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                                                                 Exhibit 10(a)


                                 MINNESOTA POWER

                               EXECUTIVE LONG-TERM

                           INCENTIVE COMPENSATION PLAN


                               Effective 01/01/96




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                                 MINNESOTA POWER
                 EXECUTIVE LONG-TERM INCENTIVE COMPENSATION PLAN




1.      Establishment, Purpose and Duration

        1     Establishment of the Plan.  Minnesota Power & Light Company,
a  Minnesota  corporation  (hereinafter  referred to as the  "Company"),  hereby
establishes an incentive  compensation  plan to be known as the "Minnesota Power
Executive Long-Term Incentive Compensation Plan" (hereinafter referred to as the
"Plan"),  as set  forth  in  this  document.  The  Plan  permits  the  grant  of
Nonqualified  Stock  Options  (NQSO),   Incentive  Stock  Options  (ISO),  Stock
Appreciation  Rights (SAR),  Restricted Stock,  Performance  Units,  Performance
Shares and other grants.

        The Plan shall become  effective as of January 1, 1996 (the  "Effective
Date"),  subject to shareholder approval, and shall remain in effect as provided
in Section 1.3 herein.

        2     Purpose of the Plan.  The  purpose of the Plan is to promote
the  success  and  enhance  the value of the  Company  by linking  the  personal
interests  of  Participants  to those of  Company  shareholders  and  customers,
providing Participants with an incentive for outstanding performance.

        The Plan is further  intended  to assist the  Company in its ability to
motivate,  attract  and  retain  the  services  of  Participants  upon  whom the
successful conduct of its operations is largely dependent.

        3  Duration  of the  Plan.  The  Plan  shall  commence  on the
Effective Date, as described in Section 1.1 herein,  and shall remain in effect,
subject to the right of the Board of Directors to terminate the Plan at any time
pursuant  to Article 15 herein,  until all Shares  subject to it shall have been
purchased or acquired according to the Plan's provisions.  However,  in no event
may a Grant be made  under  the Plan on or after the  tenth  anniversary  of the
Effective Date.

2.      Definitions

        Whenever used in the Plan, the following  terms shall have the meanings
set forth below and,  when such meaning is intended,  the initial  letter of the
word is capitalized:

        1     "Base Value" of an SAR shall have the meaning set forth in
Section 7.1 herein.

        2     "Board" or "Board of Directors" means the Board of Directors of
the Company.

        3     "Cause" means: (i) willful misconduct on the part of a Participant
that is detrimental  to the Company or (ii) the conviction of a Participant  for
the commission of a felony or crime  involving  moral  turpitude.  "Cause" under
either (i) or (ii) shall be determined in good faith by the Committee.

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        4     "Change in Control" of the Company shall be deemed to have
occurred as of the first day that any one or more of the  following  conditions
shall have been satisfied:

        (a)     the dissolution or liquidation of the Company;

        (b)     a reorganization,   merger  or  consolidation  of  the  Company
                with  one or more unrelated corporations, as a result of which
                the Company is not the surviving corporation;

        (c)     the sale, exchange, transfer or other disposition of shares of
                the common stock of the Company (or shares of the stock of any
                person that is a  shareholder  of the  Company) in one or more
                transactions,  related or  unrelated,  to one or more  Persons
                unrelated to the Company if, as a result of such transactions,
                any Person (or any Person and its  affiliates)  owns more than
                twenty  percent  (20%) of the voting power of the  outstanding
                common stock of the Company; or

        (d)     a reorganization, merger or consolidation of the Company with
                one or more  unrelated  corporations, if  immediately  after the
                consummation  of such  transaction  less than a majority  of the
                board of directors of the surviving  corporation is comprised of
                Continuing  Directors.  Continuing  Director shall mean (i) each
                member of the Board of  Directors  of the  Company,  while  such
                person is a member of the Board,  who is not the other  party to
                the  transaction,  an Affiliate or Associate (as these terms are
                defined  in  the  Exchange  Act)  of  such  other  party  to the
                transaction,  or a representative  of such other party or of any
                such  Affiliate  or  Associate,  and was a member  of the  Board
                immediately  prior  to  the  initial  public  announcement  of a
                proposal  relating to a  reorganization, merger or consolidation
                involving such other party, or an Affiliate or Associate of such
                other party or (ii) any person who subsequently becomes a member
                of the Board, while such person is a member of the Board, who is
                not the  other  party to the  transaction,  or an  Affiliate  or
                Associate  thereof,  or a representative  of such other party to
                the  transaction or of any such  Affiliate or Associate, if such
                person's  nomination for election to the Board is recommended or
                approved  by  two-thirds  of the  Continuing  Directors  then in
                office;

        (e)     the sale of all or substantially all the assets of the Company.

