<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>8
<FILENAME>rexhibit10u.txt
<DESCRIPTION>EX-10(U) SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN EFFECTIVE 1-1-04
<TEXT>
<PAGE>
                                                                   EXHIBIT 10(u)









                         ALLETE AND AFFILIATED COMPANIES


                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN



                            (AS AMENDED AND RESTATED
                           EFFECTIVE JANUARY 1, 2004)





<PAGE>

                                TABLE OF CONTENTS


                                                                            Page

SECTION 1.         ESTABLISHMENT AND PURPOSE...................................1

     1.1           Establishment of Plan.......................................1
     1.2           Purpose of the Plan.........................................4

SECTION 2.         DEFINITIONS.................................................4

     2.1           Definitions.................................................4
     2.2           Gender and Number...........................................6

SECTION 3.         ELIGIBILITY AND PARTICIPATION...............................7

     3.1           Eligibility.................................................7
     3.2           Participation...............................................8
     3.3           No Guarantee of Employment..................................9

SECTION 4.         BENEFITS....................................................9

     4.1           Annual Makeup Award.........................................9
     4.2           Salary Deferral............................................10
     4.3           Bonus Deferral.............................................10
     4.4           Severance Deferral.........................................10
     4.5           Non-Qualified Stock Option Gain Deferral...................11
     4.6           Retirement Benefit.........................................11
     4.7           Benefit Allocations and Maintenance of Accounts............12
     4.8           Date of Benefit Commencement...............................13
     4.9           Form of Benefit Payment - Executive Deferral Account.......14
     4.10          Form of Payment - Retirement Benefits......................15
     4.11          Benefit Payments Upon Participant's Death..................16
     4.12          Benefit Payment Upon Disability............................17
     4.13          Benefit Payment Upon Termination Other Than Retirement,
                   Death or Disability........................................17

                                       i

<PAGE>

     4.14          Hardship and Unscheduled Benefit Payments..................17
     4.15          Supplemental Tax Benefit...................................18

SECTION 5.         ADMINISTRATION.............................................18

     5.1           Committee..................................................18
     5.2           Uniform Rules..............................................18
     5.3           Notice of Address..........................................19
     5.4           Records....................................................19
     5.5           Correction of Errors.......................................19
     5.6           Claims Procedure...........................................19
     5.7           Change of Law..............................................20
     5.8           Tax Withholding............................................20
     5.9           Generation-Skipping Tax....................................20

SECTION 6.         GENERAL PROVISIONS.........................................21

     6.1           Nonassignability...........................................21
     6.2           Incompetency...............................................21
     6.3           Employment Rights..........................................22
     6.4           No Individual Liability....................................22
     6.5           Illegality of Particular Provision.........................22
     6.6           Contractual Obligations....................................22
     6.7           Counterparts...............................................23
     6.8           Evidence...................................................23
     6.9           Action by Company..........................................23

SECTION 7.         AMENDMENT AND TERMINATION..................................23

     7.1           Amendment and Termination..................................23
     7.2           Reorganization of the Company..............................23

SECTION 8.         APPLICABLE LAWS............................................24

     8.1           Applicable Laws ...........................................24

                                       ii

<PAGE>

                         ALLETE AND AFFILIATED COMPANIES
                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
                            (As Amended and Restated
                           Effective January 1, 2004)



                      SECTION 1. ESTABLISHMENT AND PURPOSE

     1.1  ESTABLISHMENT OF PLAN

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

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

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

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

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

                                      -1-

<PAGE>

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

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

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

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

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

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

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

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

          Effective  August 1, 1994,  the Plan was  amended  at  Section  3.1 to
          eliminate the eligibility  option of annual  compensation in excess of
          $100,000,  to increase voluntary  deferrals,  to

                                      -2-

<PAGE>

          provide for a present  value  calculation  at  Subsection  4.1(d),  to
          change  options for measuring  indexes for monies  deferred  under the
          Plan, and to make other minor administrative changes.

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

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

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

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

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

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

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

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

                                      -3-
<PAGE>

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

     1.2  PURPOSE OF THE PLAN

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


                             SECTION 2. DEFINITIONS

     2.1  DEFINITIONS

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

          (A)  "ANNUAL  INCENTIVE  AWARD" means the annual  award  received by a
               Participant  under the ALLETE  Executive Annual Incentive Plan or
               any predecessor plan.

