Document:

Exhibit
      10.5

    

    DELANCO
      FEDERAL SAVINGS BANK

    EMPLOYEE
      SEVERANCE COMPENSATION PLAN

    

    
      	
              A.

            	
              Purpose.

            

    

    

    The
      primary purpose of the Delanco Federal Savings Bank Employee Severance
      Compensation Plan (the “Plan”) is to ensure the successful continuation of the
      business of Delanco Federal Savings Bank (the “Bank”) and the fair and equitable
      treatment of the Bank’s employees following a Change in Control (as defined
      below). 

    

    
      	B.	
              Covered
                Employees.

            

    

    

    Subject
      to paragraph C below, any employee of the Bank with at least one year of service
      as of his or her termination date shall be eligible to receive a Change in
      Control Severance Benefit (as defined below) if, within the period beginning
      on
      the effective date of a Change in Control and ending on the first anniversary
      of
      such date, (i) the employee’s employment with the Bank is involuntarily
      terminated or (ii) the employee terminates employment with the Bank voluntarily
      after being offered continued employment in a position that is not a Comparable
      Position (as defined below). 

    

    
      	
              C.

            	
              Limitations
                on Eligibility for Change in Control Severance Benefits or Management
                Restructuring Benefits.

            

    

    

    
      	 	
              (1)

            	
              No
                employee shall be eligible for a Change in Control Severance Benefit
                if
                (a) his or her employment is terminated for “Cause,” (b) he or she is
                offered a Comparable Position and declines to accept such position,
                or (c)
                the employee is, at the time of termination of employment, a party
                to an
                individual employment agreement or change in control agreement with
                the
                Bank and/or Delanco Bancorp, Inc. (the “Company).
                

            

    

    

    
      	
            	(2)	
              For
                purposes of this Plan, a termination of employment for “Cause” shall
                include termination because of the employee's personal dishonesty,
                incompetence, willful misconduct, breach of fiduciary duty involving
                personal profit, intentional failure to perform stated duties, willful
                violation of any law, rule, or regulation (other than traffic violations
                or similar offenses) or final cease-and-desist order, or material
                breach
                of any provision of the Plan.

            

    

    

    
      	 	
              (3)

            	
              For
                purposes of this Plan, a “Comparable Position” shall mean a position that
                would (a) provide the employee with base compensation and benefits
                that are comparable in the aggregate to those provided to the employee
                prior to the Change in Control; (b) provide the employee with an
                opportunity for variable bonus compensation that is comparable to
                the
                opportunity provided to the employee prior to the Change in Control;
                (c)
                be in a location that would not require the employee to increase
                his or
                her daily one way commuting distance by more than thirty-five (35)
                miles
                as compared to the employee’s commuting distance immediately prior to the
                Change in Control; and (d) have job skill requirements and duties
                that are
                comparable to the requirements and duties of the position held by
                the
                employee prior to the Change in
                Control.

            

    

     

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    D. Definitions
      of Change in Control.

    

    For
      purposes of this Plan, “Change in Control” means the occurrence of any one of
      the following events:

    

    
      	 	
              (1)

            	
              Merger:
                The Company merges into or consolidates with another corporation,
                or
                merges another corporation into the Company, and as a result, less
                than a
                majority of the combined voting power of the resulting corporation
                immediately after the merger or consolidation is held by persons
                who were
                stockholders of the Company immediately before the merger or
                consolidation.

            

    

    

    
      	 	
              (2)

            	
              Acquisition
                of Significant Share Ownership:
                A
                report on Schedule 13D or another form or schedule (other than Schedule
                13G) is filed or required to be filed under Sections 13(d) or 14(d)
                of the
                Securities Exchange Act of 1934, if the schedule discloses that the
                filing
                person or persons acting in concert has or have become the beneficial
                owner(s) of 25% or more of a class of the Company’s voting securities, but
                this clause (2) shall not apply to beneficial ownership of Company
                voting
                shares held in a fiduciary capacity by an entity of which the Company
                directly or indirectly beneficially owns 50% or more of its outstanding
                voting securities.

            

    

    

    
      	 	
              (3)

            	
              Change
                in Board Composition:
                During any period of two consecutive years, individuals who constitute
                the
                Company’s Board of Directors at the beginning of the two-year period cease
                for any reason to constitute at least a majority of the Company’s Board of
                Directors; provided, however, that for purposes of this clause (3),
                each
                director who is first elected by the board (or first nominated by
                the
                board for election by the stockholders) by a vote of at least two-thirds
                (2⁄3) of the directors who were directors at the beginning of the two-year
                period shall be deemed to have also been a director at the beginning
                of
                such period; or

            

    

    

    
      	 	
              (4)

            	
              Sale
                of Assets:
                The Company or the Bank sells to a third party all or substantially
                all of
                its assets.

            

    

    

    Notwithstanding
      anything in this Plan to the contrary, in no event shall the conversion of
      the
      Bank’s mutual holding company parent, Delanco MHC, from mutual to stock form,
      i.e., a “second step conversion,” constitute a Change in Control for purposes of
      this Plan.

    

    E. Determination
      of the Change in Control Severance Benefit.

    

    
      	 	
              (1)

            	
              The
                Change in Control Severance Benefit payable to an eligible employee
                under
                this Plan shall be determined under the following
                schedule:

            

    

    

    
      	 	
              (a)

            	
              An
                eligible employee who does not receive a benefit pursuant to paragraph
                (b)
                of this Section shall receive a Change in Control Severance Benefit
                equal
                to the product of (i) the employee’s years of service from his or her hire
                date (including partial years) through the termination date and (ii)
                an
                amount equal to two (2) weeks of the employee’s Base Compensation (as
                defined below). A “year of service” shall mean each 12-month period of
                service following an employee’s hire date determined without regard the
                number of hours worked during such period(s). The minimum payment
                to an
                eligible employee under this paragraph shall be an amount equal to
                two (2)
                weeks of Base Compensation and the maximum payment to an eligible
                employee
                shall be an amount equal to six (6) months of Base
                Compensation.