        5       "Code" means the Internal Revenue Code of 1986, as amended from
time to time.

        6       "Committee" means the committee,  as specified in Article 3,
appointed by the Board to administer the Plan with respect to Grants.

        7       "Company" means Minnesota Power & Light Company, a Minnesota
corporation, or any successor thereto as provided in Article 17 herein.

        8       "Director" means any individual who is a member of the Board of
Directors of the Company.

        9       "Disability" shall have the meaning ascribed to such term under
Section  22(e)(3) of the Code.

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        10     "Dividend Equivalent" means, with respect to Shares subject to
Options or Performance  Shares, a right to an amount equal to dividends declared
on an equal number of outstanding Shares.

        11     "Eligible  Employee" means an employee who is eligible to
participate in the Plan, as set forth in Section 5.1 herein.

        12     "Employee" means any full-time employee of the Company or of the
Company's  Subsidiaries,  who  is  not  covered  by  any  collective  bargaining
agreement to which the Company or any of its Subsidiaries is a party.  Directors
who are not otherwise employed by the Company shall not be considered  Employees
under  the  Plan.  For  purposes  of  the  Plan,  transfer  of  employment  of a
Participant  between  the Company  and any one of its  Subsidiaries  (or between
Subsidiaries) shall not be deemed a termination of employment.

        13     "Exchange Act" means the  Securities  Exchange Act of 1934,
as amended from time to time, or any successor act thereto.

        14     "Exercise Period" means the period during which an SAR or Option
is exercisable, as set forth in the related Grant Agreement.

        15     "Fair Market Value" means the closing sale price as reported in
the composite  reporting  system or, if there is no such sale on the relevant
date, then on the last previous day on which a sale was reported.

        16     "Freestanding SAR" means an SAR that is granted independently of
any Options.

        17     "Grant" means, individually or collectively, a grant under the
Plan of NQSOs,  ISOs, SARs,  Restricted Stock,  Performance  Units,  Performance
Shares or any other type of grant permitted under Article 10 of the Plan.

        18     "Grant  Agreement" means an agreement entered into by each
Participant and the Company,  setting forth the terms and provisions  applicable
to a Grant made to a Participant under the Plan.

        19     "Incentive  Stock  Option" or "ISO" means an option  to purchase
Shares,  granted  under  Article 6 herein,  which is  designated as an
Incentive  Stock Option and  satisfies  the  requirements  of Section 422 of the
Code.

        20     "Insider  means an Employee who is, on the relevant  date, an
officer,  director or ten percent (10%)  beneficial owner of the Common Stock of
the Company, as defined under Section 16 of the Exchange Act.

        21     "Named Executive Officer" means a Participant  who, as of the
date of  vesting  and/or  payout  of a Grant,  is one of the  group of  "covered
employees," as defined in the Regulations promulgated under Code Section 162(m),
or any successor statute.

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        22     "Nonqualified Stock Option" or "NQSO" means an option to
purchase Shares,  granted under Article 6 herein, which is not intended to be an
Incentive Stock Option.

        23     "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.

        24     "Option Price" means the price at which a Share may be purchased
by a Participant pursuant to an Option, as determined by the Committee and set
forth in the Option Grant Agreement.

        25     "Participant" means an Employee who has outstanding a Grant made
under the Plan.

        26     "Performance Unit" means a Grant made to an Employee, as
described  in  Article 9 herein.

        27     "Performance Share" means a Grant made to an Employee, as
described  in Article 9 herein.

        28     "Period of Restriction" means the period during which the
transfer of Restricted Stock is limited, as provided in Article 8 herein.

        29     "Person  shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act, as used in Sections 13(d) and 14(d) thereof
including usage in the definition of a "group" in Section 13(d) thereof.

        30     "Restricted  Stock" means a Grant of Shares made to a Participant
pursuant to Article 8 herein.

        31     "Retirement" shall, with respect to a Participant, have the
meaning ascribed to such term in the tax-qualified  defined benefit pension plan
maintained by the Company for the benefit of such Participant.

        32     "Shares" means the shares of common stock of the Company, without
par value.

        33     "Stock Appreciation Right" or "SAR" means a right, granted alone
or in  connection  with a related  Option,  designated  as an SAR,  to receive a
payment on the day the right is  exercised,  pursuant  to the terms of Article 7
herein. Each SAR shall be denominated in terms of one Share.

        34     "Subsidiary" means any corporation that is a "subsidiary
corporation"  of the  Company as that term is  defined in Section  424(f) of the
Code.

        35     "Tandem  SAR"  means an SAR that is  granted  in  connection
with a related  Option,  the exercise of which shall  require  forfeiture of the
right  to  purchase  a Share  under  the  related  Option  (and  when a Share is
purchased under the Option, the Tandem SAR shall be similarly canceled).