          (B)  "CHANGE IN CONTROL"  means  change of control of ALLETE,  Inc. as
               defined in the ALLETE Executive Long Term Incentive  Compensation
               Plan.

          (C)  "COMMITTEE"  means the committee with authority to administer the
               Plan as provided under Section 5.1.

                                      -4-

<PAGE>

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

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

          (F)  "DEFERRED  STOCK UNIT" means the units  credited to a Participant
               which correspond to the number of shares the Participant deferred
               in accordance with Section 4.5.

          (G)  "ELIGIBLE  SURVIVING SPOUSE" means surviving spouse as defined in
               the Company's Retirement Plan A.

          (H)  "EXECUTIVE  DEFERRAL  ACCOUNT"  OR "EDA" OR  "ACCOUNT"  means the
               account where  deferrals  pursuant to Sections 4.1, 4.2, 4.3, 4.4
               and 4.5 are credited.

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

          (J)  "PAY"  means the annual  salary as of October 1 of the year prior
               to the year for  which  the  allocation  is  attributed  to under
               Section 4.1 of this Plan.

                                      -5-
<PAGE>

          (K)  "PARTICIPANT" is defined in Section 3.

          (L)  "RETIRE" OR  "RETIREMENT"  means a  Participant's  termination of
               employment  after  attaining  "Early  Retirement  Age" or "Normal
               Retirement  Age" defined as the earliest date under any qualified
               retirement plan of the Participant's employer.

          (M)  "RETIREMENT  BENEFIT" means the benefit  payable to a Participant
               pursuant  to the Plan by reason of the  Participant's  Retirement
               with the Company described in Section 4.6.

          (N)  "RETIREMENT  PLAN A" means the  Minnesota  Power  and  Affiliated
               Companies Retirement Plan A.

          (O)  "RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN" OR "RSOP" means the
               Minnesota Power and Affiliated  Companies  Retirement Savings and
               Stock Ownership Plan.

          (P)  "STOCK  OPTION GAIN SHARES  DEFERRAL  ELECTION"  means the annual
               election made by the Participant in accordance with Section 4.5.

          (Q)  "SUPPLEMENTAL  SALARY  REDUCTION  AGREEMENT"  means an  agreement
               entered  into by a  Participant  and the Company in December of a
               fiscal year under  which the  Participant  irrevocably  agrees to
               forego   compensation   that  would  otherwise  be  paid  to  the
               Participant during the next fiscal year.

          (R)  "VALUATION DATE" means each date on which the Accounts are valued
               as provided in Subsection 4.7(C).

     2.2  GENDER AND NUMBER

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

                                      -6-

<PAGE>

                    SECTION 3. ELIGIBILITY AND PARTICIPATION

     3.1  ELIGIBILITY

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

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

               The  following conditions must also be satisfied:

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

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

               iii. The Participant Retired during such calendar year;

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

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

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

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

                                   -7-

<PAGE>

     3.2  PARTICIPATION

          An employee who becomes a Participant shall remain eligible to have an
          account  in the Plan as a  Participant  hereunder,  without  regard to
          Compensation  and Annual  Incentive Awards or Other Awards received in
          subsequent  years,  until  the  last to  occur  of (i) the  employee's
          Retirement or termination from service for any reason or (ii) the date
          all benefits,  if any, to which he or she is entitled  hereunder  have
          been distributed.  Employees, who were former Participants, who become
          employed by an ALLETE wholly or partially owned company,  shall not be
          considered  as retired or  terminated  until such time as they  become
          retired  or  terminated  from the new  company.  If a  Participant  is
          employed by a subsidiary  of the Company,  and such  subsidiary  is no
          longer at least 50% owned by the Company,  then such  Participant will
          be  considered  to be  terminated  or Retired  (as  defined in Section
          2.1(L)) on such date. Distribution of the Participant's benefits under
          Sections  4.9,   4.10  or  4.13  shall  occur  as  provided   therein.
          Notwithstanding the preceding sentence of this Paragraph, in the event
          that a Participant is employed by a subisidary of the Company which is
          distributed to  shareholders  through a stock spin off to shareholders
          of  ALLETE,  then  the  Participant  will  not  be  considered  to  be
          terminated  or Retired (as defined in Section  2.1(L)) for purposes of
          Section 4.9, 4.10 or 4.13 until their  employment at such  distributed
          company terminates for any reason, including Retirement.  For purposes
          of Section 4.6, the  Participant  will be  considered  Retired (as set
          forth in Section  2.1(L)) if the Participant  continues  employment at
          such distributed  company until the Participant's  50th birthday.  Any
          employment  period,  salary or other amount  earned while  employed at
          such  distributed  company,  however,  will  not  be  included  in the
          calculation of the benefit provided under Section 4.6.

