exhibit_10i4.htm


    Exhibit
10(i)4


      ALLETE 2008 Form 10-K


      


      


      


      


      


      


      ALLETE
AND AFFILIATED COMPANIES

       

      


       

      SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN

       

       

      (As
Amended and Restated Effective January 1, 2009)

       

       

       

       

       

       

       


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      TABLE
OF CONTENTS

       

      
        
          
            
              
                
                  	 
      	 
      	
                          PAGE

                        
	
                          SECTION
      1

                        	
                          ESTABLISHMENT
      AND PURPOSE

                        	
                          1

                        
	 
      	
                          1.1

                        	
                          Establishment
      of Plan

                        	
                          1

                        
	 
      	
                          1.2

                        	
                          Purpose
      of the Plan

                        	
                          5

                        
	 
      	 
      	 
      	 
      
	
                          SECTION
      2

                        	
                          DEFINITIONS

                        	
                          5

                        
	 
      	
                          2.1

                        	
                          Definitions

                        	
                          5

                        
	 
      	
                          2.2

                        	
                          Gender
      and Number

                        	
                          8

                        
	 
      	 
      	 
      	 
      
	
                          SECTION
      3

                        	
                          ELIGIBILITY
      AND PARTICIPATION

                        	
                          8

                        
	 
      	
                          3.1

                        	
                          Eligibility

                        	
                          8

                        
	 
      	
                          3.2

                        	
                          Participation

                        	
                          9

                        
	 
      	
                          3.3

                        	
                          No
      Guarantee of Employment

                        	
                          10

                        
	 
      	 
      	 
      	 
      
	
                          SECTION
      4

                        	
                          BENEFITS

                        	
                          10

                        
	 
      	
                          4.1

                        	
                          Annual
      Makeup Award

                        	
                          11

                        
	 
      	
                          4.2

                        	
                          Salary
      Deferral

                        	
                          12

                        
	 
      	
                          4.3

                        	
                          Bonus
      Deferral

                        	
                          12

                        
	 
      	
                          4.4

                        	
                          Severance
      Deferral

                        	
                          12

                        
	 
      	
                          4.5

                        	
                          Non-Qualified
      Stock Option Gain Deferral

                        	
                          12

                        
	 
      	
                          4.6

                        	
                          Retirement
      Benefit

                        	
                          13

                        
	 
      	
                          4.7

                        	
                          Benefit
      Allocations and Maintenance of Accounts

                        	
                          14

                        
	 
      	
                          4.8

                        	
                          Date
      of Benefit Commencement

                        	
                          15

                        
	 
      	
                          4.9

                        	
                          Form
      of Benefit Payment - Executive Deferral Account

                        	
                          17

                        
	 
      	
                          4.10

                        	
                          Form
      of Payment -  Retirement Benefits

                        	
                          18

                        
	 
      	
                          4.11

                        	
                          Benefit
      Payments Upon Participant’s Death

                        	
                          18

                        
	 
      	
                          4.12

                        	
                          Benefit
      Payment Upon Disability

                        	
                          20

                        
	 
      	
                          4.13

                        	
                          Benefit
      Payments Upon Termination Other Than Retirement, Death or
      Disability

                        	
                          20

                        
	 
      	
                          4.14

                        	
                          Hardship
      and Unscheduled Benefit Payments

                        	
                          20

                        
	 
      	
                          4.15

                        	
                          Cessation
      of Deferrals Permitted by IRS Notice 2005-1

                        	
                          21

                        
	 
      	
                          4.16

                        	
                          Elections
      Permitted by IRS Notice 2005-1

                        	
                          22

                        
	 
      	 
      	 
      	 
      
	
                          SECTION
      5

                        	
                          ADMINISTRATION

                        	
                          22

                        
	 
      	
                          5.1

                        	
                          Administration
      of Plan

                        	
                          22

                        
	 
      	
                          5.2

                        	
                          Uniform
      Rules

                        	
                          23

                        
	 
      	
                          5.3

                        	
                          Notice
      of Address

                        	
                          24

                        
	 
      	
                          5.4

                        	
                          Correction
      of Errors

                        	
                          24

                        
	 
      	
                          5.5

                        	
                          Claims
      Procedure

                        	
                          24

                        
	 
      	
                          5.6

                        	
                          Change
      of Law

                        	
                          27

                        
	 
      	
                          5.7

                        	
                          Tax
      Withholding

                        	
                          28

                        
	 
      	
                          5.8

                        	
                          Generation-Skipping
      Tax

                        	
                          28

                        
	 
      	 
      	 
      	 
      
	
                          SECTION
      6

                        	
                          GENERAL
      PROVISIONS

                        	
                          29

                        
	 
      	
                          6.1

                        	
                          Nonassignability

                        	
                          29

                        
	 
      	
                          6.2

                        	
                          Incompetency

                        	
                          29

                        
	 
      	
                          6.3

                        	
                          Employment
      Rights

                        	
                          30

                        
	 
      	
                          6.4

                        	
                          No
      Individual Liability

                        	
                          30

                        
	 
      	
                          6.5

                        	
                          Illegality
      of Particular Provision

                        	
                          30

                        
	 
      	
                          6.6

                        	
                          Contractual
      Obligations

                        	
                          30

                        
	 
      	
                          6.7

                        	
                          Counterparts

                        	
                          31

                        
	 
      	
                          6.8

                        	
                          Evidence

                        	
                          31

                        
	 
      	
                          6.9

                        	
                          Action
      by Company

                        	
                          31

                        
	 
      	
                          6.10

                        	
                          Notice

                        	
                          31

                        
	 
      	 
      	 
      	 
      
	
                          SECTION
      7

                        	
                          AMENDMENT
      AND TERMINATION

                        	
                          31

                        
	 
      	
                          7.1

                        	
                          Amendment and Termination

                        	
                          31

                        
	 
      	
                          7.2

                        	
                          Reorganization
      of the Company

                        	
                          32

                        
	 
      	
                          7.3

                        	
                          Prohibition
      on Material Modifications

                        	
                          32

                        
	 
      	 
      	 
      	 
      
	
                          SECTION
      8

                        	
                          APPLICABLE
      LAWS

                        	
                          32

                        
	 
      	
                          8.1

                        	
                          Applicable Laws

                        	
                          32

                        


                

              

            

          

        

      

       

      
        
           


        

        
           


          
            

          

        

        
           


        

      


      


      ALLETE
AND AFFILIATED COMPANIES

       

      SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN

       

      (As
Amended and Restated

       

      Effective
January 1, 2009)

       

              SECTION
1.       ESTABLISHMENT AND
PURPOSE

       

      
        	
                1.1  

              	
                Establishment
      of Plan

              


      

       

      ALLETE,
Inc., formerly MINNESOTA POWER & LIGHT COMPANY (the “Company” and also
sometimes “ALLETE”) established, effective as of July 1, 1980, a
Supplemental Retirement Plan for eligible executives of the Company, such Plan
to be known as the SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (THE “PLAN”). The Plan
was established in order to provide supplemental current or retirement benefits
payable as provided hereafter solely from the general assets of the Company. The
Plan is intended to be exempt from the participation, vesting, funding, and
fiduciary requirements of Title 1 of the Employee Retirement Income Security Act
of 1974.

       

      Effective
as of January 1, 1981, the Plan was amended to include compensation attributable
to the Company’s Incentive Compensation Plan in determining benefits under this
Plan.

       

      Effective
as of January 1, 1982, the Plan was amended to change the manner in which
Incentive Awards are accounted for when determining benefits payable at
retirement under Section 4.6.

       

      Effective
December 1, 1982, the Plan was amended to change the deferral and cash payment
options of the Plan.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      The Plan
was amended including revisions through and including May 10, 1983, and restated
in its entirety as of January 1, 1983. The revisions included a provision to
provide benefits that are above the limitations under Section 415 of the
Internal Revenue Code.

