exv4w1






Exhibit 4.1


Execution Copy




SECOND AMENDED AND RESTATED


CREDIT AGREEMENT




     THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of May 4, 2010, is by and between
OTTER TAIL CORPORATION, a Minnesota corporation (the “Borrower”), the banks or financial
institutions listed on the signature pages hereof or which hereafter become parties hereto by means
of assignment and assumption as hereinafter described (individually referred to as a “Bank”
or collectively as the “Banks”), BANK OF AMERICA, N.A. and JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION, as Co-Syndication Agents, KEYBANK NATIONAL ASSOCIATION, as Documentation Agent, and
U.S. BANK NATIONAL ASSOCIATION, a national banking association, as administrative agent for the
Banks (in such capacity, the “Agent”) and as Lead Arranger.



Preliminary Statement




     Varistar Corporation (“Varistar”), certain Banks and the Agent entered into a Credit
Agreement, dated as of December 23, 2008 (as thereafter amended, the “Existing Credit
Agreement”), under which the Banks and the Swing Line Bank made loans to Varistar and issued
letters of credit for the account of Varistar or its Subsidiaries, and the Borrower thereafter
assumed the obligations of Varistar under the Existing Credit Agreement. The Borrower has
requested that the Banks continue to make loans and letters of credit available to the Borrower, as
more particularly described herein, and the Borrower, the Banks named herein, the Co-Syndication
Agents and the Agent have agreed that the Existing Credit Agreement shall be amended to read as
follows to govern such existing loans and letters of credit and those made and issued hereafter
under the terms hereof.



ARTICLE I DEFINITIONS AND ACCOUNTING TERMS




     Section 1.1 Defined Terms. In addition to the terms defined elsewhere in this
Agreement, the following terms shall have the following respective meanings (and such meanings
shall be equally applicable to both the singular and plural form of the terms defined, as the
context may require):



     “Advance” means the portion of the outstanding Revolving Loans by the Banks as to
which one of the available interest rate options and, if pertinent, an Interest Period, is
applicable. An Advance may be a “LIBOR Advance”, “Base Rate Advance” (each, a “type” of Advance).



     “Adverse Event” means the occurrence of any event that has had or could reasonably be
expected to have a material adverse effect on the business, operations, property, assets or
financial condition of the Borrower and the Subsidiaries as a consolidated enterprise or on the
ability of the Borrower and the Material Subsidiaries, taken as a consolidated enterprise, to
perform their obligations under the Loan Documents.



     “Agent” means U.S. Bank National Association, as administrative agent for the Banks
hereunder and each successor, as provided in Section 11.8, who shall act as Agent.



 









 





     “Agent’s Fee Letter” means the letter agreement, dated as of the date hereof (as
hereafter amended from time to time) between the Borrower and the Agent respecting certain fees
payable to the Agent for its own account.



     “Agreement” means this Second Amended and Restated Credit Agreement, as it may be
further amended, modified, supplemented, restated or replaced from time to time.



     “Applicable Commitment Fee Rate; Applicable Margin” means, on and after the receipt of
confirmation of the Long Term Debt Rating, the percentages set forth below, determined based on the
applicable Level set forth in this definition:



	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Applicable Margin	 	Applicable
	Level:	 	LIBOR Advances	 	Base Rate Advances	 	Commitment Fee Rate
	Level I:
	 	 	2.75	%	 	 	1.750	%	 	 	0.375	%
	Level II:
	 	 	3.00	%	 	 	2.00	%	 	 	0.500	%
	Level III:
	 	 	3.25	%	 	 	2.25	%	 	 	0.500	%
	Level IV
	 	 	3.50	%	 	 	2.50	%	 	 	0.750	%
	Level V
	 	 	3.75	%	 	 	2.75	%	 	 	0.875	%





The Applicable Commitment Fee Rate and Applicable Margin shall be adjusted ten (10) Business Days
after any change in ratings that would require such adjustment. For purposes of this definition,
the Levels shall be defined and determined as follows:




Level I shall apply if the Borrower’s Long Term Debt Rating is BBB+ or better (S&P),
Baa1 or better (Moody’s) and BBB+ or better (Fitch).




Level II shall apply if the Borrower’s Long Term Debt Rating is BBB (S&P), Baa2
(Moody’s) and BBB (Fitch), but no numerically lower Level applies.




Level III shall apply if the Borrower’s Long Term Debt Rating is BBB- (S&P), Baa3
(Moody’s) and BBB- (Fitch), but no numerically lower Level applies.




Level IV shall apply if the Borrower’s Long Term Debt Rating is BB+ (S&P), Ba1
(Moody’s) and BB+ (Fitch), but no numerically lower Level applies.




Level V shall apply if the Borrower’s Long Term Debt Rating is BB or below (S&P),
Ba2 or below (Moody’s) or BB or below (Fitch).


If the ratings established or deemed to have been established by S&P, Moody’s, and Fitch for the
Borrower are different by one Level, the Level with two out of the three Senior Unsecured Debt
Ratings falling thereunder shall apply. If the ratings differ by more than one Level and if the



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rating is the same by two rating agencies and the third agency rating is lower, then the higher
rating shall govern and otherwise, the governing rating shall be the rating next below the highest
of the three. If the Borrower is not rated by S&P, Moody’s or Fitch, then the rate shall be
established by reference to Level V.



     “Approved Fund” means any Fund that is administered or managed by (a) a Bank, (b) an
affiliate of a Bank or (c) an entity or an affiliate of an entity that administers or manages a
Bank.



     “Authorized Representatives” means any officers or employees of the Borrower
designated by the Borrower for purposes of giving and receiving notices hereunder, requesting and
repaying Loans, agreeing to rates of interest and otherwise transacting business with the Agent and
the Banks hereunder.



     “Base Rate” means, for any day, a fluctuating rate per annum as determined by the
Agent to equal to the greatest of (a) the Prime Rate in effect on such day, (b) a rate per annum
equal to the Federal Funds Effective Rate in effect on such day plus 0.50% per annum, or (c) the
LIBOR Rate (Reserve Adjusted) Daily Floating in effect on such day plus 1.00% per annum. If for
any reason the Agent shall have determined (which determination shall be conclusive in the absence
of manifest error) that it is unable to ascertain the Federal Funds Effective Rate or the LIBOR
Rate (Reserve Adjusted) Daily Floating for any reason (including, without limitation, the inability
or failure of the Agent to obtain sufficient bids or publications in accordance with the terms
hereof), the Base Rate shall be a fluctuating rate per annum equal to the Prime Rate in effect from
time to time per annum until the circumstances giving rise to such inability no longer exist.



     “Base Rate Advance” means an Advance designated as such in a notice of borrowing under
Section 2.3 or a notice of continuation or conversion under Section 2.4.



     “Borrower” shall have the meaning set forth in the introductory paragraph.



     “Borrower Obligations” means each and every debt, liability and other obligation of
the Borrower of every type and description arising under or in connection with any of the Loan
Documents which the Borrower may now or at any time hereafter owe to a Bank or to the Banks or to
the Agent, whether such debt, liability or obligation now exists or is hereafter created or
incurred, whether it is direct or indirect, due or to become due, absolute or contingent, primary
or secondary, liquidated or unliquidated, or sole, joint, several or joint and several, and
including specifically, but not limited to, all indebtedness, liabilities and obligations of the
Borrower arising under this Agreement, any Letter of Credit Agreement and the Notes.



     “Business Day” means any day (other than a Saturday, Sunday or legal holiday in the
State of Minnesota) on which national banks are permitted to be open in Minneapolis, Minnesota and
New York, New York and, with respect to LIBOR Advances, a day on which dealings in Dollars may be
carried on by the Agent in the interbank LIBOR market.



     “Capitalized Lease” means any lease which is or should be capitalized on the books of
the lessee in accordance with GAAP.



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     “Code” means the Internal Revenue Code of 1986, as amended, or any successor statute,
together with regulations thereunder.



     “Commitment” means the maximum unpaid principal amount of the Loans of all Banks which
may from time to time be outstanding hereunder, being initially $200,000,000, as the same may be
increased from time to time pursuant to Section 2.9 or reduced from time to time pursuant
to Section 4.3, or, if so indicated, the maximum unpaid principal amount of Loans of any
Bank (which amounts are set forth on Schedule 1.1(a) hereto or in the relevant Assignment
and Assumption Agreement for such Bank) and, as the context may require, the agreement of each Bank
to make Loans to the Borrower and to participate in the Letters of Credit subject to the terms and
conditions of this Agreement up to its Commitment.



     “Commitment Fees” shall have the meaning set forth in Section 3.2.



     “Compliance Certificate” means a certificate in the form of Exhibit B, duly
completed and signed by an authorized officer of the Borrower.



     “Controlled Foreign Corporation” means a Subsidiary that is a controlled foreign
corporation under Section 957 of the Code.



     “Current Extension Commitments” shall have the meaning set forth in Section
2.14(c).



     “Default” means any event which, with the giving of notice to the Borrower or lapse of
time, or both, would constitute an Event of Default.



     “Defaulting Bank” means any Bank, as determined by the Agent, that has (a) failed (a
“Funding Default”) to fund any portion of its Loans or Participation Interests (in each
case, a “Defaulted Loan”) within three (3) Business Days of the date required in the
determination of the Agent to be funded by it hereunder, (b) notified the Borrower, the Agent, the
Swing Line Lender or any Bank in writing that it does not intend to comply with any of its funding
obligations under this Agreement or has made a public statement to the effect that it does not
intend to comply with its funding obligations (i) under this Agreement or (ii) under other
agreements in which it is obligated to extend credit unless, in the case of this clause (ii), such
obligation is the subject of a good faith dispute, (c) failed, within three (3) Business Days after
request by the Agent, to confirm that it will comply with the terms of this Agreement relating to
its obligations to fund prospective Loans and Participation Interests, (d) otherwise failed to pay
over to the Agent or any other Bank any other amount required to be paid by it hereunder within
three (3) Business Days of the date when due, unless the subject of a good faith dispute, or (e)
(i) become or is insolvent or has a parent company that has become or is insolvent or (ii) become
the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee,
administrator, assignee for the benefit of creditors or similar Person charged with reorganization
or liquidation of its business or custodian, appointed for it, or has taken any action in
furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or
appointment or has a parent company that has become the subject of a bankruptcy or insolvency
proceeding, or has had a receiver, conservator, trustee, administrator, assignee for the benefit of
creditors or similar Person charged with reorganization or liquidation of its business or custodian
appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval
of or



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acquiescence in any such proceeding or appointment; provided, that a Bank shall not become a
Defaulting Bank solely as the result of (x) the acquisition or maintenance of an ownership interest
in such Bank or a Person controlling such Bank or (y) the exercise of control over a Bank or a
Person controlling such Bank, in each case, by a governmental authority or an instrumentality
thereof.



     “EBIT” means, for any period of determination, the consolidated net income of the
Borrower and its Subsidiaries before provision for income taxes, plus, (i) to the extent subtracted
in determining consolidated net income, Interest Expense, all as determined in accordance with
GAAP, excluding (to the extent included): (a) non-operating gains (including, without limitation,
extraordinary or nonrecurring gains, gains from discontinuance of operations and gains arising from
the sale of assets other than inventory), excluding gains resulting from sale of fixed assets,
during the applicable period; (b) similar non-operating losses, excluding losses from sale of fixed
assets, during such period; (c) payments of any premiums and any other costs, fees and expenses
required to be paid by the terms thereof in connection with the repayment or redemption of
Interest-bearing Debt existing as of the date of this Agreement and capital stock existing as of
the date of this Agreement; (d) fees, cash charges and other cash expenses paid by the Borrower or
any of its Subsidiaries in connection with any permitted acquisition, permitted disposition of
assets, recapitalization, Investment, issuance of Indebtedness, issuance of equity interests,
refinancing transaction or modification or amendment of any debt instrument (including any
transaction undertaken but not completed) up to an aggregate amount not to exceed $5,000,000 in any
period of four consecutive fiscal quarters; (e) non-cash charges attributable to any swap, collar
or other hedging agreement; (f) non-cash compensation charges or expenses, including any such
charges arising from the grants of stock appreciation or similar rights, stock options, restricted
stock or other management equity plans and including non-cash bonus payments; (g) the amount of any
minority interest expense (less the amount of any cash dividends paid to the holders of such
minority interests); (h) any impairment charge or asset write-off of the Borrower and its
Subsidiaries, including any charge or write-off related to intangible assets, long-lived assets or
investments, including, pursuant to Financial Accounting Standards Board Statement No. 142
“Goodwill and Other Intangible Assets” or Financial Accounting Standards Board Statement No. 144
“Accounting for the Impairment or Disposal of Long-Lived Assets” and the amortization of
intangibles arising pursuant to the Financial Accounting Standards Board Statement No. 141
“Business Combinations;” (i) plant closure, severance and other restructuring charges up to an
aggregate amount not to exceed $5,000,000 in any period of four consecutive fiscal quarters; and
(j) other non-cash charges reducing consolidated net income of the Borrower and its Subsidiaries
(excluding any such non-cash charge to the extent that it represents an accrual or reserve for
potential cash charges in any future period but including impairment charges, write-offs and
write-downs), minus (ii) the sum, without duplication, of amounts for (a) non-cash gains
attributable to any swap, collar or other hedging agreement and (b) other non-cash gains increasing
consolidated net income of the Borrower and its Subsidiaries for such period (other than any such
non-cash gain to the extent it represents the reversal of an accrual or reserve for potential cash
gain in any prior period); provided that if the Borrower or any Subsidiary acquires a
Person (an “Acquired Person”) in an Acquisition in such period, then all of the Acquired
Person’s EBIT (calculated for such Person as set forth above) for the period of determination shall
be added to EBIT, and if the Borrower or any Subsidiary sells all or substantially all of the stock
or assets of any Subsidiary in any such period, then the EBIT of such Subsidiary (calculated for
such Person as set forth above) shall be deducted from EBIT.



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     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any
successor statute, together with regulations thereunder.



     “ERISA Affiliate” means any trade or business (whether or not incorporated) that is a
member of a group of which the Borrower is a member and which is treated as a single employer under
Section 414 of the Code.



     “Event of Default” means any event described in Section 10.1.



     “Extended Termination Date” shall have the meaning set forth in Section
2.14(a).



     “Extension Amendments” shall have the meaning set forth in Section 2.14(e).



     “Extension Offer” shall have the meaning set forth in Section 2.14(a).



     “Federal Funds Effective Rate” means, for any day, an interest rate per annum equal to
the weighted average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for such day on such transactions received by the Agent from three
Federal funds brokers of recognized standing selected by it. In the case of a day which is not a
Business Day, the Federal Funds Effective Rate for such day shall be the Federal Funds Effective
Rate for the preceding Business Day. Each change in the Base Rate due to a change in the Federal
Funds Effective Rate shall take effect on the effective date of such change in the Federal Funds
Effective Rate.



     “Federal Reserve Board” means the Board of Governors of the Federal Reserve System or
an successor thereto.



     “Fitch” means Fitch Ratings and its successors.



     “Fund” means any Person (other than a natural person) that is (or will be) engaged in
making, purchasing, holding or otherwise investing in commercial loans and similar extensions of
credit in the ordinary course of its business.



     “GAAP” means generally accepted accounting principles as in effect from time to time
and applied in accordance with Section 1.2.



     “Guaranty” means to (a) endorse, guarantee, contingently agree to purchase or to
provide funds for the payment of, or otherwise become contingently liable upon, any payment
obligation of any other Person, except by the endorsement of negotiable instruments for deposit or
collection (or similar transactions) in the ordinary course of business, or (b) agree to maintain
the net worth or working capital of, or provide funds to satisfy any other financial test
applicable to, or other obligations of, any other Person.



     “Indebtedness” means, without duplication, all obligations of the Borrower or any
Subsidiary: (a) consisting of Interest-bearing Debt; (b) on account of deposits or advances,
excluding deposits and advances received in the ordinary course of business; and (c) constituting



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a Guaranty by such Person in respect to indebtedness of others to the extent not included in
clause (a). For all purposes of this Agreement, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture in which such Person is a general partner or a
joint venturer, but shall exclude trade liabilities and intercompany liabilities incurred in the
ordinary course of business.



     “Interest and Dividend Coverage Ratio” means the ratio, calculated for each period of
four consecutive fiscal quarters of the Borrower, of: (a) EBIT for such period; to (b) the
sum for such period of (i) Interest Expense, plus (ii) dividends or interest on Preferred
Stock.



     “Interest-bearing Debt” means, without duplication, all interest-bearing obligations
of the Borrower or a Subsidiary on a consolidated basis: (a) in respect of borrowed money; (b)
secured by a mortgage, pledge, security interest, lien or charge on the assets of the Borrower or a
Subsidiary, whether the obligation secured is the obligation of the owner or another Person,
provided that the amount of such obligation which has not been assumed by the Borrower or a
Subsidiary shall be the lesser of (i) the amount of such obligation and (ii) the fair market value
of such assets; (c) for the deferred purchase price of any property or services evidenced by a
note, payment contract or other instrument (other than an account payable arising in the ordinary
course of business), (d) constituting the principal component of obligations as lessee under any
Capitalized Lease; (e) that are Guaranties by the Borrower or a Subsidiary in respect to
Interest-bearing Debt of other Persons; (f) that are net liabilities under any interest rate swap,
collar or other interest rate hedging agreement; (g) consisting at any time of the aggregate
undrawn and unexpired amount of standby letters of credit plus the aggregate amount of drawings
thereunder that have not been reimbursed; (h) constituting the principal component of obligations
that are amounts calculated in respect of synthetic leases as if such leases were Capitalized
Leases; (i) that are indebtedness attributable to Permitted Sales and Leasebacks; and (j) that are
indebtedness attributable to Permitted Securitization Transactions (only to the extent such
transactions include recourse to the Borrower or a Subsidiary). For all purposes of this
Agreement, Interest-bearing Debt of any Person shall exclude trade liabilities and intercompany
liabilities incurred in the ordinary course of business.



     “Interest Expense” means, for any period of determination, the aggregate consolidated
amount, without duplication, of interest paid, accrued or scheduled to be paid in respect of any
Indebtedness of the Borrower and its Subsidiaries, including in all cases interest expense
determined in accordance with GAAP and, to the extent not otherwise included in GAAP interest
expense: (a) all but the principal component of payments in respect of conditional sale contracts,
Capitalized Leases and other title retention agreements; (b) commissions, discounts and other fees
and charges with respect to letters of credit and bankers’ acceptance financings; (c) net costs
under any interest rate swap, collar or other interest rate hedging agreements, in each case
determined in accordance with GAAP; (d) amounts calculated in respect of synthetic leases as if
such leases were Capitalized Leases, and (e) discount or other yield attributable to Permitted
Securitization Transactions.



     “Interest Period” means, for any LIBOR Advance, the period commencing on the borrowing
date of such LIBOR Advance or the date a Base Rate Advance is converted into such LIBOR Advance, or
the last day of the preceding Interest Period for such LIBOR Advance, as the case may be, and
ending one, two, three or six months, or, if available to all Banks, nine or



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twelve months thereafter, as selected by the Borrower pursuant to Section 2.3 or
Section 2.4; provided, that:




(a) any Interest Period which would otherwise end on a day which is not a Business Day shall
end on the next succeeding Business Day unless such next succeeding Business Day falls in
another calendar month, in which case such Interest Period shall end on the next preceding
Business Day;




(b) any Interest Period which begins on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day of the calendar month at the end of
such Interest Period; and




(c) no Interest Period shall extend beyond the Termination Date.



     “Investment” means the acquisition, purchase, or making of any loan, advance,
contribution to capital or extension of credit, and any purchase of stock or other debt or equity
securities of or any interest in another Person or any integral part of any business or the assets
comprising such business or part thereof.



     “Investment Grade Rated” means having a Long Term Debt Rating of BBB- or better by
S&P, Baa3 or better by Moody’s and BBB- or better by Fitch.



     “Laws” shall mean, collectively, all applicable international, foreign, Federal,
state, commonwealth and local statutes, treaties, rules, guidelines, regulations ordinances, codes
and administrative or judicial precedents or authorities, including the interpretation or
administration thereof by any governmental authority charged with the enforcement, interpretation
or administration thereof, and all applicable administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any governmental authority, in each
case whether or not having the force of law.



     “Letters of Credit” shall have the meaning set forth in Section 2.8(a).



     “Letter of Credit Agreements” shall have the meaning set forth in Section
2.8(c).



     “Letter of Credit Obligations” shall mean the aggregate amount of all possible
drawings under all Letters of Credit plus all amounts drawn under any Letter of Credit and not
reimbursed by the Borrower under the applicable Letter of Credit Agreement.



     “LIBOR Advance” means an Advance designated as such in a notice of borrowing under
Section 2.3 or a notice of continuation or conversion under Section 2.4.



     “LIBOR Interbank Rate” means the offered rate for deposits in United States Dollars
for delivery of such deposits on the first day of an Interest Period of a LIBOR Advance, for the
number of days comprised therein, quoted by the Agent from Reuters Screen LIBOR01 page or any
successor thereto as of approximately 11:00 a.m., London time, on the day that is two Banking Days
preceding the first day of the Interest Period of such LIBOR Advance, or the rate for such deposits
determined by the Agent at such time based on such other published service of



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general application as shall be selected by the Agent for such purpose; provided, that in lieu
of determining the rate in the foregoing manner, the Agent may determine the rate based on rates
offered to the Agent for deposits in United States Dollars in the interbank eurodollar market at
such time for delivery on the first day of the Interest Period for the number of days comprised
therein.



     “LIBOR Interbank Daily Rate” means the offered rate for deposits in United States
Dollars for interest periods of one month determined by the Agent from Reuters Screen LIBOR01 page
or any successor thereto as of approximately 11:00 a.m., London time, on each Business Day (without
taking into account the two-day future delivery convention applicable to such reports), which rate
shall remain in effect until the next following Business Day.



     “LIBOR Rate (Reserve Adjusted)” means a rate per annum calculated for the Interest
Period of a LIBOR Advance in accordance with the following formula:



	 	 	 	 	 	 	 

	LRRA

	 	=
	 	LIBOR Interbank Rate
	 	 
	 

	 	 	 	 
	 	 
	 

	 	 	 	1.00 - LRR	 	 





In such formula, “LRR” means “LIBOR Reserve Rate” and “LRRA” means “LIBOR Rate (Reserve Adjusted)”,
in each instance determined by the Agent for the applicable Interest Period. The Agent’s
determination of all such rates shall be conclusive in the absence of manifest error.



     “LIBOR Rate (Reserve Adjusted) Daily Floating” means a rate per annum calculated for
the Interest Period of a LIBOR Advance in accordance with the following formula:



	 	 	 	 	 	 	 

	LRRADF

	 	=
	 	LIBOR Interbank Daily Rate
	 	 
	 

	 	 	 	 
	 	 
	 

	 	 	 	1.00 -  LRR	 	 





In such formula, “LRR” means “LIBOR Reserve Rate” and “LRRADF” means “LIBOR Rate (Reserve Adjusted)
Daily Floating”. The Agent’s determination of all such rates shall be conclusive in the absence of
manifest error.



     “LIBOR Reserve Rate” means a percentage equal to the daily average during such
Interest Period of the aggregate maximum reserve requirements (including all basic, supplemental,
marginal and other reserves), as specified under Regulation D of the Federal Reserve Board, or any
other applicable regulation that prescribes reserve requirements applicable to Eurocurrency
liabilities (as presently defined in Regulation D) or applicable to extensions of credit by the
Agent the rate of interest on which is determined with regard to rates applicable to Eurocurrency
liabilities. Without limiting the generality of the foregoing, the Eurocurrency Reserve Rate shall
reflect any reserves required to be maintained by the Agent against (i) any category of liabilities
that includes deposits by reference to which the LIBOR Interbank Rate or LIBOR Interbank Daily Rate
is to be determined, or (ii) any category of extensions of credit or other assets that includes
LIBOR Advances.



     “Lien” means any security interest, mortgage, pledge, lien, hypothecation, judgment
lien or similar legal process, charge, encumbrance, title retention agreement or analogous
instrument



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or device (including, without limitation, the interest of the lessors under Capitalized Leases
and the interest of a vendor under any conditional sale or other title retention agreement).



     “Loans” means the Revolving Loans and the Swing Line Loans.



     “Loan Documents” means this Agreement, the Notes, each Letter of Credit Agreement,
each Material Subsidiary Guaranty and each other instrument, document, guaranty, security
agreement, mortgage, or other agreement executed and delivered by the Borrower, Material Subsidiary
or any other guarantor or party granting security interests in connection with this Agreement, the
Loans or any collateral for the Loans.



     “Long Term Debt Rating” means the rating assigned by S&P, Moody’s or Fitch to the long
term, unsecured and unsubordinated indebtedness guaranteed by the non-regulated Subsidiaries of the
Borrower.



     “Material Subsidiary” means (a) the Subsidiaries listed on Schedule 1.1(b)
hereto, and (b) any Subsidiary acquired or formed after the date of this Agreement if at the time
of such acquisition or formation or at any time thereafter either (i) the consolidated assets of
such Subsidiary and its Subsidiaries shall exceed 5.00% of the consolidated assets of the Borrower
and its Subsidiaries (excluding Otter Tail Power Company and its Subsidiaries), or (ii) the
consolidated gross revenues of such Subsidiary and its Subsidiaries shall exceed 5.00% of the
consolidated gross revenues of the Borrower and its Subsidiaries (excluding Otter Tail Power
Company and its Subsidiaries). Such assets and gross revenues shall be determined on a pro forma
basis at the time of such acquisition or formation, and shall be determined thereafter at the
request of the Agent, but not less than one time per fiscal year of the Borrower thereafter.
Notwithstanding the foregoing neither Otter Tail Power Company nor any other Subsidiary of Otter
Tail Power Company shall be deemed a Material Subsidiary.



     “Material Subsidiary Guaranty” means the Guaranty in the form of Exhibit C
hereto, duly completed and executed by each Material Subsidiary now existing or hereafter formed or
acquired, except for any Subsidiary that is a Controlled Foreign Corporation.



     “Minimum Extension Condition” shall have the meaning set forth in Section
2.14(d).



     “Moody’s” means Moody’s Investors Service, Inc. or its successors.



     “Notes” means the Revolving Notes and the Swing Line Note.



     “Otter Tail Power Company” shall mean Otter Tail Power Company, a Minnesota
corporation, and a Subsidiary of the Borrower..



     “Participation Interests” means the participation interest of each Bank in (a) any
Swing Line Loan, as provided in Section 2.7(b), (b) Letters of Credit, as provided in
Section 2.8(a) and (b), and (c) Loans of other Banks, as provided in Section 4.5.



     “Payment Date” means the Termination Date, plus (a) the last day of each Interest
Period for each LIBOR Advance and, if such Interest Period is in excess of three months after the
first day of such Interest Period, and thereafter each day three months after each succeeding
Payment



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Date; (b) the last Business Day of each month for any Swing Line Loan, and (c) the last day of
each March, June, September and December of each year for each Base Rate Advance and for any fees
including, without limitation, Commitment Fees and the Letter of Credit commissions payable under
Section 2.8(c)(vi).



     “PBGC” means the Pension Benefit Guaranty Corporation, established pursuant to
Subtitle A of Title IV of ERISA, and any successor thereto or to the functions thereof.



     “Percentage” means, as to any Bank, the proportion, expressed as a percentage, that
such Bank’s Commitment bears to the total Commitments of all Banks. The Percentages of the Banks
as of the date of this Agreement are set forth on Schedule 1.1(a).



