UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended June 30, 2015
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-32576
ITC HOLDINGS CORP.
(Exact Name of Registrant as Specified in Its Charter)
Michigan
(State or Other Jurisdiction of Incorporation or Organization)
 
32-0058047
(I.R.S. Employer Identification No.)
27175 Energy Way
Novi, MI 48377
(Address Of Principal Executive Offices, Including Zip Code)

(248) 946-3000
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ
 
Accelerated filer o
 
Non-accelerated filer o
 
Smaller reporting company o
 
 
 
 
(Do not check if a smaller reporting company)
 
 
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
The number of shares of the Registrant’s Common Stock, without par value, outstanding as of July 24, 2015 was 156,144,406.
 


ITC Holdings Corp.
Form 10-Q for the Quarterly Period Ended June 30, 2015
INDEX

 
Page
Exhibit Index
 
 
 
 
 
 
 
 
 
 
 
 
 



2

DEFINITIONS
Unless otherwise noted or the context requires, all references in this report to:
ITC Holdings Corp. and its subsidiaries
•
“ITC Great Plains” are references to ITC Great Plains, LLC, a wholly-owned subsidiary of ITC Grid Development, LLC;
•
“ITC Grid Development” are references to ITC Grid Development, LLC, a wholly-owned subsidiary of ITC Holdings;
•
“ITC Holdings” are references to ITC Holdings Corp. and not any of its subsidiaries;
•
“ITC Midwest” are references to ITC Midwest LLC, a wholly-owned subsidiary of ITC Holdings;
•
“ITCTransmission” are references to International Transmission Company, a wholly-owned subsidiary of ITC Holdings;
•
“METC” are references to Michigan Electric Transmission Company, LLC, a wholly-owned subsidiary of MTH;
•
“MISO Regulated Operating Subsidiaries” are references to ITCTransmission, METC and ITC Midwest together;
•
“MTH” are references to Michigan Transco Holdings, LLC, the sole member of METC and an indirect wholly-owned subsidiary of ITC Holdings;
•
“Regulated Operating Subsidiaries” are references to ITCTransmission, METC, ITC Midwest and ITC Great Plains together; and
•
“We,” “our” and “us” are references to ITC Holdings together with all of its subsidiaries.
Other definitions
•
“Consumers Energy” are references to Consumers Energy Company, a wholly-owned subsidiary of CMS Energy Corporation;
•
“DTE Electric” are references to DTE Electric Company, a wholly-owned subsidiary of DTE Energy Company;
•
“FERC” are references to the Federal Energy Regulatory Commission;
•
“FPA” are references to the Federal Power Act;
•
“IP&L” are references to Interstate Power and Light Company, an Alliant Energy Corporation subsidiary;
•
“ITC Holdings’ annual report on Form 10-K” are references to the annual report on Form 10-K filed on February 26, 2015;
•
“kV” are references to kilovolts (one kilovolt equaling 1,000 volts);
•
“kW” are references to kilowatts (one kilowatt equaling 1,000 watts);
•
“LIBOR” are references to the London Interbank Offered Rate;
•
“MISO” are references to the Midcontinent Independent System Operator, Inc., a FERC-approved RTO which oversees the operation of the bulk power transmission system for a substantial portion of the Midwestern United States and Manitoba, Canada, and of which ITCTransmission, METC and ITC Midwest are members;
•
“NERC” are references to the North American Electric Reliability Corporation;
•
“RTO” are references to Regional Transmission Organizations; and
•
“SPP” are references to Southwest Power Pool, Inc., a FERC-approved RTO which oversees the operation of the bulk power transmission system for a substantial portion of the South Central United States, and of which ITC Great Plains is a member.



3

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ITC HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

June 30,

December 31,
(in thousands, except share data)
2015

2014
ASSETS
 


Current assets
 

 
Cash and cash equivalents
$
12,790


$
27,741

Accounts receivable
119,168


100,998

Inventory
29,566


30,892

Deferred income taxes
16,072


14,511

Regulatory assets
8,974


5,393

Prepaid and other current assets
15,449


7,281

Total current assets
202,019


186,816

Property, plant and equipment (net of accumulated depreciation and amortization of $1,438,404 and $1,388,217, respectively)
5,751,630


5,496,875

Other assets
 

 
Goodwill
950,163


950,163

Intangible assets (net of accumulated amortization of $26,579 and $24,917, respectively)
47,142


48,794

Regulatory assets
242,162


223,712

Deferred financing fees (net of accumulated amortization of $15,520 and $15,972, respectively)
30,890


30,311

Other
59,214


37,418

Total other assets
1,329,571


1,290,398

TOTAL ASSETS
$
7,283,220


$
6,974,089

LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
Current liabilities
 

 
Accounts payable
$
96,677


$
107,969

Accrued payroll
16,389


23,502

Accrued interest
52,231


50,538

Accrued taxes
43,923


41,614

Regulatory liabilities
37,328


39,972

Refundable deposits from generators for transmission network upgrades
2,451


10,376

Debt maturing within one year
224,974


175,000

Other
6,094


14,043

Total current liabilities
480,067


463,014

Accrued pension and postretirement liabilities
70,197


69,562

Deferred income taxes
714,376


656,562

Regulatory liabilities
170,720


160,070

Refundable deposits from generators for transmission network upgrades
8,379


9,384

Other
18,814


17,354

Long-term debt
4,063,277


3,928,586

Commitments and contingent liabilities (Note 11)





STOCKHOLDERS’ EQUITY
 

 
Common stock, without par value, 300,000,000 shares authorized, 156,060,906 and 155,140,967 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively
920,807


923,191

Retained earnings
830,505


741,550

Accumulated other comprehensive income
6,078


4,816

Total stockholders’ equity
1,757,390


1,669,557

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
7,283,220


$
6,974,089

See notes to condensed consolidated financial statements (unaudited).


4

ITC HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
 
Three months ended
 
Six months ended
 
 
June 30,
 
June 30,
(in thousands, except per share data)
 
2015
 
2014
 
2015
 
2014
OPERATING REVENUES
 
$
275,058

 
$
263,214

 
$
547,545

 
$
521,817

OPERATING EXPENSES
 
 
 
 
 
 
 
 
Operation and maintenance
 
30,026

 
25,836

 
55,588

 
50,697

General and administrative
 
32,493

 
30,308

 
73,387

 
58,270

Depreciation and amortization
 
35,578

 
31,295

 
70,013

 
62,673

Taxes other than income taxes
 
18,786

 
17,076

 
41,166

 
38,269

Other operating (income) and expenses — net
 
(233
)
 
(229
)
 
(469
)
 
(461
)
Total operating expenses
 
116,650

 
104,286

 
239,685

 
209,448

OPERATING INCOME
 
158,408

 
158,928

 
307,860

 
312,369

OTHER EXPENSES (INCOME)
 
 
 
 
 

 
 
Interest expense — net
 
50,198

 
45,854

 
98,672

 
91,163

Allowance for equity funds used during construction
 
(7,464
)
 
(4,932
)
 
(15,013
)
 
(9,944
)
Loss on extinguishment of debt
 
—

 
29,074

 
—

 
29,074

Other income
 
(189
)
 
(236
)
 
(438
)
 
(397
)
Other expense
 
431

 
1,625

 
1,615

 
2,958

Total other expenses (income)
 
42,976

 
71,385

 
84,836

 
112,854

INCOME BEFORE INCOME TAXES
 
115,432

 
87,543

 
223,024

 
199,515

INCOME TAX PROVISION
 
43,096

 
33,207

 
83,556

 
76,043

NET INCOME
 
$
72,336

 
$
54,336

 
$
139,468

 
$
123,472

Basic earnings per common share
 
$
0.47

 
$
0.34

 
$
0.90

 
$
0.78

Diluted earnings per common share
 
$
0.46

 
$
0.34

 
$
0.89

 
$
0.78

Dividends declared per common share
 
$
0.1625

 
$
0.1425

 
$
0.325

 
$
0.285

See notes to condensed consolidated financial statements (unaudited).



5

ITC HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
 
Three months ended
 
Six months ended
 
 
June 30,
 
June 30,
(in thousands)
 
2015
 
2014
 
2015
 
2014
NET INCOME
 
$
72,336

 
$
54,336

 
$
139,468

 
$
123,472

OTHER COMPREHENSIVE INCOME (LOSS)
 
 
 
 
 
 
 
 
Derivative instruments, net of tax (Note 6)
 
1,986

 
(688
)
 
1,259

 
(582
)
Available-for-sale securities, net of tax (Note 6)
 
(103
)
 
60

 
3

 
110

TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
 
1,883

 
(628
)
 
1,262

 
(472
)
TOTAL COMPREHENSIVE INCOME
 
$
74,219

 
$
53,708

 
$
140,730

 
$
123,000

See notes to condensed consolidated financial statements (unaudited).



6

ITC HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
Six months ended
 
June 30,
(in thousands)
2015
 
2014
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
139,468

 
$
123,472

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization expense
70,013

 
62,673

Recognition, refund and collection of revenue accruals and deferrals — including accrued interest
(31,867
)
 
(7,248
)
Deferred income tax expense
47,979

 
56,978

Allowance for equity funds used during construction
(15,013
)
 
(9,944
)
Loss on extinguishment of debt
—

 
29,074

Other
10,863

 
8,142

Changes in assets and liabilities, exclusive of changes shown separately:
 
 
 
Accounts receivable
(19,758
)
 
(28,890
)
Inventory
1,326

 
2,611

Prepaid and other current assets
(8,166
)
 
(9,623
)
Accounts payable
(581
)
 
(21,394
)
Accrued payroll
(4,497
)
 
(3,524
)
Accrued interest
1,693

 
(1,951
)
Accrued taxes
2,310

 
10,869

Other current liabilities
(532
)
 
(9,370
)
Other non-current assets and liabilities, net
4,161

 
(5,903
)
Net cash provided by operating activities
197,399

 
195,972

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Expenditures for property, plant and equipment
(318,187
)
 
(375,650
)
Other
(5,542
)
 
235

Net cash used in investing activities
(323,729
)
 
(375,415
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Issuance of long-term debt
225,000

 
473,664

Borrowings under revolving credit agreements
638,500

 
1,054,100

Borrowings under term loan credit agreements
—

 
110,000

Proceeds from commercial paper
49,974

 
—

Retirement of long-term debt — including debt retirement costs
—

 
(198,494
)
Repayments of revolving credit agreements
(729,100
)
 
(1,035,300
)
Repayments under term loan credit agreements
—

 
(39,000
)
Issuance of common stock
10,704

 
14,177

Dividends on common and restricted stock
(50,467
)
 
(44,983
)
Refundable deposits from generators for transmission network upgrades
981

 
5,208

Repayment of refundable deposits from generators for transmission network upgrades
(9,831
)
 
(22,155
)
Repurchase and retirement of common stock
(21,838
)
 
(107,952
)
Forward contract of accelerated share repurchase program
—

 
(46,000
)
Other
(2,544
)
 
(9,080
)
Net cash provided by financing activities
111,379

 
154,185

NET DECREASE IN CASH AND CASH EQUIVALENTS
(14,951
)
 
(25,258
)
CASH AND CASH EQUIVALENTS — Beginning of period
27,741

 
34,275

CASH AND CASH EQUIVALENTS — End of period
$
12,790

 
$
9,017

See notes to condensed consolidated financial statements (unaudited).


7

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1.    GENERAL
These condensed consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements as of and for the year ended December 31, 2014 included in ITC Holdings’ annual report on Form 10-K for such period.
The accompanying condensed consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Rule 10-01 of Securities and Exchange Commission (“SEC”) Regulation S-X as they apply to interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. These accounting principles require us to use estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results may differ from our estimates.
The condensed consolidated financial statements are unaudited, but in our opinion include all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the results for the interim period. The interim financial results are not necessarily indicative of results that may be expected for any other interim period or the fiscal year.
Supplementary Cash Flows Information
 
Six months ended
 
June 30,
(in thousands)
2015
 
2014
Supplementary cash flows information:
 
 
 
Interest paid (net of interest capitalized)
$
93,803

 
$
90,248

Income taxes paid — net
40,776

 
25,416

Supplementary non-cash investing and financing activities:
 
 
 
Additions to property, plant and equipment and other long-lived assets (a)
$
70,737

 
$
105,246

Allowance for equity funds used during construction
15,013

 
9,944

____________________________
(a)
Amounts consist of current liabilities for construction, labor and materials that have not been included in investing activities. These amounts have not been paid for as of June 30, 2015 or 2014, respectively, but have been or will be included as a cash outflow from investing activities for expenditures for property, plant and equipment when paid.
2.    RECENT ACCOUNTING PRONOUNCEMENTS
Revenue Recognition
In May 2014, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance requiring entities to apply a new model for recognizing revenue from contracts with customers. The guidance will supersede the current revenue recognition guidance and require entities to evaluate their revenue recognition arrangements using a five step model to determine when a customer obtains control of a transferred good or service. The guidance is effective for annual reporting periods beginning after December 15, 2017 and may be adopted using a full or modified retrospective application. We do not expect the guidance to have a material impact on our results of operations, cash flows, or financial position.
Going Concern
In August 2014, the FASB issued authoritative guidance on (1) how to perform a going concern assessment and (2) when going concern disclosures are required under U.S. GAAP. The guidance extends the responsibility for performing a going concern assessment to company management; previously this requirement existed only in auditing literature. The standard is expected to enhance the timeliness, clarity, and consistency of going concern disclosures. The guidance is effective for the annual period ending after December 15, 2016, and for interim periods and annual periods thereafter. Early application is permitted. We do not expect the standard to have a material impact on our consolidated financial statements, including our disclosure.


8

Amendments to the Consolidation Analysis
In February 2015, the FASB issued authoritative guidance that amends the variable interest entity consolidation analysis under U.S. GAAP. The new standard was issued to improve targeted areas of consolidation guidance; though the FASB’s deliberations were largely focused on the investment management industry, the standard is applicable for reporting entities across industries. Specifically, the guidance amends the consolidation analysis for limited partnerships, clarifies when fees paid to a decision maker should be a factor in the consolidation analysis and amends how variable interests held by related parties affect consolidation. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early application is permitted. We do not expect the standard to have a material impact on our consolidated financial statements.
Amendment to the Balance Sheet Presentation of Debt Issuance Costs
In April 2015, the FASB issued authoritative guidance that amends the balance sheet presentation of debt issuance costs. This new standard requires debt issuance costs to be shown as a direct deduction from the carrying amount of the related debt, consistent with debt discounts. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015 and will be applied retrospectively. Upon transition, an entity is required to comply with the applicable disclosures for a change in an accounting principle. We do not expect the standard to have a material impact on our consolidated financial statements.
3.    REGULATORY MATTERS
Start-Up, Development and Pre-Construction Regulatory Assets
As of June 30, 2015, we have recorded a total of $13.7 million of regulatory assets for start-up, development and pre-construction expenses, including associated interest carrying charges, incurred by ITC Great Plains, which include certain costs incurred for the Kansas Electric Transmission Authority (“KETA”) Project and the Kansas V-Plan Project prior to construction. ITC Great Plains made a filing with the FERC under Section 205 of the FPA in May 2013 to recover these start-up, development and pre-construction expenses, including associated debt and equity carrying charges, in future rates. On March 26, 2015, FERC accepted ITC Great Plains’ request to commence amortization of the authorized regulatory assets, subject to refund, as well as set the matter for hearing and settlement judge procedures. As a result, ITC Great Plains has included the unamortized balance of the regulatory assets in its rate base and commenced amortization over a 10-year period during the second quarter of 2015. The amortization expense will be recovered through ITC Great Plains’ cost-based formula rate template, subject to refund. We do not expect the settlement of this proceeding to have a material impact on our results of operations, cash flows or financial condition.
MISO Funding Policy for Generator Interconnections
On June 18, 2015, FERC issued an order initiating a proceeding, pursuant to Section 206 of the FPA, to examine MISO’s funding policy for generator interconnections, which allows a transmission owner to unilaterally elect to fund network upgrades and recover such costs from the interconnection customer. In this order, FERC suggested the MISO funding policy be revised to require mutual agreement between the interconnection customer and transmission owner to utilize the election to fund network upgrades. We do not expect the resolution of this proceeding to have a material impact on our results of operations, cash flows or financial condition.
Order on Formula Rate Protocols
In 2012, the FERC issued an order initiating a proceeding, pursuant to Section 206 of the FPA, to determine whether the formula rate protocols under the MISO Tariff are sufficient to ensure just and reasonable rates. Our MISO Regulated Operating Subsidiaries were named in the order. In May 2013, the FERC issued an order that determined the formula rate protocols are insufficient to ensure just and reasonable rates and directed MISO and its member transmission owners (“TOs”) to file revised formula rate protocols. In September 2013, MISO and its TOs, including our MISO Regulated Operating Subsidiaries, filed revised formula rate protocols which require our MISO Regulated Operating Subsidiaries to provide additional information for certain aspects of the formula rates used to calculate their respective annual revenue requirements. On March 20, 2014, FERC issued an order conditionally accepting MISO and its TOs’ September 2013 filing and required a further compliance filing, which MISO and its TOs made on May 19, 2014. On January 22, 2015, the FERC conditionally accepted the May 19, 2014 compliance filing, subject to a further compliance filing, which was made on February 13, 2015. We do not expect the revised formula rate protocols to impact our results of operations, cash flows or financial condition.


9

Rate of Return on Equity and Capital Structure Complaints
See “Rate of Return on Equity and Capital Structure Complaints” in Note 11 for a discussion of the complaints.
Cost-Based Formula Rates with True-Up Mechanism
The transmission rates at our Regulated Operating Subsidiaries are set annually, using the FERC-approved formula rates, and the rates remain in effect for a one-year period. By completing their formula rate templates on an annual basis, our Regulated Operating Subsidiaries are able to adjust their transmission rates to reflect changing operational data and financial performance, including the amount of network load on their transmission systems (for our MISO Regulated Operating Subsidiaries), operating expenses and additions to property, plant and equipment when placed in service, among other items. The FERC-approved formula rates use approved return on equity (“ROE”) rates and do not require further action or FERC filings for the calculated joint zone rates to go into effect, although the rates are subject to legal challenge at the FERC. Our Regulated Operating Subsidiaries will continue to use formula rates to calculate their respective annual revenue requirements unless the FERC determines the rates to be unjust and unreasonable or another mechanism is determined by the FERC to be just and reasonable. See “Rate of Return on Equity and Capital Structure Complaints” in Note 11 for detail on ROE matters including incentive adders approved by FERC in 2015.
Our cost-based formula rate templates include a true-up mechanism, whereby our Regulated Operating Subsidiaries compare their actual revenue requirements to their billed revenues for each year to determine any over- or under-collection of revenue requirements. Revenue is recognized for services provided during each reporting period based on actual revenue requirements calculated using the formula rate templates. Our Regulated Operating Subsidiaries accrue or defer revenues to the extent that the actual revenue requirement for the reporting period is higher or lower, respectively, than the amounts billed relating to that reporting period. The amount of accrued or deferred revenues is reflected in customer bills within two years under the provisions of the formula rate templates.
The net changes in regulatory assets and liabilities associated with our Regulated Operating Subsidiaries’ formula rate revenue accruals and deferrals, including accrued interest, were as follows during the six months ended June 30, 2015:
(in thousands)
 
Total
Balance as of December 31, 2014
 
$
(56,103
)
Net refund of 2013 revenue deferrals and accruals, including accrued interest
 
17,578

Net revenue accrual for the six months ended June 30, 2015
 
15,316

Net accrued interest payable for the six months ended June 30, 2015
 
(1,027
)
Balance as of June 30, 2015
 
$
(24,236
)
Regulatory assets and liabilities associated with our Regulated Operating Subsidiaries’ formula rate revenue accruals and deferrals and associated accrued interest are recorded in the condensed consolidated statements of financial position at June 30, 2015 as follows:
(in thousands)
 
Total
Current assets
 
$
8,974

Non-current assets
 
27,231

Current liabilities
 
(37,244
)
Non-current liabilities
 
(23,197
)
Balance as of June 30, 2015
 
$
(24,236
)
4.    GOODWILL AND INTANGIBLE ASSETS
Goodwill
At June 30, 2015 and December 31, 2014, we had goodwill balances recorded at ITCTransmission, METC and ITC Midwest of $173.4 million, $453.8 million and $323.0 million, respectively, which resulted from the ITCTransmission acquisition, the METC acquisition and ITC Midwest’s asset acquisition, respectively.
Intangible Assets
We have recorded intangible assets as a result of the METC acquisition in 2006. The carrying value of these assets was $32.7 million and $34.2 million (net of accumulated amortization of $25.7 million and $24.2 million) as of June 30, 2015 and December 31, 2014, respectively.


10

We have also recorded intangible assets for payments and obligations made by ITC Great Plains to certain TOs to acquire rights which are required under the SPP tariff to designate ITC Great Plains to build, own and operate projects within the SPP region, including the KETA Project and the Kansas V-Plan Project. The carrying amount of these intangible assets was $14.4 million and $14.6 million (net of accumulated amortization of $0.9 million and $0.7 million) as of June 30, 2015 and December 31, 2014, respectively.
During each of the three months ended June 30, 2015 and 2014, we recognized $0.9 million and $0.8 million, respectively, of amortization expense of our intangible assets and $1.7 million and $1.6 million for the six months ended June 30, 2015 and 2014, respectively. For each of the next five years, we expect the annual amortization of our intangible assets that have been recorded as of June 30, 2015 to be $3.3 million per year.
5.    DEBT
Derivative Instruments and Hedging Activities
We may use derivative financial instruments, including interest rate swap contracts, to manage our exposure to fluctuations in interest rates. The use of these financial instruments mitigates exposure to these risks and the variability of our operating results. We are not a party to leveraged derivatives and do not enter into derivative financial instruments for trading or speculative purposes. The interest rate swaps listed below manage interest rate risk associated with the forecasted future issuance of fixed-rate debt related to the expected refinancing of the maturing ITC Holdings 5.875% Senior Notes, due September 30, 2016. As of June 30, 2015, ITC Holdings had $139.3 million outstanding under the 5.875% Senior Notes.
Interest Rate Swaps
 
Notional Amount
 
Fixed Rate
 
Original Term
 
Effective Date
(Amounts in millions)
 
 
 
 
 
 
 
 
August 2014 swap
 
$
25.0

 
3.217
%
 
10 years
 
September 2016
October 2014 swap
 
25.0

 
3.075
%
 
10 years
 
September 2016
January 2015 swap
 
25.0

 
2.301
%
 
10 years
 
September 2016
Total
 
$
75.0

 
 
 
 
 
 
The 10-year term interest rate swaps call for ITC Holdings to receive interest quarterly at a variable rate equal to LIBOR and to pay interest semi-annually at various fixed rates effective for the 10-year period beginning September 30, 2016 after the agreements have been terminated. The agreements include a mandatory early termination provision and will be terminated no later than the effective date of the interest rate swaps of September 30, 2016. The interest rate swaps have been determined to be highly effective at offsetting changes in the fair value of the forecasted interest cash flows associated with the expected debt issuance attributable to changes in benchmark interest rates from the trade date of the interest rate swaps to the issuance date of the debt obligation.
As of June 30, 2015, there has been no material ineffectiveness recorded in the condensed consolidated statement of operations. The interest rate swaps qualify for hedge accounting treatment, whereby any gain or loss recognized from the trade date to the effective date for the effective portion of the hedge is recorded net of tax in accumulated other comprehensive income (“AOCI”). This amount will be accumulated and amortized as a component of interest expense over the life of the forecasted debt. As of June 30, 2015, the fair value of the derivative instruments was an asset of $1.2 million recorded to other non-current assets and a liability of $1.4 million recorded to other non-current liabilities. None of the interest rate swaps contain credit-risk-related contingent features. Refer to Note 10 for additional fair value information.
ITC Midwest
On April 7, 2015, ITC Midwest issued $225.0 million aggregate principal amount of 3.83% First Mortgage Bonds, Series G, due 2055. The proceeds from the issuance were used for general corporate purposes, including the repayment of borrowings under ITC Midwest’s revolving credit agreement. ITC Midwest’s First Mortgage Bonds are issued under its first mortgage and deed of trust and secured by a first mortgage lien on substantially all of its property.
ITC Holdings
On June 8, 2015, pursuant to the authorization by the Board of Directors, ITC Holdings established an ongoing commercial paper program for the issuance and sale of unsecured commercial paper in an aggregate amount not to exceed $400.0 million outstanding at any one time. As of June 30, 2015, ITC Holdings had approximately $50.0 million of commercial paper issued and outstanding under the program, with a weighted-average interest rate of 0.549% and weighted average remaining days


11

to maturity of 26 days. The proceeds from the issuance were used for general corporate purposes, including the repayment of borrowings under ITC Holdings’ revolving credit agreement. The amount outstanding as of June 30, 2015 was classified as debt maturing within one year in the consolidated statements of financial position.
Revolving Credit Agreements
At June 30, 2015, ITC Holdings and its Regulated Operating Subsidiaries had the following unsecured revolving credit facilities available:
(amounts in millions)
 Total
Available
Capacity
 
Outstanding
Balance (a)
 
Unused
Capacity
 
Weighted Average
Interest Rate on
Outstanding Balance
 
 
Commitment
Fee Rate (b)
ITC Holdings
$
400.0

 
$
89.5

 
$
310.5

(c)
1.4%
(d)
 
0.175
%
ITCTransmission
100.0

 
39.8

 
60.2

 
1.1%
(e)
 
0.10
%
METC
100.0

 
8.1

 
91.9

 
1.1%
(e)
 
0.10
%
ITC Midwest
250.0

 
22.6

 
227.4

 
1.1%
(e)
 
0.10
%
ITC Great Plains
150.0

 
62.2

 
87.8

 
1.1%
(e)
 
0.10
%
Total
$
1,000.0

 
$
222.2

 
$
777.8

 
 
 
 
 
____________________________
(a)
Included within long-term debt.
(b)
Calculation based on the average daily unused commitments, subject to adjustment based on the borrower’s credit rating.
(c)
ITC Holdings’ revolving credit agreement may be used for general corporate purposes, including to repay commercial paper issued pursuant to the commercial paper program described above, if necessary. While outstanding commercial paper does not reduce available capacity under ITC Holdings’ revolving credit agreement, the unused capacity under this agreement adjusted for the commercial paper outstanding was $260.5 million as of June 30, 2015.
(d)
Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.25% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1.00% above the one month LIBOR, plus an applicable margin of 0.25%, subject to adjustments based on ITC Holdings’ credit rating.
(e)
Loans bear interest at a rate equal to LIBOR plus an applicable margin of 1.00% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, subject to adjustments based on the borrower’s credit rating.
Covenants
Our debt instruments contain numerous financial and operating covenants that place significant restrictions on certain transactions, such as incurring additional indebtedness, engaging in sale and lease-back transactions, creating liens or other encumbrances, entering into mergers, consolidations, liquidations or dissolutions, creating or acquiring subsidiaries, selling or otherwise disposing of all or substantially all of our assets and paying dividends. In addition, the covenants require us to meet certain financial ratios, such as maintaining certain debt to capitalization ratios and maintaining certain interest coverage ratios. As of June 30, 2015, we were not in violation of any debt covenant.