       

      Effective
January 1, 1984, the Plan was amended to provide for a predetermined
interest rate of 10.5% to be used in determining the value of certain benefits
under the Plan.

       

      Effective
January 1, 1987, the Plan was amended to provide for two additional investment
choices for monies deferred under the Plan and to make other minor changes to
the Plan.

       

      Effective
August 1, 1987, the Plan has been amended to provide for a fixed rate of return
of 8% under Section 4.15 for deferral elections made after that date rather than
a return that is the greater of 10.5% or the Company’s actual overall percentage
return on capital, and to make a minor change in the Plan name.

       

      Effective
May 1, 1988, the Plan was amended so that benefits under Subsections 4.1(c) and
(d) of the 1988 Plan document are available only to active Participants who were
age 60 or older as of said date.

       

      Effective
November 1, 1988, the Plan has been amended to make revisions in
certain discretions available to the Company and to eligible
Participants.

       

      Effective
January 1, 1990, the Plan has been amended to remove Participant choice with
respect to the payment of benefits under Subsection 4.1(b). The Plan has also
been amended to eliminate the makeup of the 2% CORE benefits, which were
eliminated under the Supplemental Retirement Plan (SRP) to account for the
Employee Stock Ownership Plan (ESOP), and to provide for a makeup of the
Employee Stock Ownership Plan Partnership account allocation contribution. The
Plan was also amended to eliminate the benefits previously described in
Subsections 4.1(c) and (d) of the 1988 legal plan document.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      Effective
August 1, 1992, the Plan was amended to change the date Retirement Benefits are
due and payable from the last day of the month to the first day of the
month.

       

      Effective
March 1, 1994, the Plan was amended to calculate the monthly benefit provided
under Section 4.6 using a final average earnings calculation which combines
Results Sharing with Incentive Compensation.

       

      Effective
August 1, 1994, the Plan was amended at Section 3.1 to eliminate the
eligibility option of annual compensation in excess of $100,000, to increase
voluntary deferrals, to provide for a present value calculation at Subsection
4.1(d), to change options for measuring indexes for monies deferred under the
Plan, and to make other minor administrative changes.

       

      Effective
January 1, 1995, the Plan was amended to suspend benefit payments when a
Participant is re-employed by the Company in a regular, full-time
position.

       

      Effective
January 1, 1997, the Plan was amended to allow for Participants to change the
duration of the distribution period.

       

      Effective
June 17, 1997, the Plan was amended to credit accounts during distribution of
benefits with the Company’s return on capital fixed rate of 8%.

       

      Effective
July 1, 1998, the Plan was amended to combine deferred amounts into a single
Executive Deferral Account.

       

      Effective
January 1, 1999, the Plan was amended to allow participation by those employees
who receive a management salary.

       

      Effective
January 1, 2001, the Plan was amended to provide that the Executive Deferral
Account be distributed pursuant to the Participant’s election in the event of
death, to distribute account balances of less than $10,000 in a lump sum, and to
change the name of the Plan to the ALLETE Supplemental Executive Retirement
Plan.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      Effective
January 1, 2002 the Plan was amended to allow the choice of a life or joint and
survivor annuity for Retirement Benefits, to eliminate deferrals which exceeded
limitations imposed by Code Section 415, to allow unscheduled in-service
withdrawals, to remove the limitation on deferrals of annual salary, and to
provide a supplemental tax benefit for participants in the event that they are
terminated due to a change in control, and to reflect the merger of the
Supplemental Retirement Plan and the Employee Stock Ownership Plan into the
Retirement Savings and Stock Ownership Plan.

       

      Effective
January 20, 2003, deferrals of stock option gains were eliminated.

       

      Effective
December 1, 2003, the termination of a Participant is clarified to include the
sale of a Participant’s employer, but not the separation of a Participant’s
employer from the Company through a stock dividend.

       

      Effective
January 1, 2005, the Plan was amended (1) to reflect the cessation of further
deferrals thereunder after 2004; (2) to provide Plan Participants with the
opportunity to revoke their deferral elections for their 2004 bonuses and 2005
salary and make new deferral elections for their 2005 bonuses; and (3) to the
extent that any such deferral elections are not so revoked, to redirect the
deferral of 2004 deferred bonuses, 2005 deferred salary, and 2005 deferred
bonuses to the ALLETE and Affiliated Companies Supplemental Executive Retirement
Plan II.

       

      Effective
October 1, 2006, the Plan was amended to eliminate the supplemental tax benefit
for Participants in the event that they are terminated due to a change in
control.

       

      Effective
January 1, 2007, the Plan was amended to identify the interest rate(s)
applicable to the calculation of a monthly annuity with respect to Executive
Deferral Account distributions.  The Plan was further amended to
establish the 15-year monthly annuity as the default form of Retirement Benefit
and the life annuity as the optional form of Retirement Benefit.  In
addition, a Participant who was eligible for a retirement benefit under both
this Plan and SERP II was required to elect the same form of retirement benefit
under both this Plan and SERP II.

       

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      Effective
January 1, 2009, the Plan was amended (1) to eliminate the requirement that a
Participant who was eligible for a Retirement Benefit under both this Plan and
SERP II was required to elect the same form of Retirement Benefit under both
this Plan and SERP II and (2) to conform certain administrative provisions in
this Plan to the administrative provisions in SERP II.

       

      
        	
                1.2  

              	
                Purpose
      of the Plan

              


      

       

      It is the
purpose of this Plan to provide eligible executives with benefits that will
compensate them for limitations which apply to the Minnesota Power and
Affiliated Companies Flexible Compensation Plan, Minnesota Power and Affiliated
Companies Retirement Savings and Stock Ownership Plan (sometimes hereinafter the
“Retirement Savings and Stock Ownership Plan” or “RSOP”), Minnesota Power and
Affiliated Companies Retirement Plan A and to provide a benefit which includes
compensation attributable to the ALLETE Executive Annual Incentive Plan
(sometimes hereinafter the “Annual Incentive Plan”) and Other Awards as though
such awards were eligible for benefit plans which are qualified under Section
401(a) and (k) of the Code. The Plan also provides for deferral of salary and
annual and long-term incentive compensation awards.

       

              SECTION
2.          DEFINITIONS

       

      
        	
                2.1  

              	
                Definitions

              


      

       

      Whenever
used in the Plan, the following terms shall have the respective meanings set
forth below, unless otherwise expressly provided herein, and when the defined
meaning is intended, the term is capitalized:

       

      
        	
                (A)  

              	
                “Annual Incentive Award”
      means the annual award received by a Participant under
      the  ALLETE Executive Annual Incentive Plan or any predecessor
      plan.

              


      

       

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      
        	
                (B)  

              	
                “Change in Control”
      means change of control of ALLETE, Inc. as defined in the ALLETE Executive
      Long Term Incentive Compensation
Plan.

              


      

       

      
        	
                (C)  

              	
                “Committee” means the
      the Employee Benefit Plans Committee appointed by the Board or delegates
      of the Employee Benefit Plans Committee with authority to administer the
      Plan as provided under Section 5.1.

              


      

       

      
        	
                (D)  

              	
                “Company” means ALLETE,
      Inc., and any other affiliated company which adopts this Plan by action of
      its Board of Directors and is consented to by the Compensation Committee
      of the ALLETE Board of Directors. A list of such companies shall be
      maintained by ALLETE.