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3.      Administration

        1     The  Committee.  The  Plan  shall  be  administered  by the
Executive  Compensation  Committee  of  the  Board,  or by any  other  Committee
appointed  by the  Board  consisting  of not less than  three  (3)  non-employee
Directors. The members of the Committee shall be appointed from time to time by,
and shall serve at the discretion of, the Board of Directors.

        The Committee,  to the extent  necessary,  shall be comprised  solely of
Directors who are eligible to  administer  the Plan pursuant to Rule 16b-3 under
the Exchange Act and Treas. Reg.  1.162-27(e)(3)  with respect to Grants made to
Named  Executive  Officers.  However,  if for any reason the Committee  does not
qualify to administer the Plan, as contemplated by Rule 16b-3 under the Exchange
Act or Treas.  Reg.  1.162-27(e)(3),  the Board of  Directors  may appoint a new
Committee so as to comply with Rule 16b-3 and Treas. Reg. 1.162-27(e)(3).

        2     Authority of the  Committee.  The Committee  shall have full
power except as limited by law, the Articles of Incorporation  and the Bylaws of
the Company,  subject to such other restricting limitations or directions as may
be imposed by the Board and subject to the provisions  herein,  to determine the
size and types of Grants;  to determine the terms and  conditions of such Grants
in a manner consistent with the Plan; to construe and interpret the Plan and any
agreement or  instrument  entered into under the Plan;  to  establish,  amend or
waive rules and regulations for the Plan's  administration;  and (subject to the
provisions  of  Article  15  herein)  to amend the terms and  conditions  of any
outstanding Grant.  Further,  the Committee shall make all other  determinations
which may be necessary  or  advisable  for the  administration  of the Plan.  As
permitted by law, the  Committee  may delegate  its  authorities  as  identified
hereunder.

        3     Decisions Binding.  All determinations  and  decisions made by the
Committee  pursuant  to the  provisions  of the Plan and all  related  orders or
resolutions of the Board shall be final,  conclusive and binding on all persons,
including  the Company,  its  shareholders,  Employees,  Participants  and their
estates and beneficiaries.

        4     Costs. The Company shall pay all costs of administration of the
Plan.

4.      Shares Subject to the Plan

        1     Number of Shares. Subject to Section 4.2 herein, the maximum
number  of  Shares  available  for grant  under  the Plan  shall be two  million
one hundred thousand (2,100,000).  Shares  underlying  lapsed or forfeited
Grants, or Grants that are not paid in stock, may be reused for other Grants. 
Shares may be (i) authorized but unissued shares of Common Stock or (ii) shares
purchased on the open market.

        2     Adjustments in Authorized Shares.  In the  event of  any  merger,
reorganization, consolidation,  recapitalization, separation, liquidation, stock
dividend, split-up, share combination or other change in the corporate structure
of the Company affecting the Shares, such adjustment shall be made in the number
and class of Shares which may be delivered under the Plan, and in the number and
class of and/or  price of Shares  subject to  outstanding  Grants made under the
Plan, as may be determined to be appropriate and equitable by the Committee,  in
its sole  discretion,  to prevent  dilution or enlargement of rights;  provided,
however,  that the number of Shares subject to any Grant shall always be a whole
number.

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5.      Eligibility and Participation

        1     Eligibility.  Persons eligible to participate in the Plan include
all  officers  and  key  employees  of the  Company  and  its  Subsidiaries,  as
determined by the Committee,  including  Employees who are members of the Board,
but excluding Directors who are not Employees.

        2     Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time,  select from all eligible  Employees  those to
whom  Grants  shall be made and shall  determine  the  nature and amount of each
Grant.


6.      Stock Options

        1     Grant of Options. Subject to the terms and conditions of the Plan,
Options  may be granted  to an  Eligible  Employee  at any time and from time to
time, as shall be determined by the Committee. The Committee shall have complete
discretion in  determining  the number of Shares  subject to Options  granted to
each  Participant  (subject  to  Article  4  herein)  and  consistent  with  the
provisions of the Plan, in determining  the terms and  conditions  pertaining to
such Options; provided, however, the maximum number of shares subject to Options
which may be granted to any single  Participant  during any one calendar year is
twenty thousand  (20,000).  The Committee may grant ISOs, NQSOs or a combination
thereof.

        2     Option Grant Agreement. Each Option grant shall be evidenced by
an Option Grant  Agreement that shall specify the Option Price,  the duration of
the  Option,  the number of Shares to which the Option  pertains,  the  Exercise
Period and such other  provisions as the Committee shall  determine.  The Option
Grant  Agreement also shall specify  whether the Option is intended to be an ISO
or a NQSO.

        3     Option Price. The Option Price for each Option granted under the
Plan shall be the Fair Market Value of a Share on the date of grant.

