Document:

exv10w2

 

Exhibit 10.2

EMPLOYMENT AGREEMENT

     EMPLOYMENT AGREEMENT dated as of September 1, 2006 by and between AMERISAFE, INC., a Texas
corporation (the “Company”), and Todd Walker (the “Employee”).

WITNESSETH:

     WHEREAS the Company desires to induce the Employee to continue in the employment by the
company for the period provided in this Agreement, and the Employee is willing to continue such
employment with the Company on a full-time basis, all in accordance with the terms and conditions
set forth below;

     NOW, THEREFORE, for and in consideration of the premises hereof and the mutual covenants
contained herein, the parties hereto hereby covenant and agree as follows:

	1.	 	Employment.

	 	(a)	 	The Company hereby agrees to employ the Employee, and the Employee hereby accepts such
employment with the Company, for the period set forth in Section 2 hereof, subject to the
terms and conditions hereinafter set forth.
	 
	 	(b)	 	The Employee affirms and represents that he is under no obligation to any former
employer or other party which is in any way inconsistent with, or which imposes any
restriction upon, the Employee’s employment hereunder with the Company, the employment of
the Employee by the Company, or the Employee’s undertakings under this Agreement.

	2.	 	Term of Employment. Unless earlier terminated as provided in this Agreement, the
term of the Employee’s employment under this Agreement shall be for a period beginning on
September 25, 2006 (the “Effective Date”) and ending on the third anniversary of the Effective
Date, September 25, 2009, provided, however, that this Agreement shall automatically renew for
successive one year periods, unless either party shall notify the other in writing not less
than thirty (30) days prior to the third anniversary date or any successive anniversary date
that it does not intent to renew this Agreement. Such period, plus any annual renewal
periods, or, if the Employee’s employment hereunder is earlier terminated as provided herein
and including termination pursuant to Section 9 (a)(i)-(v), or such shorter period, is
sometimes referred to herein as the “Employment Term”.

	3.	 	Duties. The Employee shall be employed by the Company as a senior executive officer
and shall endeavor in good faith to competently perform such duties as inherent in his/her
employment and/or any designated job position and/or as specified by the Company and shall

 

 

	 	 	also perform and discharge such other employment duties and responsibilities as the Board of
Directors of the Company shall from time to time reasonably determine, not inconsistent with
his/her position as a senior executive officer with the Company. Employee shall also comply
with any By-Laws of the Company, as applicable. The Employee shall perform his duties
principally at the offices of the Company at 2301 Highway 190 West, DeRidder, Louisiana, with
such travel to such other locations from time to time as the Board of Directors of the Company
may reasonably prescribe. Except as may otherwise be approved in advance by the Board of
Directors of the Company, and except during vacation periods and reasonable periods of absence
due to sickness, personal injury or other disability, the Employee shall devote his full time
during normal business hours throughout the Employment Term to the services required of him
hereunder; provided that the foregoing shall not prohibit the Employee from engaging in
reasonable charitable and community activities. The Employee shall render his business services
exclusively to the Company and its subsidiaries during the Employment Term and shall use his
good faith efforts, judgment and energy to improve and advance the business and interests of the
Company and its subsidiaries in a manner consistent with the duties of his position.

	4.	 	Conflicts of Interest and Compliance. Employee shall not engage in any conflict of
interest and/or take any actions or engage in any conduct which is contrary to the exclusive
interests of the Company. Employee shall comply with all applicable laws and regulations
(federal, state and/or local) and shall comply with all applicable directives, orders and
regulations of any governmental agency or regulatory body including federal, state and local
agencies and bodies. Employee shall also comply with all policies and procedures of the
Company and directives of the Board of Directors. Employee understands, acknowledges and
agrees that he/she may hold a position of trust and that fiduciary duties and responsibilities
may apply under applicable law and that these duties and responsibilities may be continuing in
nature, even after separation from employment. Employee agrees to fully and faithfully
perform and discharge all such duties, responsibilities and obligations.
	 
	5.	 	EEO Compliance. Employee shall not engage in any conduct which constitutes an
unlawful employment practice or which violates any laws or regulations (federal, state and/or
local) prohibiting discrimination, harassment and/or retaliation. Employee acknowledges that
the Company is an Equal Opportunity Employer and prohibits all forms of unlawful
discrimination in the terms and condition of employment and prohibits all forms of harassment,
including sexual harassment.
	 
	6.	 	Salary and Bonus.

	 	(a)	 	Salary. As compensation for the services to be performed by the Employee
hereunder during the Employment Term, the Company shall pay the Employee a base salary at
the annual rate of not less than One Hundred Seventy-five Thousand Dollars ($175,000) (said
amount, together with any increases thereto as may be determined from time to time by the
Compensation Committee of the Board of Directors of the Company in its sole discretion,
being hereinafter referred to as “Salary”). Any Salary payable hereunder shall be paid in
regular intervals in accordance with the Company’s payroll practices from time to time in
effect, but in no event less than monthly.

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	 	(b)	 	Bonus. The Employee shall be eligible to receive bonus compensation from the
Company in respect of each fiscal year (or portion thereof) occurring during the Employment
Term in amounts, if any, as may be determined by the Compensation Committee of the Board of
Directors of the Company in its sole discretion on the basis of performance-based criteria
to be established from time to time by such Committee in its sole discretion.

	 	(c)	 	Withholding, Etc. The payment of any Salary and Bonus under this Section 6,
and the payment of any severance pay pursuant to Section 7 hereof, shall be subject to
applicable withholding and payroll taxes, and such other deductions as may be required
under the Company’s employee benefit plans.

	7.	 	Other Benefits.
	 
	 	 	During the Employment Term, the Employee shall:

	 	(a)	 	be eligible to participate in all employee fringe benefits and pension and/or
profit sharing plans that may be provided by the Company for its other senior
executive officers in accordance with the provision of any such plans, as the same may
be in effect from time to time;
	 
	 	(b)	 	be eligible to participate in all medical and health plans or other employee
welfare benefit plans that may be provided by the company for its other senior
executive officers in accordance with the provisions of any such plans, as the same be
in effect from time to time;
	 
	 	(c)	 	be entitled to at least 23 vacation/personal days in each calendar year; the
Employee shall also be entitled to all paid holidays given by the company to its other
senior executive officers;
	 
	 	(iv)	 	be entitled to sick pay and disability benefits in accordance with any Company
policy that may be applicable to other senior executive officers from time to time;
	 
	 	(v)	 	be entitled to a car allowance consistent with Company practice as of the date
hereof; and
	 
	 	(vi)	 	be entitled to reimbursement for all reasonable out-of-pocket business expenses
incurred by the Employee in the performance of his duties hereunder in accordance with
company policy that may be applicable to senior executive officers from time to time.

	8.	 	Confidential Information. The Employee hereby covenants, agrees and acknowledges as
follows:

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	 	(a)	 	The Employee has and will have access to and will participate in the development of or
be acquainted with confidential or proprietary information and trade secrets that directly
or indirectly relate to the business, prospects, operations and other aspects of the
Company and any other present or future subsidiaries of the Company (collectively with the
Company, the “Companies”), including but not limited to (1) customer lists; the identity,
lists or descriptions of new or prospective customers; financial statements; cost reports
or other financial information; contract proposals or bidding information, business plans;
training and operations methods and manuals; personnel records; software programs; reports
and correspondence; and management systems, policies or procedures, including related forms
and manuals; (ii) information pertaining to future developments such as future marketing or
acquisition plans or ideas; and (iii) all other tangible and intangible property, which are
used in the business and operations of the Companies but not made public. The information
and trade secrets relating to the business of the Companies described hereinabove in this
paragraph (a) are hereinafter referred to collectively as the “Confidential Information”,
provided that the term “Confidential Information” shall not include any information (x)
that is or becomes publicly available (other than as a result of violation of this
Agreement by the Employee), or (y) that the Employee receives or received on a
non-confidential basis from a source (other than the Companies or any of their
representatives) that is not prohibited from disclosing such information by a legal,
contractual or fiduciary obligation (provided, however that the Employee shall not be
deemed to be in violation of this clause (y) unless he has actual knowledge of any such
obligation on the party of any such source).
	 
	 	(b)	 	The Employee shall not disclose, use or make known for his or another’s benefit any
Confidential Information or use such Confidential Information in any way except in
connection with the performance of the Employee’s duties under this Agreement. The
Employee may disclose Confidential Information in response to an order or subpoena of a
court or governmental agency of competent jurisdiction and authority provided, however,
notice of such order or subpoena shall be immediately communicated to the Company
telephonically and in writing so that the Company shall have an opportunity to intervene
and assert its rights to nondisclosure prior to any response by Employee to such an order
or subpoena and in such notice, Employee shall advise as to whether or not he/she intends
to comply with and/or respond to the order and/or subpoena.
	 
	 	(c)	 	The Employee acknowledges and agrees that a remedy at law for any breach or threatened
breach of the provisions of this Section 6 would be inadequate and, therefore, agrees that
the Company shall be entitled to injunctive relief in addition to any other available
rights and remedies in case of any such breach or threatened breach; provided,
however, that nothing contained herein shall be construed as prohibiting the Company from
pursuing any other rights and remedies available for any such breach or threatened breach.
	 
	 	(d)	 	The Employee agrees that upon termination of his employment with the Company for any
reason, the Employee shall promptly return to the Company all Confidential Information in
his possession in whatever form maintained (including, without limitation, computer disks
and other electronic media).

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	 	(e)	 	The obligations of the Employee under this Section 8 shall, except as otherwise
provided herein, survive the termination of the Employment Term and the expiration or
termination of this Agreement for a period of five years.

	7.	 	Termination.

	 	(a)	 	The Employee’s employment hereunder shall be terminated upon the occurrence of any of
the following:

	 	(i)	 	death of the Employee;
	 
	 	(ii)	 	the Employee’s inability to perform his duties on account of disability or
incapacity for a period of one hundred eighty (180) or more days, whether or not
consecutive, within any period of twelve (12) consecutive months;
	 
	 	(iii)	 	a Termination for Cause (as defined herein);
	 
	 	(iv)	 	a Termination Without Cause (as defined herein); or
	 
	 	(v)	 	termination of the Employee’s employment hereunder by the Employee at any time
other than a termination by the Employee pursuant to Section 9(a)(iv) hereof (a
“Resignation”).
	 