12

6.     STOCKHOLDERS’ EQUITY
The changes in stockholders’ equity for the six months ended June 30, 2015 were as follows:
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
 
 
Other
 
Total
 
Common Stock
 
Retained
 
Comprehensive
 
Stockholders’
(in thousands, except share and per share data)
Shares
 
Amount
 
Earnings
 
Income
 
Equity
BALANCE, DECEMBER 31, 2014
155,140,967

 
$
923,191

 
$
741,550

 
$
4,816

 
$
1,669,557

Net income
—

 
—

 
139,468

 
—

 
139,468

Repurchase and retirement of common stock
(664,719
)
 
(21,838
)
 
—

 
—

 
(21,838
)
Dividends declared ($0.325 per share)
—

 
—

 
(50,513
)
 
—

 
(50,513
)
Stock option exercises
1,068,085

 
9,608

 
—

 
—

 
9,608

Shares issued under the Employee Stock Purchase Plan
34,097

 
1,096

 
—

 
—

 
1,096

Issuance of restricted stock
243,493

 
—

 
—

 
—

 
—

Forfeiture of restricted stock
(44,034
)
 
—

 
—

 
—

 
—

Issuance of performance shares
287,464

 
—

 
—

 
—

 
—

Forfeiture of performance shares
(4,447
)
 
—

 
—

 
—

 
—

Share-based compensation, net of forfeitures
—

 
8,704

 
—

 
—

 
8,704

Other comprehensive income, net of tax
—

 
—

 
—

 
1,262

 
1,262

Other
—

 
46

 
—

 
—

 
46

BALANCE, JUNE 30, 2015
156,060,906

 
$
920,807

 
$
830,505

 
$
6,078

 
$
1,757,390

The changes in stockholders’ equity for the six months ended June 30, 2014 were as follows:
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
 
 
Other
 
Total
 
Common Stock
 
Retained
 
Comprehensive
 
Stockholders’
(in thousands, except share and per share data)
Shares
 
Amount
 
Earnings
 
Income (Loss)
 
Equity
BALANCE, DECEMBER 31, 2013
157,500,795

 
$
1,014,435

 
$
592,970

 
$
6,327

 
$
1,613,732

Net income
—

 
—

 
123,472

 
—

 
123,472

Repurchase and retirement of common stock
(3,013,176
)
 
(107,952
)
 
—

 
—

 
(107,952
)
Dividends declared on common stock ($0.285 per share)
—

 
—

 
(44,983
)
 
—

 
(44,983
)
Stock option exercises
761,321

 
13,172

 
—

 
—

 
13,172

Shares issued under the Employee Stock Purchase Plan
34,594

 
1,004

 
—

 
—

 
1,004

Issuance of restricted stock
289,793

 
—

 
—

 
—

 
—

Forfeiture of restricted stock
(60,593
)
 
—

 
—

 
—

 
—

Share-based compensation, net of forfeitures
—

 
8,186

 
—

 
—

 
8,186

Forward contract of accelerated share repurchase program
—

 
(46,000
)
 
—

 
—

 
(46,000
)
Other comprehensive loss, net of tax
—

 
—

 
—

 
(472
)
 
(472
)
BALANCE, JUNE 30, 2014
155,512,734

 
$
882,845

 
$
671,459

 
$
5,855

 
$
1,560,159



13

Accumulated Other Comprehensive Income
The following table provides the components of changes in AOCI for the three and six months ended June 30, 2015 and 2014:
 
Three months ended
 
Six months ended
 
June 30,
 
June 30,
(in thousands)
2015
 
2014
 
2015
 
2014
Balance at the beginning of period
$
4,195

 
$
6,483

 
$
4,816

 
$
6,327

Derivative instruments
 
 
 
 
 
 
 
Reclassification of net loss relating to interest rate cash flow hedges from AOCI to interest expense — net (net of tax of $86 and $79 for the three months ended June 30, 2015 and 2014, respectively, and net of tax of $161 and $155 for the six months ended June 30, 2015 and 2014, respectively)
125

 
112

 
261

 
218

Reclassification of loss relating to interest rate cash flow hedges from AOCI to loss on extinguishment of debt (net of tax of $83 for the three and six months ended June 30, 2014)
—

 
117

 
—

 
117

Gain (loss) on interest rate swaps relating to interest rate cash flow hedges (net of tax of $1,333 and $655 for the three months ended June 30, 2015 and 2014, respectively, and net of tax of $719 and $655 for the six months ended June 30, 2015 and 2014, respectively)
1,861

 
(917
)
 
998

 
(917
)
Derivative instruments, net of tax
1,986

 
(688
)
 
1,259

 
(582
)
Available-for-sale securities
 
 
 
 
 
 
 
Unrealized net (loss) gain on available-for-sale securities (net of tax of $74 and $43 for the three months ended June 30, 2015 and 2014, respectively, and net of tax of $2 and $79 for the six months ended June 30, 2015 and 2014, respectively)
(103
)
 
60

 
3

 
110

Available-for-sale securities, net of tax
(103
)
 
60

 
3

 
110

Total other comprehensive income (loss), net of tax
1,883

 
(628
)
 
1,262

 
(472
)
Balance at the end of period
$
6,078

 
$
5,855

 
$
6,078

 
$
5,855

Share Repurchase Program
In April 2014, the Board of Directors authorized and ITC Holdings announced a share repurchase program for up to $250.0 million, which expires in December 2015. Pursuant to such authorization, ITC Holdings completed an accelerated share repurchase from June 2014 to December 2014 in which 3.6 million shares were repurchased and retired for a total of $130.0 million. No shares were repurchased under the share repurchase program during the six months ended June 30, 2015. Additionally, we had not entered into any agreement for the remaining amount available under the share repurchase program as of June 30, 2015.
7.    SHARE-BASED COMPENSATION
Long-Term Incentive Plan Grants
On May 19, 2015, pursuant to the Second Amended and Restated 2006 Long-Term Incentive Plan (“LTIP”), we granted 473,200 options to purchase shares of our common stock with an exercise price of $35.91 per share, which was the closing price of our common stock on the date of grant. The options vest in three equal annual installments with the first installment vesting on May 19, 2016. In addition, on May 19, 2015, pursuant to the LTIP, we granted 189,299 shares of restricted stock and 287,464 performance shares. One-half of the payout of the performance shares will be based on an external measure for total shareholder return (“TSR”) relative to a predetermined peer group and the remainder will be based on adjusted diluted earnings per share (“EPS”) growth. Payout of the performance shares will range from 0% to 200% of the target number of shares granted, plus additional dividend equivalent shares as described below. The fair value for performance shares with the


14

relative TSR condition was determined using a Monte Carlo simulation valuation model, whereas the fair value for performance shares with the EPS growth condition was based on the closing price of our common stock on the grant date.
Holders of outstanding restricted stock and performance shares have all the rights of a holder of common stock of ITC Holdings, including dividend and voting rights. However, performance shares earn and accumulate dividend equivalents, which are settled in the form of additional shares upon vesting of the related award. Dividend equivalents paid on performance shares that do not vest will be forfeited. Restricted stock holders receive cash dividends at each dividend payment date. The restricted stock and performance shares generally vest three years after the grant date. Holders of restricted stock and performance shares may not sell, transfer or pledge their respective shares until vesting occurs.
Stock Option Exercises
We issued 1,068,085 and 1,011,750 shares of our common stock during the six months ended June 30, 2015 and the year ended December 31, 2014, respectively, due to the exercise of stock options.
8.    EARNINGS PER SHARE
We report both basic and diluted EPS. Our restricted stock contain rights to receive nonforfeitable dividends and thus, are participating securities requiring the two-class method of computing EPS. A reconciliation of both calculations for the three and six months ended June 30, 2015 and 2014 is presented in the following table:
 
Three months ended
 
Six months ended
 
June 30,
 
June 30,
(in thousands, except share, per share data and percentages)
2015
 
2014
 
2015
 
2014
Numerator:
 
 
 
 
 
 
 
Net income
$
72,336

 
$
54,336

 
$
139,468

 
$
123,472

Less: dividends declared and paid — common and restricted shares
(25,248
)
 
(22,530
)
 
(50,467
)
 
(44,983
)
Undistributed earnings
47,088

 
31,806

 
89,001

 
78,489

Percentage allocated to common shares (a)
99.3
%
 
99.2
%
 
99.2
%
 
99.2
%
Undistributed earnings — common shares
46,758

 
31,552

 
88,289

 
77,861

Add: dividends declared and paid — common shares
25,076

 
22,347

 
50,100

 
44,609

Numerator for basic and diluted earnings per common share
$
71,834

 
$
53,899

 
$
138,389

 
$
122,470

Denominator:
 
 
 
 
 
 
 
Basic earnings per common share — weighted average common shares outstanding
154,228,727

 
156,427,493

 
154,100,335

 
156,309,340

Incremental shares for stock options and employee stock purchase plan — weighted average assumed conversion
1,190,632

 
1,541,565

 
1,316,716

 
1,523,485

Diluted earnings per common share — adjusted weighted average shares and assumed conversion
155,419,359

 
157,969,058

 
155,417,051

 
157,832,825

Per common share net income:
 
 
 
 
 
 
 
Basic
$
0.47

 
$
0.34

 
$
0.90

 
$
0.78

Diluted
$
0.46

 
$
0.34

 
$
0.89

 
$
0.78

 
 
 
 
 
 
 
 
____________________________
(a)
Weighted average common shares outstanding
154,228,727

 
156,427,493

 
154,100,335

 
156,309,340

 
Weighted average restricted shares
(participating securities)
1,134,649

 
1,297,578

 
1,171,852

 
1,329,136

 
 Total
155,363,376

 
157,725,071

 
155,272,187

 
157,638,476

 
 Percentage allocated to common shares
99.3
%
 
99.2
%
 
99.2
%
 
99.2
%


15

The incremental shares for stock options and employee stock purchase plan (“ESPP”) shares are included in the diluted EPS calculation using the treasury stock method, unless the effect of including them would be anti-dilutive. The outstanding stock options and ESPP shares and the anti-dilutive stock options and ESPP shares excluded from the diluted EPS calculations were as follows:
 
2015
 
2014
Outstanding stock options and ESPP shares (as of June 30)
3,961,886

 
4,891,913

Anti-dilutive stock options and ESPP shares (for the three and six months ended June 30)
1,078,158

 
654,231

In addition, the performance shares discussed in Note 7 are not included in the diluted EPS calculation for the three and six months ended June 30, 2015 because the performance metric had not been met or was not substantively measurable as of June 30, 2015.
9.    RETIREMENT BENEFITS AND ASSETS HELD IN TRUST
Pension Plan Benefits
We have a qualified defined benefit pension plan (“retirement plan”) for eligible employees, comprised of a traditional final average pay plan and a cash balance plan. The traditional final average pay plan is noncontributory, covers select employees, and provides retirement benefits based on years of benefit service, average final compensation and age at retirement. The cash balance plan is also noncontributory, covers substantially all employees, and provides retirement benefits based on eligible compensation and interest credits. Our funding practice for the retirement plan is to contribute amounts necessary to meet the minimum funding requirements of the Employee Retirement Income Security Act of 1974, plus additional amounts as we determine appropriate. During the second quarter of 2015, we contributed $4.1 million to the retirement plan. We do not expect to make any additional contributions to this plan in 2015.
We also have two supplemental nonqualified, noncontributory, defined benefit pension plans for selected management employees (the “supplemental benefit plans” and collectively with the retirement plan, the “pension plans”). The supplemental benefit plans provide for benefits that supplement those provided by the retirement plan. We contributed $9.4 million to the supplemental benefit plans during the second quarter of 2015. We do not expect to make any additional contributions to these plans in 2015.
Net periodic benefit cost for the pension plans, by component, was as follows for the three and six months ended June 30, 2015 and 2014:
 
Three months ended
 
Six months ended
 
June 30,
 
June 30,
(in thousands)
2015
 
2014
 
2015
 
2014
Service cost
$
1,624

 
$
1,267

 
$
3,248

 
$
2,533

Interest cost
924

 
901

 
1,848

 
1,802

Expected return on plan assets
(959
)
 
(885
)
 
(1,919
)
 
(1,770
)
Amortization of prior service credit
(11
)
 
(11
)
 
(21
)
 
(21
)
Amortization of unrecognized loss
1,060

 
386

 
2,121

 
772

Net pension cost
$
2,638

 
$
1,658

 
$
5,277

 
$
3,316

Other Postretirement Benefits
We provide certain postretirement health care, dental, and life insurance benefits for eligible employees. During the second quarter of 2015, we contributed $4.6 million to the postretirement benefit plan. We expect to make estimated additional contributions of $4.5 million to the postretirement benefit plan during the second half of 2015.


16

Net postretirement benefit plan cost, by component, was as follows for the three and six months ended June 30, 2015 and 2014:
 
Three months ended
 
Six months ended
 
June 30,
 
June 30,
(in thousands)
2015
 
2014
 
2015
 
2014
Service cost
$
2,121

 
$
1,462

 
$
4,243

 
$
2,923

Interest cost
619

 
498

 
1,238

 
996

Expected return on plan assets
(463
)
 
(341
)
 
(926
)
 
(681
)
Amortization of unrecognized loss
125

 
—

 
250

 
—

Net postretirement cost
$
2,402

 
$
1,619

 
$
4,805

 
$
3,238

Defined Contribution Plan
We also sponsor a defined contribution retirement savings plan. Participation in this plan is available to substantially all employees. We match employee contributions up to certain predefined limits based upon eligible compensation and the employee’s contribution rate. The cost of this plan was $0.9 million and $0.8 million for the three months ended June 30, 2015 and 2014, respectively, and $2.4 million and $2.1 million for the six months ended June 30, 2015 and 2014, respectively.
10.    FAIR VALUE MEASUREMENTS
The measurement of fair value is based on a three-tier hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period. For the six months ended June 30, 2015 and the year ended December 31, 2014, there were no transfers between levels.
Our assets and liabilities measured at fair value subject to the three-tier hierarchy at June 30, 2015, were as follows:
 
Fair Value Measurements at Reporting Date Using
 
Quoted Prices in
Active Markets for
Identical Assets
 
Significant
Other Observable
Inputs
 
Significant
Unobservable
Inputs
(in thousands)
(Level 1)
 
(Level 2)
 
(Level 3)
Financial assets measured on a recurring basis:
 
 
 
 
 
Cash and cash equivalents — cash equivalents
$
49

 
$
—

 
$
—

Mutual funds — fixed income securities
35,734

 
—

 
—

Mutual funds — equity securities
869

 
—

 
—

Interest rate swap derivative
—

 
1,156

 
—

Financial liabilities measured on a recurring basis:
 
 
 
 
 
Interest rate swap derivatives
—

 
(1,372
)
 
—

Total
$
36,652

 
$
(216
)
 
$
—

Our assets and liabilities measured at fair value subject to the three-tier hierarchy at December 31, 2014, were as follows:
 
Fair Value Measurements at Reporting Date Using
 
Quoted Prices in
Active Markets for
Identical Assets
 
Significant
Other Observable
Inputs
 
Significant
Unobservable
Inputs
(in thousands)
(Level 1)
 
(Level 2)
 
(Level 3)
Financial assets measured on a recurring basis:
 
 
 
 
 
Cash and cash equivalents — cash equivalents
$
5,452

 
$
—

 
$
—

Mutual funds — fixed income securities
26,715

 
—

 
—

Mutual funds — equity securities
667

 
—

 
—

Financial liabilities measured on a recurring basis:
 
 
 
 
 
Interest rate swap derivatives
—

 
(1,934
)
 
—

Total
$
32,834

 
$
(1,934
)
 
$
—



17

As of June 30, 2015 and December 31, 2014, we held certain assets and liabilities that are required to be measured at fair value on a recurring basis. The assets consist of investments recorded within cash and cash equivalents and other long-term assets, including investments held in a trust associated with our supplemental nonqualified, noncontributory, retirement benefit plans for selected management employees. Our cash and cash equivalents consist of money market mutual funds that are administered similar to money market funds recorded at cost plus accrued interest to approximate fair value. Our mutual funds consist primarily of publicly traded mutual funds and are recorded at fair value based on observable trades for identical securities in an active market. Changes in the observed trading prices and liquidity of money market funds are monitored as additional support for determining fair value, and losses are recorded in earnings for investments classified as trading securities and other comprehensive income for investments classified as available for sale if fair value falls below recorded cost.
The asset and liability related to derivatives consist of interest rate swaps as discussed in Note 5. The fair value of our interest rate swap derivatives as of June 30, 2015 is determined based on a discounted cash flow (“DCF”) method using LIBOR swap rates which are observable at commonly quoted intervals.
We also held non-financial assets that are required to be measured at fair value on a non-recurring basis. These consist of goodwill and intangible assets. We did not record any impairment charges on long-lived assets and no other significant events occurred requiring non-financial assets and liabilities to be measured at fair value (subsequent to initial recognition) during the six months ended June 30, 2015. For additional information on our goodwill and intangible assets, please refer to the notes to the consolidated financial statements as of and for the year ended December 31, 2014 included in our Form 10-K for such period and to Note 4 of this Form 10-Q.
Fair Value of Financial Assets and Liabilities
Fixed Rate Debt
Based on the borrowing rates obtained from third party lending institutions currently available for bank loans with similar terms and average maturities from active markets, the fair value of our consolidated long-term debt and debt maturing within one year, excluding revolving and term loan credit agreements and commercial paper, was $4,035.3 million and $3,985.6 million at June 30, 2015 and December 31, 2014, respectively. These fair values represent Level 2 under the three-tier hierarchy described above. The total book value of our consolidated long-term debt and debt maturing within one year, excluding revolving and term loan credit agreements and commercial paper, was $3,855.1 million and $3,629.8 million at June 30, 2015 and December 31, 2014, respectively.
Revolving and Term Loan Credit Agreements
At June 30, 2015 and December 31, 2014, we had a consolidated total of $383.2 million and $473.8 million, respectively, outstanding under our revolving and term loan credit agreements, which are variable rate loans. The fair value of these loans approximates book value based on the borrowing rates currently available for variable rate loans obtained from third party lending institutions. These fair values represent Level 2 under the three-tier hierarchy described above.
Other Financial Instruments
The carrying value of other financial instruments included in current assets and current liabilities, including cash and cash equivalents, special deposits and commercial paper, approximates their fair value due to the short-term nature of these instruments.
11.    COMMITMENTS AND CONTINGENT LIABILITIES
Environmental Matters
Our Regulated Operating Subsidiaries’ operations are subject to federal, state, and local environmental laws and regulations, which impose limitations on the discharge of pollutants into the environment, establish standards for the management, treatment, storage, transportation and disposal of hazardous materials and of solid and hazardous wastes, and impose obligations to investigate and remediate contamination in certain circumstances. Liabilities to investigate or remediate contamination, as well as other liabilities concerning hazardous materials or contamination, such as claims for personal injury or property damage, may arise at many locations, including formerly owned or operated properties and sites where wastes have been treated or disposed of, as well as at properties currently owned or operated by our Regulated Operating Subsidiaries. Such liabilities may arise even where the contamination does not result from noncompliance with applicable environmental laws. Under a


18

number of environmental laws, such liabilities may also be joint and several, meaning that a party can be held responsible for more than its share of the liability involved, or even the entire share. Although environmental requirements generally have become more stringent and compliance with those requirements more expensive, we are not aware of any specific developments that would increase our Regulated Operating Subsidiaries’ costs for such compliance in a manner that would be expected to have a material adverse effect on our results of operations, financial position or liquidity.
Our Regulated Operating Subsidiaries’ assets and operations also involve the use of materials classified as hazardous, toxic or otherwise dangerous. Many of the properties our Regulated Operating Subsidiaries own or operate have been used for many years, and include older facilities and equipment that may be more likely than newer ones to contain or be made from such materials. Some of these properties include aboveground or underground storage tanks and associated piping. Some of them also include large electrical equipment filled with mineral oil, which may contain or previously have contained polychlorinated biphenyls, or PCBs. Our Regulated Operating Subsidiaries’ facilities and equipment are often situated close to or on property owned by others so that, if they are the source of contamination, others’ property may be affected. For example, aboveground and underground transmission lines sometimes traverse properties that our Regulated Operating Subsidiaries do not own, and, at some of our Regulated Operating Subsidiaries’ transmission stations, transmission assets (owned or operated by our Regulated Operating Subsidiaries) and distribution assets (owned or operated by our Regulated Operating Subsidiaries’ transmission customer) are commingled.
Some properties in which our Regulated Operating Subsidiaries have an ownership interest or at which they operate are, and others are suspected of being, affected by environmental contamination. Our Regulated Operating Subsidiaries are not aware of any pending or threatened claims against them with respect to environmental contamination, or of any investigation or remediation of contamination at any properties, that entail costs likely to materially affect them. Some facilities and properties are located near environmentally sensitive areas such as wetlands.
Claims have been made or threatened against electric utilities for bodily injury, disease or other damages allegedly related to exposure to electromagnetic fields associated with electric transmission and distribution lines. While our Regulated Operating Subsidiaries do not believe that a causal link between electromagnetic field exposure and injury has been generally established and accepted in the scientific community, if such a relationship is established or accepted, the liabilities and costs imposed on our business could be significant. We are not aware of any pending or threatened claims against our Regulated Operating Subsidiaries for bodily injury, disease or other damages allegedly related to exposure to electromagnetic fields and electric transmission and distribution lines that entail costs likely to have a material adverse effect on our results of operations, financial position or liquidity.
Litigation
We are involved in certain legal proceedings before various courts, governmental agencies and mediation panels concerning matters arising in the ordinary course of business. These proceedings include certain contract disputes, regulatory matters and pending judicial matters. We cannot predict the final disposition of such proceedings. We regularly review legal matters and record provisions for claims that are considered probable of loss.
Michigan Sales and Use Tax Audit
The Michigan Department of Treasury has conducted sales and use tax audits of ITCTransmission for the audit periods April 1, 2005 through June 30, 2008 and October 1, 2009 through September 30, 2013. The Michigan Department of Treasury has denied ITCTransmission’s claims of the industrial processing exemption from use tax that it has taken beginning January 1, 2007. The exemption claim denials resulted in use tax assessments against ITCTransmission. ITCTransmission filed administrative appeals to contest these use tax assessments.
In a separate, but related case involving a Michigan-based public utility that made similar industrial processing exemption claims, the Michigan Supreme Court ruled in July 2015 that the electric system, which involves altering voltage, constitutes an exempt, industrial processing activity. However, the ruling further held the electric system is also used for other functions that would not be exempt, and remanded the case to the Michigan Court of Claims to determine how the exemption applies to assets that are used in electric distribution activities. ITCTransmission is assessing the recent ruling in light of its specific facts, but cannot estimate the amount or timing of any potential tax assessments or refunds. ITCTransmission believes that the industrial processing exemption will apply to a significant portion and potentially all of the equipment purchases for which it claimed exemption, but it is reasonably possible that portions of the use tax assessments could be sustained upon resolution of this matter.