        4     Duration of Options. Each  Option shall expire at such time as the
Committee  shall  determine  at the time of grant;  provided,  however,  that no
Option shall be exercisable later than the tenth (10th)  anniversary of its date
of grant.

        5     Dividend Equivalents. Simultaneously with the grant of an Option,
the Participant  receiving the Option may be granted  Dividend  Equivalents with
respect  to the  Shares  subject  to such  Option.  Dividend  Equivalents  shall
constitute rights to amounts equal to the dividends  declared on an equal number
of outstanding  Shares on all payment dates occurring  during the period between
the grant date of an Option and the date the Option is exercised.  The Committee
shall determine at the time Dividend Equivalents are granted the conditions,  if
any, to which the payment of such Dividend Equivalents is subject.

        6     Exercise of and Payment for Options. Options granted under the
Plan shall be exercisable at such times and be subject to such  restrictions and
conditions as the Committee  shall in each instance  approve,  which need not be
the same for each  Grant or for each  Participant.  However,  in no event may an
Option  granted  under  the Plan  become  exercisable  prior  to six (6)  months
following the date of its grant.

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         A  Participant  may  exercise an Option at any time during the Exercise
Period.  Options  shall be  exercised  by the  delivery  of a written  notice of
exercise to the  Company,  setting  forth the number of Shares  with  respect to
which the Option is to be exercised,  accompanied by provisions for full payment
for the Shares.

         The Option  Price upon  exercise of any Option  shall be payable to the
Company  in  full  either  (a) in  cash  or  its  equivalent,  (b) by  tendering
previously  acquired Shares having an aggregate Fair Market Value at the time of
exercise  equal to the total  Option Price  (provided  that the Shares which are
tendered  must  have been held by the  Participant  for at least six (6)  months
prior to their tender to satisfy the Option Price),  (c) by share withholding or
(d) by a combination of (a), (b) and/or (c).

         The  Committee  also may allow  cashless  exercise as  permitted  under
Federal  Reserve  Board's  Regulation  T, subject to applicable  securities  law
restrictions,  or by any  other  means  which  the  Committee  determines  to be
consistent with the Plan's purpose and applicable law.

         As soon as  practicable  after  receipt  of a written  notification  of
exercise of an Option and  provisions  for full  payment  therefor,  the Company
shall deliver to the Participant,  in the Participant's name, Share certificates
in an  appropriate  amount based upon the number of Shares  purchased  under the
Option(s).

        7     Restrictions on Share Transferability.  The Committee may impose
such  restrictions on any Shares acquired  pursuant to the exercise of an Option
under  the  Plan  as it  may  deem  advisable,  including,  without  limitation,
restrictions  to  comply  with  applicable  Federal  securities  laws,  with the
requirements  of any stock  exchange  or market  upon which such Shares are then
listed and/or traded and with any blue sky or state  securities  laws applicable
to such Shares.

        8     Termination of Employment. Each Option Grant Agreement shall set
forth the extent to which the  Participant  shall have the right to exercise the
Option following  termination of the  Participant's  employment with the Company
and its Subsidiaries. Such provisions shall be determined in the sole discretion
of the Committee,  shall be included in the Option Grant Agreement  entered into
with Participants, need not be uniform among all Options granted pursuant to the
Plan or among Participants and may reflect distinctions based on the reasons for
termination of employment.

        9     Nontransferability of Options. No Option granted under the Plan
may  be  sold,  transferred,   pledged,  assigned,  or  otherwise  alienated  or
hypothecated,  other  than by will or by the laws of descent  and  distribution.
Further,  all  Options  granted  to  a  Participant  under  the  Plan  shall  be
exercisable  during his or her lifetime only by such  Participant  or his or her
legal representative.


7.      Stock Appreciation Rights

        1     Grant of SARs. Subject to the terms and conditions of the Plan,
an SAR may be granted to an Eligible Employee at any time and from time to time,
as shall be determined by the  Committee.  The Committee may grant  Freestanding
SARs, Tandem SARs or any combination of these forms of SAR.

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        The Committee  shall have complete  discretion in determining the number
of SARs  granted  to  each  Participant  (subject  to  Article  4  herein)  and,
consistent  with the  provisions  of the  Plan,  in  determining  the  terms and
conditions  pertaining to such SARs;  provided,  however,  the maximum number of
SARs which may be granted to any single Participant during any one calendar year
is twenty thousand (20,000).

         The Base Value of a Freestanding  SAR shall equal the Fair Market Value
of a Share on the date of grant of the SAR.  The Base Value of Tandem SARs shall
equal the Option Price of the related Option.  In no event shall any SAR granted
hereunder become exercisable within the first six (6) months of its grant.