	 	 	 	The term “Termination for Cause” shall mean a termination of the Employee’s
employment hereunder by action of the Board of Directors of the Company at any time,
including during the Employment Term, as a result of any of the following with
respect to the Employee: (1) indictment or arrest for the alleged commission of a
felony, (2) acts of dishonesty or moral turpitude which are materially detrimental
to the Companies, (3) acts or omissions which the Employee reasonably knew were
likely to materially damage the business of the Company, (4) failure by the Employee
to obey the reasonable and lawful orders of the Board of Directors of the Company,
or (5) gross negligence by the Employee in the performance of, or willful disregard
by the Employee of, his obligations hereunder; provided, however, that prior
to any termination pursuant to clauses (4) or (5) above, the Board of Directors of
the Company shall have provided the Employee with written notice of such action,
failure or event and a reasonable period in which to cure the same. This advance
notice and cure provision for termination pursuant to clauses (4) or (5) above shall
not apply and is not required if giving notice and/or a cure period would be
contrary to the best interests of the Company
	 
	 	 	 	The term “Termination Without Cause” shall mean: (1) the Company is giving written
notice at any time, including during the Employment Term, to the Employee that the
Employee’s employment is being terminated or non-renewed (pursuant to paragraph 2.
hereof) other than pursuant to clauses (i), (ii) or (iii) of

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	 	 	 	the first paragraph of this Section 7(a), or (2) the Employee giving written notice
to the Company that he is terminating his employment with the Company upon the
occurrence of any of the following items:

	 	(A)	 	significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties associated with the
job position designated and/or existing at the effective date of this
Agreement, a reduction in the Employee’s salary, or the termination of the
Employee’s rights to any employee benefits to which he was entitled pursuant to
this Agreement (other than a termination of rights or benefits applicable to
all executive officers), any of which is not remedied within 10 calendar days
after receipt by the Company of written notice from the Employee of such
change, reduction or termination as the case may be;
	 
	 	(B)	 	the Company shall require the Employee to have his principal
location of work changed to any location which is in excess of 25 miles from
the location thereof as of the date of this Agreement without his prior written
consent; or
	 
	 	(C)	 	without limiting the generality or effect of the foregoing, any
material breach of this Agreement by the Company or any successor thereto.
	 
	 	(D)	 	a “Change of Control”. For purposes of this Agreement and this
provision, a Change of Control shall mean the following: (i) sale of all or
substantially all of the Company’s assets to any person or entity, or (ii) a
merger, consolidation or other similar business combination of the Company or
of the subsidiaries of the Company taken as a whole (the “Subsidiaries”), with
or into another company when the Company is not the surviving company of such
merger, consolidation or other business combination.

	 	(b)	 	In the event that the Employee’s employment is terminated at any time by a
Termination Without Cause, for a 12 month period following the effective date of such
termination, the Company shall (i) pay (as severance, termination pay, contract payout,
compensation and/or liquidated damages) the Salary that would have otherwise been
payable to the Employee during such period. This amount will be paid during such
period in accordance with the Company’s then existing payroll practices, methods and/or
pay periods. In addition, in the event that Employee’s employment is terminated at any
time by Termination Without Cause, the Company will pay and/or reimburse Employee for a
12 month period following such termination the actual cost of COBRA continuing health
coverage premiums. In this regard, if the Employee is eligible for COBRA continuing
health benefits and if Employee timely elects COBRA continuing health care coverage,
the Company will pay and/or reimburse up to a maximum of 12 months of COBRA continuing
health care coverage premiums. It shall be at the Company’s option and discretion to
either pay the COBRA premiums directly or to reimburse the Employee for premiums that

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	 	 	 	the Employee pays for COBRA continuing health coverage. Any premiums or amounts due for
COBRA continuing health coverage beyond the 12 month period referenced above shall be at
the sole cost and expense of Employee and will not be paid an/or reimbursed by the
Company. The above described obligations of the Company (continuation of salary for a
12 month period following Termination Without Cause and payment of COBRA premiums for a
12 month period following Termination Without Cause) shall be the exclusive remedies and
payment obligations and no other amounts or obligations will be due and owing by the
Company to Employee. In this regard, Termination Without Cause may be effectuated at
any time during the Employment Term or renewal and the only amounts that the Company
will be obligated or required to pay are the amounts calculated according to the
formulas set forth above.

	 	(c)	 	Notwithstanding anything to the contrary expressed or implied herein, except as
required by applicable law and except as set forth in Section 9(b) above, the Company
shall not be obligated to make any payments to the Employee or on his behalf of
whatever kind or nature by reason of the Employee’s cessation of employment (including,
without limitation, by reason of a Termination for Cause), other than (i) such amounts,
if any, of his Salary as shall be accrued and remained unpaid as of the date of said
cessation and (ii) such other amounts, if any, which may be then otherwise payable to
the Employee pursuant to the terms of the Company’s benefits plans or pursuant to
Section 7 above.

	10.	 	Restrictive Covenants.

	 	10.01	 	Noncompetition and Nonsolicitation of Customers.

	 	(a)	 	The Employee agrees that during the Noncompete Period (as defined herein),
without the prior written consent of the Company, Employee shall refrain, directly or
indirectly, and whether as a principal, agent, employee, owner, partner, officer,
director, shareholder, member or otherwise, alone or in association with any other
person or entity, from carrying on or engaging in a business similar to that of the
Company and/or from soliciting customers of the Company within the Designated Area, so
long as the Company carries on like a business therein.
	 
	 	(b)	 	Noncompete Period. For purposes of this Agreement, the “Noncompete
Period” shall mean the Employment Term plus:

	 	(i)	 	in the event that the employment of the Employee is terminated
by a Termination Without Cause, a period of 12 months. As such, the Noncompete
Period would be the term and duration of employment and would extend beyond
terminations and/or separation for 12 months; or
	 
	 	(ii)	 	in the event that the employment of the Employee is terminated
by the Company by a Termination With Cause, or by the Employee’s Resignation
pursuant to Section 9(v) of this Agreement or the Employee’s nonrenewal under
Section 2 of this Agreement, the Noncompete Period

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	 	 	 	shall expire upon the expiration, termination and/or separation of the
Employee’s employment with the Company; provided, however, in such
event the Company shall have the exclusive option and absolute right of
extending the Noncompete Period for a period of 12 months following the
termination and/or separation of employment if the Company: (1) delivers
written notice to the Employee irrevocably exercising such option before
employment termination and/or separation or within 180 days after employment
separation and/or termination and (2) agrees to pay and does pay the
employee the Salary and Benefit amounts as designation under Section 9(b) of
this Agreement for such 12 month period. If the Company exercises this
option and right and complies with the requirements for same, the Noncompete
Period shall be extended for the 12 month period designed and Employee
agrees and acknowledges that he/she if bound by such period.

	 	(c)	 	Definition of Designated Area. The term “Designated Area” shall mean
the states, parishes, counties and/or municipalities designated in Attachment “A”.
	 
	 	(d)	 	Business of the Company. Employee acknowledges and understands that
the “business” of the Company involves and relates to the underwriting of risks for
workers’ compensation insurance and related services. Employee further acknowledges,
agrees and represents that he/she understands and knows the business in which the
Company is engaged and the scope, activities and/or business pursuits involved in the
business of the Company and in the underwriting of risks for workers’ compensation
insurance and related services. Employee further acknowledges and understands that the
noncompetition and nonsolicitation of customer restrictions in this Agreement prohibit
the Employee from engaging, in any capacity and/or any position, and/or from conducting
any activities and/or business similar to that of the Company and under the specific
terms and conditions of this Agreement.
	 
	 	(e)	 	Customers of the Company. For purposes of this Agreement, “customers”
shall include, but are not limited to, insured businesses and/or entities who have
and/or have had insurance coverage with the Company and insurance agents with whom the
Company has contracts, agreements, arrangements and/or any type of business, insurance
placement and/or working relationship. Employee acknowledges and represents that
he/she understands the nature of the Company’s customer relationships and who and/or
what comprises its customers.

	 	10.02	 	Nonsolicitation. Employee shall not, during the Noncompete Period, directly
or indirectly solicit or induce, or attempt to solicit or induce, any employee, agent of
or consultant to the Company to leave his or her employment or terminate his or her
consultation agreement or similar relationship with the Company.

	 	10.03	 	Amerisafe Designation. As used in this Section 10, Amerisafe, Inc. and/or the
“Company” includes Amerisafe, Inc., American Interstate Insurance Company, Silver

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	 	 	 	Oak Casualty, Inc., American Interstate Insurance Company of Texas, and any and all
predecessor entities, successor entities, affiliate entities, parent companies and
subsidiaries. The parties acknowledge and agree that the restrictive covenants in this
Section 10 enure to the benefit of and operate for the interest of all of the
above-mentioned companies and affiliates.

	 	10.04	 	Remedies. In the event of a breach, or a threatened or attempted breach, or
any provision of this Section 10 by the Employee, the parties recognize that such a breach
would cause irreparable harm to the Company, thus the Company shall, in addition to all
other remedies, be entitled to: (a) a temporary, preliminary and/or permanent injunction
against such breach without the necessity of showing any actual damages or any
irreparable injury; (b) a decree for the specific performance of this Agreement; and/or
(c) damages, attorney’s fees and costs. All remedies in favor of the Company shall not
be exclusive, but shall be cumulative.
	 
	 	10.05	 	Construction Reformation and Severability. It is understood and agreed that,
should any portion of any clause or paragraph of this Section 10 be deemed too broad to
permit enforcement to its full extent, or should any portion of any clause or paragraph of
this Section 10 be deemed unreasonable, then said clause or paragraph shall be reformed and
enforced to the maximum extent permitted by law. Additionally, if any of the provisions of
this Section 10 are ever found by a court of competent jurisdiction to exceed the maximum
enforceable (i) periods of time, (ii) geographic areas of restriction, (iii) scope of
noncompetition or nonsolicitation and/or (iv) description of the Company’s business or
customers, or for any other reason, then such unenforceable element(s) of this Section 10
shall be reformed and reduced to the maximum periods of time, geographic areas of
restriction, scope of noncompetition or nonsolicitation and/or description of the Company’s
business that is permitted by law. In this regard, any unenforceable, unreasonable and/or
overly broad provision shall be reformed and/or severed so as to permit enforcement to the
fullest extent permitted by law. Reformation and severability shall apply.
	 
