Document:

August
      __, 2006

    

    

    Tornado
      Gold International Corp.

    8600
      Technology Way, Suite 118

    Reno,
      Nevada 89521

    Fax
      number:
      775-853-8921

    Attention:
      Earl W. Abbott, Chief Executive Officer

    

    Re:
      Illipah Gold Project - Asset Purchase

    

    Gentlemen:

    

    This
      letter sets forth the terms of an agreement for your approval (“Letter
      Agreement”)
      to be
      effective as of August __, 2006 (“Effective
      Date”),
      by
      and among Tornado
      Gold International Corp.,
      a
      Nevada corporation, whose mailing address is 8600 Technology Way, Suite 118,
      Reno, Nevada 89521 (“Tornado”),
      and
      Golden Cycle Gold Corporation, a Colorado corporation (“Golden
      Cycle”).
      Tornado and Golden Cycle are referred to herein individually as a “Party”
and
      collectively as the “Parties.”
      

    

    Background

    

    	1.  	
            Golden
              Cycle currently has an exploration and mining lease on 139 unpatented
              mining claims described in Schedule
              A.
              (“Leased
              Claims”)
              and located an additional 52 unpatented mining claims in White Pine
              County, Nevada, more particularly described in Schedule
              B
              (“GCC
              Claims”)
              and together with the Leased Claims, the “Illipah
              Claims.”

          

     

    	2.  	
            Golden
              Cycle acquired the Leased Claims from Carl Pescio and Janet Pescio
              under
              the terms of the Mining Claims Purchase and Royalty Agreement dated
              effective as of August 31, 2001 and the Mining Deed attached thereto,
              each
              of which is attached hereto as Schedule
              C
              (the “Pescio
              Agreement”)
              and incorporated herein by reference. 

          

     

    	3.  	
            Tornado
              desires to acquire the Illipah Claims from Golden Cycle, and Golden
              Cycle
              desires to sell, transfer and assign the Illipah Claims to Tornado
              pursuant to the terms of this Letter Agreement.

          

     

    

    Agreement

     

    For
      and
      in consideration of the mutual covenants contained herein, and other good and
      valuable consideration, the receipt and sufficiency of which are hereby
      expressly acknowledged, the Parties agree as follows:

     

     

    	1)  	
            Transfer
              and Assignment of Illipah Claims.
              In consideration of the payment of the Purchase Price (as defined below)
              by Tornado to Golden Cycle and the covenants, agreements, representations,
              warranties and deliveries of Tornado and Golden Cycle set forth in
              this
              Letter Agreement, and subject to the terms set forth in this Letter
              Agreement on the Closing Date, (a) Golden Cycle shall sell, assign,
              convey
              and transfer to Tornado all right, title and interest of Golden Cycle
              in
              and to the Illipah Claims, and (b) Tornado shall purchase from Golden
              Cycle all right, title and interest of Golden Cycle in and to the Illipah
              Claims and accept, assume and be liable for the due performance of
              all
              obligations and liabilities related to the Illipah Claims and the Pescio
              Agreement (collectively, the “Transaction”).

          

     

    
      
         

      

      
        Page
          1

        
          

        

      

      
         

      

    

     

    	2)  	
            Consideration
              for Illipah Claims.
              The purchase price (the “Purchase
              Price”)
              payable by Tornado to Golden Cycle for Golden Cycle’s right, title and
              interest in and to the Illipah Claims shall be payable as
              follows:

          

     

    	a)  	
            Cash
              Payments:
              Tornado will pay to Golden Cycle:

          

     

    	i)  	
            Fifty
              Thousand Dollars (US$50,000) payable in cash immediately upon execution
              and delivery of this Letter Agreement;

          

     

    	ii)  	
            Forty-eight
              Thousand Six Dollars and fifty cents (US$48,006.50) payable in cash
              immediately upon signing of this Letter Agreement for (A) the payment
              of
              United States Department of the Interior Bureau of Land Management
              (“BLM”)
              mining claim maintenance fees in the amount of Twenty-three Thousand
              Eight
              Hundred Seventy-five Dollars (US$23,875) due in accordance with 43
              Code of
              Federal Regulations §§ 3833 et
              seq
              and required to maintain the Illipah Claims in good standing for the
              United States mining assessment year; (B) the payment of annual
              maintenance and filing fees to White Pine County in the amount of Sixteen
              Hundred Thirty-one Dollars and fifty cents (US$1,631.50) and (C) advanced
              minimum royalty payments under the Pescio Agreement in the amount of
              Twenty-two Thousand Fifty Dollars (US$22,500) representing the
              4th
              anniversary payment; and

          

     

    	iii)  	
            Fifty
              Thousand Dollars (US$50,000) payable in cash 90 days after the execution
              and delivery of this Letter Agreement.

          

     

    	b)  	
            Common
              Stock Payments:
              Tornado will issue to Golden Cycle Three Hundred Fifty Thousand (350,000)
              shares of common stock of Tornado, which shall be registered for resale
              under the terms of a registration rights obligation, issued as
              follows:

          

     

    	i)  	
            Fifty
              Thousand (50,000) shares of common stock of Tornado issued 90 days
              after
              the execution and delivery of this Letter Agreement;
              

          

     

    	ii)  	
            One
              Hundred Thousand (100,000) shares of common stock of Tornado issued
              one
              hundred eighty (180) days after the execution and delivery of this
              Letter
              Agreement; and

          

     

    	iii)  	
            Two
              Hundred Thousand (200,000) shares of common stock of Tornado issued
              one
              (1) year after the execution and delivery of this Letter
              Agreement.

          

     

    	iv)  	
            Golden
              Cycle acknowledges that the common stock issuable under this Letter
              Agreement have not been registered under the Securities Act of 1933,
              as
              amended (the “1933
              Act”),
              and may not be offered or sold absent registration or an available
              exemption from registration. Tornado shall prepare and file with the
              SEC
              within sixty (60) calendar days after the Closing Date (as defined
              in the
              Definitive Agreement, but in any event no later than 150 days after
              the
              execution and delivery of this Letter Agreement) a registration statement
              (on Form S-3, SB-1, SB-2, S-1, or other appropriate registration statement
              form reasonably acceptable to the Subscriber) under the 1933 Act (the
              “Registration
              Statement”),
              at the sole expense of Tornado, in respect of Golden Cycle, so as to
              permit a public offering and resale of the common stock issued under
              this
              Letter Agreement in the United States under the 1933 Act by Golden
              Cycle
              as selling stockholder and not as underwriter. Tornado shall use its
              best
              efforts to cause such Registration Statement to become effective as
              soon
              as possible thereafter, and within the earlier of: (A) one hundred
              twenty
              (120) calendar days after the Closing Date (as defined in the Definitive
              Agreement, but in any event no later than 210 days after the execution
              and
              delivery of this Letter Agreement), or (B) five (5) calendar days of
              the
              SEC clearance to request acceleration of effectiveness. Tornado will
              notify Golden Cycle of the effectiveness of the Registration Statement
              within three (3) business days.

