ex10-1.htm


    
      

    

    Exhibit
10.1

    


     

     

    OTELCO
INC. EXECUTIVE LONG TERM INCENTIVE PLAN

    (effective
January 1, 2009)

     

    
 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    OTELCO
INC. EXECUTIVE LONG TERM INCENTIVE PLAN

    (effective
January 1, 2009)

    


    TABLE
OF CONTENTS

     

    Page

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	
                                    SECTION
      1.

                                  	
                                    INTRODUCTION
      AND DEFINITIONS

                                  	
                                    1

                                  
	 	 	 
	 
      	
                                    1.1.

                                  	
                                    Preamble

                                  	 
      
	 
      	
                                    1.2.

                                  	
                                    Definitions

                                  	 
      
	 
      	 
      	
                                    1.2.1.

                                  	
                                    Administrator

                                  	 
      
	 
      	 
      	
                                    1.2.2.

                                  	
                                    Affiliate

                                  	 
      
	 
      	 
      	
                                    1.2.3.

                                  	
                                    Award

                                  	 
      
	 
      	 
      	
                                    1.2.4.

                                  	
                                    Beneficiary

                                  	 
      
	 
      	 
      	
                                    1.2.5.

                                  	
                                    Board
      of Directors

                                  	 
      
	 
      	 
      	
                                    1.2.6.

                                  	
                                    Cause

                                  	 
      
	 
      	 
      	
                                    1.2.7.

                                  	
                                    Change
      in Control

                                  	 
      
	 
      	 
      	
                                    1.2.8.

                                  	
                                    Code

                                  	 
      
	 
      	 
      	
                                    1.2.9.

                                  	
                                    Committee

                                  	 
      
	 
      	 
      	
                                    1.2.10.

                                  	
                                    Disability
      or Disabled

                                  	 
      
	 
      	 
      	
                                    1.2.11.

                                  	
                                    Effective
      Date

                                  	 
      
	 
      	 
      	
                                    1.2.12.

                                  	
                                    Employer

                                  	 
      
	 
      	 
      	
                                    1.2.13.

                                  	
                                    ERISA

                                  	 
      
	 
      	 
      	
                                    1.2.14.

                                  	
                                    Participant

                                  	 
      
	 
      	 
      	
                                    1.2.15.

                                  	
                                    Plan

                                  	 
      
	 
      	 
      	
                                    1.2.16.

                                  	
                                    Plan
      Statement

                                  	 
      
	 
      	 
      	
                                    1.2.17.

                                  	
                                    Plan
      Year

                                  	 
      
	 
      	 
      	
                                    1.2.18.

                                  	
                                    Retires
      and Retirement

                                  	 
      
	 
      	 
      	
                                    1.2.19.

                                  	
                                    Separation
      from Service

                                  	 
      
	 
      	 
      	
                                    1.2.20.

                                  	
                                    Vest
      and Vested

                                  	 
      
	 
      	
                                    1.3.

                                  	
                                    Rules
      of Interpretation

                                  	 
      
	 	 	 
	
                                    SECTION
      2.

                                  	
                                    ELIGIBILITY
      AND PARTICIPATION

                                  	
                                    3

                                  
	 	 	 
	
                                    SECTION
      3.

                                  	
                                    AWARDS

                                  	
                                    4

                                  
	 	 	 
	 
      	
                                    3.1.

                                  	
                                    Amount
      of Award

                                  	 
      
	 	 	 
	
                                    SECTION
      4.

                                  	
                                    PERFORMANCE
      MEASUREMENT

                                  	
                                    4

                                  
	 	 	 
	
                                    SECTION
      5.

                                  	
                                    VESTING

                                  	
                                    4

                                  
	 	 	 
	 
      	
                                    5.1.

                                  	
                                    Vesting
      Events

                                  	 
      
	 
      	 
      	
                                    5.1.1.

                                  	
                                    Disability

                                  	 
      
	 
      	 
      	
                                    5.1.2.

                                  	
                                    Death

                                  	 
      
	 
      	 
      	
                                    5.1.3.

                                  	
                                    Retirement

                                  	 
      
	 
      	 
      	
                                    5.1.4.

                                  	
                                    Change
      in Control

                                  	 
      
	 
      	 
      	
                                    5.1.5.

                                  	
                                    Involuntarily
      Separation from Service Other Than for Cause

                                  	 
      
	 
      	 
      	
                                    5.1.6.

                                  	
                                    Termination
      of the Plan

                                  	 
      


                          

                        

                      

                       

                      
                        
                          
                          

                        

                        
                          i

                          
                            

                          

                        

                        
                          
                          

                        

                      

                       

                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    	 
      	
                                                            5.2.

