Document:

EX-10.145

Exhibit 10.145

AMENDED AND RESTATED EMPLOYMENT AGREEMENT,

AMENDMENT TO STOCK OPTION AGREEMENT and

AMENDMENT TO NON-COMPETITION AGREEMENT

This Amended and Restated Employment Agreement, Amendment to Stock Option Agreement and Amendment
to Non-Competition Agreement (this “Agreement”) is made as of February 9, 2007 (the “Effective
Date”), by and between MARK FINKEL (“Executive”) and HALO TECHNOLOGY HOLDINGS, INC., a Nevada
corporation with a place of business at 200 Railroad Avenue, Greenwich, Connecticut 06830 (the
“Company”).

WHEREAS, Executive and the Company are parties to the following agreements: (i) that certain
Employment Agreement made as of December 28, 2005 (the “Employment Agreement”); (ii) that certain
Non-Competition/Non-Solicitation Agreement dated as of December 28, 2005 (the “Non-Competition
Agreement”); (iii) that certain Confidentiality/Proprietary Information and Inventions Agreement
dated as of December 28, 2005 (the “Confidentiality Agreement”); and (iv) that certain Incentive
Stock Option Agreement dated as of January 4, 2006 (the “Stock Option Agreement”).

WHEREAS, the Company and the Executive desire to amend, restate and supersede in its entirety
the Employment Agreement, and to amend, modify and supplement the Stock Option Agreement and the
Non-Competition Agreement;

WHEREAS, Executive and the Company deem it in their respective interests to enter into this
Agreement regarding the employment of Executive, subject to the terms and conditions hereinafter
set forth; and

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained and
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Executive hereby agree as follows:

1. Employment. Subject to the terms and conditions set forth in this Agreement, the Company
offers, and Executive hereby accepts, continued employment.

2. Term. Subject to earlier termination as provided in Section 5 hereof, this Agreement shall
commence on the Effective Date and end on December 31, 2007 (the “ Term”). Subject to earlier
termination as provided in Section 5 hereof at the end of the Term, Executive’s employment will
terminate.

3. Capacity and Performance.

3.1 Position. Currently, Executive is serving as the Company’s President, Chief Financial
Officer and Principal Financial Officer. Executive will continue serving in those capacities until
the Company files with the Securities and Exchange Commission its Quarterly Report on Form 10-QSB
for the fiscal quarter ended December 31, 2006 (the “Quarterly Report”). Until such filing is
complete, Executive’s primary responsibility will be the preparation and certification (in
accordance with all applicable laws and regulations) of the Quarterly Report, and Executive’s
secondary responsibility will be such other managerial assistance as requested by the Company.
After such filing, Executive’s day to day responsibilities and duties will cease and Executive will
continue to serve the Company with the title of Director of the Office of Strategic Operations. In
such capacity Executive will assist the Company’s management on financial and strategic planning as
requested by the Company, and will assist any new Chief Financial Officer who may be hired by the
Company with the transition of any duties and responsibilities to such new officer. For the
avoidance of doubt, effective upon the filing of the Quarterly Report, Executive agrees that he
resigns from the positions of, and Executive will no longer serve as, the Company’s President,
Chief Financial Officer or Principal Financial Officer, will no longer be considered an executive
officer of the Company, and will no longer hold any title or position with any of the Company’s
subsidiaries. Effective upon the end of the Term, Executive agrees that he resigns from the
position of, and will no longer serve as, Director of the Office of Strategic Operations.

3.2 Reporting and Location. Executive shall report to the Company’s Chief Executive Officer
(“CEO”) and the Company’s Board of Directors (“Board”) until the filing of the Quarterly Report, as
well as to any officer designated by the CEO or the Board, at all times during the Term. Executive
shall perform his duties and responsibilities hereunder at the Company’s principal executive
offices until the filing of the Quarterly Report.

3.3 Commitments; Non-Competition. Executive shall devote sufficient business time, attention
and energies, to the performance of Executive’s duties hereunder until the filing of the Quarterly
Report. Thereafter, Executive shall devote sufficient business time, attention and energies, to
the performance of Executive’s duties hereunder as Executive may determine in his sole, reasonable
discretion. Executive will continue to abide by the Non-Competition Agreement; provided, however,
that the Non-Competition Agreement is hereby amended such that the term “Restricted Period” used
therein shall mean the period ending December 31, 2007. The Non-Competition Agreement, as amended
by this Section 3.3, remains in full force and effect.

4. Compensation and Benefits. As compensation for Executive’s performance of his duties and
obligations hereunder to the Company and subject to the provisions of Sections 5 hereof, during the
term hereof Executive shall receive the following:

4.1 Base Salary. During the period from the date hereof through May 30, 2007, Executive will
receive monthly salary in the amount of $20,833 for each calendar month he remains employed
hereunder (for the avoidance of doubt, the monthly salary amount for January, 2007 is payment for
the period January 1, 2007 through January 31, 2007). For the month of June, 2007, Executive will
receive the monthly salary of $16,827, provided that Executive remains employed during such period.
During the period from July 1, 2007 through December 31, 2007, Executive will receive monthly
salary in the amount of $12,821 for each calendar month he remains employed hereunder. Salary
shall be payable in accordance with the customary payroll practices of the Company as may be
established or modified from time to time. In the event any monthly salary amount is not paid
when due, and the Company has not paid said overdue amount within ten (10) business days after
Executive has notified the Company that he has not received said overdue amount, then all remaining
unpaid salary amounts for the remainder of the Term shall become immediately due and payable
(except to the extent such acceleration would result in a breach under the Company’s agreements
with Fortress Credit Corp.).

4.2 Bonus. Notwithstanding anything herein or in any Company Quarterly or Annual reports,
proxy statements or other documents or materials whatsoever, including, without limitation, any
accrued amounts set forth in any such reports, statements, or other documents or materials,
Executive acknowledges and agrees that he has not earned, and will not be eligible to earn, any
bonus (quarterly, annual, discretionary or otherwise) and that the compensation set forth in this
Agreement is the sole compensation due, or which may become due, to Executive.

4.3 Benefits. During the Term hereof and subject to any contribution therefore generally
required by the Company of executives of the Company in similar positions as Executive, Executive
shall be eligible to participate in all employee benefits plans and policies as from time to time
adopted by the Company in effect for executives of the Company in similar positions; provided,
however, that Executive shall not be eligible for further vacation after January 26, 2007.
Eligibility for such participation shall be subject to (i) the terms of the applicable plan
documents, (ii) generally applicable Company policies, and (iii) the discretion of the Company
and/or the Compensation Committee or any other committee of the Board provided for in or
contemplated by such plan. The Company may alter, modify, add to, or delete its employee benefits
plans and/or policies at any time as the Company and/or the Compensation Committee (and/or any
other Board committee), in its/their sole judgment, determine to be appropriate. Notwithstanding
the foregoing, the Company will continue to provide health and dental insurance coverage for the
Executive and his eligible dependents under the Company’s plans, and will pay the premiums for such
health and dental insurance coverage, or will reimburse Executive for such insurance coverage if
the Company does not maintain plans; provided, however, that the Company will not be obligated to
pay more than $1,500 per month for such coverage (and any amount in excess of $1,500 per month
shall be the responsibility of the Executive.)

4.4 Business Expenses. The Company shall pay or reimburse Executive for all reasonable
business expenses incurred or paid by Executive in the performance of his duties and
responsibilities hereunder prior to the date hereof, subject to (i) any expense policy set by the
Company as may be modified from time to time, and (ii) such reasonable substantiation and
documentation requirements as may be specified by the Company from time to time. The Company
shall pay or reimburse Executive for all reasonable business expenses incurred or paid by Executive
in the performance of his duties and responsibilities hereunder after the date hereof, provided
such expenses have been approved in advance by the Company.

4.5 Stock Options. Pursuant to the Stock Option Agreement the option to acquire 150,000
shares of the Company’s common stock (“Common Stock”) have vested. The remaining option to acquire
450,000 shares of Common Stock has not vested, and is hereby terminated. The Stock Option
Agreement is hereby amended accordingly. The options which have vested as described above, may be
exercised by Executive in accordance with the terms of the Stock Option Agreement on or before
March 31, 2007. Failure to exercise such vested options by such date, will result in their
automatic termination, without notice. The Stock Option Agreement, as amended by this Section 4.5,
remains in full force and effect.

4.6 Office and Assistance. The Company shall provide Executive with suitable office space and
the services of an assistant through the filing of the Quarterly Report.

5. Termination of Employment. Notwithstanding the provisions of Section 2 hereof, Executive’s
employment and this Agreement shall terminate prior to the expiration of the Term under the
following circumstances.

