exhibit_10m8.htm


    Exhibit
10(m)8


      ANNEX
A

      TO

      ALLETE
EXECUTIVE LONG-TERM INCENTIVE COMPENSATION PLAN

      PERFORMANCE
SHARE GRANT

      


      1.           Further Terms and Conditions
of Performance Shares.  The Grant of Performance Shares
evidenced by the Grant to which this is annexed is subject to the following
additional terms and conditions:

      


      (a)           Dividend
Equivalents.  The Participant shall receive Dividend
Equivalents with respect to the number of Performance Shares subject to the
Grant.  Dividend Equivalents shall be calculated and credited to the
Participant at the end of the Performance Period.  The Dividend
Equivalents shall be in the form of additional Performance Shares, which shall
be added to the number of Performance Shares subject to the Grant, and which
shall equal the number of Shares (including fractional Shares) that could be
purchased on the dividend payment dates, based on the closing sale price as
reported in the consolidated transaction reporting system on that date, with
cash dividends that would have been paid on Performance Shares, if such
Performance Shares were Shares.

      


      (b)           Satisfaction of
Goals.  At the end of the Performance Period, the Executive
Compensation Committee (the “Committee”) shall determine the extent to which the
Performance Goals have been met.  The Participant will not be credited
with any Performance Shares if the threshold level has not been met. Subject to
the provisions of subsection (d) hereof and to provisions in the Plan for change
in control, percentages of the Performance Share grant shall be credited to the
Participant as follows:  If the threshold level has been met, 50% of
the Performance Shares (as increased by the Dividend Equivalents) shall be
credited to the Participant.  If the target level has been met, 100%
of the Performance Shares (as increased by the Dividend Equivalents) shall be
credited to the Participant.  If the superior level has been met, 200%
of the Performance Shares (as increased by the Dividend Equivalents) shall be
credited to the Participant.  Straight line interpolation will be used
to determine earned awards based on achievement of goals between the threshold,
target and superior levels.

      


      (c)           Payment.  Subject
to the provisions of subsection (d) hereof and to provisions in the Plan for
change in control, Performance Shares as determined by the Committee according
to subsection (b) hereof shall be paid out 100% (as increased by the Dividend
Equivalents) within two and one half months after the end of the Performance
Period and after the Committee has determined the extent to which Performance
Goals have been met.  Payment shall be made, after withholding
Performance Shares equal in value to the Participant’s income tax obligation via
a deposit of ALLETE common stock into an Invest Direct account. Performance
Share awards shall not vest until paid.

      


      (d)           Payment Upon Death,
Retirement or Disability; Forfeiture of Unvested Performance Shares Upon
Demotion, Unsatisfactory Job Performance or Other Separation from
Service.

      


      
        	
                 
      

              	
                (1)

              	
                If
      during a Performance Period the Participant (i) Retires, (ii) dies while
      employed by a Related Company, or (iii) becomes Disabled, the Participant
      (or the Participant’s beneficiary or estate) shall receive a payment of
      any Performance Shares (as increased by the Dividend Equivalents) after
      the end of the Performance Period, promptly after the Committee has
      determined the extent to which Performance Goals have been
      met.  The payment shall be prorated based upon the number of
      whole calendar months within the Performance Period which had elapsed as
      of the date of death, Retirement or Disability in relation to the number
      of calendar months in the full Performance Period. A whole month is
      counted in the calculation if the Participant was in the position as of
      the 15th
      of the month.

              


      

      


      
        	
                 
      

              	
                (2)

              	
                If
      after the end of a Performance Period, but before any or all Performance
      Shares have been paid, as specified in subsection (d)(1) above, the
      Participant Retires, dies or becomes Disabled, the Participant (or the
      Participant’s beneficiary or estate) shall be entitled to a full payout of
      all Performance Shares (as increased by the Dividend Equivalents), which
      shall be paid out at the next scheduled performance share payment
      date.

              


      

      


      
        	
                 
      

              	
                (3)

              	
                If
      prior to payment of all Performance Shares, the Participant is demoted, or
      ALLETE or a Business Unit determines, in its sole discretion, that the
      Participant’s job performance is unsatisfactory, ALLETE reserves the right
      to cancel or amend the Participant’s grant relating to any unpaid
      Performance Shares, with the result that some portion or all of the
      Participant’s unpaid Performance Shares will be
  forfeited.

              


      

      


      
        	
                 
      

              	
                (4)

              	
                If
      the Participant has a Separation from Service for any reason other than
      those specified in subsection (d)(1) above, all Performance Shares and
      related Dividend Equivalents to the extent not yet paid shall be forfeited
      on the date of such Separation from Service, except as otherwise provided
      by the Committee.