                                                          	
                                                            Forfeiture

                                                          	 
      
	 	 	 
	
                                                            SECTION
      6.

                                                          	
                                                            UNFUNDED
      PLAN

                                                          	
                                                            5

                                                          
	 	 	 
	
                                                            SECTION
      7.

                                                          	
                                                            DISTRIBUTIONS

                                                          	
                                                            5

                                                          
	 	 	 
	 
      	
                                                            7.1.

                                                          	
                                                            Distribution

                                                          	 
      
	 
      	 
      	
                                                            7.1.1.

                                                          	
                                                            Distribution
      in Cash

                                                          	 
      
	 
      	 
      	
                                                            7.1.2.

                                                          	
                                                            Time
      of Distribution

                                                          	 
      
	 
      	 
      	
                                                            7.1.3.

                                                          	
                                                            Death
      Prior to Distribution

                                                          	 
      
	 
      	 
      	
                                                            7.1.4.

                                                          	
                                                            Cooperation
      with Committee

                                                          	 
      
	 
      	
                                                            7.2.

                                                          	
                                                            Designation
      of Beneficiaries

                                                          	 
      
	 
      	 
      	
                                                            7.2.1.

                                                          	
                                                            Right
      to Designate

                                                          	 
      
	 
      	 
      	
                                                            7.2.2.

                                                          	
                                                            Failure
      of Designation

                                                          	 
      
	 	 	 
	
                                                            SECTION
      8.

                                                          	
                                                            SPENDTHRIFT
      PROVISION

                                                          	
                                                            6

                                                          
	 	 	 
	
                                                            SECTION
      9.

                                                          	
                                                            AMENDMENT
      AND TERMINATION

                                                          	
                                                            7

                                                          
	 	 	 
	 
      	
                                                            9.1.

                                                          	
                                                            Amendment

                                                          	 
      
	 
      	
                                                            9.2.

                                                          	
                                                            Plan
      Termination

                                                          	 
      
	 	 	 	 
	
                                                            SECTION
      10.

                                                          	
                                                            INDEMNIFICATION

                                                          	
                                                            7

                                                          
	 	 	 
	
                                                            SECTION
      11.

                                                          	
                                                            DETERMINATIONS
      — CLAIM PROCEDURES

                                                          	
                                                            8

                                                          
	 	 	 
	 
      	
                                                            11.1.

                                                          	
                                                            Determinations

                                                          	 
      
	 
      	
                                                            11.2.

                                                          	
                                                            Claim
      and Review Procedures

                                                          	 
      
	 
      	 
      	
                                                            11.2.1.

                                                          	
                                                            Initial
      Claim

                                                          	 
      
	 
      	 
      	
                                                            11.2.2.

                                                          	
                                                            Notice
      of Initial Adverse Determination

                                                          	 
      
	 
      	 
      	
                                                            11.2.3.

                                                          	
                                                            Request
      for Review

                                                          	 
      
	 
      	 
      	
                                                            11.2.4.

                                                          	
                                                            Claim
      on Review

                                                          	 
      
	 
      	 
      	
                                                            11.2.5.

                                                          	
                                                            Notice
      of Adverse Determination for Claim on Review

                                                          	 
      
	 
      	
                                                            11.3.

                                                          	
                                                            Deadline
      to File Claim

                                                          	 
      
	 
      	
                                                            11.4.

                                                          	
                                                            Exhaustion
      of Administrative Remedies

                                                          	 
      
	 
      	
                                                            11.5.

                                                          	
                                                            Deadline
      to File Legal Action

                                                          	 
      
	 
      	
                                                            11.6.

                                                          	
                                                            Knowledge
      of Fact by Participant Imputed to Beneficiary and Others

                                                          	 
      
	 	 	 
	
                                                            SECTION
      12.

                                                          	
                                                            PLAN
      ADMINISTRATION

                                                          	
                                                            10

                                                          
	 	 	 
	 
      	
                                                            12.1.

                                                          	
                                                            Service
      of Process

                                                          	 
      
	 
      	
                                                            12.2.

                                                          	
                                                            Receipt
      of Documents

                                                          	 
      


                                                  

                                                   

                                                  
                                                    
                                                      
                                                      

                                                    

                                                    
                                                      ii

                                                      
                                                        

                                                      

                                                    

                                                    
                                                      
                                                      

                                                    

                                                  

                                                   

                                                  
                                                    
                                                      	
                                                              SECTION
      13.

                                                            	
                                                              IN
      GENERAL

                                                            	
                                                              11

                                                            
	 	 	 
	 
      	
                                                              13.1.