          

     

    
      
         

      

      
        Page
          2

        
          

        

      

      
         

      

    

     

    	c)  	
            Production
              Royalties to Golden Cycle:

          

     

    	i)  	
            Tornado
              will grant to Golden Cycle production royalties for the rents, issues,
              profits and Bullion and Other Products derived from any lands within
              one
              (1) mile of any boundary line of any Illipah Claim located on the date
              of
              this Letter Agreement (hereafter the “Area
              of Interest”)
              of two percent (2%) of Net Smelter Returns calculated in accordance
              with
              Exhibit
              I attached
              hereto (the “GC
              Production Royalties”);
              and 

          

     

    	ii)  	
            Tornado
              will have the option, exercisable at any time prior to commercial
              production on any of the Illipah Claims, to reduce the GC Production
              Royalties from two percent (2%) to one percent (1%) by paying Golden
              Cycle, at Golden Cycle’s sole option (A) the sum of One Million Dollars
              (US$1,000,000) in cash or (B) that number of ounces of gold bullion
              equal
              to One Million Dollars (US$1,000,000) divided by the closing price
              of gold
              on the New York Commodity Exchange on the date of this Letter
              Agreement.

          

     

    	d)  	
            Work
              Commitment:
              Tornado will undertake an exploration program on the Area of Interest
              and
              incur exploration and development expenditures in the following
              amounts:

          

     

    	i)  	
            at
              least Two Hundred Fifty Thousand Dollars (US$250,000) within one (1)
              year
              of the execution and delivery of this Letter
              Agreement;

          

     

    	ii)  	
            at
              least Seven Hundred Fifty Thousand Dollars (US$750,000) in aggregate
              within two (2) years of the execution and delivery of this Letter
              Agreement; and

          

     

    	iii)  	
            within
              forty-five (45) days of each fiscal calendar quarter of Tornado and
              90
              days of the fiscal year end of Tornado. Tornado shall provide Golden
              Cycle
              with a report of exploration and development expenditures related to
              the
              Area of Interest, certified by the Chief Financial and Accounting Officer,
              and Golden Cycle may, for a period of fifteen (15) days after receipt
              of
              the report, request that the auditor for Tornado commence and complete
              as
              soon as reasonably possible thereafter, an audit of the books and records
              of Tornado related to the Illipah Claims to verify the reported
              exploration and development expenditures. Golden Cycle shall be solely
              responsible for reimbursement of all reasonable costs and expenses
              of the
              audit unless the calculation of exploration and development expenditures
              by the auditor is less than the calculation of exploration and development
              expenditures by Tornado by more than ten percent (10%), in which case
              the
              cost of the audit shall be paid by
              Tornado.

          

     

    
      
         

      

      
        Page
          3

        
          

        

      

      
         

      

    

     

    	3)  	
            Assumption
              of Pescio Agreement Obligations.
              Upon execution and delivery of this Letter Agreement, Tornado will
              assume
              all of Golden Cycle’s rights, obligations, covenants and commitments under
              the Pescio Agreement, including but not limited to, the payment of
              BLM
              mining claim maintenance fees and annual rental fees, due to the United
              States and any fees required by the State of Nevada and any agency
              or
              subdivision of the State of Nevada or County or municipality, advance
              royalty payments and royalties on production of minerals, title fees,
              recordation fees, reclamation costs, service fees and other costs to
              keep
              the Illipah Claims in good standing, except as otherwise paid by Golden
              Cycle and reimbursed by Tornado under section
              2(a)(ii).

          

     

    	4)  	
            Maintenance
              of GCC Claims.
              Upon execution and delivery of this Letter Agreement, Tornado will
              assume
              all of Golden Cycle’s rights, obligations, covenants and commitments
              related to maintaining the GCC Claims, including but not limited to,
              the
              payment of BLM mining claim maintenance fees and annual rental fees,
              due
              to the United States and any fees required by the State of Nevada and
              any
              agency or subdivision of the State of Nevada or County or municipality,
              advance royalty payments and royalties on production of minerals, title
              fees, recordation fees, reclamation costs, service fees and other costs
              to
              keep the GCC Claims in good standing (collectively, the “Maintenance
              Obligations”),
              except as otherwise paid by Golden Cycle and reimbursed by Tornado
              under
              section 2(a)(ii). Tornado will provide Golden Cycle evidence of payment
              and performance of the Maintenance Obligations no later than forty-five
              (45) days prior to the due date of such obligations. The Parties agreed
              that a failure to provide such notice shall constitute an event of
              default
              under this Letter Agreement.

          

     

    	5)  	
            Assumption
              of Reclamation Obligations.
              Tornado, its successors and assigns, hereby releases Golden Cycle from
              and
              against any environmental liabilities including any present or future
              claims arising from any environmental laws which Tornado can, shall
              or may
              have at any time against Golden Cycle, and Tornado agrees not to make
              or
              to directly or indirectly cause, facilitate or promote any environmental
              claim to be made or threatened against Golden Cycle (whether by Tornado,
              any government authority or any third party) or to allege or claim
              that
              Golden Cycle is responsible directly or indirectly, in whole or in
              part,
              for any remediation of any part of the Area of Interest, any activity
              related to such remediation, or the presence of any contaminants which
              are
              in, on or under or which may have originated from any part of the Area
              of
              Interest, or any reclamation of any part of the Area of Interest.
              

          

     

    	6)  	
            Notice
              of Impairment of Claims.
              Tornado, its successors and assigns, shall (a) give Golden Cycle, its
              successors and assigns, not less than ninety (90) days’ written notice of
              its intent to (i) reduce the Illipah Claims in number or area within
              the
              Area of Interest or (ii) withdraw from the project area of the Illipah
              Claims, the mine, if any, or the Area of Interest, and (b) Golden Cycle,
              its successors and assigns, shall have the right, at its sole option,
              to
              reacquire title to such interest and Tornado will cooperate with Golden
              Cycle, its successors and assigns, in reacquiring title thereto. The
              maintenance fees and associated charges and recordings shall be paid
              and
              filed by Tornado within the time thereafter allowed by law so as to
              preserve the title for such acquisition by Golden Cycle, its successors
              or
              assigns. 