     “Permitted Divestitures” means sales of stock or assets, transfers of stock or assets,
mergers resulting in divestiture of stock or assets or other divestitures of assets of the Borrower
and Subsidiaries, which, in the aggregate for all such transactions during any one fiscal year of
the Borrower, shall not result in the sale, transfer or other divestiture of stock or assets having
a value in excess of 10% of the consolidated assets of the Borrower and its Subsidiaries as of the
beginning of such fiscal year.



     “Permitted Sales and Leasebacks” means sales and leasebacks of assets of the Borrower
or a Subsidiary involving a sale price of assets of the Borrower and Subsidiaries not to exceed
$20,000,000 in the aggregate for all transactions after the date of this Agreement, that give rise
to Interest-bearing Debt, calculated as if the relevant leases were Capitalized Leases (whether or
not actually constituting Capitalized Leases).



     “Permitted Securitization Transactions” means sales of accounts receivable and other
securitization transactions in nominal principal amounts not to exceed $50,000,000;
provided, that such transactions may include only recourse to the Borrower or a Subsidiary
(a) under customary representations and warranties not constituting credit support for the assets
sold, and (b) constituting credit support in an amount not exceeding 10% of the nominal principal
amount of the transaction. The nominal principal amount of any Permitted Securitization
Transaction, and the discount or other yield attributable thereto for purposes of determination of
Interest Expense, shall each be determined on a reasonable basis by the Borrower as if each such
transaction were a financing transaction and not a sale.



     “Person” means any natural person, corporation, limited liability company,
partnership, joint venture, firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other entity, whether acting in an individual,
fiduciary or other capacity.



     “Plan” means an employee benefit plan or other plan, maintained for employees of the
Borrower or of any ERISA Affiliate, and subject to Title IV of ERISA or Section 412 of the Code.



     “Preferred Stock” means stock of the Borrower other than common stock.



11









 





     “Prime Rate” means the rate of interest from time to time announced by the Agent as
its “prime rate.” For purposes of determining any interest rate which is based on the Prime Rate,
such interest rate shall be adjusted each time that the prime rate changes.



     “Prior Extension Commitments” shall have the meaning set forth in Section
2.14(c).



     “Related Party” means any Person (other than a Subsidiary): (a) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or is under common
control with, the Borrower, (b) which beneficially owns or holds 10% or more of the equity
interests of the Borrower; or (c) 10% or more of the equity interests of which is beneficially
owned or held by the Borrower or a Subsidiary. The term “control” means the possession, directly
or indirectly, of the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or otherwise.



     “Reportable Event” means a reportable event as defined in Section 4043 of ERISA and
the regulations issued under such Section, with respect to a Plan, excluding, however, such events
as to which the PBGC by regulation has waived the requirement of Section 4043(a) of ERISA that it
be notified within 30 days of the occurrence of such event, provided that a failure to meet the
minimum funding standard of Section 412 of the Code and Section 302 of ERISA shall be a reportable
event regardless of the issuance of any such waivers in accordance with Section 412(d) of the Code.



     “Required Banks” means (subject to Section 2.11 with respect to any Defaulting
Bank) those Banks whose total Percentage exceeds 50.00%, or if no Commitments remain in effect,
whose share of principal of the Loans exceeds 50.00% of the aggregate outstanding principal of all
Loans.



     “Restricted Payments” means any expenditure by the Borrower or any Subsidiary for
purchase, redemption or other acquisition for value of any shares of the Borrower’s or any
Subsidiary’s stock, payment of any dividend thereon (other than stock dividends and dividends
payable solely by a Subsidiary to another Subsidiary or by a Subsidiary to the Borrower, any
distribution on, or payment on account of the purchase, redemption, defeasance or other acquisition
or retirement for value of, any shares of the Borrower’s or any Subsidiary’s stock (other than
payment to, or on account of or for the benefit of, the Borrower or any Subsidiary only).



     “Revolving Loans” means the Loans described in Section 2.1(a).



     “Revolving Notes” means the promissory notes of the Borrower described in Section
2.5(a), substantially in the form of Exhibit A-1, issued by the Borrower to each of the
Banks that have requested such a promissory note pursuant to Section 2.5(d), as such promissory
notes may be amended, modified or supplemented from time to time, and such term shall include any
substitutions for, or renewals of, such promissory notes.



     S&P” means Standard & Poor’s Ratings Group or its successors.



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     “Subsidiary” of a Person means (i) any corporation more than 50% of the outstanding
securities having ordinary voting power of which shall at the time be owned or controlled, directly
or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or
more of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint
venture or similar business organization more than 50% of the ownership interests having ordinary
voting power of which shall at the time be so owned or controlled. Unless otherwise expressly
provided, all references herein to a “Subsidiary” shall mean a Subsidiary of the Borrower.



     “Swing Line Guideline” means the maximum unpaid principal amount of the Swing Line
Loans which may from time to time be outstanding hereunder, being initially $20,000,000.



     “Swing Line Bank” means U.S. Bank.



     “Swing Line Loans” means the Loans described in Section 2.1(b).



     “Swing Line Note” means the promissory note of the Borrower described in Section
2.5(d), substantially in the form of Exhibit A-2, issued by the Borrower to the Swing
Line Bank if requested pursuant to Section 2.5(d), as such promissory note may be amended, modified
or supplemented from time to time, and such term shall include any substitutions for, or renewals
of, such promissory note.



     “Swing Line Participation Amount” is defined in Section 2.7(b).



     “Termination Date” means the earliest of (a) May 4, 2013 (or, if later, the Extended
Termination Date), (b) the date on which the Commitments are terminated pursuant to Section
10.2 or (c) the date on which the Commitments are reduced to zero pursuant to Section
4.3.



     “Total Capitalization” means as of any date of determination, the sum of (a) the
amounts set forth on the consolidated balance sheet of the Borrower as the sum of the common stock,
preferred stock, additional paid-in capital and retained earnings of the Borrower (excluding
treasury stock); plus (b) the principal amount of Interest-bearing Debt of the Borrower and
the Subsidiaries.



     “Unrefunded Swing Line Loans” is defined in Section 2.7(b).



     “U.S. Bank” means U.S. Bank National Association, in its individual capacity and not
as Agent hereunder.



     Section 1.2 Accounting Terms and Calculations. All accounting terms not specifically
or completely defined herein shall be construed in conformity with, and all financial data required
to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP, as in effect
from time to time. All financial ratios calculated pursuant to Section 9.12 shall be calculated in
a manner consistent with that used in preparing the audited consolidated balance sheet of the
Borrower as of December 31, 2009 and the related audited consolidated statements of operations,
shareholders’ equity and cash flows for the Borrower for the fiscal years then ended for the fiscal
year ended December 31, 2009, except as otherwise specifically prescribed



13









 




herein. If at any time any change in GAAP would affect the computation of any financial ratio
set forth in any Loan Document, and either the Borrower or the Required Banks shall so
request, the Agent and the Borrower shall negotiate in good faith to amend such ratio to preserve
the original intent thereof in light of such change in GAAP (subject to the approval of the
Required Banks); provided that, until so amended, (i) such ratio shall continue to be computed in
accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Agent
a written reconciliation in form and substance reasonably satisfactory to the Agent, between
calculations of such ratio made before and after giving effect to such change in GAAP..



     Section 1.3 Computation of Time Periods. In this Agreement, in the computation of a
period of time from a specified date to a later specified date, unless otherwise stated the word
“from” means “from and including” and the word “to” or “until” each means “to but excluding.”



     Section 1.4 Other Definitional Terms. The words “hereof”, “herein” and “hereunder”
and words of similar import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement. References to Sections, Exhibits, schedules
and like references are to this Agreement unless otherwise expressly provided.



     Section 1.5 References to Agreements and Laws Unless otherwise expressly
provided herein, (a) references to organizational documents, agreements (including the Loan
Documents) and other contractual instruments shall be deemed to include all subsequent amendments,
restatements, extensions, supplements and other modifications thereto, but only to the extent that
such amendments, restatements, extensions, supplements and other modifications are not prohibited
by any Loan Document; and (b) references to any Law shall include all statutory and regulatory
provisions consolidating, amending, replacing, supplementing or interpreting such Law.



ARTICLE II TERMS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT




     Section 2.1 The Commitments and the Swing Line Loans. Subject to the terms and
conditions hereof and in reliance upon the warranties of the Borrower herein:




(a) Subject to the terms and conditions hereof and in reliance upon the warranties of the
Borrower herein, each Bank agrees, severally and not jointly, to make loans (each, a
“Revolving Loan” and, collectively, the “Revolving Loans”) to the Borrower
from time to time from the date hereof until the Termination Date, during which period the
Borrower may repay and reborrow in accordance with the provisions hereof, provided,
that the aggregate unpaid principal amount of any Bank’s Revolving Loans, its Percentage of
Letter of Credit Obligations and its Percentage of Swing Line Loans shall not exceed such
Bank’s Commitment and provided, further, that the total of all outstanding
Revolving Loans, Letter of Credit Obligations and Swing Line Loans shall not exceed the
aggregate Commitments of all Banks at any time. The Revolving Loans shall be made by the
Banks on a pro rata basis, calculated for each Bank based on its Percentage.




(b) Upon request by the Borrower, the Swing Line Bank may, at its sole discretion, make
loans (each a “Swing Line Loan” and, collectively, the “Swing Line Loans”)
to the



14









 






Borrower from time to time from the date hereof until the Termination Date, provided, that the aggregate unpaid principal amount of the Swing Line Loans at any one time
outstanding shall not exceed the Swing Line Guideline.



     Section 2.2 Advance Options. The Revolving Loans shall be constituted of LIBOR
Advances and/or Base Rate Advances, as shall be selected by the Borrower, except as otherwise
provided herein. Any combination of types of Advances may be outstanding at the same time, except
that the total number of outstanding LIBOR Advances shall not exceed eight (8) at any one time (or
such greater number to which the Administrative Agent may from time to time agree). Each LIBOR
Advance shall be in a minimum amount of $500,000. Each Base Rate Advance shall be in a minimum
amount of $100,000. Swing Line Loans may be in any amount requested by the Borrower.



     Section 2.3 Borrowing Procedures.




(a) Request by Borrower. Any request by the Borrower for a Loan shall be in
writing, or by telephone promptly confirmed in writing, and must be given so as to be
received by the Agent not later than:




(i) 1:00 p.m., Minneapolis time, on the date of the requested Loan, if the Loan
shall be comprised of Base Rate Advances; or




(ii) 12:00 noon, Minneapolis time, three Business days prior to the date of the
requested Revolving Loan, if the Revolving Loan shall be, or shall include, a LIBOR
Advance.




Each request for a Loan shall specify (1) the borrowing date (which shall be a Business
Day), (2) the amount of such Loan and the type or types of Advances comprising such Loan,
and (3) if such Loan shall include LIBOR Advances, the initial Interest Periods for such
Advances. The Swing Line Bank and the Borrower shall, from time to time, enter into
mutually acceptable arrangements for requests for Swing Line Loans.




(b) Funding of Agent. The Agent shall promptly notify each other Bank of the
receipt of such request, the matters specified therein, and of such Bank’s Percentage of the
requested Revolving Loans. On the date of the requested Revolving Loans, each Bank shall
provide its share of the requested Revolving Loans to the Agent in immediately available
funds not later than 3:00 p.m., Minneapolis time. On the date of any requested Swing Line
Loans, the Swing Line Bank shall provide the requested Swing Line Loan to the Agent in
immediately available funds not later than 4:00 p.m., Minneapolis time. Unless the Agent
determines that any applicable condition specified in Article VI has not been
satisfied, the Agent will make the requested Loans available to the Borrower at the Agent’s
principal office in Minneapolis, Minnesota in immediately available funds not later than
5:00 p.m. (Minneapolis time) on the lending date so requested, provided that the
Agent shall not be required to make any amount of the requested Revolving Loans available to
the Borrower unless the Agent shall have received such amount from the Banks, and
provided, further, that unless the Agent shall have been notified in writing
by a Bank prior to the time requested Revolving Loans shall be made hereunder that such



15









 






Bank does not intend to make its Percentage share of the requested Revolving Loans
available to the Agent, the Agent may assume that such Bank has made such Percentage share
available to the Agent and the Agent may in reliance on such assumption make Revolving Loans
available to the Borrower a corresponding amount. In any case that the Agent has made a
Revolving Loan to the Borrower on behalf of a Bank but has not received the amount of such
Revolving Loan from such Bank by the time herein required, such Bank shall pay interest to
the Agent on the amount so advanced at the overnight Federal Funds rate from the date of
such Revolving Loan to the date funds are received by the Agent from such Bank, such
interest to be payable with such remittance from such Bank of the principal amount of such
Revolving Loan. If the Agent does not receive payment from such Bank by the next Business
Day after the date of any Revolving Loan, the Agent shall be entitled to recover such
Revolving Loan, with interest thereon at the rate then applicable to the such Revolving
Loan, on demand, from the Borrower, without prejudice to the Agent’s and the Borrower’s
rights against such Bank. If such Bank pays the Agent the amount herein required with
interest at the overnight rate before the Agent has recovered from the Borrower, such Bank
shall be entitled to the interest payable by the Borrower with respect to the Revolving Loan
in question accruing from the date the Agent made such Revolving Loan.



     Section 2.4 Continuation or Conversion of Loans. The Borrower may elect to (i)
continue any outstanding LIBOR Advance from one Interest Period into a subsequent Interest Period
to begin on the last day of the earlier Interest Period, or (ii) convert any outstanding Advance
into another type of Advance (on the last day of an Interest Period only, in the instance of a
LIBOR Advance), by giving the Agent notice in writing, or by telephone promptly confirmed in
writing, given so as to be received by the Agent not later than:




(a) 1:00 p.m., Minneapolis time, on the date of the requested continuation or conversion, if
the continuing or converted Advance shall be a Base Rate Advance; or




(b) 12:00 noon, Minneapolis time, three Business days prior to the date of the requested
continuation or conversion, if the continuing or converted Advance shall be a LIBOR Advance.


Each notice of continuation or conversion of an Advance shall specify (i) the effective date of the
continuation or conversion (which shall be a Business Day), (ii) the amount and the type or types
of Advances following such continuation or conversion (subject to the limitation on amount set
forth in Section 2.2), and (iii) for continuation as, or conversion into, LIBOR Advances,
the Interest Periods for such Advances. Absent timely notice of continuation or conversion,
following expiration of an Interest Period unless the LIBOR Advance is paid in full, the Agent may
at any time thereafter convert the LIBOR Advance into a Base Rate Advance. Until such time as such
Advance is converted into a Base Rate Advance by the Agent or the Borrower or is continued as a
LIBOR Advance with a new Interest Period by notice by the Borrower as provided above, such Advance
shall continue to accrue interest at a rate equal to the interest rate applicable during the
expired Interest Period adjusted, however, to reflect changes in the Applicable Margin. No Advance
shall be continued as, or converted into, a LIBOR Advance if the shortest Interest Period for such
Advance may not transpire prior to the Termination Date or



16









 







if a Default or Event of Default shall
exist and the Agent has given notice to the Borrower that no such continuations or conversions may
be made.



     Section 2.5 Evidence of Indebtedness.




(a) Each Bank and the Swing Line Bank shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrower to such Bank resulting
from each Loan made by such Bank or Swing Line Bank, including the amounts of principal and
interest payable and paid to such Bank or Swing Lien Bank from time to time hereunder.




(b) The Agent, acting for this purpose as an agent of the Borrower, shall maintain accounts
in which it shall record (i) the amount of each Loan made hereunder, the type thereof and
the Interest Period applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Bank and the Swing Line Bank
hereunder and (iii) the amount of any sum received by the Agent hereunder for the account of
the Banks and the Swing Line Bank and each Bank’s and Swing Line Bank’s share thereof (the
“Register”).




(c) The entries made in the accounts maintained pursuant to paragraph (a) or (b) of this
Section 2.5 shall be prima facie evidence of the existence and amounts of the
obligations recorded therein; provided that the failure of any Bank, the Swing Line Bank or
the Agent to maintain such accounts or any error therein shall not in any manner affect the
obligation of the Borrower to repay the Loans in accordance with the terms of this
Agreement. The Borrower, the Agent and the Banks may treat each person whose name is
recorded in the Register pursuant to the terms hereof as a Bank hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary. The Register shall be available
for inspection by the Borrower or any Bank, at any reasonable time and from time to time
upon reasonable prior notice.




(d) Any Bank or the Swing Line Bank may request that Loans made by it be evidenced by a
promissory note. In such event, the Borrower shall prepare, execute and deliver to such
Bank or Swing Line Bank a Revolving Note payable to such Bank and its registered assigns or
a Swing Line Note payable to the Swing Line Bank and its registered assigns.



     Section 2.6 Funding Losses. In the event of (a) any failure of the Borrower to
borrow, continue or convert a LIBOR Advance on a date specified in a notice thereof, or (b) any
payment (including, without limitation, any payment pursuant to Section 4.2, 4.3 or
10.2), prepayment or conversion of any LIBOR Advance on a date other than the last day of
the Interest Period for such Advance, the Borrower agrees to pay each Bank’s costs, expenses and
Interest Differential (as determined by such Bank) incurred as a result of such event. The term
“Interest Differential” shall mean that sum amount, not less than $0, equal to the financial loss
incurred by each Bank resulting from such event, calculated as the difference between the amount of
interest such Bank would have earned (from like investments in the Money Markets as of the first
day of the Interest Period of the relevant Advance) had such event not occurred and the interest
the Bank will actually earn (from like investments in the Money Markets as of the date of such
event) as a result of the redeployment of funds from such event. Because of the short-term nature
of this



17









 




facility, the Borrower agrees that the Interest Differential shall not be discounted to its
present value. The term “Money Markets” refers to one or more wholesale funding markets available
to the Banks, including negotiable certificates of deposit, commercial paper, LIBOR deposits, bank
notes, federal funds and others. Such determinations by each Bank of shall be conclusive in
the absence of manifest error.



     Section 2.7 Refunding of Swing Line Loans.




(a) At any time permitted hereunder, the Borrower may request the Banks to make Revolving
Loans which may be applied to repay the Swing Line Loans outstanding. Upon occurrence and
during continuance of a Default or Event of Default, the Swing Line Bank may, on behalf of
the Borrower (which hereby irrevocably directs the Swing Line Bank to act on its behalf),
upon notice given by the Swing Line Bank no later than 12:00 noon, Minneapolis time, on the
relevant refunding date, request each Bank to make, and each Bank hereby agrees to make, a
Revolving Loan (which shall be a Base Rate Advance), in an amount equal to such Bank’s
Percentage of the aggregate amount of the Swing Line Loans (the “Refunded Swing Line
Loans”) outstanding on the date of such notice, to refund such Swing Line Loans. Each
Bank shall make the amount of such Revolving Loan available to the Agent in immediately
available funds, no later than 2:00 p.m., Minneapolis time, on the date of such notice. The
proceeds of such Revolving Loans shall be distributed by the Agent to the Swing Line Bank
and immediately applied by the Swing Line Bank to repay the Refunded Swing Line Loans.




(b) If, for any reason, Revolving Loans may not be (as determined by the Agent in its sole
discretion), or are not, made pursuant to Section 2.7(a) to repay Swing Line Loans,
then, effective on the date such Revolving Loans would otherwise have been made, each Bank
severally, unconditionally and irrevocably agrees that it shall purchase a participating
interest in such Swing Line Loans (“Unrefunded Swing Line Loans”) in an amount equal
to the amount of Revolving Loans which would otherwise have been made by such Bank pursuant
to Section 2.7(a). Each Bank will immediately transfer to the Agent, in immediately
available funds, the amount of its participation (the “Swing Line Participation
Amount”), and the proceeds of such participation shall be distributed by the Agent to
the Swing Line Bank in such amount as will reduce the amount of the participating interest
retained by the Swing Line Bank in its Swing Line Loans.




(c) Whenever, at any time after the Swing Line Bank has received from any Bank such Bank’s
Swing Line Participation Amount, the Swing Line Bank receives any payment on account of the
Swing Line Loans, the Swing Line Bank will distribute to such Bank its Swing Line
Participation Amount (appropriately adjusted, in the case of interest payments, to reflect
the period of time during which such Bank’s participating interest was outstanding and
funded and, in the case of principal and interest payments, to reflect such Bank’s
pro rata portion of such payment if such payment is not sufficient to pay
the principal of and interest on all Swing Line Loans then due); provided,
however, that in the event that such payment received by the Swing Line Bank is
required to be returned, such Bank will return to the Swing Line Bank any portion thereof
previously distributed to it by the Swing Line Bank.



18









 






(d) Each Bank’s obligation to make the Loans referred to in Section 2.7(a) and to
purchase participating interests pursuant to Section 2.7(b) shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, (i) any setoff, counterclaim, recoupment, defense or other right which such Bank
or the Borrower may have against the Swing Line Bank, the Borrower or any other Person for
any reason whatsoever; (ii) the occurrence and continuance of a Default or an Event of
Default or the failure to satisfy any of the other conditions precedent specified in
Article VI; (iii) any adverse change in the condition (financial or otherwise) of
the Borrower; (iv) any breach of this Agreement or any other Loan Document by the Borrower
or any Bank; or (v) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.



     Section 2.8 Letters of Credit.




(a) Letters of Credit. Subject to the terms and conditions of this Agreement, and
on the condition that aggregate Letter of Credit Obligations shall never exceed the lesser
of (i) $50,000,000 or (ii) the Commitments, and that the sum of Letter of Credit Obligations
plus Loans shall never exceed the aggregate Commitments of all Banks, the Agent agrees to
issue letters of credit for the account of the Borrower or any Subsidiary, as provided in
Section 2.8(f), upon request by the Borrower to the Agent (such letters of credit as
any of them may be amended, supplemented, extended or confirmed from time to time, along
with letters of credit issued under the Existing Credit Agreement, being herein collectively
called the “Letters of Credit”). No Letter of Credit shall expire later than the
earlier to occur of (x) the fifth Business Day prior to the Termination Date and (y) one
year after its issuance, provided that, that Letters of Credit may automatically
extend absent notice of termination by the Agent; provided, further, that the expiry date of
a Letter of Credit may be later than the fifth Business Day prior to the Termination Date if
the Borrower has, on or before the fifth Business Day prior to the Termination Date, (i)
posted cash collateral to the Agent on terms satisfactory to the Agent in an amount equal to
105% of the Letter of Credit Obligations with respect to such Letter of Credit to be held
and applied in accordance with the terms of Section 10.3, (ii) delivered to the
Agent a backstop letter of credit issued by a financial institution reasonably satisfactory
to the Agent, or (iii) otherwise entered into an alternative arrangement reasonably
satisfactory to the Agent with respect to such Letter of Credit. Upon the date of the
issuance of a Letter of Credit, the Agent shall be deemed, without further action by any
party hereto, to have sold to each Bank, and each Bank shall be deemed without further
action by any party hereto, to have purchased from the Agent, a participation, in its
Percentage, in such Letter of Credit and the related Letter of Credit Obligations.




(b) Purchase Unconditional. Each Bank’s purchase of a participating interest in a
Letter of Credit pursuant to Section 2.8(a) shall be absolute and unconditional and
shall not be affected by any circumstance, including, without limitation, (i) any setoff,
counterclaim, recoupment, defense or other right which such Bank or the Borrower may have
against the Agent, the Borrower or any other Person for any reason whatsoever; (ii) the
occurrence or continuance of a Default or an Event of Default or the failure to satisfy any
of the other conditions precedent in Article VI; (iii) any adverse change in the
condition (financial or otherwise) of the Borrower; (iv) any breach of this Agreement or any
other



19









 






Loan Document by the Borrower or any Bank; (v) the expiry date of any Letter of Credit
occurring after such Bank’s Commitment has terminated; or (vi) any other circumstance,
happening or event whatsoever, whether or not similar or any of the foregoing.




(c) Additional Provisions. The following additional provisions shall apply to each
Letter of Credit:




(i) Upon receipt of any request for a Letter of Credit, the Agent shall notify each
Bank of the contents of such request and of such Bank’s Percentage of the amount of
such proposed Letter of Credit.




(ii) No Letter of Credit may be issued if after giving effect thereto the Letter of
Credit Obligations shall exceed $50,000,000 or if the sum of (A) the aggregate
outstanding principal amount of Loans plus (B) the aggregate Letter of
Credit Obligations would exceed the aggregate Commitments of all Banks. The
Commitment of each Bank shall be deemed to be utilized for all purposes hereof in an
amount equal to such Bank’s Percentage of the Letter of Credit Obligations.




(iii) Upon receipt from the beneficiary of any Letter of Credit of any demand for
payment thereunder, Agent shall promptly notify the Borrower and each Bank as to the
amount to be paid as a result of such demand and the payment date. If at any time
the Agent shall have made a payment to a beneficiary of such Letter of Credit in
respect of a drawing or in respect of an acceptance created in connection with a
drawing under such Letter of Credit, each Bank will pay to Agent immediately upon
demand by the Agent at any time during the period commencing after such payment
until reimbursement thereof in full by the Borrower, an amount equal to such Bank’s
Percentage of such payment, together with interest on such amount for each day from
the date of demand for such payment (or, if such demand is made after 2:00 p.m.
Minneapolis time on such date, from the next succeeding Business Day) to the date of
payment by such Bank of such amount at a rate of interest per annum equal to the
Federal Funds Effective Rate for such period.




(iv) The Borrower shall be irrevocably and unconditionally obligated forthwith to
reimburse the Agent for any amount paid by the Agent upon any drawing under any
Letter of Credit, without presentment, demand, protest or other formalities of any
kind, all of which are hereby waived; provided that this paragraph shall not relieve
the Agent or any Bank of any liability resulting from the gross negligence, bad
faith or willful misconduct of the Agent or such Bank, or otherwise affect any
defense or other right that the Borrower may have as a result of such gross
negligence, bad faith or willful misconduct. Such reimbursement may, subject to
satisfaction of the conditions in Article VI and to the available Commitment
(after adjustment in the same to reflect the elimination of the corresponding Letter
of Credit Obligation), be made by the borrowing of Loans. The Agent will pay to
each Bank such Bank’s Percentage of all amounts received from the Borrower for
application in payment, in whole or in part, of a Letter of Credit Obligation, but



20









 







only to the extent such Bank has made payment to the Agent in respect of such Letter
of Credit pursuant to clause (iii) above.




(v) The Borrower’s obligation to reimburse the Agent for any amount paid by the
Agent upon any drawing under any Letter of Credit shall be performed strictly in
accordance with the terms of this Agreement and the applicable Letter of Credit
Agreement under any and all circumstances whatsoever and irrespective of (A) any
lack of validity or enforceability of any Letter of Credit, any Letter of Credit
Agreement or this Agreement, or any term or provision therein, (B) any draft or
other document presented under a Letter of Credit proving to be forged, fraudulent,
or invalid in any respect or any statement therein being untrue or inaccurate in any
respect, (C) payment by the Agent under a Letter of Credit against presentation of a
draft or other document that does not comply with the terms of such Letter of
Credit, or (D) any other event or circumstance whatsoever, whether or not similar to
any of the foregoing, that might, but for the provisions of this clause (v),
constitute a legal or equitable discharge of, or provide a right of setoff against,
the Borrower’s obligations hereunder. Neither the Agent nor the Bank shall have any
liability or responsibility by reason of or in connection with the issuance or
transfer of any Letter of Credit or any payment or failure to make any payment
thereunder (irrespective of any of the circumstances referred to in the preceding
sentence), or any error, omission, interruption, loss or delay in transmission or
delivery of any draft, notice or other communication under or relating to any Letter
of Credit (including any document required to make a drawing thereunder), any error
in interpretation of technical terms or any consequence arising from causes beyond
the control of the Agent; provided that the foregoing shall not be construed to
excuse the Agent from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby waived
by the Borrower to the extent permitted by applicable law) suffered by the Borrower
that are caused by the Agent’s failure to exercise care when determining whether
drafts and other documents presented under a Letter of Credit comply with the terms
thereof. The parties hereto expressly agree that, in the absence of gross
negligence, bad faith or willful misconduct on the part of the Agent (as finally
determined by a court of competent jurisdiction), the Agent shall be deemed to have
exercised care in each such determination. In furtherance of the foregoing and
without limiting the generality thereof, the parties hereto expressly agree that,
with respect to documents presented which appear on their face to be in substantial
compliance with the terms of the Letter of Credit, the Agent may, in its sole
discretion, either accept and make payment upon such documents without
responsibility for further investigation or refuse to accept and make payment upon
such documents if such documents are not in strict compliance with the terms of such
Letter of Credit.




