extended to one year. In the case of an employee who dies, the 30 day
period and the holding period requirement for shares of common stock received
pursuant to the exercise of the option are waived. Options granted to non-
employee directors cannot qualify as ISOs.
If all of the requirements for incentive option treatment are met except for
the holding period requirement, the optionee will recognize ordinary income upon
the disposition of shares of common stock received pursuant to the exercise of
an ISO in an amount equal to the excess of the fair market value of the shares
of common stock at the time the option was exercised over the exercise price.
The balance of the realized gain, if any, will be long-term or short-term
capital gain, depending upon whether or not the shares of common stock were sold
more than one year after the option was exercised. The Company will be allowed a
business expense deduction to the extent the optionee recognizes ordinary
income, subject to Section 162(m) of the Internal Revenue Code as summarized
below.
If an optionee exercises an ISO by tendering shares of common stock with a
fair market value equal to part or all of the option exercise price, the
exchange of shares will be treated as a nontaxable exchange, except that this
21
<PAGE>
treatment would not apply if the optionee had acquired the shares being
transferred pursuant to the exercise of an ISO and had not satisfied the holding
period requirement summarized above. If the exercise is treated as a tax free
exchange, the optionee would have no taxable income from the exchange and
exercise, other than alternative minimum taxable income as noted above, and the
tax basis of the shares of common stock exchanged would be treated as the
substituted basis for the shares of common stock received. If the optionee used
shares received pursuant to the exercise of an ISO or another statutory option
as to which the optionee had not satisfied the holding period requirement, the
exchange would be treated as a taxable disqualifying disposition of the
exchanged shares, and the excess of the fair market value of the shares tendered
over the optionee's basis in the shares would be taxable.
Non-Qualified Options. Upon exercising a NSO, an optionee will recognize
ordinary income in an amount equal to the difference between the exercise price
and the fair market value of the shares of common stock on the date of exercise
except that, if the optionee is subject to certain restrictions imposed by
securities laws, the measurement date will be deferred, unless the optionee
makes a special tax election within 30 days after exercise to have income
determined without regard to the restrictions. Upon a subsequent sale or
exchange of shares of common stock acquired pursuant to the exercise of a NSO,
the optionee will have taxable gain or loss, measured by the difference between
the amount realized on the disposition and the tax basis of the shares of common
stock, which generally is the amount paid for the shares of common stock plus
the amount treated as ordinary income at the time the option was exercised.
If the Company complies with applicable reporting requirements and with the
restrictions of Section 162(m) of the Internal Revenue Code, it will be entitled
to a business expense deduction in the same amount and generally at the same
time as the optionee recognizes ordinary income. Under Section 162(m) of the
Internal Revenue Code, if the optionee is one of certain specified executive
officers, then, unless certain exceptions apply, the Company is not entitled to
deduct compensation with respect to the optionee, including compensation related
to the exercise of stock options, to the extent such compensation in the
aggregate exceeds $1,000,000 for the taxable year. The options are intended to
comply with the exception to Section 162(m) of the Internal Revenue Code for
"performance-based" compensation.
If the optionee surrenders shares of common stock in payment of part or all of
the exercise price for NSOs, no gain or loss will be recognized with respect to
the shares of common stock surrendered, regardless of whether the shares were
acquired pursuant to the exercise of an ISO, and the optionee will be treated as
receiving an equivalent number of shares of common stock pursuant to the
exercise of the option in a nontaxable exchange. The basis of the shares of
common stock surrendered will be treated as the substituted tax basis for an
equivalent number of option shares received and the new shares will be treated
as having been held for the same holding period as had expired with respect to
the transferred shares. The difference between the aggregate option exercise
price and the aggregate fair market value of the shares of common stock received
pursuant to the exercise of the option will be taxed as ordinary income. The
optionee's basis in the additional shares of common stock will be equal to the
amount included in the optionee's income.
Approval of Proposal
Approval of the ITC/\DeltaCom, Inc. 1997 Stock Option Plan amendment proposal
will require the affirmative vote of holders of a majority of the shares of
common stock present in person or represented by proxy at the annual meeting.
The board of directors recommends that the stockholders of ITC/\DeltaCom vote
"FOR" the ITC/\DeltaCom, Inc. 1997 Stock Option Plan amendment proposal.