            

    

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    
      	 	
              (b)

            	
              An
                eligible employee who held the title of Vice President or higher
                immediately prior to a Change in Control shall receive a Change in
                Control
                Severance Benefit equal to twelve (12) months of Base Compensation.
                

            

    

    

    
      	 	
              (c)

            	
              The
                Change in Control Severance Benefit shall be paid in a lump sum not
                later
                than five (5) business days after the date of the employee’s termination
                of employment.

            

    

    

    
      	 	
              (2)

            	
              For
                purpose of determinations under this paragraph E, “Base Compensation”
                shall mean: 

            

    

    

    
      	 	
              (a)

            	
              For
                salaried employees, the employee’s annual base salary at the rate in
                effect on his or her termination date or, if greater, the rate in
                effect
                on the date immediately preceding the Change in
                Control.

            

    

    

    
      	 	
              (b)

            	
              For
                employees whose compensation is determined in whole or in part on
                the
                basis of commission income, the employee’s base salary at termination (or,
                if greater, the employee’s base salary on the date immediately preceding
                the effective date of the Change in Control), if any, plus the commissions
                earned by the employee in the twelve (12) full calendar months preceding
                his or her termination date (or, if greater, the commissions earned
                in the
                twelve (12) full calendar months immediately preceding the effective
                date
                of the Change in Control).

            

    

    

    
      	 	
              (c)

            	
              For
                hourly employees, the employee’s total hourly wages for the twelve (12)
                full calendar months preceding his or her termination date or, if
                greater,
                the twelve (12) full calendar months preceding the effective date
                of the
                Change in Control.

            

    

    

    
      	F.	
              Withholding.

            

    

    

    All
      payments will be subject to customary withholding for federal, state and local
      tax purposes.

    

    
      	G.	
              Parachute
                Payment.

            

    

    

    Notwithstanding
      anything in this Plan to the contrary, if a Change in Control Severance Benefit
      to an employee who is a “Disqualified Individual” shall be in an amount which
      includes an “Excess Parachute Payment,” taking into account payments under this
      Plan and otherwise, the benefit payable under this Plan shall be reduced to
      the
      maximum amount which does not include an Excess Parachute Payment. The terms
      “Disqualified Individual” and “Excess Parachute Payment” shall have the same
      meanings as under Section 280G of the Internal Revenue Code of 1986, as amended,
      or any successor provision thereto.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    
      	H.	
              Adoption
                by Affiliates.

            

    

    

    Upon
      approval by the Board of Directors of the Bank (the “Board”), this Plan may be
      adopted by any “Subsidiary” or “Parent” of the Bank. Upon such adoption, the
      provisions of the Plan shall be fully applicable to the employees of that
      Subsidiary or Parent. The term “Subsidiary” means any corporation in which the
      Bank, directly or indirectly, holds a majority of the voting power of its
      outstanding shares of capital stock. The term “Parent” means any corporation
      which holds a majority of the voting power of the Bank’s outstanding shares of
      capital stock.

    

    
      	I.	
              Administration.

            

    

    

    The
      Plan
      is administered by the Board, which shall have the discretion to interpret
      the
      terms of the Plan and to make all determinations about eligibility and payment
      of benefits. All decisions of the Board, any action taken by the Board with
      respect to the Plan and within the powers granted to the Board under the Plan,
      and any interpretation by the Board of any term or condition of the Plan, are
      conclusive and binding on all persons, and will be given the maximum possible
      deference allowed by law. The Board may delegate and reallocate any authority
      and responsibility with respect to the Plan.

    

    
      	J.	
              Source
                of Payments.

            

    

    

    Unless
      otherwise determined by the Board, all payments and benefits provided under
      this
      Agreement shall be paid solely by the Bank. Notwithstanding anything in this
      Agreement to the contrary, no provision of this Agreement shall be construed
      so
      as to result in the duplication of any payment or benefit. 

    

    
      	K.	
              Inalienability.

            

    

    

    In
      no
      event may any Employee sell, transfer, anticipate, assign or otherwise dispose
      of any right or interest under the Plan. At no time will any such right or
      interest be subject to the claims of creditors, nor liable to attachment,
      execution or other legal process.

    

    
      	L.	
              Governing
                Law.

            

    

    

    The
      provisions of the Plan will be construed, administered and enforced in
      accordance with the laws of the State of New Jersey, except to the extent that
      federal law applies.

    

    
      	M.	
              Severability.

            

    

    

    If
      any
      provision of the Plan is held invalid or unenforceable, its invalidity or
      unenforceability will not affect any other provision of the Plan, and the Plan
      will be construed and enforced as if such provision had not been
      included.

    

    
      	N.	
              No
                Employment Rights.

            

    

    

    Neither
      the establishment nor the terms of this Plan shall be held or construed to
      confer upon any employee the right to a continuation of employment by the Bank,
      nor constitute a contract of employment, express or implied. The Bank reserves
      the right to dismiss or otherwise deal with any employee to the same extent
      and
      on the same basis as though this Plan had not been adopted. Nothing in this
      Plan
      is intended to alter the at-will status of the Bank’s employees, it being
      understood that, except to the extent otherwise expressly set forth to the
      contrary in an individual employment-related agreement, the employment of any
      employee may be terminated at any time by either the Bank or the employee with
      or without cause.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    
      	O.	
              Amendment
                and Termination.