	 	10.06	 	Reasonableness. Employee acknowledges, represents and agrees that the
restrictive covenants in this Section 10 are reasonable in nature, scope, time and
territory and in the terms and conditions set forth herein. Employee acknowledges,
represents and agrees that the Company has expended substantial cost in training Employee
and that the Company has provided him/her with access to valuable information and has
provided him/her with valuable experience. In addition, Employee acknowledges, represents and
agrees that the Company has placed Employee in contact with its customers, and has made
Employee part of its business plans. Employee further acknowledges, represents and agrees
that Employee would not have obtained such training, experience, contacts and information
from other sources without the employment relationship with the Company. Employee further
acknowledges, represents and agrees that the foregoing have occurred and/or resulted based
on the Company’s reliance on these restrictive covenants and Employee’s representations and
obligations made herein. Employee further acknowledges, represents and agrees that this
Section 10 and the obligations of Employee under these restrictive covenants

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	 	 	 	are reasonable in order to protect the legitimate interests of the Company. Employee
further acknowledges, represents and agrees that by virtue of his/her job position,
he/she has become an integral and influential component of the Company’s current and
future business plans. It is the Employee’s desire and intent that this Agreement be
given full force and effect.

	11.	 	Non-Assignability.

	 	(a)	 	Neither this Agreement nor any right or interest hereunder shall be assignable by the
Employee or his beneficiaries or legal representatives without the Company’s prior written
consent; provided, however, that nothing in this Section 11(a) shall preclude the
Employee from designating a beneficiary to receive any benefit payable hereunder upon his
death or incapacity.

	 	(b)	 	Except as required by law, no right to receive payments under this Agreement shall be
subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge,
pledge, or hypothecation or to exclusion, attachment, levy or similar process or to
assignment by operation of law, and any attempt, voluntary or involuntary, to effect any
such action shall be null, void and of no effect.

	12.	 	Binding Effect. Without limiting or diminishing the effect of Section 11 hereof,
this Agreement shall inure to the benefit of and be binding upon the parties hereto ad their
respective heirs, successors, legal representatives and assigns.
	 
	13.	 	Notices. All notices which are required or may be given pursuant to the terms of
this Agreement shall be in writing and shall be sufficient in all respects if given in writing
and (i) delivered personally, (ii) five business days after being mailed by certified or
registered mail, return receipt requested and postage prepaid, (iii) sent via a nationally
recognized overnight courier, or (iv) sent via facsimile confirmed by certified or registered
mail, return receipt requested and postage prepaid, if to the Company at the Company’s
principal place of business, and if to the Employee, at his home address most recently filed
with the Company, or to such other address or addresses as either party shall have designated
in writing to the other party hereto.
	 
	14.	 	Law Governing. This Agreement shall be governed by and construed in accordance with
the laws of the State of Louisiana.
	 
	15.	 	Severability. The Employee agrees that in the event that any court of competent
jurisdiction shall finally hold that any provision of this Agreement is void or constitutes an
unreasonable restriction against the Employee, this Agreement shall not be rendered void but
shall apply with respect to such extent as such court may judicially determine constitutes a
reasonable restriction under the circumstances. If any part of this Agreement is held by a
court of competent jurisdiction to be invalid, illegible or incapable of being enforced in
whole or in part by reason of any rule of law or public policy, such part shall be deemed to
be severed from the remainder of this Agreement for the purpose only of the particular legal
proceedings in question and all other covenants and provisions of this Agreement shall in
every other

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	 	 	respect continue in full force and effect and no covenant or provision shall be deemed dependent
upon any other covenant or provision. Severability and reformation shall apply.
	 
	 	 	It is understood and agreed that should any portion of any clause or paragraph of this Agreement
be deemed too broad to permit enforcement to its full extent or should any portion of any clause
or paragraph of this Agreement be deemed unreasonable, then said clause or paragraph shall be
reformed and enforced to the maximum extent permitted by law.
	 
	16.	 	Waiver. Failure to insist upon strict compliance with any of the terms, covenants or
conditions hereof shall not be deemed a waiver of such term, covenant or condition, nor shall
any waiver or relinquishment of any right or power hereunder at any one or more times be
deemed a waiver or relinquishment of such right or power at any other time or times.
	 
	17.	 	Entire Agreement; Modifications. This Agreement, with referenced Attachment “A”,
constitutes the entire and final expression of the agreement of the parties with respect to
the subject matter hereof and supersedes all prior and/or contemporaneous agreements, oral and
written, between the parties hereto with respect to the subject matter hereof. This Agreement
may be modified or amended only by an instrument in writing signed by both parties hereto.
	 
	18.	 	Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.

	 	 	 	 	 
	 	AMERISAFE, INC.

 	 
	 	By:  	/s/ C. Allen Bradley, Jr.
 	 
	 	 	C. Allen Bradley, Jr., President/CEO 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	EMPLOYEE:

 	 
	 	/s/ Todd R. Walker
 	 
	 	Todd R. Walker 	 
	 	 	 
	 

11exv4w1

 

Exhibit 4.1

 

CREDIT AGREEMENT

Dated as of September 1, 2006

Among

OTTER TAIL CORPORATION,

dba OTTER TAIL POWER COMPANY

and

U.S. BANK NATIONAL ASSOCIATION

 

 

 

CREDIT AGREEMENT

(OTTER TAIL POWER COMPANY)

     THIS CREDIT AGREEMENT, dated as of September 1, 2006, is by and between OTTER TAIL
CORPORATION, dba OTTER TAIL POWER COMPANY, a Minnesota corporation (the “Borrower”), and U.S. BANK
NATIONAL ASSOCIATION, a national banking association, (the “Bank”).

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):

     “Adverse Event” means the occurrence of any event that could have a material adverse
effect on the business, operations, property, assets or condition (financial or otherwise) of the
Borrower or on the ability of the Borrower to perform its obligations under the Loan Documents.

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

     “Applicable Facility Fee Rate; Applicable Margin” means the percentages set forth
below, determined based on the applicable Level:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Applicable Margin	 	Applicable
	 	 	LIBOR Rate	 	Prime Rate	 	Facility
	Level:	 	Loans*	 	Loans	 	Fee Rate
	Level I:
	 	 	0.325	%	 	 	0.0	%	 	 	0.100	%
	Level II:
	 	 	0.400	%	 	 	0.0	%	 	 	0.125	%
	Level III:
	 	 	0.550	%	 	 	0.0	%	 	 	0.150	%
	Level IV
	 	 	0.650	%	 	 	0.0	%	 	 	0.175	%
	Level V
	 	 	0.750	%	 	 	0.0	%	 	 	0.200	%
	Level VI
	 	 	1.000	%	 	 	0.0	%	 	 	0.250	%

 

			
	*	 	This Applicable Margin also applies to Daily Reset LIBOR Rate Loans.

2

 

The Applicable Facility Fee Rate and Applicable Margin shall be those shown for Level II as of
the date of this Agreement. The Applicable Facility 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 the foregoing, the Levels shall be defined and determined as follows:

Level I shall apply if the Borrower’s Long Term Debt Rating is A or better (S&P)
or A2 or better (Moody’s) but no numerically lower Level applies.

Level II shall apply if the Borrower’s Long Term Debt Rating is A- or better (S&P)
or A3 or better (Moody’s) but no numerically lower Level applies.

Level III shall apply if the Borrower’s Long Term Debt Rating is BBB+ (S&P) or
Baa1 (Moody’s) but no numerically lower Level applies.

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

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

Level VI shall apply if the Borrower’s Long Term Debt Rating is below BBB- (S&P)
or Baa3 (Moody’s).

In the event of a split rating (i.e., Long Term Debt Ratings by S&P and Moody’s that would not be
in the same Level), the Level shall be based on the higher Long Term Debt Rating unless the
ratings are more than one Level apart, in which case the Level would be based on the Long Term
Debt Rating one Level lower than the higher of the two Long Term Debt Ratings.

     “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.

     “Capital Expenditure” means any amount debited to the fixed asset account on the
consolidated balance sheet of the Borrower in respect of (a) the acquisition (including, without
limitation, acquisition by entry into a Capitalized Lease), construction, improvement, replacement
or betterment of land, buildings, machinery, equipment or of any other fixed assets or leaseholds,
and (b) to the extent related to and not included in (a) above, materials, contract labor and
direct labor (excluding expenditures properly chargeable to repairs or maintenance in accordance
with GAAP).

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

3

 

     “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 which may from
time to time be outstanding hereunder, being initially $25,000,000, as the same may be reduced from
time to time pursuant to Section 4.3, and, as the context may require, the agreement of the
Bank to make Loans to the Borrower subject to the terms and conditions of this Agreement up to its
Commitment.

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

     “Credit Agreement (non-electrical operations)” means that certain Credit Agreement,
dated as of April 26, 2006 (as thereafter amended, modified, extended, renewed, replaced or
refinanced from time to time) by and among the Borrower, the Banks thereunder, JPMorgan Chase Bank,
N.A. as Syndication Agent, Wells Fargo bank, National Association as Documentation Agent, and U.S.
Bank National Association, as agent for the Banks.

     “Daily Reset LIBOR Rate Loan” means a Loan bearing interest determined with reference
to the LIBOR Rate that is reset on each New York Business Day, as described in Section
3.1(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.

     “EBIT” means, for any period of determination, the consolidated net income of the
Borrower and its Subsidiaries before provision for income taxes, plus, 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) during the applicable period; and
(b) similar non-operating losses during such period.

     “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 9.1.

     “Facility Fees” shall have the meaning set forth in Section 3.7.

4

 

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

     “GAAP” means generally accepted accounting principles as applied in the preparation of
the audited consolidated financial statement of the Borrower referred to in Section 6.5.