              


      

       

      
        	
                (E)  

              	
                “Compensation” means the
      Participant’s earnings during a calendar year, before any reduction
      pursuant to Code Sections 125, 132(f)(4), or 401(k).  It does
      not include overtime compensation, if any, bonuses, Annual Incentive
      Awards and Other Awards, expenses, allowances, commission payments (except
      when regular compensation consists wholly or in part of commissions, in
      which case commission payments are included), employer contributions or
      awards under this Plan or other employee benefit plans, imputed income
      (whether such imputed income is from vehicle use, life insurance premiums,
      or any other source) payments made pursuant to the Results Sharing
      Program, payment of stock options and performance shares under the Long
      Term Incentive Compensation Plan, and any other payments of a similar
      nature.  In the case of a Participant who is employed jointly by
      the Company and an affiliated company (as defined in the RSOP),
      Compensation as defined herein shall include amounts received from all
      such companies.

              


      

       

      
        	
                (F)  

              	
                “Deferred Stock Unit”
      means the units credited to a Participant which correspond to the number
      of shares the Participant deferred in accordance with Section
      4.5.

              


      

       

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      
        	
                (G)  

              	
                “Eligible Surviving
      Spouse” means surviving spouse as defined in the Company’s
      Retirement Plan A.

              


      

       

      
        	
                (H)  

              	
                “Executive Deferral Account” or
      “EDA” or “Account” means the account where deferrals pursuant to
      Sections 4.1, 4.2, 4.3, 4.4 and 4.5 are
  credited.

              


      

       

      
        	
                (I)  

              	
                “Other Award” means an
      annual award received by the Participant as approved by the Committee and
      which is not the Annual Incentive Award described in Subsection 2.1(A),
      and does not include a severance
benefit.

              


      

       

      
        	
                (J)  

              	
                “Pay” means the annual
      salary as of October 1 of the year prior to the year for which the
      allocation is attributed to under Section 4.1 of this
  Plan.

              


      

       

      
        	
                (K)  

              	
                “Participant” is defined
      in Section 3.

              


      

       

      
        	
                (L)  

              	
                “Retire” or “Retirement” means a
      Participant’s termination of employment after attaining “Early Retirement
      Age” or “Normal Retirement Age” defined as the earliest date under any
      qualified retirement plan of the Participant’s
  employer.

              


      

       

      
        	
                (M)  

              	
                “Retirement Benefit”
      means the benefit payable to a Participant pursuant to the Plan by reason
      of the Participant’s Retirement with the Company described in Section
      4.6.

              


      

       

      
        	
                (N)  

              	
                “Retirement Plan A”
      means the Minnesota Power and Affiliated Companies Retirement Plan
      A.

              


      

       

      
        	
                (O)  

              	
                “Retirement Savings and Stock
      Ownership Plan” or “RSOP” means the Minnesota Power and Affiliated
      Companies Retirement Savings and Stock Ownership
  Plan.

              


      

       

      
        	
                (P)  

              	
                “SERP II” means the
      ALLETE and Affiliated Companies Supplemental Executive Retirement Plan
      II.

              


      

       

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      
        	
                (Q)  

              	
                “Stock Option Gain Shares
      Deferral Election” means the annual election made by the
      Participant in accordance with Section
4.5.

              


      

       

      
        	
                (R)  

              	
                “Supplemental Salary Reduction
      Agreement” means an agreement entered into by a Participant and the
      Company in December of a fiscal year under which the Participant
      irrevocably agrees to forego compensation that would otherwise be paid to
      the Participant during the next fiscal
year.

              


      

       

      
        	
                (S)  

              	
                “Valuation Date” means
      each date on which the Accounts are valued as provided in Subsection
      4.7(C).

              


      

       

      
        	
                2.2  

              	
                Gender
      and Number

              


      

       

      Except
when otherwise indicated by the context, any masculine terminology used herein
shall also include the feminine, and the use of any term herein in the singular
may also include the plural.

       

              SECTION
3.           ELIGIBILITY
AND PARTICIPATION

       

      
        	
                3.1  

              	
                Eligibility

              


      

       

      Any
employee of the Company shall become a Participant as follows:

       

      
        	
                (A)  

              	
                For
      benefits under Section 4.1, 4.2, 4.3 and 4.4, an employee in management
      salary grade or other employees as approved by the Committee, who
      participates in the ALLETE Executive Annual Incentive Plan or is eligible
      to receive an Other Award, shall be eligible to participate in this Plan
      beginning with the first calendar year in which such employee becomes
      eligible to receive Annual Incentive Awards or Other
    Awards.

              


      

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      The
following conditions must also be satisfied:

       

      
        	
                i.  

              	
                The
      Participant is in the employment of the Company on the last day of the
      calendar year;

              


      

       

      
        	
                ii.  

              	
                The
      Participant died while employed by the Company during such calendar
      year;

              


      

       

      
        	
                iii.  

              	
                The
      Participant Retired during such calendar
year;

              


      

       

      
        	
                iv.  

              	
                The
      Participant is disabled and is receiving benefit payments under the
      Company’s Long-Term Disability Benefit Plan during such calendar year;
      or

              


      

       

      
        	
                v.  

              	
                The
      Participant was on leave of absence at the close of such calendar year and
      received Compensation from the Company during such
  year.

              


      

       

      
        	
                (B)  

              	
                For
      benefits under Section 4.5, senior executive employees are eligible as
      approved by the Company’s Board of Directors.  Effective January
      20, 2003, no additional employees are eligible for the benefits provided
      under Section 4.5.

              


      

       

      
        	
                (C)  

              	
                For
      benefits under Section 4.6, employees who received an Annual Incentive
      Award or Other Awards while in ALLETE management salary grades SA –
      SM.

              


      

       

      
        	
                3.2  

              	
                Participation

              


      

       

      An
employee who becomes a Participant shall remain eligible to have an account in
the Plan as a Participant hereunder, without regard to Compensation and Annual
Incentive Awards or Other Awards received in subsequent years, until the last to
occur of (i) the employee’s Retirement or termination from service for any
reason or (ii) the date all benefits, if any, to which he or she is entitled
hereunder have been distributed. Employees, who were former Participants, who
become employed by an ALLETE wholly or partially owned company, shall not be
considered as retired or terminated until such time as they become retired or
terminated from the new company.  If a Participant is employed by a
subsidiary of the Company, and such subsidiary is no longer at least 50% owned
by the Company, then such Participant will be considered to be terminated or
Retired (as defined in Section 2.1(L)) on such date.  Distribution of
the Participant’s benefits under Sections 4.9, 4.10 or 4.13 shall occur as
provided therein.  

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      Notwithstanding
the preceding sentence of this Paragraph, in the event that a Participant is
employed by a subisidary of the Company which is distributed to shareholders
through a stock spin off to shareholders of ALLETE, then the Participant will
not be considered to be terminated or Retired (as defined in Section 2.1(L)) for
purposes of Section 4.9, 4.10 or 4.13 until their employment at such distributed
company terminates for any reason, including Retirement.  For purposes
of Section 4.6, the Participant will be considered Retired (as set forth in
Section 2.1(L)) if the Participant continues employment at such distributed
company until the Participant’s 50th
birthday.  Any employment period, salary or other amount earned while
employed at such distributed company, however, will not be included in the
calculation of the benefit provided under Section 4.6.

       

      An
employee who was a Participant, but is not currently eligible for benefits under
Sections 4.1, 4.2, 4.3, 4.4, and 4.5, will not receive account additions as
described herein.  However, the employee may be eligible for benefits
under Section 4.6 if they qualify under the terms provided in that
Section.

       

      An
employee who is a Participant who dies prior to Retirement is no longer entitled
to the benefit described under Section 4.6.

       

      
        	
                3.3  

              	
                No
      Guarantee of Employment

              


      

       

      Participation
in the Plan does not constitute a guarantee or contract of employment with the
Company.  Such participation shall in no way interfere with any rights
the Company would have in the absence of such participation to determine the
duration of the employee’s employment with the Company.