                                                            	
                                                              Disclaimers

                                                            	 
      
	 
      	 
      	
                                                              13.1.1.

                                                            	
                                                              Effect
      on Employment

                                                            	 
      
	 
      	 
      	
                                                              13.1.2.

                                                            	
                                                              Sole
      Source of Benefits

                                                            	 
      
	 
      	
                                                              13.2.

                                                            	
                                                              Applicable
      Laws

                                                            	 
      
	 
      	 
      	
                                                              13.2.1.

                                                            	
                                                              ERISA
      Status

                                                            	 
      
	 
      	 
      	
                                                              13.2.2.

                                                            	
                                                              Internal
      Revenue Code Status

                                                            	 
      
	 
      	
                                                              13.3.

                                                            	
                                                              Choice
      of Law

                                                            	 
      
	 
      	
                                                              13.4.

                                                            	
                                                              Plan
      Statement Controls

                                                            	 
      


                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    


    
      
        
        

      

      
        iii

        
          

        

      

      
        
        

      

    

    


    OTELCO
INC. EXECUTIVE LONG TERM INCENTIVE PLAN

    (effective
January 1, 2009)

    


    SECTION
1

     

    INTRODUCTION
AND DEFINITIONS

     

    1.1.          Preamble.  The
purposes of the Plan (as defined below in Section 1.2.15) are to provide
competitive
incentive opportunities within the context of Otelco Inc.’s overall compensation
program and to facilitate Otelco Inc.’s success.

     

    1.2.          Definitions.  When
the following terms are used herein with initial capital letters, they shall
have the following meanings:

     

    1.2.1.      
Administrator — the
Chief Executive Officer of the Employer, except that with respect to decisions
involving the Chief Executive Officer, the Administrator shall be the
Committee.

     

    1.2.2.       Affiliate — a business entity
which is not the Employer but which is part of a “controlled group” or under
“common control” with the Employer, as those terms are defined in
section 414(b) and (c) of the Code as required to be aggregated with the
Employer under section 409A based on eighty percent (80%) or greater
control.

     

    1.2.3.       Award — a grant of a potential
incentive payment to a Participant based on the Employer’s
performance.

     

    1.2.4.       Beneficiary — a person
designated by a Participant (or automatically by operation of this Plan
Statement) to receive all or a part of a Participant’s Award in the event of the
Participant’s death prior to full distribution thereof.  A person so
designated shall not be considered a Beneficiary until the death of the
Participant.

     

    1.2.5.       Board of Directors — the Board
of Directors of the Employer.  Functions generally assigned to the
Board of Directors may be delegated to and discharged by the Compensation
Committee of the Employer or other delegate, which shall report its actions to
the Board of Directors.

     

    1.2.6.       Cause — a Participant’s
Separation from Service shall be for cause for purposes of this Plan if it is
due to any of the following:

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          	 
      	(a)	Failure to
      Perform.  The Participant breaches or violates the terms
      of the Participants’s employment agreement, if any, or fails to
      substantially perform the duties of the Participant’s position (including
      gross negligence, but excluding ordinary negligence), as determined by the
      Administrator.
	 	 	 
	 
      	
                                  (b)

                                	
                                  Misconduct.  The
      Participant engages in (i) substantial misconduct, including but not
      limited to a material violation of the personnel policies of the Employer
      and its Affiliates, (ii) a material violation of the Otelco Inc. Code
      of Ethics, or (iii) gross malfeasance that harms the Employer and its
      Affiliates, as determined by the Administrator.

                                
	 	 	 
	 
      	
                                  (c)

                                	
                                  Felony.  The
      Participant is convicted of or pleads guilty to a
  felony.

                                


                        

                      

                       

                      
                        
                          
                          

                        

                        
                          1

                          
                            

                          

                        

                        
                          
                          

                        

                      

                       

                    

                  

                

              

            

          

        

      

    

    1.2.7.       Change in Control — a change
in control shall have the meaning of the definition of "Change of Control" set
forth in Otelco Inc.'s Second Amended and Restated Credit Agreement, dated as of
October 20, 2008, as the same may be amended, restated, supplemented, waived,
replaced, restructured, repaid, increased, refunded, refinanced or otherwise
modified from time to time; provided that if such agreement is not in effect,
Change in Control shall be a change in control for the purposes of section 409A
of the Code.

     

    1.2.8.       Code — the Internal Revenue
Code of 1986, including applicable regulations for the specified section of the
Code.  Any reference in this Plan Statement to a section of the Code,
including the applicable regulation, shall be considered also to mean and refer
to any subsequent amendment or replacement of that section or
regulation.