19

The amount of use tax liability associated with the exemptions taken by ITCTransmission through June 30, 2015 is estimated to be approximately $16.7 million including interest. This amount includes approximately $10.2 million, including interest, assessed for the audit periods noted above. ITCTransmission has not recorded this contingent liability as of June 30, 2015. METC has also taken the industrial processing exemption, estimated to be approximately $10.1 million for periods still subject to audit and METC has also not recorded any contingent liabilities as of June 30, 2015 associated with this matter. In the event it becomes appropriate to record additional use tax liability relating to this matter, ITCTransmission and METC would record the additional use tax primarily as an increase to the cost of property, plant and equipment, which is a component of revenue requirement, as the majority of purchases for which the exemption was taken relate to equipment purchases associated with capital projects.
Rate of Return on Equity and Capital Structure Complaints
On November 12, 2013, the Association of Businesses Advocating Tariff Equity, Coalition of MISO Transmission Customers, Illinois Industrial Energy Consumers, Indiana Industrial Energy Consumers, Inc., Minnesota Large Industrial Group, and Wisconsin Industrial Energy Group (collectively, the “complainants”) filed a complaint with the FERC under Section 206 of the FPA (the “Complaint”), requesting that the FERC find the current 12.38% MISO regional base ROE rate (the “base ROE”) for all MISO TOs, including ITCTransmission, METC and ITC Midwest, to no longer be just and reasonable. The complainants sought a FERC order reducing the base ROE used in our MISO Regulated Operating Subsidiaries’ formula transmission rates to 9.15%. The Complaint also alleged that the rates of any MISO TO using a capital structure with greater than 50% for the equity component are likewise not just and reasonable (our MISO Regulated Operating Subsidiaries use their actual capital structures, which target 60% equity, as FERC had previously authorized). The Complaint also alleged the ROE adders currently approved for certain ITC Holdings operating companies, including an adder currently charged by ITCTransmission for being a member of an RTO and adders charged by ITCTransmission and METC for being independent transmission owners, are no longer just and reasonable, and sought to have them eliminated.
On June 19, 2014, in a separate Section 206 complaint against the regional base ROE rate for ISO New England TOs, FERC adopted a new methodology for establishing base ROE rates for electric transmission utilities. The new methodology is based on a two-step discounted cash flow analysis (“two-step DCF”) that uses both short-term and long-term growth projections in calculating ROE rates for a proxy group of electric utilities. The previous methodology used only short-term growth projections. FERC also reiterated that it can apply discretion in determining how ROE rates are established within a zone of reasonableness and reiterated its policy for limiting the overall ROE rate for any company, including the base and all applicable adders, at the high end of the zone of reasonableness set by the two-step DCF methodology. The new method presented in the ISO New England ROE case will be used in resolving the MISO ROE case.
On October 16, 2014, FERC granted the complainants’ request in part by setting the base ROE for hearing and settlement procedures, while denying all other aspects of the Complaint. FERC found that the complainants failed to show that the use of actual or FERC-approved capital structures that include more than 50% equity are unjust and unreasonable. FERC also denied the request to terminate ITCTransmission’s and METC’s ROE incentives. The order reiterates that any TO’s total ROE rate is limited by the top end of a zone of reasonableness and the TO’s ability to implement the full amount of previously granted ROE adders may be affected by the outcome of the hearing. FERC set the refund effective date as November 12, 2013.
During the fourth quarter of 2014, the MISO TOs engaged in the ordered FERC settlement procedures with the complainants but were not able to reach resolution. On January 5, 2015, the Chief Judge issued an order which terminated settlement procedures and set the matter for hearing. The order established a schedule for the proceeding that provides for a hearing within 32 weeks of the order and an initial decision within 47 weeks of the order. On April 6, 2015, the MISO TOs filed expert witness testimony in the Complaint proceeding supporting the existing base ROE as just and reasonable. However, in the event that FERC elects to change the base ROE, the testimony included a recommendation of 11.39% base ROE for the period of November 12, 2013 through February 12, 2015 (the “Initial Refund Period”). In resolving the Complaint, we expect FERC to establish a new base ROE to determine any potential refund liability for the Initial Refund Period. The new base ROE as well as any ROE adders, subject to the limitations of the top end of any zone of reasonableness that is established, are expected to be used to calculate the refund liability for the Initial Refund Period.
On February 12, 2015, an additional complaint was filed with the FERC under Section 206 of the FPA (the “Second Complaint”) by Arkansas Electric Cooperative Corporation, Mississippi Delta Energy Agency, Clarksdale Public Utilities Commission, Public Service Commission of Yazoo City and Hoosier Energy Rural Electric Cooperative, Inc., seeking a FERC order to reduce the base ROE used in our MISO Regulated Operating Subsidiaries’ formula transmission rates to 8.67% with an effective date of February 12, 2015. On March 11, 2015, the MISO TOs filed an answer to the Second Complaint with the


20

FERC supporting the current base ROE as just and reasonable. On June 18, 2015, FERC accepted the Second Complaint and set it for hearing and settlement procedures. FERC also set the refund effective date for the Second Complaint as February 12, 2015.
We believe it is probable that refunds will be required for these matters and as of June 30, 2015, the estimated range of refunds on a pre-tax basis is expected to be from $69.6 million to $123.2 million for the period from November 12, 2013 through June 30, 2015. As of June 30, 2015 and December 31, 2014, our MISO Regulated Operating Subsidiaries had recorded an aggregate estimated regulatory liability of $69.6 million and $47.8 million, respectively, representing the low end of the range of potential refunds as of those dates, as there is no best estimate within the range of refunds. The recognition of this estimated liability resulted in a reduction in revenues of $13.3 million, $20.8 million and $46.9 million and an increase in interest expense of $0.5 million, $0.9 million and $0.9 million for the three and six months ended June 30, 2015 and the year ended December 31, 2014, respectively. This resulted in an estimated after-tax reduction to net income of $8.5 million, $13.3 million and $28.9 million for the three and six months ended June 30, 2015 and year ended December 31, 2014, respectively. No amounts related to these complaints were recorded as of or for the three and six months ended June 30, 2014.
Based on the estimated range of refunds identified above, we believe that it is reasonably possible that this matter could result in an additional estimated pre-tax refund of up to $53.6 million (or a $32.5 million estimated after-tax reduction of net income) in excess of the amount recorded as of June 30, 2015. It is also possible the outcome of this matter could differ from the estimated range of losses and materially affect our results of operations due to the uncertainty of the calculation of an authorized base ROE along with the zone of reasonableness under the newly adopted two-step DCF methodology, which is subject to significant discretion by the FERC. As of June 30, 2015, our MISO Regulated Operating Subsidiaries had a total of approximately $2.8 billion of equity in their collective capital structures for ratemaking purposes. Based on this level of aggregate equity, we estimate that each 10 basis point reduction in the authorized ROE would reduce annual consolidated net income by approximately $2.8 million.
In a separate but related matter, in November 2014, METC, ITC Midwest and other MISO TOs filed a request with FERC under FPA Section 205 for authority to include a 50 basis point incentive adder for RTO participation in each of the TOs’ formula rates. On January 5, 2015, FERC approved the use of this incentive adder, effective January 6, 2015. Additionally, ITC Midwest filed a request with FERC under FPA Section 205 in January 2015 for authority to include a 100 basis point incentive adder for independent transmission ownership, which is currently authorized for ITCTransmission and METC. On March 31, 2015, FERC approved the use of a 50 basis point incentive adder for independence, effective April 1, 2015. On April 30, 2015, ITC Midwest filed a request with FERC for clarification and rehearing on the approved incentive adder for independence. The RTO participation incentive adder will be applied to METC’s and ITC Midwest’s base ROEs and the independence incentive adder will be applied to ITC Midwest’s base ROE in establishing their total authorized ROE rates, subject to the limitations of the top end of any zone of reasonableness that is established. Collection of these recently approved incentive adders is being deferred pending the outcome of the complaints relating to the base ROE.
12.    SEGMENT INFORMATION
We identify reportable segments based on the criteria set forth by the FASB regarding disclosures about segments of an enterprise, including the regulatory environment of our subsidiaries and the business activities performed to earn revenues and incur expenses. The following tables show our financial information by reportable segment:
 
Three months ended
 
Six months ended
OPERATING REVENUES:
June 30,
 
June 30,
(in thousands)
2015
 
2014
 
2015
 
2014
Regulated Operating Subsidiaries
$
274,990

 
$
263,303

 
$
547,440

 
$
521,996

ITC Holdings and other
209

 
92

 
386

 
184

Intercompany eliminations
(141
)
 
(181
)
 
(281
)
 
(363
)
Total Operating Revenues
$
275,058

 
$
263,214

 
$
547,545

 
$
521,817

 
Three months ended
 
Six months ended
INCOME BEFORE INCOME TAXES:
June 30,
 
June 30,
(in thousands)
2015
 
2014
 
2015
 
2014
Regulated Operating Subsidiaries
$
149,640

 
$
147,187

 
$
298,458

 
$
288,779

ITC Holdings and other
(34,208
)
 
(59,644
)
 
(75,434
)
 
(89,264
)
Total Income Before Income Taxes
$
115,432

 
$
87,543

 
$
223,024

 
$
199,515



21

 
Three months ended
 
Six months ended
NET INCOME:
June 30,
 
June 30,
(in thousands)
2015
 
2014
 
2015
 
2014
Regulated Operating Subsidiaries
$
92,081

 
$
90,296

 
$
183,520

 
$
176,849

ITC Holdings and other
72,336

 
54,336

 
139,468

 
123,472

Intercompany eliminations
(92,081
)
 
(90,296
)
 
(183,520
)
 
(176,849
)
Total Net Income
$
72,336

 
$
54,336

 
$
139,468

 
$
123,472

TOTAL ASSETS:
June 30,
 
December 31,
(in thousands)
2015
 
2014
Regulated Operating Subsidiaries
$
7,160,442

 
$
6,867,411

ITC Holdings and other
4,112,002

 
3,944,318

Reconciliations / Intercompany eliminations (a)
(3,989,224
)
 
(3,837,640
)
Total Assets
$
7,283,220

 
$
6,974,089

____________________________
(a)
Reconciliation of total assets results primarily from differences in the netting of deferred tax assets and liabilities at our Regulated Operating Subsidiaries as compared to the classification in our condensed consolidated statements of financial position.


22

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Our reports, filings and other public announcements contain certain statements that describe our management’s beliefs concerning future business conditions, plans and prospects, growth opportunities and the outlook for our business and the electric transmission industry based upon information currently available. Such statements are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Wherever possible, we have identified these forward-looking statements by words such as “will,” “may,” “anticipates,” “believes,” “intends,” “estimates,” “expects,” “projects,” “likely” and similar phrases. These forward-looking statements are based upon assumptions our management believes are reasonable. Such forward-looking statements are subject to risks and uncertainties which could cause our actual results, performance and achievements to differ materially from those expressed in, or implied by, these statements, including, among others, the risks and uncertainties listed in Item 1A Risk Factors of our Form 10-K for the fiscal year ended December 31, 2014, and the following:
•
Certain elements of our Regulated Operating Subsidiaries’ formula rates can be and have been challenged, which could result in lowered rates and/or refunds of amounts previously collected and thus have an adverse effect on our business, financial condition, results of operations and cash flows.
•
Our actual capital investment may be lower than planned, which would cause a lower than expected rate base and therefore our revenues and earnings compared to our current expectations. In addition, we expect to invest in strategic development opportunities to improve the efficiency and reliability of the transmission grid, but we cannot assure you that we will be able to initiate or complete any of these investments. In addition, we expect to incur expenses related to the pursuit of development opportunities which may be higher than forecasted.
•
The regulations to which we are subject may limit our ability to raise capital and/or pursue acquisitions, development opportunities or other transactions or may subject us to liabilities.
•
Changes in energy laws, regulations or policies could impact our business, financial condition, results of operations and cash flows.
•
If amounts billed for transmission service for our Regulated Operating Subsidiaries’ transmission systems are lower than expected, or our actual revenue requirements are higher than expected, the timing of collection of our revenues would be delayed.
•
Each of our MISO Regulated Operating Subsidiaries depends on its primary customer for a substantial portion of its revenues, and any material failure by those primary customers to make payments for transmission services could have a material adverse effect on our business, financial condition, results of operations and cash flows.
•
A significant amount of the land on which our assets are located is subject to easements, mineral rights and other similar encumbrances. As a result, we must comply with the provisions of various easements, mineral rights and other similar encumbrances, which may adversely impact their ability to complete construction projects in a timely manner.
•
We contract with third parties to provide services for certain aspects of our business. If any of these agreements are terminated, we may face a shortage of labor or replacement contractors to provide the services formerly provided by these third parties.
•
Hazards associated with high-voltage electricity transmission may result in suspension of our operations or the imposition of civil or criminal penalties.
•
We are subject to environmental regulations and to laws that can give rise to substantial liabilities from environmental contamination.
•
We are subject to various regulatory requirements, including reliability standards; contract filing requirements; reporting, recordkeeping and accounting requirements; and transaction approval requirements. Violations of these requirements, whether intentional or unintentional, may result in penalties that, under some circumstances, could have a material adverse effect on our business, financial condition, results of operations and cash flows.
•
Acts of war, terrorist attacks, cyber attacks, natural disasters, severe weather and other catastrophic events may have a material adverse effect on our business, financial condition, results of operations and cash flows.


23

•
ITC Holdings is a holding company with no operations, and unless we receive dividends or other payments from our subsidiaries, we may be unable to pay dividends and fulfill our other cash obligations.
•
We have a considerable amount of debt and our reliance on debt financing may limit our ability to fulfill our debt obligations and/or to obtain additional financing.
•
Certain provisions in our debt instruments limit our financial and operating flexibility.
•
Adverse changes in our credit ratings may negatively affect us.
•
Provisions in our Articles of Incorporation and bylaws, Michigan corporate law and our debt agreements may impede efforts by our shareholders to change the direction or management of our company.
•
Provisions in our Articles of Incorporation restrict market participants from voting or owning 5% or more of the outstanding shares of our capital stock.
Because our forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different and any or all of our forward-looking statements may turn out to be wrong. Forward-looking statements speak only as of the date made and can be affected by assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in our discussion in this report will be important in determining future results. Consequently, we cannot assure you that our expectations or forecasts expressed in such forward-looking statements will be achieved. Except as required by law, we undertake no obligation to publicly update any of our forward-looking or other statements, whether as a result of new information, future events, or otherwise.
OVERVIEW
Through our Regulated Operating Subsidiaries, we operate high-voltage systems in Michigan’s Lower Peninsula and portions of Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma that transmit electricity from generating stations to local distribution facilities connected to our systems. Our business strategy is to operate, maintain and invest in transmission infrastructure in order to enhance system integrity and reliability, to reduce transmission constraints and to upgrade the transmission networks to support new generating resources interconnecting to our transmission systems. We also are pursuing development projects not within our existing systems, which are likewise intended to improve overall grid reliability, reduce transmission constraints and facilitate interconnections of new generating resources, as well as enhance competitive wholesale electricity markets.
As electric transmission utilities with rates regulated by the FERC, our Regulated Operating Subsidiaries earn revenues through tariff rates charged for the use of their electric transmission systems by our customers, which include investor-owned utilities, municipalities, cooperatives, power marketers and alternative energy suppliers. As independent transmission companies, our Regulated Operating Subsidiaries are subject to rate regulation only by the FERC. The rates charged by our Regulated Operating Subsidiaries are established using cost-based formula rate templates as discussed in Note 3 to the condensed consolidated financial statements under “— Cost-Based Formula Rates with True-Up Mechanism.”
Our Regulated Operating Subsidiaries’ primary operating responsibilities include maintaining, improving and expanding their transmission systems to meet their customers’ ongoing needs, scheduling outages on system elements to allow for maintenance and construction, maintaining appropriate system voltages and monitoring flows over transmission lines and other facilities to ensure physical limits are not exceeded.
We derive nearly all of our revenues from providing electric transmission service over our Regulated Operating Subsidiaries’ transmission systems to investor-owned utilities, such as DTE Electric, Consumers Energy and IP&L, and to other entities such as alternative electricity suppliers, power marketers and other wholesale customers that provide electricity to end-use consumers and from transaction-based capacity reservations on our transmission systems.
Significant recent matters that influenced our financial position and results of operations and cash flows for the six months ended June 30, 2015 or may affect future results include:
•
Our capital investment of $326.9 million at our Regulated Operating Subsidiaries for the six months ended June 30, 2015, resulting primarily from our focus on improving system reliability, increasing system capacity and upgrading the transmission network to support new generating resources;


24

•
Debt issuance as described in Note 5 to the condensed consolidated financial statements and borrowings under our revolving and term loan credit agreements in 2015 and 2014 to fund capital investment at our Regulated Operating Subsidiaries and for general corporate purposes, resulting in higher interest expense;
•
Establishment of a commercial paper program as described in Note 5 to the condensed consolidated financial statements, which provides an additional source of liquidity for our working capital needs;
•
Debt maturing within one year of $225.0 million as of June 30, 2015 and the potentially higher interest rates associated with the additional financing required to repay this debt; and
•
Recognition of an estimated contingent liability for the potential refunds relating to the rate of return on equity (“ROE”) and capital structure complaints as described in Note 11 to the condensed consolidated financial statements, which resulted in a total estimated pre-tax reduction of revenue and interest of $13.8 million and $21.7 million and an estimated after-tax reduction to net income of $8.5 million and $13.3 million for the three and six months ended June 30, 2015, respectively.
These items are discussed in more detail throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Capital Project Updates and Other Recent Developments
ITC Great Plains Regulatory Assets
As of June 30, 2015, we have recorded a total of $13.7 million of regulatory assets for start-up, development and pre-construction expenses, including associated interest carrying charges, incurred by ITC Great Plains, which include certain costs incurred for the Kansas Electric Transmission Authority (“KETA”) and the Kansas V-Plan Projects prior to construction. Based on ITC Great Plains’ FERC application under which authority to recognize these regulatory assets was sought and the related FERC order granting such authority, ITC Great Plains made a filing with the FERC under Section 205 of the FPA in May 2013 to recover these start-up, development and pre-construction expenses, including associated debt and equity carrying charges, in future rates as discussed in Note 3 of the condensed consolidated financial statements. On March 26, 2015, FERC accepted ITC Great Plains’ request to commence amortization of the authorized regulatory assets, subject to refund, as well as set the matter for hearing and settlement judge procedures. As a result, ITC Great Plains has included the unamortized balance of the regulatory assets in its rate base and commenced amortization over a 10-year period during the second quarter of 2015. The amortization expense will be recovered through ITC Great Plains’ cost-based formula rate template, subject to refund. We do not expect the settlement of this proceeding to have a material impact on our results of operations, cash flows or financial condition.
Development Bonuses
We recognized general and administrative expenses of $0.3 million and $9.8 million during the three and six months ended June 30, 2015, respectively, and $0.7 million and $2.2 million during the three and six months ended June 30, 2014, respectively, for bonuses for certain development projects, including the successful completion of certain milestones relating to projects at ITC Great Plains. Specifically, the Kansas V-Plan Project was placed in-service in December 2014 and the resulting development bonus was approved and paid during the three months ended March 31, 2015. It is reasonably possible that future development-related bonuses may be authorized and awarded for these or other development projects.
Multi-Value Projects
2011 MISO Multi-Value Projects
In December 2011, MISO approved a portfolio of Multi-Value Projects (“MVPs”) which includes portions of four MVPs that we will construct, own and operate. The four MVPs are located in south central Minnesota, northern and southeast Iowa, southwest Wisconsin, and northeast Missouri and are in various stages of construction and included in ITC Midwest’s capital investment amounts. We currently estimate ITC Midwest will invest approximately $800 million in the four MVPs from 2014 through 2018.
Thumb Loop Project
The Thumb Loop Project, an additional MVP, is located in ITCTransmission’s region and consists of a 140-mile, double-circuit 345 kV transmission line and related substations that will serve as the backbone of the transmission system needed to


25

accommodate future wind development projects in the Michigan counties of Tuscola, Huron, Sanilac and St. Clair. Construction activities commenced for the Thumb Loop Project in 2012. Phase 1 and Phase 2 of the Thumb Loop Project, which consisted of 62 miles and 20 miles of transmission line, respectively, were placed in-service in September 2013 and May 2014, respectively. The third and final phase, which consisted of 56 miles of transmission line, was placed in-service on May 13, 2015. Through June 30, 2015, ITCTransmission has invested $495.9 million in the Thumb Loop Project and any further investment to complete this project is not expected to be material.
Rate of Return on Equity and Capital Structure Complaints
In November 2013, certain parties filed a joint complaint with the FERC under Section 206 of the FPA (the “Complaint”), requesting that the FERC find the current 12.38% MISO regional base ROE rate (the “base ROE”) for all MISO TOs, including ITCTransmission, METC and ITC Midwest to no longer be just and reasonable. The complainants sought a FERC order reducing the base ROE used in our MISO Regulated Operating Subsidiaries’ formula transmission rates to 9.15%, reducing the equity component of our capital structure from the FERC approved 60% to 50% and terminating the ROE adders currently approved for certain ITC Holdings operating companies, including adders currently utilized by ITCTransmission and METC.
We believe that the current ROE encourages transmission investment and offsets the burdens associated with maintaining the independent transmission business model and RTO membership. ITCTransmission, METC and ITC Midwest filed responses during the first quarter of 2014, separately and together with other MISO TOs, that seek dismissal of the Complaint for its failure to satisfy the requirements of FPA Section 206 and the FERC’s accompanying Rules, or denial of the Complaint on the merits, with prejudice.
On October 16, 2014, FERC granted the complainants’ request in part by setting the base ROE for hearing and settlement procedures, while denying all other aspects of the Complaint. FERC found that the complainants failed to show that the use of actual or FERC-approved capital structures that include more than 50% equity are unjust and unreasonable. FERC also denied the request to terminate ITCTransmission’s and METC’s ROE incentives. The order reiterates that any TO’s total ROE rate is limited by the top end of a zone of reasonableness and the TO’s ability to implement the full amount of previously granted ROE adders may be affected by the outcome of the hearing. FERC set the refund effective date as November 12, 2013.
During the fourth quarter of 2014, the MISO TOs engaged in the ordered FERC settlement procedures with the complainants but were not able to reach resolution. On January 5, 2015, the Chief Judge issued an order which terminated settlement procedures and set the matter for hearing. The order established a schedule for the proceeding that provides for a hearing within 32 weeks of the order and an initial decision within 47 weeks of the order. On April 6, 2015, the MISO TOs filed expert witness testimony in the Complaint proceeding supporting the existing base ROE as just and reasonable. However, in the event that FERC elects to change the base ROE, the testimony included a recommendation of 11.39% base ROE for the period of November 12, 2013 through February 12, 2015 (the “Initial Refund Period”). In resolving the Complaint, we expect FERC to establish a new base ROE to determine any potential refund liability for the Initial Refund Period. The new base ROE as well as any ROE adders, subject to the limitations of the top end of any zone of reasonableness that is established, are expected to be used to calculate the refund liability for the Initial Refund Period.
On February 12, 2015, an additional complaint was filed with the FERC under Section 206 of the FPA (the “Second Complaint”) by separate complainants, seeking a FERC order to reduce the base ROE used in our MISO Regulated Operating Subsidiaries’ formula transmission rates to 8.67% with an effective date of February 12, 2015. On March 11, 2015, the MISO TOs filed an answer to the Second Complaint with the FERC supporting the current base ROE as just and reasonable. On June 18, 2015, FERC accepted the Second Complaint and set it for hearing and settlement procedures. FERC also set the refund effective date for the Second Complaint as February 12, 2015.
We believe it is probable that refunds will be required for these matters and as of June 30, 2015, the estimated range of refunds on a pre-tax basis is expected to be from $69.6 million to $123.2 million for the period from November 12, 2013 through June 30, 2015. As of June 30, 2015 and December 31, 2014, our MISO Regulated Operating Subsidiaries had recorded an aggregate estimated regulatory liability of $69.6 million and $47.8 million, respectively, representing the low end of the range of potential refunds as of those dates, as there is no best estimate within the range of refunds. The recognition of this estimated liability resulted in a reduction in revenues of $13.3 million, $20.8 million and $46.9 million and an increase in interest expense of $0.5 million, $0.9 million and $0.9 million for the three and six months ended June 30, 2015 and the year ended December 31, 2014, respectively. This resulted in an estimated after-tax reduction to net income of $8.5 million, $13.3 million and $28.9 million for the three and six months ended June 30, 2015 and year ended December 31, 2014, respectively. No amounts related to these complaints were recorded as of or for the six months ended June 30, 2014.


26

Based on the estimated range of refunds identified above, we believe that it is reasonably possible that this matter could result in an additional estimated pre-tax refund of up to $53.6 million (or a $32.5 million estimated after-tax reduction of net income) in excess of the amount recorded as of June 30, 2015. It is also possible the outcome of this matter could differ from the estimated range of losses and materially affect our results of operations due to the uncertainty of the calculation of an authorized base ROE along with the zone of reasonableness under the newly adopted two-step DCF methodology, which is subject to significant discretion by the FERC. As of June 30, 2015, our MISO Regulated Operating Subsidiaries had a total of approximately $2.8 billion of equity in their collective capital structures for ratemaking purposes. Based on this level of aggregate equity, we estimate that each 10 basis point reduction in the authorized ROE would reduce annual consolidated net income by approximately $2.8 million.
In a separate but related matter, in November 2014, METC, ITC Midwest and other MISO TOs filed a request with FERC under FPA Section 205 for authority to include a 50 basis point incentive adder for RTO participation in each of the TOs’ formula rates. On January 5, 2015, FERC approved the use of this incentive adder, effective January 6, 2015. Additionally, ITC Midwest filed a request with FERC under FPA Section 205 in January 2015 for authority to include a 100 basis point incentive adder for independent transmission ownership, which is currently authorized for ITCTransmission and METC. On March 31, 2015, FERC approved the use of a 50 basis point incentive adder for independence, effective April 1, 2015. On April 30, 2015, ITC Midwest filed a request with FERC for clarification and rehearing on the approved incentive adder for independence. The RTO participation incentive adder will be applied to METC’s and ITC Midwest’s base ROEs and the independence incentive adder will be applied to ITC Midwest’s base ROE in establishing their total authorized ROE rates, subject to the limitations of the top end of any zone of reasonableness that is established. Collection of these recently approved incentive adders is being deferred pending the outcome of the complaints relating to the base ROE.
Cost-Based Formula Rates with True-Up Mechanism
Our Regulated Operating Subsidiaries calculate their revenue requirements using cost-based formula rate templates and are effective without the need to file rate cases with the FERC, although the rates are subject to legal challenge at the FERC. Under these formula rate templates, our Regulated Operating Subsidiaries recover expenses and earn a return on and recover investments in property, plant and equipment on a current rather than a lagging basis. The formula rate templates utilize forecasted expenses, property, plant and equipment, point-to-point revenues, network load at our MISO Regulated Operating Subsidiaries and other items for the upcoming calendar year to establish projected revenue requirements for each of our Regulated Operating Subsidiaries that are used as the basis for billing for service on their systems from January 1 to December 31 of that year. Our cost-based formula rate templates include a true-up mechanism, whereby our Regulated Operating Subsidiaries compare their actual revenue requirements to their billed revenues for each year to determine any over- or under-collection of revenue. The over- or under-collection typically results from differences between the projected revenue requirement used as the basis for billing and actual revenue requirement at each of our Regulated Operating Subsidiaries, or from differences between actual and projected monthly peak loads at our MISO Regulated Operating Subsidiaries. In the event billed revenues in a given year are more or less than actual revenue requirements, which are calculated primarily using information from that year’s FERC Form No. 1, our Regulated Operating Subsidiaries will refund or collect additional revenues, with interest, within a two-year period such that customers pay only the amounts that correspond to actual revenue requirements for that given period. This annual true-up ensures that our Regulated Operating Subsidiaries recover their allowed costs and earn their allowed returns.
Revenue Accruals and Deferrals — Effects of Monthly Peak Loads
For our MISO Regulated Operating Subsidiaries, monthly peak loads are used for billing network revenues, which currently is the largest component of our operating revenues. One of the primary factors that impacts the revenue accruals and deferrals at our MISO Regulated Operating Subsidiaries is actual monthly peak loads experienced as compared to those forecasted in establishing the annual network transmission rate. Under their cost-based formula rates that contain a true-up mechanism, our Regulated Operating Subsidiaries accrue or defer revenues to the extent that their actual revenue requirement for the reporting period is higher or lower, respectively, than the amounts billed relating to that reporting period. Although monthly peak loads do not impact operating revenues recognized, network load affects the timing of our cash flows from transmission service. The monthly peak load of our MISO Regulated Operating Subsidiaries is affected by many variables, but is generally impacted by weather and economic conditions and is seasonally shaped with higher load in the summer months when cooling demand is higher.
ITC Great Plains does not receive revenue based on a peak load or a dollar amount per kW each month and therefore peak load does not have a seasonal effect on operating cash flows. The SPP tariff applicable to ITC Great Plains is billed ratably each month based on its annual projected revenue requirement posted annually by SPP.


