Document:

<PAGE>
                                                                  EXHIBIT 10(h)7
                                                           ALLETE 2006 Form 10-K

                     ALLETE EXECUTIVE ANNUAL INCENTIVE PLAN
                                  FORM OF AWARD
                                 EFFECTIVE 2007
              [ELIGIBLE EXECUTIVE EMPLOYEES - CORPORATE AND ENERGY]

                            TARGET AWARD OPPORTUNITY
                            ------------------------

Base Salary                                         $

   TIMES

Award Opportunity (percent of base salary)          %
                                                    --------
   EQUALS

Target Award                                        $

                      PERFORMANCE LEVELS AND AWARD AMOUNTS
                      ------------------------------------

-------------------------- ------------------------------- ---------------------
                                PAYOUT AS PERCENT OF
  GOAL PERFORMANCE LEVEL            TARGET AWARD               AWARD AMOUNT
-------------------------- ------------------------------- ---------------------
Superior                                200%                         $
-------------------------- ------------------------------- ---------------------
Target                                  100%                         $
-------------------------- ------------------------------- ---------------------
Threshold                              37.5%                         $
-------------------------- ------------------------------- ---------------------
Below Threshold                           0%                         $
-------------------------- ------------------------------- ---------------------

                                      GOALS
                                      -----

                                                                         GOAL
                                                                       WEIGHTING
FINANCIAL GOALS
   Net Income from Continuing Operations                                  50%
   Cash Flow from Operating Activities                                    25%

STRATEGIC NON-FINANCIAL GOALS                                             25%
                                                                        ------
                                                                         100%

<PAGE>

                     ALLETE EXECUTIVE ANNUAL INCENTIVE PLAN
                                  FORM OF AWARD
                                 EFFECTIVE 2007
                  [ELIGIBLE EXECUTIVE EMPLOYEES - REAL ESTATE]

                      FINANCIAL GOALS AND AWARD OPPORTUNITY
                      -------------------------------------

Achievement Bonus Pool (0.0% - 0.xx% of Real Estate Land Sales)         $

   PLUS

Incentive Bonus Pool (0.0% - 0.xx% of Total Real Estate Income)         $

   EQUALS                                                               --------

Bonus Pool Opportunity                                                  $

   TIMES

Strategic Non-financial Goals (0% - 120%)                               %

   EQUALS

Annual Incentive Award                                                  $
                                                                        --------
                                                                        --------<PAGE>
                                                                  EXHIBIT 10(i)4
                                                           ALLETE 2006 Form 10-K

                                AMENDMENT TO THE
                         ALLETE AND AFFILIATED COMPANIES
                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

         The ALLETE and Affiliate Companies Supplemental Executive Retirement
Plan, amended and restated effective January 1, 2004, is amended as follows:

         1. Effective January 1, 2007, Section 4.10 is DELETED in its entirety
         and replaced with the following:

         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 an 8%
         interest rate 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; provided, however, that any Participant who
         is also eligible for retirement benefits under the ALLETE and
         Affiliated Companies Supplemental Executive Retirement Plan II (SERP
         II) must receive Retirement Benefits under this Plan in the same form
         as he or she receives retirement benefits under SERP II. For purposes
         of clarification, if a Participant who is eligible for retirement
         benefits under SERP II receives the normal form of retirement benefits
         under SERP II, for any reason, any election by the Participant to
         receive the optional form of Retirement Benefits under this Plan shall
         be inoperable and the Participant shall receive the normal form of
         Retirement Benefits under this Plan.

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

                                       1

<PAGE>

         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.

                                   ALLETE, INC.

                               By: /s/ Donald J. Shippar
                                   ---------------------------------------------
                                   Donald J. Shippar
                                   Chairman, President & Chief Executive Officer

ATTEST:

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

                                       2<PAGE>
                                                                  EXHIBIT 10(m)6
                                                           ALLETE 2006 Form 10-K

                                     ALLETE
                 EXECUTIVE LONG-TERM INCENTIVE COMPENSATION PLAN
                         NONQUALIFIED STOCK OPTION GRANT
                                 EFFECTIVE 2007
                         [ELIGIBLE EXECUTIVE EMPLOYEES]

Name

SS#

In accordance with the terms of ALLETE's Executive Long-Term Incentive
Compensation Plan (the "Plan"), as determined by and through the Executive
Compensation Committee of ALLETE's Board of Directors, ALLETE hereby grants to
you (the "Participant"), subject to the terms and conditions set forth in this
Grant (including Annex A hereto and all documents incorporated herein by
reference) the rights and options (the "Options") to purchase from ALLETE,
shares of its common stock, without par value, as set forth below:

Number of Options Granted:
Number of Shares to which Options Pertain:
Date of Grant:
Option Price:
Vesting:

Expiration Date:
Exercise Period:

Further terms and conditions of the Grant are set forth in Annex A hereto, which
is an integral part of this Grant. This Grant is made in accordance with the
Plan, which was approved by ALLETE's shareholders at the 2005 Annual Meeting.
All terms, provisions and conditions applicable to the Options set forth in the
Plan and not set forth herein are incorporated by reference. To the extent any
provision hereof is inconsistent with a provision of the Plan, the provisions of
the Plan will govern.