       

              SECTION
4.        BENEFITS

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

            

      
        	
                4.1  

              	
                Annual
      Makeup Award

              


      

       

      For each
calendar year ending on or after December 31, 1980, and except as hereinafter
specifically provided in this Section 4, the Company shall credit each
Participant who qualifies:

       

      
        	
                (A)  

              	
                Flexible Dollar Makeup.
      An amount equal to the sum of (a) 2% plus (b) the Participant’s life
      insurance percentage under the Minnesota Power and Affiliated Companies
      Flexible Compensation Program for nonunion employees, multiplied by the
      following: (i) the total of the Participant’s Annual Incentive Award and
      Other Awards for such year, plus (ii) any amount of the Participant’s
      annual Pay not included in calculating benefits under the Minnesota Power
      and Affiliated Companies Flexible Compensation Program for nonunion
      employees for such year due to limitations under Internal Revenue Service
      (IRS) Code Section 404(l).

              


      

       

      
        	
                (B)  

              	
                RSOP Allocation Makeup.
      An amount equal to the applicable Partnership allocation percent
      being contributed under Section 4.4(c) of the RSOP of the
      following:

              


      

       

      
        	
                (a)  

              	
                the
      total of the Participant’s Annual Incentive Award and Other Award for such
      year, plus

              


      

       

      
        	
                (b)  

              	
                the
      amount of the Participant’s Compensation not included in calculating
      benefits under the RSOP due to limitations under IRS Code Section
      404(l).

              


      

       

      If a
Participant transfers to an ineligible status, dies or Retires during the year,
this calculation will be based on the full Annual Incentive Award and Other
Award.  If a Participant’s annual Pay exceeds that amount allowed
under IRS qualified plan’s compensation limit, the amount of Participant’s
annual Pay will be prorated for the number of months in an eligible
status.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      
        	
                (C)  

              	
                RSOP Match Allocation
      Makeup.  An amount equal to 50% of the amount deferred by
      the Participant under Section 4.2 of this Plan plus any amount deferred
      under Section 5.1 of the RSOP, provided, however, that for any calendar
      year, such match shall not apply to any amount deferred by a Participant
      in excess of the amount specified in Subsection 4.4(e) of the RSOP of the
      Participant’s Compensation plus Annual Incentive Award and Other
      Award.  Such amount shall be reduced by any amount being
      contributed by the Company under Subsection 4.4(e) of the
      RSOP.

              


      

       

      
        	
                4.2  

              	
                Salary
      Deferral

              


      

       

      Effective
through December 31, 2002, the Company shall credit each Participant who
qualifies an amount equal to the amount for which a Participant has elected to
reduce his or her annual salary pursuant to a Supplemental Salary Reduction
Agreement, not to exceed 25% of the Participant’s annual salary less the amount
allowable to be deferred under the RSOP.  Effective January 1, 2003,
the Company shall credit each Participant who qualifies an amount equal to the
amount for which a Participant has elected to reduce his or her annual salary
pursuant to a Supplemental Salary Reduction Agreement.

       

      
        	
                4.3  

              	
                Bonus
      Deferral

              


      

       

      The
Company shall credit each Participant who qualifies an amount equal to the
amount for which a Participant has elected to defer his or her Annual Incentive
Award or Other Award.

       

      
        	
                4.4  

              	
                Severance
      Deferral

              


      

       

      The
Company shall credit each Participant who qualifies an amount equal to the
amount for which a Participant has elected to defer his or her severance benefit
as approved for deferral by the Committee.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      
        	
                4.5  

              	
                Non-Qualified
      Stock Option Gain Deferral

              


      

       

      Effective
July 1, 1999 through January 20, 2003, the Company shall credit each Participant
who qualifies an amount, equal to the amount for which a Participant has elected
to defer receipt of his or her shares of ALLETE stock acquired through an
Ownership Retention Option Program provided in the Long Term Incentive
Compensation Plan and pursuant to the Stock Option Gain Shares Deferral
Election.

       

      
        	
                4.6  

              	
                Retirement
      Benefit

              


      

       

      At the
Retirement of a Participant, the Company shall credit each Participant who
qualifies under Subsection 3.1(C) with a Retirement Benefit.  The
Retirement Benefit shall be calculated as follows:

       

      
        	
                (A)  

              	
                The
      monthly Retirement Benefit that would be provided by Retirement Plan A
      if:

              


      

       

      
        	
                (1)  

              	
                any
      annual salary limitation in calculating benefits under Retirement Plan A
      due to the limitation imposed by any provision of the Code
      Section 404(l) did not exist, and the limitation on annual benefits
      contained in Code Section 415 did not
exist.

              


      

       

      
        	
                (2)  

              	
                Effective
      through December 31, 2003, the largest sum of four Annual Incentive Awards
      and Other Awards plus Results Sharing (if any)  during any
      consecutive 48-month period in the most recent 15-year period had been
      added to the final average earning calculation in Subsection 2.1(q) of
      Retirement Plan A and such calculation was then reduced by any Results
      Sharing and Other Awards included in the calculation of final average
      earnings in Subsection 2.1(q) of Retirement Plan A. The periods covering
      final average earnings and the four consecutive Annual Incentive Awards
      and Other Awards plus Results Sharing need not cover the same 48-month
      period.

              


      

       

      Effective
January 1, 2004, the largest sum of four Annual Incentive Awards or Other Awards
(if any) during any consecutive 48-month period in the most recent 15-year
period had been added to the total of the final average earning computation in
Subsection 2.1(q) of Retirement Plan A. The periods covering final average
earnings and the four consecutive Annual Incentive Awards and/or Other Awards
need not cover the same 48-month period. Notwithstanding the foregoing, any
Other Award(s) included in Retirement Plan A final average earnings, shall be
reduced from the amount herein.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      


       

      
        	
                (B)  

              	
                Less
      the actual monthly retirement benefit provided by Retirement
      Plan A.

              


      

       

      
        	
                (C)  

              	
                To
      determine the amount to be credited to the Participants, the resulting
      difference of (A) less (B) (provided the difference is greater than zero)
      is multiplied by 12, and the result is multiplied by a
      factor.  Such factor is calculated by first determining a 60%
      joint and survivor benefit  using the respective employee and
      spouse ages; second, by adjusting for cost of living as described in
      Section 4.8 of Retirement Plan A and each of the components is multiplied
      by 50% and the results are added together.  The change in the
      consumer price index shall be assumed to change after the Participant’s
      Retirement at the same average annual rate as the change in the consumer
      price index for the five-year period ending on the later of the June 30 or
      the December 31 immediately preceding Retirement. The interest rate to be
      used in determining the present value and the monthly annuity shall be an
      annual percentage rate of 8% or such other rate as determined by the
      Committee.

              


      

       

      
        	
                4.7  

              	
                Benefit
      Allocations and Maintenance of
Accounts

              


      

       

      
        	
                (A)  

              	
                The
      amounts specified in Sections 4.1 and 4.3 shall be allocated to
      the  Participant as soon as administratively practicable after
      the end of the Plan Year.

              


      

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      
        	
                (B)  

              	
                The
      amounts specified in Sections 4.2, 4.4 and 4.5 shall be allocated as soon
      as administratively practicable, but no later than the month following the
      end of the month in which the benefit was earned by the
      Participant.

              


      

       

      
        	
                (C)  

              	
                The
      Company shall establish and maintain, in the name of each Participant, an
      individual account to be known as the Executive Deferral Account (herein
      referred to as “EDA” or “Account”). The Committee shall determine the
      investment funds (known as Investment Funds) available under the Plan and
      may add or delete Investment Funds from time to time. Account
      contributions under Sections 4.1, 4.2, 4.3, and 4.4 may be credited in the
      same manner as if actually invested in the manner identified by the
      Participant’s election among Investment Funds as directed by the
      Participant.  Account additions under Section 4.5 shall be
      credited to the Participant’s Deferred Stock Unit account within the
      EDA.