     “Indebtedness” means, without duplication, all obligations, contingent or otherwise,
which in accordance with GAAP should be classified upon the obligor’s balance sheet as liabilities,
but in any event including the following (whether or not they should be classified as liabilities
upon such balance sheet): (a) obligations secured by any mortgage, pledge, security interest, lien,
charge or other encumbrance existing on property owned or acquired subject thereto, whether or not
the obligation secured thereby shall have been assumed and whether or not the obligation secured is
the obligation of the owner or another party; (b) any obligation on account of deposits or
advances; (c) any obligation for the deferred purchase price of any property or services, except
trade accounts payable arising in the ordinary course of business, (d) any obligation as lessee
under any Capitalized Lease; (e) all guaranties, endorsements and other contingent obligations in
respect to Indebtedness of others; (f) undertakings or agreements to reimburse or indemnify issuers
of letters of credit; and (g) net liabilities under any interest rate swap, collar or other
interest rate hedging agreement. 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.

     “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 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 non-recourse
obligations will only be taken into account up to the fair market value of the related property);
(c) any obligation for the deferred purchase price of any property or services evidenced by a note,
payment contract (other than an account payable arising in the ordinary course of business) or
other instrument, (d) any obligation as lessee under any Capitalized Lease; (e) all guaranties and
contingent or other legal obligations in respect to Interest-bearing Debt of other Persons,
excluding ordinary course endorsements; (f) net liabilities under any interest rate swap, collar or
other interest rate hedging agreement; and (g) undertakings or agreements to reimburse or indemnify
issuers of letters of credit other than commercial letters of credit.

     “Interest Differential” is defined in Section 3.5.

     “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

5

 

Indebtedness of the Borrower and its Subsidiaries, including in all cases interest expense
determined in accordance with GAAP and (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, and (c) net costs under any interest rate swap, collar or other interest
rate hedging agreements, in each case determined in accordance with GAAP.

     “Investment” means the acquisition, purchase, making or holding of any stock or other
security, any loan, advance, contribution to capital, extension of credit (except for trade and
customer accounts receivable for inventory sold or services rendered in the ordinary course of
business and payable in accordance with customary trade terms), any acquisitions of real or
personal property (other than real and personal property acquired in the ordinary course of
business) and any purchase or commitment or option to purchase 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.

     “LIBOR Rate Loan” means a Loan bearing interest determined with reference to the LIBOR
Rate, as described in Section 3.1(b).

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

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

     “Loan Period” means the period commencing on the advance date of the applicable LIBOR
Rate Loan and ending on the numerically corresponding day 1, 2, 3 or 6 months thereafter matching
the interest rate term selected by Borrower; provided, however, (a) if any Loan Period would
otherwise end on a day which is not a New York Banking Day, then the Loan Period shall end on the
next succeeding New York Banking Day unless the next succeeding New York Banking Day falls in
another calendar month, in which case the Loan Period shall end on the immediately preceding New
York Banking Day; or (b) if any Loan Period begins on the last New York Banking 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 the Loan Period), then the Loan Period shall end on the last New York Banking Day of the
calendar month at the end of such Loan Period.

     “Loans” means the Loans made under Section 2.1.

6

 

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

     “Moody’s” means Moody’s Investors Service, Inc.

     “Money Markets” means one or more wholesale funding markets available to and selected
by the Bank, including negotiable certificates of deposit, commercial paper, eurodollar deposits,
bank notes, federal funds, interest rate swaps or others.

     “New York Banking Day” means any Business Day (other than a Saturday or Sunday) on
which commercial banks are open for business in New York, New York and, with respect to LIBOR Rate
Loans, a day on which dealings in Dollars may be carried on by the Bank in the interbank LIBOR
market.

     “Note” means the promissory note of the Borrower described in Section 2.5,
substantially in the form of Exhibit A, 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.

     “Payment Date” means the Termination Date, plus (a) the last day of each Loan Period
for each LIBOR Rate Loan and, if such Loan Period is in excess of three months after the first day
of such Loan Period, and thereafter each day three months after each succeeding Payment Date;, and
(b) the last day of each March, June, September and December of each year for each Prime Rate Loan
and Daily Reset LIBOR Rate Loan and for any fees including, without limitation, Utilization Fees
and Facility Fees.

     “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.

     “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 after December 31, 2005, shall
not result in the sale, transfer or other divestiture of stock or assets having a value in excess
of 15% of the consolidated assets of the Borrower and its Subsidiaries at the time of
determination.

     “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.

7

 

     “Prime Rate” means the rate of interest from time to time announced by the Bank 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.

     “Prime Rate Loan” means a Loan bearing interest determined with reference to the Prime
Rate, as described in Section 3.1(a).

     “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 5% or more of the equity interest of the
Borrower; or (c) 5% or more of the equity interest 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.

     “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 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, or the setting aside of any funds for any such purpose (other
than payment to, or on account of or for the benefit of, the Borrower only).

     “S&P” means Standard & Poor’s Ratings Group.

     “Senior Indebtedness Agreement” means any agreement, instrument or indenture governing
senior unsecured Indebtedness of the Borrower (“Senior Indebtedness”).

     “Senior Indebtedness Prepayment Event” means the (a) occurrence of any event under any
Senior Indebtedness Agreement that would require the Borrower to prepay, or offer to prepay, any
Senior Indebtedness prior to its stated maturity, (b) occurrence of any event under any Senior
Indebtedness Agreement that would give the holder of Senior Indebtedness any right to put such
Senior Indebtedness to the Borrower or require the Borrower to repurchase or redeem such Senior
Indebtedness in each case prior to its stated maturity, or (c) voluntary offer by the Borrower to
prepay or purchase Senior Indebtedness prior to its stated maturity to remain in compliance with
any

8

 

covenant or agreement of a Senior Indebtedness Agreement. Senior Indebtedness Prepayment
Events shall include, without limitation, any Transfer of Utility Assets Put Event or Debt
Prepayment Application under the Note Purchase Agreement.

     “Subsidiary” means any Person of which or in which the Borrower and its other
Subsidiaries own directly or indirectly 50% or more of: (a) the combined voting power of all
classes of stock having general voting power under ordinary circumstances to elect a majority of
the board of directors of such Person, if it is a corporation, (b) the capital interest or profit
interest of such Person, if it is a partnership, joint venture or similar entity, or (c) the
beneficial interest of such Person, if it is a trust, association or other unincorporated
organization.

     “Termination Date” means the earliest of (a) September 1, 2007, (b) the date on which
the Commitment is terminated pursuant to Section 9.2 hereof or (c) the date on which the
Commitment is reduced to zero pursuant to Section 4.3 hereof.

     “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
stocks, 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.

     “Utilization Fees” is defined in Section 3.6.

     Section 1.2 Accounting Terms and Calculations. Except as may be expressly provided
to the contrary herein, all accounting terms used herein shall be interpreted and all accounting
determinations hereunder (including, without limitation, determination of compliance with financial
ratios and restrictions in Articles VII and VIII hereof) shall be made in
accordance with GAAP consistently applied. Any reference to “consolidated” financial terms shall
be deemed to refer to those financial terms as applied to the Borrower and its Subsidiaries in
accordance with 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.

ARTICLE II TERMS OF LENDING

     Section 2.1 The Commitment. Subject to the terms and conditions hereof and in
reliance upon the warranties of the Borrower herein, the Bank agrees to make loans (each, a “Loan”
and, collectively, the “Loans”) to the Borrower from time to time from the date hereof until the

9

 

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 the Loans shall
not exceed the Commitment.

     Section 2.2 Loan Options. The Loans shall be constituted of LIBOR Rate Loans, Prime
Rate Loans or Daily Reset LIBOR Rate Loans, as shall be selected by the Borrower, except as
otherwise provided herein. Any combination of types of such Loans may be outstanding at the same
time, except that the total number of outstanding LIBOR Rate Loans shall not exceed eight (8) at
any one time.

     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 Bank not later than:

(i) 1:00 p.m., Minneapolis time, the Business Day of the requested Loan, if the Loan
shall be comprised of Prime Rate Loans or Daily Reset LIBOR Rate Loans; or

(ii) 12:00 noon, Minneapolis time, two Business Days prior to the date of the
requested Loans, if the Loans shall be, or shall include, a LIBOR Rate Loan.

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 Loans comprising such Loan, and
(3) if such Loan shall include LIBOR Rate Loans, the initial Loan Periods for such Loans.

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

(a) 1:00 p.m., Minneapolis time, the Business Day prior of the requested continuation or
conversion, if the continuing or converted Loan shall be a Prime Rate Loan or a Daily Reset
LIBOR Rate Loan; or

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

10

 

Each notice of continuation or conversion of a Loan shall specify (i) the effective date of the
continuation or conversion date (which shall be a Business Day), (ii) the amount and the type or
types of Loans 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 Rate Loans,
the Loan Periods for such Loans.

     Section 2.5 The Note. The Loans shall be evidenced by a promissory note in the
amount of the Bank’s Commitment originally in effect and dated as of the date of this Agreement.
The Bank shall enter in its records the amount of each Loan, the rate of interest borne by each
Loan and the payments made on the each Loan, and such records shall be deemed conclusive evidence
of the subject matter thereof, absent manifest error.

     Section 2.6 Purpose of the Loans. The Loans shall be used to support electrical
generation operations of the Borrower, and shall not be used for non-electrical operations of the
Borrower and its Subsidiaries.

ARTICLE III INTEREST AND FEES

     Section 3.1 Interest. Interest on the Loans shall accrue at one of the following per
annum rates selected by Borrower:

(a) upon notice to the Bank, the Applicable Margin for Prime Rate Loans plus the Prime Rate
announced by Bank from time to time, as and when such rate changes;

(b) upon a minimum of two New York Banking Days prior notice, the Applicable Margin for
LIBOR Rate Loans plus the 1, 2, 3 or 6 month LIBOR rate quoted by the Bank from Telerate
Page 3750 or any successor thereto (which shall be the LIBOR rate in effect two New York
Banking Days prior to commencement of the Loan), adjusted for any reserve requirement and
any subsequent costs arising from a change in government regulation; or

(c) upon notice to the Bank, the Applicable Margin for LIBOR Rate Loans plus the one-month
LIBOR rate quoted by the Bank from Telerate Page 3750 or any successor thereto, which shall
be the one-month LIBOR rate in effect and reset each New York banking Day, adjusted for any
reserve requirement and any subsequent costs arising from a change in government regulation.