27

Capital Investment and Operating Results Trends
We expect a general trend of increases in revenues and earnings for our Regulated Operating Subsidiaries over the long term, excluding any impact resulting from the outcome of the complaints relating to base ROE as described in Note 11 to the condensed consolidated financial statements. The primary factor that is expected to continue to increase our actual revenue requirements in future years is increased rate base that would result from our anticipated capital investment, in excess of depreciation, from our Regulated Operating Subsidiaries’ long-term capital investment programs to improve reliability, increase system capacity and upgrade the transmission network to support new generating resources. In addition, our capital investment efforts relating to development initiatives are based on establishing an ongoing pipeline of projects that would position us for long-term growth. Investments in property, plant and equipment, when placed in service upon completion of a capital project, are added to the rate base of our Regulated Operating Subsidiaries.
Our Regulated Operating Subsidiaries strive for high reliability of their systems and to improve system accessibility for all generation resources. The FERC requires compliance with certain reliability standards and may take enforcement actions against violators, including fines of up to $1.0 million per day. NERC is responsible for developing and enforcing these mandatory reliability standards. We continually assess our transmission systems against standards established by NERC, as well as the standards of applicable regional entities under NERC that have been delegated certain authority for the purpose of proposing and enforcing reliability standards. We believe we meet the applicable standards in all material respects, although further investment in our transmission systems and an increase in maintenance activities will likely be needed to maintain compliance, improve reliability and address any new standards that may be promulgated.
We also assess our transmission systems against our own planning criteria that are filed annually with the FERC. Based on our planning studies, we see needs to make capital investments to (1) rebuild existing property, plant and equipment; (2) upgrade the system to address demographic changes that have impacted transmission load and the changing role that transmission plays in meeting the needs of the wholesale market, including accommodating the siting of new generation or to increase import capacity to meet changes in peak electrical demand; (3) relieve congestion in the transmission systems; and (4) achieve state and federal policy goals, such as renewable generation portfolio standards. The following table shows our expected and actual capital investment for each of the Regulated Operating Subsidiaries and our development initiatives:
 
 
 
 
Actual Capital
 
Forecasted Capital
 
 
Long-term Capital
 
Investment for the
 
Investment for the
(in millions)
 
Investment Program
 
six months ended
 
year ending
Source of Investment
 
2014-2018
 
June 30, 2015 (a)
 
December 31, 2015
ITCTransmission
 
$
647

 
$
82.8

 
$170 — 200
METC
 
546

 
51.2

 
150 — 170
ITC Midwest (b)
 
1,991

 
182.9

 
380 — 405
ITC Great Plains
 
194

 
10.0

 
10 — 25
Development and other (c)
 
1,122

 
4.1

 
0 — 10
Total
 
$
4,500

 
$
331.0

 
$710 — 810
____________________________
(a)
Capital investment amounts differ from cash expenditures for property, plant and equipment included in our condensed consolidated statements of cash flows due in part to differences in construction costs incurred compared to cash paid during that period, as well as payments for major equipment inventory that are included in cash expenditures but not included in capital investment until transferred to construction work in progress, among other factors.
(b)
ITC Midwest’s investment program includes the 2011 MISO MVPs as discussed above under “Capital Project Updates and Other Recent Developments.”
(c)
Development and other includes initiatives to upgrade the existing transmission grid and regional transmission facilities, primarily to improve overall grid reliability, reduce transmission constraints, enhance competitive markets and facilitate interconnections of new generating resources, including wind generation and other renewable resources necessary to achieve state and federal policy goals. Additionally, we may pursue other non-traditional transmission investment opportunities not described above.
Investments in property, plant and equipment could vary due to, among other things, the impact of actual loads, forecasted loads, regional economic conditions, weather conditions, union strikes, labor shortages, material and equipment prices and availability, our ability to obtain any necessary financing for such expenditures, limitations on the amount of construction that can be undertaken on our systems at any one time, regulatory approvals for reasons relating to rate construct, environmental, siting, regional planning, cost recovery or other issues or as a result of legal proceedings, variances between estimated and


28

actual costs of construction contracts awarded and the potential for greater competition. In addition, investments in transmission network upgrades for generator interconnection projects could change from prior estimates significantly due to changes in the MISO queue for generation projects and other factors beyond our control.
RESULTS OF OPERATIONS
Results of Operations and Variances
 
Three months ended
 
 
 
Percentage
 
Six months ended
 
 
 
Percentage
 
June 30,
 
Increase
 
increase
 
June 30,
 
Increase
 
increase
(in thousands)
2015
 
2014
 
(decrease)
 
(decrease)
 
2015
 
2014
 
(decrease)
 
(decrease)
OPERATING REVENUES
$
275,058

 
$
263,214

 
$
11,844

 
4.5
 %
 
$
547,545

 
$
521,817

 
$
25,728

 
4.9
 %
OPERATING EXPENSES
 
 
 
 
 
 

 
 
 
 
 
 
 
 
Operation and maintenance
30,026

 
25,836

 
4,190

 
16.2
 %
 
55,588

 
50,697

 
4,891

 
9.6
 %
General and administrative
32,493

 
30,308

 
2,185

 
7.2
 %
 
73,387

 
58,270

 
15,117

 
25.9
 %
Depreciation and amortization
35,578

 
31,295

 
4,283

 
13.7
 %
 
70,013

 
62,673

 
7,340

 
11.7
 %
Taxes other than income taxes
18,786

 
17,076

 
1,710

 
10.0
 %
 
41,166

 
38,269

 
2,897

 
7.6
 %
Other operating (income) and expenses — net
(233
)
 
(229
)
 
(4
)
 
1.7
 %
 
(469
)
 
(461
)
 
(8
)
 
1.7
 %
Total operating expenses
116,650

 
104,286

 
12,364

 
11.9
 %
 
239,685

 
209,448

 
30,237

 
14.4
 %
OPERATING INCOME
158,408

 
158,928

 
(520
)
 
(0.3
)%
 
307,860

 
312,369

 
(4,509
)
 
(1.4
)%
OTHER EXPENSES (INCOME)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
50,198

 
45,854

 
4,344

 
9.5
 %
 
98,672

 
91,163

 
7,509

 
8.2
 %
Allowance for equity funds used during construction
(7,464
)
 
(4,932
)
 
(2,532
)
 
51.3
 %
 
(15,013
)
 
(9,944
)
 
(5,069
)
 
51.0
 %
Loss on extinguishment of debt
—

 
29,074

 
(29,074
)
 
n/a

 
—

 
29,074

 
(29,074
)
 
n/a

Other income
(189
)
 
(236
)
 
47

 
(19.9
)%
 
(438
)
 
(397
)
 
(41
)
 
10.3
 %
Other expense
431

 
1,625

 
(1,194
)
 
(73.5
)%
 
1,615

 
2,958

 
(1,343
)
 
(45.4
)%
Total other expenses (income)
42,976

 
71,385

 
(28,409
)
 
(39.8
)%
 
84,836

 
112,854

 
(28,018
)
 
(24.8
)%
INCOME BEFORE INCOME TAXES
115,432

 
87,543

 
27,889

 
31.9
 %
 
223,024

 
199,515

 
23,509

 
11.8
 %
INCOME TAX PROVISION
43,096

 
33,207

 
9,889

 
29.8
 %
 
83,556

 
76,043

 
7,513

 
9.9
 %
NET INCOME
$
72,336

 
$
54,336

 
$
18,000

 
33.1
 %
 
$
139,468

 
$
123,472

 
$
15,996

 
13.0
 %
Operating Revenues
Three months ended June 30, 2015 compared to three months ended June 30, 2014
The following table sets forth the components of and changes in operating revenues:
 
 
 
 
 
 
 
 
 
 
 
Percentage
 
2015
 
2014
 
Increase
 
increase
(in thousands)
Amount
 
Percentage
 
Amount
 
Percentage
 
(decrease)
 
(decrease)
Network revenues
$
193,279

 
70.3
 %
 
$
186,300

 
70.8
%
 
$
6,979

 
3.7
 %
Regional cost sharing revenues
80,783

 
29.4
 %
 
63,934

 
24.3
%
 
16,849

 
26.4
 %
Point-to-point
3,836

 
1.4
 %
 
3,952

 
1.5
%
 
(116
)
 
(2.9
)%
Scheduling, control and dispatch
3,148

 
1.1
 %
 
3,231

 
1.2
%
 
(83
)
 
(2.6
)%
Other
7,305

 
2.7
 %
 
5,797

 
2.2
%
 
1,508

 
26.0
 %
Recognition of contingent liability for return on equity complaints
(13,293
)
 
(4.9
)%
 
—

 
—
%
 
(13,293
)
 
n/a

Total
$
275,058

 
100.0
 %
 
$
263,214

 
100.0
%
 
$
11,844

 
4.5
 %
Network revenues increased due primarily to higher net revenue requirements at our Regulated Operating Subsidiaries during the three months ended June 30, 2015 as compared to the same period in 2014. Higher net revenue requirements were due primarily to higher rate bases associated with higher balances of property, plant and equipment in-service.
Regional cost sharing revenues increased due primarily to additional capital projects identified by MISO as eligible for regional cost sharing and these projects being placed in-service in addition to higher accumulated investment for the Thumb


29

Loop Project and Kansas V-Plan Project during the three months ended June 30, 2015 as compared to the same period in 2014. We expect to continue to receive regional cost sharing revenues and the amounts could increase in the near future, including revenues associated with projects that have been or are expected to be approved for regional cost sharing.
The recognition of the estimated contingent liability for potential refunds relating to the ROE complaints resulted in a reduction to operating revenues of $13.3 million during the three months ended June 30, 2015 as described in Note 11 to the condensed consolidated financial statements. We are not able to estimate whether any required refunds would be applied to all components of revenues listed in the table above or only certain components.
Operating revenues for the three months ended June 30, 2015 include the revenue accruals and deferrals as described in Note 3 to the condensed consolidated financial statements.
Six months ended June 30, 2015 compared to six months ended June 30, 2014
The following table sets forth the components of and changes in operating revenues:
 
 
 
 
 
 
 
 
 
 
 
Percentage
 
2015
 
2014
 
Increase
 
increase
(in thousands)
Amount
 
Percentage
 
Amount
 
Percentage
 
(decrease)
 
(decrease)
Network revenues
$
390,255

 
71.3
 %
 
$
375,076

 
71.9
%
 
$
15,179

 
4.0
 %
Regional cost sharing revenues
155,333

 
28.4
 %
 
123,253

 
23.6
%
 
32,080

 
26.0
 %
Point-to-point
8,050

 
1.5
 %
 
9,637

 
1.8
%
 
(1,587
)
 
(16.5
)%
Scheduling, control and dispatch
6,363

 
1.2
 %
 
6,393

 
1.2
%
 
(30
)
 
(0.5
)%
Other
8,380

 
1.5
 %
 
7,458

 
1.5
%
 
922

 
12.4
 %
Recognition of contingent liability for return on equity complaints
(20,836
)
 
(3.9
)%
 
—

 
—
%
 
(20,836
)
 
n/a

Total
$
547,545

 
100.0
 %
 
$
521,817

 
100.0
%
 
$
25,728

 
4.9
 %
Network revenues increased due primarily to higher net revenue requirements at our Regulated Operating Subsidiaries during the six months ended June 30, 2015 as compared to the same period in 2014. Higher net revenue requirements were due primarily to higher rate bases associated with higher balances of property, plant and equipment in-service.
Regional cost sharing revenues increased due primarily to additional capital projects identified by MISO as eligible for regional cost sharing and these projects being placed in-service in addition to higher accumulated investment for the Thumb Loop Project and Kansas V-Plan Project during the six months ended June 30, 2015 as compared to the same period in 2014. We expect to continue to receive regional cost sharing revenues and the amounts could increase in the near future, including revenues associated with projects that have been or are expected to be approved for regional cost sharing.
The recognition of the estimated contingent liability for potential refunds relating to the ROE complaints resulted in a reduction to operating revenues of $20.8 million during the six months ended June 30, 2015 as described in Note 11 to the condensed consolidated financial statements. We are not able to estimate whether any required refunds would be applied to all components of revenues listed in the table above or only certain components.
Operating revenues for the six months ended June 30, 2015 include the revenue accruals and deferrals as described in Note 3 to the condensed consolidated financial statements.
Operating Expenses
Operation and maintenance expenses
Three and six months ended June 30, 2015 compared to three and six months ended June 30, 2014
Operation and maintenance expenses increased primarily due to higher vegetation management requirements and higher expenses associated with substation and overhead line maintenance activities.
General and administrative expenses
Three months ended June 30, 2015 compared to three months ended June 30, 2014
General and administrative expenses increased primarily due to higher compensation expenses of $1.7 million mainly due to personnel additions.


30

Six months ended June 30, 2015 compared to six months ended June 30, 2014
General and administrative expenses increased primarily due to higher compensation-related expenses of $11.9 million, mainly due to development bonuses paid during the three months ended March 31, 2015 as described in detail above under “Capital Project Updates and Other Recent Developments — Development Bonuses.”
Depreciation and amortization expenses
Three and six months ended June 30, 2015 compared to three and six months ended June 30, 2014
Depreciation and amortization expenses increased due primarily to a higher depreciable base resulting from property, plant and equipment in-service additions.
Taxes other than income taxes
Three and six months ended June 30, 2015 compared to three and six months ended June 30, 2014
Taxes other than income taxes increased due to higher property tax expenses due primarily to our Regulated Operating Subsidiaries’ 2014 capital additions, which are included in the assessments for 2015 personal property taxes.
Other Expenses (Income)
Three and six months ended June 30, 2015 compared to three and six months ended June 30, 2014
Interest Expense
Interest expense increased due primarily to additional interest expense associated with the net issuance of $450.0 million in long-term debt securities subsequent to June 30, 2014.
Allowance for Equity Funds Used During Construction
Allowance for Equity Funds Used During Construction (“AFUDC equity”) increased due primarily to higher balances of construction work in progress eligible for AFUDC equity during the period.
Loss on Extinguishment of Debt
The loss on extinguishment of debt related to the partial tender of the 5.875% ITC Holdings Senior Notes and the 6.375% ITC Holdings Senior Notes during the second quarter of 2014. See Note 8 to the consolidated financial statements as of and for the year ended December 31, 2014 included in our Form 10-K for such period for a detailed discussion on the cash tender offer.
Income Tax Provision
Three months ended June 30, 2015 compared to three months ended June 30, 2014
Our effective tax rates for the three months ended June 30, 2015 and 2014 were 37.3% and 37.9%, respectively. Our effective tax rate in both periods exceeded our 35% statutory federal income tax rate due primarily to state income taxes, partially offset by the tax effects of AFUDC equity which reduced the effective tax rate. The amount of income tax expense relating to AFUDC equity was recognized as a regulatory asset and not included in the income tax provision. We recorded a state income tax provision of $4.1 million (net of federal deductibility) during the three months ended June 30, 2015, compared to a state income tax provision of $3.4 million (net of federal deductibility) for the three months ended June 30, 2014.
Six months ended June 30, 2015 compared to six months ended June 30, 2014
Our effective tax rates for the six months ended June 30, 2015 and 2014 were 37.5% and 38.1%, respectively. Our effective tax rate in both periods exceeded our 35% statutory federal income tax rate due primarily to state income taxes, partially offset by the tax effects of AFUDC equity which reduced the effective tax rate. The amount of income tax expense relating to AFUDC equity was recognized as a regulatory asset and not included in the income tax provision. We recorded a state income tax provision of $8.1 million (net of federal deductibility) during the six months ended June 30, 2015, compared to a state income tax provision of $7.9 million (net of federal deductibility) for the six months ended June 30, 2015.


31

LIQUIDITY AND CAPITAL RESOURCES
We expect to fund our future capital requirements with cash from operations, our existing cash and cash equivalents, issuances under our commercial paper program and amounts available under our revolving credit agreements (described in Note 5 to the condensed consolidated financial statements). In addition, we may from time to time secure debt and equity funding in the capital markets, although we can provide no assurance that we will be able to obtain financing on favorable terms or at all. As market conditions warrant, we may also from time to time repurchase debt or equity securities issued by us, in the open market, in privately negotiated transactions, by tender offer or otherwise. We expect that our capital requirements will arise principally from our need to:
•
Fund capital expenditures at our Regulated Operating Subsidiaries. Our plans with regard to property, plant and equipment investments are described in detail above under “— Capital Investment and Operating Results Trends.”
•
Fund business development expenses and related capital expenditures. We are pursuing development activities for transmission projects which will continue to result in the incurrence of development expenses and could result in significant capital expenditures.
•
Fund working capital requirements.
•
Fund our debt service requirements, including principal repayments and periodic interest payments. We expect our interest payments to increase each year as a result of additional debt we expect to incur to fund our capital expenditures and for general corporate purposes.
•
Fund any potential share repurchases available under the Board of Directors authorized share repurchase program as described in Note 6 to the condensed consolidated financial statements.
•
Fund contributions to our retirement benefit plans, as described in Note 9 to the condensed consolidated financial statements. We expect to make an estimated additional contribution of approximately $4.5 million to these plans in 2015. The impact of the growth in the number of participants in our retirement benefit plans and changes in the requirements of the Pension Protection Act may require contributions to our retirement benefit plans to be higher than we have experienced in the past.
In addition to the expected capital requirements above, any adverse determinations relating to the contingencies described in Note 11 to the condensed consolidated financial statements would result in additional capital requirements.
We believe that we have sufficient capital resources to meet our currently anticipated short-term needs. We rely on both internal and external sources of liquidity to provide working capital and to fund capital investments. ITC Holdings’ sources of cash are dividends and other payments received by us from our Regulated Operating Subsidiaries and any other subsidiaries we may have in addition to the proceeds raised from the sale of our debt and equity securities. Each of our Regulated Operating Subsidiaries, while wholly owned by ITC Holdings, is legally distinct from ITC Holdings and has no obligation, contingent or otherwise, to make funds available to us.
We expect to continue to utilize our commercial paper program and revolving credit agreements as well as our cash and cash equivalents as needed to meet our short-term cash requirements. As of June 30, 2015, we had consolidated indebtedness under our revolving and term loan credit agreements of $383.2 million, with unused capacity under our revolving credit agreements of $777.8 million. Additionally, ITC Holdings had $50.0 million of commercial paper issued and outstanding as of June 30, 2015 with the ability to issue an additional $350.0 million under the commercial paper program. See Note 5 to the condensed consolidated financial statements for a detailed discussion of the commercial paper program and our revolving credit agreements as well as the debt issuance in 2015.
As of June 30, 2015, we had approximately $225.0 million of debt maturing within one year, which we expect to refinance with long-term debt. To address our long-term capital requirements and to repay debt maturing within one year, we expect that we will need to obtain additional debt financing. Certain of our capital projects could be delayed in the event we experience difficulties in accessing capital. We expect to be able to obtain such additional financing for both our short and long-term requirements as needed, in amounts and upon terms that will be reasonably satisfactory to us due to our strong credit ratings and our historical ability to obtain financing.
Credit Ratings
Credit ratings by nationally recognized statistical rating agencies are an important component of our liquidity profile. Credit ratings relate to our ability to issue debt securities and the cost to borrow money, and should not be viewed as an indication of future stock performance or a recommendation to buy, sell, or hold securities. Ratings are subject to revision or


32

withdrawal at any time and each rating should be evaluated independently of any other rating. Our current credit ratings are displayed in the following table. An explanation of these ratings may be obtained from the respective rating agency.

Issuer
 

Issuance
 
Standard and Poor’s
Ratings Services (a)
 
Moody’s Investor
Service, Inc. (b)
ITC Holdings
 
Senior Unsecured Notes
 
BBB+
 
Baa2
ITC Holdings
 
Commercial Paper
 
A-2
 
Prime-2
ITCTransmission
 
First Mortgage Bonds
 
A
 
A1
METC
 
Senior Secured Notes
 
A
 
A1
ITC Midwest
 
First Mortgage Bonds
 
A
 
A1
ITC Great Plains
 
First Mortgage Bonds
 
A
 
A1
____________________________
(a)
On December 6, 2013, Standard and Poor’s Ratings Services (“Standard and Poor’s”) upgraded the senior unsecured credit rating of ITC Holdings and reaffirmed the secured credit ratings of ITCTransmission, METC and ITC Midwest. On October 7, 2014, Standard and Poor’s issued a secured credit rating for ITC Great Plains. Additionally, on June 8, 2015, Standard and Poor’s assigned a short-term issuer credit rating to ITC Holdings, which applies to the recently established commercial paper program discussed in Note 5 to the condensed consolidated financial statements. All of the ratings have a stable outlook.
(b)
On April 15, 2015, Moody’s Investor Service, Inc. (“Moody’s”) reaffirmed the credit ratings for ITC Holdings and the Regulated Operating Subsidiaries. Additionally, on June 9, 2015, Moody’s assigned a short-term commercial paper rating to ITC Holdings, which applies to the recently established commercial paper program discussed in Note 5 to the condensed consolidated financial statements. All of the ratings have a stable outlook.
Covenants
Our debt instruments include senior notes, secured notes, first mortgage bonds and unsecured revolving and term loan credit agreements containing numerous financial and operating covenants that place significant restrictions, which are described in Note 5 to the condensed consolidated financial statements and in our Form 10-K for the fiscal year ended December 31, 2014. As of June 30, 2015, we were not in violation of any debt covenant. In the event of a downgrade in our credit ratings, none of the covenants would be directly impacted, although the borrowing costs under our revolving and term loan credit agreements would increase.
Cash Flows From Operating Activities
Net cash provided by operating activities was $197.4 million and $196.0 million for the six months ended June 30, 2015 and 2014, respectively. The increase in cash provided by operating activities was due primarily to an increase in cash received from operating revenues of $34.7 million during the six months ended June 30, 2015 compared to the same period in 2014. The increase was partially offset by higher income taxes paid of $15.4 million, an increase of $8.0 million in contributions to our retirement benefit plans, higher interest payments (net of interest capitalized) of $3.6 million and an increase in payments of operating expenses of $2.1 million.
Cash Flows From Investing Activities
Net cash used in investing activities was $323.7 million and $375.4 million for the six months ended June 30, 2015 and 2014, respectively. The decrease in cash used in investing activities was due primarily to the timing of payments for investments in property, plant and equipment during the six months ended June 30, 2015 compared to the same period in 2014.
Cash Flows From Financing Activities
Net cash provided by financing activities was $111.4 million and $154.2 million for the six months ended June 30, 2015 and 2014, respectively. The decrease in cash provided by financing activities was due primarily to a decrease in long-term debt issuances of $248.7 million and a net decrease of $180.4 million in amounts outstanding under our revolving and term loan credit agreements during the six months ended June 30, 2015 compared to the same period in 2014. These decreases were partially offset by a decrease of $198.5 million in payments to retire long-term debt and the $50.0 million in proceeds from the issuance of commercial paper in June 2015 under the commercial paper program. Additionally, there were no payments for the accelerated share repurchase program during the six months ended June 30, 2015 as compared to the payment of $150.0


33

million during the same period in 2014. See Note 5 to the condensed consolidated financial statements for details on the commercial paper program.
CONTRACTUAL OBLIGATIONS
Our contractual obligations are described in our Form 10-K for the year ended December 31, 2014. There have been no material changes to that information since December 31, 2014, other than the items listed below and described in Note 5 to the condensed consolidated financial statements:
•
Amounts borrowed under our unsecured, unguaranteed revolving credit agreements;
•
The issuance of $225.0 million of 3.83% First Mortgage Bonds, Series G, due 2055 by ITC Midwest; and
•
The $50.0 million of commercial paper issued by ITC Holdings under the recently established commercial paper program.
CRITICAL ACCOUNTING POLICIES
Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these condensed consolidated financial statements requires the application of appropriate technical accounting rules and guidance, as well as the use of estimates. The application of these policies necessarily involves judgments regarding future events. These estimates and judgments, in and of themselves, could materially impact the condensed consolidated financial statements and disclosures based on varying assumptions, as future events rarely develop exactly as forecasted, and even the best estimates routinely require adjustment. The accounting policies discussed in “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” in our Form 10-K for the fiscal year ended December 31, 2014 are considered by management to be the most important to an understanding of the consolidated financial statements because of their significance to the portrayal of our financial condition and results of operations or because their application places the most significant demands on management’s judgment and estimates about the effect of matters that are inherently uncertain. There have been no material changes to that information during the six months ended June 30, 2015.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 2 to the condensed consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Fixed Rate Debt
Based on the borrowing rates currently available for bank loans with similar terms and average maturities, the fair value of our consolidated long-term debt and debt maturing within one year, excluding revolving and term loan credit agreements and commercial paper, was $4,035.3 million at June 30, 2015. The total book value of our consolidated long-term debt and debt maturing within one year, excluding revolving and term loan credit agreements and commercial paper, was $3,855.1 million at June 30, 2015. We performed an analysis calculating the impact of changes in interest rates on the fair value of long-term debt and debt maturing within one year, excluding revolving and term loan credit agreements and commercial paper, at June 30, 2015. An increase in interest rates of 10% (from 5.0% to 5.5%, for example) at June 30, 2015 would decrease the fair value of debt by $164.1 million, and a decrease in interest rates of 10% at June 30, 2015 would increase the fair value of debt by $179.3 million at that date.
Revolving and Term Loan Credit Agreements
At June 30, 2015, we had a consolidated total of $383.2 million outstanding under our revolving and term loan credit agreements, which are variable rate loans and fair value approximates book value. A 10% increase or decrease in borrowing rates under the revolving and term loan credit agreements compared to the weighted average rates in effect at June 30, 2015 would increase or decrease interest expense by $0.5 million, respectively, for an annual period with a constant borrowing level of $383.2 million.