22
<PAGE>
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP has acted as ITC/\DeltaCom's independent accountants for
the Company's 1999 fiscal year and has been selected to act as the Company's
independent accountants for the Company's 2000 fiscal year. Representatives of
Arthur Andersen LLP are expected to be present at the annual meeting and will be
afforded the opportunity to make a statement if they so desire and to respond to
appropriate questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than 10% of a
registered class of the Company's equity securities to file with the SEC initial
reports of ownership and reports of changes in ownership of common stock and
other equity securities of ITC/\DeltaCom. Such reporting persons are required by
rules of the SEC to furnish the Company with copies of all Section 16(a) reports
they file. Based solely upon a review of Section 16(a) reports furnished to the
Company for fiscal 1999 or written representations that no other reports were
required, the Company believes that the foregoing reporting persons complied
with all filing requirements for fiscal 1999.
STOCKHOLDER PROPOSALS FOR THE ANNUAL MEETING IN 2001
Any proposal or proposals by a stockholder intended to be included in the
Company's proxy statement and form of proxy relating to the 2001 annual meeting
of stockholders must be received by the Company no later than December 9, 2000,
pursuant to the proxy solicitation rules of the SEC. Nothing in this paragraph
shall be deemed to require the Company to include in its proxy statement and
proxy relating to the 2001 annual meeting of stockholders any stockholder
proposal which may be omitted from the Company's proxy materials pursuant to
applicable regulations of the SEC in effect at the time such proposal is
received. For any proposal that is not submitted for inclusion in next year's
proxy statement but is instead presented directly at the 2001 annual meeting of
stockholders, such proposal shall be considered untimely, and management will be
entitled to vote proxies in its discretion with respect to such proposal, if the
Company does not receive notice of the proposal prior to the close of business
on February 22, 2001.
OTHER MATTERS
The board of directors does not intend to present to the annual meeting any
other matters not referred to above and does not presently know of any matters
that may be presented to the meeting by others. If other matters are properly
brought before the meeting, the persons named in the enclosed proxy will vote on
such matters in their own discretion.
By Order of the Board of Directors
[facsimile signature]
Campbell B. Lanier, III
Chairman of the Board of Directors
Dated: April ___, 2000
23
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Appendix A
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ITC/\DELTACOM, INC.
1997 STOCK OPTION PLAN
(Amended and Restated)
<PAGE>
TABLE OF CONTENTS
Page
----
1. PURPOSE................................................ 2
2. DEFINITIONS............................................ 2
3. ADMINISTRATION......................................... 4
3.1. Committee....................................... 4
3.2. No Liability.................................... 5
4. STOCK.................................................. 5
5. ELIGIBILITY............................................ 5
6. EFFECTIVE DATE AND TERM................................ 5
6.1. Effective Date.................................. 5
6.2. Term............................................ 6
7. GRANT OF OPTIONS....................................... 6
8. LIMITATION ON INCENTIVE STOCK OPTIONS.................. 6
9. OPTION AGREEMENTS...................................... 6
10. OPTION PRICE........................................... 6
11. TERM AND EXERCISE OF OPTIONS........................... 7
11.1. Term............................................ 7
11.2. Exercise by Optionee............................ 7
11.3. Option Period and Limitations on Exercise....... 7
11.4. Method of Exercise.............................. 8
11.5. Parachute Limitations........................... 9
12. TRANSFERABILITY OF OPTIONS............................. 10
13. TERMINATION OF SERVICE RELATIONSHIP.................... 10
14. RIGHTS IN THE EVENT OF DEATH OR DISABILITY............. 11
14.1. Death........................................... 11
14.2. Disability...................................... 12
15. USE OF PROCEEDS........................................ 12
16. SECURITIES LAWS........................................ 12
17. EXCHANGE ACT: RULE 16B-3............................... 13
17.1. General......................................... 13
17.2. Compensation Committee.......................... 13
17.3. Restriction on Transfer of Stock................ 13
18. AMENDMENT AND TERMINATION.............................. 14
19. EFFECT OF CHANGES IN CAPITALIZATION.................... 14
19.1. Changes in Stock................................ 14
20. REORGANIZATION WITH CORPORATION SURVIVING.............. 14
20.1. Other Reorganizations; Sale of Assets or Stock.. 15
20.2. Adjustments..................................... 15
20.3. No Limitations on Corporation................... 15
21. WITHHOLDING............................................ 16
22. DISCLAIMER OF RIGHTS................................... 16
23. NONEXCLUSIVITY......................................... 16
24. GOVERNING LAW.......................................... 16
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<PAGE>
ITC/\DELTACOM, INC.