5.1 Death. In the event of Executive’s death during the Term hereof (and provided that this
Agreement has not been earlier terminated), Executive’s employment and this agreement shall
immediately and automatically terminate and the Company shall pay to Executive’s designated
beneficiary or, if no beneficiary has been designated by Executive, his estate, any salary to the
extent earned but unpaid through the date of death, and any salary which would have been earned
during the Term hereof.

5.2 Disability.

(a) In the event of Executive’s (as defined below) during the Term hereof (and provided that
this Agreement has not been earlier terminated), Executive’s employment and this agreement shall
immediately and automatically terminate and the Company shall pay to Executive any salary to the
extent earned but unpaid through the date of Disability and any salary which would have been earned
during the Term hereof if such Disability had not occurred. To the extent Executive qualifies for
either short term disability and/or long term disability insurance in accordance with the terms and
conditions of the Company’s plans, the Company may reduce any amounts due to Executive by the
amounts of such insurance payments.

(b) As used herein, the term “Disability” shall mean that the Executive has become disabled
by suffering physical or mental illness, injury, or infirmity that prevents Executive from
performing, with or without reasonable accommodation, Executive’s essential job functions for any
one hundred fifty (150) days in any one hundred eighty (180)-day period, the Board determines in
good faith that such illness or other disability is likely to continue for at least the next
following thirty (30) days, and the Board notifies Executive of such determination.

5.3 By the Company for Cause.

(a) Upon approval of a majority of the Board, the Board may terminate Executive’s employment
and this Agreement for Cause (as defined below) at any time during the Term hereof. The Company
shall thereafter have no further obligation or liability to Executive relating to Executive’s
employment or this Agreement, or otherwise, other than any salary to the extent earned but unpaid
through the date of termination.

(b) Any one or more of the following events or conditions shall constitute “Cause” for
termination: (i) failure to render all services and to takes all actions reasonably necessary to
prepare, certify and file with the Securities and Exchange Commission (in accordance with all
applicable laws and regulations) the Quarterly Report; (ii) breach of Section 10 (Release) of this
Agreement; (iii) material breach of Section 11 (No Disparagement) of this Agreement, or material
breach of any other provision of this Agreement, (iv) breach of the Non-Competition Agreement; or
(v) breach of the Confidentiality Agreement.

5.4 By Executive. Executive may, upon at least one hundred and twenty (120) days written
notice, terminate this Agreement and his employment with the Company for any reason. During such
120-day period, Executive will be available on a full-time basis for the benefit of the Company.
The Company, at its own option, may accelerate Executive’s departure date. If Executive terminates
his employment under this Section 5.4, the Company shall have no further obligation Executive
relating to Executive’s employment or this Agreement, or otherwise, other than for any salary to
the extent earned but unpaid through his actual departure date.

5.5 COBRA. Upon the expiration or earlier termination of this Agreement, other than a
termination by the Company for Cause pursuant to Section 5.3, if Executive elects to continue
medical insurance coverage after such expiration or termination and in accordance with the
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company
will pay the Executive’s monthly premium payments up to $1,500 per month (and any amount in excess
of $1,500 per month shall be the responsibility of the Executive), until (x) the conclusion of the
one-year period after the termination of his employment, (y) Executive no longer is eligible for
COBRA coverage, or (z) Executive accepts other employment through which he is eligible for medical
insurance coverage that is comparable to such COBRA coverage, whichever occurs first; thereafter,
Executive will be responsible for any and all payments for the elected period of continued health
insurance coverage under COBRA. If this Agreement is terminated by the Company for Cause pursuant
to Section 5.3, Executive will be responsible for any and all payments for the elected period of
continued health insurance coverage under COBRA. Notwithstanding the foregoing, in the event that
Executive breaches any of the terms of this Agreement which survive termination hereof, or
Executive breaches any of the terms of the Non-Competition Agreement or the Confidentiality
Agreement which extend beyond the termination hereof, then the Company will have no further
obligation under this Section 5.5.

6. Effect of Termination. The provisions of this Section 6 shall apply in the event of
termination of this Agreement and/or Executive’s employment pursuant to Sections 2 or 5.

6.1 Payment in Full. Payment by the Company to Executive of any salary and other compensation
amounts as provided and referenced herein shall constitute the entire obligation of the Company to
Executive, provided that nothing in this Section 6.1 is intended or shall be construed (i) to
affect the rights and obligations of the Company, on the one hand, and Executive, on the other,
under the Stock Option Agreement other than as set forth in Section 4.5 hereof, or (ii) to affect
the vested rights that the Executive may have under the Company’s 401(k) plan. For the avoidance
of doubt, Executive will continue to vest under the Company’s 401(k) plan through the end of the
Term, or the earlier termination of this Agreement.

6.2 Termination of Benefits. Except for any right of continuation of benefits coverage to the
extent provided by COBRA or other applicable law or as otherwise described herein, benefits shall
terminate pursuant to the terms of the applicable benefit plans as of the termination date of
Executive’s

employment.

7. Survival of Certain Provisions. The obligations of Executive under the Non-competition
Agreement and the Confidentiality Agreement expressly survive any termination of Executive’s
employment or termination of this Agreement, regardless of the manner of such termination.
Moreover, the rights and obligations contained herein shall survive the termination of Executive’s
employment or termination of this Agreement for any reason if so provided herein or if necessary or
desirable to fully accomplish the purpose of such provision.

8. Withholding Taxes. All payments made by the Company under this Agreement shall be subject
to and reduced by any federal, state and/or local taxes or other amounts required to be withheld by
the Company under any applicable law, and the Company may withhold from any amounts payable to
Executive (including any amounts payable to Executive pursuant to this Agreement) in order to
comply with such withholding obligations.

9. Other Agreements.

9.1 Executive confirms to the Company that entering into this Agreement and his performance of
the position and duties described herein do not and will not breach any agreement entered into by
Executive prior to employment with the Company. Executive has provided, or prior to the Effective
Date will provide, the Company with a copy of any such agreements.

9.2 Executive acknowledges that if Executive breaches his obligations under this Agreement,
the Non-Competition Agreement, the Confidentiality Agreement that the Company may pursue any
remedies at law or in equity available to the Company, including the right to seek specific
performance or an injunction as set forth herein or therein.

10. Release. Executive hereby waives, releases and forever discharges, the Company and its
Affiliates (as such term is defined below) from and against any and all claims, counterclaims,
demands, debts, actions, causes of action, suits and liabilities of any nature whatsoever, whether
known or unknown, which Executive ever had, now has or hereafter can, shall or may have against the
Company and/or its Affiliates, for, upon, or by reason of any matter, cause or thing whatsoever
arising from the beginning of the world to the date Executive signs this Agreement, including, but
not limited to, rights under any and all federal, state or local laws, regulations, rules, orders,
and any governmental or judicial decisions or interpretations thereof prohibiting discrimination in
employment, including, but not limited to, the Federal Age Discrimination in Employment Act, any
federal, state or local laws regulating employment, claims arising out of any public policy,
contract or common law, or any other claims of breach of contract, wrongful termination, breach of
duty, fraud, negligence or unfair or fraudulent business practice, misrepresentation or defamation
(including, without limitation, any claims under any prior agreements or understandings between
Executive and the Company and/or its Affiliates, oral or in writing, and including, but not limited
to, the Employment Agreement, any offer letter, position description, the Company’s, or any
Affiliate’s employee handbook or other policies or procedures), and any alleged entitlement to
costs, fees or expenses, including attorneys’ fees, whether such fees are claimed under statutory
or common law, and any other claims that were or could have been asserted arising out of or
relating to Executive’s employment by the Company. Expressly excluded from this release are any
claims arising after the date of the execution of this Agreement or any claims relating to the
enforcement or breach of this Agreement. Executive agrees not to sue the Company or its
Affiliates, not to file or permit to be filed against the Company or its Affiliates any complaint,
suit, action, hearing or other proceeding whatsoever, or to execute, seek to impose, collect or
recover upon or otherwise enforce or accept any judgment, decision, award or attachment, arising
from, relating to any claim, liability or other matter released by Executive in this Agreement. As
used in this Agreement, the term “Affiliates” means the Company, any and all of the Company’s
subsidiaries, other affiliates, predecessors, successors, and any other persons or entities which
control, are controlled by, or are under common control with the Company, and any and all of the
Company’s or such other persons’ or entities’ respective, past, present or future officers,
directors, managers, partners, members, shareholders, employees, consultants, attorneys, agents and
representatives. Nothing contained herein shall affect in any way Executive’s right to be
indemnified, defended and held harmless by the Company pursuant to the Company’s organizational
documents for those acts or omission for which the Company indemnifies, defends and holds harmless
its officers and/or directors, subject to the limitations on any such indemnity obligations imposed
under Nevada corporate law, and/or applicable federal law.