              


      

       

      As of
each Valuation Date, each Account shall be adjusted to reflect the effect of
investment gains or losses, income contributions, distributions, transfers and
all other transactions with respect to that Account since the previous Valuation
Date.

       

      
        	
                (D)  

              	
                The
      Account of each Participant shall be entered on the books of the Company
      and shall represent a liability, payable when due under this Plan, out of
      the general assets of the Company. Prior to benefits becoming due
      hereunder, the Company shall expense the liability for payment of such
      accounts in accordance with policies determined appropriate by the
      Company’s auditors.

              


      

       

      
        	
                4.8  

              	
                Date
      of Benefit Commencement

              


      

       

      
        	
                (A)  

              	
                Executive
      Deferal Account Election

              


      

       

      
        	
                (1)  

              	
                All
      amounts credited to a Participant’s Account under Section 4.1, 4.2, 4.3,
      4.4, and Deferred Stock Units under Section 4.5, shall be distributed
      pursuant to an election submitted by the Participant. Elections under this
      4.8 must be made in writing to the Committee prior to the end of the
      calendar year preceding the year in which benefits are
      earned.  Participants who become eligible during the Plan Year
      shall make their election upon becoming eligible.  If no
      election has been received herein, or the Participant Retires or dies
      prior to the benefit allocation, the allocation for such Plan Year shall
      be paid in cash. If a Participant transfers to an ineligible status during
      the calendar year, any such award specified in Section 4.1 and or 4.3
      shall be paid in cash.

              


      

       

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      Each
Participant shall have the right to elect to have all or any portion of the
benefit amounts allocated to said Participant for a calendar year paid under one
of the following options:

       

      
        	
                (a)  

              	
                in
      cash (either partially or totally);

              


      

       

      
        	
                (b)  

              	
                deferred
      to a date specified by the Participant (at which time such benefit amounts
      shall be paid as a lump sum, with the latest deferral date to be no later
      than April 1 following a Participant attaining age 70 1⁄2);
      or

              


      

       

      
        	
                (c)  

              	
                deferred
      to the earlier to occur of the following
events:

              


      

       

      
        	
                (i)  

              	
                Retirement
      or at the time when a disabled Participant is no longer eligible to
      receive benefits under the applicable employer’s  long-term
      disability benefit plan or, if elected, up to five years after Retirement
      but in no event later than April 1 following a Participant attaining
      age 70 1⁄2.

              


      

       

      
        	
                (ii)  

              	
                Death
      of the Participant.

              


      

       

      
        	
                (iii)  

              	
                Termination
      of the Participant’s employment other than at Retirement or long-term
      disability.

              


      

       

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      
        	
                (B)  

              	
                Commencement
      of Retirement Benefits.

              


      

       

      Pursuant
to Section 4.6, this benefit shall commence on the last day of the month
following the date of the Participant’s Retirement.  If a Participant
dies or terminates employment prior to Retirement, the Retirement Benefit
described in Section 4.6 shall be forfeited and will not be
payable.

       

      


       

      
        	
                4.9  

              	
                Form
      of Benefit Payment - Executive Deferral
Account

              


      

       

      Subject
to the provisions of Sections 4.11, 4.12 and 4.13 hereof, and in accordance with
Subsection 4.8(A)(1)(c), a Participant may elect distribution of the Executive
Deferral Account as a lump sum, five (5), ten (10), or fifteen (15) year
monthly annuity, or partial lump sum with the remainder paid in a five (5), ten
(10), fifteen (15) year monthly annuity.  Any monthly annuity provided
under this section shall be calculated using a 7.5% interest rate, or other rate
as approved by the Committee.  Notwithstanding the foregoing, monthly
annuities under this section shall be calculated using an 8% interest rate in
any circumstance in which one of the following conditions applies: (i) the
Participant left service prior to January 1, 2007; or (ii) the Participant
provided official notice of retirement to the Company prior to January 1, 2007
with an effective retirement date on or before April 1, 2007. Deferred Stock
Units shall be distributed in equal annual installments, during the elected
payout period.  If a Participant has not elected a payout period, the
balance will be paid in a lump sum. The Participant may change the length of the
payment period, if such change is received by the Committee more than 12 months
prior to commencement of the payment period. Notwithstanding the
above,  if the sum of Sections 4.1, 4.2, 4.3, 4.4 and 4.5 is less than
$10,000, the EDA is paid as a lump sum.

       

      EDA
distributions (except Deferred Stock Units) will be paid in cash, in equal
monthly installments commencing on the last day of the month pursuant to
Participants election in Subsection 4.8(A)(1)(c), except that Deferred Stock
Units will be distributed in shares of stock commencing within the first 60 days
of the Plan Year pursuant to the Participant’s election in Subsection
4.8(A)(1)(c).

       

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      If a
Participant has commenced receipt of benefits under this Plan, and is
re-employed by the Company, payments shall be suspended until the Participant
again becomes eligible to receive payments under the Plan.

       

      


       

      
        	
                4.10  

              	
                Form
      of Payment -  Retirement
Benefits

              


      

       

      The
normal, or default, form of the Retirement Benefits provided for in Section 4.6
will be a 15-year monthly annuity (calculated using the interest rate applicable
for determining actuarial equivalence or other rate as approved by the
Committee).  The Participant may elect to receive the Retirement
Benefits in the optional form of a monthly life annuity (calculated using the
factor described in Section 4.6), such amount to be adjusted (i.e.,
cost-of-living adjustments) in the same manner as provided in Section 5.11 of
Retirement Plan A.

       

      If the
actuarial present value of the Retirement Benefits under Section 4.6 is less
than $10,000, the benefit will be paid out in a lump sum payment.

       

      If a
Participant has commenced receipt of Retirement Benefits under this Plan and is
re-employed by the Company, Retirement Benefit payments under this Plan shall be
suspended upon such re-employment until the Participant again becomes eligible
to receive Retirement Benefit payments under the Plan.

       

      
        	
                4.11  

              	
                Benefit
      Payments Upon Participant’s Death

              


      

       

      Each
Participant shall have the right, in accordance with procedures established from
time to time by the Committee, to designate a Beneficiary(ies) (both primary as
well as contingent) to whom Plan benefits shall, if permitted by the Plan, be
paid if a Participant dies prior to complete distribution of
benefits.  Each Beneficiary designation shall be in a written form
prescribed by the Committee, and will be effective only when filed with the
Committee during the Participant’s lifetime.  Any Beneficiary
designation may be changed by a Participant without the consent of the
previously named Beneficiary by filing a new Beneficiary designation with the
Committee.  The most recent Beneficiary designation received by the
Committee shall control the payment of all benefits under the Plan in the event
of the Participant’s death.

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      In the
absence of an effective Beneficiary designation, or if all designated
Beneficiaries predecease the Participant or die prior to the complete
distribution of the Participant’s benefits, benefits shall be paid in the
following order of precedence: (1) the Participant’s surviving spouse; (2) the
Participant’s children (including adopted children), per stirpes; or (3) the
Participant’s estate.

       

      The
benefits shall be paid under the circumstances as described in (a) or (b)
below:

       

      
        	
                (a)  

              	
                If
      the designated beneficiary is the Eligible Surviving Spouse, the payment
      as elected by the Participant pursuant to Section 4.9 & 4.10 will be
      paid to the beneficiary beginning  the month following the date
      of death of the Participant, except if the benefit elected under Section
      4.10 is a life annuity, the surviving spouse will receive 60% of the
      Participant’s life annuity benefit for the remainder of the beneficiary’s
      life. If the Participant has elected a distribution to commence prior to
      Retirement, the Company shall pay the remaining payments to the
      Participant’s beneficiary in the same manner and at the same time as if
      the Participant had lived to receive such payments, subject to the
      conditions set forth in this
Section.