These Options are not intended to qualify as incentive stock options under
Section 422 of the Internal Revenue Code of 1986, as amended.

IN WITNESS WHEREOF, ALLETE has caused this Grant to be executed by its Chairman,
President and Chief Executive Officer as of the date and year first above
written.

                                        ALLETE

                                        By:
                                           -------------------------------------
                                                Chairman, President and CEO

Attachment: Annex A

<PAGE>

                                     ANNEX A
                                       TO
                 EXECUTIVE LONG-TERM INCENTIVE COMPENSATION PLAN
                         NONQUALIFIED STOCK OPTION GRANT
                                 EFFECTIVE 2007
                         [ELIGIBLE EXECUTIVE EMPLOYEES]

     1.   FURTHER TERMS AND CONDITIONS OF OPTIONS. The Grant of Options
evidenced by the Grant to which this is annexed is subject to the following
additional terms and conditions:

          (a)    EXERCISE OF OPTIONS. Except as otherwise provided in subsection
(b) hereof, upon a Change in Control as set forth in the Plan or as the
Executive Compensation Committee (the "Committee") may determine, the
Participant must be in the employ of ALLETE or a Subsidiary thereof at the time
the Options are exercised. Subject to the foregoing and to subsection (b)
hereof, after vesting, the Options may be exercised in whole or in part from
time to time by written or electronic notice of exercise delivered to
Computershare, such notice to be received and effective not later than the
Expiration Date, specifying the number of Shares to be purchased. In the event
that the Expiration Date shall fall on a day that is not a regular business day
at ALLETE's executive offices in Duluth, Minnesota, such notice must be
delivered to Computershare no later than the last regular business day prior to
the Expiration Date.

          (b)    EXERCISE UPON DEATH, RETIREMENT, OR DISABILITY; FORFEITURE UPON
TERMINATION OF EMPLOYMENT FOR CAUSE, DEMOTION, OR UNSATISFACTORY JOB
PERFORMANCE.

          (1) If the Participant retires pursuant to the terms of a tax-
              qualified retirement plan of ALLETE or a Subsidiary or upon such
              other retirement as may be approved by the Committee, the Options,
              to the extent not yet vested, shall vest in full and all Options
              covered by the Grant, to the extent not yet exercised, shall be
              exercisable by the Participant in full at any time during the
              three-year period immediately following his retirement, but in no
              event after the Expiration Date.

          (2) In the event of the death of the Participant while in the employ
              of ALLETE or a Subsidiary, the Options, to the extent not yet
              vested, shall vest in full and all Options covered by the Grant,
              to the extent not yet exercised, shall be exercisable by the
              executors, administrators, legatees or distributees of his estate,
              as the case may be, in full at any time during the one-year period
              following his death, but in no event after the Expiration Date.

          (3) In the event of the termination of the employment of the
              Participant due to Disability (as defined in Section 22(e)(3) of
              the Code), the Options, to the extent not yet vested, shall vest
              in full and all Options covered by the Grant, to the extent not
              yet exercised, shall be exercisable in full at any time during the
              one-year period following such termination of employment, but in
              no event after the Expiration Date.

<PAGE>

          (4) If the Participant's employment or service with the Company
              terminates for any reason other than for Cause (defined below).
              Participant shall have ninety (90) days from the date of
              termination of employment or service to exercise vested options
              and all unvested options will be forfeited as of the date of
              termination.

          (5) If the Participant's employment with the Company or any Subsidiary
              is terminated for Cause, all outstanding unvested and vested
              Options shall be forfeited as of the date of such termination of
              employment or service. Cause is defined as (a) any conduct by the
              Participant that causes or threatens a loss to the Company; (b)
              any violation of any Company policy; (c) Participant's refusal or
              neglect to substantially perform his or her obligations and
              services; (d) violation of the Company's code of business conduct
              and ethics; or (e) Participant's arrest, conviction or admission
              of any crime involving injury to persons, misappropriation of
              money, or damage to property.

          (6) If the Participant is demoted, or if ALLETE or a Business Unit
              determines in its sole discretion that the Participants job
              performance is unsatisfactory, ALLETE reserves the right to cancel
              any grants and unvested options.

          (7) Notwithstanding the foregoing, the Committee may, in its
              discretion and at any time, provide that the Options may be
              exercisable during a period of up to 5 years following termination
              of employment but in no event after the Expiration Date.

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

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

     4.   DEFINITIONS. Capitalized terms not otherwise defined herein shall have
the meanings given them in the Plan.

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

                                       2

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