The Company hereby waives, releases and forever discharges the Executive from and against any
and all claims of which the Company has actual knowledge on the date hereof (excluding matters
known only to the Executive), to the extent that the acts or omissions of Executive forming the
basis for such claim are not acts or omissions which constitute acts or omissions for which
indemnification by the Company of the Executive would not be permitted under the Company’s
organizational documents, Company policy, Nevada corporate law, and/or applicable federal law.

11. No Disparagement. Executive represents that he has not and agrees that he shall not in
any way disparage the Company and/or its Affiliates, nor will the Executive make or solicit any
comments, statements, or the like to Company customers or clients, clients or customers of the
Company’s Affiliates, the media or others that may be considered derogatory or detrimental to the
good name or reputation of the Company and/or its Affiliates. The Company represents that it has
not and agrees that it shall not in any way disparage the Executive, nor will the Company make or
solicit any comments, statements, or the like to the media or others that may be considered
derogatory or detrimental to the good name or reputation of the Executive. For purposes of this
Agreement, the term “disparage” shall mean any statement or representation which, directly or by
implication, tends, in the minds of a reasonable audience, to create a negative impression about
the subject of the statement or representation.

12. Company Property. Executive agrees to return to the Company, any and all property of the
Company and/or its Affiliates, including, without limitation, any laptop or desktop computers, any
phone(s) or other equipment, any credit cards, identification cards, keys, building passes, and any
and all documents, (including without limitation any email and/or instant messages stored on any
computer other than the computers which Executive is to return), all business records, and all
other materials concerning the Company, and/or its Affiliates, including, without limitation, any
and all customer lists, contact lists, and other information concerning customers, prospective
customers, and other Company business or opportunities. Executive will return any and all such
Company property upon request of the Company at any time after the filing of the Quarterly Report,
and in the event Company has not so requested, promptly upon the expiration or earlier termination
of this Agreement.

13. Miscellaneous

13.1 Assignment. Executive shall not assign this Agreement or any interest herein. The Company
may assign this Agreement. This Agreement shall inure to the benefit of and be binding upon the
Company’s successors and assigns.

13.2 Severability/Reformation. In the event that any nonmaterial provision of this Agreement
is determined to be legally invalid, the affected provision shall be stricken from the Agreement
and the remaining terms of the Agreement shall be enforced so as to give effect to the intention of
the parties to the maximum extent practicable, and this Agreement shall be construed and reformed
to the maximum extent permitted by law.

13.3 Waiver; Amendment. Any waiver by the Company of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach of such provision
or any other provision hereof. In addition, any amendment to or modification of this Agreement or
any waiver of any provision hereof must be in writing and signed by the Company.

13.4 Notices. All notices, request and other communications provided for by this Agreement
shall be in writing and shall be effective when delivered in person or four business days after
being deposited in the mail of the United States, postage prepaid, registered or certified, and
addressed (a) in the case of Executive, to the address set forth underneath his signature to this
Agreement, with a copy to Robert Kraus, Kraus & Zuchlewski LLP, 500 Fifth Avenue, Suite 5100, New
York, N.Y. 10110, or (b) in the case of the Company, to the attention of the Board, with
a copy to the Secretary of the Company c/o Halo Technology Holdings, Inc., 200 Railroad Avenue,
Greenwich, CT 06830; and/or to such other address as either party may specify by notice to the
other, or, in the case of the Company, to any other address which at the time is the Company’s
principal headquarters.

13.5 Entire Agreement. This Agreement, the Non-Competition Agreement (as amended hereby), the
Confidentiality Agreement, and the Stock Option Agreement (as amended hereby) constitute the entire
agreement between the Company and Executive and fully supersede and cancel all prior
communications, agreements and understandings, written or oral, between Executive and the Company,
including without limitation, the Employment Agreement, any offer letter, position description, the
Company’s, or an Affiliate’s employee handbook or other policies or procedures. Executive also
acknowledges that in deciding to enter into this Agreement, he has not received and is not relying
on any representations, promises, or assurances of any kind other than those expressly set forth in
writing in this Agreement.

13.6 Specific Performance. Executive acknowledges and agrees that the Company and its
Affiliates would be damaged irreparably in the event any of the provisions of this Agreement are
not performed in accordance with their specific terms or otherwise are breached. Accordingly,
Executive agrees that the Company and its Affiliates shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the matter in addition
to any other remedy to which it may be entitled, at law or in equity.

13.7 Counterparts. This Agreement may be executed in counterparts, each of which shall be
original and all of which together, shall constitute one and the same instrument.

13.8 Governing Law. This Agreement, the employment relationship contemplated herein and any
claim arising from such relationship, whether or not arising under this Agreement, shall be
governed by and construed in accordance with the internal laws of the State of Connecticut without
giving effect to any choice or conflict of laws provisions or rule thereof, and this Agreement
shall be deemed to be performable in such State.

13.9 Resolutions of Disputes. Exclusive jurisdiction over any claims arising out of this
Agreement shall be any court appropriate subject matter jurisdiction in the State of Connecticut
and the parties by this Agreement expressly subject themselves to the personal jurisdiction of said
court for the resolution of any dispute, action, or suit arising in connection with this Agreement.

13.10 Consultation. Executive acknowledges that he has been advised to consult with an
attorney regarding this Agreement and that he has been given an opportunity to discuss this
Agreement with an attorney. Executive further acknowledges that he has had reasonable and
sufficient time to review this Agreement, discuss it with an attorney, and is voluntarily signing
it without duress or coercion. Executive acknowledges that he has read this Agreement in its
entirety and that he understands its meaning and effect.

[Remainder of Page is blank. Signature Page follows.]

1

IN WITNESS WHEREOF, this Agreement has been executed by the Company, by its duly authorized
representative, and by Executive, as of the date first above written.

HALO TECHNOLOGY HOLDINGS, INC.

/s/ Ernest C. Mysogland

By: Ernest C. Mysogland

Its: Executive Vice President

MARK FINKEL

/s/ Mark Finkel

2<PAGE>
                                                                   EXHIBIT 4(a)3
                                                           ALLETE 2006 FORM 10-K

--------------------------------------------------------------------------------

                                  ALLETE, INC.
                    (formerly Minnesota Power & Light Company
                       and formerly Minnesota Power, Inc.)

                                       TO

                              THE BANK OF NEW YORK
                         (formerly Irving Trust Company)

                                       AND

                               DOUGLAS J. MACINNES

                  (successor to Richard H. West, J. A. Austin,
            E.J. McCabe, D.W. May, J.A. Vaughan and W.T. Cunningham)

                                        As Trustees under ALLETE, Inc.'s
                                        Mortgage and Deed of Trust dated as of
                                        September 1, 1945

                           --------------------------

                       Twenty-sixth Supplemental Indenture
                        Providing among other things for
             First Mortgage Bonds, 5.99% Series due February 1, 2027
                             (Thirty-second Series)

                           DATED AS OF OCTOBER 1, 2006
--------------------------------------------------------------------------------

<PAGE>

                       TWENTY-SIXTH SUPPLEMENTAL INDENTURE

     THIS INDENTURE,  dated as of October 1, 2006, by and between  ALLETE,  INC.
(formerly Minnesota Power & Light Company and formerly Minnesota Power, Inc.), a
corporation  of the State of  Minnesota,  whose post  office  address is 30 West
Superior  Street,  Duluth,  Minnesota 55802  (hereinafter  sometimes  called the
"Company"),  and  THE  BANK OF NEW  YORK  (formerly  Irving  Trust  Company),  a
corporation  of the State of New York,  whose post office address is 101 Barclay
Street,  New York, New York 10286  (hereinafter  sometimes called the "Corporate
Trustee"),  and DOUGLAS J. MACINNES (successor to Richard H. West, J. A. Austin,
E. J. McCabe, D. W. May, J. A. Vaughan and W. T. Cunningham),  whose post office
address is 1784 W. McGalliard Avenue,  Hamilton,  New Jersey 08610 (said Douglas
J.  MacInnes  being  hereinafter  sometimes  called  the  "Co-Trustee"  and  the
Corporate Trustee and the Co-Trustee being hereinafter together sometimes called
the "Trustees"),  as Trustees under the Mortgage and Deed of Trust,  dated as of
September 1, 1945,  between the Company and Irving Trust  Company and Richard H.
West, as Trustees,  securing  bonds issued and to be issued as provided  therein
(hereinafter  sometimes called the  "Mortgage"),  reference to which mortgage is
hereby made,  this indenture  (hereinafter  sometimes  called the  "Twenty-sixth
Supplemental Indenture") being supplemental thereto:

     WHEREAS, the Mortgage was filed and recorded in various official records in
the State of Minnesota; and

     WHEREAS,  an  instrument,  dated as of October 16,  1957,  was executed and
delivered under which J. A. Austin succeeded Richard H. West as Co-Trustee under
the Mortgage,  and such  instrument  was filed and recorded in various  official
records in the State of Minnesota; and

     WHEREAS,  an  instrument,  dated as of  April 4,  1967,  was  executed  and
delivered  under which E. J. McCabe in turn succeeded J. A. Austin as Co-Trustee
under the  Mortgage,  and such  instrument  was filed and  recorded  in  various
official records in the State of Minnesota; and

     WHEREAS,  under the  Sixth  Supplemental  Indenture,  dated as of August 1,
1975, to which reference is hereinafter  made, D. W. May in turn succeeded E. J.
McCabe as Co-Trustee under the Mortgage; and

     WHEREAS,  an  instrument,  dated  as of June 25,  1984,  was  executed  and
delivered  under which J. A. Vaughan in turn  succeeded D. W. May as  Co-Trustee
under the  Mortgage,  and such  instrument  was filed and  recorded  in  various
official records in the State of Minnesota; and

     WHEREAS,  an  instrument,  dated  as of July 27,  1988,  was  executed  and
delivered  under  which W. T.  Cunningham  in turn  succeeded  J. A.  Vaughan as
Co-Trustee  under the Mortgage,  and such  instrument  was filed and recorded in
various official records in the State of Minnesota; and

     WHEREAS,  on May 12, 1998, the Company filed Amended and Restated  Articles
of Incorporation  with the Secretary of State of the State of Minnesota changing
its name from Minnesota Power & Light Company to Minnesota Power, Inc. effective
May 27, 1998; and

<PAGE>

                                       2

     WHEREAS,  an  instrument,  dated as of April 15,  1999,  was  executed  and
delivered  under which Douglas J. MacInnes in turn succeeded W. T. Cunningham as
Co-Trustee  under the Mortgage,  and such  instrument  was filed and recorded in
various official records in the State of Minnesota; and

     WHEREAS, on May 8, 2001, the Company filed Amended and Restated Articles of
Incorporation with the Secretary of State of the State of Minnesota changing its
name from Minnesota Power, Inc. to ALLETE, Inc.; and

     WHEREAS, by the Mortgage the Company  covenanted,  among other things, that
it would execute and deliver such supplemental  indenture or indentures and such
further  instruments and do such further acts as might be necessary or proper to
carry out more  effectually  the purposes of the Mortgage and to make subject to
the lien of the  Mortgage any  property  thereafter  acquired and intended to be
subject to the lien thereof; and

     WHEREAS,  for  said  purposes,  among  others,  the  Company  executed  and
delivered the following indentures supplemental to the Mortgage:

            DESIGNATION                                     DATED AS OF
            -----------                                     -----------
     First Supplemental Indenture...........................March 1, 1949
     Second Supplemental Indenture..........................July 1, 1951
     Third Supplemental Indenture...........................March 1, 1957
     Fourth Supplemental Indenture..........................January 1, 1968
     Fifth Supplemental Indenture...........................April 1, 1971
     Sixth Supplemental Indenture...........................August 1, 1975
     Seventh Supplemental Indenture.........................September 1, 1976
     Eighth Supplemental Indenture..........................September 1, 1977
     Ninth Supplemental Indenture...........................April 1, 1978
     Tenth Supplemental Indenture...........................August 1, 1978
     Eleventh Supplemental Indenture........................December 1, 1982
     Twelfth Supplemental Indenture.........................April 1, 1987
     Thirteenth Supplemental Indenture......................March 1, 1992
     Fourteenth Supplemental Indenture......................June 1, 1992
     Fifteenth Supplemental Indenture.......................July 1, 1992
     Sixteenth Supplemental Indenture.......................July 1, 1992
     Seventeenth Supplemental Indenture.....................February 1, 1993
     Eighteenth Supplemental Indenture......................July 1, 1993
     Nineteenth Supplemental Indenture......................February 1, 1997
     Twentieth Supplemental Indenture.......................November 1, 1997
     Twenty-first Supplemental Indenture....................October 1, 2000
     Twenty-second Supplemental Indenture...................July 1, 2003
     Twenty-third Supplemental Indenture....................August 1, 2004
     Twenty-fourth Supplemental Indenture...................March 1, 2005
     Twenty-fifth Supplemental Indenture....................December 1, 2005

<PAGE>

                                       3

which  supplemental  indentures were  filed and  recorded  in  various  official
records in the State of Minnesota; and

     WHEREAS,  the  Company  has  heretofore  issued,  in  accordance  with  the
provisions of the Mortgage, as heretofore supplemented,  the following series of
First Mortgage Bonds:

SERIES                                             PRINCIPAL          PRINCIPAL
------                                              AMOUNT              AMOUNT
                                                    ISSUED           OUTSTANDING
                                                   ---------         -----------
3-1/8% Series due 1975.......................     $26,000,000           None
3-1/8% Series due 1979.......................       4,000,000           None
3-5/8% Series due 1981.......................      10,000,000           None
4-3/4% Series due 1987.......................      12,000,000           None
6-1/2% Series due 1998.......................      18,000,000           None
8-1/8% Series due 2001.......................      23,000,000           None
10-1/2% Series due 2005......................      35,000,000           None
8.70% Series due 2006........................      35,000,000           None
8.35% Series due 2007........................      50,000,000           None
9-1/4% Series due 2008.......................      50,000,000           None
Pollution Control Series A...................     111,000,000           None
Industrial Development Series A..............       2,500,000           None
Industrial Development Series B..............       1,800,000           None
Industrial Development Series C..............       1,150,000           None
Pollution Control Series B...................      13,500,000           None
Pollution Control Series C...................       2,000,000           None
Pollution Control Series D...................       3,600,000           None
7-3/4% Series due 1994.......................      55,000,000           None
7-3/8% Series due March 1, 1997..............      60,000,000           None
7-3/4% Series due June 1, 2007...............      55,000,000           None
7-1/2% Series due August 1, 2007 ............      35,000,000           None
Pollution Control Series E...................     111,000,000           None
7% Series due March 1, 2008..................      50,000,000           None
6-1/4% Series due July 1, 2003...............      25,000,000           None
7% Series due February 15, 2007..............      60,000,000        60,000,000
6.68% Series due November 15, 2007...........      20,000,000        20,000,000
Floating Rate Series due October 20, 2003....     250,000,000           None
Collateral Series A..........................     255,000,000           None
Pollution Control Series F...................     111,000,000       111,000,000
5.28% Series due August 1, 2020..............      35,000,000        35,000,000
5.69% Series due March 1, 2036...............      50,000,000        50,000,000

which  bonds are also hereinafter  sometimes  called bonds of the  First through
Thirty-first Series, respectively; and

     WHEREAS, Section 8 of the Mortgage provides that the form of each series of
bonds  (other  than the First  Series)  issued  thereunder  and of coupons to be
attached to coupon bonds of such series shall be  established  by  Resolution of
the Board of Directors of the Company and that the

<PAGE>

                                       4

form of such series,  as established  by said Board of Directors,  shall specify
the descriptive title of the bonds and various other terms thereof, and may also
contain such provisions not inconsistent  with the provisions of the Mortgage as
the Board of  Directors  may, in its  discretion,  cause to be inserted  therein
expressing or referring to the terms and conditions upon which such bonds are to
be issued and/or secured under the Mortgage; and

     WHEREAS, Section 120 of the Mortgage provides, among other things, that any
power,  privilege  or right  expressly  or  impliedly  reserved to or in any way
conferred upon the Company by any provision of the Mortgage, whether such power,
privilege  or right is in any way  restricted  or is  unrestricted,  may (to the
extent  permitted  by law) be in  whole  or in part  waived  or  surrendered  or
subjected  to any  restriction  if at the  time  unrestricted  or to  additional
restriction  if already  restricted,  and the Company may enter into any further
covenants, limitations or restrictions for the benefit of any one or more series
of bonds  issued  thereunder,  or the Company may cure any  ambiguity  contained
therein,  or in any  supplemental  indenture,  or may  establish  the  terms and
provisions  of any  series  of  bonds  (other  than  said  First  Series)  by an
instrument in writing executed and acknowledged by the Company in such manner as
would be necessary  to entitle a  conveyance  of real estate to record in all of
the states in which any property at the time subject to the lien of the Mortgage
shall be situated; and