34

Commercial Paper
At June 30, 2015, ITC Holdings had $50.0 million of commercial paper issued and outstanding under the commercial paper program. Due to the short-term nature of these financial instruments, the carrying value approximates fair value. A 10% increase or decrease in interest rates for commercial paper would increase or decrease interest expense by less than $0.1 million for an annual period with a continuous level of commercial paper outstanding of $50.0 million.
Derivative Instruments and Hedging Activities
We use derivative financial instruments, including interest rate swap contracts, to manage our exposure to fluctuations in interest rates. The use of these financial instruments mitigates exposure to these risks and the variability of our operating results. We are not a party to leveraged derivatives and do not enter into derivative financial instruments for trading or speculative purposes. The interest rate swap contracts held as of June 30, 2015 manage interest rate risk associated with the forecasted future issuance of fixed-rate debt related to the expected refinancing of the maturing ITC Holdings 5.875% Senior Notes, due September 30, 2016. As of June 30, 2015, ITC Holdings had $139.3 million outstanding under the 5.875% Senior Notes.
Other
As described in our Form 10-K for the fiscal year ended December 31, 2014, we are subject to commodity price risk from market price fluctuations, and to credit risk primarily with DTE Electric, Consumers Energy and IP&L, our primary customers. There have been no material changes in these risks during the six months ended June 30, 2015.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that material information required to be disclosed in our reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, with a company have been detected.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at a reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the three months ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 11 to the condensed consolidated financial statements for a description of recent developments in the rate of return on equity and capital structure complaints filed against all MISO TOs, including our MISO Regulated Operating Subsidiaries.


35

ITEM 1A. RISK FACTORS
For information regarding risk factors affecting us, see “Item 1A Risk Factors” of our Form 10-K for the fiscal year ended December 31, 2014. There have been no material changes to the risk factors set forth therein.
ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table sets forth the repurchases of common stock for the quarter ended June 30, 2015:
 
Period
 
Total Number of Shares Purchased (a)
 
 Average Price Paid per Share
 
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or Programs (b)
 
Maximum Number (or Approximate Dollar
Value) of Shares that May
Yet Be Purchased Under the Plans or Programs (in millions) (b)
 
 
April 2015
 
793

 
$
36.23

 
—

 
$
120.0

 
May 2015
 
79,705

 
35.95

 
—

 
120.0

 
June 2015 (c)
 
1,815

 
33.46

 
—

 
120.0

 
Total
 
82,313

 
$
35.89

 
—

 

____________________________
(a)
Shares acquired were delivered to us by employees as payment of tax withholding obligations due to us upon the vesting of restricted stock as well as payment of obligations for the exercise price and tax withholdings for certain option exercises.
(b)
In April 2014, the Board of Directors authorized and ITC Holdings announced a share repurchase program for up to $250.0 million, which expires in December 2015.
(c)
Amount does not include 569,782 shares deemed issued and repurchased for accounting purposes in connection with the payment of the exercise price and tax withholding obligations relating to net option exercises.


36

ITEM 6. EXHIBITS
The following exhibits are filed as part of this report (unless otherwise noted to be previously filed, and therefore incorporated herein by reference). Our SEC file number is 001-32576.
Exhibit No.
 
Description of Document
 
 
 
4.43

 
Eighth Supplemental Indenture, dated as of March 18, 2015, between ITC Midwest LLC and The Bank of New York Mellon Trust Company, N.A. (as successor to The Bank of New York Trust Company, N.A.), as trustee (filed with Registrant’s Form 8-K filed on April 7, 2015)
 
 
 
10.143

 
ITC Holdings Corp. 2015 Employee Stock Purchase Plan
 
 
 
10.144

 
ITC Holdings Corp. 2015 Long Term Incentive Plan
 
 
 
10.145

 
Form of Stock Option Grant Agreement under Second Amended and Restated 2006 LTIP (May 2015)
 
 
 
10.146

 
Form of Restricted Stock Grant Agreement under Second Amended and Restated 2006 LTIP (May 2015)
 
 
 
10.147

 
Form of Performance Share Award Agreement under Second Amended and Restated 2006 LTIP (May 2015)
 
 
 
10.148

 
Form of Amendment to 2014 Stock Option Grant Agreement (May 2015)
 
 
 
10.149

 
Form of Amendment to 2014 Restricted Stock Grant Agreement (May 2015)
 
 
 
10.150

 
Employment Agreement between ITC Holdings Corp. and Christine Mason Soneral, effective as of February 3, 2015
 
 
 
31.1

 
Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
31.2

 
Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
32

 
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
 
101.INS

 
XBRL Instance Document
 
 
 
101.SCH

 
XBRL Taxonomy Extension Schema
 
 
 
101.CAL

 
XBRL Taxonomy Extension Calculation Linkbase
 
 
 
101.DEF

 
XBRL Taxonomy Extension Definition Database
 
 
 
101.LAB

 
XBRL Taxonomy Extension Label Linkbase
 
 
 
101.PRE

 
XBRL Taxonomy Extension Presentation Linkbase



37

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: July 30, 2015
ITC HOLDINGS CORP.
 
 
By:
/s/ Joseph L. Welch
 
 
Joseph L. Welch
 
 
President and Chief Executive Officer
(duly authorized officer) 
 
 
 
 
By:
/s/ Rejji P. Hayes
 
 
Rejji P. Hayes
 
 
Senior Vice President, Chief Financial Officer and Treasurer (principal financial and accounting officer)
 


38




Exhibit 10.143

ITC HOLDINGS CORP.
2015 EMPLOYEE STOCK PURCHASE PLAN

I.
GENERAL PROVISIONS
1.Establishment. On March 26, 2015, the Board of Directors (“Board”) of ITC Holdings Corp. (“Corporation”) adopted the ITC Holdings Corp. 2015 Employee Stock Purchase Plan (“Plan”), subject to the approval of shareholders at the Corporation’s 2015 annual meeting of shareholders.
2.Purpose. The purpose of the Plan is to (a) promote the best interests of the Corporation and its shareholders by encouraging Employees of the Corporation and its Subsidiaries to acquire an ownership interest in the Corporation through the purchase of stock in the Corporation, thus aligning their interests with those of shareholders, and (b) enhance the ability of the Corporation and its Subsidiaries to attract, motivate and retain qualified Employees. The Plan is intended to constitute an “employee stock purchase plan” under Code Section 423.
3.Plan Duration. Subject to shareholder approval, the Plan shall become effective on May 20, 2015 and shall continue in effect until its termination by the Board; provided, however, that no new Offers may be made under the Plan on or after March 26, 2025.
4.Definitions. As used in this Plan, the following terms have the meaning described below:
(a)“Base Compensation” means for a pay period, a participating Employee’s pre-tax base salary, but excluding commissions, bonuses, overtime, disability pay, severance pay, moving expenses, expense reimbursements and allowances and other special payments and supplemental compensation.
(b) “Board” means the Board of Directors of the Corporation.
(c)“Change in Control” means the occurrence of any of the following events:
(i)If any one person, or more than one person acting as a group (as defined in Code Section 409A and regulations thereunder), acquires ownership of Common Stock of the Corporation that, together with stock held by such person or group, constitutes more than fifty (50) percent of the total fair market value or total voting power of the Common Stock of the Corporation. However, if any one person or more than one person acting as a group, is considered to own more than fifty (50) percent of the total fair market value or total voting power of the Common Stock of the Corporation, the acquisition of additional stock by the same person or persons is not considered to cause a Change in Control, or to cause a change in the effective control of the Corporation (within the meaning of Code Section 409A and regulations thereunder). An increase in the percentage of Common Stock owned by any one person, or persons acting as a group, as a result of a transaction in which the Corporation acquires its stock in exchange for property shall be treated as an acquisition of stock for purposes of this Section. This paragraph applies only when there is a transfer of stock of the Corporation (or issuance of stock of the Corporation) and stock in such Corporation remains outstanding after the transaction;
(ii)If any one person, or more than one person acting as a group (as determined in accordance with Code Section 409A and regulations thereunder), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of Common Stock of the Corporation possessing thirty-five (35) percent or more of the total voting power of the Common Stock of the Corporation;
(iii)If a majority of members on the Corporation’s Board is replaced during any 12-month period by Directors whose appointment or election is not endorsed by a majority of the members of the Corporation’s Board prior to the date of the appointment or election (provided that for purposes of this paragraph, the term Corporation refers solely to the “relevant corporation,” as defined in Code Section 409A and regulations thereunder), for which no other Corporation is a




majority shareholder; or
(iv)If there is a change in the ownership of a substantial portion of the Corporation’s assets, which shall occur on the date that any one person, or more than one person acting as a group (within the meaning of Code Section 409A and regulations thereunder) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Corporation that have a total gross fair market value equal to or more than forty (40) percent of the total gross fair market value of all of the assets of the Corporation immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the Corporation, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
(d)“Code” means the Internal Revenue Code of 1986, as amended.
(e)“Committee” means the Compensation Committee of the Board.
(f)“Common Stock” means shares of the Corporation’s Common Stock, as described in Section 1.5, below.
(g)“Corporation” means ITC Holdings Corp., a Michigan corporation.
(h)“Election Period” means the period of time designated by the Committee when an eligible Employee may elect to participate in one or more Purchase Periods.
(i)“Employee” means an individual who has an “employment relationship” with the Corporation or a Subsidiary, as defined in Treasury Regulation 1.421‑1(h), and the term “employment” means employment with the Corporation or a Subsidiary, as applicable.
(j)“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto.
(k)“Fair Market Value” means the value of Common Stock as determined in accordance with Section 2.2.
(l)“Offer” means the Committee’s designation of a Purchase Period available to eligible Employees and the terms on which an option may be exercised during the applicable Purchase Period.
(m)“Option Price” means the price, determined by the Committee, at which Common Stock subject to an option may be purchased during a Purchase Period.
(n)“Plan” means the ITC Holdings Corp. 2015 Employee Stock Purchase Plan, the terms of which are set forth herein, and any amendments thereto.
(o)“Purchase Period” means a period established by the Committee during which an eligible Employee may exercise options granted hereunder.
(p)“Stock Exchange” means the principal national securities exchange on which the Common Stock is listed for trading, or, if the Common Stock is not listed for trading on a national securities exchange, such other recognized trading market upon which the largest number of shares of Common Stock has been traded in the aggregate during the last 20 days before the first or last day of a Purchase Period, as applicable.
(q)“Subsidiary” means a corporation or other entity defined in Code Section 424(f).
5.Stock. The stock subject to option and purchase under the Plan shall be the Common Stock of the Corporation, and may be either authorized and unissued shares or shares that have been reacquired by the Corporation. The total amount of Common Stock on which options may be granted under the Plan shall not exceed one million (1,000,000) shares, subject to adjustment in accordance with Section 3.2. Shares of Common Stock subject to any unexercised portion of a terminated, canceled or expired option granted under the Plan may again be used for options under the Plan.
6.Administration.
(a)The Plan shall be administered by the Committee. The Committee shall interpret the Plan, prescribe, amend and rescind rules and regulations relating to the Plan, and make all other determinations necessary or advisable for its administration. The decision of the Committee on any question concerning the interpretation of the Plan or its administration with respect to any option granted under the Plan shall be




final and binding upon all participating Employees. No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option granted hereunder.
(b)The Committee, from time to time, shall grant to eligible Employees on a uniform basis (except as otherwise determined pursuant to Section 2.1(b)), options to purchase Common Stock pursuant to the terms and conditions of the Plan.
7.Participants. Except as provided in Sections 2.1(b) or 2.4 below, any Employee whose customary employment is more than twenty (20) hours per week and five (5) or more months per calendar year at the time of an Offer, is eligible to participate in such Offer under the Plan upon commencing employment with the Corporation or a Subsidiary, in accordance with the terms of the Plan. An Employee who meets the eligibility requirements in this Section 1.7 shall be entitled to participate in the first Offer commencing after the eligibility requirements have been satisfied.
II. OFFER TERMS
1.Offer and Purchase Period.
(a)The Committee shall determine the date or dates upon which one or more Offers shall be made under the Plan. The Purchase Period pursuant to each Offer shall be three (3) months, or such other term as the Committee shall determine prior to the commencement of an Offer, but which in no event shall exceed twenty-seven (27) months.
(b)Anything to the contrary herein notwithstanding, but subject to all applicable requirements of Code Section 423 and the regulations promulgated thereunder, the Committee may determine that such Offers and Purchase Periods may be consecutive or overlapping, and that the terms of each Offer need not be identical. Further, the Committee may establish separate Offers with different terms under the Plan, and designate the eligible Employees of which entities (the Corporation and/or one or more Subsidiaries) may participate in any such Offer.
(c)To participate in an Offer, an eligible Employee must submit such enrollment forms as shall be prescribed by the Committee (which shall include a payroll deduction authorization form) at such time and in such manner as shall be prescribed by the Committee. The payroll deductions authorized by a participant on a payroll deduction authorization form shall be expressed as a whole number percentage of the participant’s Base Compensation for each pay period during the Purchase Period.
2.Option Price.
(a)The Option Price at which shares of Common Stock may be purchased under the Plan shall be determined by the Committee at the time of the Offer but in no event shall such amount be less than the lesser of:
(i)85% of the Fair Market Value of a share of Common Stock on the date of grant of the option (first day of a Purchase Period), or
(ii)85% of the Fair Market Value of a share of Common Stock on the date the option is deemed exercised pursuant to Section 2.3(d) (last day of a Purchase Period).
(b)For purposes of this Plan, the Fair Market Value per share shall be deemed to be the closing price of Common Stock on the Stock Exchange for the first and last days of the Purchase Period, as applicable. In the event that there are no Common Stock transactions on either date, the Fair Market Value shall be determined as of the immediately preceding date on which there were Common Stock transactions.
3.Participation.
(a)An eligible Employee may elect to participate in an Offer by delivering to the Corporation an election to participate and a payroll deduction form within the Election Period designated by the Committee prior to the commencement of a Purchase Period. An eligible Employee’s election to participate and payroll deduction form from the preceding Election Period automatically shall carry over to the next Election Period unless affirmatively revoked in writing by the Employee. An Employee who elects to participate may not authorize payroll deductions which, in the aggregate, are more than ten percent (10%) of the Employee’s Base Compensation. Only whole shares of Common Stock may be purchased under the Plan.




(b)All Employees granted options under an Offer under the Plan shall have the same rights and privileges under the Plan, except (i) that the number of shares each participant may purchase shall depend upon his or her Base Compensation and the designated payroll deduction he or she authorizes, and (ii) as otherwise determined pursuant to Section 2.1(b).
(c)Payroll deductions shall commence on the first payroll date in the Purchase Period and shall continue until the last payroll date in the Purchase Period. An Employee may suspend payroll deductions during a Purchase Period only at the discretion of the Corporation in the event of an unforeseen hardship; provided, however, that payroll deductions made prior to approval of the suspension by the Corporation shall still be used to purchase Common Stock for the Employee at the end of the Purchase Period.
(d)A participating Employee’s option shall be deemed to have been exercised on the last business day of the Purchase Period.
(e)As soon as practicable after the end of the Purchase Period, the Corporation shall deliver to each Employee, certificates evidencing the shares of Common Stock that an Employee has purchased (or a book entry representing such shares shall be made and the shares deposited with the appropriate registered book-entry custodian). Any amount that has been deducted representing a fractional share shall be applied toward the purchase of option shares in the next Purchase Period; provided, that an Employee who does not elect to participate in the following Purchase Period shall receive a check from the Corporation for any amount that has been deducted and represents a fractional share. Any payroll deductions that exceed the limits set forth in Section 2.4 shall be returned to the participant in the amount of the excess.
(f)The Corporation retains the right to designate an exclusive broker to handle the Common Stock transactions under the Plan. As soon as practicable after the end of the Purchase Period, the Corporation shall deliver to each Employee or a designated brokerage account, through a certificate or electronic transfer, the shares of Common Stock that such Employee has purchased. Unless otherwise determined by the Committee, any amount that has been deducted and withheld in excess of the option price automatically shall be paid by check to the participating Employee promptly following the end of the Purchase Period in which withheld.
(g)Unless otherwise determined by the Committee, no interest shall accrue or be paid on any amounts paid by payroll deduction by any participating Employee in connection with any Offer.
4.Participation Limitations. Notwithstanding any other provision of the Plan, the following individual limitations shall apply to eligible Employees under the Plan:
(a)No Employee shall be eligible to participate in an Offer under the Plan if the Employee, immediately after such grant, would, in the aggregate, own and/or hold shares of Common Stock (including all shares which may be purchased under outstanding options, whether or not such options qualify for the special tax treatment afforded by Code Section 421(a)) equal to or exceeding five percent (5%) or more of the total combined voting power or value of all classes of capital stock of the Corporation or of its Subsidiaries; provided, that for purposes of this limitation, the rules of Code Section 424(d) and the regulations promulgated thereunder (relating to attribution of stock ownership) shall apply;
(b)No Employee shall be eligible to participate in an Offer under the Plan if such grant would permit, under the rules set forth in Code Section 423 and the regulations promulgated thereunder, the Employee’s right to purchase Common Stock under this Plan and all other Code Section 423 employee stock purchase plans maintained by the Corporation and its Subsidiaries to accrue at a rate in excess of $25,000 in Fair Market Value of such stock (determined at the time such option is granted) for each calendar year in which such option is outstanding at any time;
(c)In the event of insufficient shares being authorized by the Committee for purchase during a Purchase Period, the Committee shall allocate the right to purchase shares to each participating Employee in the same proportion that such participant’s total current Base Compensation paid by the Corporation for the Purchase Period bears to the total of such Base Compensation paid by the Corporation to all participants during the same period. All excess funds withheld, as a result of insufficient shares, shall be returned to the participating Employees; and




(d)A participating Employee may not purchase more than seven hundred (700) shares of Common Stock in any three (3) month Purchase Period (proportionately adjusted upward for Purchase Periods of more than three (3) months).
5.Termination of Employment. If a participating Employee ceases to be employed by the Corporation or a Subsidiary for any reason, including but not limited to, voluntary or forced resignation, retirement, death, disability or lay-off, the Corporation, within a reasonable time after notice of the termination, shall issue a check to the former Employee (or executor, administrator or legal representative, if applicable) in the aggregate amount of the Employee’s payroll deductions that had not been applied towards the purchase of option shares as of the date of termination.
6.Restrictions on Transfer. Unless otherwise permitted by the Committee, no shares of Common Stock purchased under the Plan shall be sold, exchanged, transferred, pledged, assigned or otherwise disposed of for six (6) months following the close of the Purchase Period in which acquired.
III. MISCELLANEOUS
1.Non‑Assignability. No option shall be transferable by a participating Employee, and an option may be exercised during a participating Employee’s lifetime only by the Employee. Upon the death of a participating Employee, his or her executor, administrator or other legal representative shall receive a check from the Corporation representing the aggregate amount of the deceased Employee’s payroll deductions that had not been applied towards the purchase of option shares as of the date of death.
2.Adjustments. In the event of a merger, reorganization, statutory share exchange, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property), stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting the Common Stock or the value thereof, such adjustments and other substitutions shall be made to the Plan and options as the Committee, in its sole discretion, deems equitable or appropriate, including adjustments in the aggregate number, class and kind of securities that may be delivered under the Plan and, in the aggregate or to any one participant, in the number, class, kind and option price of securities subject to outstanding options under the Plan (including, if the Committee deems appropriate, the substitution of similar options to purchase the shares of another company, as the Committee may determine to be appropriate in its sole discretion). Any of the foregoing adjustments may provide for the elimination of any fractional share which might otherwise become subject to any option.
3.Change in Control.
(a)After any merger of one or more corporations into the Corporation in which the Corporation shall be the surviving corporation or any share exchange in which the Corporation is a constituent corporation, each participant shall, at no additional cost, be entitled upon the exercise of an option, to receive (subject to any required action by shareholders), in lieu of the number of shares of Common Stock for which such option shall then be exercisable, the consideration which such participant would have been entitled to receive pursuant to the terms of the agreement of merger or share exchange if at the time of such merger or share exchange such participant had been a holder of record of a number of shares of Common Stock equal to the number of shares then underlying the option.
(b)In addition, in the event of a Change in Control, the Committee shall have the right to terminate the Purchase Period as of such date, and, if so terminated, each participant shall be deemed to have exercised, immediately prior to such merger, share exchange, acquisition or sale of assets, his or her option to the extent payroll deductions were made prior thereto. Comparable rights shall accrue to each participant in the event of successive Changes in Control.
(c)Notwithstanding anything contained herein to the contrary, upon the dissolution or liquidation of the Corporation or upon any merger or share exchange in which the Corporation is not the surviving corporation (other than a merger with a wholly-owned subsidiary of the Corporation formed for the purpose of changing the Corporation’s corporate domicile where the Plan is assumed by the survivor), the Purchase Period for any option granted under this Plan shall terminate as of the date of the aforementioned event, and each participant shall be deemed to have exercised, immediately prior to such dissolution,




liquidation, merger or share exchange, his or her option to the extent payroll deductions were made prior thereto.
(d)The foregoing adjustments and the manner of application of the foregoing provisions shall be determined by the Committee in its sole discretion. Any such adjustment may provide for the elimination of any fractional share which might otherwise become subject to an option.
4.Termination and Amendment.
(a)The Board may terminate the Plan, or the granting of options under the Plan, at any time.
(b)The Board may amend or modify the Plan at any time and from time to time, but no amendment or modification shall disqualify the Plan under Code Section 423 without the approval of the shareholders of the Corporation.
(c)No amendment, modification, or termination of the Plan shall materially and adversely affect any option granted under the Plan without the consent of the Employee holding the option.
5.Rights Prior to Issuance of Shares. No participating Employee shall have any rights as a shareholder with respect to shares covered by an option until the issuance of a stock certificate for such shares or electronic transfer to the Employee (or book entry representing such shares has been made and such shares have been deposited with the appropriate registered book-entry custodian). No adjustment shall be made for dividends or other rights with respect to such shares for which the record date is prior to the date the certificate is issued or the shares electronically delivered to the Employee’s brokerage account (or book entry is made).
6.Securities Laws.
(a)Anything to the contrary herein notwithstanding, the Corporation’s obligation to sell and deliver Common Stock pursuant to the exercise of an option is subject to such compliance with federal and state laws, rules and regulations applying to the authorization, issuance or sale of securities as the Corporation deems necessary or advisable. The Corporation shall not be required to sell and deliver or issue Common Stock unless and until it receives satisfactory assurance that the issuance or transfer of such shares shall not violate any of the provisions of the Securities Act of 1933 or the Exchange Act, or the rules and regulations of the Securities and Exchange Commission promulgated thereunder or those of the Stock Exchange or any stock exchange on which the Common Stock may be listed, the provisions of any other applicable laws governing the sale of securities, or that there has been compliance with the provisions of such acts, rules, regulations and laws.
(b)The Committee may impose such restrictions on any shares of Common Stock acquired pursuant to the exercise of an option under the Plan as it may deem advisable, including, without limitation, restrictions (i) under applicable federal securities laws; (ii) under the requirements of the Stock Exchange or any other securities exchange or recognized trading market upon which such shares of Common Stock are then listed or traded; and (iii) under any other applicable securities laws.
7.Withholding Taxes. The Corporation shall have the right to withhold from an eligible Employee’s compensation or require an Employee to remit sufficient funds to satisfy applicable withholding for income and employment taxes with respect to any option granted under the Plan.
8.Delivery of Plan. Each Employee who is a participant in the Plan shall be entitled to receive a copy of the Plan from the Corporation.
9.Effect on Employment. Neither the adoption of the Plan nor the granting of an option pursuant to the Plan shall be deemed to create any right in any individual to be retained or continued in the employment of the Corporation or a Subsidiary.
10.Certificates. If certificates are issued, the Corporation shall have the right to retain such certificates representing shares of Common Stock issued pursuant to the Plan until such time as all conditions and/or restrictions applicable to such shares of Common Stock have been satisfied.
11.Use of Proceeds. The proceeds received from the sale of Common Stock pursuant to the Plan shall be used for general corporate purposes of the Corporation.




12.Severability. If any one or more of the provisions (or any part thereof) of this Plan shall be held to be invalid, illegal or unenforceable in any respect, such provision shall be modified so as to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions (or any part thereof) of the Plan shall not in any way be affected or impaired thereby. The Board may, without the consent of any eligible Employee, and in a manner determined necessary solely in the discretion of the Board, amend the Plan as the Corporation deems necessary to ensure the Plan and all options granted under the Plan remain valid, legal or enforceable in all respects.
13.Approval of Plan. The Plan shall be subject to the approval of the holders of at least a majority of the votes cast on a proposal to approve the Plan at a duly held meeting of shareholders of the Corporation held within twelve (12) months after adoption of the Plan by the Board. If not approved by shareholders within such 12-month period, the Plan and any options granted under the Plan shall be null and void, with no further force or effect.
14.Governing Law. Except to the extent governed by applicable federal law, the validity, interpretation, construction and performance of the Plan shall be governed by the laws of the State of Michigan, without regard to its conflict of law rules.