            

    

    

    The
      Plan
      may be terminated or amended in any respect by resolution adopted by a majority
      of the Board, unless a Change in Control has previously occurred. If a Change
      in
      Control occurs, the Plan no longer shall be subject to amendment, change,
      substitution, deletion, revocation or termination in any respect whatsoever.
      The
      form of any proper amendment or termination of the Plan shall be a written
      instrument signed by a duly authorized officer or officers of the Bank,
      certifying that the amendment or termination has been approved by the Board.
      A
      proper amendment of the Plan automatically shall effect a corresponding
      amendment to each Participant’s rights hereunder. A proper termination of the
      Plan automatically shall effect a termination of all employees’ rights and
      benefits hereunder.

    

    
      	P.	
              Required
                Provisions.

            

    

    

    
      	 	
              (1)

            	
              In
                the event any of the provisions of this Section P are in conflict
                with the
                terms of this Plan, this Section P shall
                prevail.

            

    

    

    
      	 	
              (2)

            	
              The
                Bank’s Board of Directors may terminate an employee’s employment at any
                time, but any termination by the Bank, other than termination for
                Cause,
                shall not prejudice an employee’s right to compensation or other benefits
                under this Plan. An employee shall not have the right to receive
                compensation or other benefits for any period after Termination for
                Cause.

            

    

    

    
      	 	
              (3)

            	
              If
                an employee is suspended from office and/or temporarily prohibited
                from
                participating in the conduct of the Bank’s affairs by a notice served
                under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance
                Act, 12
                U.S.C. §1818(e)(3) or (g)(1); the Bank’s obligations under this Plan shall
                be suspended as of the date of service, unless stayed by appropriate
                proceedings. If the charges in the notice are dismissed, the Bank
                may in
                its discretion: (i) pay the employee all or part of the compensation
                withheld while their contract obligations were suspended; and (ii)
                reinstate (in whole or in part) any of the obligations which were
                suspended.

            

    

    

    
      	 	
              (4)

            	
              If
                an employee is removed and/or permanently prohibited from participating
                in
                the conduct of the Bank’s affairs by an order issued under Section 8(e)(4)
                or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(4) or
                (g)(1), all obligations of the Bank under this Plan shall terminate
                as of
                the effective date of the order, but vested rights of the contracting
                parties shall not be affected.

            

    

    

    
      	 	
              (5)

            	
              If
                the Bank is in default as defined in Section 3(x)(1) of the Federal
                Deposit Insurance Act, 12 U.S.C. §1813(x)(1) all obligations under this
                Plan shall terminate as of the date of default, but this paragraph
                shall
                not affect any vested rights of the contracting
                parties.

            

    

    

    
      	 	
              (6)

            	
              All
                obligations under this Plan shall be terminated, except to the extent
                determined that continuation of the Plan is necessary for the continued
                operation of the Bank: (i) by the Director of the Office of Thrift
                Supervision (OTS), or his designee, at the time the Federal Deposit
                Insurance Corpporation (FDIC) enters into an agreement to provide
                assistance to or on behalf of the Bank under the authority contained
                in
                Section 13(c) of the Federal Deposit Insurance Act, 12 U.S.C. §1823(c); or
                (ii) by the Director of the OTS (or his designee) at the time the
                Director
                (or his designee) approves a supervisory merger to resolve problems
                related to the operations of the Bank or when the Bank is determined
                by
                the Director to be in an unsafe or unsound condition. Any rights
                of the
                parties that have already vested, however, shall not be affected
                by such
                action.

            

    

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    
      	 	
              (7)

            	
              Any
                payments made to employees pursuant to this Plan, or otherwise, are
                subject to and conditioned upon their compliance with 12 U.S.C. §1828(k)
                and FDIC regulation 12 C.F.R. Part 359, Golden Parachute and
                Indemnification Payments.

            

    

     

    This
      plan
      has been approved and adopted by the Board of Directors of the Bank and is
      effective as of March 30, 2007.

     

    
      	 	 	 
	 	DELANCO
              FEDERAL SAVINGS BANK
	 
 	 
 	 
 
	Attest:    /s/ Robert M.
              Notigan 	By:  	/s/ 
John
              W.
              Seiber
	
              
                

              

            	
              
For
              the Entire Board of Directors 
	 	
            

    
      
         

      

      
        6FIRST
      AMENDMENT TO AMENDED
      AND RESTATED CREDIT AGREEMENT

    

    

    THIS
      FIRST AMENDMENT dated as of July 13, 2007 (“Amendment”)
      TO
      AMENDED AND RESTATED CREDIT AGREEMENT dated as of July 3, 2006 (“the
      Credit Agreement”)
      by and
      among Otelco Inc., a Delaware corporation (“Borrower”),
      the
      other Credit Parties signatory hereto, as Credit Parties, the Lenders signatory
      hereto from time to time, and General Electric Capital Corporation, a Delaware
      corporation, for itself, as Lender, and as Agent for the Lenders (“Agent”).
      

    

    RECITALS

    

    
      	 	
              A.

            	
              Borrower,
                the other Credit Parties signatory thereto, the Lenders signatory
                thereto
                from time to time and Agent are parties to the Credit Agreement.
                

            

      	 	 	 

    

    
      	 	
              B.

            	
              On
                July 5, 2007 Borrower made mandatory prepayments of the Term Loan
                in the
                aggregate amount of $55,353,032.12 upon receipt of proceeds of Stock
                Issuances.

            

      	 	 	 

    

    
      	 	
              C.

            	
              As
                a result of such mandatory prepayments, the Lenders’ Total Term Loan
                Commitment has been permanently reduced to
                $64,646,967.88.

            

      	 	 	 

    

    
      	 	
              D.

            	
              Borrower
                has requested that the Lenders waive LIBOR breakage incurred in connection
                with the prepayments and the Lenders have agreed
                thereto.

            

      	 	 	 

    

    
      	 	
              E.

            	
              Borrower
                has requested that the Lenders agree to amend the interest rates
                applicable to the Revolving Credit Advances and the Term Loans.
                