(vi) The Borrower will pay to Agent for the account of each Bank (subject to
Section 2.11 with respect to any Defaulting Bank) in accordance with its
Percentage a letter of credit fee with respect to each Letter of Credit equal to an
amount, calculated on the basis of daily amount available to be drawn on each Letter
of Credit from time to time, in each case for the period from and including



21









 






the date of issuance of such Letter of Credit to and including the date of expiration or
termination thereof at a per annum rate equal to the then-applicable Applicable
Margin for LIBOR Advances, such fee to be due and payable quarterly, in arrears on
the Payment Dates. The Agent will pay to each Bank (subject to Section 2.11
with respect to any Defaulting Bank), promptly after
receiving any payment in respect of letter of credit fee referred to in this
clause (vi), an amount equal to the product of such Bank’s Percentage
times the amount of such fees. The Borrower shall also pay to Agent at the
Principal Office for the account of the Agent a fronting fee of 0.25% of the face
amount of the applicable Letter of Credit. At all times that the rate of interest
provided in Section 3.1(d) shall apply to the Loans, the fee paid for the
account of the Banks under this Section shall be increased by 2.00% per annum. All
fees hereunder shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed.




(vii) The issuance by the Agent of each Letter of Credit shall be subject to the
conditions precedent that the Borrower shall have executed and delivered such
applications and other customary instruments and agreements relating to such Letter
of Credit as the Agent shall have reasonably requested and are not inconsistent with
the terms of this Agreement (the “Letter of Credit Agreements”). In the
event of a conflict between the terms of this Agreement and the terms of any Letter
of Credit Agreement (including the charging of any fees other than normal and
customary reimbursable expenses), the terms hereof shall control.




(viii) In the event that any Letter of Credit remains outstanding after the
Termination Date, the Borrower shall deliver, prior to the Termination Date, cash
collateral to be held and applied in accordance with the terms of Section
10.3, or a backstop letter of credit issued by a financial institution
reasonably satisfactory to the Agent, or otherwise entered into an alternative
arrangement reasonably satisfactory to the Agent with respect to any outstanding
Letters of Credit.




(d) Indemnification; Release. The Borrower hereby indemnifies and holds harmless
the Agent and each Bank from and against any and all claims and damages, losses,
liabilities, costs or expenses which the Agent or such Bank may incur (or which may be
claimed against the Agent or such Bank by any Person whatsoever), regardless of whether
caused in whole or in part by the negligence of any of the indemnified parties, in
connection with the execution and delivery of any Letter of Credit or transfer of or payment
or failure to pay under any Letter of Credit; provided that the Borrower shall not
be required to indemnify any party seeking indemnification for any claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent, caused by (i) the
gross negligence, bad faith or willful misconduct of the party seeking indemnification, or
(ii) by the failure by the party seeking indemnification to pay under any Letter of Credit
after the presentation to it of a request required to be paid under applicable law.



22









 






(e) Existing Letters of Credit. Letters of Credit previously issued by the Agent
under the Existing Credit Agreement shall be deemed to be “Letters of Credit” for all
purposes hereunder.




(f) Issuance of Letters of Credit for Account of Subsidiaries. Upon request of the
Borrower, Letters of Credit may be issued for the account of Subsidiaries of the Borrower.
In such event, the Borrower shall be deemed to have irrevocably guarantied
payment of the obligations of each Subsidiary in respect of Letters of Credit issued for the
account of such Subsidiary, and if requested by the Bank, the Borrower shall, together with
such Subsidiary, enter into the Letter of Credit Agreement as co-applicant or guarantor, and
shall execute and deliver such other instrument of guaranty as shall be required by the
Agent.



     Section 2.9 Increase to Commitments. The Borrower may, on up to two occasions,
increase the Commitments hereunder, by giving notice to the Agent, specifying the dollar amount of
the increase (which shall be in a minimum amount of $10,000,000 plus integral multiples of
$5,000,000, and which shall not result in total aggregate Commitments hereunder in excess of
$250,000,000); provided, however, that an increase in the Commitments hereunder may only be made at
a time when no Default or Event of Default shall have occurred and be continuing. The Borrower may
increase the Commitments by either increasing a Commitment with an existing Bank or obtaining a
Commitment from a new financial institution, the selection of which shall require the consent of
the Agent, not to be unreasonably withheld or delayed. The Borrower, the Agent and each Bank or
other financial institution that is increasing its Commitment or extending a new Commitment shall
enter into an amendment to this Agreement setting forth the amounts of the Commitments, as so
increased, providing that any new financial institution extending a new Commitment shall be a Bank
for all purposes under this Agreement and effecting such other changes as the Borrower and the
Agent shall deem necessary or advisable in connection with such increase of the Commitments
hereunder. No such amendment shall require the approval or consent of any Bank whose Commitment is
not being increased and no Bank shall be required to increase its Commitment unless it shall so
agree in writing. Upon the execution and delivery of such amendment as provided above, this
Agreement shall be deemed to be amended accordingly and the Agent shall adjust the funded amount of
the Advances of the Banks so that each Bank (including the Banks with new or increased Commitments)
shall hold their respective Percentages (as amended by such amendment) of the Advances outstanding
and the unfunded Commitments (and each Bank shall so fund any increased amount of Advances).



     Section 2.10 Purpose of the Loans. The Loans shall be used (a) to refinance certain
indebtedness of the Borrower, and (b) for purposes of funding working capital, capital
expenditures, and other corporate purposes of the Borrower and its Subsidiaries.



     Section 2.11 Defaulting Banks. Notwithstanding any provision of this Agreement to the
contrary, if any Bank becomes a Defaulting Bank, then the following provisions shall apply for so
long as such Bank is a Defaulting Bank (the “Default Period”):




(a) Commitment Fees. Such Defaulting Bank’s Commitment, outstanding Loans and
Participation Interests shall be excluded for purposes of calculating the Commitment Fees



23









 







and Letter of Credit commissions payable to Banks, and such Defaulting Bank shall not be
entitled to receive any Commitment Fee or Letter of Credit commission pursuant to
Section 3.2 and Section 2.8(c)(vi), respectively, with respect to such
Defaulting Bank’s Commitment and such fees with respect to such Defaulting Bank shall cease
to accrue.




(b) Voting. Such Defaulting Bank shall be deemed not to be a “Bank” for purposes of
voting on any matters and the Commitment, outstanding Loans and Participation Interests
of such Defaulting Bank shall not be included in determining whether all Banks or the
Required Banks have taken or may take any action hereunder (including any consent to any
amendment or waiver pursuant to Section 12.2).




(c) Prepayments. To the extent permitted by applicable law, until the end of the
Default Period, any voluntary prepayment of the Loans shall, if Borrower so directs at the
time of making such voluntary prepayment, be applied to the Loans of other Banks as if such
Defaulting Bank had no Loans outstanding.




(d) Reallocation of Swing Line Loans and Letters of Credit. If any Swing Line Loans
or Letters of Credit are outstanding at the time a Bank becomes a Defaulting Bank then:




(i) all or any part of such Defaulting Bank’s Participation Interests in such Swing
Line Loans or Letters of Credit shall be reallocated among the non-Defaulting Banks
in accordance with their respective Percentages but only to the extent (x) the sum
of all non-Defaulting Banks’ Loans and Participation Interests plus such Defaulting
Bank’s Loans and Participation Interests does not exceed the total of all
non-Defaulting Banks’ Commitments and (y) the conditions set forth in Article
VI are satisfied at such time; and




(ii) if the reallocation described in clause (i) above cannot, or can only
partially, be effected, the Borrower shall within three (3) Business Days following
notice by the Agent prepay such Defaulting Bank’s portion of the Swing Line Loans,
or deliver collateral for such Defaulting Bank’s portion of drawings under Letters
of Credit to be held as provided in Section 10.3 (to the extent not fully
reallocated as provided in clause (i) above after giving effect to any
partial reallocation thereunder), or enter into an alternative arrangement
satisfactory to the Agent with respect to such Defaulting Bank’s portion of the
Swing Line Loans or Letters of Credit.




(e) Application of Payments. Subject to application of voluntary prepayments as
described in Section 2.11(c), any amount otherwise payable to a Defaulting Bank
hereunder (whether on account of principal, interest, fees or otherwise and including any
amount that would otherwise be payable to such Defaulting Bank pursuant to Sections
2.7(c), 2.8(c)(iv), 4.1, 4.2, 4.3, 4.4,
4.5 or 10.4) shall, in lieu of being distributed to such Defaulting Bank, be
applied by the Agent (i) first, to the payment of any amounts owing by such
Defaulting Bank to the Agent hereunder, (ii) second, pro rata, to the payment of any
amounts owing by such Defaulting Bank to the Swing Line Bank hereunder, (iii) third,
to the funding of any Loan or the funding of any Participation Interest in respect of which
such Defaulting Bank has failed to fund its Percentage thereof



24









 






as required by this
Agreement, as determined by the Agent, (iv) fourth, at the election of the Agent and
the Borrower, either to (x) repay Borrower Obligations to the non-Defaulting Banks, in such
order of application as the Agent shall designate, or (y) be held on account with the Agent
as cash collateral for future funding obligations of the Defaulting Bank under this
Agreement, (v) fifth, pro rata, to the payment of any amounts owing to the Borrower
or the non-Defaulting Banks as a result of any judgment of a court of competent jurisdiction
obtained by the Borrower or any Bank against such Defaulting Bank as a result of such
Defaulting Bank’s breach of its obligations under this Agreement and (vi) sixth, to
such Defaulting Bank or as otherwise directed by a court of competent jurisdiction.




(f) Remedy by Defaulting Bank. In the event that the Agent, the Borrower and the
Swing Line Bank each agrees that a Defaulting Bank has adequately remedied all matters that
caused such Bank to be a Defaulting Bank, then the Participation Interests of the Banks
shall be readjusted to reflect the inclusion of such Bank’s Commitment and on such date such
Bank shall purchase at par such of the Loans of the other Banks (other than Swing Line
Loans) as the Agent shall determine may be necessary in order for such Bank to hold such
Loans in accordance with its Percentage. In addition, at such time as a Defaulting Bank
ceases to be a Defaulting Bank, the Agent shall cause any and all collateral delivered by
the Borrower pursuant to Section 2.11(d)(ii) to be promptly released and returned to
the Borrower, and there shall be no retroactive adjustment to or accrual of any Commitment
Fees or Letter of Credit commissions that would otherwise have been payable to such
Defaulting Bank during the Default Period if such Defaulting Bank had not been a Defaulting
Bank.




(g) Non-exclusive Remedies. The rights and remedies against a Defaulting Bank under
this Section 2.11 are in addition to other rights and remedies which Borrower may
have against such Defaulting Bank with respect to any Funding Default and which the Agent or
any Bank may have against such Defaulting Bank with respect to any Funding Default.



     Section 2.12 Replacement of Banks. If the Agent or a Bank provides the Borrower with
a notice pursuant to Section 5.1, 5.2 or 5.3 or if any Bank becomes a
Defaulting Bank, then the Borrower may, at its sole expense and effort, upon notice to such
Defaulting Bank and the Agent, require such Bank or Defaulting Bank to assign and delegate, without
recourse, all of its interests, rights and obligations under this Agreement and the related Loan
Documents to an assignee that shall assume such obligations (which assignee may be another Bank, if
a Bank accepts such assignment), provided that:




(a) The Borrower shall have paid to the Agent the assignment fee specified in Section
12.3(b)(ii);




(b) Such Defaulting Bank shall have received payment of an amount equal to the outstanding
principal of its Loans and its portion of the Swing Line Participation Amount, accrued
interest thereon, accrued fees and all other amounts payable to it hereunder and under the
other Loan Documents from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts); and



25









 






(c) Such assignment does not conflict with applicable law.



     Section 2.13 Authorized Representatives. The Borrower shall act hereunder through the
Authorized Representatives designated from time to time and all notices and requests to be given
and received by the Borrower, including requests for Loans and designation of amounts of Advances
and Interest Periods, shall be given by and directed to such Authorized Representatives.



     Section 2.14 Extensions of Commitments.




(a) The Borrower may from time to time, pursuant to the provisions of this Section
2.14, agree with one or more Banks holding Commitments to extend the termination date,
and otherwise modify the terms of such Commitments or any portion thereof (including,
without limitation, by increasing the interest rate or fees payable in respect of such
Commitments or any portion thereof (each, such modification an “Extension”) pursuant to one
or more written offers (each, an “Extension Offer”) made from time to time by the Borrower
to all Banks, in each case on a pro rata basis (based on their respective Percentages) and
on the same terms to each such Bank. In connection with each Extension, the Borrower will
provide notification to the Agent (for distribution to the Banks), no later than 60 days
prior to the Termination Date of the requested new termination date for the extended
Commitments (each an “Extended Termination Date”) and the due date for Bank responses. In
connection with any Extension, each Bank wishing to participate in such Extension shall,
prior to such due date, provide the Agent with a written notice thereof in a form reasonably
satisfactory to the Agent. Any Bank that does not respond to an Extension Offer by the
applicable due date shall be deemed to have rejected such Extension.




(b) Each Extension shall be subject to the following:




(i) no Default or Event of Default shall have occurred and be continuing at the time
any Extension Offer is delivered to the Banks or at the time of such Extension;




(ii) except as to interest rates, fees, termination date and increase to Commitments
under Section 2.9 (which shall, subject to immediately clause (iii) below,
be determined by the Borrower and set forth in the relevant Extension Offer), the
Commitment of any Bank extended pursuant to any Extension shall have the same terms
as the Commitments of the Banks that did not agree to the Extension Offer;




(iii) the final termination date of the Commitments to be extended pursuant to an
Extension shall be later than the final termination date of the Commitments of the
Banks that did not agree to the Extension Offer;




(iv) if the aggregate amount of Commitments in respect of which Banks shall have
accepted an Extension Offer exceeds the maximum aggregate amount of Commitments
offered to be extended by the Borrower pursuant to the relevant Extension Offer,
then such Commitments shall be extended ratably up to such



26









 






maximum amount based on
the relative Commitments of the Banks that accepted such Extension Offer;




(v) all documentation in respect of such Extension shall be consistent with the
foregoing, and all written communications by the Borrower generally directed to the
applicable Banks in connection therewith shall be in form and substance consistent
with the foregoing and otherwise reasonably satisfactory to the Agent;




(vi) any applicable Minimum Extension Condition shall be satisfied; and




(vii) no Extension shall become effective unless, on the proposed effective date of
such Extension, the conditions set forth in Section 6.2 shall be satisfied
(with all references in such Section to a request for a Loan being deemed to be
references to the Extension on the applicable date of such Extension), and the Agent
shall have received a certificate to that effect dated the applicable date of such
Extension and executed by an Authorized Representative of the Borrower.




(c) If at the time any Extension of Commitments (as so extended, “Current Extension
Commitments”) becomes effective, there will be Commitments or Revolving Loans attributable
to a prior Extension that will remain outstanding (collectively, the “Prior Extension
Commitments”), then, if the interest rate spread applicable to any such Current Extension
Commitments exceeds the interest rate spread applicable to such Prior Extension Commitments
by more than 0.25%, then the interest rate spread applicable to such Prior Extension
Commitments shall be increased so that it equals the interest rate spread applicable to the
Current Extension Commitments (calculated as provided above).




(d) The consummation and effectiveness of any Extension will be subject to a condition set
forth in the relevant Extension Offer (a “Minimum Extension Condition”) that a minimum
amount be agreed to by the Banks subject to such Extension (to be determined in the
Borrower’s discretion and specified in the relevant Extension Offer, but in no event less
than $25,000,000, unless another amount is agreed to by the Agent). For the avoidance of
doubt, it is understood and agreed that the provisions of Section 4.5 will not apply
to Extensions of Commitments pursuant to Extension Offers made pursuant to and in accordance
with the provisions of this Section 2.14, including to any payment of interest or
fees in respect of any Commitments or Revolving Loans that have been made extended or made
pursuant to an Extension at a rate or rates different from those paid or payable in respect
of Commitments or Revolving Loans of Banks that did not extend their Commitments, in each
case as is set forth in the relevant Extension Offer.




(e) The Banks hereby irrevocably authorize the Agent to enter into amendments
(collectively, “Extension Amendments”) to this Agreement and the other Loan Documents as may
be necessary in order establish new classes of Commitments and Revolving Loans created
pursuant to an Extension, in each case on terms consistent with this Section 2.14.
Notwithstanding the foregoing, the Agent shall have the right (but not the obligation) to
seek the advice or concurrence of the Required Banks with respect to any matter contemplated
by this Section 2.14 and, if the Agent seeks such advice or concurrence, the Agent
shall be permitted to enter into such amendments with the




27











 






Borrower in accordance with any instructions received from such Required Banks and
shall also be entitled to refrain from entering into such amendments with the Borrower
unless and until it shall have received such advice or concurrence; provided,
however, that whether or not there has been a request by the Agent for any such advice or
concurrence, all such Extension Amendments entered into with the Borrower by the Agent
hereunder shall be binding on the Banks. Without limiting the foregoing, in connection with
any Extension, the Borrower and any Material Subsidiary shall execute such agreements,
confirmations or other documentation as the Agent shall reasonably request to accomplish the
purposes of this Section 2.14.




(f) In connection with any Extension, the Borrower shall provide the Agent at least 60
days’ (or such shorter period as may be agreed by the Administrative Agent) prior written
notice thereof, and shall agree to such procedures, if any, as may be reasonably established
by, or acceptable to, the Agent to accomplish the purposes of this Section 2.14.



     Section 2.15 Tax Matters. No Person can become a Bank unless it is either a United States Person
or an “exempt recipient” within the meaning of Treasury Regulations Section 1.6049-4(c) based on
the indicators set forth therein, unless such Person represents and warrants to the Agent and the
Borrower that it is entitled to receive interest payments without withholding or deduction of any
taxes and executes and delivers to the Agent and the Borrower a United States Internal Revenue
Service Form W8BEN, W8ECI, W-8 IMY and/or W-9 or any successor to either of such forms, as
appropriate, properly completed a claiming complete exemption from withholding and deduction of all
Federal Income Taxes. A “United States Person” means any citizen, national or resident of the
United States, any corporation or other entity created or organized in or under the laws of the
United States or any political subdivision hereof or any estate or trust, in each case that is not
subject to withholding of United States Federal income taxes or other taxes on payment of interest,
principal of fees hereunder.



ARTICLE III INTEREST AND FEES




     Section 3.1 Interest.




(a) LIBOR Advances. The unpaid principal amount of each LIBOR Advance shall bear
interest prior to maturity at a rate per annum equal to the LIBOR Rate (Reserve Adjusted) in
effect for each Interest Period for such LIBOR Advance plus the Applicable Margin per annum.




(b) Base Rate Advances. The unpaid principal amount of each Base Rate Advance shall
bear interest prior to maturity at a rate per annum equal to the Base Rate plus the
Applicable Margin per annum.




(c) Swing Line Loans. The unpaid principal amount of all Swing Line Loans shall
bear interest prior to maturity at a rate per annum equal to the LIBOR Rate (Reserve
Adjusted) Daily Floating plus the Applicable Margin for LIBOR Advances per annum.




(d) Interest After Maturity. If any amount of the Loans not paid when due, whether
at the date scheduled therefor or earlier upon acceleration, shall bear interest until paid
in full at



28









 






a rate per annum equal to the greater of (i) 2.00% in excess of the rate applicable to the
unpaid principal amount immediately before it became due, or (ii) 2.00% in excess of the
Base Rate in effect from time to time.



     Section 3.2 Commitment Fee. The Borrower shall (subject to Section 2.11 with respect to
any Defaulting Bank) pay fees (the “Commitment Fees”) to the Agent for the account of the
Banks (in according with their respective Percentages) in an amount determined by applying the
Applicable Commitment Fee Rate per annum to the average daily unused amount of the Commitments
(with the face amount of all Letters of Credit deemed usage for such purpose, but Swing Line Loans
not deemed usage) of the Banks for the period from the date hereof to the Termination Date.



     Section 3.3 Computation. Interest and Commitment Fees shall be computed on the basis of actual
days elapsed and a year of 360 days, provided, that any interest or fee calculated with reference
to the Base Rate shall be computed on the basis of actual days elapsed and a year of 365/366 days.



     Section 3.4 Payment Dates. Accrued interest under Section 3.1(a), (b) and
(c), and Commitment Fees shall be payable on the applicable Payment Dates. Accrued
interest under Section 3.1(d) shall be payable on demand.



     Section 3.5 Agent’s Fee. The Borrower shall pay to the Agent fees described in the Agent’s Fee
Letter.



ARTICLE IV PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION

OF THE CREDIT AND SETOFF




     Section 4.1 Repayment. Principal of the Loans, together with all accrued and unpaid interest
thereon, shall be due and payable on the Termination Date.



     Section 4.2 Optional Prepayments. The Borrower may, upon at least one (1) Business Day’s (in the
case of Base Rate Advances, or three (3) Business Days’ in the case of LIBOR Advances) prior
written or telephonic notice received by the Bank, prepay the Loans, in whole or in part, at any
time subject to the provisions of Section 2.6, without any other premium or penalty. In
the event that the Loans are being refinanced, any such notice may be made contingent upon the
closing of such refinancing. Any such prepayment must be accompanied by accrued and unpaid
interest on the amount prepaid. Each partial prepayment shall be in an amount of $50,000 or an
integral multiple thereof. Any prepayment of a LIBOR Advance shall be in an amount equal to the
remaining entire principal balance of such Advance. In the event that the Loans are being
refinanced, any such notice may be made contingent upon the closing of such refinancing.



     Section 4.3 Optional Reduction or Termination of Commitment. The Borrower may, at any time, upon
no less than one (1) Business Day prior written or telephonic notice received by the Agent, reduce
the Commitment, with any such reduction in a minimum amount of $500,000 or an integral multiple
thereof. In the event that the Loans are being refinanced, any such notice may be made contingent
upon the closing of such refinancing. Upon any reduction in the Commitment pursuant to this
Section, the Borrower shall pay to the Agent for the account of the



29









 




Banks the amount, if any, by which the aggregate unpaid principal amount of outstanding Loans
plus the Letter of Credit Obligations exceeds the Commitment as so reduced. Amounts so paid cannot
be reborrowed. The Borrower may, at any time, upon not less than one (1) Business Day prior
written notice to the Agent, terminate the Commitment in its entirety. Upon termination of the
Commitment pursuant to this Section, the Borrower shall pay to the Agent for the account of the
Banks the full amount of all outstanding Loans, all accrued and unpaid interest thereon, all unpaid
Commitment Fees accrued to the date of such termination and all other unpaid obligations of the
Borrower to the Banks hereunder. All payment described in this Section is subject to the
provisions of Section 2.6. Notwithstanding the foregoing, the Commitment may not be
reduced to an amount below outstanding Letter of Credit Obligations, or terminated if Letters of
Credit are outstanding (unless the Borrower has provided cash collateral or a backstop letter of
credit issued by a financial institution reasonably satisfactory to the Agent, or otherwise entered
into an alternative arrangement reasonably satisfactory to the Agent with respect to any
outstanding Letters of Credit).




     Section 4.4 Payments. Payments and prepayments of principal of, and interest on, the Notes and
all fees, expenses and other obligations under the Loan Documents shall be made (subject only to
required withholding by the Borrower in the case of non-compliance by a Bank with the requirements
of Section 12.3(e)) without set-off or counterclaim in immediately available funds not
later than 2:00 p.m., Minneapolis time, on the dates due at the main office of the Agent in
Minneapolis, Minnesota, provided, however, that the Swing Line Bank and the
Borrower shall enter into mutually acceptable arrangements for payment of the Swing Line Loans
which may permit payment of the Swing Line Loans later than such time. Funds received on any day
after such time shall be deemed to have been received on the next Business Day. The Agent shall
promptly distribute in like funds to each Bank its Percentage share of each such payment of
principal, interest and Commitment Fees. Subject to the definition of the term “Interest Period”,
whenever any payment to be made hereunder or on the Notes shall be stated to be due on a day which
is not a Business Day, such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of any interest or fees. The Agent is
authorized to debit the operating account of the Borrower designated by the Borrower for such
purpose from time to time for all payments when due hereunder (provided that if such account shall
not have sufficient available funds to pay interest when due, the Borrower shall pay such interest
in immediately available funds).



     Section 4.5 Proration of Payments. If any Bank or other holder of a Loan shall obtain any payment
or other recovery (whether voluntary, involuntary, by application of offset, pursuant to the
Material Subsidiary Guaranties or otherwise) on account of principal of, interest on, or fees with
respect to any Loan, or payment of any Letter of Credit Obligations, in any case in excess of the
share of payments and other recoveries of other Banks or holders, such Bank or other holder shall
purchase from the other Banks or holders, in a manner to be specified by the Agent, such
participations in the Loans held by such other Banks or holders as shall be necessary to cause such
purchasing Bank or other holder to share the excess payment or other recovery ratably with each of
such other Banks or holders; provided, however, that if all or any portion of the
excess payment or other recovery is thereafter recovered from such purchasing Bank or holder, the
purchase shall be rescinded and the purchase price restored to the extent of such recovery, but
without interest.