     WHEREAS,  the  Company  now  desires  to  create a new  series of bonds and
(pursuant  to the  provisions  of  Section  120 of the  Mortgage)  to add to its
covenants and agreements contained in the Mortgage, as heretofore  supplemented,
certain  other  covenants  and  agreements to be observed by it and to alter and
amend  in  certain  respects  the  covenants  and  provisions  contained  in the
Mortgage, as heretofore supplemented; and

     WHEREAS,  the  execution  and delivery by the Company of this  Twenty-sixth
Supplemental Indenture,  and the terms of the bonds of the Thirty-second Series,
hereinafter  referred to, have been duly authorized by the Board of Directors of
the Company by appropriate resolutions of said Board of Directors;

     NOW, THEREFORE, THIS INDENTURE WITNESSETH:

     That the Company,  in consideration of the premises and of One Dollar to it
duly paid by the  Trustees  at or before the  ensealing  and  delivery  of these
presents, the receipt whereof is hereby acknowledged, and in further evidence of
assurance of the estate,  title and rights of the Trustees and in order  further
to secure the payment of both the principal of and interest and premium, if any,
on the  bonds  from  time to time  issued  under  the  Mortgage,  as  heretofore
supplemented, according to their tenor and effect and the performance of all the
provisions of the Mortgage (including any instruments  supplemental  thereto and
any  modification  made as in the Mortgage  provided) and of said bonds,  hereby
grants,  bargains,  sells, releases,  conveys,  assigns,  transfers,  mortgages,
pledges,  sets over and confirms (subject,  however,  to Excepted  Encumbrances)
unto THE BANK OF NEW YORK  and  DOUGLAS  J.  MACINNES,  as  Trustees  under  the
Mortgage,  and to their  successor  or  successors  in said  trust,  and to said
Trustees and their successors and assigns forever, all property,  real, personal
and mixed,  of the kind or nature  specifically  mentioned in the  Mortgage,  as
heretofore supplemented,  or of any other kind or nature acquired by the Company
after the date of the  execution  and delivery of the  Mortgage,  as  heretofore
supplemented (except any herein or in the  Mortgage, as heretofore supplemented,

<PAGE>

                                       5

expressly  excepted),  now owned or, subject to the provisions of subsection (I)
of Section 87 of the Mortgage,  hereafter  acquired by the Company (by purchase,
consolidation, merger, donation, construction, erection or in any other way) and
wheresoever situated, including (without in anywise limiting or impairing by the
enumeration  of the same the scope and intent of the foregoing or of any general
description  contained in this Twenty-sixth  Supplemental  Indenture) all lands,
power  sites,   flowage   rights,   water   rights,   water   locations,   water
appropriations,  ditches, flumes, reservoirs, reservoir sites, canals, raceways,
dams,  dam sites,  aqueducts,  and all other rights or means for  appropriating,
conveying,  storing and supplying water; all rights of way and roads; all plants
for the generation of electricity by steam,  water and/or other power; all power
houses,  gas plants,  street  lighting  systems,  standards and other  equipment
incidental thereto,  telephone,  radio and television systems,  air-conditioning
systems and equipment incidental thereto, water works, water systems, steam heat
and hot water plants,  substations,  lines, service and supply systems, bridges,
culverts, tracks, ice or refrigeration plants and equipment,  offices, buildings
and other structures and the equipment thereof; all machinery, engines, boilers,
dynamos,  electric, gas and other machines,  regulators,  meters,  transformers,
generators, motors, electrical, gas and mechanical appliances, conduits, cables,
water,  steam heat,  gas or other  pipes,  gas mains and pipes,  service  pipes,
fittings,  valves and connections,  pole and transmission lines, wires,  cables,
tools,  implements,  apparatus,  furniture and chattels; all municipal and other
franchises, consents or permits; all lines for the transmission and distribution
of electric current,  gas, steam heat or water for any purpose including towers,
poles,  wires,  cables,  pipes,  conduits,  ducts and all  apparatus  for use in
connection therewith; all real estate, lands, easements,  servitudes,  licenses,
permits, franchises,  privileges,  rights of way and other rights in or relating
to real  estate or the  occupancy  of the same and  (except  as herein or in the
Mortgage, as heretofore  supplemented,  expressly excepted) all the right, title
and  interest of the Company in and to all other  property of any kind or nature
appertaining  to and/or used and/or  occupied  and/or enjoyed in connection with
any  property  hereinbefore  or in the  Mortgage,  as  heretofore  supplemented,
described.

     TOGETHER WITH all and singular the tenements, hereditaments, prescriptions,
servitudes  and  appurtenances  belonging  or in  anywise  appertaining  to  the
aforesaid  property or any part  thereof,  with the  reversion  and  reversions,
remainder  and  remainders  and (subject to the  provisions of Section 57 of the
Mortgage) the tolls, rents,  revenues,  issues,  earnings,  income,  product and
profits  thereof,  and all the  estate,  right,  title  and  interest  and claim
whatsoever,  at law as well  as in  equity,  which  the  Company  now has or may
hereafter acquire in and to the aforesaid property and franchises and every part
and parcel thereof.

     IT IS HEREBY  AGREED by the  Company  that,  subject to the  provisions  of
subsection  (I) of Section 87 of the  Mortgage,  all the property,  rights,  and
franchises  acquired  by  the  Company  (by  purchase,  consolidation,   merger,
donation,  construction,  erection  or in any other way) after the date  hereof,
except any herein or in the  Mortgage,  as  heretofore  supplemented,  expressly
excepted,  shall be and are as fully  granted  and  conveyed  hereby  and by the
Mortgage  and as  fully  embraced  within  the lien  hereof  and the lien of the
Mortgage  as if such  property,  rights  and  franchises  were now  owned by the
Company and were  specifically  described herein or in the Mortgage and conveyed
hereby or thereby.

     PROVIDED  that  the  following  are not and are not  intended  to be now or
hereafter granted, bargained, sold, released, conveyed,  assigned,  transferred,
mortgaged, hypothecated, affected,

<PAGE>

                                       6

pledged,  set over or confirmed hereunder and are hereby expressly excepted from
the lien and operation of this Twenty-sixth  Supplemental Indenture and from the
lien and operation of the Mortgage,  namely:  (1) cash, shares of stock,  bonds,
notes and other  obligations  and other  securities  not hereafter  specifically
pledged, paid, deposited,  delivered or held under the Mortgage or covenanted so
to be; (2) merchandise, equipment, apparatus, materials or supplies held for the
purpose of sale or other disposition in the usual course of business;  fuel, oil
and similar  materials  and supplies  consumable  in the operation of any of the
properties of the Company; all aircraft,  rolling stock, trolley coaches, buses,
motor  coaches,  automobiles  and other vehicles and materials and supplies held
for the purpose of repairing  or  replacing  (in whole or part) any of the same;
all  timber,  minerals,  mineral  rights and  royalties;  (3)  bills,  notes and
accounts receivable, judgments, demands and choses in action, and all contracts,
leases and operating  agreements not specifically  pledged under the Mortgage or
covenanted so to be; the Company's  contractual  rights or other  interest in or
with respect to tires not owned by the Company;  (4) the last day of the term of
any lease or leasehold  which may  hereafter  become  subject to the lien of the
Mortgage;  (5) electric energy, gas, steam, ice, and other materials or products
generated,  manufactured,  produced  or  purchased  by  the  Company  for  sale,
distribution  or  use in the  ordinary  course  of its  business;  and  (6)  the
Company's franchise to be a corporation;  provided,  however,  that the property
and rights expressly  excepted from the lien and operation of this  Twenty-sixth
Supplemental  Indenture  and from the lien and  operation of the Mortgage in the
above  subdivisions  (2) and (3) shall (to the extent permitted by law) cease to
be so  excepted  in the  event  and as of the date  that  either  or both of the
Trustees or a receiver or trustee  shall enter upon and take  possession  of the
Mortgaged  and Pledged  Property in the manner  provided in Article  XIII of the
Mortgage  by reason of the  occurrence  of a Default  as  defined  in Section 65
thereof.

     TO HAVE AND TO HOLD all such properties, real, personal and mixed, granted,
bargained, sold, released, conveyed, assigned, transferred,  mortgaged, pledged,
set over or  confirmed by the Company as  aforesaid,  or intended so to be, unto
the Trustees and their successors and assigns forever.

     IN TRUST  NEVERTHELESS,  for the  same  purposes  and upon the same  terms,
trusts and conditions and subject to and with the same provisos and covenants as
are set forth in the Mortgage, as supplemented,  this Twenty-sixth  Supplemental
Indenture being supplemental thereto.