     

    1.2.9.       Committee — the Compensation
Committee of the Employer’s Board of Directors.  Functions generally
assigned to the Committee may be delegated to and discharged by the officers and
employees of the Employer.

     

    1.2.10.     Disability or Disabled — a
determination the Participant is disabled under the Employer’s long term
disability plan or a determination by the Social Security Administration that
the Participant is disabled.

     

    1.2.11.     Effective Date —
January 1, 2009.

     

    1.2.12.     Employer — Otelco Inc., a
Delaware corporation.

     

    1.2.13.     ERISA — the Employee
Retirement Income Security Act of 1974, including applicable regulations for the
specified section of ERISA.  Any reference in this Plan Statement to a
section of ERISA, including the applicable regulation, shall be considered also
to mean and refer to any subsequent amendment or replacement of that section or
regulation.

     

    1.2.14.     Participant — the Chief
Executive Officer of Otelco Inc. and additional employees in the management of
Otelco Inc. (consisting of any employee who is selected by the
Committee).  An employee who has become a Participant shall continue
as a Participant in the Plan until the date the Participant no longer has an
unpaid Award under the Plan.

     

    1.2.15.     Plan — the executive long term
incentive plan established for the benefit of employees eligible to participate
therein, as set forth in this Plan Statement.

     

    1.2.16.     Plan Statement — this document
entitled “Otelco Inc. Executive Long Term Incentive Plan.”

     

    1.2.17.     Plan Year — each calendar year
beginning on January 1 and ending on December 31.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    1.2.18.     Retires and Retirement — a
Participant’s voluntary Separation from Service on or after attaining age
fifty-five (55) and completing ten (10) years of service provided the
Administrator determines the Participant’s Separation from Service is not due to
Cause (and provided the Administrator determines the Participant would not have
had a Separation from Service for Cause if the Participant had not voluntarily
terminated employment). Years of service with respect to employees of acquired
entities shall be determined by the Administrator.  The Chief
Financial Officer of the Company on the effective date of this Plan shall be
deemed to have satisfied the above age and service requirements.

     

    1.2.19.     Separation from Service — a
Participant’s termination of employment.

     

    1.2.20.     Vest and Vested — means
nonforfeitable.

     

    1.3.          Rules of
Interpretation.  Whenever appropriate, words used herein in the
singular may be read in the plural, or words used herein in the plural may be
read in the singular; the masculine may include the feminine and the feminine
may include the masculine; and the words “hereof,” “herein” or “hereunder” or
other similar compounds of the word “here” shall mean and refer to this entire
Plan Statement and not to any particular paragraph or Section of this Plan
Statement unless the context clearly indicates to the contrary.  The
titles given to the various Sections of this Plan Statement are inserted for
convenience of reference only and are not part of this Plan Statement, and they
shall not be considered in determining the purpose, meaning or intent of any
provision hereof.  Any reference in this Plan Statement to a statute
or regulation shall be considered also to mean and refer to any subsequent
amendment or replacement of that statute or regulation.

     

    SECTION
2

     

    ELIGIBILITY
AND PARTICIPATION

     

    The
Committee shall determine each year the employees who are eligible to
participate in this Plan. The Chief Executive Officer of the Employer shall
notify each employee selected of the employee’s eligibility for an Award under
the Plan.

     

    SECTION
3

     

    AWARDS

     

    3.1.          Amount of Award. Before the
start of each Plan Year during the term of this Plan, the Committee shall
establish a target level of EBITDA (“Target EBITDA”) for such Plan
Year.  At the close of a Plan Year, the Company’s audited financial
statements shall be used to calculate the Company’s actual level of EBITDA
(“Actual EBITDA”) for such Plan Year.  An “Incentive Pool Amount”
shall be established for each Plan Year based on the amount, if any, by which
Actual EBITDA exceeds Target EBITDA (“Excess EBITDA”) for such Plan
Year.  The Committee shall determine the percentage of Excess EBITDA
to be distributed under the Plan. If Actual EBITDA does not exceed Target EBITDA
for a Plan Year, no Incentive Pool Amount shall be established for such Plan
Year.  The Incentive Pool Amount shall be allocated among
Participants, in the sole discretion of the Committee, based on the
Participant’s contribution to the overall financial results of the Company or
such other factors as the Committee deems relevant, on or as soon as
administratively practicable following the close of such Plan Year (the
“Crediting Date”).

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    


    SECTION
4

     

    PERFORMANCE
MEASUREMENT

     

    The
Committee shall have sole discretion to interpret and determine the measurements
of the Employer’s performance for the Plan Year and the allocation of Awards to
Participants.