30









 





ARTICLE V ADDITIONAL PROVISIONS RELATING TO LOANS




     Section 5.1 Increased Costs. If, as a result of any change after the date hereof of any law,
rule, regulation, treaty or directive or in the interpretation or administration thereof, or
compliance by the Banks with any request or directive (whether or not having the force of law) from
any court, central bank, governmental authority, agency or instrumentality, or comparable agency:




(a) any tax, duty or other charge with respect to any Loan, the Notes or the Commitments is
imposed, modified or deemed applicable, or the basis of taxation of payments to any Bank of
interest or principal of the Loans or of the Commitment Fees (other than taxes imposed on
the overall net income of such Bank by the jurisdiction in which such Bank has its principal
office) is changed;




(b) any reserve, special deposit, special assessment or similar requirement against assets
of, deposits with or for the account of, or credit extended by, any Bank (excluding any
reserve or other requirement reflected in the calculation of LIBOR Rate (Reserve Adjusted))
is imposed, modified or deemed applicable;




(c) any increase in the amount of capital required or expected to be maintained by any Bank
or any Person controlling such Bank is imposed, modified or deemed applicable as a
consequence of this Agreement or the Loans made by such Bank; or




(d) any other condition (other than any condition relating to taxes, duties, or other
charges as set forth in clause (a) above) affecting this Agreement or the Commitments is
imposed on any Bank or the relevant funding markets;


and such Bank determines that, by reason thereof, the cost to such Bank of making or maintaining
the Loans, issuing or participating in the Letters of Credit or extending its Commitment is
increased, or the amount of any sum receivable by such Bank hereunder or under the Notes in respect
of any Loan is reduced to a level below which such Bank could have achieved but for such change
(taking into consideration such Bank’s policies with respect to capital adequacy);



then, the Borrower shall pay to such Bank upon demand such additional amount or amounts as
will compensate such Bank (or the controlling Person in the instance of (c) above) for such
additional costs or reduction (provided that the Banks have not been compensated for such
additional cost or reduction in the calculation of the LIBOR Reserve Rate). Any Bank making such
demand shall inform the Borrower of the basis for such demand, and provide a statement showing, in
reasonable detail, calculation of the amount demanded. The Borrower will promptly notify such Bank
if the Borrower does not agree to such Bank’s determination of any such amount. Any Bank’s
reasonable determination of such amount shall be presumed correct, absent its manifest error or
negligence in determining such amounts. In determining such amounts, the Banks may use any
reasonable averaging, attribution and allocation methods. Notwithstanding the foregoing, no Bank
shall charge the Borrower for additional amounts for such additional costs or reductions: (i) which
additional amounts applied or accrued more than 90 days prior to the time that such Bank became
aware of the event giving rise to such additional costs or





31









 







reductions; or (ii) unless such Bank is generally requiring payment under comparable provisions of
its agreements with similarly situated borrowers.




     Section 5.2 Deposits Unavailable or Interest Rate Unascertainable or Inadequate; Impracticability.
If the Agent determines (which determination shall be conclusive and binding on the parties
hereto), or in the case of Section 5.2(b), the Agent or the Required Banks determine, that:




(a) deposits of the necessary amount for the relevant Interest Period for any LIBOR Advance
are not available in the relevant markets or that, by reason of circumstances affecting such
market, adequate and reasonable means do not exist for ascertaining the LIBOR Interbank Rate
for such Interest Period; or




(b) that the LIBOR Rate (Reserve Adjusted) will not adequately and fairly reflect the cost
to the Banks of making, maintaining or funding the LIBOR Advance for a relevant Interest
Period;


the Agent shall promptly give notice of such determination to the Borrower, and (i) any notice of a
new LIBOR Advance previously given by the Borrower and not yet borrowed or converted shall be
deemed to be a notice to make a Base Rate Advance, and (ii) the Borrower shall be obligated to
either prepay in full any outstanding LIBOR Advances or convert any such LIBOR Advance to a Base
Rate Advance, without premium or penalty on the last day of the current Interest Period with
respect thereto.




     Section 5.3 Changes in Law Rendering LIBOR Advances Unlawful. If at any time due to the adoption
of any law, rule, regulation, treaty or directive, or any change therein or in the interpretation
or administration thereof by any court, central bank, governmental authority, agency or
instrumentality, or comparable agency charged with the interpretation or administration thereof, or
for any other reason arising subsequent to the date of this Agreement, it shall become unlawful or
impossible for any Bank to make or fund any LIBOR Advance, the obligation of such Bank to provide
such Advance shall, upon the happening of such event, forthwith be suspended for the duration of
such illegality or impossibility. If any such event shall make it unlawful or impossible for the
Bank to continue any LIBOR Advance previously made by it hereunder, such Bank shall, upon the
happening of such event, notify the Agent and the Borrower thereof in writing, and the Borrower
shall, at the time notified by such Bank, either convert each such unlawful Advance to a Base Rate
Advance or repay such Advance in full, together with accrued interest thereon, subject to the
provisions of Section 2.6.



     Section 5.4 Discretion of the Banks as to Manner of Funding. Notwithstanding any provision of
this Agreement to the contrary, each Bank shall be entitled to fund and maintain its funding of all
or any part of the Loans in any manner it elects; it being understood, however, that for purposes
of this Agreement, all determinations hereunder shall be made as if the Banks had actually funded
and maintained each LIBOR Advance during the Interest Period for such Advance through the purchase
of deposits having a term corresponding to such Interest Period and bearing an interest rate equal
to the LIBOR Interbank Rate for such Interest Period (whether or not any Bank shall have granted
any participations in such Advances).



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ARTICLE VI CONDITIONS PRECEDENT




     Section 6.1 Conditions of Closing. This Agreement shall become effective, and shall govern Loans
made and Letters of Credit issued under the Existing Credit Agreement and further Loans and Letters
of Credit to be made hereunder, subject to the satisfaction of the conditions precedent, in
addition to the applicable conditions precedent set forth in Section 6.2 below, that the
Agent shall have received all of the following, in form and substance satisfactory to the Agent,
each duly executed and certified or dated as of the date of this Agreement or such other date as is
satisfactory to the Agent and the following shall have occurred:




(a) The Notes (if any), duly executed by the Borrower.




(b) The Material Subsidiary Guaranty, duly executed by each Material Subsidiary.




(c) A certificate or certificates of the Secretary or an Assistant Secretary of the
Borrower, attesting to and attaching (i) a copy of the corporate resolution of the Borrower
authorizing the execution, delivery and performance of the Loan Documents, (ii) an
incumbency certificate showing the names and titles, and bearing the signatures of, the
officers of the Borrower authorized to execute the Loan Documents, (iii) a copy of the
Articles or Certificate of Incorporation of the Borrower with all amendments thereto, and
(iv) a copy of the By-Laws of the Borrower with all amendments thereto.




(d) A certificate or certificates of the Secretary or an Assistant Secretary of the Material
Subsidiaries attesting to the incumbency of the officers of the Material Subsidiary
authorized to execute the Loan Documents.




(e) A Certificate of Good Standing for the Borrower and each Material Subsidiary in the
jurisdiction of its incorporation, certified by the appropriate governmental officials.




(f) An opinion of counsel to the Borrower and each Material Subsidiary, addressed to the
Banks, in substantially the form of Exhibit D.




(j) The Agent’s Fee Letter and payment of all fees and reimbursements payable hereunder and
thereunder.



     Section 6.2 Conditions Precedent to all Loans and Issuances of Letters of Credit. The obligation
of the Banks to make any Loan hereunder or of the Agent to issue any Letter of Credit hereunder
shall be subject to the satisfaction or waiver of the following conditions precedent (and any
request for a Loan or issuance of a Letter of Credit shall be deemed a representation by the
Borrower that the following are satisfied):




(a) Before and after giving effect to such Loan or issuance of such Letter of Credit, the
representation and warranties contained in Article VII shall be true and correct in
all material respects with respect to representations and warranties containing
qualifications as to materiality, and true and correct in all material respects with respect
to representations and warranties without qualifications as to materiality, on and as of the
date of such Loan or issuance of such Letter of Credit, except to the extent such
representations and warranties specifically relate to an earlier date, in which case such



33









 






representations and warranties shall have been true and correct in all material respects on
and as of such earlier date; and




(b) Before and after giving effect to such Loan or issuance of such Letter of Credit, no
Default or Event of Default shall have occurred and be continuing.



ARTICLE VII REPRESENTATIONS AND WARRANTIES




     To induce the Agent and the Banks to enter into this Agreement, to grant the Commitments and
to make Loans hereunder, the Borrower represents and warrants to the Agent and the Banks:



     Section 7.1 Organization, Standing, Etc. The Borrower and each of its corporate Material
Subsidiaries are corporations duly incorporated and validly existing and in good standing under the
laws of the jurisdiction of their respective incorporation and have all requisite corporate power
and authority to carry on their respective businesses as now conducted, to (in the instance of the
Borrower) enter into the Loan Documents and to perform its obligations under the Loan Documents.
The Borrower and each of the Material Subsidiaries are duly qualified and in good standing as a
foreign corporation in each jurisdiction in which the character of the properties owned, leased or
operated by it or the business conducted by it makes such qualification necessary, and failure to
so qualify or remain in good standing would constitute an Adverse Event.



     Section 7.2 Authorization and Validity. The execution, delivery and performance by the Borrower
of the Loan Documents have been duly authorized by all necessary corporate action by the Borrower,
and the Loan Documents constitute the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms, subject to limitations
as to enforceability which might result from bankruptcy, insolvency, moratorium and other similar
laws affecting creditors’ rights generally and subject to limitations on the availability of
equitable remedies.



     Section 7.3 No Conflict; No Default. The execution, delivery and performance by the Borrower of
the Loan Documents will not (a) violate any provision of any law, statute, rule or regulation or
any order, writ, judgment, injunction, decree, determination or award of any court, governmental
agency or arbitrator presently in effect having applicability to the Borrower, (b) violate or
contravene any provisions of the Articles (or Certificate) of Incorporation or by-laws of the
Borrower, or (c) result in a breach of or constitute a default under any indenture, loan or credit
agreement or any other agreement, lease or instrument to which the Borrower is a party or by which
it or any of its properties may be bound or result in the creation of any Lien on any asset of the
Borrower or any Material Subsidiary, which in any such case under subsection (a) or (c) would
reasonably constitute an Adverse Event. Neither the Borrower nor any Material Subsidiary is in
default under or in violation of any such law, statute, rule or regulation, order, writ, judgment,
injunction, decree, determination or award or any such indenture, loan or credit agreement or other
agreement, lease or instrument in any case in which the consequences of such default or violation
would constitute an Adverse Event. No Default or Event of Default has occurred and is continuing.



34









 





     Section 7.4 Government Consent. No order, consent, approval, license, authorization or validation
of, or filing, recording or registration with, or exemption by, any governmental or public body or
authority is required on the part of the Borrower to authorize, or is required in connection with
the execution, delivery and performance of, or the legality, validity, binding effect or
enforceability of, the Loan Documents, except for such orders, consents, approvals, licenses,
authorizations, validations, filings, recordings, registrations or exemptions as have been made or
obtained and are in full force and effect.



     Section 7.5 Financial Statements and Condition. The Borrower’s audited consolidated financial
statements as of December 31, 2009, and the Borrower’s unaudited quarterly financial statements as
at March 31, 2010, as heretofore furnished to the Banks, have been prepared in accordance with GAAP
on a consistent basis (except, in the case of the unaudited quarterly financial statements, for the
absence of footnotes and for year-end audit adjustments) and fairly present in all material
respects the financial condition of the Borrower and the Subsidiaries, taken as a consolidated
enterprise, as at such dates and the results of their operations for the fiscal year then ended.
As of the dates of such consolidated financial statements, neither the Borrower nor any Material
Subsidiary had any material obligation, contingent liability, liability for taxes or long term
lease obligation which is not reflected in such consolidated financial statements or in the notes
thereto. Since December 31, 2009, no Adverse Event has occurred.



     Section 7.6 Litigation and Contingent Liabilities. Except as described in Schedule 7.6,
there are no actions, suits or proceedings pending or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any Material Subsidiary or any of their properties before any
court or arbitrator, or any governmental department, board, agency or other instrumentality which,
if determined adversely to the Borrower or such Material Subsidiary, would constitute an Adverse
Event. Except as described in Schedule 7.6, neither the Borrower nor any Material
Subsidiary has any contingent liabilities which are material to the Borrower and the Subsidiaries
as a consolidated enterprise.



     Section 7.7 Compliance. The Borrower and the Material Subsidiaries are in material compliance
with all statutes and governmental rules and regulations applicable to them, except where
noncompliance thereof would not constitute an Adverse Event.



     Section 7.8 Environmental, Health and Safety Laws. To the best of the Borrower’s knowledge after
due inquiry, there does not exist any violation by the Borrower or any Material Subsidiary of any
applicable federal, state or local law, rule or regulation or order of any government, governmental
department, board, agency or other instrumentality relating to environmental, pollution, health or
safety matters which would constitute an Adverse Event. Neither the Borrower nor any Material
Subsidiary has received any notice to the effect that any part of its operations or properties is
not in material compliance with any such law, rule, regulation or order or notice that it or its
property is the subject of any governmental investigation evaluating whether any remedial action is
needed to respond to any release of any toxic or hazardous waste or substance into the environment,
the consequences of which non compliance or remedial action would constitute an Adverse Event.



     Section 7.9 ERISA. Each Plan complies with all material applicable requirements of ERISA and the
Code and with all material applicable rulings and regulations issued under the



35









 




provisions of ERISA and the Code setting forth those requirements, except where noncompliance
would not constitute an Adverse Event. No Reportable Event which would be an Adverse Event, has
occurred and is continuing with respect to any Plan. As of each January 1, all of the minimum
funding standards applicable to such Plans have been satisfied, except where nonsatisfaction would
not constitute an Adverse Event, and there exists no event or condition which would permit the
institution of proceedings to terminate any Plan under Section 4042 of ERISA, except for any event
or condition which would not constitute an Adverse Event.




     Section 7.10 Regulation U. The Borrower is not engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) and no part of the proceeds of any Loan will be used to
purchase or carry margin stock or for any other purpose which would violate any of the margin
requirements of the Board of Governors of the Federal Reserve System.



     Section 7.11 Ownership of Property; Liens. Each of the Borrower and the Material Subsidiaries has
good and marketable title to, or valid leasehold interests in or easements or other limited
property interests in, its real properties necessary in the ordinary course of its business and
good and sufficient title to its other material properties, except for minor defects in title that
do not materially interfere with its ability to conduct its business and to utilize such assets for
their intended purposes and except where the failure to have such title or other property interests
described above would not constitute an Adverse Event. None of the properties, revenues or assets
of the Borrower or any of the Material Subsidiaries is subject to a Lien, except for Liens
disclosed in the consolidated financial statements referred to in Section 7.5 or permitted
under Section 9.8.



     Section 7.12 Taxes. Each of the Borrower and the Material Subsidiaries has filed all federal and
material state and local tax returns required to be filed and has paid or made provision for the
payment of all taxes due and payable pursuant to such returns and pursuant to any assessments of
which it has received notice made against it or any of its property and all other taxes, fees and
other charges imposed on it or any of its property by any governmental authority (other than taxes,
fees, charges or assessments the amount or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which reserves in accordance with GAAP have
been provided on the books of the Borrower, and other than taxes, fees, charges or assessments with
respect to which the failure to pay would not constitute an Adverse Event). No tax Liens have been
filed and no material claims are being asserted with respect to any such taxes, fees or charges,
except for Liens or claims which would not constitute an Adverse Event.



     Section 7.13 Trademarks, Patents. Each of the Borrower and the Material Subsidiaries possesses or
has the right, by way of ownership, license or otherwise, to use all of the patents, trademarks,
trade names, service marks and copyrights, and applications therefor, and all technology, know how,
processes, methods and designs used in or necessary for the conduct of its business, without known
conflict with the rights of others, except where the lack of such possession or right or where the
existence of such conflict would not constitute an Adverse Event.



36









 





     Section 7.14 Investment Company Act. Neither the Borrower nor any Subsidiary is an “investment
company” or a company “controlled” by an investment company within the meaning of the Investment
Company Act of 1940, as amended.



     Section 7.15 Subsidiaries. Schedule 7.15 sets forth as of the date of this Agreement a
list of all Subsidiaries and the number and percentage of the shares of each class of capital stock
owned beneficially or of record by the Borrower or any Subsidiary therein, and the jurisdiction of
incorporation of each Subsidiary.



     Section 7.16 Partnerships and Joint Ventures. Schedule 7.16 sets forth as of the date of
this Agreement a list of all partnerships or joint ventures in which the Borrower or any Subsidiary
is a partner (limited or general) or joint venturer.



     Section 7.17 Senior Debt. The Loans are senior unsecured Indebtedness of the Borrower, and are
pari passu and of equal rank and seniority with all senior unsecured Indebtedness of the Borrower.



ARTICLE VIII AFFIRMATIVE COVENANTS




     From the date of this Agreement and thereafter until the Commitments are terminated or expire
and the Loans and all other liabilities of the Borrower to the Banks hereunder and under the Note
(other than in respect of contingent indemnification and expense reimbursement obligations for
which no claim has been made) have been paid in full, unless the Required Banks shall otherwise
expressly agree in writing the Borrower will do, and will cause each Material Subsidiary (except in
the instance of Section 8.1) to do, all of the following:



     Section 8.1 Financial Statements and Reports. Furnish to the Agent for prompt distribution to the
Banks:




(a) As soon as available and in any event within 120 days after the end of each fiscal year
of the Borrower, (i) the annual audited financial statements of the Borrower and its
Subsidiaries prepared on a consolidated basis and in conformity with GAAP, consisting of at
least statements of income, cash flow, and a consolidated balance sheet as at the end of
such year, setting forth in each case in comparative form corresponding figures from the
previous fiscal year, certified without a “going concern” or like qualification, or a
qualification arising out of the scope of the audit, by independent certified public
accountants of recognized standing selected by the Borrower (it being agreed that the
furnishing of the Borrower’s annual report on Form 10-K for such year, as filed with the
Securities and Exchange Commission, will satisfy the Borrower’s obligation under this
Section 8.1(a)(i) with respect to such year except with respect to the requirement
that such financial statements be reported on without a “going concern” or like
qualification, or a qualification arising out of the scope of the audit), together with any
related management letters, and (ii) supplemental schedules detailing balance sheet and
income statement results for Varistar Corporation and its Subsidiaries, and a statement from
such independent certified public accountants substantially similar to “the schedules have
been subjected to the auditing procedures applied in the basic consolidated financial
statements of the Borrower and in the opinion of the undersigned, are fairly stated in all
material



37









 






respects when considered in relation to the basic consolidated statements taken as a whole”.




(b) As soon as available and in any event within 45 days after the end of the first three
quarters of each fiscal year, (i) a copy of the unaudited financial statements of the
Borrower and its Subsidiaries prepared on a consolidated basis and in conformity with GAAP
(except for the absence of footnotes and for year-end audit adjustments), signed by a senior
financial officer of the Borrower, consisting of at least consolidated statements of income
and cash flow for the Borrower and its Subsidiaries for such quarter and for the period from
the beginning of such fiscal year to the end of such quarter, and a consolidated balance
sheet of the Borrower and its Subsidiaries as at the end of such quarter (it being agreed
that the furnishing of the Borrower’s quarterly report on Form 10-Q for such quarter, as
filed with the Securities and Exchange Commission, will satisfy the Borrower’s obligation
under this Section 8.1(b)(i) with respect to such quarter), and (ii) supplemental
schedules detailing balance sheet and income statement results for Varistar Corporation and
its Subsidiaries, and a statement from an Authorized Representative that the financial
statements are fairly stated in all material respects when considered in relation to the
basic consolidated statements taken as a whole.




(c) Together with the consolidated financial statements furnished by the Borrower under
Sections 8.1(a) and 8.1(b), a Compliance Certificate signed by a senior
financial officer of the Borrower, which shall confirm either that as at the date of each
such financial statement there did not exist any Default or Event of Default or, that a
Default or Event of Default existed, in which case it shall specify the nature and period of
existence thereof and what action the Borrower proposes to take with respect thereto.




(d) Promptly upon becoming aware of any Default or Event of Default, a notice describing the
nature thereof and what action the Borrower proposes to take with respect thereto.




(e) Promptly upon becoming aware of the occurrence, with respect to any Plan, of any
Reportable Event or any “prohibited transaction” (as defined in Section 4975 of the Code),
except for any Reportable Event or “prohibited transaction” which would not constitute an
Adverse Event, a notice specifying the nature thereof and what action the Borrower proposes
to take with respect thereto, and, when received, copies of any notice from PBGC of
intention to terminate or have a trustee appointed for any Plan.




(f) Promptly after the same become publicly available, copies of all financial statements,
reports and proxy statements mailed to the Borrower’s shareholders, and copies of all
registration statements, periodic reports and other documents filed with the Securities and
Exchange Commission (or any successor thereto) or any national securities exchange.




(g) Promptly upon becoming aware of the occurrence thereof, notice of the institution of any
litigation, arbitration or governmental proceeding, or the rendering of a judgment or
decision in such litigation or proceeding, which, in each case if adversely determined,
would constitute an Adverse Event.




38












 






(h) Promptly upon becoming aware of the occurrence thereof, notice of any violation as to
any environmental matter by the Borrower or any Material Subsidiary and of the commencement
of any judicial or administrative proceeding relating to health, safety or environmental
matters in which such violation or an adverse determination or result in such proceeding
would constitute an Adverse Event.




Documents required to be delivered pursuant to clauses (a), (b) and (f) of this Section
8.1 may be delivered electronically and if so delivered, shall be deemed to have been
delivered on the date on which such documents are filed for public availability on the
Securities and Exchange Commission’s Electronic Data Gathering and Retrieval System.



     Section 8.2 Corporate Existence. Except as permitted by Sections 9.1,
9.2 and 9.4, maintain its corporate existence in good standing under the laws of
its jurisdiction of incorporation and its qualification to transact business in each jurisdiction
in which the character of the properties owned, leased or operated by it or the business conducted
by it makes such qualification necessary and failure to so qualify or remain in good standing would
constitute an Adverse Event, provided, that the Borrower may cause any Material Subsidiary
to be dissolved that has substantially no assets, revenues or operations.



     Section 8.3 Insurance. Maintain with financially sound and reputable insurance
companies such insurance as may be required by law and such other insurance in such amounts and
against such hazards as is customary in the case of reputable corporations engaged in the same or
similar business and similarly situated.



     Section 8.4 Payment of Taxes. File all federal and material state and local tax
returns and reports which are required by law to be filed by it and pay before they become
delinquent all federal and material state and local taxes, assessments and governmental charges and
levies imposed upon it or its property; provided that the foregoing items need not be paid
if they are being contested in good faith by appropriate proceedings and adequate reserves with
respect thereto have been set aside on the Borrower’s or such Material Subsidiary’s books in
accordance with GAAP or if nonpayment thereof would not constitute an Adverse Event.



     Section 8.5 Inspection. Permit representatives of the Agent to visit and inspect any
of its properties, corporate books and financial records, to examine and to make copies of its
books of accounts and other financial records, and to discuss the affairs, finances and accounts of
the Borrower and the Subsidiaries with, and to be advised as to the same by, its officers at such
reasonable times during normal business hours of the Borrower and the Subsidiaries, upon reasonable
advance notice to the Borrower and the Subsidiaries; provided that, so long as no Event of Default
has occurred and is continuing, the expenses of the Agent and its representatives for such visits,
inspections and examinations shall be at the expense of the Agent, but any such visits,
inspections, and examinations made while any Event of Default is continuing shall be at the expense
of the Borrower.



     Section 8.6 Maintenance of Properties. Maintain its properties used or useful in the
conduct of its business in good condition, repair and working order, and supplied with all
necessary equipment, and make all necessary repairs, renewals, replacements, betterments and
improvements thereto, all as may be necessary so that the business carried on in connection



39









 




therewith may be properly and advantageously conducted at all times, except where the failure to do
so would not constitute an Adverse Event.




     Section 8.7 Books and Records. Keep adequate and proper records and books of account
in which full and correct entries will be made of its dealings, business and affairs in a manner
that permits the preparation of financial statements in accordance with GAAP.



     Section 8.8 Compliance. Comply in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject,
except where the failure so to comply would not constitute an Adverse Event.



     Section 8.9 ERISA. Maintain each Plan in compliance with all material applicable
requirements of ERISA and of the Code and with all material applicable rulings and regulations
issued under the provisions of ERISA and of the Code, including without limitation minimum funding
standards, except where the failure so to comply would not constitute an Adverse Event.



     Section 8.10 Environmental Matters. Observe and comply with all laws, rules,
regulations and orders of any government or government agency relating to health, safety,
pollution, hazardous materials or other environmental matters to the extent non compliance would
constitute an Adverse Event.



     Section 8.11 Senior Debt. Take all actions necessary to assure that the Loans are
senior unsecured Indebtedness of the Borrower, and are and remain pari passu and of equal rank and
seniority with all senior unsecured Indebtedness of the Borrower (without limiting the obligation
of the Borrower to deliver cash collateral or deposits under certain circumstances, as specifically
provided herein).



     Section 8.12 Subsidiaries. Within 30 days after the formation or acquisition of any
Subsidiary that is a Material Subsidiary, other than a Material Subsidiary that is a Controlled
Foreign Corporation or is dissolved, disposed of or merged during such 30 day period in a manner
permitted under this Agreement, the Borrower will cause such Material Subsidiary to execute and
deliver a Material Subsidiary Guaranty to the Agent for the benefit of the Banks, and provide (a) a
certificate or certificates of the Secretary or an Assistant Secretary of such Material
Subsidiaries attesting to the incumbency of the officers of such Material Subsidiary authorized to
execute the Material Subsidiary Guaranty and attaching copies of the Articles or Certificate of
Incorporation or By-Laws (or other governing documents); (b) a Certificate of Good Standing for
such Material Subsidiary in the jurisdiction of its incorporation, certified by the appropriate
governmental officials, and (c) at the request of the Agent, an opinion of counsel to such Material
Subsidiary, addressed to the Banks, addressing with respect to such Material Subsidiary, the
matters addressed with respect to the Material Subsidiaries in the opinion of counsel the form of
Exhibit D. At any time the Borrower determines that a Subsidiary which has executed the
Material Subsidiary Guaranty is not required to be a party to the Material Subsidiary Guaranty
under the definition of “Material Subsidiary,” including upon the addition of another Subsidiary as
a Material Subsidiary, the Borrower shall provide the Agent with written notice thereof setting
forth information in reasonable detail describing why such Subsidiary is no longer required to be a
party to the Material Subsidiary Guaranty. Upon the Agent’s reasonable determination that such
Subsidiary is no longer required to be a party to the



40









 




Material Subsidiary Guaranty, the Agent shall, at the Borrower’s expense, release such Subsidiary from the Material Subsidiary Guaranty
pursuant to such documentation as the Borrower shall reasonably request.




     Section 8.13 Ratings. In the case of the Borrower, use commercially reasonable
efforts to obtain and maintain Long Term Debt Ratings with S&P, Moody’s and Fitch.



ARTICLE IX NEGATIVE COVENANTS




     From the date of this Agreement and thereafter until the Commitments are terminated or expire
and the Loans and all other liabilities of the Borrower to the Banks hereunder and under the Note
(other than in respect of contingent indemnification and expense reimbursement obligations for
which no claim has been made) have been paid in full, unless the Required Banks shall otherwise
expressly agree in writing the Borrower will not, and will not permit any Material Subsidiary to,
do any of the following:



     Section 9.1 Merger. Merge or consolidate or enter into an analogous reorganization or
transaction with any Person; provided, however, that (a) any Subsidiary may be
merged with or liquidated into the Borrower (if the Borrower is the surviving corporation) or any
other wholly-owned Subsidiary (if such wholly-owned Subsidiary is the surviving corporation); (b)
the Borrower and Material Subsidiaries may enter into Permitted Divestitures; (c) any wholly-owned
Subsidiary may merge with any other Person in order to effect an Investment permitted pursuant to
Section 9.7 so long as the continuing or surviving Person shall be a wholly-owned
Subsidiary; and (d) any non-wholly-owned Subsidiary of the Borrower may merge into another
Subsidiary of the Borrower to the extent permitted under Section 9.2(c).



