SECOND AMENDMENT to Note Purchase Agreement

Exhibit 4.2

Otter Tail Corporation

Second Amendment
Dated as of October 1, 2004

to

Note Purchase Agreement
Dated as of December 1, 2001

Re: $90,000,000 6.63% Senior Notes

due December 1, 2011

Second Amendment to Note Purchase Agreement

     This Second Amendment dated as of October 1, 2004 (the or this “Second Amendment” ) to the Note Purchase Agreement dated as of December 1, 2001 is between and among Otter Tail Corporation, a Minnesota corporation (the “Company” ), and each of the institutions which is a signatory to this Second Amendment (collectively, the “Noteholders” ).

Recitals:

     A. The Company and each of the Noteholders have heretofore entered into the Note Purchase Agreement dated as of December 1, 2001, as amended by a First Amendment thereto dated as of December 1, 2002 (as heretofore amended, the “Note Purchase Agreement” ). The Company has heretofore issued the $90,000,000 6.63% Senior Notes due December 1, 2011 (the “Notes” ) dated December 27, 2001 pursuant to the Note Purchase Agreement. The Noteholders are the holders of 100% of the outstanding principal amount of the Notes.

     B. The Company has requested that the Note Purchase Agreement be amended to, among other things, (1) eliminate the Investment Grade Put Event set forth in Section 8.3 of the Note Purchase Agreement and, in place thereof, add a Transfer of Utility Assets Put Event, (2) eliminate the Company’s option in clause (B) of Section 10.5(d) to use the Net Proceeds Amount from a Transfer of Utility Assets to be applied to a Utility Property Reinvestment Application and, in its place, permit the Company to use such Net Proceeds Amount to be applied to a Debt Prepayment Application, with any remaining Net Proceeds Amount being applied to a Utility Property Reinvestment Application and (3) provide that the Company deposit into a segregated investment account a minimum amount of Net Proceeds Amount from Transfers of Utility Assets during any consecutive four fiscal quarter period of the Company in which the Disposition Value of such Transfers has exceeded 5% of Total Utility Plant, each as more fully set forth herein.

     C. The Company and the Noteholders now desire to amend the Note Purchase Agreement to address those items in B above in the respects, but only in the respects, hereinafter set forth.

     E. Capitalized terms used herein shall have the respective meanings ascribed thereto in the Note Purchase Agreement (as amended hereby) unless herein defined or the context shall otherwise require.

     Now, therefore, upon the full and complete satisfaction of the conditions precedent to the effectiveness of this Second Amendment set forth in §3.1 hereof, and in consideration of good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the Company and the Noteholders do hereby agree as follows:

Section 1. Amendments.

      Section 1.1. Section 8.3 of the Note Purchase Agreement shall be and is hereby amended in its entirety to read as follows:

           “Section 8.3. Transfer of Utility Assets Put Event. (a) In the event that a Transfer of Utility Assets Put Event shall occur, the Company will give written notice (a “Company Notice” ) of such fact not more than 15 days after the occurrence of such event to all holders of the Notes. The Company Notice shall (i) describe the facts and circumstances of the Transfer of Utility Assets Put Event in reasonable detail, (ii) describe the Debt of the Company then outstanding, (iii) refer to this Section 8.3 and the right of the holders of the Notes to require the Company to purchase their Notes on the terms and conditions provided for herein upon the occurrence of a Transfer of Utility Assets Put Event, and (iv) contain an offer by the Company to purchase all of the outstanding Notes in full together with unpaid accrued interest to the date of purchase and the Make-Whole Amount. Each holder of the Notes shall have the right to accept such offer and require purchase of the Notes held by such holder in full by written notice to the Company given within 60 days following receipt of the Company Notice. On the date designated in such holder’s notice (which shall be not less than 15 days nor more than 30 days after the date such notice is delivered to the Company), the Company shall purchase all Notes held by such holder at 100% of the principal amount of such Notes, together with unpaid accrued interest thereon to the date of purchase, and the Make-Whole Amount, if any. Failure to respond by a holder of the Notes shall constitute an acceptance of such offer and the date of purchase shall be the 10th Business Day following the end of the 60 day period referred to in the preceding sentence. The obligation of the Company to give notice in accordance with this subsection (a) shall remain in effect so long as any Notes remain outstanding.

          (b) In the event that a holder of the Notes shall have rejected the Company’s offer of purchase of its Notes in connection with a Transfer of Utility Assets Put Event, such holder shall have the right to require the Company to purchase its Notes at a Subsequent Transfer of Utility Assets Put Event. The provisions in subsection (a) of this Section 8.3 shall apply upon the occurrence of Subsequent Transfer of Utility Assets Put Event.