     AND IT IS HEREBY COVENANTED by the Company that all the terms,  conditions,
provisos,  covenants and  provisions  contained in the  Mortgage,  as heretofore
supplemented,  shall affect and apply to the property hereinbefore described and
conveyed and to the estate,  rights,  obligations  and duties of the Company and
Trustees and the  beneficiaries of the trust with respect to said property,  and
to the  Trustees and their  successors  in the trust in the same manner and with
the same effect as if said property had been owned by the Company at the time of
the execution of the Mortgage, and had been specifically and at length described
in and  conveyed  to said  Trustees by the  Mortgage  as a part of the  property
therein stated to be conveyed.

The Company  further covenants  and agrees to  and with  the Trustees  and their
successors in said trust under the Mortgage as follows:

<PAGE>

                                       7

                                    ARTICLE I
                          THIRTY-SECOND SERIES OF BONDS

     SECTION 1. There shall be a series of bonds  designated  "5.99%  Series due
February 1, 2027" (herein sometimes referred to as the "Thirty-second  Series"),
each of which shall also bear the descriptive  title "First Mortgage Bond",  and
the form  thereof,  which shall be  established  by  Resolution  of the Board of
Directors of the Company,  shall contain suitable provisions with respect to the
matters hereinafter in this Section specified. Bonds of the Thirty-second Series
shall be dated as in Section 10 of the Mortgage provided,  mature on February 1,
2027,  be issued as fully  registered  bonds in  denominations  of One  Thousand
Dollars and, at the option of the  Company,  in any multiple or multiples of One
Thousand  Dollars (the  exercise of such option to be evidenced by the execution
and delivery  thereof) and bear  interest  from  February 1, 2007 at the rate of
5.99% per annum, payable  semi-annually on February 1 and August 1 of each year,
commencing August 1, 2007, the principal of and interest on each said bond to be
payable at the office or agency of the Company in the Borough of Manhattan,  The
City of New York, in such coin or currency of the United States of America as at
the time of payment is legal tender for public and private debts.

     (I)    OPTIONAL PREPAYMENT. The Company may, at its option,  upon notice as
provided  below,  prepay at any time all,  or from time to time any part of, the
bonds of the  Thirty-second  Series at 100% of the principal  amount so prepaid,
and the Make-Whole  Amount  determined for the Settlement  Date specified by the
Company in such notice with respect to such principal  amount.  The Company will
give each registered owner of Bonds of the  Thirty-second  Series written notice
(by first  class mail or such other  method as may be agreed upon by the Company
and such registered owner) of each optional prepayment under this subsection (I)
mailed or otherwise  given not less than 30 days and not more than 60 days prior
to the date fixed for such prepayment, to each such registered owner at his, her
or its last  address  appearing on the  registry  books.  Each such notice shall
specify the  Settlement  Date (which  shall be a Business  Day),  the  aggregate
principal amount of the bonds of the Thirty-second  Series to be prepaid on such
date,  the  principal  amount of each bond held by such  registered  owner to be
prepaid (determined in accordance with subsection (II) of this section), and the
interest to be paid on the Settlement Date with respect to such principal amount
being  prepaid,  and shall be  accompanied  by a certificate  signed by a Senior
Financial  Officer as to the estimated  Make-Whole Amount due in connection with
such  prepayment  (calculated as if the date of such notice were the date of the
prepayment),  setting forth the details of such  computation.  Two Business Days
prior to such Settlement  Date, the Company shall send to each registered  owner
of bonds of the  Thirty-second  Series  (by first  class  mail or by such  other
method  as may be  agreed  upon by the  Company  and  such  registered  owner) a
certificate  signed by a Senior Financial Officer  specifying the calculation of
such  Make-Whole  Amount as of the  specified  Settlement  Date.  As promptly as
practicable  after the giving of the notice and the sending of the  certificates
provided in this  subsection,  the Company  shall  provide a copy of each to the
Corporate  Trustee.  The Trustees  shall be under no duty to inquire  into,  may
conclusively presume the correctness of, and shall be fully protected in relying
upon the information  set forth in any such notice or certificate.  The bonds of
the  Thirty-second  Series are not  otherwise  subject to  voluntary or optional
prepayment.

<PAGE>

                                       8

     (II)   ALLOCATION  OF PARTIAL  PREPAYMENTS.  In the  case of  each  partial
prepayment of the bonds of the Thirty-second Series, the principal amount of the
Bonds of the  Thirty-second  Series  to be  prepaid  shall be  allocated  by the
Company  among  all of  the  Bonds  of  the  Thirty-second  Series  at the  time
outstanding in proportion, as nearly as practicable, to the respective unpaid
principal amounts thereof not theretofore called for prepayment.

     (III)  MATURITY; SURRENDER, ETC. In  the  case of each notice of prepayment
of  bonds  of the  Thirty-second  Series  pursuant  to  this  section,  if  cash
sufficient  to pay the  principal  amount to be prepaid on the  Settlement  Date
(which shall be a Business Day), together with interest on such principal amount
accrued to such date and the applicable  Make-Whole  Amount, if any, is not paid
as agreed upon by the Company and each  registered  owner of the affected bonds,
or, to the extent that there is no such agreement  entered into with one or more
such owners,  deposited  with the Corporate  Trustee on or before the Settlement
Date, then such notice of prepayment  shall be of no effect.  If such cash is so
paid or  deposited,  such  principal  amount of the  bonds of the  Thirty-second
Series  shall be deemed paid for all  purposes  and  interest on such  principal
amount  shall cease to accrue.  In case the Company  pays any  registered  owner
pursuant to an agreement with that  registered  owner,  the Company shall notify
the Corporate  Trustee as promptly as practicable of such agreement and payment,
and shall furnish the Corporate  Trustee with a copy of such agreement;  in case
the Company  deposits any cash with the  Corporate  Trustee,  the Company  shall
provide  therewith a list of the  registered  owners and the amount of such cash
each  registered  owner is to receive.  The  Trustees  shall be under no duty to
inquire into, may  conclusively  presume the  correctness of, and shall be fully
protected in relying upon the information set forth in any such notice,  list or
agreement,  and shall not be chargeable with knowledge of any of the contents of
any such agreement. Any bond prepaid in full shall be surrendered to the Company
or the Corporate  Trustee for  cancellation on or before the Settlement Date or,
with respect to cash  deposited  with the Corporate  Trustee,  before payment of
such  cash  by the  Corporate  Trustee;  any  bond  prepaid  in  part  shall  be
surrendered to the Company or the Corporate  Trustee on or before the Settlement
Date (unless  otherwise agreed between the Company and the registered owner) or,
with respect to cash  deposited  with  Corporate  Trustee before payment of such
cash by the Corporate  Trustee,  for a substitute  bond in the principal  amount
remaining unpaid.

     (IV)   MAKE-WHOLE AMOUNT.

     "Make-Whole  Amount" means,  with respect to any bond of the  Thirty-second
Series,  an amount equal to the excess,  if any, of the Discounted  Value of the
Remaining  Scheduled  Payments with respect to the Called Principal of such bond
of the Thirty-second  Series over the amount of such Called Principal,  provided
that the  Make-Whole  Amount may in no event be less than zero. For the purposes
of determining  the Make-Whole  Amount,  the following  terms have the following
meanings:

     "Business  Day" means any day other than a  Saturday,  a Sunday or a day on
which commercial banks in New York City are required or authorized to be closed.

     "Called  Principal"  means,  with respect to any bond of the  Thirty-second
Series,  the principal of such bond that is to be prepaid pursuant to subsection
(I) of this section.

<PAGE>

                                       9

     "Discounted  Value" means, with respect to the Called Principal of any bond
of the  Thirty-second  Series,  the amount obtained by discounting all Remaining
Scheduled  Payments with respect to such Called  Principal from their respective
scheduled  due  dates  to the  Settlement  Date  with  respect  to  such  Called
Principal,  in  accordance  with accepted  financial  practice and at a discount
factor  (applied  on the same  periodic  basis as that on which  interest on the
bonds of the  Thirty-second  Series is payable) equal to the Reinvestment  Yield
with respect to such Called Principal.