     Section 9.2 Sale of Assets. Sell, transfer, lease or otherwise convey all or any
substantial part of its assets except for:




(a) sales, subleases, leases and licensing of assets in the ordinary course of business;




(b) sales or other transfers (i) by a wholly-owned Subsidiary to the Borrower or another
wholly-owned Subsidiary, (ii) by a non-wholly-owned Subsidiary of the Borrower to the
Borrower or a wholly-owned Subsidiary of the Borrower and (iii) by a non-wholly-owned
Subsidiary to another non-wholly-owned Subsidiary to the extent permitted under clause (c),
below;




(c) Permitted Divestitures;




(d) Permitted Securitization Transactions;




(e) Permitted Sales and Leasebacks;




(f) sales of used, obsolete, worn out or surplus property or property no longer used or
useful in the conduct of its business;




(g) sales of permitted cash equivalents for cash or cash equivalents;



41









 






(h) synthetic leases described in subsection (h) of the definition of Interest-bearing Debt
and subsection (d) of the definition of Interest Expense;




(i) abandonment of non-material intellectual property assets in the ordinary course of
business;




(j) surrender, release or waiver of contract rights in the ordinary course of business;




(k) sales or other dispositions of property to the extent that such property is exchanged
for credit against the purchase price of similar replacement property or the proceeds of
such sale or other disposition are promptly applied to the purchase price of such
replacement property;




(l) charitable donations in the ordinary course of business and consistent with past
practices; and




(m) sales to or other dispositions of Investments or assets into joint ventures to the
extent required by, or made pursuant to buy/sell arrangements between the joint venture
parties set forth in, joint venture arrangements and similar binding arrangements in effect
on the date hereof or pursuant to an Investment permitted by Section 9.7.



     Section 9.3 Plans. Permit any condition to exist in connection with any Plan which
would constitute grounds for the PBGC to institute proceedings to have such Plan terminated or a
trustee appointed to administer such Plan, or permit any Plan to terminate under any circumstances
which would cause the lien provided for in Section 4068 of ERISA to attach to any property, revenue
or asset of the Borrower or any Subsidiary.



     Section 9.4 Ownership of Stock. Except as set forth on Schedule 9.4, take any action,
or permit any Material Subsidiary to take any action, which would result in a decrease in the
Borrower’s or any Material Subsidiary’s ownership interest in any Material Subsidiary (including,
without limitation, decrease in the percentage of the shares of any class of stock owned), other
than as permitted under Sections 9.1 and 9.2.



     Section 9.5 Other Agreements. Enter into any agreement, bond, note or other
instrument with or for the benefit of any Person other than the Banks or the Agent which would: (a)
be violated or breached by the Borrower’s performance of its obligations under the Loan Documents,
except where such violation or breach would not constitute an Adverse Event, or (b) other than this
Agreement or the other Loan Documents, prohibit any Subsidiary of the Borrower from paying
dividends or distributions on, or redeeming, acquiring or retiring for value, any shares of stock
or other ownership interest that the Borrower holds in such Subsidiary, except for (i) any
such prohibition that applies only when a default shall exist under such agreement or shall result
from such payment, acquisition or retirement; (ii) as to clause (b), agreements and instruments
entered into in connection with Permitted Securitization Transactions; (iii) customary prohibitions
or restrictions in joint venture agreements and similar agreements that relate solely to the
activities of such joint venture; (iv) as to clause (b), customary prohibitions or restrictions
contained in agreements relating to any asset sale or disposition pending such sale or disposition,
provided that such prohibitions and restrictions apply only to the Subsidiary or its assets
to be sold or disposed of and such sale or disposition is permitted hereunder; (v) as to clause
(b), restrictions



42









 




and conditions imposed by any governmental authority; (vi) as to clause (b), any
such prohibition contained in any agreement, bond, note or other instrument (or any refinancing
thereof) with respect to any Person or the property or assets of such Person acquired by the
Borrower or any Subsidiary in an acquisition permitted hereunder and existing at the time of such
acquisition; provided that such prohibition is not applicable to any Person or the property
or assets of any Person other than such acquired Person or the property or assets of such acquired
Person; (vii) any agreement evidencing any permitted renewal, extension, replacement or refinancing
of any agreement referred to in the
foregoing clause (vi) so long as such renewal, extension, replacement or refinancing does not
expand the scope of the restrictions described in clause (b); and (viii) as to clause (b),
limitations or restrictions consisting of customary net worth, leverage or other financial
covenants in each case contained in, or required by, any contractual obligation governing
Indebtedness of a Subsidiary.




     Section 9.6 Restricted Payments. Either: (a) make any Restricted Payment, other than
any dividend or distribution payable solely in shares or other equity interests to the holders of
such shares or other equity interests, if any Default or Event of Default shall exist or shall
result from the making of such Restricted Payment; or (b) directly or indirectly make any payment
on, or redeem, repurchase, defease, or make any sinking fund payment on account of, or otherwise
pay, acquire or retire for value any Indebtedness of the Borrower or any Subsidiary that is
expressly subordinated in right of payment to the Loans, except for (i) regularly-scheduled
payments of interest and principal and mandatory prepayments of principal that are not otherwise
prohibited by any document or agreement stating the terms of subordination of such other
Indebtedness, and (ii) refinancing of the Indebtedness of the Borrower or a Subsidiary that is
expressly subordinated in right of payment to the Loans by the incurrence of Indebtedness that is
similarly subordinated in right of payment to the Loans.



     Section 9.7 Investments. Acquire for value, make, have or hold any Investments in any
other Person, except:




(a) Investments outstanding or contemplated on the date hereof and listed on Schedule
9.7, and any increases or decreases in the value thereof or write-ups, write-downs,
write-offs, reinvestments, renewals and extensions with respect to such Investments;




(b) loans and advances to officers and employees in the ordinary course of business;




(c) Investments in readily marketable direct obligations of the United States of America
having maturities of one year or less from the date of acquisition;




(d) certificates of deposit or bankers’ acceptances, each maturing within one year from the
date of acquisition, issued by any commercial bank organized under the laws of the United
States or any State thereof which has (i) combined capital, surplus and undivided profits of
at least $100,000,000, and (ii) a credit rating with respect to its unsecured indebtedness
from S&P that is rated A- (or the equivalent thereof from any other nationally recognized
rating service) or higher;




(e) commercial paper maturing within 270 days from the date of issuance and given the
highest rating by a nationally recognized rating service;



43









 






(f) repurchase agreements relating to securities issued or guaranteed as to principal and
interest by the United States of America;




(g) cash and demand deposits with any bank or trust company;




(h) money market funds substantially all the assets of which are comprised of securities of
the types described in any of clauses (c) through (f) above;




(i) in the case of foreign Subsidiaries, short-term Investments comparable to clauses (c)
through (h) above;




(j) Investments in the nature of an indebtedness owed by the Borrower to any Subsidiary or
any Subsidiary to the Borrower or another Subsidiary in connection with cash management of
the Borrower and its Subsidiaries in the ordinary course of business consistent with past
practices;




(k) Investments by the Borrower or any Material Subsidiary (i) outstanding on the date
hereof (or refinancings thereof) in Subsidiaries (other than Material Subsidiaries) and (ii)
in the Borrower or any Material Subsidiary;




(l) Investments made after the date hereof in Subsidiaries that are not Material
Subsidiaries, provided, that such Investments in the aggregate to such Subsidiaries
that are not Material Subsidiaries shall not exceed $10,000,000 in aggregate amounts
outstanding at any time (net of any repayment of loans or return of equity);




(m) Investments not otherwise permitted hereunder which shall not exceed (based on total
consideration paid by the Borrower or a Material Subsidiary): (i) $20,000,000 for any single
Investment or series of related Investments in any Person not engaged in one or more of the
Borrower’s and Subsidiaries’ present lines of business, or (ii) $40,000,000 for any single
Investment or series of related Investments in any Person that is engaged in one or more of
the Borrower’s and Subsidiaries’ present lines of business, provided, that not less
than 10 Business Days prior to consummation of such Investment, the Borrower shall have
provided pro forma financial statements to the Agent demonstrating that in the good faith
judgment of the Borrower, the Borrower will continue to comply with the covenants of this
Agreement after giving effect to such Investment, and provided, further,
that consent of the Required Banks to such Investments in excess of such limits shall not be
unreasonably withheld;




(n) Investments arising out of the receipt by the Borrower or any Subsidiary of noncash
consideration for the sale of assets permitted under Section 9.2;




(o) Investments consisting of hedging arrangements not otherwise prohibited hereunder
relating to interest rate, commodity price or foreign exchange rate exposure not entered
into for any speculative purpose;




(p) accounts receivable, notes receivable and security deposits and prepayments arising and
trade credit granted in the ordinary course of business and any prepayments and other
credits to suppliers made in the ordinary course of business;



44









 






(q) Investments resulting from pledges and deposits permitted by Section 9.8;




(r) Investments in the form of Guaranties permitted by Section 9.9;




(s) Investments consisting of the licensing or contribution of intellectual property
pursuant to joint marketing arrangements with other Persons;




(t) Investments received in connection with the bankruptcy or reorganization of, or
settlement of delinquent accounts and disputes with or judgments against, customers and
suppliers, in each case in the ordinary course of business or Investments acquired by the
Borrower or a Material Subsidiary as a result of a foreclosure by the Borrower or any of the
Material Subsidiaries with respect to any Investments or other transfer of title with
respect to any Investment in default;




(u) Investments of a Material Subsidiary acquired after the date hereof or of a corporation
merged into the Borrower or merged into or consolidated with a Material Subsidiary in
accordance with Section 9.1 after the date hereof to the extent that such
Investments were not made in contemplation of or in connection with such acquisition, merger
or consolidation and were in existence on the date of such acquisition, merger or
consolidation;




(v) Investments in the ordinary course of business consisting of Uniform Commercial Code
Article 3 endorsements for collection or deposit and Uniform Commercial Code Article 4
customary trade arrangements with customers consistent with past practices;




(w) Investments by the Borrower or any Material Subsidiary, if the Borrower or any Material
Subsidiary would otherwise be permitted to make a dividend or distribution in such amount
(provided that the amount of any such Investment shall also be deemed to be a distribution
under the appropriate clause of Section 9.6);




(x) Investments in joint ventures in one or more of the Borrower’s and Subsidiaries’ present
lines of business in an aggregate amount not to exceed $10,000,000 at any time outstanding;
and




(y) any other Investments not otherwise permitted hereunder not to exceed $10,000,000 at any
time outstanding.



     Section 9.8 Liens. Create, incur, assume or suffer to exist any Lien with respect to
any property, revenues or assets now owned or hereafter arising or acquired, except:




(a) Liens in connection with the acquisition of property by way of purchase money mortgage
and security interests, conditional sale or other title retention agreement, Capitalized
Lease or other deferred payment contract, and attaching only to the property being acquired
(or accessions to such property, related records and proceeds thereof);




(b) Liens existing on assets of Material Subsidiaries acquired after the date of this
Agreement, which existed at the time of such acquisition and attach only to the assets of
such Material Subsidiaries;



45









 






(c) Liens existing on the date of this Agreement and disclosed on Schedule 9.8 hereto and
Liens securing any extension, renewal, restatement or replacement of the credit facilities
described on Schedule 9.8, provided, that Liens securing such extensions, renewals,
restatements or replacement credit facilities shall not attach to materially different
assets than the Liens disclosed on such Schedule 9.8 and shall not secure indebtedness
exceeding the amount of credit facilities described on Schedule 9.8 (other than premiums,
interest, fees or costs capitalized or required to be paid in connection with such
extension, renewal, restatement or replacement credit facility);




(d) Deposits or pledges and other Liens to secure payment of workers’ compensation,
unemployment insurance, old age pensions or other social security obligations, and deposits
securing liability to insurance carriers under insurance or self-insurance arrangements in
respect of such obligations, in each case in the ordinary course of business of the Borrower
or a Subsidiary;




(e) Liens of landlord’s, carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s,
construction or other like Liens arising in the ordinary course of business or imposed by
law and securing obligations that are not overdue by more than 30 days or that are being
contested in good faith by appropriate proceedings and in respect of which, if applicable,
the Borrower or any Subsidiary shall have set aside on its books reserves in accordance with
GAAP;




(f) Deposits and other Liens to secure the performance of bids, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance and return of money bonds, bids,
leases, government contracts, trade contracts, agreements with public utilities, and other
obligations of a like nature (including letters of credit in lieu of any such bonds or to
support the issuance thereof) incurred by the Borrower or any Material Subsidiary in the
ordinary course of business, including those incurred to secure health, safety and
environmental obligations in the ordinary course of business;




(g) Liens granted to secure obligations to any other holder of senior Indebtedness of the
Borrower (including without limitation obligations to insurers of bond obligations of the
Borrower constituting Interest-Bearing Debt), provided, that (i) such Liens were required to
be granted pursuant to agreements and instruments entered into by the Borrower prior to the
date of this Agreement, and (ii) the Agent is granted a pari passu Lien, not subordinate in
priority (whether due to time of filing or otherwise) to such Lien attaching to either (x)
the same assets and rights as the Lien in favor of such other holder of senior Indebtedness
(in which case if the Agent shall so notify the Borrower, the holder of such senior
Indebtedness shall enter into an inter-creditor agreement reasonably satisfactory to the
Agent confirming such respective priorities of such Liens), or (y) other assets that are
reasonably acceptable to the Required Banks in their sole discretion to secure all
Indebtedness and obligations of the Borrower hereunder, whether then existing or thereafter
arising;




(h) Liens of lessors of real property on which facilities owned or leased by the Borrower or
any Subsidiary are located;



46









 






(i) Liens (to the extent falling under the definition of “Lien”) consisting of
ownership interests (and protective filings respecting such ownership interests) of lessors
of assets to the Borrower or any Subsidiary under any operating lease, and of licensors of
intellectual property or other rights to the Borrower or any Subsidiary;




(j) Liens (to the extent falling under the definition of “Lien”) consisting of
rights of lessees or sublessees of assets of the Borrower or any Subsidiary leased in the
ordinary course of the Borrower’s or such Subsidiary’s business, which leases do not
materially interfere with the ordinary course of business of the Borrower or such
Subsidiary;




(k) Liens in favor of customs and revenue authorities to secure payment of customs duties in
connection with the importation of goods by the Borrower or any Subsidiary in the ordinary
course of business and other similar Liens arising in the ordinary course of business of the
Borrower or any Subsidiary;




(l) Liens in favor of the Agent for the benefit of the Agent and the Banks under any
provisions of this Agreement or any other Loan Document or any replacement, additional or
successor agreement hereto or thereto, creating such Liens;




(m) Liens for taxes, assessments or other governmental charges or levies not yet delinquent
or that are being contested in compliance with Section 8.4;




(n) Liens securing Indebtedness incurred to pay annual premiums for property, casualty or
liability insurance policies maintained by the Borrower or any Material Subsidiary;
provided that such Liens attach only to insurance policies and proceeds thereof, and
pledges and deposits and other Liens securing liability for reimbursement or indemnification
obligations of (including obligations in respect of letters of credit or bank guarantees for
the benefit of) insurance carriers providing property, casualty or liability insurance to
the Borrower or any Material Subsidiary;




(o) Liens created under any agreement relating to the sale, transfer or other disposition of
assets permitted hereunder; provided that such Liens relate solely to the assets to
be sold, transferred or otherwise disposed of;




(p) survey exceptions, encroachments, protrusions, easements, restrictions, reservations,
licenses, rights-of-way, sewers, electric lines, telegraphs and telephone lines and other
similar minor title defects affecting the real property, or zoning or other restrictions as
to the use of the real property or Liens incidental to the conduct of the business of the
Borrower or any Material Subsidiary or to the ownership of its properties, in each case
which were not incurred in connection with Indebtedness and which do not individually or in
the aggregate materially and adversely affect the value of said properties or materially
impair their use in the operation of the business of the Borrower or any Material
Subsidiary;




(q) Liens securing judgments for the payment of money not constituting an Event of Default
under Section 10.1(h);




(r) Liens encumbering cash collateral or other financial assets securing Investments
consisting of hedging arrangements not otherwise prohibited hereunder relating to



47









 






interest rate, commodity price or foreign exchange rate exposure not entered into for any speculative
purpose;




(s) Liens arising under or related to any statutory or common law provisions or other
customary or contractual rights (i) relating to the establishment of depository relations




with banks or other financial institutions not given in connection with the issuance of
Indebtedness, including banker’s liens, rights of setoff or similar rights and remedies as
to deposit or securities accounts or other funds or instruments maintained or held with a
depositary or other financial institution or securities intermediary, (ii) relating to
pooled deposit or sweep accounts of the Borrower or any Material Subsidiary to permit
satisfaction of overdraft or similar obligations incurred in the ordinary course of business
of the Borrower and the Material Subsidiaries or (iii) relating to purchase orders and other
agreements entered into with customers of the Borrower or any Material Subsidiary in the
ordinary course of business;




(t) Any encumbrance or restriction with respect to the equity interests of any joint venture
or similar arrangement pursuant to any joint venture or similar agreement;




(u) Liens on securities that are the subject of repurchase agreements permitted by Section
9.7;




(v) Liens solely on any cash earnest money deposits made by the Borrower or any Material
Subsidiary in connection with any letter of intent or purchase agreement permitted
hereunder; and




(w) Liens not otherwise permitted by this Section securing Indebtedness or other obligations
not to exceed $10,000,000 in the aggregate at any time outstanding.


In no case shall Liens permitted hereunder apply to the stock of any Subsidiary (other than Liens,
if any, under clause (g)) and in no case shall Liens under clause (d), (e), (f), (i), (j), (k),
(m), (o) or (p) secure any Indebtedness for borrowed money or Indebtedness constituting obligations
to issuers of letters of credit.




     Section 9.9 Contingent Liabilities. Guaranty obligations of any other Person, except
for:




(a) Guaranties by the Borrower or any Material Subsidiary of obligations of the Borrower or
any Subsidiary as lessee under any lease that is not a Capitalized Lease;




(b) Guaranties by the Borrower of obligations of DMI Industries, Inc. in respect of
downpayments by customers of DMI Industries, Inc., in aggregate amounts of up to
$30,000,000, with the amount of such Guaranties to be deemed to be either (i) the dollar
limitation set forth in any such Guaranty, if applicable, or (ii) the amount of such
downpayment so Guarantied;




(c) Guaranties by the Borrower to assure payment of workers’ compensation, unemployment
insurance, old age pensions or other social security obligations, or performance, surety,
statutory, stay, customs or appeal bonds, performance and



48









 






completion guarantees, and other
similar obligations, in the ordinary course of business of the Borrower or a Material
Subsidiary or consistent with past practice;




(d) Guaranty by any Material Subsidiary of the obligations of Borrower in respect of up to
$50,000,000 of 8.89% senior notes due November 30, 2017;




(e) Guaranties by the Borrower of the obligations of a Subsidiary under any Agreement
involving the sale of accounts receivable permitted by Section 9.2(d),
provided, that such Guaranties shall not, in the aggregate, Guaranty receivables
sale arrangements involving account receivable sales at any time remaining outstanding in
excess of $50,000,000;




(f) Guaranties by the Borrower or any Subsidiary of the obligations of the Borrower or any
Material Subsidiary under any unsecured Interest-bearing Debt the incurrence of which does
not cause a Default or Event of Default; and




(g) Other Guaranties limited as to principal of recovery to not more than $10,000,000 in the
aggregate at any time outstanding.



     Section 9.10 Transactions with Related Parties. Enter into or be a party to any
transaction or arrangement, including, without limitation, the purchase, sale lease or exchange of
property or the rendering of any service, with any Related Party, except upon fair and reasonable
terms no less favorable to the Borrower or such Material Subsidiary than such entity would obtain
in a comparable arm’s-length transaction with a Person not a Related Party, excluding (i)
transactions between the Borrower and a Material Subsidiary and transactions between Material
Subsidiaries, (ii) transactions otherwise expressly permitted (or required) with such Related
Parties under this Agreement, (iii) any issuance of securities or other payments, awards or grants
in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, equity
purchase agreements, stock options and stock ownership plans approved by the Board of Directors of
the Borrower or a Material Subsidiary, (iv) loans or advances to employees or consultants of the
Borrower or any of its Subsidiaries otherwise permitted hereunder, (v) transactions among the
Borrower or any Subsidiary permitted by this Agreement, (vi) the payment of fees, reasonable
out-of-pocket costs and indemnities and provision of indemnification to directors, officers,
consultants and employees of the Borrower and the Subsidiaries in the ordinary course of business,
(vii) any employment agreement, benefit plan or arrangement or any health, disability or similar
insurance plan which covers employees, entered into by the Borrower or any of the Subsidiaries in
the ordinary course of business, (viii) any subscription agreement or similar agreement pertaining
to the repurchase of equity interests pursuant to put/call rights or similar rights with employees,
officers or directors, (ix) payments or loans (or cancellation of loans) to employees or
consultants that are (A) approved by a majority of the Board of Directors of the Borrower in good
faith, (B) made in compliance with applicable law and (C) otherwise permitted under this Agreement,
(x) transactions with wholly owned Subsidiaries for the purchase or sale of goods, products, parts
and services entered into in the ordinary course of business in a manner consistent with past
practice, (xi) transactions between the Borrower or any of the Subsidiaries and any person, a
director of which is also a director of the Borrower or a Material Subsidiary, provided, however,
that (A) such director abstains from voting as a director of the Borrower or a Material Subsidiary
on any matter involving such other person and (B) such person is not a Related Party for any reason
other than such director’s acting



49









 




in such capacity, (xii) transactions with joint ventures for the
purchase or sale of goods, equipment and services entered into in the ordinary course of business
and in a manner consistent with past practice, (xiii) intercompany transactions for the purpose of
improving the consolidated tax efficiency of the Borrower and the Subsidiaries, (xiv) payments by
the Borrower and the Subsidiaries pursuant to tax sharing agreements among the Borrower and the
Subsidiaries on customary terms that require each party to make payments when such taxes are
due or refunds received of amounts equal to the income tax liabilities and refunds generated
by each such party calculated on a separate return basis and payments to the party generating tax
benefits and credits of amounts equal to the value of such tax benefits and credits made available
to the group by such party, and (xv) the payment of fees, expenses, indemnities or other payments
pursuant to the agreements in existence on the date hereof and set forth on Schedule 9.10 or any
amendment thereto to the extent such an amendment is not adverse to the Banks in any material
respect.




     Section 9.11 Use of Proceeds. Permit any proceeds of the Loans to be used, either
directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of “purchasing
or carrying any margin stock” within the meaning of Regulation U of the Federal Reserve Board, as
amended from time to time.



     Section 9.12 Financial Covenants, Permit, at any time:




(a) the ratio, as of the last day of any fiscal quarter of the Borrower, of (a)
Interest-bearing Debt, to (b) Total Capitalization to be greater than 0.60 to 1.00; or




(b) the Interest and Dividend Coverage Ratio for any period of four consecutive fiscal
quarters to be less than 1.50 to 1.00.



ARTICLE X EVENTS OF DEFAULT AND REMEDIES




     Section 10.1 Events of Default. The occurrence of any one or more of the following
events shall constitute an Event of Default:




(a) The Borrower shall fail to make when due, whether by acceleration or otherwise, any
payment of principal of the Note, or the Borrower shall fail to make within three (3)
Business Days after the same becomes due, any interest on the Note or any fee or other
amount required to be made to the Banks pursuant to the Loan Documents;




(b) Any representation or warranty made or deemed to have been made by or on behalf of the
Borrower or any Material Subsidiary by any of the Loan Documents or by or on behalf of the
Borrower or any Material Subsidiary in any certificate, statement, report or other writing
required to be furnished by or on behalf of the Borrower to the Banks pursuant to the Loan
Documents shall prove to have been false or misleading in any material respect on the date
as of which the facts set forth are stated or certified or deemed to have been stated or
certified;




(c) The Borrower shall fail to comply with Section 8.2 or any Section of Article
IX;



50









 






(d) The Borrower shall fail to comply with any agreement, covenant, condition, provision or
term contained in the Loan Documents (and such failure shall not constitute an Event of
Default under any of the other provisions of this Section 10.1) and such failure to
comply shall continue for thirty (30) calendar days after the Borrower obtains knowledge of
such non-compliance;




(e) The Borrower, any Material Subsidiary or Otter Tail Power Company shall admit in writing
that it is insolvent or shall generally not pay its debts as they mature or shall apply for,
shall consent to, or shall acquiesce in the appointment of a custodian, trustee or receiver
of the Borrower, any Material Subsidiary or Otter Tail Power Company or for a substantial
part of the property thereof or, in the absence of such application, consent or
acquiescence, a custodian, trustee or receiver shall be appointed for the Borrower, any
Material Subsidiary or Otter Tail Power Company or for a substantial part of the property
thereof and such appointment shall not be discharged, dismissed or stayed within 60 days;




(f) Any bankruptcy, reorganization, debt arrangement or other proceedings under any
bankruptcy or insolvency law shall be instituted by or against the Borrower, any Material
Subsidiary or Otter Tail Power Company, and, if instituted against the Borrower, any
Material Subsidiary or Otter Tail Power Company, shall have been consented to or acquiesced
in by the Borrower, such Material Subsidiary or Otter Tail Power Company, or shall remain
undischarged, undismissed, unstayed or unbonded for 60 days, or an order for relief shall
have been entered against the Borrower, such Material Subsidiary or Otter Tail Power
Company, or the Borrower, any Material Subsidiary or Otter Tail Power Company shall take any
corporate action to approve institution of, or acquiescence in, such a proceeding;




(g) Any dissolution or liquidation proceeding shall be instituted by or against the
Borrower, any Material Subsidiary or Otter Tail Power Company and, if instituted against the
Borrower, any Material Subsidiary or Otter Tail Power Company, shall be consented to or
acquiesced in by the Borrower, any Material Subsidiary or Otter Tail Power Company or shall
remain for 30 days undismissed, undischarged, unstayed or unbonded, or the Borrower, any
Material Subsidiary or Otter Tail Power Company shall consent to or acquiescence in such a
proceeding; provided that any dissolution or proceeding not prohibited by Section
9.1 or Section 9.2 shall not constitute an Event of Default;




(h) A final judgment or judgments for the payment of money in excess of the sum of
$10,000,000 in the aggregate (to the extent not covered by third-party insurance as to which
the insurer has not denied coverage in respect thereof) shall be rendered against the
Borrower or a Material Subsidiary, and there is a period of 30 consecutive days during which
(i) the Borrower or such Material Subsidiary has not discharged the same or provided for its
discharge in accordance with its terms, or (ii) the Borrower or such Material Subsidiary has
not procured a stay of execution, prior to any execution on such judgment or (iii) such
judgment has not otherwise been dismissed, vacated or bonded pending appeal;



51









 






(i) The termination of any Plan by the Borrower or any ERISA Affiliate if in order to
effectuate such termination, the Borrower or any ERISA Affiliate would be required to make a
contribution to such Plan, or would incur a liability or obligation to such Plan, and the
requirement to make such contribution or the incurrence of such liability or obligations
shall constitute an Adverse Event, or the termination of any such Plan by the PBGC if in
order to effectuate such termination, the Borrower or any ERISA Affiliate would be required
to make a contribution to such Plan, or would incur a liability or
obligation to such Plan, and the requirement to make such contribution or the incurrence of
such liability or obligations shall constitute an Adverse Event;




(j) The maturity of any Indebtedness of the Borrower (other than Indebtedness under this
Agreement) or a Material Subsidiary in the aggregate in excess of $10,000,000 shall be
accelerated, or the Borrower or a Material Subsidiary shall fail to pay any such
Indebtedness (in excess of such amount) when due (beyond the applicable grace period with
respect thereto) or, in the case of such Indebtedness payable on demand, when demanded
(beyond the applicable grace period with respect thereto), or any other event shall occur or
condition shall exist and shall continue for more than the period of grace, if any,
applicable thereto and, in each case, such nonpayment or other event shall have the effect
of causing, or permitting (any required notice having been given and grace period having
expired) the holder of any such Indebtedness (in excess of such amount) or any trustee or
other Person acting on behalf of such holder to cause, such Indebtedness to become due prior
to its stated maturity; provided that this clause (j) shall not apply to secured
Indebtedness that becomes due as a result of the voluntary sale or transfer of the property
or assets securing such Indebtedness if such sale or transfer is permitted hereunder and
under the documents providing for such Indebtedness, and provided further, that an Event of
Default under this clause (j) caused by the occurrence of a breach or default with respect
to Indebtedness in the aggregate in excess of $10,000,000 shall be cured for purposes of
this Agreement upon the Person asserting such breach or default waiving such breach or
default or upon the Borrower or a Material Subsidiary curing such breach or default if, at
the time of such waiver or such cure the Agent has not exercised any rights or remedies with
respect to an Event of Default under this clause (j);




(k) Any material provision of any Loan Document shall not be, or shall cease to be,
enforceable and binding in accordance with its terms (other than as permitted hereunder or
thereunder), or the Borrower or any Material Subsidiary shall disavow or contest in writing
its obligations under such Loan Document (other than as permitted hereunder or thereunder;
or




(l) Either (i) the Borrower shall cease to own, directly or indirectly, all of the voting
stock of Varistar Corporation, or (ii) any person or group (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934), that owned less than 5% of
the shares of any voting class stock of the Borrower shall have acquired more than 25% of
the shares of such voting stock.