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

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

                                      -8-

<PAGE>

     3.3  NO GUARANTEE OF EMPLOYMENT

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


                               SECTION 4. BENEFITS

     4.1  ANNUAL MAKEUP AWARD

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

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

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

                    (a)  the total of the  Participant's  Annual Incentive Award
                         and Other Award for such year, plus

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

                                      -9-

<PAGE>

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

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

     4.2  SALARY DEFERRAL

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

     4.3  BONUS DEFERRAL

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

     4.4  SEVERANCE DEFERRAL

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

                                  -10-

<PAGE>

     4.5  NON-QUALIFIED STOCK OPTION GAIN DEFERRAL

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

     4.6  RETIREMENT BENEFIT

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

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

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

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

                    Effective  January 1, 2004,  the  largest sum of four Annual
                    Incentive  Awards  or  Other  Awards  (if  any)  during  any
                    consecutive  48-month  period  in the  most  recent  15-year
                    period  had been  added to the  total of the  final  average

                                      -11-

<PAGE>

                    earning  computation in Subsection 2.1(q) of Retirement Plan
                    A. The periods  covering final average earnings and the four
                    consecutive Annual Incentive Awards and/or Other Awards need
                    not  cover the same  48-month  period.  Notwithstanding  the
                    foregoing,  any Other Award(s) included in Retirement Plan A
                    final  average  earnings,  shall be reduced  from the amount
                    herein.

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

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


     4.7  BENEFIT ALLOCATIONS AND MAINTENANCE OF ACCOUNTS

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

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

          (C)  The Company shall  establish  and  maintain,  in the name of each
               Participant,  an individual  account to be known as the Executive
               Deferral Account (herein referred to as "EDA" or "Account").  The
               Committee shall determine the investment funds

                                      -12-

<PAGE>

               (known as Investment  Funds) available under the Plan and may add
               or  delete   Investment   Funds   from  time  to  time.   Account
               contributions  under  Sections  4.1,  4.2,  4.3,  and  4.4 may be
               credited in the same manner as if actually invested in the manner
               identified by the  Participant's  election among Investment Funds
               as directed by the Participant.  Account  additions under Section
               4.5 shall be credited to the  Participant's  Deferred  Stock Unit
               account within the EDA.

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

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

     4.8  DATE OF BENEFIT COMMENCEMENT

          (A)  Executive Deferal Account Election

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

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

                                      -13-

<PAGE>

                    (a)  in cash (either partially or totally);

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

                    (c)  deferred  to the  earlier  to  occur  of the  following
                         events:

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

                         (ii)  Death of the Participant.

                         (iii) Termination of the Participant's employment other
                               than at Retirement or long-term disability.

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

     4.9  FORM OF BENEFIT PAYMENT - EXECUTIVE DEFERRAL ACCOUNT

          Subject to the provisions of Sections 4.11, 4.12 and 4.13 hereof,  and
          in accordance  with Subsection  4.8(A)(1)(c),  a Participant may elect
          distribution  of the  Executive  Deferral  Account as a lump sum, five
          (5), ten (10), or fifteen (15) year monthly  annuity,  or partial lump
          sum with the remainder paid in a five (5), ten (10), fifteen (15) year
          monthly  annuity.  Deferred  Stock Units shall be distributed in equal
          annual   installments,   during  the  elected  payout  period.   If  a
          Participant has not elected a payout period,  the balance will be paid
          in a lump sum.  The  Participant  may change the length of the payment
          period,  if such

                                      -14-

<PAGE>

          change is  received  by the  Committee  more  than 12 months  prior to
          commencement of the payment period.  Notwithstanding the above, if the
          sum of Sections 4.1,  4.2, 4.3, 4.4 and 4.5 is less than $10,000,  the
          EDA is paid as a lump sum.