IN WITNESS WHEREOF, this ITC Holdings Corp. 2015 Employee Stock Purchase Plan has been executed on behalf of the Corporation on this 20th day of May, 2015.
ITC HOLDINGS CORP.
By:    Christine Mason Soneral
Its:    Senior Vice President and General Counsel

BOARD APPROVAL: March 26, 2015
SHAREHOLDER APPROVAL: May 20, 2015










Exhibit 10.144

ITC HOLDINGS CORP.
2015 LONG TERM INCENTIVE PLAN

I.
GENERAL PROVISIONS
1.Establishment. On March 26, 2015, the Board of Directors (“Board”) of ITC Holdings Corp. (“Corporation”) adopted the ITC Holdings Corp. 2015 Long Term Incentive Plan (“Plan”), subject to the approval of shareholders at the Corporation's 2015 annual meeting of shareholders.
2.Purpose. The purpose of the Plan is to (a) promote the best interests of the Corporation and its shareholders by encouraging Employees, non-Employee Directors and Consultants of the Corporation and its Subsidiaries to acquire an ownership interest in the Corporation by granting stock-based Awards, thus aligning their interests with those of shareholders, and (b) enhance the ability of the Corporation and its Subsidiaries to attract, motivate and retain qualified Employees, non-Employee Directors and Consultants. It is the further purpose of the Plan to authorize certain Awards that will constitute performance based compensation, as described in Code Section 162(m) and regulations thereunder.
3.Plan Duration. Subject to shareholder approval, the Plan shall become effective on May 20, 2015 and shall continue in effect until its termination by the Board; provided, however, that no new Awards may be granted on or after March 26, 2025.
4.Definitions. As used in this Plan, the following terms have the meaning described below:
(a)“Agreement” means the written document that sets forth the terms of a Participant's Award. Such term may include a separate employment agreement between the Participant and the Corporation or a Subsidiary, to the extent such agreement provides for any type of Award permitted to be granted under the Plan.
(b)“Award” means any form of Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Award or Incentive Award granted under the Plan.
(c)“Board” means the Board of Directors of the Corporation.
(d)“Cause” means (i) if the Employee is a party to a written employment agreement with the Corporation or a Subsidiary, “Cause” as defined in such agreement, as in effect from time to time, and (ii) in all other cases, (A) Employee’s continued failure substantially to perform Employee’s duties to the Corporation or its affiliates (other than as a result of total or partial incapacity due to physical or mental illness) for a period of 10 days following written notice by the Corporation to Employee of such failure, (B) dishonesty in the performance of Employee’s duties hereunder, (C) Employee’s conviction of, or plea of nolo contendere to a crime constituting (x) a felony under the laws of the United States or any state thereof, or (y) a misdemeanor involving moral turpitude, (D) Employee’s willful malfeasance or willful misconduct in connection with Employee’s duties hereunder or any act or omission which is injurious to the financial condition or business reputation of the Corporation or its affiliates, or (E) Employee’s breach of any non-compete or confidentiality obligations to the Corporation or its affiliates.
(e)“Change in Control” means the occurrence of any of the following events:
(i)If any one person, or more than one person acting as a group (as defined in Code Section 409A and regulations thereunder), acquires ownership of Common Stock of the Corporation that, together with stock held by such person or group, constitutes more than fifty (50) percent of the total fair market value or total voting power of the Common Stock of the Corporation. However, if any one person or more than one person acting as a group, is considered to own more than fifty (50) percent of the total fair market value or total voting power of the Common Stock of the Corporation, the acquisition of additional stock by the same person or persons is not considered to cause a Change in Control, or to cause a change in the effective control of the Corporation (within the meaning of Code Section 409A and regulations thereunder). An increase in the percentage of Common Stock owned by any one person, or persons acting as a group, as a result of a transaction




in which the Corporation acquires its stock in exchange for property shall be treated as an acquisition of stock for purposes of this Section. This paragraph applies only when there is a transfer of stock of the Corporation (or issuance of stock of the Corporation) and stock in such Corporation remains outstanding after the transaction;
(ii)If any one person, or more than one person acting as a group (as determined in accordance with Code Section 409A and regulations thereunder), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of Common Stock of the Corporation possessing thirty-five (35) percent or more of the total voting power of the Common Stock of the Corporation;
(iii)If a majority of members on the Corporation’s Board is replaced during any 12-month period by Directors whose appointment or election is not endorsed by a majority of the members of the Corporation’s Board prior to the date of the appointment or election (provided that for purposes of this paragraph, the term Corporation refers solely to the “relevant corporation,” as defined in Code Section 409A and regulations thereunder), for which no other corporation is a majority shareholder; or
(iv)If there is a change in the ownership of a substantial portion of the Corporation’s assets, which shall occur on the date that any one person, or more than one person acting as a group (within the meaning of Code Section 409A and regulations thereunder) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Corporation that have a total gross fair market value equal to or more than forty (40) percent of the total gross fair market value of all of the assets of the Corporation immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the Corporation, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
(f)“Change in Control Termination” means a termination of Employee’s employment by the Corporation without “Cause” or, if the Employee is a party to a written employment agreement with the Corporation, by Employee for “Good Reason” (as defined in such agreement as in effect from time to time), which termination occurs after:
(i)the execution of an agreement to which the Corporation is a party pursuant to which a Change in Control has occurred or will occur (upon consummation of the transactions contemplated by such agreement) but, if a Change in Control has occurred pursuant thereto, not more than two years after such Change in Control, and if a Change in Control has not yet occurred pursuant thereto, while such agreement remains executory; or
(ii)the occurrence of a Change in Control not pursuant to an agreement with the Corporation, but not more than two years thereafter.
(g)“Code” means the Internal Revenue Code of 1986, as amended.
(h)“Code Section 162(m) Award” means an Award which is designated (or deemed designated) by the Committee pursuant to Section 7.1 to be subject to the requirements of Code Section 162(m) and regulations thereunder (to the extent applicable).
(i)“Committee” means the Compensation Committee of the Board, or any other committee or sub-committee of the Board, designated by the Board from time to time, comprised solely of two or more Directors who are “non-employee directors,” as defined in Rule 16b-3 of the Exchange Act, “outside directors” as defined in Code Section 162(m) and regulations thereunder, and “independent directors” for purposes of the rules and regulations of the Stock Exchange. However, the fact that a Committee member shall fail to qualify under any of these requirements shall not invalidate any Award made by the Committee, if the Award is otherwise validly made under the Plan. The members of the Committee shall be appointed by, and may be changed at any time and from time to time, at the discretion of the Board.
(j)“Common Stock” means shares of the Corporation's authorized common stock.




(k)“Consultant” means a consultant or advisor (other than as an Employee or member of the Board) to the Corporation or a Subsidiary; provided that such person (i) renders bona fide services that are not in connection with the offer and sale of the Corporation’s securities in a capital-raising transaction, and (ii) does not promote or maintain a market for the Corporation’s securities.
(l)“Corporation” means ITC Holdings Corp., a Michigan corporation.
(m)“Director” means an individual, other than an Employee, who has been elected or appointed to serve as a member of the Board.
(n)“Disability” means total and permanent disability, as defined in the Corporation’s long-term disability benefits program, as in effect from time to time; provided, however, that for purposes of a Code Section 409A distribution event, “disability” shall be defined under Code Section 409A and regulations thereunder.
(o)“Dividend Equivalent” means a credit, made at the discretion of the Committee or as otherwise provided by the Plan, to the account of a Participant in an amount equal to the cash dividend paid on one share of Common Stock for each share of Common Stock represented by an Award held by such Participant. Dividend Equivalents shall not be paid on Option or Stock Appreciation Right Awards.
(p)“Employee” means an individual who has an "employment relationship" with the Corporation or a Subsidiary, as defined in Treasury Regulation 1.421‑1(h), and the term "employment" means employment with the Corporation or a Subsidiary, as applicable.
(q)“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto.
(r)“Fair Market Value” means for purposes of determining the value of Common Stock on the Grant Date, the closing price per share of the Common Stock on the Stock Exchange for the Grant Date. In the event that there are no Common Stock transactions on such date, the Fair Market Value shall be determined as of the immediately preceding date on which there were Common Stock transactions. Unless otherwise specified in the Plan, "Fair Market Value" for purposes of determining the value of Common Stock on the date of exercise or Vesting means the closing price of the Common Stock on the Stock Exchange on the last date preceding the date of exercise or Vesting on which there were Common Stock transactions. If the Common Stock is not listed on a Stock Exchange on the relevant date, the Fair Market Value shall be determined by the Committee in good faith and in accordance with Code Section 409A and regulations thereunder.
(s)“Grant Date” means the date on which the Committee authorizes an Award, or such later date as shall be designated by the Committee.
(t)“Incentive Award” means an Award that is granted pursuant to Article VI.
(u)“Incentive Stock Option” means an Option granted pursuant to Article II that is intended to meet the requirements of Code Section 422.
(v)“Nonqualified Stock Option” means an Option granted pursuant to Article II that is not an Incentive Stock Option.
(w)“Option” means either an Incentive Stock Option or a Nonqualified Stock Option.
(x)“Participant” means an Employee, Director or Consultant, who is designated by the Committee to participate in the Plan.
(y)“Performance Award” means any Award of Performance Shares or Performance Units granted pursuant to Article V.
(z)“Performance Measures” means the measures of performance of the Corporation and its Subsidiaries used to determine a Participant’s entitlement to an Award under the Plan. Such performance measures shall have the same meanings as used in the Corporation’s financial statements, or, if such terms are not used in the Corporation’s financial statements, they shall have the meaning applied pursuant to generally accepted accounting principles, or as used generally in the Corporation’s industry. Performance Measures shall be calculated with respect to the Corporation and each Subsidiary consolidated therewith for financial reporting purposes or such division or other business unit as may be selected by the




Committee. For purposes of the Plan, the Performance Measures shall be calculated in accordance with generally accepted accounting principles, but, unless otherwise determined by the Committee, prior to the accrual or payment of any Award under this Plan for the same performance period and excluding the effect (whether positive or negative) of any change in accounting standards or any extraordinary, unusual or nonrecurring item, as determined by the Committee, occurring after the establishment of the performance goal(s). Performance Measures shall be one or more of the following, or a combination of any of the following, as determined by the Committee:
•
earnings (as measured by net income, gross profit, operating income, operating income before interest, EBIT, EBITA, EBITDA, pre-tax income, or cash earnings, or earnings as adjusted by excluding one or more components of earnings, including each of the above on a per share and/or segment basis);
•
revenues/net revenues;
•
return on net revenue (as measured by net income, operating income, operating income before interest, EBIT, EBITA, EBITDA, pre-tax income, operating cash flow or cash earnings as a percentage of net revenue);
•
revenue growth;
•
cash flow;
•
operating cash flow;
•
free cash flow;
•
discounted cash flow;
•
working capital;
•
market capitalization;
•
cash return on investment - CRI;
•
return on capital;
•
return on cost of capital;
•
shareholder value;
•
return on equity;
•
total shareholder return;
•
return on investment;
•
economic value added;
•
return on assets/net assets;
•
stock trading multiples (as measured vs. investment, net income, operating income, operating income before interest, EBIT, EBITA, EBITDA, pre-tax income, cash earnings or operating cash flow);
•
stock price;
•
attainment of strategic or operational initiatives;
•
achievement of operational goals, including but not limited to safety records, outage frequencies, and capital and maintenance projects.
(aa)“Performance Share” means any grant pursuant to Article V and Section 5.2(b)(i).
(ab)“Performance Unit” means any grant pursuant to Article V and Section 5.2(b)(ii).
(ac)“Plan” means the ITC Holdings Corp. 2015 Long Term Incentive Plan, the terms of which are set forth herein, and any amendments thereto.
(ad)“Restriction Period” means the period of time during which a Participant's Restricted Stock or Restricted Stock Unit is subject to restrictions and is nontransferable.
(ae)“Restricted Stock” means Common Stock granted pursuant to Article IV that is subject to a Restriction Period.
(af)“Restricted Stock Unit” means a right granted pursuant to Article IV to receive Restricted Stock, Common Stock or an equivalent value in cash.




(ag)“Securities Act” means the Securities Act of 1933, as amended.
(ah)“Stock Appreciation Right” means the right to receive a cash or Common Stock payment from the Corporation, in accordance with Article III of the Plan.
(ai)“Stock Exchange” means the principal national securities exchange on which the Common Stock is listed for trading, or, if the Common Stock is not listed for trading on a national securities exchange, such other recognized trading market upon which the largest number of shares of Common Stock has been traded in the aggregate during the last 20 days before the applicable date.
(aj)“Subsidiary” means a corporation or other entity defined in Code Section 424(f).
(ak)“Substitute Awards” shall mean Awards granted or shares issued by the Corporation in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, by a company acquired by the Corporation or any Subsidiary or with which the Corporation or any Subsidiary combines.
(al)“Vested” or “Vesting” means the extent to which an Award granted or issued hereunder has become exercisable, any applicable Restriction Period has terminated or lapsed in accordance with the Plan and the terms of any respective Agreement pursuant to which such Award was granted or issued, or has become payable in whole or in part due to the satisfaction of performance goal(s) set forth in the respective Agreement pursuant to which such Award was granted or issued. Anything to the contrary herein notwithstanding, Awards granted under the Plan shall not Vest (in part or in full) prior to the first anniversary of their Grant Date; provided, that the Committee in its discretion may grant Awards (or modify existing Awards) to provide for full Vesting in less than one year (i) on account of a Participant’s retirement, death, Disability, leave of absence, or termination of employment or services, or (ii) as a Substitute Award in replacement of an award previously scheduled to vest in full in less than one year from the Grant Date of such Substitute Award.
5.Administration.
(a)The Plan shall be administered by the Committee. The Committee shall interpret the Plan, prescribe, amend, and rescind rules and regulations relating to the Plan, and make all other determinations necessary or advisable for its administration. The decision of the Committee on any question concerning the interpretation of the Plan or its administration with respect to any Award granted under the Plan shall be final and binding upon all Participants. No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Award hereunder.
(b)In addition to any other powers set forth in the Plan and subject to Code Section 409A and the provisions of the Plan, including the minimum Vesting requirements set forth in Section 1.4(ll) (and in the case of any Code Section 162(m) Awards, subject to any additional requirements of Code Section 162(m) and regulations thereunder), the Committee shall have the full and final power and authority, in its discretion to:
(i)amend, modify, or cancel any Award, or to waive any restrictions or conditions applicable to any Award or any shares acquired pursuant thereto;
(ii)accelerate, continue, or defer the exercisability or Vesting of any Award or any shares acquired pursuant thereto;
(iii)authorize, in conjunction with any applicable deferred compensation plan of the Corporation, that the receipt of cash or Common Stock subject to any Award under this Plan may be deferred under the terms and conditions of such deferred compensation plan;
(iv)determine the terms and conditions of Awards granted to Participants and whether such terms and conditions have been satisfied, including without limitation as required in Section 7.2 of the Plan; and
(v)establish such other Awards, besides those specifically enumerated in the Plan, which the Committee determines are consistent with the Plan’s purposes.
6.Participants. Participants in the Plan shall be such Employees, Directors and Consultants of the Corporation and its Subsidiaries as the Committee in its sole discretion may select from time to time.




The Committee may grant Awards to an individual upon the condition that the individual become an Employee, Director or Consultant of the Corporation or of a Subsidiary, provided that the Award shall be deemed to be granted only on the date that the individual becomes an Employee, Director or Consultant, as applicable.
7.Stock.
(a)The Corporation has reserved six million five hundred thousand (6,500,000) shares of Common Stock for issuance pursuant to stock-based Awards under the Plan. Up to four million six hundred thousand (4,600,000) of the reserved shares may be granted as Awards that may be settled in shares of Common Stock other than Options or Stock Appreciation Rights. Up to one million three hundred thousand (1,300,000) of the reserved shares may be granted as Incentive Stock Options under the Plan. All provisions in this Section 1.7 shall be adjusted, as applicable, in accordance with Article IX.
(b)Each share of Common Stock subject to any Award shall be counted against the aggregate reserved share limit in paragraph (a) above as one share.
(c)The shares subject to any portion of an Award that is forfeited, cancelled, or expires or otherwise terminates without issuance of such shares, or is settled for cash or otherwise does not result in the issuance of all or a portion of the shares subject to such Award, shall, to the extent of such forfeiture, cancellation, expiration, termination, cash settlement or non-issuance, again be available for issuance pursuant to Awards under the Plan and shall not be counted against the other limitations in Section 1.7(a).
(d)For the avoidance of doubt, the following shares of Common Stock, however, may not again be made available for issuance as Awards under the Plan: (i) the full number of shares not issued or delivered as a result of the net settlement of an outstanding Option or Stock Appreciation Right, regardless of the number of shares actually used to make such settlement; (ii) shares used to pay the exercise price or for settlement of any Award; (iii) shares used to satisfy withholding taxes related to the exercise or settlement of any Award; (iv) shares repurchased on the open market with the proceeds of the option exercise price; and (v) shares subject to a Restricted Stock Award that have been forfeited.
(e)Substitute Awards shall not reduce the shares reserved for issuance under the Plan or authorized for grant to a Participant in any fiscal year. Additionally, in the event that a company acquired by the Corporation or any Subsidiary or with which the Corporation or any Subsidiary combines has shares available under a pre-existing plan approved by shareholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the shares authorized for issuance under the Plan; provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not Employees or Directors or an affiliate of the Corporation or its Subsidiaries prior to such acquisition or combination.
8.Repricing. Except as provided in Section 9.1, without the affirmative vote of holders of a majority of the shares of Common Stock cast in person or by proxy at a meeting of the shareholders of the Corporation at which a quorum representing a majority of all outstanding shares is present or represented by proxy, neither the Board nor the Committee shall approve a program providing for (a) the cancellation of outstanding Options and/or Stock Appreciation Rights and the grant in substitution therefore of any new Options and/or Stock Appreciation Rights under the Plan having a lower exercise price than the Fair Market Value of the underlying Common Stock on the original Grant Date, (b) the amendment of outstanding Options and/or Stock Appreciation Rights to reduce the exercise price thereof below the Fair Market Value of the underlying Common Stock on the original Grant Date, or (c) the exchange of outstanding Options or Stock Appreciation Rights for cash or other Awards if the exercise price per share of such Options or Stock Appreciation Rights is greater than the Fair Market Value per share as of the date of exchange. This Section




shall not be construed to apply to “issuing or assuming a stock option in a transaction to which section 424(a) applies,” within the meaning of Code Section 424.
II. STOCK OPTIONS
1.Grant of Options. The Committee, at any time and from time to time, subject to the terms and conditions of the Plan, may grant Options to such Participants and for such number of shares of Common Stock as it shall designate, and shall determine the general terms and conditions of exercise, which shall be set forth in a Participant's Agreement. Any Participant may hold more than one Option under the Plan and any other plan of the Corporation or Subsidiary. No Option granted hereunder may be exercised after the tenth anniversary of the Grant Date. The Committee may designate any Option granted as either an Incentive Stock Option or a Nonqualified Stock Option, or the Committee may designate a portion of an Option as an Incentive Stock Option or a Nonqualified Stock Option. Unless otherwise provided in a Participant’s Agreement, any Options granted pursuant to the Plan are intended to satisfy the requirements of Code Section 162(m) and regulations thereunder (to the extent applicable), and shall be deemed to have been designated by the Committee as Code Section 162(m) Awards.
2.Incentive Stock Options. Any Option intended to constitute an Incentive Stock Option shall comply with the requirements of this Section 2.2. An Incentive Stock Option only may be granted to an Employee. No Incentive Stock Option shall be granted with an exercise price below the Fair Market Value of Common Stock on the Grant Date nor with an exercise term that extends beyond ten (10) years from the Grant Date. An Incentive Stock Option shall not be granted to any Participant who owns (within the meaning of Code Section 424(d)) stock of the Corporation or any Subsidiary possessing more than 10% of the total combined voting power of all classes of stock of the Corporation or a Subsidiary unless, at the Grant Date, the exercise price for the Option is at least 110% of the Fair Market Value of the shares subject to the Option and the Option, by its terms, is not exercisable more than five (5) years after the Grant Date. The aggregate Fair Market Value of the underlying Common Stock (determined at the Grant Date) as to which Incentive Stock Options granted under the Plan (including a plan of a Subsidiary) may first be exercised by a Participant in any one calendar year shall not exceed $100,000. To the extent that an Option intended to constitute an Incentive Stock Option shall violate the foregoing $100,000 limitation (or any other limitation set forth in Code Section 422), the portion of the Option that exceeds the $100,000 limitation (or violates any other Code Section 422 limitation) shall be deemed to constitute a Nonqualified Stock Option.
3.Exercise Price. The Committee shall determine the per share exercise price for each Option granted under the Plan. No Option may be granted with an exercise price below 100% of the Fair Market Value of Common Stock on the Grant Date.
4.Payment for Option Shares.
(a)The purchase price for shares of Common Stock to be acquired upon exercise of an Option granted hereunder shall be paid in full in cash or by personal check, bank draft or money order at the time of exercise; provided, however, that in lieu of such form of payment, unless otherwise provided in a Participant’s Agreement, payment may be made by (i) tendering shares of Common Stock to the Corporation, which are withheld from the Option being exercised, or are freely owned and held by the Participant independent of any restrictions or hypothecations; (ii) by delivery to the Corporation of a properly executed exercise notice, acceptable to the Corporation, together with irrevocable instructions to the Participant’s broker to deliver to the Corporation sufficient cash to pay the exercise price and any applicable income and employment withholding taxes, in accordance with a written agreement between the Corporation and the brokerage firm; (iii) delivery of other consideration approved by the Committee having a Fair Market Value on the exercise date equal to the total purchase price; (iv) other means determined by the Committee; or (v) any combination of the foregoing.
(b)Notwithstanding the foregoing, an Option may not be exercised by delivery to or withholding by the Corporation of shares of Common Stock to the extent that such delivery or withholding (i) would constitute a violation of the provisions of any law or regulation (including the Sarbanes-Oxley Act of 2002), or (ii) if there is a substantial likelihood that the use of such form of payment would result in adverse




accounting treatment to the Corporation under generally accepted accounting principles. Until a Participant has been issued a certificate or certificates for the shares of Common Stock so purchased (or the book entry representing such shares has been made and such shares have been deposited with the appropriate registered book-entry custodian), he or she shall possess no rights as a record holder with respect to any such shares.
III. STOCK APPRECIATION RIGHTS
1.Grant of Stock Appreciation Rights. Stock Appreciation Rights may be granted, held and exercised in such form and upon such general terms and conditions as determined by the Committee on an individual basis. A Stock Appreciation Right may be granted to a Participant with respect to such number of shares of Common Stock of the Corporation as the Committee may determine. No Stock Appreciation Right shall be granted with an exercise term that extends beyond ten (10) years from the Grant Date. Unless otherwise provided in a Participant’s Agreement, any Stock Appreciation Rights granted pursuant to the Plan are intended to satisfy the requirements of Code Section 162(m) and regulations thereunder (to the extent applicable), and shall be deemed to have been designated by the Committee as Code Section 162(m) Awards.
2.Exercise Price. The Committee shall determine the per share exercise price for each Stock Appreciation Right granted under the Plan; provided, however, that the exercise price of a Stock Appreciation Right shall not be less than 100% of the Fair Market Value of the shares of Common Stock covered by the Stock Appreciation Right on the Grant Date.
3.Exercise of Stock Appreciation Rights. A Stock Appreciation Right shall be deemed exercised upon receipt by the Corporation of written notice of exercise from the Participant. The Committee shall specify in a Participant’s Agreement whether payment shall be made in cash or shares of Common Stock, any combination thereof, or in any other applicable method set forth in Section 2.4(a).
4.Stock Appreciation Right Payment. Upon exercise of a Stock Appreciation Right, a Participant shall be entitled to payment from the Corporation, in cash, shares, or partly in each (as determined by the Committee in accordance with any applicable terms of the Agreement), of an amount equal to the difference between (a) the aggregate Fair Market Value on the exercise date for the specified number of shares being exercised, and (b) the aggregate exercise price for the specified number of shares being exercised.
5.Maximum Stock Appreciation Right Amount Per Share. The Committee may, in its sole discretion, establish (at the time of grant) a maximum amount per share which shall be payable upon the exercise of a Stock Appreciation Right, expressed as a dollar amount.
IV. RESTRICTED STOCK AND RESTRICTED STOCK UNITS
1.Grant of Restricted Stock and Restricted Stock Units. Subject to the terms and conditions of the Plan, the Committee, at any time and from time to time, may grant Awards of Restricted Stock and Restricted Stock Units under the Plan to such Participants and in such amounts as it shall determine.
2.Terms of Awards. Each Award of Restricted Stock or Restricted Stock Units shall be evidenced by an Agreement that shall specify the terms of the restrictions, including the Restriction Period, or periods, the number of Common Stock shares or units subject to the Award, the purchase price for the shares of Restricted Stock, if any, the form of consideration that may be used to pay the purchase price of the Restricted Stock, including those specified in Section 2.4, and such other general terms and conditions, including performance goal(s), as the Committee shall determine.
3.Transferability. Except as provided in this Article IV and Section 10.3 of the Plan, the shares of Common Stock subject to an Award of Restricted Stock or Restricted Stock Units granted hereunder may not be transferred, pledged, assigned, or otherwise alienated or hypothecated until the termination of the applicable Restriction Period or for such period of time as shall be established by the Committee and specified in the applicable Agreement, or upon the earlier satisfaction of other conditions as specified by the Committee in its sole discretion and as set forth in the applicable Agreement.
4.Other Restrictions. The Committee shall impose such other restrictions on any shares of Common Stock subject to an Award of Restricted Stock or Restricted Stock Units under the Plan as it may deem advisable including, without limitation, restrictions under applicable federal or state securities laws, and the issuance of a legended certificate of Common Stock representing such shares to give appropriate