     "Reinvestment  Yield"  means,  with respect to the Called  Principal of any
bond of the Thirty-second Series, 0.5% over the yield to maturity implied by (i)
the yields reported as of 10:00 a.m. (New York City time) on the second Business
Day preceding the Settlement Date with respect to such Called Principal,  on the
display  designated as "Page PX1" (or such other display as may replace Page PX1
on Bloomberg  Financial Markets  ("Bloomberg") or, if Page PX1 (or its successor
screen on Bloomberg) is  unavailable,  the Telerate  Access Service screen which
corresponds  most  closely  to Page PX1 for the most  recently  issued  actively
traded U.S. Treasury securities having a maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date, or (ii) if such yields
are not reported as of such time or the yields  reported as of such time are not
ascertainable  (including  by  way  of  interpolation),  the  Treasury  Constant
Maturity Series Yields  reported,  for the latest day for which such yields have
been so reported as of the second  Business Day  preceding the  Settlement  Date
with respect to such Called Principal,  in Federal Reserve  Statistical  Release
H.15 (519) (or any comparable  successor  publication)  for actively traded U.S.
Treasury  securities  having a constant  maturity equal to the Remaining Average
Life of such Called  Principal as of such  Settlement  Date.  Such implied yield
will  be  determined,  if  necessary,  by  (a)  converting  U.S.  Treasury  bill
quotations  to bond  equivalent  yields in accordance  with  accepted  financial
practice and (b)  interpolating  linearly  between (1) the actively  traded U.S.
Treasury  security with the maturity  closest to and greater than such Remaining
Average  Life  and (2) the  actively  traded  U.S.  Treasury  security  with the
maturity closest to and less than such Remaining  Average Life. The Reinvestment
Yield  shall be  rounded  to the  number of  decimal  places as  appears  in the
interest rate of the applicable bond of the Thirty-second Series.

     "Remaining  Average Life" means, with respect to any Called Principal,  the
number  of years  (calculated  to the  nearest  one-twelfth  year)  obtained  by
dividing (i) such Called Principal into (ii) the sum of the products obtained by
multiplying (a) the principal component of each Remaining Scheduled Payment with
respect to such Called  Principal by (b) the number of years  (calculated to the
nearest  one-twelfth  year) that will elapse  between the  Settlement  Date with
respect to such Called  Principal and the  scheduled due date of such  Remaining
Scheduled Payment.

     "Remaining  Scheduled Payments" means, with respect to the Called Principal
of any Bond of the Thirty-second  Series,  all payments of such Called Principal
and interest thereon that would be due after the Settlement Date with respect to
such Called  Principal if no payment of such Called Principal were made prior to
its scheduled due date,  provided that if such  Settlement Date is not a date on
which  interest  payments are due to be made under the terms of the Bonds of the
Thirty-second  Series, then the amount of the next succeeding scheduled interest
payment  will be reduced by the amount of  interest  accrued to such  Settlement
Date and required to be paid on such  Settlement Date pursuant to subsection (I)
of this section.

<PAGE>

                                       10

     "Settlement  Date" means,  with respect to the Called Principal of any Bond
of the  Thirty-second  Series,  the date on which such Called Principal is to be
prepaid pursuant to subsection (I) of this section.

     "Senior  Financial  Officer" means the chief financial  officer,  principal
accounting officer, treasurer or comptroller of the Company.

     (V) At the option of the registered  owner, any bonds of the  Thirty-second
Series,  upon surrender  thereof for cancellation at the office or agency of the
Company  in the  Borough of  Manhattan,  The City of New York,  together  with a
written instrument of transfer wherever required by the Company duly executed by
the registered owner or by his duly authorized  attorney,  shall (subject to the
provisions of Section 12 of the Mortgage) be  exchangeable  for a like aggregate
principal amount of bonds of the same series of other authorized denominations.

     Bonds of the  Thirty-second  Series shall be  transferable  (subject to the
provisions of Section 12 of the Mortgage) at the office or agency of the Company
in the Borough of  Manhattan,  The City of New York.  The  Company  shall not be
required to make transfers or exchanges of bonds of the Thirty-second Series for
a period of ten (10) days next preceding any designation of bonds of said series
to be prepaid,  and the  Company  shall not be  required  to make  transfers  or
exchanges  of any  bonds  of said  series  designated  in  whole  or in part for
prepayment.

     Upon any  exchange or transfer of bonds of the  Thirty-second  Series,  the
Company may make a charge  therefor  sufficient  to  reimburse it for any tax or
taxes or other  governmental  charge, as provided in Section 12 of the Mortgage,
but the Company hereby waives any right to make a charge in addition thereto for
any exchange or transfer of bonds of the Thirty-second Series.

     After the delivery of this  Twenty-sixth  Supplemental  Indenture  and upon
compliance  with the  applicable  provisions  of the  Mortgage  and  receipt  of
consideration  therefor by the Company, there shall be an initial issue of bonds
of the Thirty-second Series for the aggregate principal amount of $60,000,000.

                                   ARTICLE II
                            MISCELLANEOUS PROVISIONS

     SECTION 1. Section 126 of the Mortgage,  as heretofore  amended,  is hereby
further amended by adding the words "and February 1, 2027," after the words "and
March 1, 2036."

     SECTION 2.  Subject to the  amendments  provided  for in this  Twenty-sixth
Supplemental  Indenture,  the  terms  defined  in the  Mortgage,  as  heretofore
supplemented,   shall,  for  all  purposes  of  this  Twenty-sixth  Supplemental
Indenture,   have  the  meanings  specified  in  the  Mortgage,   as  heretofore
supplemented.

     SECTION 3. The holders of bonds of the  Thirty-second  Series  consent that
the  Company  may,  but shall not be  obligated  to,  fix a record  date for the
purpose of determining the holders of bonds of the Thirty-second Series entitled
to consent to any  amendment,  supplement or waiver.

<PAGE>

                                       11

If a record date is fixed,  those  persons who were  holders at such record date
(or their duly designated proxies), and only those persons, shall be entitled to
consent  to such  amendment,  supplement  or  waiver or to  revoke  any  consent
previously given,  whether or not such persons continue to be holders after such
record date.  No such consent  shall be valid or effective for more than 90 days
after such record date.

     SECTION 4. The Trustees hereby accept the trusts herein declared, provided,
created  or  supplemented  and  agree to  perform  the same  upon the  terms and
conditions herein and in the Mortgage set forth and upon the following terms and
conditions:

     The Trustees shall not be  responsible  in any manner  whatsoever for or in
respect  of the  validity  or  sufficiency  of  this  Twenty-sixth  Supplemental
Indenture or for or in respect of the recitals  contained  herein,  all of which
recitals  are made by the Company  solely.  In general,  each and every term and
condition contained in Article XVII of the Mortgage shall apply to and form part
of this Twenty-sixth Supplemental Indenture with the same force and effect as if
the same were  herein  set forth in full with  such  omissions,  variations  and
insertions,  if any,  as may be  appropriate  to make  the same  conform  to the
provisions of this Twenty-sixth Supplemental Indenture.

         SECTION 5. Whenever in this Twenty-sixth Supplemental Indenture any
party hereto is named or referred to, this shall, subject to the provisions of
Articles XVI and XVII of the Mortgage, as heretofore supplemented, be deemed to
include the successors or assigns of such party, and all the covenants and
agreements in this Twenty-sixth Supplemental Indenture contained by or on behalf
of the Company, or by or on behalf of the Trustees shall, subject as aforesaid,
bind and inure to the benefit of the respective successors and assigns of such
party whether so expressed or not.

     SECTION 6. Nothing in this Twenty-sixth  Supplemental Indenture,  expressed
or implied, is intended, or shall be construed,  to confer upon, or give to, any
person,  firm or  corporation,  other than the parties hereto and the holders of
the bonds and coupons  Outstanding  under the Mortgage,  any right,  remedy,  or
claim  under or by reason of this  Twenty-sixth  Supplemental  Indenture  or any
covenant,  condition,  stipulation,  promise or  agreement  hereof,  and all the
covenants,   conditions,   stipulations,   promises  and   agreements   in  this
Twenty-sixth  Supplemental  Indenture  contained by and on behalf of the Company
shall be for the sole and exclusive  benefit of the parties  hereto,  and of the
holders of the bonds and of the coupons Outstanding under the Mortgage.

     SECTION 7. This  Twenty-sixth  Supplemental  Indenture shall be executed in
several counterparts,  each of which shall be an original and all of which shall
constitute but one and the same instrument.

     SECTION 8. The Company, the mortgagor named herein, by its execution hereof
acknowledges  receipt of a full,  true and  complete  copy of this  Twenty-sixth
Supplemental Indenture.