     Section 3.2 Interest After Maturity. 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 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 Prime
Rate in effect from time to time.

11

 

     Section 3.3 Failure to Select Rate Option. In the event Borrower does not timely
select another interest rate option at least two New York Banking Days before the end of the Loan
Period for a LIBOR Rate Loan, the Bank may at any time after the end of the Loan Period convert the
LIBOR Rate Loan to a Daily Floating LIBOR Rate Loan, but until such conversion, the funds advanced
under the LIBOR Rate Loan shall continue to accrue interest at the same rate as the interest rate
in effect for such LIBOR Rate Loan prior to the end of the Loan Period.

     Section 3.4 Limitations on LIBOR Rate Loans; Bank’s Records. No LIBOR Rate Loan may
extend beyond the Termination Date. In any event, if the Loan Period for a LIBOR Rate Loan should
happen to extend beyond the Termination Date, such loan must be prepaid on the Termination Date.
Bank’s internal records of applicable interest rates shall be determinative in the absence of
manifest error. Each LIBOR Rate Loan shall be in a minimum principal amount of $100,000. Prime
Rate Loans and Daily Reset LIBOR Rate Loans may be in any amount requested by the Borrower.

     Section 3.5 Prepayment. If a LIBOR Rate Loan is prepaid prior to the end of the Loan
Period for such LIBOR Rate Loan, whether voluntarily or because prepayment is required due to the
Loans maturing or due to acceleration of the Loans upon default or otherwise, Borrower agrees to
pay all of Bank’s costs, expenses and Interest Differential (as determined by Bank) incurred as a
result of such prepayment. The term “Interest Differential” shall mean that sum equal to the
greater of zero or the financial loss incurred by Bank resulting from prepayment, calculated as the
difference between the amount of interest Bank would have earned (from like investments in the
Money Markets as of the first day of the LIBOR Rate Loan ) had prepayment not occurred and the
interest Bank will actually earn (from like investments in the Money Markets as of the date of
prepayment) as a result of the redeployment of funds from the prepayment. Because of the
short-term nature of this facility, Borrower agrees that the Interest Differential shall not be
discounted to its present value. Any prepayment of a LIBOR Rate Loan shall be in an amount equal
to the remaining entire principal balance of such loan.

     Section 3.6 Utilization Fees. At any time that the outstanding Loans equals or
exceeds 50% of the total Commitment outstanding, the Borrower shall pay fees (the “Utilization
Fees”) to the Bank in an amount determined by applying 0.10% per annum to an amount equal to the
excess of the outstanding Loans over 50% of the total Commitment.

     Section 3.7 Facility Fee. The Borrower shall pay fees (the “Facility Fees”) to the
Bank in an amount determined by applying the Applicable Facility Fee Rate per annum to the average
daily amount of the Commitment (whether used or unused) of the Bank for the period from the date
hereof to the Termination Date.

     Section 3.8 Computation. Interest, Utilization Fees and Facility Fees shall be
computed on the basis of actual days elapsed and a year of 360 days.

12

 

     Section 3.9 Payment Dates. Accrued interest under Section 3.1(a), (b)
and (c), Utilization and Facility Fees shall be payable on the applicable Payment Dates.
Accrued interest under Section 3.2 shall be payable on demand.

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 three (3) Business
Days’ 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 3.5, without any other premium or
penalty. Any such prepayment must be accompanied by accrued and unpaid interest on the amount
prepaid. Each partial prepayment of a LIBOR Rate Loan shall be in an amount of $100,000 or an
integral multiple thereof.

     Section 4.3 Optional Reduction or Termination of Commitment. The Borrower may, at
any time, upon no less than 2 Business Days prior written or telephonic notice received by the
Bank, reduce the Commitment, with any such reduction in a minimum amount of $500,000 or an integral
multiple thereof. Upon any reduction in the Commitment pursuant to this Section, the Borrower
shall pay to the Bank the amount, if any, by which the aggregate unpaid principal amount of
outstanding Loans exceeds the Commitment as so reduced. Amounts so paid cannot be reborrowed. The
Borrower may, at any time, upon not less than 2 Business Days prior written notice to the Bank,
terminate the Commitment in its entirety. Upon termination of the Commitment pursuant to this
Section, the Borrower shall pay to the Bank the full amount of all outstanding Loans, all accrued
and unpaid interest thereon, all unpaid Utilization and Facility Fees accrued to the date of such
termination and all other unpaid obligations of the Borrower to the Bank hereunder. All payment
described in this Section is subject to the provisions of Section 3.5.

     Section 4.4 Payments. Payments and prepayments of principal of, and interest on, the
Note and all fees, expenses and other obligations under the Loan Documents shall be made 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 Bank in Minneapolis, Minnesota. Funds received on any
day after such time shall be deemed to have been received on the next Business Day. Subject to the
definition of the term “Loan Period”, whenever any payment to be made hereunder or on the Note
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 Bank 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

13

 

available funds to pay interest when due, the
Borrower shall pay such interest in immediately available funds).

Section 4.5 Senior Indebtedness Prepayment Event.

(a) If a Senior Indebtedness Prepayment Event shall occur, the Borrower shall offer to
reduce the Commitment hereunder in Ratable Portion not later than the date of prepayment,
purchase or redemption of the relevant Senior Indebtedness, by written notice given to the
Bank not later than any notice required under the relevant Senior Indebtedness Agreement.
The Bank shall elect whether to require such a reduction of the Commitment hereunder.

(b) If such a reduction of the Commitment shall be so required, it will become effective
upon the prepayment, purchase or redemption by the Borrower of the relevant Indebtedness
under the relevant Senior Indebtedness Agreement. Upon such reduction, if the Loans
outstanding shall exceed the Commitment as so reduced, the Borrower shall pay any Loans.
Failure by the Borrower to so pay the Loans shall constitute an Event of Default under
Section 9.1(a) hereof.

(c) For such purpose, a “Ratable Portion” shall mean a fraction the numerator of which is
equal to the amount of the prepayment, purchase or redemption of the relevant Senior
Indebtedness that the Borrower is required to make or offer to make, and the denominator of
which is the aggregate principal amount of such Senior Indebtedness outstanding. In the
instance of a Transfer of Utility Assets Put Event under the Note Purchase Agreement, the
Ratable Portion shall be 100%.

ARTICLE V CONDITIONS PRECEDENT

     Section 5.1 Conditions of Initial Loan. The obligation of the Bank to make the
initial Loan hereunder shall be subject to the satisfaction of the conditions precedent, in
addition to the applicable conditions precedent set forth in Section 5.2 below, that the
Bank shall have received all of the following, in form and substance satisfactory to the Bank, each
duly executed and certified or dated as of the date of this Agreement or such other date as is
satisfactory to the Bank:

(a) The Note executed by a duly authorized officer (or officers) of the Borrower.

(b) 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 any
amendments to the Articles or Certificate of Incorporation or By-Laws of the Borrower

14

 

since
the date of the certified copy delivered to U.S. Bank in connection with the Credit
Agreement (non-electrical operations).

(c) An opinion of counsel to the Borrower, addressed to the Bank, in substantially the form
of Exhibit D.

(d) Payment of a one-time closing fee in the amount of $25,000, and payment of all fees and
reimbursements payable hereunder and thereunder.

     Section 5.2 Conditions Precedent to all Loans. The obligation of the Bank to make
any Loan hereunder (including the initial Loan) shall be subject to the satisfaction of the
following conditions precedent (and any request for a Loan shall be deemed a representation by the
Borrower that the following are satisfied):

(a) Before and after giving effect to such Loan, the representation and warranties
contained in Article VI shall be true and correct, as though made on the date of
such Loan; and

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

ARTICLE VI REPRESENTATIONS AND WARRANTIES

     To induce the Bank to enter into this Agreement, to grant the Commitment and to make Loans
hereunder, the Borrower represents and warrants to the Bank:

     Section 6.1 Organization, Standing, Etc. The Borrower is a corporations duly
incorporated and validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on its businesses as now
conducted, to enter into the Loan Documents and to perform its obligations under the Loan
Documents. The Borrower is 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 6.2 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.

15

 

     Section 6.3 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, which in any such case under this subsection (c) would constitute an Adverse
Event. The Borrower is not 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 could constitute an Adverse Event. No Default or
Event of Default has occurred and is continuing.

     Section 6.4 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, provided, however, the Borrower is
required to make an annual filing of its Capital Structure with the Minnesota Public Utilities
Commission, and such Commission may thereafter issue orders approving or disapproving of the
Borrower’s capital structure.

     Section 6.5 Financial Statements and Condition. The Borrower’s audited consolidated
financial statements as at December 31, 2005, as heretofore furnished to the Bank, have been
prepared in accordance with GAAP on a consistent basis and fairly present the financial condition
of the Borrower and the Subsidiaries 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, the Borrower
had no 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, 2005, no Adverse Event has occurred.

     Section 6.6 Litigation and Contingent Liabilities. Except as described in
Schedule 6.6, there are no actions, suits or proceedings pending or, to the knowledge of
the Borrower, threatened against or affecting the Borrower or any of its properties before any
court or arbitrator, or any governmental department, board, agency or other instrumentality which,
if determined adversely to the Borrower, could constitute an Adverse Event. Except as described in
Schedule 6.6, the Borrower has no contingent liabilities which are material to the
Borrower.

     Section 6.7 Compliance. The Borrower is in material compliance with all statutes and
governmental rules and regulations applicable to it.

16

 

     Section 6.8 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 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 will or threatens to impose a material liability on the Borrower or which
would require a material expenditure by the Borrower to cure. The Borrower has not 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 could constitute an Adverse Event.

     Section 6.9 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
provisions of ERISA and the Code setting forth those requirements. No Reportable Event, other than
a Reportable Event for which the reporting requirements have been waived by regulations of the
PBGC, has occurred and is continuing with respect to any Plan. All of the minimum funding
standards applicable to such Plans have been satisfied and there exists no event or condition which
would permit the institution of proceedings to terminate any Plan under Section 4042 of ERISA. The
current value of the Plans’ benefits guaranteed under Title IV or ERISA does not exceed the current
value of the Plans’ assets allocable to such benefits.