          

     

    
      
         

      

      
        Page
          4

        
          

        

      

      
         

      

    

     

    	7)  	
            Formal
              Agreement.
              The Parties shall prepare and execute formal agreements to memorialize
              the
              Transaction acceptable to Tornado and Golden Cycle to satisfy United
              States corporate security requirements and incorporating the provisions
              of
              this Letter Agreement and such other commercial terms as are generally
              applicable in the mining industry to a lease and an option of unpatented
              mining claims and other properties (“Formal
              Agreements”).
              In the event the Parties do not execute the Formal Agreements on or
              before
              January 1, 2007, Golden Cycle shall have the right to terminate this
              Letter Agreement upon written notice to Sellers not later than thirty
              (30)
              days from January 1, 2007. Upon termination, Golden Cycle shall reimburse
              Tornado for US$25,506.50 related to the payment of the BLM mining claim
              maintenance fees and the payment of annual maintenance and filing fees
              paid to White Pine County. The balance of the payments made under Section
              2(a)(i) and (ii) shall be retained by Golden Cycle. If Golden Cycle
              does
              not elect to terminate this Letter Agreement as provided herein, this
              Letter Agreement shall remain fully enforceable whether or not the
              Formal
              Agreements are executed.

          

     

    	8)  	
            Failure
              to Pay Purchase Price or Failure to Maintain Illipah
              Claims.
              The Parties acknowledge that Golden Cycle is transferring a valuable
              right
              and interest in the Illipah Claims and its rights to develop the Area
              of
              Interest. The Parties acknowledge that there is no adequate remedy
              at law
              for failure by Tornado to satisfy its obligations under this Letter
              Agreement, including but not limited to, payment of the Purchase Price
              under Section 2, performance of the obligations under the Pescio Agreement
              under Section 3, maintenance of the GCC Claims under Section 4, assumption
              of the reclamation obligations under Section 5 and notice of impairment
              under Section 6, and that such failure would not be adequately compensable
              in damages. Therefore, Tornado agrees that in the event that within
              ten
              (10) days after a written notice of default upon failure to make any
              payment when due or satisfy its obligations under this Letter Agreement,
              Tornado will transfer all rights title and interest in the Illipah
              Claims
              to Golden Cycle, free of all liens, claims and charges of any kind,
              as
              liquidated damages and not as a penalty for such failure. The Parties
              agree that such transfer will be evidenced by quit claim deed delivered
              at
              Closing under the terms of the Formal Agreements, but in no event later
              than one hundred twenty (120) days after the execution and delivery
              of
              this Letter Agreement.

          

     

    	9)  	
            Term.
              Any
              right to acquire any interest in real or personal property under this
              Letter Agreement shall be exercised, if at all, so as to vest such
              interest in Tornado within twenty-one (21) years after the date of
              this
              Letter Agreement.

          

     

    	10)  	
            Costs
              and Expenses.
              Except as provided in this Letter Agreement, each Party shall pay its
              own
              costs and expenses in connection with the proposed Transaction and
              the
              activities contemplated herein, including but not limited to any fees
              payable to attorneys, consultants and other
              advisors.

          

     

    	11)  	
            Assignment.
              Neither this Letter Agreement nor any rights hereunder shall be assignable
              by any Party without the prior written consent of the other Parties
              hereto, which may be withheld for any
              reason.

          

     

    	12)  	
            No
              Third Party Beneficiaries.
              Nothing in this Letter Agreement is intended, nor shall it be construed
              to
              give any person other than the Parties hereto and their successors
              and
              permitted assigns any legal or equitable right, remedy or claim under
              or
              in respect of this Letter Agreement or any provision contained
              herein.

          

     

    
      
         

      

      
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          5

        
          

        

      

      
         

      

    

     

    	13)  	
            Entire
              Agreement.
              This Letter Agreement constitutes the entire understanding between
              the
              Parties with respect to the Transaction and supersedes all negotiations,
              prior discussions or prior agreements and understandings relating to
              such
              matters, provided that this Letter Agreement shall be replaced by the
              Formal Agreements upon their execution.

          

     

    	14)  	
            Governing
              Law.
              This Letter Agreement shall be governed and construed under the laws
              of
              the State of Colorado without regard to its conflicts of laws
              principles.

          

     

    	15)  	
            Amendment.
              This Letter Agreement shall not be amended except by a written instrument
              executed by all of the Parties hereto.

          

     

    	16)  	
            Counterparts.
              This Letter Agreement may be executed in counterparts, each of which
              shall
              be deemed to constitute an original but all of which together shall
              constitute one and the same instrument.

          

     

    If
      the
      terms of this Letter Agreement are in accordance with your understanding of
      the
      Transaction, please sign and return the enclosed duplicate of this Letter
      Agreement to Golden Cycle.

    

    
      	 	
            	
              Very
                truly yours,

              

              GOLDEN
                CYCLE GOLD CORPORATION

               

               

              By:
                _______________________________

              Name:
                _____________________________    

              Title:
                ______________________________

            

    

     

    Duly
      agreed to and executed 

    as
      of the
      Effective Date.

    

    TORNADO
      GOLD INTERNATIONAL CORP.

    

    
      	By	 	 	 
	Name:	 	 	 
	Title:	 	 	 
	Date:	 	 	 

    

    
         

    

     

    
      
         

      

      
        Page
          6

        
          

        

      

      
         

      

    

     

    STATE
      OF
      _________________)

                                                                )SS

    COUNTY
      OF
      _______________)

     

    Subscribed,
      sworn to and acknowledged before me this __ day of ________________,
      2006,
      by _________________________,
      the
      ________________________ of
      Golden
      Cycle Gold Corporation., a Colorado corporation, who stated that the foregoing
      instrument was signed on behalf of said corporation.

     

    My
      commission expires: __________________________________.

     

     

    
      	 	 	____________________________________
	 	 	NOTARY
              PUBLIC

    

     

    
      STATE
        OF
        _________________)

                                                                  )SS

      COUNTY
        OF
        _______________)

    

    
       

       

    

    Subscribed,
      sworn to and acknowledged before me this __ day of ________________,
      2006,
      by _________________________,
      the
      ________________________ of
      Tornado
      Gold International Corp.,
      a
      Nevada corporation, who stated that the foregoing instrument was signed on
      behalf of said corporation.

     

    My
      commission expires: __________________________________    

     

    
       

      
        	 	 	____________________________________
	 	 	NOTARY
                PUBLIC

      

       

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Schedule
      A 

     

     

     

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    Schedule
      B 

     

     

     

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    Schedule
      C

     

     

     

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    Exhibit
      I

    

    A. Production
      Royalties. Golden Cycle Gold Corporation (“Golden
      Cycle”)
      and
      Tornado Gold International Corp. (“Tornado”)
      agree
      that production royalties shall be paid quarterly in a timely manner to Golden
      Cycle according to the following provisions of this
      paragraph (A):

    

    	(1)  	
            Net
              Smelter Returns for Bullion. Net Smelter Returns shall be paid to Golden
              Cycle for fine gold and/or silver bullion or dore bullion (collectively
              “Bullion”
              in this paragraph (A)) produced from the Area of Interest during each
              calendar quarter as “production”
              is defined in paragraph (A)(1)(c) below, regardless of whether Tornado
              actually sells such Bullion to a third party during such calendar quarter.
              The Net Smelter Returns calculation described in this paragraph (A)(1)
              shall be applied if products are produced from the Area of Interest
              in the
              form of Bullion.

