Legalectric

OTTER TAIL CORPORATION
3203 32^nd AVENUE S.W.
FARGO, NORTH DAKOTA 58106-9156

$50,000,000 5.778% Senior Note due November 30, 2017

Dated as of
February 23, 2007

Cascade Investment L.L.C.

Ladies and Gentlemen:

     OTTER TAIL CORPORATION, a Minnesota corporation (the “Company”), agrees with CASCADE INVESTMENT L.L.C., a Washington limited liability company (the “Purchaser”) as follows:

ARTICLE I
AUTHORIZATION OF NOTE

   Section 1.1 Authorization of Note. The Company will authorize the issue and sale of its 5.778% Senior Note due November 30, 2017 in the aggregate principal amount of $50,000,000 (the “Note,” such term to include any note or notes issued in substitution therefor pursuant to Article XIII of this Agreement). The Note sh all be substantially in the form set out in Exhibit 1 with such changes therefrom, if any, as may be approved by the Purchaser and the Company. Certain capitalized terms used in this Agreement are defined in Annex A; references to a “Schedule” or an “Exhibit” are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement.

     Section 1.2 Interest Rate; Adjustment to Interest Rate.

     (a) The Note shall bear interest at a rate of 5.778% per annum (the “Interest Rate”); provided, however, that if, after the date hereof but on or prior to the Closing, a rating assigned by either Moody’s or S&P to the long-term senior unsecured indebtedness of the Company is downgraded below “Baa3” or “BBB-,” respectively, then the Interest Rate will increase by 0.50% for each rating notch downgrade below “Baa3” by Moody’s, and 0.50% for each rating notch downgrade below “BBB-” by S&P. For illustration purposes only, if each of Moody’s and S&P downgrades its rating of the Company’s long-term senior unsecured indebtedness by one rating notch, the Interest Rate will be increased by 1.0%.

     (b) If, after a downgrade as described in the first sentence of Section 1.2(a) but on or prior to the Closing, a rating assigned by either Moody’s or S&P to the long-term senior unsecured indebtedness of the Company is upgraded, then the Interest Rate will decrease by 0.50% for each rating notch upgrade by each of Moody’s and S&P. For illustration purposes only, if, Moody’s and S&P each downgrade their respective ratings assigned to the Company’s long-term senior unsecured indebtednes s by one rating notch after the date hereof but on or prior to the Closing (resulting in a 1.0% increase in the Interest Rate pursuant to Section 1.2(a)), but then, on or prior to the Closing upgrade their respective ratings of such indebtedness by one rating notch each, the Interest Rate, as previously increased, will be decreased by 1.0%.

     (c) Notwithstanding the provisions of Sections 1.2(a) and (b), in no event shall the Interest Rate be (i) less than 5.778% or (ii) adjusted following the Closing.

     Section 1.3 Subsidiary Guarantors. The payment by the Company of all amounts due with respect to the Note and the performance by the Company of its obligations under this Agreement described in Article II below will be unconditionally guaranteed by all Subsidiaries designated on Schedule 5.4 as Guarantors (the “Subsidiary Guarantors”) under the Guaranty Agreement dated as of December 3, 2007 (the “Guaranty Agreement”) from such Subsidiary Guarantors, which Guaranty Agreement shall be in the form attached hereto as Exhibit 2.