              


      

       

      
        	
                (b)  

              	
                If
      the designated beneficiary is anyone other than the Eligible Surviving
      Spouse, the remaining benefit payments shall be paid in a lump sum in the
      month following the month of the Participant’s death, except if the
      benefit elected under Section 4.10 is a life annuity, the payments
      end.

              


      

       

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      In the
event a Participant dies prior to Retirement, the benefit described in Section
4.6 shall be forfeited and will not be payable.

       

      
        	
                4.12  

              	
                Benefit
      Payment Upon Disability

              


      

       

      In the
event a Participant is determined to be disabled under the Company’s Long Term
Disability Plan, the Participant shall continue to be eligible for this Plan
during such period of disability.   If the Participant ceases to
be disabled prior to Retirement and does not return to active employment with
the Company, the Participant shall be deemed to have terminated
employment.  The Company shall pay the Participant the balance
credited to the Participant’s EDA account in a single lump sum the month
following the month of such termination.

       

      
        	
                4.13  

              	
                Benefit
      Payments Upon Termination Other Than Retirement, Death or
      Disability

              


      

       

      If a
Participant’s employment with the Company terminates for any reason other than
Retirement, death or disability, the Company shall pay each Participant the
balance credited to the Participant’s EDA account in a single lump sum no later
than the month following the month in which the Participant terminates, without
regard to any election made by the Participant under Section 4.8. The benefit
described in Section 4.6 shall be forfeited and will not be
payable.

       

      


       

      
        	
                4.14  

              	
                Hardship
      and Unscheduled Benefit Payments

              


      

       

      
        	
                (A)  

              	
                A
      Participant who has demonstrated a severe financial need as approved by
      the Committee may request a lump sum distribution of all or any portion of
      their EDA.   Partial distributions will be taken pro rata
      from the Participant’s EDA sub-accounts.  However, if a
      Participant has commenced payment of benefits, the hardship distribution
      will be the entire remaining
balance.

              


      

       

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      
        	
                (B)  

              	
                A
      Participant may elect at any time prior to the time that the first payment
      from his or her account would otherwise be paid, to withdraw in a single
      lump sum all, or a specified portion of the balance of his or her
      Executive Deferral Account.  A Participant may also make an
      election at any time subsequent to the start of installment payments from
      his or her Executive Deferral Account.  Withdrawals under this
      Section will be reduced in amount by an early withdrawal penalty equal to
      ten percent of the amount requested, which will be deducted from the
      amount paid to the Participant and forfeited by the Participant to the
      Company. Written notice of election to withdraw under this Section stating
      the lump sum amount withdrawn shall be sent to the Company, and payment of
      the early withdrawal shall be made by the Company within thirty days of
      receipt of written notice.

              


      

       

      
        	
                4.15  

              	
                Cessation
      of Deferrals Permitted by IRS Notice
2005-1.

              


      

       

      Notwithstanding
any other Plan provision to the contrary, no amount of Annual Makeup Award,
Salary Deferral, Bonus Deferral, Severance Deferral, Non-qualified Stock Option
Gain Deferral, or Retirement Benefit (collectively “Deferral”) earned for
services performed in Plan years beginning after December 31, 2004 shall be
deferred under this Plan.  Accordingly, any election to make any
Deferral under this Plan shall terminate as to future Deferrals as of December
31, 2004 and shall no longer have any force or effect under this
Plan.  Subject to Section 4.16 hereof, Bonus Deferrals that were
earned in 2004 and Deferrals earned in 2005, in each case, that are subject to
Deferral elections made under the terms of this Plan shall not be credited under
this Plan, but shall be credited under SERP II in accordance with the terms of
SERP II and shall be subject to the terms and conditions of such SERP II,
including, without limitation, its distribution provisions.  No new
Deferral elections shall be made under this Article 4 with respect to amounts
earned after December 31, 2004.  Investment earnings (and losses)
shall continue to be credited (or debited) to each participant’s EDA account as
provided in this Article 4.

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      
        	
                4.16  

              	
                Elections
      Permitted by IRS Notice 2005-1.

              


      

       

      Notwithstanding
anything contained herein to the contrary, (i) any Participant who elected a
2004 Bonus Deferral may revoke his or her election in its entirety; (ii) any
Participant who elected a 2005 Salary Deferral may revoke his or her election in
part or in its entirety; and (iii) any Participant who elected a 2005 Bonus
Deferral may file a new deferral election with respect to such 2005 Bonus
Deferral, in each case as provided in this Section 4.16.  Such
revocation election with respect to 2004 Bonus Deferral and/or 2005 Salary
Deferral or new deferral election with respect to 2005 Bonus Deferral must be in
writing on a form provided by the Committee and must be filed with the Committee
on or before January 28, 2005.  Any Participant who revokes his or her
2004 Bonus Deferral Election as provided herein shall receive such bonus in cash
at or about the same time that such award is paid to other employees of the
Company.  Any Participant who revokes his or her 2005 Salary Deferral
will be paid in accordance with the Company’s standard payroll
practices.

       

      SECTION
5.                                           ADMINISTRATION

       

      
        	
                5.1  

              	
                Administration
      of Plan

              


      

       

      
        	
                (A)  

              	
                Administrator.  The
      Employee Benefit Plans Committee shall administer the
      Plan.  Notwithstanding the foregoing, the Committee may delegate
      any of its duties to such other person or persons from time-to-time as it
      may designate. Members of the Employee Benefit Plans Committee may
      participate in the Plan; however, any individual serving on the Employee
      Benefit Plans Committee shall not vote or act on any matter relating
      solely to himself or herself.

              


      

       

      
        	
                (B)  

              	
                Duties.  The
      Committee is authorized to construe and interpret all provisions of the
      Plan, and the Committee is authorized to remedy any errors,
      inconsistencies or omissions, to resolve any ambiguities, to adopt rules
      and practices concerning the administration of the Plan, and to make any
      determinations and calculations necessary or appropriate
      hereunder.  The Company shall pay all expenses and liabilities
      incurred in connection with Plan
administration.

              


      

       

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      
        	
                (C)  

              	
                Agents.  The
      Committee may engage the services of accountants, attorneys, actuaries,
      investment consultants, and such other professional personnel as are
      deemed necessary or advisable to assist in fulfilling the Committee’s
      responsibilities.  The Committee, the Company and the Board may
      rely upon the advice, opinions or valuations of any such
      persons.

              


      

       

      
        	
                (D)  

              	
                Binding Effect of
      Decisions.  The decision or action of the Committee with
      respect to any question arising out of or in connection with the
      administration, interpretation and application of the Plan and the rules
      and regulations promulgated hereunder shall be final, conclusive and
      binding upon all persons having any interest in the
      Plan.  Neither the Committee, its delegates, nor the Board shall
      be personally liable for any good faith action, determination or
      interpretation with respect to the Plan, and each shall be fully protected
      by the Company in respect of any such action, determination or
      interpretation.

              


      

       

      
        	
                (E)  

              	
                Employer
      Information.  To enable the Committee to perform its
      duties, the Company shall supply full and timely information to the
      Committee on all matters relating to the compensation of Plan
      Participants, the date and circumstances of the Participant’s Retirement,
      death, disability or Termination, and other pertinent information as the
      Committee may reasonably require.

              


      

       

       

      
        	
                5.2  

              	
                Uniform
      Rules

              


      

       

      In
administering the Plan, the Committee will apply uniform rules to all
Participants similarly situated.