notice of such restrictions (or, if issued in book entry form, a notation with similar restrictive effect with respect to the book entry representing such shares). Subject to Code Section 409A and the minimum Vesting requirements set forth in Section 1.4(ll), the Committee shall have the discretion to waive the applicable Restriction Period with respect to all or any part of the Common Stock subject to an Award of Restricted Stock or Restricted Stock Units that has not been designated (or deemed designated) as a Code Section 162(m) Award.
5.Voting Rights. During the Restriction Period, Participants holding issued and outstanding shares of Common Stock subject to an Award of Restricted Stock may exercise full voting rights with respect to the Restricted Stock, while such Award remains outstanding.
6.Dividends and Dividend Equivalents.
(a)Except as set forth below or in a Participant’s Agreement, a Participant shall be entitled to receive all dividends and other distributions paid with respect to issued and outstanding shares of Common Stock subject to an Award of Restricted Stock, while such Award remains outstanding. If any dividends or distributions are paid in shares of Common Stock during the Restriction Period applicable to an Award of Restricted Stock, the dividend or other distribution shares shall be subject to the same restrictions on transferability as the shares of Common Stock with respect to which they were paid.
(b)The Committee, in its discretion, may provide in the Agreement evidencing any Restricted Stock Unit Award that the Participant shall be entitled to receive Dividend Equivalents with respect to the payment of cash dividends on Common Stock having a record date prior to the date on which Restricted Stock Units held by such Participant are settled. Such Dividend Equivalents, if any, shall be paid by crediting the Participant with additional whole Restricted Stock Units as of the date of payment of such cash dividends on Common Stock. The number of additional Restricted Stock Units (rounded to the nearest whole number) to be so credited shall be determined by dividing (i) the amount of cash dividends paid on such date with respect to the number of shares of Common Stock represented by the Restricted Stock Units previously credited to the Participant as of the record date of such dividend, by (ii) the Fair Market Value per share of Common Stock on such date. Such additional Restricted Stock Units shall be subject to the same terms and conditions and shall be settled in the same manner and at the same time or times (or as soon thereafter as practicable) as the corresponding Restricted Stock Units on which the Dividend Equivalent was paid. In the event of a dividend or distribution paid in shares of Common Stock or any other adjustment made upon a change in the capital structure of the Corporation as described in Article IX, appropriate adjustments shall be made in the Participant’s Restricted Stock Unit so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant would be entitled by reason of the shares of Common Stock issuable upon settlement of the Restricted Stock Unit, and all such new, substituted or additional securities or other property shall be immediately subject to the same restrictions as are applicable to the Restricted Stock Unit.
7.Settlement of Restricted Stock Units. If a Restricted Stock Unit is payable in Common Stock, the Corporation shall issue to a Participant on the date on which Restricted Stock Units subject to the Participant’s Award Vest or (subject to the minimum Vesting requirements set forth in Section 1.4(ll)) on such other date determined by the Committee, in its discretion, and set forth in the Agreement, one share of Common Stock and/or any other new, substituted or additional securities or other property pursuant to an adjustment described in Section 9.1 for each Restricted Stock Unit then becoming Vested or otherwise to be settled on such date, subject to the withholding of applicable taxes. Notwithstanding any other provision in this Plan to the contrary, any Restricted Stock Unit, whether settled in Common Stock, cash or other property, shall be paid no later than two and a half (2½) months after the later of the end of the fiscal or calendar year in which the Restricted Stock Unit Vests.
8.Restricted Stock Unit Bonus Deferral Awards. A Participant designated by the Committee who is an insider or otherwise among a select group of highly compensated Employees may irrevocably elect, prior to a date specified by the Committee and in compliance with Code Section 409A, to defer receipt of any cash bonus or cash Incentive Award payable by the Corporation (subject to any minimum or maximum




limitations imposed by the Committee), which shall be credited to the Participant in the form of Restricted Stock Units, subject to such terms and other conditions established by the Committee as set forth in the associated Agreement. In consideration for foregoing bonus or Incentive Award compensation, the dollar amount deferred by a Participant may be increased by the Committee up to fifty (50) percent (or such lesser percentage specified by the Committee), for purposes of determining the number of Restricted Stock Units in the Participant’s Award. The electing Participant shall be credited, as of the date specified in the Agreement, with a number of Restricted Stock Units, equal to the amount of the deferral (increased by any Committee match), divided by the Fair Market Value on the applicable date.
V. PERFORMANCE AWARDS
1.Grant of Performance Awards. The Committee, in its discretion, may grant Performance Awards to Participants and may determine, on an individual or group basis, the performance goal(s) to be attained pursuant to each Performance Award.
2.Terms of Awards.
(a)Performance Awards shall consist of rights to receive cash, Common Stock, other property or a combination thereof, if designated performance goal(s) are achieved. The terms of a Participant's Performance Award shall be set forth in a Participant’s Agreement. Each Agreement shall specify the performance goal(s), which may include the Performance Measures, applicable to a particular Participant or group of Participants, the period over which the targeted goal(s) are to be attained, the payment schedule if the goal(s) are attained, and any other general terms as the Committee shall determine and conditions applicable to an individual Performance Award. Subject to Code Section 409A and the minimum Vesting requirements set forth in Section 1.4(ll), the Committee, in its discretion, may waive all or part of the conditions, goals and restrictions applicable to the receipt of full or partial payment of a Performance Award that has not been designated (or deemed designated) as a Code Section 162(m) Award.
(b)Performance Awards may be granted as Performance Shares or Performance Units, at the discretion of the Committee. Performance Awards shall be paid no later than two and a half (2½) months after the later of the end of the fiscal or calendar year in which the Performance Award is no longer subject to a substantial risk of forfeiture.
(i)In the case of Performance Shares, the Participant shall receive a legended certificate of Common Stock, restricted from transfer prior to the satisfaction of the designated performance goal(s) and restrictions (or shares may be issued in book entry form with a notation having similar restrictive effect with respect to the book entry representing such shares), as determined by the Committee and specified in the Participant’s Agreement. Prior to satisfaction of the performance goal(s) and restrictions, the Participant shall be entitled to vote the Performance Shares to the extent such shares are issued and outstanding. Further, any dividends paid on such shares during the performance period automatically shall, as provided in the Participant’s Agreement: (A) be reinvested on behalf of the Participant in additional Performance Shares under the Plan, and such additional shares shall be subject to the same performance goal(s) and restrictions as the other shares under the Performance Share Award; (B) be payable in cash upon satisfaction of, and subject to the same performance goal(s) and restrictions as the underlying shares for the Performance Share Award; or (C) be provided in a combination thereof.
(ii)In the case of Performance Units, the Participant shall receive an Agreement from the Committee that specifies the performance goal(s) and restrictions that must be satisfied before the Corporation shall issue the payment, which may be cash, a designated number of shares of Common Stock, other property or a combination thereof.
VI. INCENTIVE AWARDS
1.Grant of Incentive Awards.
(a)The Committee, in its discretion, may grant Incentive Awards to such Participants as it may designate from time to time. The terms of a Participant’s Incentive Award shall be set forth in the Participant’s individual Agreement and/or in any separate program(s) authorized by the Committee. Each




Agreement and/or separate program shall specify such general terms and conditions as the Committee shall determine.
(b)The determination of Incentive Awards for a given year or years may be based upon the attainment of specified levels of Corporation or Subsidiary performance as measured by pre-established, objective performance criteria determined at the discretion of the Committee, including any or all of the Performance Measures.
(c)The Committee shall (i) select those Participants who shall be eligible to receive an Incentive Award, (ii) determine the performance period, (iii) determine target levels of performance, and (iv) determine the level of Incentive Award to be paid to each selected Participant upon the achievement of each performance level. The Committee generally shall make the foregoing determinations prior to the commencement of services to which an Incentive Award relates (or by such later date permitted under the deduction limitation exemption provisions of Code Section 162(m) and regulations thereunder), to the extent applicable, and while the outcome of the performance goals and targets is uncertain.
2.Payment of Incentive Awards.
(a)Incentive Awards shall be paid in cash, shares of Common Stock or other property, at the discretion of the Committee. Payments shall be made following a determination by the Committee that the performance targets were attained and shall be made within two and a half (2½) months after the later of the end of the fiscal or calendar year in which the Incentive Award is no longer subject to a substantial risk of forfeiture.
(b)The amount of an Incentive Award to be paid upon the attainment of each targeted level of performance shall equal a percentage of a Participant's base salary for the fiscal year, a fixed dollar amount, or such other formula, as determined by the Committee.
VII. CODE SECTION 162(m) AWARDS
1.Awards Granted Under Code Section 162(m).
(a)Unless otherwise provided in a Participant’s Agreement, any Options or Stock Appreciation Rights granted pursuant to the Plan are intended to satisfy the requirements of Code Section 162(m) and regulations thereunder (to the extent applicable), and shall be deemed to have been designated by the Committee as Code Section 162(m) Awards.
(b)Unless otherwise provided in a Participant’s Agreement, any Award granted to an Employee Participant pursuant to the Plan, other than an Option or Stock Appreciation Right, which otherwise complies with the applicable requirements set forth in this Article VII shall be deemed to have been designated by the Committee as a Code Section 162(m) Award that is subject to the requirements of Code Section 162(m) and regulations thereunder (to the extent applicable). Such an Award must comply with the following additional requirements, which shall control over any other provision that pertains to such Award under Articles IV, V and VI:
(i)Each such Code Section 162(m) Award shall be based upon the attainment of specified levels of pre-established, objective Performance Measures that are intended to satisfy the performance based compensation requirements of Code Section 162(m) and regulations thereunder. Further, at the discretion of the Committee, such an Award also may be subject to goals and restrictions in addition to the Performance Measures.
(ii)For each such Code Section 162(m) Award, the Committee shall (A) select the Participant who shall be eligible to receive a Code Section 162(m) Award, (B) determine the applicable performance period, (C) determine the target levels of the Corporation or Subsidiary Performance Measures, and (D) determine the number of shares of Common Stock or cash or other property (or combination thereof) subject to an Award to be paid to each selected Participant. The Committee shall make the foregoing determinations prior to the commencement of services to which such an Award relates (or by such later date permitted under the deduction limitation exemption provisions of Code Section 162(m) and regulations thereunder), and while the outcome of the performance goals and targets is uncertain.




2.Attainment of Code Section 162(m) Goals.
(a)With respect to each Award designated (or deemed designated) as a Code Section 162(m) Award pursuant to Section 7.1(b), after each performance period, the Committee shall certify, in writing (which may include the written minutes for any meeting of the Committee): (i) if the Corporation has attained the performance targets, and (ii) the number of shares pursuant to the Award that are to become freely transferable, if applicable, or the cash or other property payable under the Award. The Committee shall have no discretion to waive all or part of the conditions, goals and restrictions applicable to the receipt of full or partial payment or to accelerate payment of such an Award, except in the case of the death or Disability of a Participant, or upon a Change in Control Termination.
(b)Notwithstanding the foregoing, the Committee may, in its discretion, reduce any Award based on such factors as may be determined by the Committee, including, without limitation, a determination by the Committee that such a reduction is appropriate in light of pay practices of competitors, or the performance of the Corporation, a Subsidiary or a Participant relative to the performance of competitors, or performance with respect to the Corporation’s strategic business goals.
3.Individual Participant Limitations. Subject to adjustment as provided in Section 9.1, with respect to those Awards which are designated (or deemed designated) by the Committee to be Code Section 162(m) Awards:
(a)no Employee Participant in any one fiscal year of the Corporation may be granted:
(i)Options with respect to more than six hundred thousand (600,000) shares of Common Stock;
(ii)Stock Appreciation Rights with respect to more than six hundred thousand (600,000) shares of Common Stock;
(iii)Restricted Stock Awards with respect to more than four hundred thousand (400,000) shares of Common Stock;
(iv)Restricted Stock Unit Awards that are denominated in shares of Common Stock with respect to more four hundred thousand (400,000) shares;
(v)Performance Awards that are denominated in shares of Common Stock with respect to more than four hundred thousand (400,000) shares; or
(vi)Incentive Awards that are denominated in shares of Common Stock with respect to more than four hundred thousand (400,000) shares.
(b)The maximum dollar value payable to any Employee Participant in any one fiscal year of the Corporation with respect to Restricted Stock Units, Performance Awards or Incentive Awards that are valued in property other than Common Stock shall be limited to the lesser of three million dollars ($3,000,000) or four (4) times the Participant’s base salary for the fiscal year.
(c)If an Award is cancelled, the cancelled Award shall continue to be counted towards the applicable limitations set forth above.
VIII. TERMINATION OF EMPLOYMENT OR SERVICES
1.Options and Stock Appreciation Rights. Unless otherwise provided in a Participant’s Agreement:
(a)If, prior to the date when an Option or Stock Appreciation Right first becomes Vested, a Participant’s employment or services are terminated for any reason, the Participant's right to exercise the Option or Stock Appreciation Right shall terminate and all rights thereunder shall cease.
(b)If, on or after the date when an Option or Stock Appreciation Right first becomes Vested, a Participant’s employment or services are terminated for any reason other than the Participant’s death or Disability, the Participant shall have the right, within the earlier of (i) the expiration of the Option or Stock Appreciation Right, and (ii) three (3) months after termination of employment or services, as applicable, to exercise the Option or Stock Appreciation Right to the extent that it was exercisable and unexercised on the date of the Participant's termination of employment or services, subject to any other limitation on the exercise of the Option or Stock Appreciation Right in effect on the date of exercise.




(c)If, on or after the date when an Option or Stock Appreciation Right first becomes Vested, a Participant’s employment or services are terminated due to the Participant’s death while the Option or Stock Appreciation Right is still exercisable, the person or persons to whom the Option or Stock Appreciation Right shall have been transferred by will or the laws of descent and distribution, shall have the right within the exercise period specified in the Participant's Agreement to exercise the Option or Stock Appreciation Right to the extent that it was exercisable and unexercised on the Participant's date of death, subject to any other limitation on exercise in effect on the date of exercise. The beneficial tax treatment of an Incentive Stock Option may be forfeited if the Option is exercised more than one year after a Participant's date of death.
(d)If, on or after the date when an Option or Stock Appreciation Right first becomes Vested, a Participant’s employment or services are terminated due to the Participant’s Disability, the Participant shall have the right, within the exercise period specified in the Participant’s Agreement, to exercise the Option or Stock Appreciation Right to the extent that it was exercisable and unexercised on the date of the Participant's termination of employment or services due to Disability, subject to any other limitation on the exercise of the Option or Stock Appreciation Right in effect on the date of exercise. If the Participant dies after termination of employment or services, as applicable, while the Option or Stock Appreciation Right is still exercisable, the Option or Stock Appreciation Right shall be exercisable in accordance with the terms of paragraph (c) above.
(e)For the avoidance of doubt, the Committee, at the time of a Participant's termination of employment or services, may accelerate a Participant's right to exercise an Option or Stock Appreciation Right, or, subject to Code Section 409A and Sections 2.1 and 3.1 of the Plan, may extend the term of the Option or Stock Appreciation Right.
(f)Shares subject to Options and Stock Appreciation Rights that are not exercised in accordance with the provisions of (a) through (e) above shall expire and be forfeited by the Participant as of their expiration date.
2.Restricted Stock Awards, Restricted Stock Unit Awards, Performance Awards and Incentive Awards. With respect to any Restricted Stock Award, Restricted Stock Unit Award, Performance Award or Incentive Award, unless otherwise provided in a Participant’s Agreement:
(a)If a Participant’s employment or services are terminated for any reason, any portion of such an Award that is not yet Vested automatically shall terminate and be forfeited by the Participant.
(b)If, with respect to a Restricted Stock Award or Restricted Stock Unit Award, the terminated Participant was required to pay a purchase price for the Restricted Stock subject to such Award, other than for the performance of services, the Corporation shall have the option to repurchase any shares acquired by the Participant which are still subject to any Restriction Period for the purchase price paid by the Participant.
(c)For the avoidance of doubt, the Committee, in its discretion, may provide in a Participant’s Agreement for the continuation of any such Award after a Participant’s employment or services are terminated or, subject to Code Section 409A, may waive or change the remaining conditions, goals or restrictions, or add additional conditions, goals or restrictions, with respect to such Award, as it deems appropriate. Notwithstanding the foregoing, the Committee shall not waive any restrictions on any such Award that is designated (or deemed designated) as a Code Section 162(m) Award, but the Committee may provide in the Participant’s Agreement or otherwise that, upon the Participant’s termination of employment due to death or Disability, or upon a Change in Control Termination prior to Vesting of such Award, the Award shall be deemed to have been Vested on terms determined by the Committee.
3.Other Provisions. The transfer of an Employee from one corporation to another among the Corporation and any of its Subsidiaries, or a leave of absence under the leave policy of the Corporation or any of its Subsidiaries shall not be a termination of employment for purposes of the Plan, unless a provision to the contrary is expressly stated by the Committee in a Participant's Agreement issued under the Plan.




IX. ADJUSTMENTS AND CHANGE IN CONTROL
1.Adjustments. In the event of a merger, reorganization, statutory share exchange, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property), stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting the Common Stock or the value thereof, such adjustments and other substitutions shall be made to the Plan and Awards as the Committee, in its sole discretion, deems equitable or appropriate, including adjustments in the aggregate number, class and kind of securities that may be delivered under the Plan and, in the aggregate or to any one Participant, in the number, class, kind and option or exercise price of securities subject to outstanding Awards granted under the Plan (including, if the Committee deems appropriate, the substitution of cash, similar options to purchase the shares of, or other awards denominated in the shares of, another company, or other property, as the Committee may determine to be appropriate in its sole discretion). Any of the foregoing adjustments may provide for the elimination of any fractional share which might otherwise become subject to any Award.
2.Change in Control.
(a)With respect to an Employee Participant and notwithstanding anything contained herein to the contrary, unless otherwise provided in such Employee Participant’s Agreement or elsewhere, upon a Change in Control Termination, the following shall occur: (i) any outstanding Option or Stock Appreciation Right granted hereunder immediately shall become fully Vested and exercisable, regardless of any installment provision applicable to such Option or Stock Appreciation Right; (ii) the remaining Restriction Period on any shares of Common Stock subject to a Restricted Stock or Restricted Stock Unit Award granted hereunder immediately shall lapse and the shares shall become fully transferable, subject to any applicable federal or state securities laws; (iii) all performance goals and conditions shall be deemed to have been satisfied and all restrictions shall lapse on any outstanding Performance Awards, which immediately shall become payable (either in full or pro-rata based on the portion of the applicable performance period completed as of the Change in Control Termination); and (iv) all performance targets and performance levels shall be deemed to have been satisfied for any outstanding Incentive Awards, which immediately shall become payable (either in full or pro-rata based on the portion of the applicable performance period completed as of the Change in Control Termination).
(b)With respect to a Participant other than an Employee Participant and notwithstanding anything contained herein to the contrary, unless otherwise provided in such Participant’s Agreement or elsewhere, upon a Change in Control, the following shall occur: (i) any outstanding Option or Stock Appreciation Right granted hereunder immediately shall become fully Vested and exercisable, regardless of any installment provision applicable to such Option or Stock Appreciation Right; (ii) the remaining Restriction Period on any shares of Common Stock subject to a Restricted Stock or Restricted Stock Unit Award granted hereunder immediately shall lapse and the shares shall become fully transferable, subject to any applicable federal or state securities laws; (iii) all performance goals and conditions shall be deemed to have been satisfied and all restrictions shall lapse on any outstanding Performance Awards, which immediately shall become payable (either in full or pro-rata based on the portion of the applicable performance period completed as of the Change in Control); and (iv) all performance targets and performance levels shall be deemed to have been satisfied for any outstanding Incentive Awards, which immediately shall become payable (either in full or pro-rata based on the portion of the applicable performance period completed as of the Change in Control).
(c)The Committee may, in its sole discretion and without the consent of any Participant, determine that, upon the occurrence of a Change in Control, each or any Option or Stock Appreciation Right outstanding immediately prior to the Change in Control shall be cancelled in exchange for a payment with respect to each Vested share of Common Stock subject to such cancelled Option or Stock Appreciation Right in (i) cash, (ii) stock of the Corporation or of a corporation or other business entity that is a party to the Change in Control, or (iii) other property which, in any such case, shall be in an amount having a Fair Market Value equal to the excess of the Fair Market Value of the consideration to be paid per share of Common




Stock in the Change in Control transaction over the exercise price per share under such Option or Stock Appreciation Right (the “Spread”). In the event such determination is made by the Committee, the Spread (reduced by applicable withholding taxes, if any) shall be paid to a Participant in respect of the Participant’s cancelled Options and Stock Appreciation Rights on or as soon as practicable following the date of the Change in Control.
X. MISCELLANEOUS
1.Partial Exercise/Fractional Shares. The Committee may permit, and shall establish procedures for, the partial exercise of Options and Stock Appreciation Rights granted under the Plan. No fractional shares shall be issued in connection with the exercise of an Option or Stock Appreciation Right or payment of a Performance Award, Restricted Stock Award, Restricted Stock Unit Award or Incentive Award; instead, the Fair Market Value of the fractional shares shall be paid in cash, or at the discretion of the Committee, the number of shares shall be rounded down to the nearest whole number of shares and any fractional shares shall be disregarded.
2.Rights Prior to Issuance of Shares. No Participant shall have any rights as a shareholder with respect to shares covered by an Award until the issuance of a stock certificate for such shares or electronic transfer to the Participant (or book entry representing such shares has been made and such shares have been deposited with the appropriate registered book-entry custodian). No adjustment shall be made for dividends or other rights with respect to such shares for which the record date is prior to the date the certificate is issued or the shares electronically delivered to the Participant’s brokerage account (or book entry is made), except as otherwise provided in the Plan or a Participant’s Agreement or by the Committee.
3.Non‑Assignability; Certificate Legend; Removal.
(a)Except as described below or as otherwise determined by the Committee in a Participant’s Agreement, no Award shall be transferable by a Participant except by will or the laws of descent and distribution, and an Option or Stock Appreciation Right shall be exercised only by a Participant during the lifetime of the Participant. Notwithstanding the foregoing, a Participant may assign or transfer an Award that is not an Incentive Stock Option with the consent of the Committee (each transferee thereof, a “Permitted Assignee”); provided that such Permitted Assignee shall be bound by and subject to all of the terms and conditions of the Plan and any Agreement relating to the transferred Award and shall execute an agreement satisfactory to the Corporation evidencing such obligations; and provided further that such Participant shall remain bound by the terms and conditions of the Plan.
(b)Each certificate representing shares of Common Stock subject to an Award, to the extent a certificate is issued, shall bear the following legend:
The sale or other transfer of the shares of stock represented by this certificate, whether voluntary, involuntary or by operation of law, is subject to certain restrictions on transfer set forth in the ITC Holdings Corp. 2015 Long Term Incentive Plan (“Plan”), rules and administrative guidelines adopted pursuant to such Plan [and an Agreement dated ______ __, ____]. A copy of the Plan, such rules [and such Agreement] may be obtained from the Secretary of ITC Holdings Corp.
If shares are issued in book entry form, a notation to the same restrictive effect as the legend above shall be placed on the transfer agent’s books in connection with such shares.
(c)Subject to applicable federal and state securities laws, issued shares of Common Stock subject to an Award shall become freely transferable by the Participant after all applicable restrictions, limitations, performance requirements or other conditions have terminated, expired, lapsed or been satisfied. Once such issued shares of Common Stock are released from such restrictions, limitations, performance requirements or other conditions, the Participant shall be entitled to have the legend required by this Section 10.3 removed from the applicable Common Stock certificate (or notation removed from such book entry).