     

    SECTION
5

     

    VESTING

     

    5.1.          Vesting
Events.  Amounts awarded to a Participant shall vest ratably
over a three year period commencing with the Plan Year in which the Award
relates. On the last day of the Plan Year to which an Award relates a
participant shall become vested in one third of the amount Awarded for that Plan
Year provided the Participant is employed on the last day of that Plan Year. A
Participant shall become vested in the second third of an Award for a Plan Year
on the last day of the year following the Plan Year in which an Award relates
provided the Participant is employed on the last day of year following the Plan
Year to which the Award relates. A Participant shall become vested in the final
third of an Award for a Plan Year on the last day of the second year following
the Plan Year in which an Award relates provided the Participant is employed on
the last day of second year following the Plan Year to which the Award relates.
Prior to that date, the Participant shall have no interest in or right to any
amount under the Plan.  Vested amounts will be distributed to the
Participant in accordance with Section 7.  Notwithstanding the
foregoing, the Participant shall become Vested upon the occurrence of any of the
following events while employed by the Employer:

     

    5.1.1.       Disability.  If a
Participant becomes Disabled, the Participant’s Award shall become Vested as of
the date the Administrator determines that the Participant is
Disabled.

     

    5.1.2.       Death.  If a
Participant dies, the Participant’s Award shall become Vested as of the date of
the Participant’s death.

     

    5.1.3.       Retirement.  If a
Participant Retires, the Participant’s Award shall become Vested as of the date
of the Participant’s Retirement.

     

    5.1.4.       Change in
Control.  If there is a Change in Control, the Participant’s
Award shall become Vested as of the date a day before the Change in
Control.

     

    5.1.5.       Involuntary Separation from Service
Other Than for Cause.  If a Participant has an involuntary
Separation from Service for reasons other than Cause, the Administrator may
decide in its sole discretion to fully or partially Vest the
Participant.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    5.1.6.       Termination of the
Plan.  If the Board of Directors terminates the Plan, all
Awards shall become Vested prior to the Plan’s termination.

     

    5.2.          Forfeiture.  The
Participant’s Award shall not Vest and shall be forfeited if the Participant has
a Separation from Service before the end of the Performance Period unless one of
the exceptions listed in Section 5.1 applies.

     

    SECTION
6

     

    UNFUNDED
PLAN

     

    The
obligations to make payments under the Plan constitute only the unsecured (but
legally enforceable) promises of the Employer.  No Participant shall
have any lien, prior claim or other security interest in any property of the
Employer or the Affiliates.  The Employer shall have no obligation to
establish or maintain any fund, trust or account for funding or paying the
Plan’s benefits.  If such a fund, trust or account is established, the
property therein shall remain the property of the Employer.

     

    SECTION
7

     

    DISTRIBUTIONS

     

    7.1.          Distribution.

     

    7.1.1.       Distribution in
Cash.  All distributions under the Plan shall be made in cash
in a single lump sum.

     

    7.1.2.       Time of Distribution. If a
Participant becomes Vested in the Participant’s Award, the Participant’s Award
shall be paid no later than March 14th of the
year following the year such amounts vest, provided however, that the
Participant’s death, Disability, Retirement, Involuntary Separation from Service
for reasons other than Cause, or a Change in Control shall not accelerate the
payment date.

     

    7.1.3.       Death Prior to
Distribution.  If the Participant dies before distribution of
the Participant’s Award, the Award shall be distributed to the Participant’s
Beneficiary.

     

    7.1.4.       Cooperation with
Committee.  Each individual who claims to be or is entitled to
benefits shall cooperate with the Committee (including, but not limited to
signing documents).  Each individual who claims to be or is entitled
to benefits shall furnish the Committee with such documents, evidence, data or
information as the Committee considers necessary or desirable for the purpose of
administering the Plan.

     

    7.2.          Designation of
Beneficiaries.

     

    7.2.1.       Right to
Designate.  Each Participant may designate a Beneficiary on a
form prepared by and filed with the Employer.  The Participant may
change or revoke such designation from time to time without notice to or consent
from any Beneficiary or spouse.  No such designation, change or
revocation shall be effective unless signed by the Participant and received by
the division or person at the Employer designated by the Committee during the
Participant’s lifetime.  The Committee may establish rules for the use
of electronic signatures.  Until such rules are established,
electronic signatures shall not be effective.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    7.2.2.       Failure of
Designation.  If a Participant (i) fails to designate a
Beneficiary, (ii) designates a Beneficiary and thereafter revokes such
designation without naming another Beneficiary, or (iii) designates one or
more Beneficiaries and all such Beneficiaries so designated fail to survive the
Participant, such Participant’s said death benefit, or the part thereof as to
which such Participant’s designation fails, as the case may be, shall be payable
to the first class of the following classes of automatic Beneficiaries with a
member surviving the Participant and (except in the case of his surviving issue)
in equal shares if there is more than one member in such class surviving the
Participant:

     

    Participant’s
surviving spouse

    Participant’s
surviving issue per stirpes and not per capita

    Participant’s
surviving parents

    Representative
of Participant’s estate.