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      
        	
                5.3  

              	
                Notice
      of Address

              


      

       

      Any
payment to a Participant or beneficiary, at the last known post office address
on file with the Company, shall constitute a complete acquittance and discharge
to the Company and any director or officer with respect thereto unless the
Company shall have received prior written notice of any change in the address,
condition, or status of the distributee. Neither the Company nor any director or
officer shall have any duty or obligation to search for or ascertain the
whereabouts of any Participant or his beneficiary.

       

      
        	
                5.4  

              	
                Correction
      of Errors

              


      

       

      It is
recognized that in the operation and administration of the Plan, certain
mathematical and accounting errors may be made or mistakes may arise by reason
of factual errors in information supplied to the Company. The Company shall have
power to cause such equitable adjustments to be made to correct for such errors
as the Company in its discretion considers appropriate. Such adjustments shall
be final and binding on all persons.

       

      
        	
                5.5  

              	
                Claims
      Procedure

              


      

       

      
        	
                (A)  

              	
                Presentation of
      Claim.  Any Participant or Beneficiary of a deceased
      Participant (such Participant or Beneficiary being referred to below as a
      “Claimant”) may file with the Committee a written claim for a
      determination with respect to Plan benefits.  The claim must
      state with particularity the determination desired by the
      Claimant.

              


      

       

      
        	
                (B)  

              	
                Notification of
      Decision.  The Committee shall consider a Claimant’s
      claim, and within 90 days after the claim is received, shall notify the
      Claimant in writing:

              


      

       

      
        	
                (1)  

              	
                That
      the claim has been allowed in full;
or

              


      

       

      
        	
                (2)  

              	
                That
      the claim has been denied, in whole or in part, and such notice must set
      forth in a manner calculated to be understood by the
    Claimant:

              


      

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      
        	
                (a)  

              	
                The
      specific reason(s) for the denial of the claim, or any part of
      it;

              


      

       

      
        	
                (b)  

              	
                Specific
      reference(s) to pertinent provisions of the Plan upon which such denial
      was based;

              


      

       

      
        	
                (c)  

              	
                A
      description of any additional material or information necessary for the
      Claimant to perfect the claim, and an explanation of why such material or
      information is necessary; and

              


      

       

      
        	
                (d)  

              	
                An
      explanation of the claim review procedures and time limits, including a
      statement of the Claimant’s right to initiate a civil action pursuant to
      section 502(a) of ERISA following an adverse determination upon
      review.

              


      

       

      
        	
                (3)  

              	
                If
      the Committee determines that an extension of time for processing is
      required, written notice of the extension shall be furnished to the
      Claimant prior to termination of the original 90-day period.  In
      no event shall such extension exceed 90 days from the end of such initial
      period.

              


      

       

      
        	
                (4)  

              	
                In
      the case of a claim for disability benefits, the Committee shall notify
      the Claimant, in accordance with Section 5.5(B)(2) above, within 45 days
      after the claim is received.  The notification shall advise the
      Claimant whether the Committee’s denial relied upon any specific rule,
      guideline, protocol or scientific or clinical
  judgment.

              


      

       

      
        	
                (5)  

              	
                In
      the case of a claim for disability benefits, if the Committee determines
      that an extension of time for processing is required due to matters beyond
      the control of the Plan, written notice of the extension shall be
      furnished to the Claimant prior to termination of the original 45-day
      period.  Such extension shall not exceed 30 days from the end of
      the initial period.  If, prior to the end of the first 30-day
      extension period, the Committee determines that, due to matters beyond the
      control of the Plan, an additional extension of time for processing is
      required, written notice of a second 30-day extension shall be furnished
      to the Claimant prior to termination of the first 30-day
      extension.

              


      

       

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

      
        	
                (C)  

              	
                Review of a Denied
      Claim.  Within 90 days after receiving a notice from the
      Committee that a claim has been denied, in whole or in part, a Claimant
      (or the Claimant’s duly authorized representative) may file a written
      request for a review of the denial of the claim and of pertinent
      documents.  The Claimant (or the Claimant’s duly authorized
      representative):

              


      

       

      
        	
                (1)  

              	
                May
      request reasonable access to, and copies of, all documents, records, and
      other information relevant to the claim, which shall be provided to
      Claimant free of charge;

              


      

       

      
        	
                (2)  

              	
                May
      submit written comments or other documents;
and

              


      

       

      
        	
                (D)  

              	
                Decision on
      Review.  The Committee shall review all comments or other
      documents submitted by the Claimant relating to the claim, without regard
      to whether such information was submitted or considered in the initial
      benefit determination.  The Committee shall render its decision
      on review promptly, and not later than 60 days after the filing of a
      written request for review of the denial (or, if other special
      circumstances require additional time and written notice of such extension
      and circumstances is given to the Claimant within the initial 60-day
      period).  The Committee shall notify the Claimant, in language
      calculated to be understood by the
Claimant:

              


      

       

      
        	
                (1)  

              	
                That
      the claim has been allowed in full;
or

              


      

       

      
        	
                (2)  

              	
                That
      the claim has been denied, in whole or in part, and such notice must set
      forth:

              


      

       

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

      
        	
                (a)  

              	
                Specific
      reasons for the decision;

              


      

       

      
        	
                (b)  

              	
                Specific
      reference(s) to the pertinent Plan provisions upon which the decision was
      based;

              


      

       

      
        	
                (c)  

              	
                A
      statement that Claimant is entitled to reasonable access to, and copies
      of, all documents, records or other information relevant to the claim upon
      request and free of charge;

              


      

       

      
        	
                (d)  

              	
                A
      statement regarding the Claimant’s right to initiate an action pursuant to
      section 502(a) of ERISA; and

              


      

       

      
        	
                (e)  

              	
                Such
      other matters as the Committee deems
relevant.

              


      

       

      
        	
                (3)  

              	
                In
      the case of a claim for disability benefits, the notice shall set
      forth:

              


      

       

      


      
        	
                (a)  

              	
                Whether
      the Committee’s denial relied upon any specific rule, guideline, protocol
      or scientific or clinical judgment;
and

              


      

       

      
        	
                (b)  

              	
                The
      following statement: “You and your Plan may have other voluntary
      alternative dispute resolution options, such as mediation.  One
      way to find out what may be available is to contact your local U.S.
      Department of Labor Office and your State insurance regulatory
      agency.”

              


      

       

      
        	
                (E)  

              	
                Other
      Remedies.  A Claimant’s compliance with the foregoing
      procedures is a mandatory prerequisite to a Claimant’s right to pursue any
      other remedy with respect to any claim relating to this
    Plan.

              


      

       

      
        	
                5.6  

              	
                Change
      of Law

              


      

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

       

      The
Committee may make payments of any benefits or deferred amounts to be paid under
the Plan, to any Participant or Participants, or to the beneficiary of any
Participant or Participants, in advance of the date when otherwise due, (i) if,
based on a change in federal tax law or regulation, published rulings or similar
announcements by the Internal Revenue Service, decision by a court of competent
jurisdiction involving the Plan, a Participant or a beneficiary, or a closing
agreement made under Section 7121 of the Internal Revenue Code of 1986 that
involves the Plan, a Participant or a beneficiary, it determines that a
Participant or beneficiary will recognize income for federal income tax purposes
with respect to amounts that are otherwise not then payable under the Plan; or
(ii) if it shall be determined that the Plan is subject to the requirements of
Parts 2 and 3 of Subtitle B of Title I of the Employee Retirement Income
Security Act of 1974, because such Plan is not maintained primarily for the
purpose of providing deferred compensation for a select group of management or
highly compensated employees.

       

      


       

      


       

      
        	
                5.7  

              	
                Tax
      Withholding

              


      

       

      The
Company shall have the right to deduct from all payments to be made under the
Plan, any federal, state or local taxes or other charges required by law to be
withheld with respect to such payments.