     Section 6.10 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 6.11 Ownership of Property; Liens. The Borrower has good and marketable
title to its real properties and good and sufficient title to its other properties, including all
properties and assets referred to as owned by the Borrower in the audited consolidated financial
statement of the Borrower referred to in Section 6.5 (other than property disposed of since
the date of such financial statement in the ordinary course of business). None of the properties,
revenues or assets of the Borrower is subject to a Lien, except for (a) Liens disclosed in the
consolidated financial statements referred to in Section 6.5, (b) Liens listed on
Schedule 6.11, or (c) Liens allowed under Section 8.8.

     Section 6.12 Taxes. The Borrower has filed all federal, 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 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 or charges 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). No tax Liens have been filed and no
material

17

 

claims are being asserted with respect to any such taxes, fees or charges. The charges,
accruals and reserves on the books of the Borrower in respect of taxes and other governmental
charges are adequate.

     Section 6.13 Trademarks, Patents. The Borrower possesses or has the right, by way of
ownership or license, 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.

     Section 6.14 Investment Company Act. The Borrower is not an “investment company” or
a company “controlled” by an investment company within the meaning of the Investment Company Act of
1940, as amended.

     Section 6.15 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 VII AFFIRMATIVE COVENANTS

     From the date of this Agreement and thereafter until the Commitment is terminated or expire
and the Loans and all other liabilities of the Borrower to the Bank hereunder and under the Note
have been paid in full, unless the Bank shall otherwise expressly agree in writing the Borrower
will do all of the following:

     Section 7.1 Financial Statements and Reports. Furnish to the Bank:

(a) As soon as available and in any event within 120 days after the end of each fiscal year
of the Borrower, the annual audit report 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 annual audit,
certified without qualification by independent certified public accountants of recognized
standing selected by the Borrower and acceptable to the Bank, together with any related
management letters.

(b) As soon as available and in any event within 45 days after the end of each quarter of
each fiscal year, a copy of the unaudited financial statement of the Borrower and its
subsidiaries prepared in the same manner as the audit report referred to in Section
7.1(a), signed by the Borrower’s chief financial officer, consisting of at least
consolidated statements of income and cash flow for the Borrower and the 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 as at the end of such quarter.

18

 

(c) Together with the consolidated financial statements furnished by the Borrower under
Sections 7.1(a) and 7.1(b), a Compliance Certificate signed by the chief
financial officer of the Borrower, which shall (i) confirm the Borrower’s Long Term Debt
Rating; and (ii) 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) Immediately 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) Immediately upon becoming aware of the occurrence, with respect to any Plan, of any
Reportable Event (other than a Reportable Event for which the reporting requirements have
been waived by PBGC regulations) or any “prohibited transaction” (as defined in Section 4975
of the Code), 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 upon the mailing or filing thereof, 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) Copies of any order issued by the Minnesota Public Utilities Commission regarding the
Borrower’s capital structure.

(h) Immediately 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 is material to the Borrower and its
Subsidiaries as a consolidated enterprise, and the steps being taken by the Person(s)
affected by such proceeding.

(i) Immediately upon becoming aware of the occurrence thereof, notice of any violation as to
any environmental matter by the Borrower and of the commencement of any judicial or
administrative proceeding relating to health, safety or environmental matters (i) in which
an adverse determination or result could result in the revocation of or have a material
adverse effect on any operating permits, air emission permits, water discharge permits,
hazardous waste permits or other permits held by the Borrower which are material to the
operations of the Borrower, or (ii) which will or threatens to impose a material liability
on the Borrower to any Person or which will require a material expenditure by the Borrower
to cure any alleged problem or violation.

19

 

(j) From time to time, such other information regarding the business, operation and
financial condition of the Borrower and the Subsidiaries as any Bank may reasonably request.

     Section 7.2 Corporate Existence. 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.

     Section 7.3 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 7.4 Payment of Taxes and Claims. File all tax returns and reports which are
required by law to be filed by it and pay before they become delinquent all taxes, assessments and
governmental charges and levies imposed upon it or its property and all claims or demands of any
kind (including, without limitation, those of suppliers, mechanics, carriers, warehouses, landlords
and other like Persons) which, if unpaid, might result in the creation of a Lien upon its property;
provided that the foregoing items need not be paid if they are being contested in good
faith by appropriate proceedings, and as long as the Borrower’s title to its property is not
materially adversely affected, its use of such property in the ordinary course of its business is
not materially interfered with and adequate reserves with respect thereto have been set aside on
the Borrower’s books in accordance with GAAP.

     Section 7.5 Inspection. Permit any Person designated by any Bank 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 and intervals as the Bank may designate. So long as no Event of
Default exists,
the expenses of the Bank for such visits, inspections and examinations shall be at the expense of
the Bank, but any such visits, inspections, and examinations made while any Event of Default is
continuing shall be at the expense of the Borrower.

     Section 7.6 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
therewith may be properly and advantageously conducted at all times.

     Section 7.7 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.

20

 

     Section 7.8 Compliance. Comply in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject.

     Section 7.9 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.

     Section 7.10 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 could
result in a material liability or otherwise constitute or result in an Adverse Event.

     Section 7.11 Failure to Approve Capital Structure. If the Minnesota Public Utilities
Commission or any other governmental authority of appropriate jurisdiction shall issue an order
finally determining not to approve, or finally disapproving of, this Agreement, the Borrower will
terminate the Commitment and repay the Loans within thirty (30) days after such order becoming
final (or within such shorter period as such order shall provide for such termination and
repayment).

     Section 7.12 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 collateral under certain circumstances, as specifically provided
herein).

     Section 7.13 Ratings Triggers. If documentation applicable to any Indebtedness of
the Borrower or any Subsidiary shall hereafter include a Ratings Trigger, the Borrower shall
promptly notify the Bank of such Ratings Trigger. If any Ratings Trigger shall apply to the
Borrower or any Subsidiary and if the Bank shall so request of the Borrower, the Borrower agrees to
enter into an amendment to this Agreement to include a substantively similar Ratings Trigger in
this Agreement. For such purpose, a “Ratings Trigger” shall mean any provision in any document
applicable to any Indebtedness of the Borrower or any Subsidiary stating that if the Borrower or
any Subsidiary shall not maintain a minimum debt rating by S&P, Moody’s or any other ratings
agency: (i) the Borrower or such Subsidiary shall be deemed not to have complied with such
document, (ii) a default or event
of default or other acceleration event shall be deemed to have occurred under such document, or
(iii) Indebtedness governed by such document shall be prepaid or the holder of such Indebtedness
shall have the option to require such prepayment (whether immediately or with the giving of notice,
passage of time or both).

ARTICLE VIII NEGATIVE COVENANTS

     From the date of this Agreement and thereafter until the Commitment is terminated or expire
and the Loans and all other liabilities of the Borrower to the Bank hereunder and under the Note

21

 

have been paid in full, unless the Bank shall otherwise expressly agree in writing the Borrower
will not do any of the following:

     Section 8.1 Merger. Merge or consolidate or enter into any analogous reorganization
or transaction with any Person; provided, however, any wholly-owned Subsidiary may
be merged with or liquidated into the Borrower (if the Borrower is the surviving corporation) or
any other wholly-owned Subsidiary, and the Borrower may enter Permitted Divestitures.

     Section 8.2 Sale of Assets. Sell, transfer, lease or otherwise convey all or any
substantial part of its assets except for (a) sales and leases of inventory in the ordinary course
of business, (b) sales or other transfers by a wholly-owned Subsidiary to the Borrower or another
wholly-owned Subsidiary; and (c) Permitted Divestitures.

     Section 8.3 Plans. Permit any condition to exist in connection with any Plan which
might constitute grounds for the PBGC to institute proceedings to have such Plan terminated or a
trustee appointed to administer such Plan, 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 or permit the underfunded amount of Plan benefits
guaranteed under Title IV of ERISA to exceed $500,000.

     Section 8.4 Ownership of Stock. Take any action which would result in a decrease in
the Borrower’s ownership interest in any Subsidiary (including, without limitation, decrease in the
percentage of the shares of any class of stock owned), other than Permitted Divestitures.

     Section 8.5 Other Agreements. Enter into any agreement, bond, note or other
instrument with or for the benefit of any Person other than the Bank which would: (a) be violated
or breached by the Borrower’s performance of its obligations under the Loan Documents, or (b)
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.

     Section 8.6 Restricted Payments. Either: (a) make any Restricted Payment 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 any other provision for, or otherwise pay, acquire or retire
for value,
any Indebtedness of the Borrower or any Subsidiary that is subordinated in right of payment to the
Loans (whether pursuant to its terms or by operation of law), except for regularly-scheduled
payments of interest and principal (which shall not include payments contingently required upon
occurrence of a change of control or other event) that are not otherwise prohibited hereunder or
under the document or agreement stating the terms of such subordination.

     Section 8.7 Investments. Acquire for value, make, have or hold any Investments,
except:

22

 

(a) Investments outstanding on the date hereof and listed on Schedule 8.7, and
any increases or decreases in the value thereof or write-ups, write-downs or write-offs with
respect to such Investments;

(b) Travel 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 a nationally recognized rating service that is satisfactory to the Bank;

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

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

(g) Extensions of credit in the nature of accounts receivable or notes receivable arising
from the sale of goods and services in the ordinary course of business;

(h) Share of stock, obligations or other securities received in settlement of claims arising
in the ordinary course of business;

(i) Investments outstanding on the date hereof in Subsidiaries by the Borrower and other
Subsidiaries, Investments by the Borrower or other Subsidiaries in Persons that will be
Subsidiaries upon completion of such Investments;

(j) Investments not otherwise permitted hereunder which shall not exceed (based on total
consideration paid by the Borrower and any Subsidiary): (i) $10,000,000 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) $20,000,000 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 consent of
the Bank to such Investments in excess of such limit shall not be unreasonably withheld; and

(k) Any Subsidiary may make Investments constituting Loans to the Borrower and provided
that no Default or Event of Default shall have occurred and continued, the Borrower and any
Subsidiary may make Investments constituting loans to any Subsidiaries, provided,
that such

23

 

loans to any one Subsidiary shall not exceed $15,000,000 in aggregate principal amounts
outstanding at any time.