     

    SECTION
8

     

    SPENDTHRIFT
PROVISION

     

    No
Participant or Beneficiary shall have any transmissible interest in any Award
nor shall any Participant or Beneficiary have any power to anticipate, alienate,
dispose of, pledge or encumber the same while it is in the possession or control
of the Employer, nor shall the Employer recognize any assignment thereof, either
in whole or in part, nor shall the Award be subject to attachment, garnishment,
execution following judgment or other legal process (including without
limitation any domestic relations order, whether or not a “qualified domestic
relations order” under section 414(p) of the Code).

     

    SECTION
9

     

    AMENDMENT
AND TERMINATION

     

    9.1.          Amendment.  The
Board of Directors reserves the power to amend this Plan Statement either
prospectively or retroactively or both in any respect. In addition, the
Administrator may amend the Plan in any respect (i) to comply with changes
in the law provided the amendment does not materially increase the cost of the
Plan, and (ii) to revise the Plan in a manner that does not materially
alter the Plan or materially increase the cost of the Plan.  The
Administrator shall report all amendments to the Committee and the Board of
Directors. Notwithstanding the
foregoing, if there is a material adverse change in the Employer’s financial
condition (as determined by the Committee), the Committee may reduce or
eliminate the amount of the Participants’ Awards under this Plan, provided
however, that the Committee can not reduce or eliminate any Award that is
already vested.

     

    9.2.          Plan
Termination.  The Board of Directors shall have the right at
any time to terminate the Plan.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    SECTION
10

     

    INDEMNIFICATION

     

    Except as
prohibited by applicable law, the Employer shall defend, indemnify and hold
harmless from any and all liabilities, costs and expenses (including legal
fees), to the extent not covered by insurance, each director, officer, and
employee of the Employer  and its Affiliates, who is a party to or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding with respect to the Plan, wherever brought, whether civil,
criminal, administrative or investigative by reason of the fact that the
individual is or was a fiduciary or administrator of the Plan, or by reason of
acting in any other capacity in connection with the Plan.

    


    Notwithstanding
the foregoing, no such indemnification shall be required or provided if such
liability arises (i) from the individual’s claim for the individual’s own
benefit, (ii) from the willful misconduct, fraud or bad faith of the
individual, or (iii) from the criminal misconduct of such individual if the
individual had reason to believe the conduct was unlawful.

    


    The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not,
of itself, create a presumption that the person did not act in good faith, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that the individual’s conduct was unlawful.  This
indemnification shall continue as to an individual who has ceased to be a
director, officer, and employee of the Employer and its Affiliates and shall
inure to the benefit of the heirs, executors and administrators of such an
individual.

    


    SECTION
11

     

    DETERMINATIONS
— CLAIM PROCEDURES

     

    11.1.        Determinations.  The
Administrator and the Committee have discretionary authority to grant or deny
benefits under the Plan.  The Administrator and the Committee shall
have the discretion, authority and responsibility to interpret and construe this
Plan Statement and all relevant documents and information, and to determine all
factual and legal questions under the Plan, including but not limited to the
entitlement of all persons to benefits and the amounts of their
benefits.  The Administrator and the
Committee shall make such
determinations as may be required from time to time in the administration of the
Plan.  This discretionary authority shall include all matters arising
under the Plan.  The Administrator and the Committee may retain
advisors to assist them in making their determinations under the
Plan.

     

    11.2.        Claim and Review Procedures.
Until modified by the Committee, the claim and review procedures set forth in
this Section shall be the mandatory claim and review procedures for the
resolution of disputes and disposition of claims filed under the Plan to be
reviewed by the Administrator.

     

    11.2.1.     Initial Claim.  If
there is a dispute, an individual may, subject to any applicable deadline, file
with the Administrator a written claim for benefits under the Plan in a form and
manner prescribed by the Administrator.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    
      
        
          	 
      	
                  (a)

                	
                  If
      the Administrator denies the claim in whole or in part, the Administrator
      shall notify the claimant of the adverse benefit determination within
      ninety (90) days after receipt of the claim.