     Section 10.2 Remedies. If (a) any Event of Default described in Sections
10.1(e), (f) or (g) shall occur and be continuing with respect to the Borrower,
the Commitments shall automatically terminate and the outstanding unpaid principal balance of the
Notes, the accrued



52









 




interest thereon and all other obligations of the Borrower to the Banks and the
Agent under the Loan Documents shall automatically become immediately due and payable; or (b) any
other Event of Default shall occur and be continuing, then the Agent may (with the consent of the
Required Banks) take any or all of the following actions (and shall take any or all of the
following actions on direction of the Required Banks): (i) declare the Commitments terminated,
whereupon the Commitments shall terminate, (ii) declare that the outstanding unpaid principal
balance of the Notes, the accrued and unpaid interest thereon and all other obligations of the
Borrower to the Banks and the Agent under the Loan Documents to be forthwith due and payable,
whereupon the Notes, all accrued and unpaid interest thereon and all such obligations shall
immediately become due and payable, in each case without demand or notice of any kind, all of which
are hereby expressly waived, anything in this Agreement or in the Notes to the contrary
notwithstanding, (iii) exercise all rights and remedies under any other Loan Document, and (iv)
enforce all rights and remedies under any applicable law.




     Section 10.3 Letters of Credit. In addition to the foregoing remedies, if any Event
of Default described in Section 10.1(e), (f) or (g) shall have occurred and
be continuing, or if any other Event of Default shall have occurred and be continuing and the Agent
shall have declared that the principal balance of the Notes is due and payable, the Agent may, with
the consent of the Required Banks, and shall on direction of the Required Banks, require the
Borrower to pay to the Agent an amount equal to all Letter of Credit Obligations. Such payment
shall be in immediately available funds or in similar cash collateral reasonably acceptable to the
Agent and shall be pledged to the Agent for the ratable benefit of the Banks. Such amount shall be
held by the Agent in a cash collateral account until the outstanding Letters of Credit are
terminated without payment or are paid and Letter of Credit Obligations with respect thereto are
payable. In the event the Borrower defaults in the payment of any Letter of Credit Obligations,
the proceeds of the cash collateral account shall be applied to the payment thereof. The Borrower
acknowledges and agrees that the Banks would not have an adequate remedy at law for failure by the
Borrower to pay immediately to the Agent the amount provided under this Section, and that the Agent
shall, on behalf of the Banks, have the right to require the Borrower to perform specifically such
undertaking whether or not any of the Letter of Credit Obligations are due and payable. Upon the
failure of the Borrower to make any payment required under this Section, the Agent, on behalf of
the Banks, may proceed to use all remedies available at law or equity to enforce the obligation of
the Borrower to pay or reimburse the Agent. The balance of any payment due under this Section
shall bear interest payable on demand until paid in full at a per annum rate equal to the Base Rate
plus 2.00%.



     Section 10.4 Setoff. In addition to, and without limitation of, any rights of the
Banks under applicable law, if any Event of Default occurs and is continuing, upon written
direction by the Agent to such effect any and all deposits (including all account balances, whether
provisional or final and whether or not collected or available) and any other Indebtedness at any
time held or owing by any Bank to or for the credit or account of the Borrower may be offset and
applied toward the payment of the Borrower Obligations then due and payable owing to such Bank.
Each Bank agrees to promptly notify the Borrower and the Agent after any such setoff and
application made by such Bank; provided that the failure to give such notice shall not affect the
validity of such setoff and application.



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ARTICLE XI THE AGENT




     Section 11.1 Appointment and Grant of Authority. Each Bank hereby appoints the Agent,
and the Agent hereby agrees to act, as agent under this Agreement and under the other Loan
Documents. The Agent shall have and may exercise such powers under this Agreement and the other
Loan Documents as are specifically delegated to the Agent by the terms hereof and thereof, together
with such other powers as are reasonably incidental thereto. Each Bank hereby
authorizes, consents to, and directs the Borrower to deal with the Agent as the true and
lawful agent of such Bank to the extent set forth herein and under the other Loan Documents.



     Section 11.2 Non-Reliance on Agent. Each Bank agrees that it has, independently and
without reliance on the Agent or any other Bank, and based on such documents and information as it
has deemed appropriate, made its own credit analysis of the Borrower and decision to enter into
this Agreement and that it will, independently and without reliance upon the Agent, and based on
such documents and information as it shall deem appropriate at the time, continue to make its own
analysis and decisions in taking or not taking action under this Agreement. The Agent shall not be
required to keep informed as to the performance or observance by the Borrower of this Agreement and
the Loan Documents or to inspect the properties or books of the Borrower. Except for notices,
reports and other documents and information expressly required to be furnished to the Banks by the
Agent hereunder, the Agent shall not have any duty or responsibility to provide any Bank with any
credit or other information concerning the affairs, financial condition or business of the Borrower
(or any of its related companies) which may come into the Agent’s possession.



     Section 11.3 Responsibility of the Agent and Other Matters.




(a) The Agent shall have no duties or responsibilities except those expressly set forth in
this Agreement and those duties and liabilities shall be subject to the limitations and
qualifications set forth in this Section. The duties of the Agent shall be mechanical and
administrative in nature.




(b) Neither the Agent nor any of its directors, officers or employees shall be liable for
any action taken or omitted (whether or not such action taken or omitted is within or
without the Agent’s responsibilities and duties expressly set forth in this Agreement) under
or in connection with this Agreement, or any other instrument or document in connection
herewith, except for gross negligence, bad faith or willful misconduct. Without limiting
the foregoing, neither the Agent nor any of its directors, officers or employees shall be
responsible for, or have any duty to examine: (i) the genuineness, execution, validity,
effectiveness, enforceability, value or sufficiency of the Loan Agreements; (ii) the
collectability of any amounts owed by the Borrower; (iii) any recitals or statements or
representations or warranties in connection with this Agreement or the Notes; (iv) any
failure of any party to this Agreement to receive any communication sent; or (v) the assets,
liabilities, financial condition, results of operations, business or creditworthiness of the
Borrower.




(c) The Agent shall be entitled to act, and shall be fully protected in acting upon, any
communication in whatever form believed by the Agent in good faith to be genuine and



54









 






correct and to have been signed or sent or made by a proper person or persons or entity. The Agent
may consult counsel and shall be entitled to act, and shall be fully protected in-any
action taken in good faith, in accordance with advice given by counsel. The Agent may
employ agents and attorneys-in-fact and shall not be liable for the default or misconduct of
any such agents or attorneys-in-fact selected by the Agent with reasonable care. The Agent
shall not be bound to ascertain or inquire as to the performance or
observance of any of the terms, provisions or conditions of this Agreement or the Notes on
the Borrower’s part.



     Section 11.4 Action on Instructions. The Agent shall be entitled to act or refrain
from acting, and in all cases shall be fully protected in acting or refraining from acting under
this Agreement or the Notes or any other instrument or document in connection herewith or therewith
in accordance with instructions in writing from (i) the Required Banks except for instructions
which under the express provisions hereof must be received by the Agent from all the Banks, and
(ii) in the case of such instructions, from all the Banks.



     Section 11.5 Indemnification. To the extent the Borrower does not reimburse and save
the Agent harmless according to the terms hereof for and from all costs, expenses and disbursements
in connection herewith or with the other Loan Documents, such costs, expenses and disbursements to
the extent reasonable shall be borne by the Banks ratably in accordance with their Percentages and
the Banks hereby agree on such basis (a) to reimburse the Agent for all such reasonable costs,
expenses and disbursements on request and (b) to indemnify and save harmless the Agent against and
from any and all losses, obligations, penalties, actions, judgments and suits and other reasonable
costs, expenses and disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against the Agent, other than as a consequence of actual gross negligence,
bad faith or willful misconduct on the part of the Agent, arising out of or in connection with this
Agreement or the Notes or any instrument or document in connection herewith or therewith, or any
request of the Banks, including without limitation the reasonable and documented costs, expenses
and disbursements in connection with defending itself against any claim or liability, or answering
any subpoena, related to the exercise or performance of any of its powers or duties under this
Agreement or the other Loan Documents or the taking of any action under or in connection with this
Agreement or the Notes.



     Section 11.6 U.S. Bank National Association and Affiliates. With respect to U.S. Bank
National Association’s Commitment and any Loans by U.S. Bank National Association under this
Agreement and any Note and any interest of U.S. Bank National Association in any Note, U.S. Bank
National Association shall have the same rights, powers and duties under this Agreement and such
Note as any other Bank and may exercise the same as though it were not the Agent. U.S. Bank
National Association and its affiliates may accept deposits from, lend money to, and generally
engage, and continue to engage, in any kind of business with the Borrower as if U.S. Bank National
Association were not the Agent.



     Section 11.7 Notice to Holder of Notes. The Agent may deem and treat the payees of
the Notes as the owners thereof for all purposes unless a written notice of assignment, negotiation
or transfer thereof has been filed with the Agent. Any request, authority or consent of any holder
of any Note shall be conclusive and binding on any subsequent holder, transferee or assignee of
such Note.




55












 





     Section 11.8 Successor Agent. The Agent may resign at any time by giving at least 30
days written notice thereof to the Banks and the Borrower, with the effectiveness of such
resignation subject to the appointment and acceptance of a successor Agent. Upon any such
resignation, the Required Banks shall have the right to appoint a successor Agent (subject to the
Borrower’s approval, such approval not to be unreasonably withheld or delayed). If no successor
Agent shall have been appointed by the Required Banks and shall have accepted such appointment
within 30 days after the retiring Agent’s giving notice of resignation, then the retiring Agent
may, but shall not be required to, on behalf of the Banks, appoint a successor Agent with a
combined capital and surplus of at least $500,000,000 (or an affiliate of any such bank)..



     Section 11.9 Co-Documentation Agents and Lead Arranger. None of the Co-Documentation
Agents or Lead Arranger shall have any duties, responsibilities or liabilities in such capacities.



ARTICLE XII MISCELLANEOUS




     Section 12.1 No Waiver and Amendment. No failure on the part of the Banks or the
holder of the Notes to exercise and no delay in exercising any power or right hereunder or under
any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise
of any power or right preclude any other or further exercise thereof or the exercise of any other
power or right. The remedies herein and in any other instrument, document or agreement delivered
or to be delivered to the Banks hereunder or in connection herewith are cumulative and not
exclusive of any remedies provided by law. No notice to or demand on the Borrower not required
hereunder or under the Notes shall in any event entitle the Borrower to any other or further notice
or demand in similar or other circumstances or constitute a waiver of the right of the Banks or the
holder of the Notes to any other or further action in any circumstances without notice or demand.



     Section 12.2 Amendments, Etc. No amendment or waiver of any provision of this
Agreement, nor consent to any departure by the Borrower therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Borrower and the Agent upon direction of the
Required Banks (subject to Section 2.11 with respect to any Defaulting Bank) and then such waiver
or consent shall be effective only in the specific instance and for the specific purpose for which
given; provided that Agent may, with the consent of Borrower only, amend, modify or
supplement this Agreement to cure any ambiguity, omission, defect or inconsistency, so long as such
amendment, modification or supplement does not materially and adversely affect the rights of any
Bank; provided further, however, that no amendment, waiver or consent
shall, unless agreed to by the Agent and each of the Banks directly affected thereby (subject to
Section 2.11 with respect to any Defaulting Bank):




(a) increase the amounts of or extend the terms of the Commitments of such Bank (it being
understood that a waiver or modification of any condition precedent, covenant, Default,
Event of Default, mandatory prepayment or mandatory reduction of the Commitments shall not
constitute an extension or increase of any Commitment of any Bank);



56









 






(b) decrease or forgive the principal of, or decrease the rate of interest on, the Notes of
such Bank, or decrease any fees or other amounts payable hereunder to such Bank;




(c) postpone any date fixed for any payment of principal of, or interest on, the Notes of
such Bank, or any fees or other amounts payable hereunder to such Bank;




(d) release all or substantially all of the Material Subsidiaries from the Material
Subsidiary Guaranty (except pursuant to a transaction or series of transactions permitted by
Section 8.12, 9.1 or 9.2) or release all or substantially all of the
collateral held subject to Section 10.3, except as contemplated by such Section; or




(e) reduce the percentage in the definition of Required Banks or amend this
Section 12.2.


provided, further that amendments, waivers or consents adversely affecting the
rights of the Agent shall also require the consent of the Agent. Notwithstanding the foregoing
provisions of this Section 12.2, with the agreement and consents of the Persons referred to
therein, and without the necessity of obtaining the approval of any other Banks hereunder, (i)
amendments may be entered into as provided in Section 2.9 and (ii) Extension Amendments may
be entered into pursuant to Section 2.14.




     Section 12.3 Assignments and Participations.




(a) Assignments. Each Bank shall have the right, subject to the further provisions
of this Sections 12.3, to sell or assign all or any part of its Commitments, Loans,
Notes, and other rights and obligations under this Agreement and related documents (such
transfer, an “Assignment”) to any commercial lender, other financial institution or
other entity other than the Borrower or one of its Subsidiaries or affiliates (an
“Assignee”). Upon such Assignment becoming effective as provided in
Section 12.3(b), the assigning Bank shall be relieved from the portion of its
Commitment, obligations to indemnify the Agent and other obligations hereunder to the extent
assumed and undertaken by the Assignee, and to such extent the Assignee shall have the
rights and obligations of a “Bank” hereunder. Notwithstanding the foregoing, unless
otherwise consented to by the Borrower and the Agent, each Assignment shall be in the
initial principal amount of not less than $10,000,000 in the aggregate for all Loans and
Commitments assigned, or an integral multiple of $1,000,000 if above such amount. Each
Assignment shall be documented by an agreement between the assigning Bank and the Assignee
(an “Assignment and Assumption Agreement”) substantially in the form of
Exhibit E attached hereto.




(b) Effectiveness of Assignments. An Assignment shall become effective hereunder
when all of the following shall have occurred: (i) the Agent and the Borrower (or, following
occurrence and during continuance of an Event of Default, the Agent only and not the
Borrower) shall consent to such Assignment (which consent shall not be unreasonably
withheld), by either written notice of such consent or by executing and delivering such
Assignments, provided that no such consents shall be required for an assignment to one of
the Banks or an affiliate of a Bank or an Approved Fund, (ii) either the assigning Bank or
the Assignee shall have paid a processing fee of $3,500 to the



57









 







Agent for its own account (unless waived by the Agent), (iii) the Assignee shall have
submitted the Assignment and Assumption Agreement to the Agent with a copy for the Borrower,
and shall have provided to the Agent information the Agent shall have reasonably requested
to make payments to the Assignee, (iv) the assigning Bank and the Agent shall have agreed
upon a date upon which the Assignment shall become effective, and (v) the Agent shall have
recorded such Assignment in the Register; provided that assignments pursuant to Section
2.12 shall not require the signature or agreement of the assigning Bank to become
effective, and any processing fee in connection with such assignments may be paid by the
Borrower. Upon the Assignment becoming effective, (x) if requested by the assigning Bank,
the Agent and the Borrower shall make appropriate arrangements so that new Notes are issued
to the assigning Bank and the Assignee; and (y) the Agent shall forward all payments of
interest, principal, fees and other amounts that would have been made to the assigning Bank,
in proportion to the percentage of the assigning Bank’s rights transferred, to the Assignee.
Any assignment or transfer by a Bank of rights or obligations under this Agreement that
does not comply with clauses 12.3(a) and (b) shall be treated for purposes of this Agreement
as a sale by such Bank of a participation in such rights and obligations in accordance with
Section 12.3(c).




(c) Participations. Each Bank shall have the right, subject to the further
provisions of this Section 12.3, to grant or sell a participation in all or any part
of its Loans, Notes and Commitments (a “Participation”) to any commercial lender,
other financial institution or other entity (a “Participant”) without the consent of
the Borrower, the Agent of any other party hereto. The Borrower agrees that if amounts
outstanding under this agreement and the Notes are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence and during the continuance
of an Event of Default, each Participant shall be deemed to have the right of setoff in
respect of its Participation in amounts owing under this Agreement and any Note to the same
extent as if the amount of its Participation were owing directly to it as a Bank under this
agreement or any note; provided, that such right of setoff shall be subject to the
obligation of such Participant to share with the Banks, and the Banks agree to share with
such Participant, as provided in Section 4.5. The Borrower also agrees that each
Participant shall be entitled to the benefits of Article V with respect to its
Participation, provided, that no Participant shall be entitled to receive any greater amount
pursuant to such Sections than the transferor Bank would have been entitled to receive in
respect of the amount of the Participation transferred by such transferor Bank to such
Participant had no such transfer occurred.




(d) Limitation of Rights of any Assignee or Participant. Notwithstanding anything
in the foregoing to the contrary, except in the instance of an Assignment that has become
effective as provided in Section 12.3(b), (i) no Assignee or Participant shall have
any direct rights hereunder, (ii) the Borrower, the Agent and the Banks other than the
assigning or selling Bank shall deal solely with the assigning or selling Bank and shall not
be obligated to extend any rights or make any payment to, or seek any consent of, the
Assignee or Participant, (iii) no Assignment or Participation shall relieve the assigning or
selling Bank from its Commitment to make Loans hereunder or any of its other obligations
hereunder and such Bank shall remain solely responsible for the performance hereof, the
(iv) no Assignee or Participant, other than an affiliate of the assigning or



58









 







selling Bank, shall be entitled to require such Bank to take or omit to take any action
hereunder, except that such Bank may agree with such Assignee or Participant that such Bank
will not, without such Assignee’s or Participant’s consent, take any action which would, in
the case of any principal, interest or fee in which the Assignee or Participant has an
ownership or beneficial interest: (x) extend the final maturity of any Loans or extend the
Termination Date, (y) reduce the interest rate on the Loans or the rate of the Commitment
Fees, or (z) forgive any principal of, or interest on, the Loans or any fees.




(e) Tax Matters. No Bank shall be permitted to enter into any Assignment or
Participation with any Assignee or Participant who (i) is not a United States Person or
(ii) is a United States Person that the Borrower may not treat as an “exempt recipient”
within the meaning of Treasury Regulations Section 1.6049-4(c) based on the indicators set
forth therein, unless such Assignee or Participant represents and warrants to such Bank, the
Agent and the Borrower that, as at the date of such Assignment or Participation, it is
entitled to receive interest payments without withholding or deduction of any taxes and such
Assignee or Participant executes and delivers to such Bank on or before the date of
execution and delivery of documentation of such Participation or Assignment, a United States
Internal Revenue Service Form W8BEN, W8ECI, W-8 IMY and/or W-9 or any successor to either of
such forms, as appropriate, properly completed an claiming complete exemption from
withholding and deduction of all Federal Income Taxes. A “United States Person” means any
citizen, national or resident of the United States, any corporation or other entity created
or organized in or under the laws of the United States or any political subdivision hereof
or any estate or trust, in each case that is not subject to withholding of United States
Federal income taxes or other taxes on payment of interest, principal of fees hereunder.




(f) Information. Each Bank may furnish any information concerning the Borrower in
the possession of such Bank from time to time to Assignees and Participants and potential
Assignees and Participants, so long as such entities agree in writing to keep such
information confidential in accordance with Section 12.17.




(g) Federal Reserve Bank. Nothing herein stated shall limit the right of any Bank
to assign a security interest in all or any portion of its rights herein and in any Note to
a Federal Reserve Bank; provided that no such assignment of a security interest shall
release a Bank from any of its obligations hereunder or substitute any such assignee for
such Bank as a party hereto.



     Section 12.4 Costs, Expenses and Taxes; Indemnification.




(a) The Borrower agrees, whether or not any Advance is made hereunder, to pay promptly on
written demand: (i) all reasonable and documented out-of-pocket costs and expenses of the
Agent (including the reasonable fees and expenses of one counsel to the Agent and Banks
taken as a whole) incurred in connection with the preparation, execution and delivery of the
Loan Documents and the preparation, negotiation and execution of any and all amendments to
each thereof, and (ii) all reasonable and documented out-of-pocket costs and expenses of the
Agent and each of the Banks incurred after the occurrence and during the continuance of an
Event of Default in



59









 







connection with the enforcement of the Loan Documents. The Borrower agrees to pay, and save
the Banks harmless from all liability for, any stamp or other taxes which may be payable
with respect to the execution or delivery of the Loan Documents. The Borrower agrees to
indemnify and hold the Banks harmless from any loss or expense which may arise or be created
by the acceptance in good faith by the Agent of telephonic or other instructions for making
Advances or disbursing the proceeds thereof, except to the extent resulting from the gross
negligence or willful misconduct.




(b) The Borrower agrees to defend, protect, indemnify, and hold harmless the Agent and each
and all of the Banks, each of their respective affiliates and each of the respective
officers, directors, employees and agents of each of the foregoing (each an “Indemnified
Person” and, collectively, the “Indemnified Persons”) from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including, without
limitation, the reasonable fees and disbursements of counsel to such Indemnified Persons in
connection with any investigative, administrative or judicial proceeding, whether direct,
indirect or consequential and whether based on any federal or state laws or other statutory
regulations, including, without limitation, securities and commercial laws and regulations,
under common law or at equitable cause, or on contract or otherwise, arising out of or in
connection with the Commitments, the making of, management of and participation in the
Advances or the use or intended use of the proceeds of the Advances, provided that the
Borrower shall have no obligation under this Section 13.4(b) to an Indemnified
Person with respect to any of the foregoing to the extent resulting from the gross
negligence, bad faith or willful misconduct of such Indemnified Person or arising solely
from claims between one such Indemnified Person and another such Indemnified Person. The
indemnity set forth herein shall be in addition to any other obligations or liabilities of
the Borrower to each Indemnified Person under the Loan Documents or at common law or
otherwise. To the extent permitted by applicable law, any Person seeking to be indemnified
under this Section 12.4(b) shall, upon obtaining knowledge thereof, use commercially
reasonable efforts to give prompt written notice to the Borrower of the commencement of any
action or proceeding giving rise to such indemnification claim, provided that the failure to
give such notice shall not relieve the Borrower of any indemnification obligations
hereunder.




(c) The obligations of the Borrower under this Section 12.4 shall survive any
termination of this Agreement.



     Section 12.5 Notices.




(a) Except when telephonic or electronic notice is expressly authorized by this Agreement,
any notice or other communication to any party in connection with this Agreement shall be in
writing and shall be sent by manual delivery, facsimile transmission, overnight courier or
United States mail (postage prepaid) addressed to such party at the address specified on the
signature page hereof, or at such other address as such party shall have specified to the
other party hereto in writing. All periods of notice shall be measured from the date of
delivery thereof if manually delivered, from the date of sending thereof if sent by
facsimile transmission, from the first Business Day after the



60









 







date of sending if sent by overnight courier, or from four days after the date of mailing if
mailed; provided, however, that any notice to the Agent under
Article II shall be deemed to have been given only when received by the Agent.




(b) Financial statements, reports and letters under Section 8.1(a), (b), (c), (f), (g) and
(h) other ordinary course requests or communications by the Borrower to the Agent may be
sent by the Borrower to the Agent by e-mail, and may be distributed by the Agent to the Bank
by similar means or by posting to DebtX, or other coded commercial service selected for such
purpose by the Agent.



     Section 12.6 Successors. This Agreement shall be binding upon the Borrower, the Banks
and the Agent and their respective successors and permitted assigns, and shall inure to the benefit
of the Borrower, the Banks and the Agent and their respective successors and permitted assigns.
The Borrower shall not assign its rights or duties hereunder without the written consent of the
Banks.



     Section 12.7 Severability. Any provision of the Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other jurisdiction.



     Section 12.8 Subsidiary References. The provisions of this Agreement relating to
Subsidiaries shall apply only during such times as the Borrower has one or more Subsidiaries.



     Section 12.9 Captions. The captions or headings herein and any table of contents
hereto are for convenience only and in no way define, limit or describe the scope or intent of any
provision of this Agreement.



     Section 12.10 Entire Agreement. The Loan Documents embody the entire agreement and
understanding between the Borrower, the Banks and the Agent with respect to the subject matter
hereof and thereof. This Agreement supersedes all prior agreements and understandings relating to
the subject matter hereof.



     Section 12.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same instrument, and either
of the parties hereto may execute this Agreement by signing any such counterpart. Delivery of an
executed counterpart to this Agreement by facsimile transmission or in PDF or other electronic
format shall be as effective as delivery of a manually signed original.



     Section 12.12 Governing Law. THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS
AGREEMENT AND THE NOTES SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT
GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE
UNITED STATES APPLICABLE TO NATIONAL BANKS.



     Section 12.13 Consent to Jurisdiction. THIS AGREEMENT AND THE NOTES MAY BE ENFORCED
IN ANY FEDERAL COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA; AND EACH PARTY HERETO CONSENTS
TO THE JURISDICTION AND



61









 




VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT.
IN THE EVENT ANY PARTY HERETO COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT
OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT,
ANY OTHER PARTY TO SUCH ACTION AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE
OF THE JURISDICTIONS AND VENUES ABOVE DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER
APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.




     Section 12.14 Waiver of Jury Trial. THE BORROWER, THE BANKS AND THE AGENT EACH WAIVE
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (a) UNDER
THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN
THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR (b) ARISING FROM ANY BANKING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.



     Section 12.15 Customer Identification — USA PATRIOT Act Notice. Each Bank (for itself
and not on behalf of any other party) hereby notifies the Borrower that, pursuant to the
requirements of the USA PATRIOT Act, Title III of Pub. L. 107-56, signed into law October 26, 2001
(the “Act”), it is required to obtain, verify and record information that identifies the
Borrower, which information includes the name and address of the Borrower and other information
that will allow such Bank, as applicable, to identify the Borrower in accordance with the Act.



     Section 12.16 OFAC and Asset Control Regulations. The Borrower shall (a) ensure, and
cause each Subsidiary to ensure, that no Person who owns a controlling interest in or otherwise
controls the Borrower or any Subsidiary is or shall be listed on the Specially Designated Nationals
and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control
(“OFAC”), the Department of the Treasury, or included in any Executive Orders, and (b) not
use or permit the use of the proceeds of the Loans to violate any of the foreign asset control
regulations of OFAC or any enabling statute or Executive Order relating thereto.



