EXHIBIT 10(u)
ALLETE AND AFFILIATED COMPANIES
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(AS AMENDED AND RESTATED
EFFECTIVE JANUARY 1, 2004)
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
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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
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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.
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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
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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.
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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.
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(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.
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(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.
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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.
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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.
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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).
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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.
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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
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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
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(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:
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(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
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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.
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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.
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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
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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.
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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
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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
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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.
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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.
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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
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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
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Its President and Chief Executive Officer
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ATTEST:
By /s/ Philip R. Halverson
------------------------------------
Vice President,
Its General Counsel & Secretary
-----------------------------------
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