1997 STOCK OPTION PLAN
(Amended and Restated)
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.
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<PAGE>
2.6 "Corporation" means ITC/\DELTACOM, Inc.
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.
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<PAGE>
2.15 "Option Agreement" means the written agreement evidencing the
grant of an Option hereunder.
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.
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<PAGE>
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
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 9,815,000
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.
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<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 1,605,000 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.
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
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<PAGE>
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
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,
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<PAGE>
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 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
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<PAGE>
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
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.
-9-
<PAGE>
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 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
-10-
<PAGE>
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 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
-11-
<PAGE>
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.
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
-12-
<PAGE>
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.
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.
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<PAGE>
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 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.
-14-
<PAGE>
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,
whether or not such Option was otherwise exercisable at the time such
termination occurs, but subject to any additional provisions that the Committee
may, in its sole 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
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<PAGE>
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 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>
ITC/\DELTACOM, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 11, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of ITC/\DeltaCom, Inc. (the "Company") hereby
appoints Douglas A. Shumate and J. Thomas Mullis, or either of them, with full
power of substitution, as proxies to cast all votes, as designated below, which
the undersigned stockholder is entitled to cast at the 2000 annual meeting of
stockholders (the "Annual Meeting") to be held on Thursday, May 11, 2000, at
11:00 a.m., local time, at the New Horizon Community Theatre, 411 West 8th
Street, West Point, Georgia, and at any adjournment thereof, upon the following
matters and any other matter as may properly come before the Annual Meeting or
any adjournments thereof.
Proposal 1: TO ELECT FOUR DIRECTORS TO SERVE ON THE BOARD OF DIRECTORS, EACH
- ----------
FOR A THREE-YEAR TERM AND UNTIL THEIR RESPECTIVE SUCCESSORS ARE ELECTED AND
QUALIFIED.
FOR all nominees listed WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees listed
contrary below)
[_] [_]
Nominees: Campbell B. Lanier, III
Andrew M. Walker
William B. Timmerman
James H. Black, Jr.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
- ------------------------------------------------------------------------------
Proposal 2: TO APPROVE AN AMENDMENT TO ARTICLE 4.1 OF THE COMPANY'S RESTATED
- ----------
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF THE
COMPANY'S CAPITAL STOCK.
FOR: [_] AGAINST: [_] ABSTAIN: [_]
Proposal 3: TO APPROVE AN AMENDMENT TO THE COMPANY'S 1997 STOCK OPTION PLAN
- ----------
TO INCREASE THE NUMBER OF THE COMPANY'S COMMON STOCK THAT MAY BE ISSUED
THEREUNDER.
FOR: [_] AGAINST: [_] ABSTAIN: [_]
This proxy, when properly executed, will be voted as directed by the undersigned
stockholder and in accordance with the best judgment of the proxies as to other
matters. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR" THE NOMINEES
LISTED IN PROPOSAL 1, "FOR" PROPOSAL 2, "FOR" PROPOSAL 3, AND IN ACCORDANCE WITH
THE BEST JUDGMENT OF THE PROXIES AS TO OTHER MATTERS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED IN PROPOSAL
1, "FOR" PROPOSAL 2, AND "FOR" PROPOSAL 3.
The undersigned stockholder hereby acknowledges receipt of the Notice of Annual
<PAGE>
Meeting of Stockholders and Proxy Statement relating to the Annual Meeting and
hereby revokes any proxy or proxies heretofore given. The undersigned
stockholder may revoke this proxy at any time before it is voted by filing with
the Secretary of the Company a written notice of revocation or a duly executed
proxy bearing a later date, or by attending the Annual Meeting and voting in
person.
If you receive more than one proxy card, please date, sign and return all cards
in the accompanying envelope.
Dated:
--------------------------------------
--------------------------------------------
--------------------------------------------
Signature of Stockholder or
Authorized Representative
(Please date and sign here exactly as name
appears hereon. When signing as attorney,
executor, administrator, trustee, guardian or
other fiduciary, give full title as such; and
when stock has been issued in the name of two
or more persons, all should sign.)
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
POSTAGE PREPAID ENVELOPE.