     Section 12.17 Confidentiality. Each of the Banks and the Agent agrees that it shall
maintain in confidence any information relating to the Borrower and its Subsidiaries and their
respective businesses furnished to it by or on behalf of the Borrower or any of its Subsidiaries
and shall not reveal the same except: (a) to its and its affiliates’ directors, officers, employees
and agents, including accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential nature of such
information and instructed to keep such information confidential), (b) to the extent requested by
any regulatory authority (including any self-regulatory authority, such as the National Association
of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any
subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with
the exercise of any remedies under this Agreement or any other Loan Document or any suit, action or
proceeding relating to this Agreement or any other Loan



62









 




Document or the enforcement of rights hereunder or thereunder, (f) subject to a written
agreement containing provisions substantially the same as those of this Section, to (i) any
assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights
or obligations under this Agreement or (ii) any actual or prospective counterparty (or its
advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g)
with the consent of the Borrower and (h) to the extent such information (i) becomes publicly
available other than as a result of a breach of this Section 12.17 or (ii) becomes available to the
Agent or any Bank on a nonconfidential basis from a source other than the Borrower.




(signature pages follow)









63









 








     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the
date first above.



	 	 	 	 	 
	 	OTTER TAIL CORPORATION

 	 
	 	By:  	/s/ Kevin Moug
 	 
	 	 	Title:  Chief Financial Officer 	 



	 	 	 

	 

	 	4334 18th Avenue South
	 

	 	Suite 200
	 

	 	Fargo, North Dakota 58103
	 

	 	Attention: Mr. Kevin G. Moug
	 

	 	                    Chief Financial Officer
	 

	 	Telephone: (701) 451-3562
	 

	 	Fax: (701) 232-4108






(signature page to Second Amended and Restated Credit Agreement)




 









 








	 	 	 	 	 
	 	U.S. BANK NATIONAL ASSOCIATION,

as Agent, Lead Arranger and a Bank

 	 
	 	By:  	/s/ Delton Steele
 	 
	 	 	Title:  Vice President/Senior Lender 	 



	 	 	 

	 

	 	505 Second Avenue North
	 

	 	Mail Code EP-ND-0630
	 

	 	Fargo, ND 58102
	 

	 	Attention: Mr. Delton Steele
	 

	 	                    Vice President
	 

	 	Telephone: (701) 280-3553
	 

	 	Fax: (701) 280-3580






(signature page to Second Amended and Restated Credit Agreement)




 









 








	 	 	 	 	 
	 	BANK OF AMERICA, N.A., as Co-Syndication

Agent and as a Bank

 	 
	 	By:  	/s/ A. Quinn Richardson
 	 
	 	 	Title:  Senior Vice President 	 



	 	 	 

	 

	 	IL4-135-07-65
	 

	 	135 S. LaSalle Street
	 

	 	Chicago, IL 60603
	 

	 	Attention: A. Quinn Richardson
	 

	 	                    Senior Vice President
	 

	 	Telephone: (312) 992-2160
	 

	 	Fax: (312) 904-6546






(signature page to Second Amended and Restated Credit Agreement)





 









 








	 	 	 	 	 
	 	JPMORGAN CHASE BANK, N.A., as Co-
Syndication Agent
and as a Bank

 	 
	 	By:  	/s/ Helen D. Davis
 	 
	 	 	Title:  Vice President 	 



	 	 	 

	 

	 	10 South Dearborn, 9th Floor, IL1-0090
	 

	 	Chicago, IL 60603
	 

	 	Attention: Helen Davis
	 

	 	Telephone: (312) 732-1759
	 

	 	Fax: (312) 732-1762






(signature page to Second Amended and Restated Credit Agreement)





 









 








	 	 	 	 	 
	 	KEYBANK NATIONAL ASSOCIATION, as 
Documentation Agent
and as a Bank

 	 
	 	By:  	/s/ Keven D. Smith
 	 
	 	 	Title:  Senior Vice President 	 



	 	 	 

	 

	 	601 108TH Avenue N.E.
	 

	 	Mail Code: WA-31-18-0512
	 

	 	Bellevue, WA 98004
	 

	 	Attention: Keven D. Smith
	 

	 	Telephone: (425) 709-4579
	 

	 	Fax: (425) 709-4565






(signature page to Second Amended and Restated Credit Agreement)





 









 








	 	 	 	 	 
	 	BANK OF THE WEST, as a Bank

 	 
	 	By:  	/s/ Philip P. Krump
 	 
	 	 	Title:  Vice President 	 



	 	 	 

	 

	 	250 Marquette Ave., Suite 575
	 

	 	Minneapolis, MN 55401
	 

	 	Attention: Philip P. Krump
	 

	 	Telephone: (612) 359-3600
	 

	 	Fax: (612) 339-6362






(signature page to Second Amended and Restated Credit Agreement)




 









 








	 	 	 	 	 
	 	STATE BANK OF INDIA, as a Bank

 	 
	 	By:  	/s/ Prabodh Parikh
 	 
	 	 	Title:  Vice President & Head (Credit) 	 



	 	 	 

	 

	 	460, Park Avenue, New York, NY 10022
	 
	 

	 	Attention:
	 

	 	Telephone: 212-521-3262
	 

	 	Fax: 212-521-3362






(signature page to Second Amended and Restated Credit Agreement)





 









 








	 	 	 	 	 
	 	MEGA INTERNATIONAL COMMERCIAL 
BANK CO., LTD., SILICON
VALLEY BRANCH, 
as a Bank
 	 
	 
	 	By:  	/s/ Kuang Hau Wei
 	 
	 	 	Title:  SVP & General Manager 	 



	 	 	 

	 

	 	Attention:
	 

	 	Telephone: (408) 283-1888
	 

	 	Fax: (408) 283-1679






(signature page to Second Amended and Restated Credit Agreement)





 









 








	 	 	 	 	 
	 	CHANG HWA COMMERCIAL BANK, LTD., 
NEW YORK BRANCH, as
a Bank

 	 
	 	By:  	/s/ Eric Tsai
 	 
	 	 	Title:  V.P. & General Manager 	 



	 	 	 

	 

	 	Attention: Eric Tsai
	 

	 	Telephone: 212-651-9777






(signature page to Second Amended and Restated Credit Agreement)











 









 








EXHIBITS




	 	 	 
	Exhibit	 	Contents
	A-1

	 	Revolving Note
	 
	 	 
	A-2

	 	Swing Line Note
	 
	 	 
	B

	 	Compliance Certificate
	 
	 	 
	C

	 	Material Subsidiary Guaranty
	 
	 	 
	D

	 	Form of Legal Opinion
	 
	 	 
	E

	 	Assignment and Assumption






	 	 	 
	Schedules	 	 
	1.1(a)

	 	Commitments and Percentages
	 
	 	 
	1.1(b)

	 	Material Subsidiaries
	 
	 	 
	7.6

	 	Litigation (Section 7.6)
	 

	 	Contingent Liabilities (Section 7.6)
	 
	 	 
	7.11

	 	Existing Liens (Sections 7.11 and 9.8)
	 
	 	 
	7.15

	 	Subsidiaries (Section 7.15)
	 
	 	 
	7.16

	 	Partnerships/Joint Ventures (Section 7.16)
	 
	 	 
	9.4

	 	Exceptions to Ownership of Material Subsidiaries (Section 9.4)
	 
	 	 
	9.7

	 	Investments (Section 9.7)
	 
	 	 
	9.10

	 	Certain Transactions with Related Parties (Section 9.10)






 









 






EXHIBIT A-1




PROMISSORY NOTE




			
	$[Commitment]
	 	Minneapolis, Minnesota: [___], 2010






     FOR VALUE RECEIVED, the undersigned OTTER TAIL CORPORATION, a Minnesota corporation (the
“Borrower”), promises to pay to the order of [BANK] (the “Bank”), on the Termination Date, or other
due date or dates determined under the Second Amended and Restated Credit Agreement hereinafter
referred to, the principal sum of  DOLLARS ($[Commitment]), or if
less, the then aggregate unpaid principal amount of the Revolving Loans (as such terms are defined
in the Second Amended and Restated Credit Agreement) as may be borrowed by the Borrower from the
Bank under the Second Amended and Restated Credit Agreement. All Revolving Loans and all payments
of principal shall be recorded by the holder in its records which records shall be conclusive
evidence of the subject matter thereof, absent manifest error.



     The Borrower further promises to pay to the order of the Bank interest on the aggregate unpaid
principal amount hereof from time to time outstanding from the date hereof until paid in full at
the rates per annum which shall be determined in accordance with the provisions of the Second
Amended and Restated Credit Agreement. Accrued interest shall be payable on the dates specified in
the Second Amended and Restated Credit Agreement.



     All payments of principal and interest under this Note shall be made in lawful money of the
United States of America in immediately available funds at the office of U.S. Bank National
Association, at 800 Nicollet Mall, Minneapolis, Minnesota 55402, or at such other place as may be
designated by the Agent to the Borrower in writing.



     This Note is the Note referred to in, and evidences indebtedness incurred under, a Second
Amended and Restated Credit Agreement dated as of May 4, 2010 (herein, as it may be amended,
modified or supplemented from time to time, called the “Second Amended and Restated Credit
Agreement”) among the Borrower, the Banks, as defined therein (including the Bank) and U.S. Bank
National Association, as Agent, to which Second Amended and Restated Credit Agreement reference is
made for a statement of the terms and provisions thereof, including those under which the Borrower
is permitted and required to make prepayments and repayments of principal of such indebtedness and
under which such indebtedness may be declared to be immediately due and payable.



     All parties hereto, whether as makers, endorsers or otherwise, severally waive presentment,
demand, protest and notice of dishonor in connection with this Note.



     This Note is made under and governed by the internal laws of the State of Minnesota.



	 	 	 	 	 
	 	OTTER TAIL CORPORATION

 
	 	By:  	 	 
	 
	 	Title: 
	 
	 	 	 	 



 









 






	 	 	 	 	 



EXHIBIT A-2




PROMISSORY NOTE




			
	$20,000,000
	 	Minneapolis, Minnesota: [___], 2010






     FOR VALUE RECEIVED, the undersigned OTTER TAIL CORPORATION, a Minnesota corporation (the
“Borrower”), promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION (the “Bank”), on the
Termination Date, or other due date or dates determined under the Second Amended and Restated
Credit Agreement hereinafter referred to, the principal sum of TWENTY MILLION DOLLARS
($20,000,000), or if less, the then aggregate unpaid principal amount of the Swing Line Loans (as
such terms are defined in the Second Amended and Restated Credit Agreement) as may be borrowed by
the Borrower from the Bank under the Second Amended and Restated Credit Agreement. All Swing Line
Loans and all payments of principal shall be recorded by the holder in its records which records
shall be conclusive evidence of the subject matter thereof, absent manifest error.



     The Borrower further promises to pay to the order of the Bank interest on the aggregate unpaid
principal amount hereof from time to time outstanding from the date hereof until paid in full at
the rates per annum which shall be determined in accordance with the provisions of the Second
Amended and Restated Credit Agreement. Accrued interest shall be payable on the dates specified in
the Second Amended and Restated Credit Agreement.



     All payments of principal and interest under this Note shall be made in lawful money of the
United States of America in immediately available funds at the office of U.S. Bank National
Association, at 800 Nicollet Mall, Minneapolis, Minnesota 55402, or at such other place as may be
designated by the Agent to the Borrower in writing.



     This Note is the Note referred to in, and evidences indebtedness incurred under, a Second
Amended and Restated Credit Agreement dated as of May 4, 2010 (herein, as it may be amended,
modified or supplemented from time to time, called the “Second Amended and Restated Credit
Agreement”) among the Borrower, the Banks, as defined therein (including the Bank) and U.S. Bank
National Association, as Agent, to which Second Amended and Restated Credit Agreement reference is
made for a statement of the terms and provisions thereof, including those under which the Borrower
is permitted and required to make prepayments and repayments of principal of such indebtedness and
under which such indebtedness may be declared to be immediately due and payable.



     All parties hereto, whether as makers, endorsers or otherwise, severally waive presentment,
demand, protest and notice of dishonor in connection with this Note.



     This Note is made under and governed by the internal laws of the State of Minnesota.



	 	 	 	 	 
	 	OTTER TAIL CORPORATION

 	 
	 	By:  	 	 
	 
	 	Title: 
	 
	 	 	 	 



 









 






	 	 	 	 	 



EXHIBIT B




Compliance Certificate



____________, 20_____




U.S. Bank National Association

505 Second Avenue North

EP-ND-0630

Fargo, ND 58102

Attention: Delton Steele

Vice President



Ladies/Gentlemen:





     Reference is made to that certain Second Amended and Restated Credit Agreement, dated as of
May 4, 2010 (as amended from time to time, the “Second Amended and Restated Credit Agreement”),
among OTTER TAIL CORPORATION (the “Borrower”), the Banks named therein and U.S. BANK NATIONAL
ASSOCIATION, as Agent (the “Agent”). Terms not otherwise expressly defined herein shall have the
meanings set forth in the Second Amended and Restated Credit Agreement.



     As required pursuant to Section 8.1(c) of the Second Amended and Restated Credit Agreement,
the Borrower hereby certifies that as of _________, 20___, the following is true, correct and
accurate in all respects:



     1. The consolidated financial statements submitted herewith or as most recently filed with
the Securities Exchange Commission are fairly presented in all material respects.



     2. No Default and no Event of Default, has occurred and is continuing.



     3. Covenant compliance is demonstrated as follows (include 9.14 or 9.15 as applicable):


Section 9.12 Financial Covenants.




     (a) Interest-bearing Debt to Total Capitalization.



	 	 	 	 	 

	 

	 	Interest-bearing Debt:
	 	$_________
	 

	 	to:	 	 
	 
	 	 	 	 
	 

	 	Total Capitalization:
	 	$_________
	 
	 	 	 	 
	 

	 	(Required: not greater than 0.60 to 1.00).







     (b) Interest and Dividend Coverage Ratio. For the four-quarter period ending on the
date of the enclosed consolidated financial statements:



	 	 	 	 	 

	 

	 	EBIT:
	 	$_________






 









 






	 	 	 	 	 

	 

	 	to:	 	 
	 
	 	 	 	 
	 

	 	sum of	 	 
	 

	 	Interest Expense:
	 	$_________
	 

	 	Dividends on Preferred Stock:
	 	$_________
	 

	 	$_________	 	 
	 
	 	 	 	 
	 

	 	Ratio: ______ to 1.00	 	 
	 
	 	 	 	 
	 

	 	(Required: not less than 1.50 to 1.00).






     4. For purposes of calculating the Applicable Commitment Fee Rate and Applicable Margin, the
Long Term Debt Ratings of the Borrower are as follows:



	 	 	 

	S&P
	 	____________
	 
	 	 
	Moody’s
	 	____________
	 
	 	 
	Fitch
	 	____________






	 	 	 	 	 
	 	OTTER TAIL CORPORATION

 	 
	 	By:  	 	 
	 
	 	Title: 

	 	 	 	[chief financial officer or other senior financial
officer] 	 



 









 






	 	 	 	 	 



EXHIBIT C




GUARANTY

(Joint and Several)





     FOR VALUE RECEIVED and in consideration of entry by the Banks (as defined in the Second
Amended and Restated Credit Agreement) and U.S. BANK NATIONAL ASSOCIATION, as agent for the Banks
(in such capacity, together with it successors and assigns, called the “Agent”) into that certain
Second Amended and Restated Credit Agreement, dated as of May 4, 2010 (as thereafter amended,
modified, extended, renewed, restated or replaced from time to time called the “Second Amended and
Restated Credit Agreement”) among the Banks, the Agent and OTTER TAIL CORPORATION, a Minnesota
corporation (hereinafter called the “Debtor”), the undersigned corporations (the “Guarantors”)
hereby JOINTLY AND SEVERALLY unconditionally guarantee the full and prompt payment when due,
whether by acceleration or otherwise, and at all times thereafter, of all obligations of the Debtor
to the Banks or the Agent under the Second Amended and Restated Credit Agreement, each Note issued
thereunder, and each other Loan Document (as defined therein), including without limitation all
future advances, and all obligations to reimburse the Agent for drawings under all Letters of
Credit, and all of such obligations that arise after the filing of a petition by or against the
Debtor under the Bankruptcy Code, even if the obligations do not accrue because of the automatic
stay under Bankruptcy Code Section 362 or otherwise (all such obligations being hereinafter
collectively called the “Liabilities”), and the Guarantors further jointly and severally agree to
pay all expenses (including attorneys’ fees and legal expenses) paid or incurred by the Banks or
Agent in endeavoring to collect the Liabilities, or any part thereof, and in enforcing this
guaranty.



     The Guarantors agree that, in the event of the dissolution or insolvency of the Debtor or any
Guarantor, or the inability of the Debtor or any Guarantor to pay debts as they mature, or an
assignment by the Debtor or any Guarantor for the benefit of creditors, or the institution of any
proceeding by or against the Debtor or the Guarantor alleging that the Debtor or any Guarantor is
insolvent or unable to pay debts as they mature, and if such event shall occur at a time when any
of the Liabilities may not then be due and payable, the Guarantors will pay to the Agent forthwith
the full amount which would be payable hereunder by the Guarantors if all Liabilities were then due
and payable.



     In addition to, and without limitation of, any rights of the Agent and the Banks under
applicable law, if any Event of Default occurs and is continuing under the Second Amended and
Restated Credit Agreement, upon written direction by the Agent to such effect any and all deposits
(including all account balances, whether provisional or final and whether or not collected or
available) and any other Indebtedness (as defined in the Second Amended and Restated Credit
Agreement) at any time held or owing by the Agent or any Bank to or for the credit or account of
any Guarantor may be offset and applied toward the payment of the Liabilities and all obligations
of the Guarantors hereunder, whether or not the Liabilities and all obligations of the Guarantors
hereunder, or any part thereof, shall then be due.



     This guaranty shall in all respects be a continuing, absolute and unconditional guaranty, and
shall remain in full force and effect (notwithstanding, without limitation, the dissolution of



 









 




any Guarantor or that at any time or from time to time all Liabilities may have been paid in
full). This guaranty is a guaranty of payment and performance and not merely a guaranty of
collection.




     The Guarantors further agree that, if at any time all or any part of any payment theretofore
applied by the Agent or the Banks to any of the Liabilities is or must be rescinded or returned by
the Agent or the Banks for any reason whatsoever (including, without limitation, the insolvency,
bankruptcy or reorganization of the Debtor), such Liabilities shall, for the purposes of this
guaranty, to the extent that such payment is or must be rescinded or returned, be deemed to have
continued in existence, notwithstanding such application by the Agent or the Banks, and this
guaranty shall continue to be effective or be reinstated, as the case may be, as to such
Liabilities, all as though such application by the Agent or the Banks had not been made.



     The Agent and the Banks may, from time to time, at their sole discretion and without notice to
any Guarantor, take any or all of the following actions: (a) be granted a security interest in any
property to secure any of the Liabilities or the Guaranty Obligations, (b) retain or obtain the
primary or secondary obligation of any obligor or obligors, in addition to the Guarantors, with
respect to any of the Liabilities, (c) extend or renew for one or more periods (whether or not
longer than the original period), alter or exchange any of the Liabilities, or release or
compromise any obligation of any nature of any other obligor with respect to any of the
Liabilities, (d) release its security interest in, or surrender, release or permit any substitution
or exchange for, all or any part of any property securing any of the Liabilities or any obligation
hereunder, or extend or renew for one or more periods (whether or not longer than the original
period) or release, compromise, alter or exchange any obligations of any nature of any obligor with
respect to any such property, and (e) resort to any Guarantor for payment of any of the
Liabilities, whether or not the Agent and the Banks (i) shall have resorted to any property
securing any of the Liabilities or (ii) shall have proceeded against any other obligor primarily or
secondarily obligated with respect to any of the Liabilities including without limitation any other
Guarantor (all of the actions referred to in preceding clauses (i) and (ii) being hereby expressly
waived by each Guarantor).



     Any amounts received by the Agent and the Banks from whatsoever source on account of the
Liabilities may be applied by it toward the payment of such of the Liabilities, and in such order
of application, as the Agent may from time to time elect.



     Until such time as this guaranty shall have been discontinued and the Agent and the Banks
shall have received payment of the full amount of all Liabilities and of all obligations of the
Guarantors hereunder, no payment made by or for the account of the Guarantors pursuant to this
guaranty shall entitle the Guarantors by subrogation or otherwise to any payment by the Debtor or
from or out of any property of the Debtor and the Guarantors shall not exercise any right or remedy
against the Debtor or any property of the Debtor by reason of any performance by the Guarantors of
this guaranty.



     The Guarantors hereby expressly waive: (a) notice of the acceptance by the Agent or the Banks
of this guaranty, (b) notice of the existence or creation or non-payment of all or any of the
Liabilities, (c) presentment, demand, notice of dishonor, protest, and all other notices
whatsoever, and (d) all diligence in collection or protection of or realization upon the
Liabilities



 









 




or any part thereof, any obligation hereunder, or any security for, or guaranty of, any of the
foregoing.




     Each Bank may from time to time without notice to the Guarantors, assign or transfer its
Percentage (as defined in the Second Amended and Restated Credit Agreement) or any or all of the
Liabilities or any interest therein; and, notwithstanding any such assignment or transfer or any
subsequent assignment or transfer thereof, such Liabilities shall be and remain Liabilities for the
purposes of this guaranty, and each and every immediate and successive assignee or transferee of
any of the Liabilities or of any interest therein shall, to the extent of the interest of such
assignee or transferee in the Liabilities, be entitled to the benefits of this guaranty to the same
extent as if such assignee or transferee were such Bank.



     Unless the Agent shall otherwise consent in writing, the Agent shall have the sole right to
enforce this Guaranty, as Agent as provided in the Second Amended and Restated Credit Agreement,
for the benefit of the Agent and the Banks (including any transferee, as provided in the prior
paragraph).



     Each Guarantor hereby warrants to the Agent and the Banks that such Guarantor now has, and
will continue to have independent means of obtaining information concerning the affairs, financial
condition and business of the Debtor. Neither the Agent nor the Bank shall have any duty or
responsibility to provide the Guarantors with any credit or other information concerning the
affairs, financial condition or business of the Debtor which may come into the Agent’s or the
Bank’s possession.



     No delay on the part of the Agent or any Bank in the exercise of any right or remedy shall
operate as a waiver thereof, and no single or partial exercise by the Agent or any Bank of any
right or remedy shall preclude other or further exercise thereof or the exercise of any other right
or remedy; nor shall any modification or waiver of any of the provisions of this guaranty be
binding upon the Agent or any Bank except as expressly set forth in a writing duly signed and
delivered on behalf of the Agent and the Required Banks (as defined in the Second Amended and
Restated Credit Agreement). No action of the Agent or the Banks permitted hereunder shall in any
way affect or impair the rights of the Agent or the Banks and the obligations of the Guarantors
under this guaranty. For the purposes of this guaranty, Liabilities shall include all obligations
of the Debtor to the Agent or the Banks specified as Liabilities, notwithstanding any right or
power of the Debtor or anyone else to assert any claim or defense as to the invalidity or
unenforceability of any such obligation, and no such claim or defense shall affect or impair the
obligations of the Guarantors hereunder, and shall specifically include, without limitation, any
and all interest, fees or commissions included in the Liabilities and accruing or payable after the
commencement of any bankruptcy or insolvency proceedings, notwithstanding any provision or rule of
law which might restrict the rights of the Bank to collect such obligations from the Debtor. The
obligations of the Guarantors under this guaranty shall be absolute and unconditional irrespective
of any circumstance whatsoever which might constitute a legal or equitable discharge or defense of
any Guarantor. The Guarantors hereby acknowledge that there are no conditions to the effectiveness
of this guaranty.



     This guaranty shall be binding upon each Guarantor, and upon the successors and assigns of
each Guarantor.



 









 





     Wherever possible, each provision of this guaranty shall be interpreted in such a manner as to
be effective and valid under applicable law, but if any provision of this guaranty shall be
prohibited by or invalid under such law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision or the remaining
provisions of this guaranty.



     THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS GUARANTY SHALL BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES
THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS.



     THE AGENT AND THE BANKS (BY ACCEPTING THIS GUARANTY) AND THE GUARANTORS HEREBY EXPRESSLY WAIVE
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
GUARANTY OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.



     AT THE OPTION OF THE AGENT, THIS GUARANTY MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA
STATE COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA; AND THE GUARANTORS CONSENT TO THE
JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVE ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT
CONVENIENT. IN THE EVENT ANY GUARANTOR COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER
ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS
GUARANTY, THE AGENT, AT ITS OPTION, SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE
JURISDICTIONS AND VENUES ABOVE DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER
APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.



(signature page follows)







 









 








     SIGNED AND DELIVERED as of May 4, 2010.



	 	 	 	 	 
	 	Varistar Corporation

Aevenia, Inc.

BTD Manufacturing, Inc.

Miller Welding & Iron Works, Inc.

DMI Industries, Inc.

DMS Health Technologies, Inc.

DMS Imaging, Inc.

Foley Company

Idaho Pacific Holdings, Inc.

Idaho Pacific Corporation

Northern Pipe Products, Inc.

ShoreMaster, Inc.

Vinyltech Corporation

 	 
	 	By:  	 	 
	 
	 	Title: 
	 
	 	 	 	 
	 




 











 





EXHIBIT D




Opinion of Counsel



May 4, 2010



To: The Banks party to the Second

Amended and Restated Credit

Agreement described herein




U.S. Bank National Association

Bank of America, N.A.

JPMorgan Chase Bank, N.A.

KeyBank National Association

Wells Fargo Bank, National Association

Bank of the West

Union Bank of California, N.A.




Ladies and Gentlemen:




     I have acted as counsel to Otter Tail Corporation, a Minnesota corporation (the “Company”), in
connection with entry by the Company into that certain Second Amended and Restated Credit
Agreement, dated as of May 4, 2010, among the Company, the Banks, as defined therein, and U.S. Bank
National Association, as Agent (the “Second Amended and Restated Credit Agreement”), and to the
Material Subsidiaries, as defined in the Second Amended and Restated Credit Agreement (the
“Material Subsidiaries”), in connection with entry by the Material Subsidiaries into that certain
Material Subsidiary Guaranty, dated as of May 4, 2010 (the “Material Subsidiary Guaranty”). This
opinion is being delivered to you pursuant to Section 6.1 of the Second Amended and Restated Credit
Agreement. Capitalized terms used herein, except as otherwise specifically defined herein, are
used with the same meaning as defined in the Second Amended and Restated Credit Agreement.



     In connection with this opinion, I have examined the following documents:




     (a) The Articles or Certificate of Incorporation of the Company and each Material
Subsidiary;




     (b) The Bylaws of the Company and each Material Subsidiary;




     (c) Resolutions of the Board of Directors of each Material Subsidiary; and




     (d) An executed copy of the Second Amended and Restated Credit Agreement and the
Material Subsidiary Guaranty.




     I also have examined such other documents and reviewed such questions of law as I have
considered necessary and appropriate for the purposes of this opinion.