        2     SAR Grant Agreement. Each SAR grant shall be evidenced by an SAR
Grant Agreement  that shall specify the number of SARs  granted, the Base Value,
the term of the SAR (not to exceed ten (10) years), the Exercise Period and such
other provisions as the Committee shall determine.

        3     Exercise of Tandem SARs.  Tandem SARs may be exercised for all or
part of the Shares subject to the related Option upon the surrender of the right
to exercise the equivalent  portion of the related  Option.  A Tandem SAR may be
exercised  only with respect to the Shares for which its related  Option is then
exercisable.

        Notwithstanding  any other  provision of the Plan to the contrary,  with
respect to a Tandem SAR granted in  connection  with an ISO:  (i) the Tandem SAR
will expire no later than the expiration of the  underlying  ISO; (ii) the value
of the payout with respect to the Tandem SAR may be for no more than one hundred
percent (100%) of the difference  between the Option Price of the underlying ISO
and the Fair Market  Value of the Shares  subject to the  underlying  ISO at the
time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only
when the Fair Market  Value of the Shares  subject to the ISO exceeds the Option
Price of the ISO.

        4     Exercise of Freestanding SARs. Freestanding SARs may be exercised
upon  whatever  terms and  conditions  the  Committee,  in its sole  discretion,
imposes upon them.

        5     Exercise and Payment of SARs. A Participant may exercise an SAR
at anytime during the Exercise  Period.  SARs shall be exercised by the delivery
of a written notice of exercise to the Company, setting forth the number of SARs
being  exercised.  Upon exercise of an SAR, a  Participant  shall be entitled to
receive payment from the Company in an amount equal to the product of:

        (a)    the  excess of (i) the Fair Market  Value of a Share on the date
of exercise over (ii) the Base Value of the SAR, multiplied by

        (b)    the number of Shares with respect to which the SAR is exercised.

        At the sole  discretion of the Committee,  the payment upon SAR exercise
may be in cash, in Shares of equivalent value, or in some combination thereof.

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        6     Termination of Employment.  Each SAR Grant Agreement shall set
forth the extent to which the  Participant  shall have the right to exercise the
SAR following  termination of the Participant's  employment with the Company and
its Subsidiaries.  Such provisions shall be determined in the sole discretion of
the Committee,  shall be included in the SAR Grant  Agreement  entered into with
Participants, need not be uniform among all SARs granted pursuant to the Plan or
among  Participants  and may  reflect  distinctions  based  on the  reasons  for
termination of employment.

        7     Nontransferability of SARs. No SAR granted under the Plan may be
sold, transferred,  pledged,  assigned, or otherwise  alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further, all SARs
granted to a Participant  under the Plan shall be exercisable  during his or her
lifetime only by such Participant or his or her legal representative.


8.      Restricted Stock

        1     Grant of Restricted Stock.  Subject to the terms and conditions
of the Plan,  Restricted Stock may be granted to Eligible  Employees at any time
and from time to time, as shall be determined  by the  Committee.  The Committee
shall have complete discretion in determining the number of shares of Restricted
Stock granted to each Participant  (subject to Article 4 herein) and, consistent
with the  provisions  of the Plan,  in  determining  the  terms  and  conditions
pertaining to such Restricted Stock.

        2     Restricted Stock Grant Agreement. Each Restricted Stock grant
shall  be evidenced by a Restricted Stock Grant Agreement that shall specify the
Period or Periods of Restriction,  the number of Restricted Stock Shares granted
and such other provisions as the Committee shall determine.

        3     Transferability.  Except as provided in this Article 8, Restricted
Stock  granted  herein  may not be  sold,  transferred,  pledged,  assigned,  or
otherwise  alienated or hypothecated  until the end of the applicable  Period of
Restriction  established by the Committee and specified in the Restricted  Stock
Grant Agreement. However, in no event may any Restricted Stock granted under the
Plan become vested in a Participant  prior to six (6) months  following the date
of its grant.  All rights  with  respect to the  Restricted  Stock  granted to a
Participant under the Plan shall be available during his or her lifetime only to
such Participant.
 
        4     Certificate  Legend.  Each certificate  representing  Restricted
Stock granted pursuant to the Plan may bear a legend substantially as follows:

        "The sale or other  transfer of the shares of stock  represented by
        this certificate, whether voluntary, involuntary or by operation of
        law, is subject to certain restrictions on transfer as set forth in
        the Minnesota  Power  Executive  Long-Term  Incentive  Compensation
        Plan,  and in a Restricted  Stock Grant  Agreement.  A copy of such
        Plan and such  Agreement  may be obtained  from  Minnesota  Power &
        Light Company."

     The Company  shall have the right to retain the  certificates  representing
Restricted Stock in the Company's possession until such time as all restrictions
applicable to such Shares have been satisfied.