          

    

    	(a)  	
            Net
              Smelter Returns Calculation. For Bullion, Net Smelter Returns shall
              mean
              the quantity of recoverable fine gold or silver contained in the Bullion
              produced (as defined in Paragraph (A)(1)(c) below) from the Area of
              Interest during each calendar quarter, multiplied by its average price
              (as
              calculated under paragraph (A)(1)(b) below), less one percent (1%)
              of such
              amount for reimbursement to Tornado for all costs associated with refining
              the Bullion, insuring the Bullion, transporting the Bullion to the
              place
              of sale, marketing the Bullion, and the amount of all taxes imposed
              upon
              or in connection with the Bullion, excepting federal and state income
              taxes. If the actual amount of fine gold or silver actually recovered
              from
              the Bullion differs from the amount determined at the time the Bullion
              is
              produced, the amount of royalty paid will be adjusted in the next calendar
              quarter to reflect the overpayment or underpayment that resulted from
              such
              difference.

          

    

    	(b)  	
            Price.
              The price for the Bullion shall be the average of the closing prices
              for
              gold or silver on the New York Commodity Exchange (“COMEX”) for the
              calendar quarter in which gold or silver is produced from the Area
              of
              Interest. The average gold and silver prices for each calendar quarter
              shall be determined by dividing the sum of all the daily prices in
              U.S.
              dollars per troy ounce, as posted during the calendar quarter, by the
              number of days that prices were posted. The posted price shall be obtained
              from the Wall
              Street Journal or
              other reliable source agreeable to both
              parties.

          

    

    	(c)  	
            Definition
              of Production. For the purposes of this paragraph (A)(1), production
              of
              Bullion shall be defined as follows:

          

    

    	(i)  	
            when
              Bullion is processed within the Area of Interest at a smelter or refinery
              owned or controlled by Tornado, Bullion shall be deemed to have been
              produced from the Area of Interest on the date Tornado completes the
              final
              process necessary for the metal product to be in a saleable form,
              or

          

     

    	(ii)  	
            when
              Bullion is processed off the Area of Interest at a smelter or refinery
              owned or controlled by Tornado, Bullion shall be deemed to have been
              produced from the Area of Interest on the date Tornado completes the
              final
              process necessary for the metal product to be in a saleable form,
              or

          

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    	(iii)  	
            when
              Bullion is sold to a third party smelter or refiner or to another
              purchaser as final product, Bullion shall be deemed to have been produced
              from the Area of Interest when credited to Tornado’s account by such
              purchaser, or

          

     

    	(iv)  	
            when
              Bullion is smelted or refined at a smelter or refinery not owned or
              controlled by Tornado, under an arrangement whereby Tornado retains
              title
              to the resultant metal product, Bullion shall be deemed to have been
              produced from the Area of Interest on the date of final settlement
              by
              Tornado with the smelter or refinery.

          

     

    	(2)  	
            Net
              Smelter Returns for Other Products. Net Smelter Returns shall be paid
              to
              Golden Cycle for all products other than Bullion which are produced
              from
              the Area of Interest during each calendar quarter as “production” is
              defined in paragraph (A)(2)(c) below. Such other products shall include,
              without limitation, concentrates, precipitates, slags, carbon fines,
              or
              any other final product derived from metalliferous ores, except Bullion
              (collectively “Other Products” in this paragraph (A)). Other Products
              shall not include non-locatable substances (including, without limitation,
              rock, dirt, limestone, or similar materials) whether used by Tornado
              in
              its operations or not. The Net Smelter Returns calculation described
              in
              this paragraph (A)(2) shall be applied if products are sold, transferred
              or transported directly from the Area of Interest in the form of Other
              Products.

          

    

    	(a)  	
            Net
              Smelter Returns Calculations. For Other Products, Net Smelter Returns
              shall mean the total price received by Grantor (as calculated under
              paragraph (A)(2)(b) below) for the Other Products produced from the
              Area
              of Interest (as defined in paragraph (A)(2)(c) below) during each calendar
              quarter, less five percent (5%) of such amount for reimbursement to
              Tornado for all costs associated with insuring the Other Products,
              transporting the Other Products from the Area of Interest to the place
              of
              sale or transfer, marketing the Other Products, and the amount of all
              taxes imposed upon or in connection with the Other Products, excepting
              federal and state income taxes.

          

     

    	(b)  	
            Price.
              For sales to nonaffiliated persons or entities in arm’s length
              transactions, the price for Other Products shall be the actual amounts
              received by Tornado for the Sale of Other Products, including all credits
              and bonuses. For sales or transfers to affiliates of Tornado, or
              purchasers or transferees owned or controlled by Tornado, the price
              for
              Other Products shall be the greater of the amounts received by Tornado,
              including all credits and bonuses, or the fair market value of the
              Other
              Products had they been sold or transferred in an arm’s length transaction
              with a nonaffiliated purchaser, provided, however, that in all cases,
              if
              Tornado has not sold Other Products within twelve (12) months of the
              date
              upon which they were produced, the Other Products will be deemed to
              have
              been sold at the fair market value of the Other
              Products.

          

     

    	(c)  	
            Definition
              of Production. For the purposes of this paragraph (A)(2), production
              of
              Other Products shall be defined as
              follows:

          

     

    	(i)  	
            when
              Other Products are processed by Tornado on the Area of Interest at
              a
              facility owned or controlled by Tornado, Other Products Shall be deemed
              to
              have been produced from the Area of Interest on the date Tornado completes
              the final process necessary for the mineral product to be sold in a
              saleable form, or

          

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    	(ii)  	
            when
              Other Products are processed off the Area of Interest either at a facility
              owned or controlled by Tornado or a third-party facility, Other Products
              shall be deemed to have been produced from the Area of Interest on
              the
              date the Other Products are removed from the Area of Interest,
              or

          

     

    	(iii)  	
            when
              Other Products are sold, transferred or transported directly from the
              Area
              of Interest in a crude or unprocessed state, Other Products shall be
              deemed to have been produced from the Area of Interest on the date
              the
              Other Products are removed from the Area of
              Interest.

          

     

    	(3)  	
            Other
              Costs. Except as specifically set forth herein, Tornado shall not deduct
              any costs of mining, milling, leaching, or other processing costs incurred
              by Tornado in the determination of the Net Smelter Returns, and provided,
              in all cases, that if raw ore is transported from the Area of Interest
              to
              be processed, no transportation or added processing costs incurred
              by
              Tornado shall be deducted in the determination of the Net Smelter
              Returns.