 









 





     In rendering my opinions set forth below, I have assumed the authenticity of all documents
submitted to me as originals, the genuineness of all signatures (other than the signatures of
officers of the Company and each Material Subsidiary) and the conformity to authentic originals of
all documents submitted to me as copies. I also have assumed the legal capacity for all purposes
relevant hereto of all natural persons (other than officers of the Company and each Material
Subsidiary) and, with respect to all parties to agreements or instruments relevant hereto other
than the Company and each Material Subsidiary, that such parties had the requisite power and
authority (corporate or otherwise) to execute, deliver and perform such agreements or instruments,
that such agreements or instruments have been duly authorized by all requisite action (corporate or
otherwise), executed and delivered by such parties and that such agreements or instruments are the
valid, binding and enforceable obligations of such parties. As to questions of fact material to my
opinion, I have relied upon representations and certificates of officers and other employees of the
Company and each Material Subsidiary (known by me to have authority to make such representations
and certifications on behalf of the Company and each Material Subsidiary) and certificates of
public officials.



     Based on the foregoing, I am of the opinion that:



     (i) The Company is and each Material Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation, and each is duly
qualified and in good standing as a foreign corporation in all other jurisdictions in which its
respective present operations or properties require such qualification, except where failure so to
qualify or to be in good standing would not constitute an Adverse Event.



     (ii) The Company and each Material Subsidiary each has full corporate power and authority to
(a) own and operate its properties and assets and carry on its business as presently conducted, as
described with respect to the Company in Otter Tail Corporation’s Annual Report or Form 10-K for
the year ended December 31, 20[_], and (b) enter into and perform its obligations under the Loan
Documents to which it is a party.



     (iii) The execution and delivery by each of the Company and each Material Subsidiary of the
Loan Documents to which it is a party, the borrowing by the Company under the Second Amended and
Restated Credit Agreement, and the performance by each of the Company and each Material Subsidiary
of its respective obligations under the Loan Documents to which it is a party have been duly
authorized by all necessary corporate action, and the Loan Documents have been duly executed and
delivered on behalf of the Company and each Material Subsidiary, as applicable and constitute valid
and binding obligations of the Company and each Material Subsidiary, as applicable, enforceable in
accordance with their respective terms.



     (iv) There is no provision in (a) the Company’s or any Material Subsidiary’s Articles or
Certificate of Incorporation or Bylaws, (b) any indenture, mortgage, contract or agreement to which
the Company or any Material Subsidiary is a party or by which the Company or any Material
Subsidiary or its respective properties are bound, (c) any law, statute, rule or regulation or
(d) any writ, order or decision of any court or governmental instrumentality binding on the Company
or any Material Subsidiary which would be contravened by the execution, delivery or performance by
the Company or any Material Subsidiary of the Loan Documents to



 









 




which it is a party, except in the case of clauses (b) and (d) for any such contravention
which would not constitute an Adverse Event.




     (v) There are no actions, suits or proceedings pending or, to the best of my knowledge,
threatened against the Company or any Material Subsidiary before any court or arbitrator or by or
before any administrative agency or government authority, which, if adversely determined, could
reasonably be expected to constitute an Adverse Event.



     The opinion set forth in paragraph (iii) above is subject to the following qualifications and
exceptions:




	 	(i)	 	The opinion set forth in paragraph (iii) above is subject to the effect of any
applicable bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent
transfer, statutes of limitation or other similar laws and judicial decisions affecting
or relating to the rights of creditors generally.
	 
	 	(ii)	 	The opinion set forth in paragraph (iii) above is subject to the effect of
general principles of equity, including without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, estoppel, election of remedies and other
similar doctrines affecting the enforceability of agreements generally (regardless of
whether considered in a proceeding in equity or at law). In addition, the availability
of specific performance, injunctive relief, the appointment of a receiver or other
equitable remedies is subject to the discretion of the tribunal before which any
proceeding therefor may be brought.
	 
	 	(iii)	 	I express no opinion as to the enforceability of provisions in the Loan
Documents to the extent they contain obligations of the Company or any Material
Subsidiary to pay any prepayment premium, default interest rate or other form of
liquidated damages if the payment of such premium, interest rate or damages may be
construed as unreasonable in relation to the actual damages or disproportionate to
actual damages suffered by the party claiming such amounts as a result of such
prepayment or default.
	 
	 	(iv)	 	I express no opinion (A) as to the validity, binding effect or enforceability
of (1) any provision of the Loan Documents related to choice of law, forum selection or
submission to jurisdiction (including, without limitation, any express or implied
waiver of any objection to venue in any court or of any objection that a court is an
inconvenient forum), (2) waivers by the Company or any Material Subsidiary of any
statutory or constitutional rights or remedies, (3) terms which excuse any person or
entity from liability for such person’s or entity’s negligence or willful misconduct,
or (4) cumulative remedies to the extent such cumulative remedies purport to
compensate, or would have the effect of compensating, the party entitled to the
benefits thereof in an amount in excess of the actual loss suffered by such party; or
(B) as to compliance or the effect of noncompliance by you with any state or federal
laws or regulations applicable to you in connection with the transactions described in
the Loan Documents.




 









 












	 	(v)	 	The opinion set forth in paragraph (iii) above with respect to the Material
Subsidiary Guaranty is subject to the defenses available to a guarantor under
applicable law, but the waivers of such defenses set forth in the Material Subsidiary
Guaranty are enforceable, subject to the other exceptions set forth herein.





     I draw your attention to the fact that, under certain circumstances, the enforceability of
terms to the effect that provisions may not be waived or modified except in writing may be limited.



     The opinions expressed above are limited to the laws of the States of Minnesota and North
Dakota and the federal laws of the United States and, with respect to my opinion in paragraphs (i),
(ii) and (iv) only, the following corporate laws: the Arizona Business Corporation Act, the
Delaware General Corporation Law, the Idaho Business Corporation Act, and the General and Business
Corporation Law of Missouri. I express no opinion as to the laws of any other jurisdiction.



     The foregoing opinions are being furnished to you solely for your benefit and may not be
relied upon by, nor may copies be delivered to, any other person without my prior written consent.



	 	 	 	 	 
	 	Very truly yours,

 	 
	 	
 	 
	 	George A. Koeck 	 
	 	General Counsel and Corporate Secretary 	 



 









 






	 	 	 	 	 



EXHIBIT E




Assignment and Assumption

ASSIGNMENT AND ASSUMPTION AGREEMENT





     This Agreement, dated as of the date set forth in Item I (each reference to an
“Item” herein shall be deemed to refer to such Item on Schedule I hereto),
is made by the party named in Item II, (the “Assignor”) to the entity named in Item
III (the “Assignee”).



WITNESSETH




     The Assignor has entered into a Second Amended and Restated Credit Agreement dated as of May
4, 2010, as amended thereafter (the “Second Amended and Restated Credit Agreement”) among OTTER
TAIL CORPORATION (the “Borrower”), certain lenders including the Assignor (collectively, the “Bank
Group”) and U.S. BANK NATIONAL ASSOCIATION, as Agent, under which the Assignor has agreed to make
Revolving Loans, and to issue or participate in the risk of issuance of Letters of Credit, in each
instance in amounts of up to those set forth in Item IV (such amount equals the original
commitment of the Assignor and may have been, or may be, reduced or increased by other assignments
by, or to, the Assignor, and will be reduced by the assignment under this Agreement) and the Bank
Group has agreed to make Revolving Loans, and to issue or participate in the risk of issuance of
Letters of Credit, in each instance in amounts of up to those set forth in Item V. Such
Revolving Loans are sometimes called the “Loans” hereinafter; such Letters of Credit are sometimes
called the “Letters of Credit” hereinafter; the Loans, the Bank’s participation in the Letters of
Credit, and the Bank’s participation in any unreimbursed drawing under any Letter of Credit or any
advance or loans made in connection with drawings under any Letter of Credit are sometimes called
the “Advances” or each “Advance,, hereinafter. Unless the context clearly indicates otherwise, all
other terms used in this Agreement shall have the meanings given them by, and shall be construed as
set forth in the Second Amended and Restated Credit Agreement.



     In consideration of the premises and the mutual covenants contained herein, the Assignor and
the Assignee hereby covenant and agree as follows:



     1. Assignment and Assumption. Subject to the terms and conditions of this Agreement,
the Assignor and the Assignee agree that:




(a) the Assignor hereby sells, transfers, assigns and delegates to the Assignee, in
consideration of entry by the Assignee into this Agreement [and of payment by the
Assignee to the Assignor of the amount set forth in Item VI]; and




(b) the Assignee hereby purchases, assumes and undertakes from the Assignor, without
recourse and without representation or warranty (except as expressly provided in this
Agreement)


a share equal to the percentage set forth in Item VII (expressed as a percentage of the
aggregate Advances and Commitments of the Bank Group) of the Assignor’s commitments, loans,
participations, rights, benefits, obligations, liabilities and indemnities under and in connection
with the Second Amended and Restated Credit Agreement and all of the Advances, including





 









 







without limitation the right to receive payment of principal, and interest on such percentage of
the Assignor’s Advances, and the obligation to fund all future Advances and drawings under the
Letters of Credit in respect of such assignment, and to indemnify the Agent or any other party
under the Second Amended and Restated Credit Agreement and to pay all other amounts payable by a
Bank (in such percentage of the aggregate obligations of the Bank Group) under or in connection
with the Second Amended and Restated Credit Agreement.




     The interest of the Assignor under the Second Amended and Restated Credit Agreement (including
the portion of the Assignor’s Advances and all such commitments, loans, participations, rights,
benefits, obligations, liabilities and indemnities) which the Assignee purchases and assumes
hereunder is hereinafter referred to as its “Assigned Share”. The day upon which the Assignee
shall make the payment described in the prior paragraph is hereinafter referred to as the “Funding
Date”. Upon completion of the assignment hereunder, the Assignor will have the revised share of
the total Loans and Commitments of the Bank Group set fort in Item VIII.



     2. Future Payments. The Assignor shall notify the Agent to make all payments with
respect to the Assigned Share after the Funding Date directly to the Assignee. The Assignor and
Assignee agree and acknowledge that all payment of interest, commitment fees, letter of credit
commissions and other fees accrued up to, but not including, the Funding Date are the property of
the Assignor, and not the Assignee. The Assignee shall, upon payment of any interest, commitment
fees, letter of credit commissions or other fees, remit to the Assignor all of such interest,
commitment fees, letter of credit commissions an other fees accrued u to, but not including, the
Funding Date.



     3. No Warranty or Recourse. The sale, transfer, assignment and delegation of the
Assigned Share is made without warranty or recourse against the Assignor of any kind, except that
the Assignor warrants that it has not sold or otherwise transferred any other interest in the
Assigned Share to any other party. The Assignor may, however, have sold and may hereafter sell
Participations in, or may have assigned or may hereafter assign, portions of its interest in the
Advances and the Second Amended and Restated Credit Agreement that in the aggregate (together with
the portion assigned hereby), do not exceed 100% of the Assignor’s interest in the Advances and the
Second Amended and Restated Credit Agreement.



     4. Covenants and Warranties. To induce the other to enter into this Agreement, each
of the Assignee and the Assignor warrants and covenants with respect to itself that:




(a) Existence. It is, in the case of the Assignee, a                      organized
under the laws of                      and it is, in the case of the Assignor, a                      duly existing under the laws of                     ;




(b) Authority. It is duly authorized to execute, deliver and perform this
Agreement;




(c) No Conflict. The execution, delivery and performance of this Agreement do not
conflict with any provision of law or of the charter or by-laws (or equivalent constituent
documents) of such party, or of any agreement binding upon it; and



 









 






(d) Valid and Binding. All acts, conditions and things required to be done and
performed and to have occurred prior to the execution, delivery and performance of this
Agreement, and to constitute the same the legal, valid and binding obligation of such party
enforceable against such party in accordance with its terms, have been done and performed
and have occurred in due and strict compliance with all applicable laws.



     5. Covenants and Warranties by the Assignee. To induce the Assignor to enter into
this Agreement, the Assignee warrants and covenants that (a) it is purchasing and assuming the
Assigned Share in the course of making loans in the ordinary course of its commercial lending
business, and (b) it has, independently and without reliance upon the Assignor, and based upon such
financial statements and other documents and information as it has deemed appropriate, made its own
credit analysis an decision to engage in this purchase and transfer of the Assigned Share. The
Assignee acknowledges that the Assignor has not made and does not make any representations or
warranties or assume any responsibility with respect to the validity, genuineness, enforceability
or collectibility of the Advances, the Second Amended and Restated Credit Agreement or any related
instrument, document or agreement.



     6. Promissory Note. The Notes of the Assignor shall be delivered to the Agent or
Borrower at such time and by such means as the Assignor and the Agent or Borrower shall agree, with
the request by the Assignor that the Borrower issue new notes payable to the Assignor and to the
Assignee to reflect the assignment of the Assigned Share hereunder.



     7. Payments to the Assignor. All amounts payable to the Assignor in U.S. Dollars
shall be paid by transfer of federal funds to the Assignor, ABA No.       , Account
No.       Attention:       Reference: [Borrower].



     8. Other Transactions. The Assignee shall have no interest in any property in the
Assignor’s possession or control, or in any deposit held or other indebtedness owing by the
Assignor, which may be or become collateral for or otherwise available for payment of the Advances
by reason of the general description of secured obligations contained in any security agreement or
other agreement or instrument held by the Assignor or by reason of the right of set-off,
counterclaim or otherwise, except that if such interest is provided for in provisions of the Second
Amended and Restated Credit Agreement regarding sharing of set-off, the Assignee shall have the
same rights as any other lender that is a party to the Second Amended and Restated Credit
Agreement. The Assignor and its affiliates may accept deposits from, lend money to, act as trustee
under indentures for an generally engage in any kind of business with the Borrower, and any person
who may do business with or own securities of the Borrower, or any of the Borrower’s subsidiaries.
The Assignee shall have no interest in any property taken as security for any other loans or any
other credits extended to the Borrower or any of its subsidiaries by the Assignor to the Borrower.



     9. Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of the Assignor and the Assignee.



     10. Expenses. In the event of any action to enforce the provisions of this Agreement
against a party hereto, the prevailing party shall be entitled to recover all costs and expenses



 









 




incurred in connection therewith including, without limitation, attorneys’ fees and expenses,
including allocable cost of in-house legal counsel and staff.




     11. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF MINNESOTA.



     12. Amendments, Changes and Modifications. This Agreement may not be amended,
changed, modified, altered, or terminated except by an agreement in writing signed by the Assignor
and the Assignee or their permitted successors or assigns).



     13. Withholding Taxes. The Assignee (a) represents and warrants to the Assignor, the
Agent and the Borrower that under applicable law and treaties no tax will be required to be
withheld by the Assignor with respect to any payments to be made to the Assignee hereunder,
(b) agrees to furnish (if it is organized under the laws of any jurisdiction other than the United
States or any State thereof) to the Assignor, the Agent and the Borrower prior to the time that the
Agent or Borrower is required to make any payment of principal, interest or fees hereunder either
U.S. Internal Revenue Service Form W8ECI or W8BEN and agrees to provide new Forms upon the
expiration of any previously delivered form or comparable statements in accordance with applicable
U.S. law and regulations and amendments thereto, duly executed and completed by the Assignee, and
(c) agrees to comply with all applicable U.S. laws and regulations with regard to such withholding
tax exemption.



     14. Entire Agreement. This Agreement sets forth the entire understanding of the
parties except for the consents contemplated hereby, and supersedes any and all prior agreements,
arrangements, and understandings relating to the subject matter hereof. No representation,
promise, inducement or statement of intent has been made by any party which is not embodied in this
Agreement, and no party shall be bound by or liable for any alleged representation, promise,
inducement or statement of intention not expressly set forth herein.



     15. Counterparts. This Agreement may be executed by the Assignor and the Assignee in
separate counterparts, each of which when so executed and delivered shall be deemed to be an
original and all of which taken together shall constitute one and the same Agreement.



 









 





     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on their behalf by
their duly authorized officers as of the date and year first above written.



	 	 	 	 	 	 	 	 	 

	Address:

	 	[Assignor]
	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	(print name)	 	 
	 	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Address:

	 	[Assignee]	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	(print name)	 	 
	 	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 	 	 
	 	 	 	 	 	 	 





     [Consents required to become effective as provided in Section 12.3 of the Second Amended and
Restated Credit Agreement:



Consented to this ___ day

of                     , 20___.




U.S. Bank National Association, as Agent




	 	 	 	 	 	 

	By:
	 	 	 	 
	 	 	 
	 

	 	 	 	(print name)
	 	 	 
	Title:
	 	 	 	 
	 	 	 





Consented to this ___ day

of                     , 20___.




OTTER TAIL CORPORATION, as Borrower






	 	 	 	 	 	 

	By:
	 	 	 	 
	 	 	 
	 

	 	 	 	(print name)
	 	 	 
	Title:
	 	 	 	 	] 
	 	 	 






 









 








Schedule I

to

Assignment and Assumption




	 	 	 

	Item I:

	 	Date of Assignment:
	 
	 	 
	Item II:

	 	Assigning Bank (the “Assignor”):
	 
	 	 
	Item III:

	 	Assignee (the “Assignee”):
	 
	 	 
	Item IV:

	 	Initial Total Commitment of the Assignor:
	 

	 	Revolving Loans:
	 

	 	Letters of Credit:
	 
	 	 
	Item V:

	 	Bank Group’s Initial Total Commitment:
	 

	 	Revolving Loans:
	 

	 	Letters of Credit:
	 
	 	 
	Item VI:

	 	Payment to the Assignor on Funding Date:
	 
	 	 
	Item VII:

	 	Percentage Assigned:                     %
	 

	 	(Expressed as a percentage of the total aggregate Commitments
of the Bank Group, carry out to 10 decimal places; upon
effectiveness of the Assignment as provide in the Second
Amended and Restated Credit Agreement, this will constitute the
Assignee’s “Pro Rata Share”
	 
	 	 
	Item VIII:

	 	Revised Percentage of the Assignor:                     %
	 

	 	(carry out to 10 decimal places; upon effectiveness of the
Assignment as provided in the Second Amended and Restated
Credit Agreement, this will constitute the Assignor’s “Pro Rata
Share”)










 









 








Schedule 1.1(a)

Commitments and Percentages




	 	 	 	 	 	 	 	 	 
	Bank:	 	Initial Commitment:	 	Percentage:
	U.S. Bank
	 	$	40,000,000	 	 	 	20.00	%
	Bank of America
	 	$	37,500,000	 	 	 	18.75	%
	JPMorgan Chase
	 	$	37,500,000	 	 	 	18.75	%
	Key Bank
	 	$	30,000,000	 	 	 	15.00	%
	Bank of the West
	 	$	20,000,000	 	 	 	10.00	%
	State Bank of India
	 	$	20,000,000	 	 	 	10.00	%
	Mega International Commercial Bank
	 	$	10,000,000	 	 	 	5.00	%
	Chang Hwa Commercial Bank
	 	$	5,000,000	 	 	 	2.50	%
	 	 	 
	Total:
	 	$	200,000,000	 	 	 	100.000000000	%






 









 






Schedule 1.1(b)




Material Subsidiaries

(as of date of the Second Amended and Restated Credit Agreement)


Varistar Corporation

Aevenia, Inc.

BTD Manufacturing, Inc.

Miller Welding & Iron Works, Inc.

DMI Industries, Inc.

DMS Health Technologies, Inc.

DMS Imaging, Inc.

Foley Company

Idaho Pacific Holdings, Inc.

Idaho Pacific Corporation

Northern Pipe Products, Inc.

ShoreMaster, Inc.

Vinyltech Corporation








 









 








Schedule 7.6

Litigation (Section 7.6)

Contingent Liabilities (Section 7.6)



Litigation – All material litigation matters affecting the Borrower or a Material Subsidiary are
reported in Otter Tail Corporation’s 10-K (See Item 3) filed with the SEC on February 26,
2010.



Contingent Liabilities – None.





 











 





Schedule 7.15

Subsidiaries (Section 7.15)

Subsidiaries of Otter Tail Corporation




	 	 	 	 	 	 	 	 	 
	 	 	 	 	Number and Class of Shares	 	 
	 	 	 	 	Issued and Owned by Otter	 	 
	 	 	State of	 	Tail Corporation or its	 	 
	Company	 	Organization	 	Subsidiaries	 	Footnote Ref.
	AWI Acquisition Company Limited

	 	Prince Edward

Island

Canada
	 	1 Share Common
	 	 	(8	)
	Aevenia, Inc.

	 	Minnesota
	 	100 Shares Common
	 	 	(1	)
	AgraWest Investments Limited

	 	Prince Edward

Island

Canada
	 	5,000,000 Shares Common 


1,500 Shares Class C Preferred
	 	 	(9	)
	Aviva Sports, Inc.

	 	Minnesota
	 	100 Shares Common
	 	 	(6	)
	BTD Manufacturing, Inc.

	 	Minnesota
	 	200 Shares Common
	 	 	(1	)
	DMI Industries, Inc.

	 	North Dakota
	 	980 Shares Common
	 	 	(1	)
	DMI Canada, Inc.

	 	Canada
	 	1 Share Common
	 	 	(4	)
	DMI Equipment, LLC

	 	Delaware
	 	100 Membership Units
	 	 	(4	)
	DMS Health Technologies, Inc.

	 	North Dakota
	 	8,500 Shares Class A 


5,100 Shares Class B
	 	 	(1	)
	DMS Health Technologies —
Canada, Inc.

	 	North Dakota
	 	1,000 Shares Common
	 	 	(10	)
	DMS Imaging, Inc.

	 	North Dakota
	 	1,606 Shares Common Voting
	 	 	(2	)
	DMS Leasing Corporation**

	 	North Dakota
	 	2,500 Shares Common
	 	 	(2	)
	E. W. Wylie Corporation

	 	North Dakota
	 	100 Shares Common
	 	 	(1	)
	Foley Company

	 	Missouri
	 	50,000 Shares Common
	 	 	(1	)
	Galva Foam Marine Industries,
Inc.

	 	Missouri
	 	100,000 Shares Common
	 	 	(6	)
	Green Hills Energy, LLC

	 	Minnesota
	 	1,000 Membership Units
	 	 	(5	)
	Idaho Pacific Holdings, Inc.

	 	Delaware
	 	10,002 Shares Class A Common
(voting)
	 	 	(1	)
	Idaho-Pacific Corporation

	 	Idaho
	 	400 Shares Common
	 	 	(8	)
	Idaho-Pacific Colorado 

Corporation

	 	Delaware
	 	100 Shares Common
	 	 	(8	)
	Miller Welding & Iron Works, Inc.

	 	Minnesota
	 	1,000 Shares Common
	 	 	(11	)
	Moorhead Electric, Inc.

	 	Minnesota
	 	80 Shares Common
	 	 	(3	)
	Northern Pipe Products, Inc.

	 	North Dakota
	 	10,000 Shares Common
	 	 	(1	)
	Otter Tail Assurance Limited

	 	Cayman Islands
	 	50,000 Shares Common
	 	 	(7	)
	Otter Tail Energy Services
Company, Inc.

	 	Minnesota
	 	1,000 Shares Common
	 	 	(7	)
	Otter Tail Power Company

	 	Minnesota
	 	100 Shares Common
	 	 	(7	)
	Overland Mechanical Services,
Inc.

	 	Minnesota
	 	100 Shares Common
	 	 	(5	)
	Sheridan Ridge I, LLC

	 	Minnesota
	 	1,000 Membership Units
	 	 	(5	)
	Sheridan Ridge II, LLC

	 	Minnesota
	 	1,000 Membership Units
	 	 	(5	)
	Shoreline Industries, Inc.

	 	Minnesota
	 	1,000 Shares Common
	 	 	(6	)
	ShoreMaster, Inc.

	 	Minnesota
	 	100 Shares Common
	 	 	(1	)
	ShoreMaster Costa Rica SRL

	 	Costa Rica
	 	50 quotas
	 	 	(6	)
	T.O. Plastics, Inc.

	 	Minnesota
	 	100 Shares Common
	 	 	(1	)
	Varistar Corporation

	 	Minnesota
	 	100 Shares Common
	 	 	(7	)
	Vinyltech Corporation

	 	Arizona
	 	100 Shares Common
	 	 	(1	)








 






	 	 	 

	(1)      Subsidiary of Varistar Corporation

	 	(6)      Subsidiary of ShoreMaster, Inc.
	(2)      Subsidiary of DMS Health Technologies, Inc.

	 	(7)      Subsidiary of Otter Tail Corporation
	(3)      Subsidiary of Aevenia, Inc.

	 	(8)      Subsidiary of Idaho Pacific Holdings, Inc.
	(4)      Subsidiary of DMI Industries, Inc.

	 	(9)      Subsidiary of AWI Acquisition Company Limited
	(5)      Subsidiary of Otter Tail Energy Services
Company, Inc.

	 	(10)    Subsidiary of DMS Imaging, Inc.
	 


	 	
(11)    Subsidiary of BTD Manufacturing, Inc.

	 


	 	

**      Inactive






 









 






Schedule 7.16




Partnerships/Joint Ventures (Section 7.16)



	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Book value of
	 	 	Type of	 	Ownership	 	Investment
	Partnership Name	 	Partner	 	Percent	 	March 31, 2010
	 
	Boston Financial Institutional Tax Credit
VIII Fund
	 	Limited	 	 	3.4	 	 	$	—	 
	Walnut Properties Limited — Summit Group
	 	Limited	 	 	15.7	 	 	 	—	 
	WNC Institutional Tax Credit Fund II
	 	Limited	 	 	13.3332	 	 	 	—	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Commons Housing Partners Limited Partnership
	 	Limited	 	 	88.0	 	 	 	88,309	 
	Foxboro Housing Partners Limited Partnership
	 	Limited	 	 	89.0	 	 	 	192,506	 
	Grace Village Limited Partnership
	 	Limited	 	 	89.0	 	 	 	—	 
	The Homestead Limited Partnership
	 	Limited	 	 	89.0	 	 	 	112,870	 
	Lincoln Square of Alexandria Limited Partnership
	 	Limited	 	 	89.0	 	 	 	302,634	 
	Southwood Park Townhomes, Limited Partnership
	 	Limited	 	 	89.0	 	 	 	23,890	 
	Stillwater Village Limited Partnership
	 	Limited	 	 	89.0	 	 	 	147,566	 
	Wildwoods Apartments Limited Partnership
	 	Limited	 	 	89.1	 	 	 	40,474	 
	 
	Total
	 	 	 	 	 	 	 	 	 	$	908,249	 
	 






 









 






Schedule 9.4




Exceptions to Ownership of Material Subsidiaries (Section 9.4)



Idaho Pacific Holdings, Inc. (“IPH”) has granted to key employees 772 Options to purchase an equal
number of shares of Class B common stock of IPH. Class B stock is non-voting and pays no
dividends. Varistar owns 100% of the voting Class A common stock of IPH. Upon exercise of the
Options, any issued Class B shares are subject to certain Put Options and Call Options granting to
the option holders and Varistar Corporation the option to sell or purchase, as applicable, the
outstanding Class B shares pursuant to terms and conditions set forth in a Stockholders Agreement.







 









 








Schedule 9.7




Investments (Section 9.7)



	 	 	 	 	 
	 	 	3/31/2010	 
	Investment in Affordable Housing (OTC)
	 	 	908,249	 
	Investment in Loan Pools (OTP)
	 	 	465,116	 
	Investments — Bank of Butterfield (OTAL)
	 	 	8,609,449	 
	CoBank (St Paul Bank for Coop’s) (VSC)
	 	 	183,819	 
	Other Miscellaneous (OTP, OTESCO)
	 	 	107,162	 
	 
	 	 	 	 
	 
	 	 	 
	Total Investments of Otter Tail Corporation and
Subsidiaries
	 	$	10,273,795	 
	 
	 	 	 






 









 






Schedule 9.8




Existing Liens (Section 9.8)



None.




 









 





Schedule 9.10




Certain Transactions with Related Parties (Section 9.10)



None.