        5     Removal of Restrictions.  Except as otherwise provided in this
Article 8, Restricted  Stock shall become freely  transferable by the
Participant  after the last day of the Period of Restriction applicable thereto.
Once Restricted  Stock is released from the restrictions,  the  Participant
shall be entitled to have the legend  referred to in Section 8.4 removed  from
his or her stock certificate.

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        6     Voting Rights. During the Period of Restriction,  Participants
holding  Restricted  Stock may exercise  full voting  rights with respect to
those Shares.

        7     Dividends and Other Distributions.  During the Period of
Restriction,  Participants  holding  Restricted Stock shall be credited with all
regular cash  dividends  paid with respect to all Shares while they are so held.
All cash dividends and other distributions paid with respect to Restricted Stock
shall  be  credited  to  Participants   subject  to  the  same  restrictions  on
transferability and forfeitability as the Restricted Stock with respect to which
they were paid. If any such dividends or distributions are paid in Shares,  such
Shares  shall  be  subject  to the  same  restrictions  on  transferability  and
forfeitability  as the  Restricted  Stock with  respect to which they were paid.
Subject  to the  restrictions  on vesting  and the  forfeiture  provisions,  all
dividends  credited to a Participant  shall be paid to the Participant  promptly
following  the full vesting of the  Restricted  Stock with respect to which such
dividends were paid. The provisions of this Section 8.7 are subject to the right
of the Committee to determine otherwise at the time of grant.

        8     Termination  of  Employment.  Each  Restricted  Stock Grant
Agreement  shall set forth the  extent to which the  Participant  shall have the
right  to  receive  unvested  Restricted  Shares  following  termination  of the
Participant's employment with the Company and its Subsidiaries.  Such provisions
shall be determined in the sole  discretion of the Committee,  shall be included
in the Restricted Stock Grant Agreement entered into with Participants, need not
be uniform among all grants of Restricted  Stock or among  Participants  and may
reflect distinctions based on the reasons for termination of employment.
 
9.      Performance Units and Performance Shares

        1     Grant of  Performance  Units and Performance  Shares.  Subject to
the  terms of the Plan,  Performance  Units  and/or  Performance  Shares  may be
granted to an Eligible  Employee at any time and from time to time,  as shall be
determined by the  Committee.  The Committee  shall have complete  discretion in
determining the number of Performance Units and/or Performance Shares granted to
each  Participant  (subject  to  Article  4  herein)  and,  consistent  with the
provisions of the Plan, in determining  the terms and  conditions  pertaining to
such Grants;  provided,  however,  the maximum payout to any single  Participant
with respect to Performance Units granted in any one calendar year shall be 200%
of base salary  determined  at the earlier of the  beginning of the  Performance
Period  and the time the  performance  goals are set by the  Committee  and with
respect to Performance Shares shall be twenty thousand (20,000) shares.

        2     Performance  Unit/Performance  Share Grant  Agreement.  Each grant
of  Performance  Units  and/or  Performance  Shares  shall  be  evidenced  by  a
Performance Unit and/or Performance Share Grant Agreement that shall specify the
number of Performance Units and/or Performance Shares granted, the initial value
(if applicable),  the Performance  Period,  the performance goals and such other
provisions as the Committee shall determine,  including, but not limited to, any
right to Dividend Equivalents during or after the Performance Period.

                                   10
<PAGE>

        3     Value of Performance  Units/Shares.  Each  Performance  Unit shall
have an initial value that is established by the Committee at the time of grant.
The  value of a  Performance  Share  shall  equal the  value of one  Share.  The
Committee shall set performance goals in its discretion which,  depending on the
extent  to  which  they are met,  will  determine  the  number  and/or  value of
Performance  Units/Shares  that will be paid out to the  Participants.  The time
period  during  which  the  performance  goals  must be met  shall  be  called a
"Performance  Period."  Performance Periods shall, in all cases, be at least six
(6) months in length.

        Unless and until the Committee  proposes for shareholder  vote a change
in the general  performance goals set forth below, the attainment of which shall
serve as a basis for the determination of the number and/or value of Performance
Units and/or Performance Shares granted under the Plan, the performance goals to
be used for purposes of grants to Named  Executive  Officers shall be based upon
any one or more of the following:

        (a)      Total  shareholder return (measured as the sum of Share
             appreciation  and  dividends declared).

        (b)      Return on invested capital, assets or net assets.

        (c)      Share earnings/earnings growth.

        (d)      Cash flow/cash flow growth.

        (e)      Cost of services to consumers.

        (f)      Growth in revenues, sales, operating income, net income, stock
             price and/or earnings per share.

        (g)      Return on shareholders equity.

        (h)      Economic value created.

        (i)      Customer satisfaction and/or customer service quality.

        (j)      Operating effectiveness.