          

     

    	(4)  	
            Payment
              of Production Royalties. The amount of Net Smelter Returns due Golden
              Cycle shall be payable in the following alternative manners, depending
              upon the product produced:

          

    

    	(a)  	
            For
              Bullion, Production Royalties payable to Golden Cycle shall be calculated
              by multiplying the dollar amount of Net Smelter Returns determined
              in
              accordance with paragraph (A)(2) above by two percent
              (2%).

          

     

    	(b)  	
            For
              Other Products, Production Royalties payable to Golden Cycle shall
              be
              calculated by multiplying the dollar amount of Net Smelter Returns
              determined in accordance with paragraph (A)(2) above by two percent
              (2%).

          

     

    	(5)  	
            Data
              and Statements. Tornado shall provide to Golden Cycle data describing
              the
              date on which products are produced from the Area of Interest, the
              product
              produced, the shipment dates, and the quantity shipped. Final settlement
              data, identifying shipments and the quantities of shipments, shall
              be
              provided to Golden Cycle as received by Tornado, but not less frequently
              than annually. Each payment of Net Smelter Returns royalty to Golden
              Cycle
              shall be accompanied by a statement showing the basis for calculating
              the
              Net Smelter Returns royalty and copies of all data relating to the
              royalty
              calculation (including, but not limited to, settlement sheets used
              in
              calculating the royalty).

          

     

    	(6)  	
            Examination
              of Statements. Each statement rendered and Net Smelter Returns amount
              paid
              by Tornado may, at Golden Cycle’s written request given to Tornado within
              six (6) months following the delivery of such statement or payment,
              be
              verified by Golden Cycle and its agents and representatives from the
              financial and production records maintained by Tornado. The verification
              shall be at Golden Cycle’s sole risk and expense and shall be conducted so
              as not to interfere or conflict with Tornado’s operations. All statements
              rendered and Net Smelter Returns royalties paid shall conclusively
              be
              presumed to be correct and accepted by Golden Cycle as rendered or
              paid
              unless Golden Cycle timely requests verification in accordance with
              the
              provisions of this paragraph (A)(6).

          

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    	(7)  	
            Commingling.
              Tornado may commingle products produced from the Area of Interest with
              similar product from other properties. If Tornado engages in such
              commingling, Tornado shall establish procedures for determining the
              proportional amount of the total metal content in the commingled ores
              and
              concentrates attributable to the input from each of the properties,
              so
              that production royalties applicable to ores produced from each of
              the
              properties from which ores are commingled may reasonably be determined.
              The procedures to be used by Tornado shall represent standard industry
              practices for ores and processes similar to those encountered or used
              in
              connection with the Area of Interest.

          

     

    	(8)  	
            Golden
              Cycle agrees that Tornado shall have the exclusive right to market
              and
              sell to third parties all Bullion produced from the Area of Interest,
              including, without limitation, the forward sale of Bullion on the
              commodity markets and the repayment of gold loans. Golden Cycle shall
              have
              no right to participate in any hedging or price protection activities
              of
              Tornado, including any sales of Bullion by Tornado on the commodity
              markets, nor shall Golden Cycle otherwise share in any profits or losses
              received or incurred by Tornado as a result of Tornado’s marketing or
              hedging activities.Unassociated Document

    EMPLOYMENT
      AGREEMENT

    

    

      This
      Employment Agreement dated as of August 24, 2006 (this “Agreement”),
      by
      and between OTELCO INC., a Delaware corporation (the “Company”)
      and
      DENNIS ANDREWS (the “Employee”).
      

    

    WHEREAS,
      the
      Company and the Employee desire to enter into this Agreement.

    

    NOW
      THEREFORE,
      in
      consideration of the mutual covenants contained herein and other good and
      valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, the parties hereto agree as follows:

    

    Section
      1. Effective
      Date; Termination.
      

    

    This
      Agreement shall become effective on the date first written above (the
“Effective
      Date”).

    

    Section
      2. Employment
      Period.
      

    

    Subject
      to Section
      4,
      the
      Company hereby agrees to employ the Employee, and the Employee hereby agrees
      to
      be employed by the Company, in accordance with the terms and provisions of
      this
      Agreement, for the period from the Effective Date through the Termination Date
      (the “Employment
      Period”).

    

    Section
      3. Terms
      of Employment.

    

    (a)
      Duties
      and Position.
      During
      the Employment Period, the Employee shall serve as Senior Vice President of
      the
      Company. As such, the Employee shall have duties and responsibilities
      commensurate with such position and such other duties and responsibilities
      as
      may from time to time be assigned to or vested in the Employee by the Company’s
      Board of Directors (the “Board”)
      or the
      Chief Executive Officer. 

    

    (b)
      Full
      Time.
      During
      the Employment Period, and excluding any periods of vacation and sick leave
      to
      which the Employee is entitled, the Employee agrees to devote his full business
      time and efforts, to the best of his ability, experience and talent, to the
      business and affairs of the Company. During the Employment Period, it shall
      not
      be a violation of this Agreement for the Employee to serve on corporate, civic
      or charitable boards or committees or manage personal investments (including
      serving as a member of boards of directors or similar bodies of entities not
      engaged in competition with the Company (as determined by the Board in its
      reasonable discretion)), in each case, so long as such activities do not
      interfere with the performance of the Employee’s responsibilities as an employee
      of the Company in accordance with this Agreement.

    

    (c)
      Compensation.
      

    

    (i)
      Base
      Salary.
      During
      the Employment Period, the Employee shall receive an annual base salary of
      $150,000 which Annual Base Salary shall be subject to annual increase by an
      amount equal to at least the increase in the cost of living, if any, between
      the
      date of the immediately preceding increase and the date of each such adjustment,
      based upon the Consumer Price Index for the Birmingham, Alabama MSA, or if
      that
      index is discontinued, a similar index prepared by a department or agency of
      the
      United States government (as so adjusted, the “Annual
      Base Salary”).
      The
      Annual Base Salary shall be paid in accordance with the customary payroll
      practices of the Company, subject to withholding and other payroll
      taxes.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
 

    (ii)
      Bonus.
      For
      each fiscal year during the Employment Period, the Employee will be entitled
      to
      receive a bonus (the “Bonus”)
      of up
      to 25% of the Annual Base Salary. The Bonus shall be based upon the Company
      achieving operating and/or financial goals to be established by the Board or
      any
      duly appointed committee thereof in good faith, in its sole
      discretion.

    

    (iii)
      Benefits.
      During
      the Employment Period, the Employee shall be entitled to participate in all
      incentive (including any long term incentive plan), savings and retirement
      plans, practices, policies and programs applicable generally to other employees
      of the Company and shall be eligible for participation in and shall receive
      all
      benefits under welfare benefit plans, practices, policies and programs provided
      by the Company to the extent applicable generally to other employees of the
      Company. In addition, the Employee will be entitled to coverage under any
      directors’ and officers’ liability insurance maintained by the
      Company.