            

      	 	 	 

    

    
      	 	
              F.

            	
              AIG
                Annuity Reinsurance, The Variable Annuity Life Insurance Company
                and AIG
                Inc-The Matched Investment Program (collectively, the “AIG Lenders”) have
                declined to agree to amend the interest rates applicable to the Term
                Loans.

            

      	 	 	 

    

    
      	 	
              G.

            	
              Pursuant
                to Section 11(d) of the Credit Agreement, Borrower has requested
                that, on
                the First Amendment Date, Agent and CoBank, ACB (“CoBank”) purchase from
                the AIG Lenders all of the Term Loan Commitments of the AIG Lenders
                for an
                amount equal to the principal balance thereof held by the AIG Lenders
                and
                all accrued interest and Fees with respect thereto through the date
                of
                sale, and Agent and CoBank have agreed to such purchase.
                

            

      	 	 	 

    

    
      	 	
              H.

            	
              Borrower
                has requested that the Lenders amend the Credit Agreement in certain
                respects to reflect the aforementioned changes and other changes
                and
                Lenders have agreed to amend the Credit Agreement, subject to the
                terms
                and conditions hereof.

            

    

    

    NOW,
      THEREFORE, in consideration of the premises and the mutual covenants hereinafter
      contained, and intending to be legally bound, the parties hereto agree as
      follows:

    

    A.
      AMENDMENTS

    

    1.    Amendment
      to Section 1.1(b)(i). Section 1.1(b)(i) of the Credit Agreement is amended
      by replacing such Section in its entirety with the following: 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “(b)
      Term
      Loan.
      (i)
Effective
      July 5, 2007, the Lenders’ Total Term Loan Commitment shall be $64,646,967.88
      (the “Term
      Loan”).
      The
      obligations of each Term Lender hereunder shall be several and not joint. The
      Term Loan shall be evidenced by promissory notes substantially in the form
      of
Exhibit
      1.1(b)
      (each a
      "Term
      Note"
      and
      collectively the "Term
      Notes"),
      and,
      except as provided in Section
      1.12 ,
      Borrower agrees that, promptly after the receipt from a Lender of an original
      Term Note executed and delivered by Borrower pursuant to the Credit Agreement
      and marked “cancelled”, Borrower shall execute and deliver to such Lender a new
      Term Note in replacement of such Term Note in the principal amount of the Term
      Loan of such Lender hereunder. Each Term Note shall represent the obligation
      of
      Borrower to pay the amount of the applicable Term Lender's Total Term Loan
      Commitment, together with interest thereon as prescribed in Section
      1.5.
”
      

    

    2.    Amendment
      to Section 1.4. Section 1.4 of the Credit Agreement is amended by replacing
      such Section in its entirety with the following: 

     

    “Beginning
      with the First Amendment Date, the Borrower shall utilize the proceeds of the
      Revolving Loan and the Swing Line Loan for the financing of Borrower’s ordinary
      working capital and general corporate purposes.”

    

    3.    Amendment
      to Section 1.5.
      Section
1.5(a)
      of the
      Credit Agreement is amended by replacing such Section in its entirety with
      the
      following:

    

    “(a)
      Borrower shall pay interest to Agent, for the ratable benefit of Lenders in
      accordance with the various Loans being made by each Lender, in arrears on
      each
      applicable Interest Payment Date, at the following rates: (i) with respect
      to
      the Revolving Credit Advances, the Index Rate plus the Applicable Revolver
      Index
      Margin per annum or, at the election of Borrower, the applicable LIBOR Rate
      plus
      the Applicable Revolver LIBOR Margin per annum based on the aggregate Revolving
      Credit Advances outstanding from time to time; (ii) with respect to the Term
      Loan, the Index Rate plus the Applicable Term Loan Index Margin per annum or,
      at
      the election of Borrower, the applicable LIBOR Rate plus the Applicable Term
      Loan LIBOR Margin per annum; and (iii) with respect to the Swing Line Loan,
      the
      Index Rate plus the Applicable Revolver Index Margin per annum.

    

    “As
      of
      the First Amendment Date, the Applicable Margins are as follows:

     

    
      	
              Applicable
                Revolver Index Margin

            	
              0.75%

            
	
              Applicable
                Revolver LIBOR Margin

            	
              1.75%

            
	
              Applicable
                Term Loan Index Margin

            	
              0.75%

            
	
              Applicable
                Term Loan LIBOR Margin

            	
              1.75%

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    “The
      Applicable Margins shall be adjusted by reference to the following
      grids:

    

    
      	
              If
                Leverage Ratio is:

            	 	
              Level
                of

              Applicable
                Margins:

            
	
               >
                5.75:1.0

            	 	
              Level
                I

            
	
              <5.75:1.0,
                but >
                5.25:1.0

            	 	
              Level
                II

            
	
              <5.25:1.0,
                but >
                4.75:1.0

            	 	
              Level
                III

            
	
              <4.75:1.0,
                but >
                4.25:1.0

            	 	
              Level
                IV

            
	
              <4.25:1.0

            	 	
              Level
                V

            

    

     

    
      	 	 	
              Applicable
                Margins

            	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	
              Level
                I

            	 	
               Level
                II

            	 	
              Level
                III

            	 	
              Level
                IV

            	 	
              Level
                V

            	 
	
              Applicable
                Revolver

              Index
                Margin

            	 	 	
              1.50

            	
              %

            	 	
              1.25

            	
              %

            	 	
              1.00

            	
              %

            	 	
              0.75

            	
              %

            	 	
              0.50

            	
              %

            
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Applicable
                Revolver LIBOR Margin