      In the event that applicable tax and/or securities laws change to permit
Committee discretion to alter the governing  performance goals without obtaining
shareholder  approval of such changes and without losing any income tax benefits
to the Company,  the Committee  shall have sole  discretion to make such changes
without obtaining shareholder approval.

        4     Earning of Performance Units/Shares. After the applicable
Performance  Period has ended, the holder of Performance  Units/Shares  shall be
entitled to receive payout with respect to the Performance  Units/Shares  earned
by the Participant over the Performance  Period,  to be determined as a function
of the extent to which the corresponding performance goals have been achieved.

                                   11
<PAGE>

        5     Form and  Timing of  Payment  of  Performance  Units/Shares.
Payment of earned Performance  Units/Shares shall be made following the close of
the applicable Performance Period or at such later time as the Committee, in its
sole discretion,  may determine. The Committee, in its sole discretion,  may pay
earned  Performance  Units/Shares  in cash  or in  Shares  (or in a  combination
thereof),  which have an  aggregate  Fair Market Value equal to the value of the
earned  Performance Units/Shares  at the  close of the  applicable  Performance
Period.  Such Shares may  be  granted  subject  to  any  restrictions  deemed
appropriate by the Committee.

        6     Dividend Equivalents. Simultaneously with the grant of Performance
Shares, the Participant may be granted Dividend Equivalents with respect to such
Performance  Shares.  Dividend  Equivalents  shall constitute  rights to amounts
equal to the dividends  declared on an equal number of outstanding Shares on all
payment dates  occurring  during the period  between the grant date and the date
the Performance  Shares are earned or paid out. The Committee shall determine at
the time Dividend  Equivalents are granted the conditions,  if any, to which the
payment of such Dividend Equivalents is subject.

        7     Termination of Employment.  Each Grant  Agreement  shall set forth
the  extent  to which  the  Participant  shall  have  the  right  to  receive  a
Performance   Unit/Share  payout  following  termination  of  the  Participant's
employment  with the  Company and its  Subsidiaries.  Such  provisions  shall be
determined  in the sole  discretion of the  Committee,  shall be included in the
Grant Agreement  entered into with the  Participants,  need not be uniform among
all grants of Performance  Units/Shares  or among  Participants  and may reflect
distinctions based upon reasons for termination of employment.

        8     Nontransferability.  Performance  Units/Shares  may  not be sold,
transferred,  pledged,  assigned or otherwise  alienated or hypothecated,  other
than  by  will  or  by  the  laws  of  descent  and  distribution.   Further,  a
Participant's   rights   under  the  Plan  shall  be   exercisable   during  the
Participant's  lifetime  only  by the  Participant  or the  Participant's  legal
representative.

10.     Other Grants

       The  Committee  shall  have the  right to make  other  Grants  which may
include,  without  limitation,  the grant of Shares based on certain conditions,
the payment of cash based on performance  criteria established by the Committee,
and the payment of Shares in lieu of cash under other Company incentive or bonus
programs.  Payment  under or settlement of any such Grants shall be made in such
manner and at such times as the Committee may determine.


11.     Beneficiary Designation

       Each  Participant  under  the Plan  may,  from  time to  time,  name any
beneficiary or beneficiaries  (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she  receives  any or all of such  benefit.  Each such  designation  shall
revoke  all  prior  designations  by the  same  Participant,  shall be in a form
prescribed  by the  Committee,  and will be  effective  only  when  filed by the
Participant in writing with the Committee during the Participant's  lifetime. In
the  absence  of  any  such  designation,   benefits  remaining  unpaid  at  the
Participant's death shall be paid to the Participant's estate.

        The spouse of a married  Participant  domiciled in a community  property
jurisdiction shall join in any designation of beneficiary or beneficiaries other
than the spouse.

                                   12
<PAGE>
12. Deferrals

        The  Committee  may permit a  Participant  to defer  such  Participant's
receipt of the payment of cash or the delivery of Shares that would otherwise be
due to such  Participant  by  virtue  of (1) the  exercise  of an SAR or (2) the
satisfaction  of any  requirements  or goals with respect to any Grants.  If any
such  deferral  election  is  permitted,   the  Committee  shall,  in  its  sole
discretion, establish rules and procedures for such payment deferrals.


13. Rights of Employees

        1     Employment.  Nothing in the Plan shall  interfere with or limit in
any way the right of the Company to terminate  any  Participant's  employment at
any time,  for any reason or no reason in the  Company's  sole  discretion,  nor
confer upon any Participant any right to continue in the employ of the Company.

        2     Participation. No  Employee shall have the right to be selected to
receive a Grant under the Plan,  or, having been so selected,  to be selected to
receive a future Grant.