     Section 8.8 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;

(b) Liens existing on the date of this Agreement and disclosed on Schedule 6.11
hereto and Liens securing any extension, renewal, restatement or replacement of the credit
facilities described on Schedule 6.11, 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 6.11 and shall
not secure indebtedness exceeding the amount of credit facilities described on Schedule
6.11;

(c) Deposits or pledges to secure payment of workers’ compensation, unemployment insurance,
old age pensions or other social security obligations, in the ordinary course of business of
the Borrower or a Subsidiary;

(d) Liens for taxes, fees, assessments and governmental charges not delinquent or to the
extent that payments therefor shall not at the time be required to be made in accordance
with the provisions of Section 7.4;

(e) Liens of carriers, warehousemen, mechanics and materialmen, and other like Liens
arising in the ordinary course of business, for sums not due or to the extent that payment
therefor shall not at the time be required to be made in accordance with the provisions of
Section 7.4;

(f) Deposits to secure the performance of bids, trade contracts, leases, statutory
obligations and other obligations of a like nature incurred 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), provided, that (i) such Liens were required to be granted pursuant to
agreement and instruments entered into by the Borrower prior to the date of this Agreement,
and (ii) the Bank 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 Bank
shall so notify the Borrower, the holder of such senior Indebtedness shall enter into an
inter-creditor agreement satisfactory to the Bank confirming such respective priorities of
such Liens), or (y) other assets that are acceptable to the Banks in its sole discretion to
secure all

24

 

Indebtedness and obligations of the Borrower hereunder, whether then existing or thereafter
arising; and

(h) Liens not otherwise permitted by this Section securing Indebtedness not to exceed
$2,000,000 in the aggregate at any time outstanding.

In no case shall Liens permitted under (c), (d) or (f) secure any Indebtedness for borrowed money
or Indebtedness constituting obligations to issuers of letters of credit.

     Section 8.9 Contingent Liabilities. Either: (a) endorse, guarantee, contingently
agree to purchase or to provide funds for the payment of, or otherwise become contingently liable
upon, any 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, any other Person, except (in the case of (a) or (b) above) for (i) guaranty by the
Borrower of loans to leveraged Employee Stock Ownership Plans; and (ii) other guaranties limited as
to principal of recovery to not more than $10,000,000 in the aggregate.

     Section 8.10 Unconditional Purchase Obligations. Enter into or be a party to any
contract for the purchase or lease of materials, supplies or other property or services if such
contract requires that payment be made by it regardless of whether or not delivery is ever made of
such materials, supplies or other property or services.

     Section 8.11 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 in the ordinary course of
and pursuant to the reasonable requirements of the Borrower’s business and upon fair and reasonable
terms no less favorable to the Borrower than would obtain in a comparable arm’s-length transaction
with a Person not a Related Party.

     Section 8.12 Use of Proceeds. Permit any proceeds of the Loans to be used for
purposes other than general corporate purposes (including acquisitions, to the extent permitted
hereunder) or 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, and
furnish to any Bank, upon its request, a statement in conformity with the requirements of Federal
Reserve Form U-1 referred to in Regulation U.

     Section 8.13 Interest-bearing Debt to Total Capitalization. Permit 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.

25

 

     Section 8.14 Interest and Dividend Coverage Ratio. Permit the Interest and Dividend
Coverage Ratio for any period of four consecutive fiscal quarters to be less than 1.50 to 1.00.

ARTICLE IX EVENTS OF DEFAULT AND REMEDIES

     Section 9.1 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 or interest on the Note or any fee or other amount required to be
made to the Bank pursuant to the Loan Documents;

(b) Any representation or warranty made or deemed to have been made by or on behalf of the
Borrower by any of the Loan Documents or by or on behalf of the Borrower in any certificate,
statement, report or other writing furnished by or on behalf of the Borrower to the Bank
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 7.2 hereof or any Section of
Article VIII hereof;

(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 9.1) and such failure to
comply shall continue for thirty (30) calendar days after notice thereof to the Borrower by
the Bank;

(e) The Borrower shall become 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 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 or for a substantial part of the property thereof and
shall not be discharged within 30 days;

(f) Any bankruptcy, reorganization, debt arrangement or other proceedings under any
bankruptcy or insolvency law shall be instituted by or against the Borrower, and, if
instituted against the Borrower, shall have been consented to or acquiesced in by the
Borrower, or shall remain undismissed for 30 days, or an order for relief shall have been
entered against the Borrower, or the Borrower 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
and, if instituted against the Borrower, shall be consented to or acquiesced in by the

26

 

Borrower or shall remain for 30 days undismissed, or the Borrower shall take any corporate
action to approve institution of, or acquiescence in, such a proceeding;

(h) A judgment or judgments for the payment of money in excess of the sum of $1,000,000 in
the aggregate shall be rendered against the Borrower, and the Borrower shall not discharge
the same or provide for its discharge in accordance with its terms, or procure a stay of
execution thereof, prior to any execution on such judgments by such judgment creditor,
within 30 days from the date of entry thereof, and within said period of 30 days, or such
longer period during which execution of such judgment shall be stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal;

(i) The institution by the Borrower or any ERISA Affiliate of steps to terminate any Plan 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, in excess of $1,000,000, or the institution by the PBGC of steps to terminate any
Plan;

(j) The maturity of any Indebtedness of the Borrower (other than Indebtedness under this
Agreement) in the aggregate in excess of $5,000,000 shall be accelerated, or the Borrower
shall fail to pay any such Indebtedness (in excess of such amount) when due or, in the case
of such Indebtedness payable on demand, when demanded, or any event shall occur or condition
shall exist and shall continue for more than the period of grace, if any, applicable thereto
and 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 or to realize upon any collateral
given as security therefor;

(k) An Event of Default shall occur under the Credit Agreement (non-electrical operations);
or

(l) Any Person, or group of Persons acting in concert, that owned less than 5% of the
shares of any voting class of stock of the Borrower shall have acquired more than 25% of the
shares of such voting stock.

     Section 9.2 Remedies. If (a) any Event of Default described in Sections
9.1(e), (f) or (g) shall occur with respect to the Borrower, the Commitment
shall automatically terminate and the outstanding unpaid principal balance of the Note, the accrued
interest thereon and all other obligations of the Borrower to the Bank 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 Bank may take any or all of the following actions: (i) declare
the Commitment terminated, whereupon the Commitment shall terminate, (ii) declare that the
outstanding unpaid principal balance of the Note, the accrued and unpaid interest thereon and all
other obligations of the Borrower to the Bank under the Loan Documents to be forthwith due and
payable,

27

 

whereupon the Note, 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 Note to the contrary
notwithstanding, (iii) exercise all rights and remedies under any other instrument, document or
agreement between the Borrower and the Bank, and (iv) enforce all rights and remedies under any
applicable law.

     Section 9.3 Security Agreement in Accounts and Setoff. As additional security for
the payment of all of the Obligations, the Borrower grants to the Bank and each holder of a Note a
security interest in, a lien on, and an express contractual right to set off against, each deposit
account and all deposit account balances, cash and any other property of the Borrower now or
hereafter maintained with, or in the possession of, the Bank or such other holder of a Note. Upon
the occurrence of any Event of Default, upon written direction by the Bank to such effect, the Bank
and each such holder of a Note may: (a) refuse to allow withdrawals from any such deposit account;
(b) apply the amount of such deposit account balances and the other assets of the Borrower
described above to the Obligations; and (c) offset any other obligation of the Bank or such holder
of a Note against the Obligations; all whether or not the Obligations are then due or have been
accelerated and all without any advance or contemporaneous notice or demand of any kind to the
Borrower, such notice and demand being expressly waived.

ARTICLE X MISCELLANEOUS

     Section 10.1 No Waiver and Amendment. No failure on the part of the Bank or the
holder of the Note 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 Bank 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 Note 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 Bank or the holder of the
Note to any other or further action in any circumstances without notice or demand.

     Section 10.2 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 Bank and then such waiver or
consent shall be effective only in the specific instance and for the specific purpose for which
given.

     Section 10.4 Costs, Expenses and Taxes; Indemnification.

28

 

(a) The Borrower agrees, whether or not any Loan is made hereunder, to pay on demand: (i)
all costs and expenses of the Bank (including the reasonable fees and expenses of counsel
and paralegals for such persons who may be employees of such persons) 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 costs and expenses of the Bank incurred after the occurrence of an Event of Default in
connection with the enforcement of the Loan Documents. The Borrower agrees to pay, and hold
the Bank 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 Bank harmless from any loss or expense which may arise or be created
by the acceptance in good faith by the Bank of telephonic or other instructions for making
Loans or disbursing the proceeds thereof.

(b) The Borrower agrees to defend, protect, indemnify, and hold harmless the Bank and its
officers, directors, employees and agents (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 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, the capitalization of the Borrower,
the Commitment, the making of, management of and participation in the Loans or the use or
intended use of the proceeds of the Loans, provided that the Borrower shall have no
obligation under this Section 10.4(b) to an Indemnified Person with respect to any
of the foregoing to the extent resulting from the gross negligence 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.

(c) The obligations of the Borrower under this Section 10.4 shall survive any
termination of this Agreement.

     Section 10.5 Notices. Except when telephonic 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, telegram, telex, 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 telegram, telex

29

 

or facsimile transmission, from the first Business Day after the 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 Bank under Article II hereof shall be deemed to
have been given only when received by the Bank.

     Section 10.6 Successors. This Agreement shall be binding upon the Borrower, the Bank
and their respective successors and assigns, and shall inure to the benefit of the Borrower, the
Bank and the successors and assigns of the Bank. The Borrower shall not assign its rights or
duties hereunder without the written consent of the Bank.

     Section 10.7 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 10.8 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 10.9 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 10.10 Entire Agreement. The Loan Documents embody the entire agreement and
understanding between the Borrower and the Bank with respect to the subject matter hereof and
thereof. This Agreement supersedes all prior agreements and understandings relating to the subject
matter hereof.