                
	 	 	 
	 
      	
                  (b)

                	
                  The
      ninety (90) day period for making the claim determination may be extended
      for ninety (90) days if the Administrator determines that special
      circumstances require an extension of time for determination of the claim,
      provided that the Administrator notifies the claimant, prior to the
      expiration of the initial ninety (90) day period, of the special
      circumstances requiring an extension and the date by which a claim
      determination is expected to be
made.

                


        

         

      

    

    11.2.2.     Notice of Initial Adverse
Determination. A notice of an adverse
determination shall set forth in a manner calculated to be understood by the
claimant:

     

    
      
        
          
            	 
      	
                    (a)

                  	
                    the
      specific reasons for the adverse determination;

                  
	 	 	 
	 
      	
                    (b)

                  	
                    references
      to the specific provisions of this Plan Statement (or other applicable
      Plan document) on which the adverse determination is based;
      and

                  
	 	 	 
	 
      	
                    (c)

                  	
                    a
      description of any additional material or information necessary to perfect
      the claim and an explanation of why such material or information is
      necessary.

                  


          

           

        

      

    

    11.2.3.     Request for
Review.  Within sixty (60) days after receipt of an initial
adverse benefit determination notice, the claimant may file with the
Administrator a written request for a review of the adverse determination and
may, in connection therewith submit written comments, documents, records and
other information relating to the claim for benefits.  The
Administrator will forward the request for review to the
Committee.  Any request for review of the initial adverse
determination not filed within sixty (60) days after receipt of the initial
adverse determination notice shall be untimely.

     

    11.2.4.     Claim on Review.  If
the Committee denies the claim upon review, in whole or in part, the Committee
shall notify the claimant of the adverse benefit determination within sixty (60)
days after receipt of such a request for review.

     

    
      
        
          
            	 
      	
                    (a)

                  	
                    The
      sixty (60) day period for deciding the claim on review may be extended for
      sixty (60) days if the Committee determines that special circumstances
      require an extension of time for determination of the claim, provided that
      the Committee notifies the claimant, prior to the expiration of the
      initial sixty (60) day period, of the special circumstances requiring an
      extension and the date by which a claim determination is expected to be
      made.

                  
	 	 	 
	 
      	
                    (b)

                  	
                    In
      the event that the time period is extended due to a claimant’s failure to
      submit information necessary to decide a claim on review, the claimant
      shall have sixty (60) days within which to provide the necessary
      information and the period for making the claim determination on review
      shall be tolled from the date on which the notification of the extension
      is sent to the claimant until the date on which the claimant responds to
      the request for additional information or, if earlier, the expiration of
      sixty (60) days.

                  
	 	 	 
	 
      	
                    (c)

                  	
                    The Committee’s
      review of a denied claim shall take into account all comments, documents,
      records, and other information submitted by the claimant relating to the
      claim, without regard to whether such information was submitted or
      considered in the initial benefit
determination.

                  


          

           

          
            
              
              

            

            
              8

              
                

              

            

            
              
              

            

          

           

        

      

    

    11.2.5.     Notice of Adverse Determination for
Claim on Review. A notice of an adverse
determination for a claim on review shall set forth in a manner calculated to be
understood by the claimant:

     

    
      
        
          	 
      	
                  (a)

                	
                  the
      specific reasons for the denial; and

                
	 	 	 
	 
      	
                  (b)

                	
                  references
      to the specific provisions of this Plan Statement (or other applicable
      Plan document) on which the adverse determination is
  based.

                


        

      

    

     

    11.3.        Deadline to File
Claim.  To be considered timely under the Plan’s claim and
review procedure, a claim must be filed with the Administrator within one (1)
year after the claimant knew or reasonably should have known of the principal
facts upon which the claim is based.

     

    11.4.        Exhaustion of Administrative
Remedies.  Notwithstanding any provision in this Plan
Statement, the exhaustion of the claim and review procedure is mandatory for
resolving every claim and dispute arising under the Plan.  As to such
claims and disputes:

     

    
      
        
          	 
      	
                  (a)

                	
                  no
      legal action to recover Plan benefits or to enforce or clarify rights
      under the Plan under any provision of law, whether or not statutory, may
      be commenced until the claim and review procedure set forth herein has
      been exhausted in the entirety; and

                
	 	 	 
	 
      	
                  (b)

                	
                  in
      any such legal action all explicit and all implicit determinations by the
      Administrator and the Committee (including, but not limited to,
      determinations as to whether the initial request for benefits or request
      for review was timely filed) shall be afforded the maximum deference
      permitted by law.