<PAGE>

                                       12

IN WITNESS  WHEREOF,  ALLETE,  Inc. has caused its corporate name to be hereunto
affixed,  and this instrument to be signed and sealed by its President or one of
its Vice  Presidents,  and its corporate seal to be attested by its Secretary or
one of its  Assistant  Secretaries  for and in its  behalf,  all in the  City of
Duluth,  Minnesota, and The Bank of New York has caused its corporate name to be
hereunto affixed, and this instrument to be signed and sealed by one of its Vice
Presidents or one of its Assistant Vice  Presidents and its corporate seal to be
attested by one of its Assistant  Treasurers,  one of its Vice Presidents or one
of its Assistant Vice  Presidents,  and Douglas J. MacInnes has hereunto set his
hand and affixed his seal,  all in The City of New York,  as of the day and year
first above written.

                                       ALLETE, INC.

                                       By /s/ Mark A. Schober
                                         ---------------------------------------
                                         Mark A. Schober
                                         Senior Vice President & Chief Financial
                                         Officer

Attest:

/s/ Deborah A. Amberg
--------------------------------------
Deborah A. Amberg
Senior Vice President, General Counsel
& Secretary

Executed, sealed and delivered by
ALLETE, INC. in the presence of:

/s/ Kristie Lindstrom
---------------------

/s/ Susan Romans
---------------------

<PAGE>

                                       13

                                       THE BANK OF NEW YORK,
                                             as Trustee

                                       By /s/ Mary K. LaGumina
                                         ---------------------------------------
                                         Printed Name: Mary K. LaGumina
                                         Title: Vice President

Attest:

/s/ Alexander Pabon
-------------------
Printed Name: Alexander Pabon
Title: Assistant Vice President

                                       /s/ Douglas J. MacInnes              L.S.
                                       -----------------------------------------
                                           DOUGLAS J. MACINNES

Executed, sealed and delivered by
THE BANK OF NEW YORK and
DOUGLAS J. MACINNES in the presence of:

/s/ Franca Ferrera
------------------

/s/ Sean Johnson
------------------

<PAGE>

                                       14

STATE OF MINNESOTA     )
                       ) SS.:
COUNTY OF ST. LOUIS    )

     On this 18th day  of January, 2007, before  me, a Notary Public  within and
for said County,  personally  appeared Mark A. Schober and Deborah A. Amberg, to
me personally  known,  who,  being each by me duly sworn,  did say that they are
respectively  the Senior  Vice  President  and Chief  Financial  Officer and the
Senior Vice President,  General  Counsel,  and Secretary of ALLETE,  INC. of the
State of Minnesota, the corporation named in the foregoing instrument;  that the
seal  affixed  to  the  foregoing  instrument  is the  corporate  seal  of  said
corporation;  that  said  instrument  was  signed  and  sealed in behalf of said
corporation by authority of its Board of Directors; and said Mark A. Schober and
Deborah A. Amberg  acknowledged  said  instrument to be the free act and deed of
said corporation.

     Personally  came before  me on  this 18th  day of  January,  2007, Mark  A.
Schober,  to me  known to be the  Senior  Vice  President  and  Chief  Financial
Officer,  and Deborah A.  Amberg,  to me known to be the Senior Vice  President,
General Counsel,  and Secretary of the above named ALLETE, INC., the corporation
described in and which executed the foregoing  instrument,  and to me personally
known to be the persons who as such officers  executed the foregoing  instrument
in the name and  behalf of said  corporation,  who,  being by me duly  sworn did
depose  and say and  acknowledge  that they are  respectively  the  Senior  Vice
President and Chief  Financial  Officer and the Senior Vice  President,  General
Counsel,  and  Secretary  of said  corporation;  that the seal  affixed  to said
instrument  is the  corporate  seal of said  corporation;  and that they signed,
sealed  and  delivered  said  instrument  in the  name  and on  behalf  of  said
corporation  by authority of its Board of Directors and  stockholders,  and said
Mark A.  Schober  and  Deborah  A.  Amberg  then  and  there  acknowledged  said
instrument  to be the  free  act and  deed of said  corporation  and  that  such
corporation executed the same.

     On the 18th day of January, 2007, before me personally came Mark A. Schober
and Deborah A. Amberg,  to me known, who, being by me duly sworn, did depose and
say that they respectively reside at 202 W. Owatonna Street, Duluth,  Minnesota,
and 2738 Northridge  Drive,  Duluth,  Minnesota;  that they are respectively the
Senior Vice President and Chief Financial Officer and the Senior Vice President,
General  Counsel,  and  Secretary  of  ALLETE,  INC.,  one of  the  corporations
described in and which executed the above instrument; that they know the seal of
said  corporation;  that the seal affixed to said  instrument is such  corporate
seal;  that it was so  affixed  by  order  of the  Board  of  Directors  of said
corporation, and that they signed their names thereto by like order.

     GIVEN under my hand and notarial seal this 18th day of January, 2007.

           [NOTARY PUBLIC SEAL]                  /s/ Jodi Nash
                JODI M. NASH                     ------------------------------
         NOTARY PUBLIC - MINNEOSTA               NOTARY PUBLIC - MINNESOTA
     My Commission Expires Jan 31, 2010          My Commission Expires 1/31/2010

<PAGE>

                                       15

STATE OF NEW YORK      )
                       ) SS:
COUNTY OF NEW YORK     )

     On  this 7th day of  December, 2006, before  me, a Notary Public within and
for said County, personally appeared Mary K. LaGumina and Alexander Pabon, to me
personally  known,  who,  being  each by me duly  sworn,  did say that  they are
respectively a Vice President and an Assistant Vice President of THE BANK OF NEW
YORK  of  the  State  of New  York,  the  corporation  named  in  the  foregoing
instrument;  that the seal affixed to the foregoing  instrument is the corporate
seal of said  corporation;  that said instrument was signed and sealed in behalf
of said  corporation  by authority of its Board of  Directors;  and said Mary K.
LaGumina and Alexander Pabon acknowledged said instrument to be the free act and
deed of said corporation.

     Personally came  before  me on  this  7th day  of  December, 2006,  Mary K.
LaGumina,  to me known to be a Vice President,  and Alexander Pabon, to me known
to be an Assistant Vice President,  of the above named THE BANK OF NEW YORK, the
corporation described in and which executed the foregoing instrument,  and to me
personally  known to be the persons who as such officers  executed the foregoing
instrument  in the name and behalf of said  corporation,  who,  being by me duly
sworn did  depose  and say and  acknowledge  that they are  respectively  a Vice
President and an Assistant  Vice  President of said  corporation;  that the seal
affixed to said instrument is the corporate seal of said  corporation;  and that
they signed,  sealed and delivered said  instrument in the name and on behalf of
said  corporation  by  authority  of its  Board of  Directors,  and said Mary K.
LaGumina and Alexander Pabon then and there  acknowledged  said instrument to be
the free act and deed of said corporation and that such corporation executed the
same.

     On  the  7th day  of  December, 2006,  before  me  personally  came Mary K.
LaGumina and Alexander  Pabon,  to me known,  who,  being by me duly sworn,  did
depose  and say that they  respectively  reside  at 17 The  Quarter  Deck,  Port
Washington,  NY 11233, and 245 Seaman Avenue, Apt. 1-E, New York, NY 10034; that
they are  respectively  a Vice  President and an Assistant Vice President of THE
BANK OF NEW YORK,  one of the  corporations  described in and which executed the
above  instrument;  that they know the seal of said  corporation;  that the seal
affixed to said  instrument is such  corporate  seal;  that it was so affixed by
order of the Board of Directors of said corporation,  and that they signed their
names thereto by like order.

     GIVEN under my hand and notarial seal this 7th day of December, 2006.

            CARLOS R. LUCIANO
     Notary Public, State of New York           /s/ Carlos R. Luciano
              No. 41-4765897                    --------------------------------
        Qualified in Queens County              Notary Public, State of New York
       Commission Expires 4/30/2010

<PAGE>

                                       16

STATE OF NEW YORK      )
                       ) SS:
COUNTY OF NEW YORK     )

     On this 7th day of December, 2006, before me personally appeared DOUGLAS J.
MACINNES,  to me  known  to be the  person  described  in and who  executed  the
foregoing instrument, and acknowledged that he executed the same as his free act
and deed.

     Personally  came before me this 7th day of December,  2006, the above named
DOUGLAS J.  MACINNES,  to me known to be the person who executed  the  foregoing
instrument, and acknowledged the same.

     On the 7th day of  December,  2006,  before me  personally  came DOUGLAS J.
MACINNES,  to me  known  to be the  person  described  in and who  executed  the
foregoing instrument, and acknowledged that he executed the same.

     GIVEN under my hand and notarial seal this 7th day of December, 2006.

            CARLOS R. LUCIANO
     Notary Public, State of New York           /s/ Carlos R. Luciano
              No. 41-4765897                    --------------------------------
        Qualified in Queens County              Notary Public, State of New York
       Commission Expires 4/30/2010

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