              


      

      


      2.           Ratification of
Actions.  By receiving the Grant or other benefit under the
Plan, the Participant and each person claiming under or through Participant
shall be conclusively deemed to have indicated the Participant’s acceptance and
ratification of, and consent to, any action taken under the Plan or the Grant by
ALLETE, the Board or the Committee.

      


      3.           Notices.  Any
notice hereunder to ALLETE shall be addressed to ALLETE, 30 West Superior
Street, Duluth, Minnesota 55802, Attention:  Manager - Executive
Compensation and Employee Benefits, Human Resources, and any notice hereunder to
the Participant shall be directed to the Participant’s address as indicated by
ALLETE’s records, subject to the right of either party to designate at any time
hereafter in writing some other address.

      


      4.           Governing Law and
Severability.  To the extent not preempted by the Federal law,
the Grant will be governed by and construed in accordance with the laws of the
State of Minnesota, without regard to its conflicts of law
provisions.  In the event any provision of the Grant shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Grant, and the Grant shall be construed and enforced
as if the illegal or invalid provision had not been included.

      


      5.           Definitions.  Capitalized
terms not otherwise defined herein shall have the meanings given them in the
Plan.  The following definitions apply to the Grant and this Annex
A:

      


      (a)           “Code” means the Internal
Revenue Code of 1986, as it may be amended from time to time.

       

      (b)           “Disability” or “Disabled” means a physical or
mental condition in which the Participant is:

       

      
        	
                 
      

              	
                (i)

              	
                unable
      to engage in any substantial gainful activity by reason of any medically
      determinable physical or mental impairment that can be expected to result
      in death or can be expected to last for a continuous period of not less
      than twelve (12) months;

              


      

       

      
        	
                 
      

              	
                (ii)

              	
                by
      reason of any medically determinable physical or mental impairment which
      can be expected to result in death or can be expected to last for a
      continuous period of not less than twelve (12) months, receiving income
      replacement benefits for a period of not less than three (3) months under
      the Employer’s accident and health
plan;

              


      

       

      
        	
                 
      

              	
                (iii)

              	
                determined
      to be totally disabled by the Social Security Administration;
      or

              


      

       

      
        	
                 
      

              	
                (iv)

              	
                disabled
      pursuant to an Employer-sponsored disability insurance arrangement
      provided that the definition of disability applied under such disability
      insurance program complies with the foregoing definition of
      Disability.

              


      

       

      (c)           “Related Company” means ALLETE,
Inc. and all persons with whom the ALLETE, Inc. would be considered a single
employer under Code section 414(b) (employees of controlled group of
corporations), and all persons with whom such person would be considered a
single employer under Code section 414(c) (employees of partnerships,
proprietorships, etc., under common control); provided that in applying Code
sections 1563(a)(1), (2), and (3) for purposes of determining a controlled group
of corporations under Code section 414(b), the language “at least 50 percent” is
used instead of “at least 80 percent” each place it appears in Code sections
1563(a)(1), (2), and (3), and in applying Treasury Regulations section
1.414(c)-2 for purposes of determining trades or businesses (whether or not
incorporated) that are under common control for purposes of Code section 414(c),
“at least 50 percent” is used instead of “at least 80 percent” each place it
appears in Treasury Regulations section 1.414(c)-2.

      


      (d)           “Retirement” or “Retires” means Separation from
Service, for reasons other than death or Disability, on or after attaining
normal retirement age or early retirement age as defined in the most applicable
qualified retirement plan sponsored by the Related Company that
employed  the Participant immediately preceding the Separation from
Service, without regard to whether the Participant is a participant in such
plan, or if the employer Related Company does not sponsor such retirement plan,
on or after attaining Normal Retirement Age or Early Retirement Age as defined
in the Minnesota Power and Affiliated Companies Retirement Plan A, without
regard to whether the Participant is a participant under the Minnesota Power and
Affiliated Companies Retirement Plan A.

      


      (e)           “Separation from Service” means
that the Participant terminates employment within the meaning of Treasury
Regulations section 1.409A-1(h) and other applicable guidance with all Related
Companies.  Whether a termination of employment has occurred is
determined under the facts and circumstances, and a termination of employment
shall occur if all Related Companies and the Participant reasonably anticipate
that no further services shall be performed after a certain date or that the
level of bona fide services the Participant shall perform after such date (as an
employee or an independent contractor) shall permanently decrease to no more
than 20 percent of the average level of bona fide services performed (whether as
an employee or an independent contractor) over the immediately preceding
36-month period (or the full period of services to the Related Companies if the
Participant has been providing services to the Related Companies less than 36
months).  A Participant shall not be considered to separate from
service during a bona fide leave of absence for less than six (6) months or
longer if the Participant retains a right to reemployment with any Related
Company by contract or statute.  With respect to disability leave, a
Participant shall not be considered to separate from service for 29 months
unless the Participant otherwise terminates employment or is terminated by all
Related Companies.