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

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

     4.10 FORM OF PAYMENT -  RETIREMENT BENEFITS

          The Participant may elect to receive the Retirement  Benefits provided
          for in Section 4.6 in the form of (A) or (B) below:

          (A)  15-year monthly annuity  (calculated using an 8% interest rate or
               other rate as approved by the Committee)

          (B)  Monthly life annuity (calculated using the factor described under
               Section  4.6).  Such amount to be adjusted  (i.e.  cost of living
               adjustment) in accordance with Retirement Plan A Section 4.8.

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

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

                                      -15-

<PAGE>

     4.11 BENEFIT PAYMENTS UPON PARTICIPANT'S DEATH

          Each  Participant  may  designate,  by  letter  to  the  Committee,  a
          beneficiary  to receive  any  payment to be made  hereunder  after the
          death of the  Participant.  The  designation  shall take  effect  upon
          receipt of the letter by the Committee.  A Participant  may change his
          or her designated  beneficiary or beneficiaries  from time to time and
          each such letter of designation shall revoke any previous designation.
          If  no  beneficiary  has  been   designated,   or  if  all  designated
          beneficiaries   have   predeceased  the   Participant,   the  deceased
          Participant's  estate  shall be the  Participant's  beneficiary.  If a
          designated   beneficiary   shall  survive  the   Participant  but  all
          designated  beneficiaries shall die prior to complete  distribution of
          the benefit  payable  with  respect to the  Participant,  the deceased
          Participant's  beneficiary  shall be the estate of the last  surviving
          designated beneficiary.

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

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

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

                                      -16-

<PAGE>

     4.12 BENEFIT PAYMENT UPON DISABILITY

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

     4.13 BENEFIT PAYMENTS UPON TERMINATION  OTHER  THAN  RETIREMENT,  DEATH  OR
          DISABILITY

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

     4.14 HARDSHIP AND UNSCHEDULED BENEFIT PAYMENTS

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

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

                                      -17-

<PAGE>

               withdrawn shall be sent to the Company,  and payment of the early
               withdrawal  shall be made by the  Company  within  thirty days of
               receipt of written notice.

     4.15 SUPPLEMENTAL TAX BENEFIT

          In the event that there is a Change in Control of the Company, and if,
          within twelve (12) months after a Change in Control a  Participant  is
          involuntarily  terminated,  the  Participant  shall be  entitled to an
          additional  benefit  equal  to  forty  percent  (40%)  of  the  amount
          distributed  ("Supplemental Tax Benefit") pursuant to Section 4.13, if
          any. If a Participant is eligible for Retirement,  no Supplemental Tax
          Benefit will be paid.


                            SECTION 5. ADMINISTRATION

     5.1  COMMITTEE

          This Plan shall be  administered  by the  committee  appointed  by the
          Board of Directors of the Company and known as the Employees'  Benefit
          Plans Committee (the "Committee").

          The interpretation and construction by the Committee of any provisions
          of the Plan shall be final unless otherwise determined by the Board of
          Directors.  Subject to the  Board,  the  Committee  is  authorized  to
          interpret  the  Plan,  to  prescribe,  amend  and  rescind  rules  and
          regulations  relating  to it,  and to make  all  other  determinations
          necessary for its administration.

          Without limiting the generality of the foregoing,  the Committee shall
          have the authority to calculate amounts allocable to Participants,  to
          maintain and adjust  accounts,  and to calculate  the  percentage  net
          return on account balances.

     5.2  UNIFORM RULES

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

                                      -18-

<PAGE>

     5.3  NOTICE OF ADDRESS

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

     5.4  RECORDS

          The  records  of the  Committee  with  respect  to the  Plan  shall be
          conclusive  on all  Participants,  all  beneficiaries,  and all  other
          persons whomsoever.

     5.5  CORRECTION OF ERRORS

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

     5.6  CLAIMS PROCEDURE

          If any claim  for  benefits  under  the Plan is  wholly  or  partially
          denied,  the  claimant  shall be given  notice  in  writing,  within a
          reasonable  period of time after  receipt of the claim by the Plan, by
          registered  or certified  mail,  of such  denial,  written in a manner
          calculated  to be  understood  by  the  claimant,  setting  forth  the
          specific reasons for such denial, specific reference to pertinent Plan
          provisions  on  which  the  denial  is  based,  a  description  of any
          additional  material  or  information  necessary  for the  claimant to
          perfect  the  claim  and  an  explanation  of  why  such  material  or
          information  is  necessary,  and an  explanation  of the Plan's  claim
          review  procedure.  The claimant  also shall be advised that he or his
          duly authorized  representative  may request a review by the Committee
          of the decision denying the claim by filing with the Committee, within
          60 days after such notice has been received by the claimant, a written
          request for such review,  and that the  claimant may review