    

    (iv)
      Automobile.
      During
      the Employment Period, the Company shall provide the Employee with the use
      of a
      Company automobile (or, at the Company’s option, shall lease an automobile for
      the Employee’s use) and shall reimburse the Employee for all reasonable expenses
      incurred by the Employee in connection with the use and maintenance of such
      automobile.

    

    (v)
      Expenses.
      The
      Employee shall be entitled to receive reimbursement for all reasonable expenses
      incurred by the Employee during the Employment Period in connection with the
      performance of his duties hereunder, in accordance with the policies, practices
      and procedures of the Company as in effect from time to time.

    

    (vi)
      Vacation
      and Holidays.
      During
      the Employment Period, the Employee shall be entitled to up to 5 weeks paid
      vacation per year in accordance with the policies of the Company applicable
      to
      other employees of the Company generally.

    

    Section
      4. Termination
      of Employment.

    

    (a)
      Death
      or Disability.
      The
      Employee’s employment shall terminate automatically upon the Employee’s death or
      Disability. For purposes of this Agreement, “Disability”
shall
      mean the Employee’s inability to perform his duties and obligations hereunder
      for any 90 days during a period of 180 consecutive days due to mental or
      physical incapacity as determined by a physician selected by the Company or
      its
      insurers.

    

    (b)
      Termination
      by the Employee.
      The
      Employee may terminate his employment with the Company at any time, without
      prior notice.

    

    (c)
      Termination
      by the Company.
      The
      Company may terminate the Employee’s employment with the Company at any time,
      with or without Cause and without prior notice. “Cause”
will
      mean that any of the following will have occurred: (i) the Employee has been
      convicted of a felony, stolen funds or otherwise engaged in fraudulent conduct,
      (ii) the Employee has engaged in willful misconduct or has been grossly
      negligent, in each case, which has been materially injurious to the Company,
      (iii) the Employee has failed or refused to comply with directions of the Board
      that are reasonably consistent with the Employee’s current position, or (iv) the
      Employee has breached the terms of this Agreement. “Without
      Cause”
shall
      mean a termination by the Company of the Employee’s employment during the
      Employment Period for any reason other than a termination based upon Cause,
      death or Disability.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    Section
      5. Obligations
      of the Company upon Termination.

    

    (a)
      Without
      Cause.
      If,
      during the Employment Period, the Company shall terminate the Employee’s
      employment Without Cause, then the Company will provide the Employee with the
      following severance payments and/or benefits:

    

    (i)
      The
      Company shall pay to the Employee a lump sum in the amount of the Employee’s
      accrued but unpaid Annual Base Salary through the Termination Date
      (“Accrued
      Obligations”);

    

    (ii)
      The
      Employee, if applicable, and members of his family shall be entitled to continue
      their participation in the Company’s welfare and benefit plans (the
“Benefits”)
      until
      the Termination Date;

    

    (iii)
      The
      Company shall pay to the Employee a lump sum in the amount of 1/2 of his Annual
      Base Salary; and

    

    (iv)
      The
      Company shall pay to the Employee a lump sum amount equal to the Bonus the
      Employee would have received had he remained employed by the Company through
      the
      end of the fiscal year in which the termination occurred, pro rated for the
      number of days Employee was employed by the Company during such fiscal year,
      to
      be paid at the same time that similar bonuses are paid to the Company’s other
      employees.

    

    (b)
      Cause;
      by the Employee; Death or Disability.
      If the
      Employee’s employment shall be terminated by the Company for Cause, by the
      Employee for any reason, or due to death or Disability, then the Company shall
      have no further payment obligations to the Employee (or his heirs or legal
      representatives) other than for (i) payment of Accrued Obligations and (ii)
      the
      continuance of Benefits through the Termination Date.

    

    (c)
      Condition:
      Remedies.
      The
      Employee acknowledges and agrees that, (a) the Company’s obligations to make
      payments under Section
      5(a)
      will be
      conditioned on the Employee executing and delivering a customary general release
      in form and substance reasonably satisfactory to the Company.

    

    Section
      6. Nondisclosure
      and Nonuse of Confidential Information.

    

    (a)
      The
      Employee shall not disclose or use at any time, either during the Employment
      Period or thereafter, any Confidential Information (as hereinafter defined)
      of
      which the Employee is or becomes aware as a consequence of or in connection
      with
      his employment with a Company, whether or not such information is developed
      by
      him, except (i) to the extent that such disclosure or use is in furtherance
      of
      the Employee’s performance in good faith of his duties as President of the
      Company or (ii) to the extent required by law or legal process; provided
      that (A)
      the Employee agrees to provide the Company with prompt written notice of any
      such law or legal process and to assist the Company, at the Company’s expense,
      in asserting any legal challenges to or appeals of such law or legal process
      that the Company in its sole discretion pursues, and (B) in complying with
      any
      such law or legal process, the Employee shall limit his disclosure only to
      the
      Confidential Information that is expressly required to be disclosed by such
      law
      or legal process. The Employee will take all commercially reasonable steps
      to
      safeguard Confidential Information and to protect it against disclosure, misuse,
      espionage, loss and theft. The Employee shall deliver to the Company at the
      termination of the Employment Period, or at any time the Company may request,
      all memoranda, notes, plans, records, reports, computer tapes and software
      and
      other documents and data (and copies thereof) relating to the Confidential
      Information or the Work Product (as hereinafter defined) of the Company which
      the Employee may then possess or have under his control.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    (b)
      The
      Employee agrees that all Work Product belongs in all instances to the Company.
      The Employee will promptly disclose such Work Product to the Board and perform
      all actions reasonably requested by the Board (whether during or after the
      Employment Period) to establish and confirm the Company’s ownership of the Work
      Product (including, without limitation, the execution and delivery of
      assignments, consents, powers of attorney and other instruments) and to provide
      reasonable assistance to the Company (whether during or after the Employment
      Period), at the Company’s sole expense, in connection with the prosecution of
      any applications for patents, trademarks, trade names, service marks or reissues
      thereof or in the prosecution or defense of interferences relating to any Work
      Product. The Employee recognizes and agrees that the Work Product, to the extent
      copyrightable, constitutes works for hire under the copyright laws of the United
      States.

    

    (c)
      “Confidential
      Information”
means
      information that is not generally known to the public and that is used,
      developed or obtained by the Company in connection with its business, including,
      but not limited to, information, observations and data obtained by the Employee
      while employed by the Company or any predecessors thereof (including those
      obtained prior to the date of this Agreement) concerning (i) the business or
      affairs of the Company and its Affiliates and (ii) products, services, fees,
      costs, pricing structures, analyses, drawings, photographs and reports, computer
      software (including operating systems, applications and program listings),
      data
      bases, accounting and business methods, inventions, devices, new developments,
      methods and processes (whether patentable or unpatentable and whether or not
      reduced to practice), customers and clients and customer and client lists,
      all
      technology and trade secrets, and all similar and related information in
      whatever form. Confidential Information will not include any information that
      (A) is or becomes generally available to the public other than through
      disclosure by the Employee in violation of this Section
      6,
      (B) was
      provided to the Employee prior to the date hereof a nonconfidential basis from
      a
      Person who was not otherwise bound by a confidentiality agreement or duty with
      the Company or an Affiliate thereof, or (C) becomes available to the Employee
      on
      a nonconfidential basis from a Person who is not otherwise bound by a
      confidentiality agreement or duty with the Company or its Affiliates or is
      not
      otherwise prohibited from transmitting the information to the
      Employee.