            	 	 	
              2.50

            	
              %

            	 	
              2.25

            	
              %

            	 	
              2.00

            	
              %

            	 	
              1.75

            	
              %

            	 	
              1.50

            	
              %

            
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Applicable

              Term
                Loan Index Margin

            	 	 	
              1.50

            	
              %

            	 	
              1.25

            	
              %

            	 	
              1.00

            	
              %

            	 	
              0.75

            	
              %

            	 	
              0.50

            	
              %

            
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Applicable
                

              Term
                Loan 

              LIBOR
                Margin

            	 	 	
              2.50

            	
              %

            	 	
              2.25

            	
              %

            	 	
              2.00

            	
              %

            	 	
              1.75

            	
              %

            	 	
              1.50

            	
              %

            

    

    

    “Adjustments
      in the Applicable Margins commencing with the Fiscal Quarter ending September
      30, 2007 shall be implemented quarterly on a prospective basis, for each
      calendar month commencing no later than five (5) days after the date of delivery
      to Lenders of the quarterly unaudited or annual audited (as applicable)
      Financial Statements evidencing the need for an adjustment (as required in
      Annex
      E or otherwise). Concurrently with the delivery of those Financial Statements,
      Borrower shall deliver to Agent and Lenders a certificate, signed by its chief
      financial officer, setting forth in reasonable detail the basis for the
      continuance of, or any change in, the Applicable Margins. Failure to deliver
      such Financial Statements timely shall, in addition to any other remedy provided
      for in this Agreement, result in an increase in the Applicable Margins to the
      highest level set forth in the foregoing grid, until the first day of the first
      calendar month following the delivery of those Financial Statements
      demonstrating that such an increase is not required. If a Default or an Event
      of
      Default has occurred and is continuing at the time any reduction in the
      Applicable Margins is to be implemented, that reduction shall be deferred until
      the first day of the first calendar month following the date on which such
      Default
      or
      Event of
      Default is waived or cured.”

    

    4.    Amendment
      to Section 2.1. Section 2.1 of the Credit Agreement is amended by replacing
      such Section in its entirety with the following: “[Intentionally
      Omitted.]”

    

    5.    Amendment
      to Section 2.2(b). Section 2.2(b) of the Credit Agreement is amended by
      replacing such Section in its entirety with the following: “[Intentionally
      Omitted.]”

    

    6.    Amendments
      to Annex A.
      (a)
      Annex A of the Credit Agreement is amended by deleting the following defined
      terms: “Additional
      Term Loan”,
      “Additional
      Term Loan Commitment”,
      “Original
      Term Loan”
and
      “Original
      Term Loan Commitment”.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    (b)
      Annex
      A of the Credit Agreement is amended by adding the definition “First
      Amendment Date”
set
      forth below and inserting it in correct alphabetical order in Annex A and by
      replacing the definitions of “Commitments”,
      “Dividend
      Suspension Period”,
      “Interest
      Deferral Period”,
      “LIBOR
      Rate”,
      “Pro
      Rata Share”,
      “Requisite
      Lenders”,
      “Term
      Loan”
and
      “Total
      Term Loan Commitment”
with
      the definitions set forth below and inserting them in correct alphabetical
      order
      in Annex A:

    

    “Commitments”
means
      (a) as to any Lender, the aggregate of such Lender’s Revolving Loan Commitment
      (including without duplication the Swing Line Lender’s Swing Line Commitment as
      a subset of its Revolving Loan Commitment) and Term Loan Commitment as set
      forth
      on Annex
      J
      to the
      Agreement or in the most recent Assignment Agreement executed by such Lender
      and
      (b) as to all Lenders, the aggregate of all Lenders’ Revolving Loan Commitments
      (including without duplication the Swing Line Lender’s Swing Line Commitment as
      a subset of its Revolving Loan Commitment) and Term Loan Commitments, which
      aggregate commitment shall be Seventy-Nine Million Six Hundred Forty-Six
      Thousand Nine Hundred Sixty-Seven and 88/100 Dollars ($79,646,967.88) on the
      First Amendment Date, as to each of clauses
      (a) and (b),
      as such
      Commitments may be reduced, amortized or adjusted from time to time in
      accordance with the Agreement.

    

    “First
      Amendment Date”
means
      July 13,
      2007.

    

    “Dividend
      Suspension Period”
means,
      with respect to any period (for these purposes, the "subject
      period")
      consisting of one or more consecutive, four-Fiscal Quarter periods of Borrower
      as of the end of which either (a) the Consolidated Fixed Charge Coverage Ratio
      is less than 1.14 to 1.00 or (b) the Consolidated Senior Leverage Ratio is
      greater than 2.80 to 1.00, the period commencing on the date Borrower is
      required to deliver a Compliance Certificate pursuant to Section
      4.1
      in
      respect of the first such four-Fiscal Quarter period in such subject period
      and
      ending on date on which Borrower delivers a Compliance Certificate pursuant
      to
Section
      4.1
      in
      respect of the last Fiscal Quarter of Borrower in such subject period.

    

    “Interest
      Deferral Period”
means,
      with respect to any period (for these purposes, the "subject
      period")
      consisting of one or more consecutive, four-Fiscal Quarter periods of Borrower
      as of the end of which either (a) the Consolidated Fixed Charge Coverage Ratio
      is less than 1.09 to 1.00 or (b) the Consolidated Senior Leverage Ratio is
      greater than 2.90 to 1.00, the period commencing on the date Borrower is
      required to deliver a Compliance Certificate pursuant to Section
      4.1
      in
      respect of the first such four-quarter period in such subject period and ending
      on the date on which Borrower delivers a Compliance Certificate pursuant to
      Section
      4.1
      in
      respect of the last Fiscal Quarter of Borrower in such subject period.