       

      


       

      
        	
                5.8  

              	
                Generation-Skipping
      Tax

              


      

       

      Notwithstanding
any provisions in this Plan to the contrary, the Committee may withhold any
benefits payable to a beneficiary as a result of the death of the Participant
(or the death of any beneficiary designated by the Participant) until such time
as (i) the Committee is able to determine whether a generation-skipping transfer
tax, as defined in Chapter 13 of the Internal Revenue Code of 1986, or any
substitute provision therefor, is payable by the Company; and (ii) the Committee
has determined the amount of generation-skipping transfer tax that is due,
including interest thereon. If any such tax is payable, the Committee shall
reduce the benefits otherwise payable hereunder to such beneficiary by the
amount necessary to provide said beneficiary with a benefit equal to the amounts
that would have been payable if the original benefits had been calculated on the
basis of a value for the Participant’s supplemental account reduced by an amount
equal to the generation-skipping transfer tax and any interest thereon that is
payable as a result of the death in question. The Committee may also withhold
from distribution by further reduction of the then net value of benefits
calculated in accordance with the terms of the previous sentence such amounts as
the Committee feels are reasonably necessary to pay additional
generation-skipping transfer tax and interest thereon from amounts initially
calculated to be due. Any amounts so withheld, and not actually paid as a
generation-skipping transfer tax or interest thereon, shall be payable as soon
as there is a final determination of the applicable generation-skipping tax and
interest thereon.

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

              SECTION
6.            GENERAL
PROVISIONS

       

      
        	
                6.1  

              	
                Nonassignability

              


      

       

      Benefits
under the Plan are not in any way subject to the debts of other obligations of
the persons entitled thereto and may not voluntarily or involuntarily be sold,
transferred, or assigned.

       

      
        	
                6.2  

              	
                Incompetency

              


      

       

      If the
Committee determines that a distribution under this Plan is to be paid to a
minor, a person declared incompetent or to a person incapable of handling the
disposition of that person’s property, the Committee may direct such
distribution to be paid to the guardian, legal representative or person having
the care and custody of such minor, incompetent or incapable
person.  The Committee may require proof of majority, competence,
capacity, guardianship, or status as a legal representative as it may deem
appropriate prior to distribution of a payment.  Any distribution
shall be a payment for the account of the Participant and the Participant’s
Beneficiary, as the case may be, and shall be a complete discharge of any
liability for such payment amount.

       

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

      
        	
                6.3  

              	
                Employment
      Rights

              


      

       

      The
establishment of the Plan shall not be construed as conferring any legal rights
upon any Participant or any other person for a continuation of employment, nor
shall it interfere with the rights of the Company to discharge any person and/or
treat such person without regard to the effect which such treatment might have
upon him or her as a person covered by this Plan.

       

      
        	
                6.4  

              	
                No
      Individual Liability

              


      

       

      It is
declared to be the express purpose and intention of the Plan that no liability
whatever shall attach to or be incurred by the shareholders, officers, or
directors of the Company, or any representatives appointed hereunder by the
Company, under or by reason of any of the terms or conditions of the
Plan.

       

      
        	
                6.5  

              	
                Illegality
      of Particular Provision

              


      

       

      If any
particular provision of the Plan shall be found to be illegal or unenforceable,
such provision shall not affect the other provisions thereof, but the Plan shall
be construed in all respects as if such invalid provision were
omitted.

       

      
        	
                6.6  

              	
                Contractual
      Obligations

              


      

       

      It is
intended that the Company is under a contractual obligation to make payments to
Participants from the general funds and assets of the Company in accordance with
the terms and conditions of the Plan, with such payments to reduce the amounts
allocated to the Participant’s account hereunder. A Participant shall have no
rights to such payments other than as a general, unsecured creditor of the
Company.

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

      
        	
                6.7  

              	
                Counterparts

              


      

       

      This Plan
may be executed in any number of counterparts, each of which shall constitute
but one and the same instrument and may be sufficiently evidenced by any one
counterpart.

       

      
        	
                6.8  

              	
                Evidence

              


      

       

      Evidence
required of anyone under the Plan may be by certificate, affidavit, document or
other information which the person relying thereon considers pertinent and
reliable, and signed, made or presented by the proper party or
parties.

       

      
        	
                6.9  

              	
                Action
      by Company

              


      

       

      Any
action required of or permitted by the Company under the Plan shall be by
resolution of it’s Board of Directors or by a person or persons authorized by
resolution of the Board to act on its behalf with respect to the
Plan.

       

      
        	
                6.10  

              	
                Notice

              


      

       

      Any
notice or filing required or permitted under the Plan shall be sufficient if in
writing and if (i) hand-delivered or sent by telecopy, (ii) sent by registered
or certified mail, or (iii) sent by nationally-recognized overnight
courier.  Such notice shall be deemed given as of  (a) the
date of delivery if hand-delivered or sent by telecopy, (b) as of the date shown
on the postmark on the receipt for registration or certification, if delivery is
by mail, or (c) on the first business day after dispatch, if sent by
nationally-recognized overnight courier.

       

              SECTION
7.          AMENDMENT
AND TERMINATION

       

      
        	
                7.1  

              	
                Amendment
      and Termination

              


      

       

      The
Company expects the Plan to be permanent, but since future conditions affecting
the Company cannot be anticipated or foreseen, the Company must necessarily and
does hereby reserve the right to amend, modify, or terminate the Plan at any
time by written resolution of its Board of Directors. Provided, however, no
amendment, termination or other change in the Plan shall reduce the amount
allocated to the account of a Participant on the date of such amendment,
termination or other change, which account balance shall be payable to such
Participant or such Participant’s beneficiary as provided herein.

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

       

      
        	
                7.2  

              	
                Reorganization
      of the Company

              


      

       

      In the
event of a merger or consolidation of the Company, or the transfer of
substantially all of the assets of the Company to another corporation, such
continuing, resulting or transferee corporation shall have the right to continue
and carry on the Plan and to assume all liabilities of the Company hereunder
without obtaining the consent of any Participant or beneficiary. If such
successor shall assume the liabilities of the Company hereunder, then the
Company shall be relieved of all such liability, and no Participant or
beneficiary shall have the right to assert any claim against the Company for
benefits under or in connection with this Plan.

       

      
        	
                7.3  

              	
                Prohibition
      on Material Modifications

              


      

       

      Notwithstanding
anything to the contrary contained herein, this Plan is intended to be
grandfathered under and exempt from section 409A of the Internal Revenue Code
(“Section 409A”) and shall be administered and interpreted in a manner intended
to ensure that the Plan remains exempt from Section 409A. No amendments or other
modifications to the Plan shall be made, interpreted or construed in a manner
that would cause a material modification (within the meaning of Section 409A,
including Treasury Regulation § 1.409A-6(a)(4)) to the Plan or to the benefits
available under the Plan.

       

              SECTION
8.          APPLICABLE
LAWS

       

      
        	
                8.1  

              	
                Applicable
      Laws.

              


      

       

      The Plan
shall be governed by and construed according to the laws of the State of
Minnesota.

       

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

       

      IN
WITNESS WHEREOF, ALLETE, Inc. has caused these presents to be signed and its
corporate seal to be hereunto affixed by its duly authorized officers, effective
as of January 1, 2009

       

      


       

      


       

      ALLETE, Inc.

       

      


       

      By: Donald J.
Shippar                                                               

       

                                                     Donald
J. Shippar

       

      
        	
                 
      

              	
                Its:

              	
                Chairman,
      President and Chief Executive
Officer

              


      

       

      


       

      ATTEST

       

      By:  Deborah A.
Amberg                                                                         

       

      Deborah A. Amberg

       

      Its:           Senior
Vice President, General Counsel and Secretary

       

      


       

      


       

      


       


      
        
           


        

        
          33