          (c) For purposes of this Section 8.3, “ Transfer of Utility Assets Put Event” shall mean, and occur on, the first date on which the Disposition Value of all property that was the subject of any Transfer of Utility Assets (i) occurring in any Four Quarter Period which begins on or after July 1, 2004, exceeds 15% of Total Utility Plant as of the end of the then most recently ended fiscal year of the Company, or (ii) occurring after July 1, 2004 through the date of determination on a cumulative basis exceeds 25% of Total Utility Plant as of the end of the then most recently ended fiscal year of the Company; and “ Subsequent Transfer of Utility Assets Put Event” shall mean, and occur on, the date on which the Disposition Value of all property that was the subject of any

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Transfer of Utility Assets occurring after the Transfer of Utility Assets Put Event through the date of determination exceeds 10% of Total Utility Plant as of the end of the then most recently ended fiscal year of the Company. All Transfers of Utility Assets, regardless of whether the Net Proceeds Amount therefrom were used for a Utility Property Reinvestment Application or a Debt prepayment Application in accordance with the terms of Section 10.5(d), shall be included in the determination of the occurrence of a Transfer of Utility Assets Put Event and Subsequent Transfer of Utility Assets Put Event, as the case may be.”

      Section 1.2. Section 10.5(c) of the Note Purchase Agreement shall be and is hereby amended by inserting the phrase “Debt Prepayment Application and/or a” and the phrase “in accordance with the terms of subsection (d) of this Section 10.5” immediately before and after, respectively, the phrase “Utility Property Reinvestment Application within 180 days after such Transfer” appearing therein.

      Section 1.3. Section 10.5 of the Note Purchase Agreement shall be and is hereby further amended by deleting subsection (d) therein in its entirety and adding a new subsection (d) and (e) thereto to read as follows:

          “(d) immediately after giving effect to a Transfer of Utility Assets, the Disposition Value of all property that was the subject of any Transfer of Utility Assets (i) occurring in the period of four fiscal quarters of the Company then next ending would not exceed 10% of Total Utility Plant (the “10% Four Quarter Limit” ) as of the end of the then most recently ended fiscal year of the Company, and (ii) occurring after the Closing Date through the date of determination would not exceed 25% of Total Utility Plant (the “25% Cumulative Limit” ) as of the end of the then most recently ended fiscal year; provided , that if the Net Proceeds Amount for any Transfer is applied to a Utility Property Reinvestment Application within 180 days after such Transfer, then such Transfer, only for purposes of compliance with subsection (d) of this Section 10.5 as of a date on or after the Net Proceeds Amount is so applied, shall be deemed not to be a Transfer of Utility Assets; provided, however , that if the Disposition Value of any property subject to a Transfer of Utility Assets when added to the Disposition Value of other Transfers of Utility Assets pursuant to clause (i) or (ii) of this subsection (d) would be in excess of either or both of the applicable 10% Four Quarter Limit or the 25% Cumulative Limit, then such Transfer shall be deemed not to be a Transfer of Utility Assets for purposes of compliance with subsection (d) of this Section 10.5 only if the Net Proceeds Amount for such Transfer is (A) deposited upon receipt by the Company in a segregated investment account with an institution which is not a creditor of the Company or any of its Subsidiaries (such account being referred to herein as the “ Utility Assets Proceeds Account ”) and kept therein until application under the following clause (B) and (B) applied directly to a Debt Prepayment Application within 180 days after such Transfer and any remaining Net Proceeds Amount thereafter (such remaining Net Proceeds Amount resulting from one or more holders electing not to receive a Debt Prepayment Application) are applied to a Utility Property Reinvestment Application within 180 days after such Transfer, provided , for the purposes of the foregoing clauses

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(A) and (B), any Put Event Funds deposited in the Utility Assets Proceeds Account pursuant to Section 10.5(e) in connection with a Transfer with respect to which a deposit is required under this subsection (d), may be used towards satisfying the deposit requirement in clause (A) hereof and, subject to the provisions of Section 10.5(e), may be applied to a Debt Prepayment Application and Utility Property Reinvestment Application in accordance with clause (B) hereof; and

          (e) if during any Four Quarter Period which begins on or after July 1, 2004, the Net Proceeds Amount from any Transfer of Utility Assets when added to the Net Proceeds Amount from any other such Transfers during such Four Quarter Period exceeds 5% of Total Utility Plant as of the most recently ended fiscal year, such Net Proceeds and any other Net Proceeds Amounts from any Transfers occurring thereafter during such Four Quarter Period (collectively, the “Put Event Funds” ) shall be deposited into the Utility Assets Proceeds Account and such Put Event Funds together with any other funds in the Utility Assets Proceeds Account (collectively, all such funds so deposited or in the Utility Assets Proceeds Account being “Available Funds” ) shall be used to the extent of a Pro Rata Part thereof for the repurchase of any Notes pursuant to Section 8.3 in connection with either a Transfer of Utility Assets Put Event or a Subsequent Transfer of Utility Assets Put Event (collectively, the “Put Events” or individually a “Put Event” ) with the remaining balance of such Available Funds to be used to prepay other Debt of the Company, provided , that if any such Put Event occurs after an offer has been made by the Company for a Debt Prepayment Application, the Available Funds needed to consummate such Debt Prepayment Application shall first be used for such purpose and any remaining Available Funds shall be used to the extent of a Pro Rata Part thereof for the repurchase of Notes resulting from such Put Event pursuant to Section 8.3 with the remaining balance of such Available Funds to be used to prepay other Debt of the Company, provided, further that (i) so long as no Put Event has occurred, Put Event Funds shall be released to the Company at the end of the third fiscal quarter next following the fiscal quarter in which such Put Event Funds were so deposited unless required for application pursuant to Section 10.5(d) and (ii) if a Put Event was exercise