    

    “LIBOR
      Rate”
means
      for each LIBOR Period, a rate of interest determined by Agent equal to:

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

       

    

    (a)    the
      offered rate for deposits in United States Dollars for the applicable LIBOR
      Period that appears on Reuters Screen LIBOR01 Page as of 11:00 a.m. (London
      time), on the second full LIBOR Business Day next preceding the first day of
      such LIBOR Period (unless such date is not a Business Day, in which event the
      next succeeding Business Day will be used); divided by

     

    (b)    a
      number
      equal to 1.0 minus
      the
      aggregate (but without duplication) of the rates (expressed as a decimal
      fraction) of reserve requirements in effect on the day that is two (2) LIBOR
      Business Days prior to the beginning of such LIBOR Period (including basic,
      supplemental, marginal and emergency reserves under any regulations of the
      Federal Reserve Board or other Governmental Authority having jurisdiction with
      respect thereto, as now and from time to time in effect) for Eurocurrency
      funding (currently referred to as "Eurocurrency Liabilities" in Regulation
      D of
      the Federal Reserve Board) that are required to be maintained by a member bank
      of the Federal Reserve System. 

     

    If
      such
      interest rates shall cease to be available from Reuters, the LIBOR Rate shall
      be
      determined from such financial reporting service or other information as shall
      be acceptable to Agent.

    

    “Pro
      Rata Share”
means
      with respect to all matters relating to any Lender (a) with respect to the
      Revolving Loan, the percentage obtained by dividing (i) the Revolving Loan
      Commitment of that Lender by (ii) the aggregate Revolving Loan Commitments
      of
      all Lenders, (b)
      with
      respect to the Term Loan, the percentage obtained by dividing (i) the Total
      Term
      Loan Commitment of that Lender by (ii) the aggregate Total Term Loan Commitments
      of all Lenders, as any such percentages may be adjusted by assignments permitted
      pursuant to Section
      9.1,
      (c)
      with respect to all Loans, the percentage obtained by dividing (i) the aggregate
      Commitments of that Lender by (ii) the aggregate Commitments of all Lenders,
      and
      (d) with respect to all Loans on and after the Commitment Termination Date,
      the
      percentage obtained by dividing (i) the aggregate outstanding principal balance
      of the Loans held by that Lender, by (ii) the outstanding principal balance
      of
      the Loans held by all Lenders.

    

    “Requisite
      Term Lenders”
means
      Lenders holding more than 50% of the aggregate principal amount of the Term
      Loan
      then outstanding.

    

    “Term
      Loan”
has
      the
      meaning set forth in Section 1.1(b)(i).

    

    “Total
      Term Loan Commitment”
means
      the Total Term Loan Commitment of a Lender set forth on Annex J. 

    

    7.    Amendment
      to Annex G.
      Annex G
      of the Credit Agreement is amended by deleting paragraph (b) thereto and
      replacing it with the following: 

     

    “
      Maximum Consolidated Senior Leverage Ratio.
      Credit
      Parties shall have, at the end of each Fiscal Quarter, a Consolidated Senior
      Leverage Ratio as of the last day of such Fiscal Quarter, a Consolidated Senior
      Leverage Ratio as of the last day of such Fiscal Quarter and for the Test Period
      ending with such Fiscal Quarter of not more than 3.00 to 1.00.”

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    8.    Amendment
      to Annex
      J.
Annex
      J
      of the
      Credit Agreement is amended by replacing such Annex in its entirety with
Annex
      J
      attached
      hereto. 

    

    B. CONDITIONS
      TO EFFECTIVENESS 

    

    Notwithstanding
      any other provision of this Amendment and without affecting in any manner the
      rights of the Lenders hereunder, it is understood and agreed that this Amendment
      shall not become effective, and the Borrower shall have no rights under this
      Amendment, until each Lender shall have received payment of an amendment fee
      and
      Agent shall have received the following documents, each of which shall be in
      form and substance satisfactory to Agent:

     

    (a)
      duly
      executed Assignment Agreements by and among the AIG Lenders as Assignor Lenders
      and General Electric Capital Corporation and CoBank as Assignee Lenders;

    

    (b)
      duly
      executed signature pages to this Amendment from the Lenders, Borrower, Agent
      and
      each Credit Party;

    

    (c)
      for
      each Credit Party a certification that such Person’s bylaws, and all charter
      documents including partnership and/or operating agreements, have not been
      amended since the Closing Date; and 

    

    (d)
      for
      each Credit Party, such other certificates, documents and agreements respecting
      any Credit Party as Agent may, in its sole discretion, request. 

    

    C.
      REPRESENTATIONS

    

    Each
      Credit Party hereby represents and warrants to Lenders and Agent that:

    

    1.    The
      execution, delivery and performance by such Credit Party of this Amendment:
      (a)
      are within such Person’s power; (b) have been duly authorized by all necessary
      corporate, limited liability company or limited partnership action; (c) do
      not
      contravene any provision of such Person’s charter, bylaws or partnership or
      operating agreement as applicable; (d) do not violate any law or regulation,
      or
      any order or decree of any court or Governmental Authority except where such
      violation, individually or in the aggregate, could not reasonably be expected
      to
      have a Material Adverse Effect; (e) do not conflict with or result in the breach
      or termination of, constitute a default under or accelerate or permit the
      acceleration of any performance required by, any indenture, mortgage, deed
      of
      trust, lease, agreement or other instrument to which such Person is a party
      or
      by which such Person or any of its property is bound; (f) do not result in
      the
      creation or imposition of any Lien upon any of the property of such Person
      other
      than those in favor of Agent, on behalf of itself and Lenders pursuant to the
      Loan Documents; and (g) do not require the consent or approval of any
      Governmental Authority or any other Person , except any consents or approvals
      of
      any Person other than a Governmental Authority where the failure to obtain
      such
      consents or approvals of any such Person, individually or in the aggregate,
      could not reasonably be expected to have a Material Adverse Effect.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    

    2.    This
      Amendment has been duly executed and delivered by each Credit Party and
      constitutes a legal, valid and binding obligation of such Credit Party,
      enforceable against it in accordance with its terms except as may be limited
      by
      bankruptcy, insolvency, reorganization, moratorium or other similar laws
      relating to or limiting creditors’ rights and remedies generally or by general
      principles of equity, regardless of whether considered in a proceeding in equity
      or at law.