                


        

      

    

     

    11.5.        Deadline to File Legal
Action.  No legal action to recover Plan benefits or to enforce
or clarify rights under the Plan under any provision of law, whether or not
statutory, may be brought by any claimant on any matter pertaining to the Plan
unless the legal action is commenced in the proper forum before the earlier
of:

     

    
      
        
          	 
      	
                  (a)

                	
                  thirty
      (30) months after the date the claimant knew or reasonably should have
      known of the principal facts on which the claim is based,
    or

                
	 	 	 
	 
      	
                  (b)

                	
                  six
      (6) months after the date the claimant has exhausted the claim and review
      procedure.

                


        

      

    

     

    11.6.        Knowledge of Fact by Participant
Imputed to Beneficiary and Others.  Knowledge of all facts that
a Participant knew or reasonably should have known shall be imputed to every
claimant who is or claims to be a Beneficiary of the Participant or otherwise
claims to derive an entitlement by reference to the Participant for the purpose
of applying the previously specified periods.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    SECTION
12

     

    PLAN
ADMINISTRATION

     

    12.1.        Service of
Process.  The Chief Financial Officer (or the Chief Executive
Officer with respect to claims made by the Chief Financial Officer) of the
Employer is designated as the appropriate and exclusive agent for the receipt of
service of process directed to the Plan in any legal proceeding, including
arbitration, involving the Plan.

     

    12.2.        Receipt of
Documents.  If a form or document must be filed with or
received by the Employer, the Committee, the Administrator, and the Human
Resources Department (the “appropriate entity”), it must be actually received by
the appropriate entity to be effective.  The determination of whether
or when a form or document has been received by the appropriate entity shall be
made by the Administrator without regard to the “mailbox rule” or similar rule
of evidence.  The absence of a beneficiary designation in the
appropriate entity’s records and files shall be conclusive and binding proof
that the beneficiary designation was not received by the appropriate
entity.  Unless otherwise specified, forms and documents must be
mailed to and received at the following address:

     

    Otelco
Inc.

    Attn:  Chief
Financial Officer

    505 Third
Avenue East

    Oneonta,
Alabama 35121

     

    SECTION
13

     

    IN
GENERAL

     

    13.1.        Disclaimers.

     

    13.1.1.     Effect on
Employment.  Neither the terms of this Plan Statement nor the
benefits hereunder nor the continuance thereof shall be a term of the employment
of any employee, and the Employer  shall not be obligated to continue
the Plan.  The terms of this Plan Statement shall not give any
employee the right to be retained in the employment of the
Employer  and its Affiliates.

     

    13.1.2.     Sole Source of
Benefits.  Neither the Board of Directors, the Committee, the
Administrator, the officers or employees in any way guarantee the payment of any
benefit or amount which may become due and payable hereunder to any Participant,
Beneficiary, or other person.  Each Participant, Beneficiary, or other
person entitled at any time to payments hereunder shall look solely to the
assets of the Employer  for such payments.  If an Award
shall have been distributed to a former Participant, Beneficiary, or any other
person entitled to the receipt thereof, such former Participant, Beneficiary, or
other person, as the case may be, shall have no further right or interest in the
Employer’s assets.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    13.2.        Applicable Laws.

     

    13.2.1.     ERISA Status.  The
Plan is not intended to provide for retirement income or the deferral of income
until after Separation from Service.  The Plan is not an employee
benefit pension plan, a pension plan, an employee benefit plan, or plan for
purposes of ERISA.

     

    13.2.2.     Internal Revenue Code
Status.  The Plan is maintained as a long term incentive plan
that is designed to be exempt from the requirements of Internal Revenue Code
Section 409A under the “short term deferral rule” in that all payments under the
Plan shall be paid by March 15 of the year following the year in which amounts
payable under the Plan are no longer subject to a substantial risk of
forfeiture.  Each provision shall be interpreted and administered
accordingly.  Notwithstanding the foregoing, neither the
Employer  nor any of its officers, directors, agents or affiliates
shall be obligated, directly or indirectly, to any Participant or any other
person for any taxes, penalties, interest or like amounts that may be imposed on
the Participant or other person on account of any amounts under this Plan or on
account of any failure to comply with the Code.

     

    13.3.        Choice of
Law.  Except to the extent that federal law is controlling, the
Plan shall be construed and enforced in accordance with the laws of the State of
Delaware, without regard to any choice of law provisions.

     

    13.4.        Plan Statement
Controls.  If there is a discrepancy between this Plan
Statement and other documents prepared with respect to the Plan, including any
plan overview or summary, the terms of this Plan Statement shall control and
govern over the other document.

     

     

    11