                                      -19-

<PAGE>

          pertinent documents,  and submit issues and comments in writing within
          the same 60-day period. If such request is so filed, such review shall
          be made by the Committee within 60 days after receipt of such request,
          and the  claimant  shall  be  given  written  notice  of the  decision
          resulting from such review, and shall include specific reasons for the
          decision,  written  in a manner  calculated  to be  understood  by the
          claimant,  and specific references to the pertinent Plan provisions on
          which the decision is based.

     5.7  CHANGE OF LAW

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

     5.8  TAX WITHHOLDING

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

     5.9  GENERATION-SKIPPING TAX

          Notwithstanding  any  provisions  in this  Plan to the  contrary,  the
          Committee  may  withhold any benefits  payable to a  beneficiary  as a
          result  of  the  death  of  the  Participant  (or  the  death  of  any
          beneficiary  designated by the Participant) until such time as (i) the
          Committee is able to determine whether a generation-skipping  transfer
          tax, as defined in Chapter 13 of the Internal Revenue Code of 1986, or
          any substitute provision therefor, is

                                      -20-

<PAGE>

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


                          SECTION 6. GENERAL PROVISIONS

     6.1  NONASSIGNABILITY

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

     6.2  INCOMPETENCY

          Every person  receiving or claiming  benefits  under the Plan shall be
          conclusively  presumed to be mentally  competent  and of age until the
          Committee  receives written notice, in a form and manner acceptable to
          it, that such person is incompetent  or a minor,  and that a guardian,
          conservator,  statutory committee, or other person legally vested with
          the care of his or her  estate has been  appointed.  In the event that
          the Committee finds that any person to whom a benefit is payable under
          the Plan is unable to properly  care for his or her  affairs,  or is a
          minor,  then any payment due (unless a prior claim therefor shall have
          been made by a duly appointed legal representative) may be paid to the
          spouse,  a child,  a parent,  a brother  or  sister,  or to any person
          deemed by the  Committee  to have  incurred  expense  for such  person
          otherwise entitled to payment.

                                      -21-

<PAGE>

          In the event a guardian or conservator  or statutory  committee of the
          estate of any person  receiving  or claiming  benefits  under the Plan
          shall be appointed by a court of competent jurisdiction, payment shall
          be made to either  guardian  or  conservator  or  statutory  committee
          provided that proper proof of  appointment  is furnished in a form and
          manner  suitable  to  the  Committee.   Any  payment  made  under  the
          provisions  of  this  Subsection  shall  be a  complete  discharge  of
          liability therefor under the Plan.

     6.3  EMPLOYMENT RIGHTS

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

     6.4  NO INDIVIDUAL LIABILITY

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


     6.5  ILLEGALITY OF PARTICULAR PROVISION

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

     6.6  CONTRACTUAL OBLIGATIONS

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

                                      -22-

<PAGE>

     6.7  COUNTERPARTS

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

     6.8  EVIDENCE

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

     6.9  ACTION BY COMPANY

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


                      SECTION 7. AMENDMENT AND TERMINATION

     7.1  AMENDMENT AND TERMINATION

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

     7.2  REORGANIZATION OF THE COMPANY

          In the  event of a merger  or  consolidation  of the  Company,  or the
          transfer of substantially  all of the assets of the Company to another
          corporation,  such  continuing,  resulting or

                                      -23-

<PAGE>

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


                           SECTION 8. APPLICABLE LAWS

     8.1  APPLICABLE LAWS.

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



     IN WITNESS WHEREOF, ALLETE, Inc., has caused this instrument to be executed
by its duly authorized  officers  and its corporate seal to be hereunto affixed.

                                      ALLETE, Inc.



     [CORPORATE SEAL]

                                      By           /s/ Donald J. Shippar
                                        ----------------------------------------


                                      Its  President and Chief Executive Officer
                                         ---------------------------------------

ATTEST:

By       /s/ Philip R. Halverson
  ------------------------------------
     Vice President,
Its  General Counsel & Secretary
   -----------------------------------

                                      -24-

</TEXT>
</DOCUMENT>