    

    3.    Both
      before and after giving effect to this Amendment, no Default or Event of Default
      has occurred and is continuing as of the date hereof.

    

    D.
      OTHER
      AGREEMENTS

    

    1.    Waiver
      of LIBOR Breakage. The Lenders hereby waive the payment of LIBOR breakage
      costs incurred by them in connection with the prepayments of the Term Loan
      effected on July 5, 2007.

    

    2.    Continuing
      Effectiveness of Loan Documents.
      As
      amended hereby, all terms of the Credit Agreement and the other Loan Documents
      shall be and remain in full force and effect and shall constitute the legal,
      valid, binding and enforceable obligations of the Credit Parties party thereto.
      To the extent any terms and conditions in any of the other Loan Documents shall
      contradict or be in conflict with any terms or conditions of the Credit
      Agreement, after giving effect to this Amendment, such terms and conditions
      are
      hereby deemed modified and amended accordingly to reflect the terms and
      conditions of the Credit Agreement as modified and amended hereby. Upon the
      effectiveness of this Amendment such terms and conditions are hereby deemed
      modified and amended accordingly to reflect the terms and conditions of the
      Credit Agreement as modified and amended hereby. This Amendment shall constitute
      a Loan Document for all purposes of the Credit Agreement. 

    

    3.    Reaffirmation
      of Guaranty.
      Each
      Guarantor consents to the execution and delivery by Borrower of this Amendment
      and the consummation of the transactions described herein, and ratifies and
      confirms the terms of the Guaranty to which such Guarantor is a party with
      respect to the indebtedness now or hereafter outstanding under the Credit
      Agreement as amended hereby and all promissory notes issued thereunder. Each
      Guarantor acknowledges that, notwithstanding anything to the contrary contained
      herein or in any other document evidencing any indebtedness of Borrower to
      the
      Lenders or any other obligation of Borrower, or any actions now or hereafter
      taken by the Lenders with respect to any obligation of Borrower, the Guaranty
      to
      which such Guarantor is a party (i) is and shall continue to be a primary
      obligation of such Guarantor, (ii) is and shall continue to be an absolute,
      unconditional, continuing and irrevocable guaranty of payment, and (iii) is
      and
      shall continue to be in full force and effect in accordance with its terms.
      Nothing contained herein to the contrary shall release, discharge, modify,
      change or affect the original liability of any Guarantor under the Guaranty
      to
      which such Guarantor is a party. 

    

    4.    Acknowledgment
      of Perfection of Security Interest.
      Each
      Credit Party hereby acknowledges that, as of the date hereof, the security
      interests and liens granted to Agent and the Lenders under the Credit Agreement
      and the other Loan Documents are in full force and effect, are properly
      perfected and are enforceable in accordance with the terms of the Credit
      Agreement and the other Loan Documents.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    

    5.    Effect
      of Agreement.
      Except
      as
      set forth expressly herein, all terms of the Credit Agreement, as amended
      hereby, and the other Loan Documents shall be and remain in full force and
      effect and shall constitute the legal, valid, binding and enforceable
      obligations of the Borrower to the Lenders and Agent. The
      execution, delivery and effectiveness of this Amendment shall not, except as
      expressly provided herein, operate as a waiver of any right, power or remedy
      of
      the Lenders under the Credit Agreement, nor constitute a waiver of any provision
      of the Credit Agreement. This Amendment shall constitute a Loan Document for
      all
      purposes of the Credit Agreement.

    

    6.    Governing
      Law.
      THIS
      AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
      THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
      PERFORMED IN THAT STATE AND ALL APPLICABLE FEDERAL LAWS OF THE UNITED STATES
      OF
      AMERICA.

    

    7.    No
      Novation.
      This
      Amendment is not intended by the parties to be, and shall not be construed
      to
      be, a novation of the Credit Agreement and the other Loan Documents or an accord
      and satisfaction in regard thereto.

    

    8.    Costs
      and Expenses.
      Borrower agrees to pay on demand all costs and expenses of Agent (not to exceed
      $10,000) in connection with the preparation, execution and delivery of this
      Amendment, including, without limitation, the reasonable fees and out-of-pocket
      expenses of outside counsel for Agent with respect thereto.

    

    9.    Counterparts.
      This
      Amendment may be executed by one or more of the parties hereto in any number
      of
      separate counterparts, each of which shall be deemed an original and all of
      which, taken together, shall be deemed to constitute one and the same
      instrument. Delivery of an executed counterpart of this Amendment by facsimile
      transmission, Electronic Transmission or containing an E-Signature shall be
      as
      effective as delivery of a manually executed counterpart
      hereof.

    

    10.    Binding
      Nature.
      This
      Amendment shall be binding upon and inure to the benefit of the parties hereto,
      their respective successors, successors-in-titles, and assigns

    

    11.    Entire
      Understanding.
      This
      Amendment sets forth the entire understanding of the parties with respect to
      the
      matters set forth herein, and shall supersede any prior negotia-tions or
      agreements, whether written or oral, with respect thereto.

    

    [remainder
      of page intentionally left blank]

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, this Amendment has been duly executed as of the date first
      written above.

     

    
      	 	 	 
	 	OTELCO
              INC.
	 
 	 
 	 
 
	 	By:  	/s/
              Curtis L. Garner, Jr.
	 	