14.     Change in Control

        Upon the occurrence of a Change in Control,  as defined  herein,  unless
otherwise  specifically  prohibited  by the terms of Article 18 herein or unless
the Committee provides otherwise prior to the Change in Control:

        (a)      Any  and  all Options and SARs granted hereunder shall  become
             immediately exercisable;

        (b)      Any restriction periods and restrictions imposed on Restricted
             Stock shall be deemed to have expired;

        (c)      With  respect  to all outstanding Grants of Performance Units,
             Performance   Shares  and other performance-based   Grants,  there
             shall be paid out immediately to Participants the superior number
             of Performance Units or Shares granted for the entire Performance
             Period as increased by Dividend Equivalents for the entire
             Performance Period. Payment shall be made in cash or in stock, as
             determined by the Committee. However, there shall not be an
             accelerated payout under this Section 14(c) with respect to Grants
             of Performance Units, Performance Shares or other performance-based
             Grants which were made less than six (6) months prior to the
             effective date of the Change in Control; and

                                   13
<PAGE>
 
        (d)      All  earned  Performance  Units, Performance Shares  and  other
             performance-based  Grants (as increased by any Dividend Equivalents
             to the  date of  payment)  not  yet  paid  out  shall  be paid  out
             immediately, in cash or in stock, as determined by the Committee.

15.     Amendment, Modification  and Termination

        1     Amendment,  Modification and  Termination.  The Board may, at any
time and from time to time, alter, amend, suspend or terminate the Plan in whole
or in part;  provided,  however,  that no amendment  which requires  shareholder
approval  in order for the Plan to  continue to comply with Rule 16b-3 under the
Exchange Act,  including any successor to such Rule,  shall be effective  unless
such amendment  shall be approved by the requisite vote of the  shareholders  of
the Company entitled to vote thereon.

        2     Grants  Previously Made. No termination, amendment or modification
of the Plan shall adversely affect in any material way any Grant previously made
under the Plan,  without the written  consent of the  Participant  holding  such
Grant  unless  such  termination,  modification  or  amendment  is  required  by
applicable law.

16.     Withholding

        1     Tax  Withholding.  The Company shall have the power and the right
to deduct or withhold,  or require a  Participant  to remit to the  Company,  an
amount  sufficient  to satisfy  Federal,  state and local taxes  (including  the
Participant's FICA obligation)  required by law to be withheld with respect to a
Grant made under the Plan.

        2     Share  Withholding.  With  respect to  withholding  required  upon
the exercise of Options or SARs,  upon the lapse of  restrictions  on Restricted
Stock,  or upon any other  taxable event arising out of or as a result of Grants
made  hereunder,  Participants  may  elect,  subject  to  the  approval  of  the
Committee,  to satisfy  the  withholding  requirement,  in whole or in part,  by
having the Company  withhold  Shares  having a Fair Market Value on the date the
tax is to be determined equal to the minimum  statutory total tax which could be
imposed on the transaction. All elections shall be irrevocable,  made in writing
and signed by the Participant.

17.     Successors

        All  obligations  of the Company under the Plan,  with respect to Grants
made  hereunder,  shall be binding on any successor to the Company,  whether the
existence  of such  successor  is the result of a direct or  indirect  purchase,
merger,  consolidation or otherwise, of all or substantially all of the business
and/or assets of the Company.

                                   14
<PAGE>
18.     Legal Construction

        1     Gender and Number. Except where otherwise indicated by the
context,  any masculine  term used herein also shall  include the feminine,  the
plural shall include the singular and the singular shall include the plural.

        2     Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.

        3     Requirements of Law. The making of Grants and the issuance of
Shares  under  the Plan  shall be  subject  to all  applicable  laws,  rules and
regulations,  and to such  approvals  by any  governmental  agencies or national
securities exchanges as may be required.

        Notwithstanding  any other  provision set forth in the Plan, if required
by the then-current Section 16 of the Exchange Act, any "derivative security" or
"equity security" offered pursuant to the Plan to any Insider may not be sold or
transferred  within the minimum time limits  specified or required in such rule.
The terms "equity  security" and  "derivative  security" shall have the meanings
ascribed to them in the then-current Rule 16a-1 under the Exchange Act.

        4     Securities Law Compliance.  With respect to Insiders, transactions
under the Plan are  intended to comply  with all  applicable  conditions  of the
Federal  securities  laws.  To the extent any provision of the Plan or action by
the  Committee  fails to so  comply,  it shall be deemed  null and void,  to the
extent permitted by law and deemed advisable by the Committee.

        5     Governing  Law. To the extent not preempted by Federal law, the
Plan, and all agreements  hereunder,  shall be construed in accordance with, and
governed by, the laws of the State of Minnesota.

                                                  MINNESOTA POWER



                                                  By      Edwin L. Russell
                                                    ---------------------------
                                                    Its Chief Executive Officer

Attest:


By       Philip R. Halverson
  -----------------------------------
         Corporate Secretary



                                   15