     Section 10.11 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.

     Section 10.12 Governing Law. THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS
AGREEMENT AND THE NOTE 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 10.13 Consent to Jurisdiction. AT THE OPTION OF THE BANK, THIS AGREEMENT AND
THE NOTE MAY BE ENFORCED IN ANY FEDERAL COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA; AND
THE BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT
VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWER COMMENCES ANY ACTION IN ANOTHER
JURISDICTION

30

 

OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE
RELATIONSHIP CREATED BY THIS AGREEMENT, THE BANK 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 10.14 Waiver of Jury Trial. THE BORROWER AND THE BANK 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.

(signature pages follows)

31

 

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

	 	 	 	 	 	 	 
	 	 	OTTER TAIL CORPORATION, dba	 	 
	 	 	Otter TAIL POWER COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Kevin G. Moug	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Kevin G. Moug	 	 
	 

	 	Title:
	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	P.O. Box 496	 	 
	 	 	Fergus Falls, MN 56538-0496	 	 
	 	 	Attention: Mr. Kevin G. Moug	 	 
	 	 	                 Chief Financial Officer	 	 
	 	 	Telephone: (701) 451-3562	 	 
	 	 	Fax: (701) 232-4108	 	 

Signature Page 1

to Credit Agreement

 

 

	 	 	 	 	 
	 	 	U.S. BANK NATIONAL ASSOCIATION
	 
	 	 	 	 
	 

	 	By:	/s/ Delton Steel
	 

	 	 	 
	 

	 	Title:
	 	Vice President
	 
	 	 	 	 
	 	 	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 2

to Credit Agreement

 

 

EXHIBITS

	 	 	 
	Exhibit	 	Contents
	A

	 	Note
	 
	 	 
	B

	 	Compliance Certificate
	 
	 	 
	C

	 	Form of Legal Opinion
	 
	 	 
	D

	 	Assignment and Assumption
	 
	 	 
	Schedules
	 	 
	 
	 	 
	6.6

	 	Litigation
(Section 6.6)

Contingent Liabilities (Section 6.6)
	 
	 	 
	6.11

	 	Existing Liens (Sections 6.11 and 8.8)
	 
	 	 
	8.7

	 	Investments (Section 8.7)

 

 

EXHIBIT A-1

PROMISSORY NOTE

			
	$25,000,000
	 	Minneapolis, Minnesota: September 1, 2006

     FOR VALUE RECEIVED, the undersigned OTTER TAIL CORPORATION, dba OTTER TAIL POWER COMPANY, 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
Credit Agreement hereinafter referred to, the principal sum of TWENTY FIVE MILLION DOLLARS
($25,000,000), or if less, the then aggregate unpaid principal amount of the Loans (as such terms
are defined in the Credit Agreement) as may be borrowed by the Borrower from the Bank under the
Credit Agreement. All 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 Credit
Agreement. Accrued interest shall be payable on the dates specified in the 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 the Bank, at 800 Nicollet
Mall, Minneapolis, Minnesota 55402, or at such other place as may be designated by the Bank to the
Borrower in writing.

     This Note is the Note referred to in, and evidences indebtedness incurred under, a Credit
Agreement dated as of September 1, 2006 (herein, as it may be amended, modified or supplemented
from time to time, called the “Credit Agreement”) between the Borrower and the Bank, to which
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, dba	 	 
	 	 	OTTER TAIL POWER COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Kevin G. Moug	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:
	 	Chief Financial Officer	 	 

 

 

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 Credit Agreement, dated as of September 1, 2006 (as amended
from time to time, the “Credit Agreement”), between OTTER TAIL CORPORATION, dba OTTER TAIL POWER
COMPANY (the “Borrower”) and U.S. BANK NATIONAL ASSOCIATION (the “Bank”). Terms not otherwise
expressly defined herein shall have the meanings set forth in the Credit Agreement.

     As required pursuant to Section 7.1(d) of the 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 are fairly presented in all
material respects.

     2. No Default and no Event of Default, has occurred and continued.

     3. All representations and warranties of the Borrower contained in Article VI of the
Credit Agreement are true and correct, as though made on such date;

     4. The Borrower’s Long Term Debt Rating is:

	 	 	 	 	 	 	 	 	 
	 	 	 	 	Standard & Poor’s:
	 	 	                    	 
	 	 	 	 	 
	 	 	 	 
	 	 	 	 	Moody’s:
	 	 	                    .	 

     5. Covenant compliance is demonstrated as follows:

     Section 8.13 Interest-bearing Debt to Total Capitalization.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	Interest-bearing Debt:
	 	$	                    	 
	 	 	 	 	 
	 	 	 	 
	 	 	 	 	to:
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	 	 	 	Total Capitalization:
	 	$	                    	 

(Required: not greater than 0.60 to 1.00).

 

 

     Section 8.14 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).

	 	 	 	 	 
	 
	 	OTTER TAIL CORPORATION , dba	 	 
	 
	 	OTTER TAIL POWER COMPANY	 	 
	 
	 	 	 	 
	 
	 	By:	 	 
	 
	 	 
	 
	 
	 	Title:	 	 
	 
	 	 
	 
	 
	 	[chief financial officer]	 	 

 

 

Exhibit C

Opinion of Counsel

                    , 2006

U.S. Bank National Association

505 Second Avenue North

Mail Code EP-ND-0630

Fargo, ND 58102

Attention: Mr. Delton Steele

                    Vice President

Ladies and Gentlemen:

     I have acted as counsel to Otter Tail Corporation, a Minnesota corporation (the “Company”), in
connection with the transactions contemplated by that certain Credit Agreement, dated as of
September 1, 2006, entered into between the Company and U.S. Bank National Association (the “Credit
Agreement”). This opinion is being delivered to you pursuant to Section 5.1(e) of the Credit
Agreement. Capitalized terms used herein, except as otherwise specifically defined herein, are
used with the same meaning as defined in the Credit Agreement.

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

          (a) The Articles or Certificate of Incorporation of the Company;

          (b) The Bylaws of the Company;

          (c) Resolutions of the Board of Directors of the Company;

          (d) An executed copy of the Credit Agreement; and

          (e) An executed copy of the Note.

     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 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, with respect to all parties to agreements or
instruments relevant hereto other than the Company, 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 (known by me to have authority to make such
representations and certifications on behalf of the Company) and certificates of public officials.

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

     (i) The Company 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 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 in the Company’s Annual
Report or Form 10-K for the year ended December 31, 2005, and (b) enter into and perform its
obligations under the Loan Documents to which it is a party.

     (iii) The execution and delivery of the Loan Documents, the borrowing by the Company under the
Credit Agreement and the performance by the Company of its 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 the Loan Documents
have been duly executed and delivered on behalf of the Company, as applicable and constitute valid
and binding obligations of the Company, enforceable in accordance with their respective terms.

     (iv) There is no provision in (a) the Company’s Articles or Certificate of Incorporation or
Bylaws, (b) any indenture, mortgage, contract or agreement to which the Company is a party or by
which the Company or its properties are bound, (c) any law, statute, rule or regulation or (c) any
writ, order or decision of any court or governmental instrumentality binding on the Company which
would be contravened by the execution, delivery or performance by the Company 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 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 opinions expressed above are limited to the laws of the States of Minnesota and the
federal laws of the United States and 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

 

 

Schedule 6.6

Litigation (Section 6.6)

Contingent Liabilities (Section 6.6)

NONE

 

 

Schedule 6.11

Existing Liens (Sections 6.11 and 8.8)

     1. Varistar Corporation (“Varistar”) and its Subsidiaries have pledged their respective shares or
membership interests in the following subsidiaries to U.S. Bank National Association:

1. BTD MANUFACTURING, INC.

2. DMI INDUSTRIES, INC.

3. NORTHERN PIPE PRODUCTS, INC.

4. AERIAL CONTRACTORS, INC.

5. MOORHEAD ELECTRIC, INC.

6. E.W. WYLIE CORPORATION

7. T.O. PLASTICS, INC.

8. DMS HEALTH TECHNOLOGIES, INC.

9. DMS IMAGING, INC.

10. DMS LEASING, INC.

11. VINYLTECH CORPORATION

2. Pledges of such shares and membership interests secure the following indebtedness:

(a) $1,210,000 Term Note issued by the Guarantor to U.S Bank National Association (not as
Agent under the Credit Agreement, but individually, called “USB”);

(b) $750,000 Facility for issuance of letters of credit by USB for the account of the
Guarantor or its Subsidiaries;

(c) $450,000 facility for issuance of letters of credit by USB for the account of the
Guarantor or its Subsidiaries;

(d) Letters of Credit with face amounts of up to $12,215,205, which have been, or may
hereafter be, issued by U.S. Bank National Association for the account of DMI Industries,
Inc., a Subsidiary of the Guarantor; and

3. The following debt is also secured by collateral:

(a) $103,000 term loan by USB to DMI Industries, Inc. secured by certain real property and
related assets; and

(b) $61,000 term loan by USB to DMI Industries, Inc., secured by certain real property and
related assets.

 

 

Schedule 8.7

Investments (Section 8.7)

Investments as of June 30, 2006

	 	 	 	 	 
	 	 	6/30/2006	 
	Investment in Affordable Housing (OTC)
	 	$	2,531,515	 
	Investment in Loan Pools (OTP)
	 	 	525,237	 
	Investment in Otter Tail Ag (OTP)
	 	 	500,000	 
	Investment — Moorhead State Lighting (OTESCO)
	 	 	635,392	 
	Investment — Bank of Butterfield Bond Fund (OTAL)
	 	 	1,711,836	 
	Investment — Bank of Butterfield Reserve Fund (OTAL)
	 	 	1,459,183	 
	Note Receivable — SMI — Aviva
	 	 	200,000	 
	Note Receivable — DMS
	 	 	—	 
	CoBank (St Paul Bank for Coop’s)
	 	 	431,678	 
	Other Miscellaneous
	 	 	137,531	 
	 
	 	 	 	 
	 
	 	 	 
	TOTAL
	 	$	8,132,372

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}]]