    

    (d)
      “Work
      Product”
means
      all inventions, innovations, improvements, technical information, systems,
      software developments, methods, designs, analyses, drawings, reports, service,
      marks, trademarks, trade names, trade dress, logos and all similar or related
      information (whether patentable or unpatentable) which relates to the Company’s
      actual or anticipated business, research and development or existing or future
      products or services and which are conceived, developed or made by the Employee
      (whether or not during usual business hours and whether or not alone or in
      conjunction with any other person) during the Employment Period together with
      all patent applications, letters patent, trademark, trade name and service
      mark
      applications or registrations, copyrights and reissues thereof that may be
      granted for or upon any of the foregoing.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    Section
      7. Non-Compete
      and Non-Solicit.

    

    (a)
      The
      Employee acknowledges that, in the course of his employment with the Company,
      he
      has become familiar, or will become familiar, with the Company’s and its
      Affiliates’ trade secrets and with other confidential information concerning the
      Company and its Affiliates and that his services have been and will be of
      special, unique and extraordinary value to the Company and its Affiliates.
      Therefore, the Employee agrees that, during the Employment Period and for 6
      months thereafter (the “Restricted
      Period”),
      he
      shall not directly or indirectly (i) engage, within the Restricted Territory,
      in
      any telephone or communications business, including, but not limited to,
      incumbent local exchange carrier, long distance telephone business, cable
      television, Internet access, or other business that the Company’ or any of its
      Affiliates’ is engaged in during the Employee’s employment by the Company (the
“Company
      Business”),
      (ii)
      compete or participate as agent, employee, consultant, advisor, representative
      or otherwise in any enterprise engaged in a business which has any operations
      engaged in the Company Business within the Restricted Territory; or (iii)
      compete or participate as a stockholder, partner, member or joint venturer,
      or
      have any direct or indirect financial interest, in any enterprise which has
      any
      material operations engaged in the Company Business within the Restricted
      Territory; provided,
      however,
      that
      nothing contained herein will prohibit the Employee from (A) owning, operating
      or managing any business, or acting upon any business opportunity, after
      obtaining approval of a majority of the Board; or (B) owning no more than five
      percent (5%) of the equity of any publicly traded entity with respect to which
      the Employee does not serve as an officer, director, employee, consultant or
      in
      any other capacity other than as an investor. The term "Restricted
      Territory"
      means
      all states within the United States in which the Company or any of its
      Affiliates conducts or is pursuing or analyzing plans to conduct Company
      Business as of the Termination Date.

    

    (b)
      As a
      means reasonably designed to protect Confidential Information, the Employee
      agrees that, during the period commencing on the Effective Date and ending
      on
      the expiration of the Restricted Period, he will not (i) solicit or make any
      other contact with, directly or indirectly, any customer of the Company or
      any
      of its Affiliates as of the date that the Employee ceases to be employed by
      the
      Company with respect to the provision of any service to any such customer that
      is the same or substantially similar to any service provided to such customer
      by
      the Company or its Affiliates or (ii) solicit or make any other contact with,
      directly or indirectly, any employee of the Company or any of its Affiliates
      on
      the date that the Employee ceases to be employed by the Company (or any person
      who was employed by the Company or any of its Affiliates at any time during
      the
      three-month period prior to the Termination Date) with respect to any
      employment, services or other business relationship.

    

    Section
      8. Remedies.
      

    

    The
      Employee acknowledges that irreparable damage would occur in the event of a
      breach of the provisions of Section
      6
      or
Section
      7
      by the
      Employee. It is accordingly agreed that, in addition to any other remedy to
      which its is entitled at law or in equity, the Company will be entitled to
      an
      injunction or injunctions to prevent breaches of such sections of this Agreement
      and to enforce specifically the terms and provisions of such
      sections.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
 

    Section
      9. Definitions.

    

    “Accrued
      Obligations”
has
      the
      meaning set forth in Section
      5(a)(i).

    

    “Affiliate”
means,
      with respect to any Person, any other Person that is controlled by, controlling
      or under common control with, such Person. Notwithstanding anything to the
      contrary contained herein, with respect to the Company, the term “Affiliate”
will include, without limitation, each Person with an ownership interest in
      the
      Company (and each member, stockholder or partner of each such Person), each
      Person in which the member of the Company (and each member, stockholder or
      partner of each such Person) holds or has the right to acquire, collectively,
      more than 25% of the voting equity interests. 

    

    “Agreement”
has
      the
      meaning set forth in the Caption.

    

    “Annual
      Base Salary”
has
      the
      meaning set forth in Section
      3(c)(i).

    

    “Benefits”
has
      the
      meaning set forth in Section
      5(a)(ii).

    

    “Board”
has
      the
      meaning set forth in Section
      3(a).

    

    “Bonus”
has
      the
      meaning set forth in Section
      3(c)(ii).

    

    “Business
      Day”
means
      any day that is not a Saturday, Sunday, legal holiday or other day on which
      banks are required to be closed in New York, New York.

    

    “Cause”
has
      the
      meaning set forth in Section
      4(c).

    

    “Company”
has
      the
      meaning set forth in the Caption.

    

    “Company
      Business”
has
      the
      meaning set forth in Section
      7(a).

    

    “Confidential
      Information”
has
      the
      meaning set forth in Section
      6(c).

    

    “Disability”
has
      the
      meaning set forth in Section
      4(a).

    

    “Effective
      Date”
has
      the
      meaning set forth in Section
      1.
      

    

    “Employment
      Period”
has
      the
      meaning set forth in Section
      1.

    

    “Employee”
has
      the
      meaning set forth in the Caption.

    

    “Person”
means
      an individual, partnership, corporation, limited liability company, trust or
      unincorporated organization, or a government or agency or political subdivision
      thereof.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    “Restricted
      Period”
has
      the
      meaning set forth in Section
      7(a).

    

    “Restricted
      Territory”
has
      the
      meaning set forth in Section
      7(a).

    

    “Termination
      Date”
means
      the effective date of the termination of the Employee’s employment with the
      Company, for any reason, by any party, or by death or Disability.

    

    “Without
      Cause”
has
      the
      meaning set forth in Section
      4(c).

    

    “Work
      Product”
has
      the
      meaning set forth in Section
      6(d).

    

    Section
      10. General
      Provisions.