              
Name:
Curtis
              L. Garner, Jr.
	 	Title:
              Chief
              Financial Officer

    

     

    
      	 	 	 
	 	OTELCO
              TELECOMMUNICATIONS LLC
	 
 	 
 	 
 
	 	By:  	/s/
              Curtis L. Garner, Jr.
	 	
              
Name:
              Curtis L. Garner, Jr.
	 	Title:
              Chief Financial Officer

    

     

    
      	 	 	 
	 	OTELCO
              TELEPHONE LLC
	 
 	 
 	 
 
	 	By:  	/s/
              Curtis L. Garner, Jr.
	 	
              
Name:
              Curtis L. Garner, Jr.
	 	Title:
              Chief Financial Officer

    

     

    
      	 	 	 
	 	HOPPER
              HOLDING COMPANY, INC. 
	 
 	 
 	 
 
	 	By:  	/s/
              Curtis L. Garner, Jr.
	 	
              
Name:
              Curtis L. Garner, Jr.
	 	Title:
              Chief Financial Officer

    

     

    
      	 	 	 
	 	HOPPER
              TELECOMMUNICATIONS COMPANY, INC. 
	 
 	 
 	 
 
	 	By:  	/s/
              Curtis L. Garner, Jr.
	 	
              
Name:
              Curtis L. Garner, Jr.
	 	Title:
              Chief Financial Officer

    

     

    
      	 	 	 
	 	BRINDLEE
              HOLDINGS LLC
	 
 	 
 	 
 
	 	By:  	/s/
              Curtis L. Garner, Jr.
	 	
              
Name:
              Curtis L. Garner, Jr.
	 	Title:
              Chief Financial Officer

    

     

    [SIGNATURE
      PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	BRINDLEE
              MOUNTAIN TELEPHONE COMPANY
	 
 	 
 	 
 
	 	By:  	/s/
              Curtis L. Garner, Jr.
	 	
              
Name:
              Curtis L. Garner, Jr.
	 	Title:
              Chief Financial Officer

    

     

    
      	 	 	 
	 	PAGE
&
              KISER COMMUNICATIONS, INC.
	 
 	 
 	 
 
	 	By:  	/s/
              Curtis L. Garner, Jr.
	 	
              
Name:
              Curtis L. Garner, Jr.
	 	Title:
              Chief Financial Officer

    

     

    
      	 	 	 
	 	BLOUNTSVILLE
              TELEPHONE COMPANY, INC.
	 
 	 
 	 
 
	 	By:  	/s/
              Curtis L. Garner, Jr.
	 	
              
Name:
              Curtis L. Garner, Jr.
	 	Title:
              Chief Financial Officer

    

     

    
      	 	 	 
	 	MID-MISSOURI
              HOLDING CORP.
	 
 	 
 	 
 
	 	By:  	/s/
              Curtis L. Garner, Jr.
	 	
              
Name:
              Curtis L. Garner, Jr.
	 	Title:
              Chief Financial Officer

    

     

    
      	 	 	 
	 	MID-MISSOURI
              TELEPHONE COMPANY
	 
 	 
 	 
 
	 	By:  	/s/
              Curtis L. Garner, Jr.
	 	
              
Name:
              Curtis L. Garner, Jr.
	 	Title:
              Chief Financial Officer

    

     

    
      	 	 	 
	 	IMAGINATION,
              INC.
	 
 	 
 	 
 
	 	By:  	/s/
              Curtis L. Garner, Jr.
	 	
              
Name:
              Curtis L. Garner, Jr.
	 	Title:
              Chief Financial Officer

    

     

    
      [SIGNATURE
        PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	MID-MAINE
              COMMUNICATIONS, INC. 
	 
 	 
 	 
 
	 	By:  	/s/
              Curtis L. Garner, Jr.
	 	
              
Name:
              Curtis L. Garner, Jr.
	 	Title:
              Vice President

    

     

    
      	 	 	 
	 	MID-MAINE
              TELECOM, INC.
	 
 	 
 	 
 
	 	By:  	/s/
              Curtis L. Garner, Jr.
	 	
              
Name:
              Curtis L. Garner, Jr.
	 	Title:
              Vice President

    

     

    
      	 	 	 
	 	MID-MAINE
              TELPLUS
	 
 	 
 	 
 
	 	By:  	/s/
              Curtis L. Garner, Jr.
	 	
              
Name:
              Curtis L. Garner, Jr.
	 	Title:
              Vice President

    

     

    
      [SIGNATURE
        PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	GENERAL
              ELECTRIC CAPITAL
	 	CORPORATION, as
              Agent and a Lender 
	 
 	 
 	 
 
	 	By:  	/s/
              Julia R. Meade
	 	
              
Name:
Julia
              R. Meade
	 	Title:
              Duly
              Authorized Signatory

    

     

    
      [SIGNATURE
        PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	COBANK,
              ACB, as
              a Lender
	 
 	 
 	 
 
	 	By:  	/s/
              Kevin A. Oliver
	 	
              
Name:
Kevin
              A. Oliver
	 	Title:
              Assistant
              Vice President

    

     

    
      [SIGNATURE
        PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    ANNEX
      J (from Annex A - Commitments definition)

    to

    CREDIT
      AGREEMENT

    

    

    Lender(s):

    

    GENERAL
      ELECTRIC CAPITAL CORPORATION

    

    
      	
              Revolving
                Loan Commitment:

            	 	
              $

            	
              7,500,000.00

            	 
	
              Total
                Term Loan Commitment:

            	 	
              $

            	
              35,385,708.73

            	 

    

    

    

    COBANK,
      ACB

    

    
      	
              Revolving
                Loan Commitment (including a Swing Line Commitment 

              of
                $1,500,000):

            	 	
              $

            	
              7,500,000.00

            	 
	
              Total
                Term Loan Commitment:

            	 	
              $

            	
              29,261,259.15

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