    

    (a)
      Severability.
      It is
      the desire and intent of the parties hereto that the provisions of this
      Agreement be enforced to the fullest extent permissible under the laws and
      public policies applied in each jurisdiction in which enforcement is sought.
      Accordingly, if any particular provision of this Agreement shall be adjudicated
      by a court of competent jurisdiction to be invalid, prohibited or unenforceable
      for any reason, such provision, as to such jurisdiction, shall be ineffective,
      without invalidating the remaining provisions of this Agreement or affecting
      the
      validity or enforceability of such provision in any other jurisdiction.
      Notwithstanding the foregoing, if such provision could be more narrowly drawn
      so
      as not to be invalid, prohibited or unenforceable in such jurisdiction, it
      shall, as to such jurisdiction, be so narrowly drawn, without invalidating
      the
      remaining provisions of this Agreement or affecting the validity or
      enforceability of such provision in any other jurisdiction.

    

    (b)
      Entire
      Agreement.
      This
      Agreement embodies the complete agreement and understanding among the parties
      hereto with respect to the subject matter hereof. This Agreement supersedes
      and
      preempts any prior understandings, agreements or representations by or among
      the
      parties, written or oral, which may have related to the subject matter hereof
      in
      any way.

    

    (c)
      Survival.
      Notwithstanding anything to the contrary contained herein, the provisions of
      Section
      6,
      Section
      7
      and
Section
      8
      shall
      survive the termination of this Agreement. 

    

    (d)
      Counterparts.
      This
      Agreement may be executed in separate counterparts, each of which is deemed
      to
      be an original and all of which taken together constitute one and the same
      agreement.

    

    (e)
      Successors
      and Assigns; Beneficiaries.
      This
      Agreement is personal to the Employee and without the prior written consent
      of
      the Company shall not be assignable by the Employee other than by will or the
      laws of descent and distribution. This Agreement shall inure to the benefit
      of
      and be enforceable by the Employee’s heirs and legal representatives and the
      successors and assigns of the Company. The Company reserves the right to assign
      this Agreement in whole or in part to any of its Affiliates and upon any such
      assignment, the term “Company” will be deemed to be such Affiliate

    

    (f)
      Governing
      Law.
      THIS
      AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
      THE
      STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING
      PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION)
      THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK
      TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE
      OF
      NEW YORK WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT,
      EVEN IF UNDER SUCH JURISDICTION’S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE
      SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    (g)
      Waiver
      of Jury Trial.
      EACH OF
      THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY
      CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
      DEALINGS BETWEEN THE PARTIES HERETO RELATING TO THE SUBJECT MATTER
      HEREOF.

    

    (h)
      Amendment
      and Waiver.
      The
      provisions of this Agreement may be amended and waived only with the prior
      written consent of the Employee and the Company and no course of conduct or
      failure or delay in enforcing the provisions of this Agreement shall be
      construed as a waiver of such provisions or affect the validity, binding effect
      or enforceability of this Agreement or any provision hereof.

    

    (i)
      Notices.
      All
      notices, requests, demands, claims, consents and other communications which
      are
      required or otherwise delivered hereunder shall be in writing and shall be
      deemed to have been duly given if (i) personally delivered or transmitted by
      electronic mail, (ii) sent by nationally recognized overnight courier, (iii)
      mailed by registered or certified mail with postage prepaid, return receipt
      requested, or (iv) transmitted by facsimile (with a copy of such transmission
      concurrently transmitted by registered or certified mail with postage prepaid,
      return receipt requested), to the parties hereto at the following addresses
      (or
      at such other address for a party as shall be specified by like
      notice):

    

    (j)
      If to
      the Board or the Company, to:

    

    Otelco
      Inc. 

    505
      Third
      Avenue East

    Oneonta,
      Alabama 35121 

    Attention:
      Michael Weaver 

    Telephone
      No: (205) 625-3596

    Facsimile
      No: (205) 625-3528

    

    with
      a
      copy to:

    

    Dorsey
      & Whitney LLP

    250
      Park
      Avenue 

    New
      York,
      New York 10177

    Attention:
      Steven Khadavi, Esq. 

    Telephone
      No: (212) 415-9376

    Facsimile
      No: (212) 953-7201

    

    (b)
      if to
      the Employee to:

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    Dennis
      Andrews

    460
      Rocky
      Ridge Road

    Union
      Grove, AL 35175

    Telephone
      No: (256) 498-2515

    

    or
      to
      such other address as the party to whom such notice or other communication
      is to
      be given may have furnished to each other party in writing in accordance
      herewith. Any such notice or communication shall be deemed to have been received
      (i) when delivered, if personally delivered or transmitted by electronic mail,
      with receipt acknowledgment by the recipient by return electronic mail, (ii)
      when sent, if sent by facsimile on a Business Day during normal business hours
      (or, if not sent on a Business Day during normal business hours, on the next
      Business Day after the date sent by facsimile), (iii) on the next Business
      Day
      after dispatch, if sent by nationally recognized, overnight courier guaranteeing
      next Business Day delivery, and (iv) on the 5th
      Business
      Day following the date on which the piece of mail containing such communication
      is posted, if sent by mail. 

    

    (k)
      Descriptive
      Headings.
      The
      descriptive headings of this Agreement are inserted for convenience only and
      do
      not constitute a part of this Agreement.

    

    (l)
      Construction.
      Where
      specific language is used to clarify by example a general statement contained
      herein, such specific language shall not be deemed to modify, limit or restrict
      in any manner the construction of the general statement to which it relates.
      The
      language used in this Agreement shall be deemed to be the language chosen by
      the
      parties to express their mutual intent, and no rule of strict construction
      shall
      be applied against any party.

    

    (m)
      Nouns
      and Pronouns.
      Whenever the context may require, any pronouns used herein shall include the
      corresponding masculine, feminine or neuter forms, and the singular form of
      nouns and pronouns shall include the plural and vice-versa.

    

    

    

    [signature
      page follows]

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

      IN
      WITNESS WHEREOF,
      the
      parties hereto have executed this Employment Agreement as of the date first
      written above.

    

     

    

     

    

    
      	
               

            	
              OTELCO
                INC.  

            
	
               

            	
               

            
	
               

            	
               

            
	
               

            	
              By:
                

            	
              /s/
                Curtis L. Garner, Jr.

            	
               

            
	 	 	
              

            	 
	
               

            	
              Name:
                Curtis L. Garner, Jr.

            
	
               

            	
              Title:
                Chief Financial Officer

            
	
               

            	
               

            
	
               

            	
               

            
	
               

            	
               

            
	
               

            	
              EMPLOYEE 

            
	
               

            	
               

            
	
               

            	
               

            
	
               

            	
              /s/
                Dennis Andrews

            	
               

            
	 	
              

            	 
	
               

            	
              DENNIS
                ANDREWS

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