4.Securities Laws.
(a)Anything to the contrary herein notwithstanding, the Corporation's obligation to sell and deliver Common Stock pursuant to the exercise of an Option or Stock Appreciation Right or deliver Common Stock pursuant to a Restricted Stock Award, Restricted Stock Unit Award, Performance Award or Incentive Award is subject to such compliance with federal and state laws, rules and regulations applying to the authorization, issuance or sale of securities as the Corporation deems necessary or advisable. The Corporation shall not be required to sell and deliver or issue Common Stock unless and until it receives satisfactory assurance that the issuance or transfer of such shares shall not violate any of the provisions of the Securities Act or the Exchange Act, or the rules and regulations of the Securities and Exchange Commission promulgated thereunder or those of the Stock Exchange or any stock exchange on which the Common Stock may be listed, the provisions of any other applicable laws governing the sale of securities, or that there has been compliance with the provisions of such acts, rules, regulations and laws.
(b)The Committee may impose such restrictions on any shares of Common Stock acquired pursuant to the exercise of an Option or Stock Appreciation Right or the grant of Restricted Stock or Restricted Stock Units or the payment of a Performance Award or Incentive Award under the Plan as it may deem advisable, including, without limitation, restrictions (i) under applicable federal securities laws; (ii) under the requirements of the Stock Exchange or any other securities exchange or recognized trading market upon which such shares of Common Stock are then listed or traded; and (iii) under any other applicable securities laws.
5.Withholding Taxes.
(a)The Corporation shall have the right to withhold from a Participant’s compensation or require a Participant to remit sufficient funds to satisfy applicable withholding for income and employment taxes upon the exercise of an Option or Stock Appreciation Right, the lapse of the Restriction Period on a Restricted Stock Award or Restricted Stock Unit Award, or the payment of a Performance Award or Incentive Award. A Participant may in order to fulfill the withholding obligation tender previously-acquired shares of Common Stock or have shares of stock withheld from the exercise, provided that the shares have an aggregate Fair Market Value sufficient to satisfy in whole or in part the applicable withholding taxes. Other payment methods as set forth in Sections 2.4(a) and 3.3 may also be utilized to satisfy any applicable withholding requirements. At no point shall the Corporation withhold from the exercise of an Option more shares than are necessary to meet the established tax withholding requirements of federal, state and local obligations.
(b)Notwithstanding the foregoing, a Participant may not use shares of Common Stock to satisfy the withholding requirements to the extent that (i) there is a substantial likelihood that the use of such form of payment or the timing of such form of payment would subject the Participant to a substantial risk of liability under Section 16 of the Exchange Act; (ii) such withholding would constitute a violation of the provisions of any law or regulation (including the Sarbanes-Oxley Act of 2002); or (iii) there is a substantial likelihood that the use of such form of payment would result in adverse accounting treatment to the Corporation under generally accepted accounting principles.
6.Termination and Amendment.
(a)The Board may terminate the Plan, or the granting of Awards under the Plan, at any time.
(b)Subject to the minimum Vesting requirements set forth in Section 1.4(ll), the Board may amend or modify the Plan at any time and from time to time, and the Committee may amend or modify the terms of an outstanding Agreement at any time and from time to time, but no amendment or modification, without the approval of the shareholders of the Corporation, shall (i) materially increase the benefits accruing to Participants under the Plan; (ii) increase the amount of Common Stock for which Awards may be made under the Plan, except as permitted under Sections 1.7 and Article IX; or (iii) change the provisions relating to the eligibility of individuals to whom Awards may be made under the Plan. In addition, if the Corporation’s Common Stock is listed on a Stock Exchange, the Board may not amend the Plan in a manner requiring




approval of the shareholders of the Corporation under the rules of the Stock Exchange without obtaining the approval of the shareholders.
(c)No amendment, modification, or termination of the Plan or an outstanding Agreement shall in any manner materially and adversely affect any then outstanding Award under the Plan without the consent of the Participant holding such Award, except as set forth in any Agreement relating to the Award, as set forth in Sections 9.2 or 10.10, or to bring the Plan and/or an Award into compliance with the requirements of Code Section 409A or to qualify for an exemption under Code Section 409A.
7.Code Section 409A. It is intended that Awards granted under the Plan shall be exempt from or in compliance with Code Section 409A, and the provisions of the Plan are to be construed accordingly. The Board reserves the right to amend the terms of the Plan, and the Committee reserves the right to amend any outstanding Agreement if necessary either to exempt such Award from Code Section 409A or comply with the requirements of Code Section 409A, as applicable. However, unless otherwise specified herein or in a Participant’s Agreement, in no event shall the Corporation or a Subsidiary be responsible for any tax or penalty owed by a Participant or beneficiary with regard to an Award payment. Notwithstanding anything in the Plan to the contrary, all or part of an Award payment to a Participant who is determined to constitute a “specified employee” (as defined in Code Section 409A and regulations thereunder) at the time of separation from service, shall be delayed (if then required) under Code Section 409A, and paid in an aggregated lump sum on the first business day following the date that is six months after the date of the Participant’s separation from service, or the date of the Participant’s death, if earlier; any remaining payments shall be paid on their regularly scheduled payment dates. For purposes of the Plan and any Agreement, the terms “separation from service” or “termination of employment” (or variations thereof) shall be synonymous with the meaning given to the term “separation from service” as defined in Code Section 409A and regulations thereunder.
8.Effect on Employment or Services. Neither the adoption of the Plan nor the granting of any Award pursuant to the Plan shall be deemed to create any right in any individual to be retained or continued in the employment or services of the Corporation or a Subsidiary.
9.Use of Proceeds. The proceeds received from the sale of Common Stock pursuant to the Plan shall be used for general corporate purposes of the Corporation.
10.Severability. If any one or more of the provisions (or any part thereof) of this Plan or of any Agreement issued hereunder, shall be held to be invalid, illegal or unenforceable in any respect, such provision shall be modified so as to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions (or any part thereof) of the Plan or of any Agreement shall not in any way be affected or impaired thereby. The Board may, without the consent of any Participant, and in a manner determined necessary solely in the discretion of the Board, amend the Plan and any outstanding Agreement as the Corporation deems necessary to ensure the Plan and all Awards remain valid, legal or enforceable in all respects.
11.Beneficiary Designation. Except as otherwise designated in a Participant’s Agreement, and subject to local laws and procedures, each Participant may file a written beneficiary designation with the Corporation stating who is to receive any benefit under the Plan to which the Participant is entitled in the event of such Participant's death before receipt of any or all of a Plan benefit. Each designation shall revoke all prior designations by the same Participant, be in a form prescribed by the Corporation, and become effective only when filed by the Participant in writing with the Corporation during the Participant's lifetime. If a Participant dies without an effective beneficiary designation for a beneficiary who is living at the time of the Participant's death, the Corporation shall pay any remaining unpaid benefits to the Participant's legal representative.
12.Unfunded Obligation. A Participant shall have the status of a general unsecured creditor of the Corporation. Any amounts payable to a Participant pursuant to the Plan shall be unfunded and unsecured obligations for all purposes. The Corporation shall not be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Corporation shall retain at all times beneficial ownership of any investments, including trust investments,




which the Corporation may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Participant account shall not create or constitute a trust or fiduciary relationship between the Committee or the Corporation and a Participant, or otherwise create any Vested or beneficial interest in any Participant or the Participant's creditors in any assets of the Corporation. A Participant shall have no claim against the Corporation for any changes in the value of any assets which may be invested or reinvested by the Corporation with respect to the Plan.
13.Approval of Plan. The Plan shall be subject to the approval of the holders of at least a majority of the votes cast on a proposal to approve the Plan at a duly held meeting of shareholders of the Corporation held within twelve (12) months after adoption of the Plan by the Board. No Award granted under the Plan may be exercised or paid in whole or in part unless the Plan has been approved by the shareholders as provided herein. If not approved by shareholders within such 12-month period, the Plan and any Awards granted under the Plan shall be null and void, with no further force or effect.
14.Governing Law. Except to the extent governed by applicable federal law, the validity, interpretation, construction and performance of the Plan and Agreements under the Plan, shall be governed by the laws of the State of Michigan, without regard to its conflict of law rules.
IN WITNESS WHEREOF, this ITC Holdings Corp. 2015 Long Term Incentive Plan has been executed on behalf of the Corporation on this 20th day of May, 2015.

ITC HOLDINGS CORP.

By: Christine Mason Soneral    
Its: Senior Vice President and General Counsel    
    


BOARD APPROVAL: March 26, 2015
SHAREHOLDER APPROVAL: May 20, 2015















Exhibit 10.145
STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of (____) (the “Grant Date”), is made by and between ITC Holdings Corp., a Michigan corporation (the “Company”), and the individual whose name is set forth on the signature page hereof, who is an employee of the Company or a Subsidiary of the Company (the “Optionee”). Any capitalized terms herein but not otherwise defined shall have the meaning set forth in the Company’s Second Amended and Restated 2006 Long Term Incentive Plan, as may be further amended from time to time (the “Plan”).
WHEREAS, the Company wishes to afford the Optionee the opportunity to purchase shares of its common stock (the “Common Stock”) pursuant to the terms and conditions of this Agreement and the Plan, the terms of which are hereby incorporated by reference and made a part of this Agreement; and
WHEREAS, this Agreement and the grant made pursuant to this Agreement are not subject to and shall not be governed by any Management Stockholder’s Agreement between the Company and Optionee; and
WHEREAS, the Committee has determined that it would be in the best interest of the Company and its shareholders to grant the Option provided for herein to the Optionee as an incentive for increased efforts during his term of office with the Company or its Subsidiaries, has approved the grant of the Option on the Grant Date and has advised the Company thereof and instructed the undersigned officer to issue said Option.
NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
OPTION GRANT
1.1. Grant of Options. For good and valuable consideration, on and as of the date hereof, the Company irrevocably grants to the Optionee a Nonqualified Stock Option to purchase ________ shares of Common Stock upon the terms and conditions set forth in this Agreement (the “Option”).
1.2. Exercise Price. Subject to Section 2.1, the exercise price of the shares of Common Stock covered by the Option shall be $_______ per share without commission or other charge (which is the Fair Market Value per share of the Common Stock on the Grant Date).
ARTICLE II
ADJUSTMENTS
2.1. Adjustments to Option. In the event of a merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property), stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting the Common Stock or the value thereof, such adjustments and other substitutions shall be made to the Option as the Committee, in its sole discretion, deems equitable or appropriate, including adjustments in the number, class, kind and exercise price of securities subject to the Option (including, if the Committee deems




appropriate, the substitution of similar options to purchase the shares of another company, as the Committee may determine to be appropriate in its sole discretion).
ARTICLE III
PERIOD OF EXERCISABILITY
3.1. Exercisability of Option.
(a) So long as the Optionee continues to be employed by the Company or any of its Subsidiaries, or in the event Optionee’s employment terminates due to Retirement, the Option shall become exercisable pursuant to the following schedule:
Percentage of Shares As to Which Option Is
Date Option Becomes Exercisable         Exercisable On and After Such Date
On and after the first anniversary
of the Grant Date                         33 1/3%
On and after the second anniversary
of the Grant Date                         66 2/3%
On and after the third anniversary
of the Grant Date                         100%
(b) Notwithstanding the foregoing, the Option shall become immediately exercisable as to 100% of the shares of Common Stock subject to such Option (but only to the extent such Option has not otherwise terminated or become exercisable) (i) if the Optionee ceases to be employed due to Optionee’s death or Disability, or (ii) upon the occurrence of a Change in Control Termination (as defined below); provided, however, that this Section 3.1(b)(ii) is subject to the Committee’s rights, in the event of a Change in Control, to cash out the Option pursuant to Section 9.2(b) of the Plan. The Committee has irrevocably determined not to, and shall not (and shall not permit the Board to), exercise any right it may have under the Plan, including without limitation under Section 9.2(c) of the Plan, to determine that the Option shall not become immediately exercisable upon a Change in Control.
(c) A “Change in Control Termination” shall mean a termination of the Optionee’s employment by the Company without “Cause” or, if the Optionee is a party to a written employment agreement with the Company, by the Optionee for “Good Reason” (as defined in such agreement as in effect from time to time), which termination occurs after:
(i)    the execution of an agreement to which the Company is a party pursuant to which a Change in Control has occurred or will occur (upon consummation of the transactions contemplated by such agreement) but, if a Change in Control has occurred pursuant thereto, not more than two years after such Change in Control, and if a Change in Control has not yet occurred pursuant thereto, while such agreement remains executory; or
(ii)    the occurrence of a Change in Control not pursuant to an agreement with the Company, but not more than two years thereafter.
(d) “Cause” shall mean (i) if the Optionee is a party to a written employment agreement with the Company or a Subsidiary, “Cause” as defined in such agreement, as in effect from time to time, and (ii) in all other cases, (A) Optionee’s continued failure substantially to perform Optionee’s duties to the




Company or its affiliates (other than as a result of total or partial incapacity due to physical or mental illness) for a period of 10 days following written notice by the Company to Optionee of such failure, (B) dishonesty in the performance of Optionee’s duties, (C) Optionee’s conviction of, or plea of nolo contendere to a crime constituting (x) a felony under the laws of the United States or any state thereof or (y) a misdemeanor involving moral turpitude, (D) Optionee’s willful malfeasance or willful misconduct in connection with Optionee’s duties or any act or omission which is injurious to the financial condition or business reputation of the Company or its affiliates or (E) Optionee’s breach of any non-compete or confidentiality obligations to the Company or its affiliates.
3.2 Expiration of Option. The Option may not be exercised after the first to occur of the following events and shall in no event be exercisable after the tenth anniversary of the Grant Date:
(a) If, prior to the date when the Option first becomes exercisable, Optionee’s employment terminates for any reason other than death, Disability or Retirement, Optionee’s right to exercise the Option shall terminate and all rights thereunder shall cease; or
(b) If, on or after the date when the Option first becomes exercisable, Optionee’s employment terminates for any reason other than death, Disability or Retirement, Optionee shall have the right, within three months after termination of employment to exercise the Option to the extent that it was exercisable and unexercised on the date of Optionee’s termination of employment, subject to any other limitation on the exercise of the Option in effect on the date of exercise.
If Optionee’s employment terminates due to death, Disability or Retirement, or is a Change in Control Termination occurring, before the tenth anniversary of the Grant Date, Optionee or the person or persons to whom the Option shall have been transferred by will or the laws of descent and distribution shall have the right within the exercise period specified in this Agreement to exercise the Option, subject to any other limitation on exercise in effect on the date of exercise.
3.3. Committee Discretion. The Committee, at the time of Optionee’s termination of employment, subject to the limitations set forth in the Plan, may accelerate Optionee’s right to exercise the Option or, subject to Code Section 409A, may extend the Option term.
3.4. Retirement. “Retirement” as used in this Agreement shall mean the termination of the Optionee’s employment, by the Company or by Optionee, on or after Optionee’s 65th birthday, other than due to death or Disability.
ARTICLE IV
EXERCISE OF OPTION
4.1. Person Eligible to Exercise. During the lifetime of the Optionee, only the Optionee may exercise the Option or any portion thereof. After the death of the Optionee, any exercisable portion of an Option may, prior to the time when an Option becomes unexercisable under Section 3.2, be exercised by his personal representative or by any person empowered to do so under the Optionee’s will or under the then applicable laws of descent and distribution.
4.2. Partial Exercise. Any exercisable portion of an Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.2 of this Agreement; provided, however, that any partial exercise shall be for whole shares of Common Stock only.




4.3. Manner of Exercise. The exercise price for shares of Common Stock to be acquired upon exercise of the Option shall be paid in full in cash or by personal check, bank draft or money order at the time of exercise upon written notice to the Company of such exercise; provided, however, that in lieu of such form of payment, subject to the limitations set forth in Section 2.4 of the Plan, Optionee may elect to make payment may be made by means of a “net exercise” (described below) or by any other means permitted by the Plan and by the Committee from time to time in the Committee’s sole discretion. A “net exercise” shall mean an exercise of the Option pursuant to which, upon delivery to the Company of written notice of exercise, the consideration received in payment for the exercise of the Option shall be the cancellation of a portion of the Option and the Company shall become obligated to issue the “net number” of shares of Common Stock determined according to the following formula:
((A x B) - (A x C))
B
For purposes of the foregoing formula:
A = the total number of shares with respect to which the Option is then being exercised (which, for the avoidance of doubt, shall include both the number of shares to be issued to the Optionee and the number of shares subject to the portion of the Option to be cancelled in payment of the exercise price).
B= the Stock Exchange closing price for the Common Stock on the last date on which there were Common Stock transactions preceding the date of the Company’s receipt of the exercise notice.
C= the exercise price in effect at the time of such exercise.
If the foregoing formula would yield a number of shares to be issued that is not a whole number, any such fraction shall be rounded down and disregarded. The shares underlying the exercised portion of the Option that are not issued pursuant to the foregoing formula, along with the corresponding portion of the Option, shall be considered cancelled and no longer subject to exercise.
4.4. Conditions to Issuance of Stock Certificates. The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of an Option or portion thereof (or make or cause to be made any book entry evidencing such issuance) prior to fulfillment of all of the following conditions:
(a) The obtaining of approval or other clearance from any state or federal governmental agency or stock exchange which the Committee shall, in its reasonable and good faith discretion, determine to be necessary or advisable; and
(b) The receipt by the Company of such assurance of compliance with federal and state securities laws as it may deem necessary or advisable.
In the event of exercise after Optionee’s death, shares shall be issued not later than 15 business days after the later of (i) exercise in accordance with the terms hereof and (ii) receipt by the Company of written notice of the administrator’s or executor’s status and evidence satisfactory to the Company to establish the validity of the transfer of the Option and compliance with any laws or regulations pertaining to said transfer.
4.5. Rights as Shareholder. The holder of the Option shall not be, nor have any of the rights or privileges of, a shareholder of the Company in respect of any shares purchasable upon the exercise of the Option or any portion thereof unless and until a certificate or certificates representing such shares shall




have been issued by the Company to such holder or a book entry representing such shares has been made and such shares have been deposited with the appropriate registered book-entry custodian. The Company shall not be liable to the Optionee for damages relating to any delay in issuing a stock certificate to Optionee, any loss of a certificate, or any mistakes or errors in the issuance of a certificate to Optionee.
4.6. Withholding. The Company shall have the right to withhold from Optionee’s compensation or to require Optionee to remit sufficient funds to satisfy applicable withholding for income and employment taxes upon the exercise of an Option. Subject to the limitations in Section 10.5 of the Plan, Optionee may, in order to fulfill the withholding obligation, make payment to the Company in any manner permitted for payment of the exercise price under Section 4.3 of this Agreement. If the “net exercise” method is used to satisfy the tax withholding obligations, the number of shares to be otherwise issued upon exercise (whether the exercise price was paid in cash or by “net exercise”) shall be reduced by an amount equal to (a) the tax withholding obligation, as determined by the Company in good faith, divided by (b) the Stock Exchange closing price for the Common Stock on the last date on which there were Common Stock transactions preceding the date of the Company’s receipt of the exercise notice, and rounded up to the nearest whole share. The corresponding portion of the Option shall be considered cancelled and no longer subject to exercise. The Company shall not withhold from the exercise of an Option more shares than are necessary to meet the established tax withholding requirements of federal, state and local obligations and, if the exercise price is paid by means of “net exercise,” to pay the exercise price. The Company shall be authorized to take such action as may be necessary, in the opinion of the Company’s counsel (including, without limitation, withholding vested Common Stock otherwise deliverable to the Optionee and/or withholding amounts from any compensation or other amount owing from the Company to the Optionee), to satisfy the obligations for payment of the minimum amount of any such taxes.
ARTICLE V
MISCELLANEOUS
5.1. Option Not Transferable. Neither the Option nor any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Optionee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that this Section 5.1 shall not prevent transfers by will or by the applicable laws of descent and distribution, or transfers to which the Committee has given prior written consent subject to the conditions set forth in Section 10.3(a) of the Plan.
5.2. Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary, and any notice to be given to the Optionee shall be addressed to him or her at the address stated in the Company’s employee records. By a notice given pursuant to this Section 5.2, either party may hereafter designate a different address for notices to be given to the party. Any notice, which is required to be given to the Optionee, shall, if the Optionee is then deceased, be given to the Optionee’s personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 5.2. Any notice shall have been deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.




5.3. Amendment. Subject to Section 3.3 of this Agreement and Sections 9.1 and 10.6 of the Plan, this Agreement may be amended only by a writing executed by the parties hereto if such amendment would adversely affect Optionee. Any such amendment shall specifically state that it is amending this Agreement.
5.4. Governing Law. The laws of the State of Michigan shall govern the interpretation, validity and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.
5.5. No Guarantee of Employment. Nothing in this Agreement or in the Plan shall confer upon the Optionee any right to continue in the employ of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries, which are hereby expressly reserved, to terminate the employment of the Optionee at any time for any reason whatsoever, with or without cause, subject to the applicable provisions of, if any, the Optionee’s employment agreement with the Company.
5.6 Plan Terms Control. In the event of any conflict between the Plan and this Agreement, the terms of the Plan shall control, it being understood that variations in this Agreement from terms set forth in the Plan shall not be considered to be in conflict if the Plan permits such variations.
5.7 Recoupment Policy. This Agreement, the Option and any economic benefits recognized by Optionee in connection with the Option (including, without limitation, shares received upon exercise of the Option and the proceeds from the sale of such shares) are subject to forfeiture and/or recoupment pursuant to the Company’s Recoupment Policy adopted November 26, 2013, as amended from to time.
[Signatures on next page.]

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Grant Date.
ITC HOLDINGS CORP.
By: /s/ Christine Mason Soneral___________________
Name: Christine Mason Soneral
Title: Senior Vice President and General Counsel
OPTIONEE:
_First Name/Last Name_________________________








Exhibit 10.146
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT (the “Agreement”) is made effective as of (____) (the “Grant Date”), between ITC Holdings Corp., a Michigan corporation (hereinafter called the “Company”), and the individual whose name is set forth on the signature page hereof, who is an employee of the Company or a Subsidiary of the Company, hereinafter referred to as the “Employee”. Capitalized terms not otherwise defined herein shall have the same meanings as in the Second Amended and Restated 2006 Long Term Incentive Plan, as may be further amended from time to time (the “Plan”).
WHEREAS, the Committee desires to grant the Employee shares of Common Stock, pursuant to the terms and conditions of this Agreement (the “Restricted Stock Award”) and the Plan (the terms of which are hereby incorporated by reference and made a part of this Agreement); and
WHEREAS, this Agreement and the grants made pursuant to this Agreement are not otherwise subject to and shall not be governed by any Management Stockholder’s Agreement between Company and Employee; and
WHEREAS, the Committee has determined that it would be in the best interest of the Company and its shareholders to grant the shares of Common Stock provided for herein to the Employee as an incentive for increased efforts during his or her employment, has approved the grant of the Restricted Stock Award on the Grant Date and has advised the Company thereof and instructed the undersigned officer to grant said Restricted Stock Award.
NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:
1. Grant of the Restricted Stock. Subject to the terms and conditions of the Plan and the additional terms and conditions set forth in this Agreement, the Company hereby grants to the Employee ________ shares of Common Stock (hereinafter called the “Restricted Stock”). The Restricted Stock shall vest and become nonforfeitable in accordance with Section 2 hereof. In the event of any conflict between the Plan and this Agreement, the terms of the Plan shall control, it being understood that variations in this Agreement from terms set forth in the Plan shall not be considered to be in conflict if the Plan permits such variations.
2. Vesting and Forfeiture.
(a) So long as the Employee continues to be employed by the Company or its Subsidiaries, the Restricted Stock shall become 100% vested and non-forfeitable upon the earliest to occur of (i) the third anniversary of the Grant Date (the “Vesting Date”), (ii) the Employee ceasing to be employed due to Employee’s death or Disability, or (iii) the occurrence of a Change in Control Termination (as defined below). The Committee has irrevocably determined not to, and shall not (and shall not permit the Board to), exercise any right it may have under the Plan, including without limitation under Section 9.2(c) of the Plan, to determine that the Restricted Stock shall not become immediately 100% vested upon a Change in Control.
(b) If Employee’s employment is terminated for any reason other than Employee’s death, Disability or Retirement prior to the Vesting Date or a Change in Control Termination, Employee’s right to shares of Common Stock subject to the Restricted Stock Award that are not yet vested automatically




shall terminate and be forfeited by Employee unless the Committee, in the exercise of its authority under the Plan, modifies the Vesting Date in connection with such termination.
(c) The foregoing provisions of this Section 2 notwithstanding, if Employee attains or has attained “Normal Retirement Age” (as defined in the International Transmission Company Retirement Plan) prior to the Vesting Date while continuing to be employed by the Company or its Subsidiaries, the Restricted Stock shall become vested (i) as of the date Employee attains such Normal Retirement Age, in increments of 33-1/3% of such shares in respect of each one year anniversary (if any) of the date of this Agreement that has occurred prior to Employee’s attaining such Normal Retirement Age, and (ii) in increments of 33-1/3% of such shares as of each one year anniversary of the date of this Agreement that occurs after Employee attains such Normal Retirement Age until all shares have fully vested (provided that Employee continues to be employed by the Company or its Subsidiaries as of each such anniversary).
(d) A “Change in Control Termination” shall mean a termination of Employee’s employment by the Company without “Cause” or, if the Employee is a party to a written employment agreement with the Company, by Employee for “Good Reason” (as defined in such agreement as in effect from time to time), which termination occurs after:
(i) the execution of an agreement to which the Company is a party pursuant to which a Change in Control has occurred or will occur (upon consummation of the transactions contemplated by such agreement) but, if a Change in Control has occurred pursuant thereto, not more than two years after such Change in Control, and if a Change in Control has not yet occurred pursuant thereto, while such agreement remains executory; or
(ii) the occurrence of a Change in Control not pursuant to an agreement with the Company, but not more than two years thereafter.
(e) “Cause” shall mean (i) if the Employee is a party to a written employment agreement with the Company or a Subsidiary, “Cause” as defined in such agreement, as in effect from time to time, and (ii) in all other cases, (A) Employee’s continued failure substantially to perform Employee’s duties to the Company or its affiliates (other than as a result of total or partial incapacity due to physical or mental illness) for a period of 10 days following written notice by the Company to Employee of such failure, (B) dishonesty in the performance of Employee’s duties, (C) Employee’s conviction of, or plea of nolo contendere to a crime constituting (x) a felony under the laws of the United States or any state thereof or (y) a misdemeanor involving moral turpitude, (D) Employee’s willful malfeasance or willful misconduct in connection with Employee’s duties or any act or omission which is injurious to the financial condition or business reputation of the Company or its affiliates or (E) Employee’s breach of any non-compete or confidentiality obligations to the Company or its affiliates.
3. Certificates.
(a) Certificates evidencing the Restricted Stock shall be issued by the Company and shall be registered in the Employee’s name on the stock transfer books of the Company promptly after the date hereof, but shall remain in the physical custody of the Company or its designee at all times prior to the vesting of such Restricted Stock pursuant to Section 2. The Employee hereby acknowledges and agrees that the Company shall retain custody of such certificate or certificates until the restrictions imposed by Section 2 on the Common Stock granted hereunder lapse. As a condition to the receipt of this Restricted Stock Award, the Employee shall deliver to the Company a stock power, duly endorsed in blank, relating to the Restricted Stock. Alternatively, instead of issuing a stock certificate, the shares may be issued in book entry form. No certificates shall be issued for fractional shares.




(b) As soon as practicable following the vesting of the Restricted Stock pursuant to Section 2, certificates for the Restricted Stock which shall have vested shall be delivered to the Employee or to the Employee’s legal guardian or representative along with the stock powers relating thereto. If the shares have been issued in book entry form, the restrictive notation made pursuant to Section 5 of this Agreement shall be removed. If vesting occurs due to Employee’s death, such certificates shall be delivered or notation removed not later than 15 business days after the later of (i) the Employee’s death and (ii) receipt by the Company of written notice of the administrator’s or executor’s status and evidence satisfactory to the Company to establish the validity of the transfer of the vested shares and compliance with any laws or regulations pertaining to said transfer.
4. Rights as a Shareholder. The Employee shall have no rights as a shareholder of the Company until the shares underlying the Award are issued. Once issued, the Employee shall be the record owner of the Restricted Stock unless or until such Restricted Stock is forfeited pursuant to Section 2 hereof or is otherwise sold, and as record owner shall be entitled to all rights of a common shareholder of the Company (including, without limitation, the right to vote and to receive dividends and other distributions on the shares of Restricted Stock).
5. Legend on Certificates. The certificates representing the vested Restricted Stock delivered to the Employee shall bear the following legend:
The sale or other transfer of the shares of stock represented by this certificate, whether voluntary, involuntary or by operation of law, is subject to certain restrictions on transfer set forth in the ITC Holdings Corp. Second Amended and Restated 2006 Long Term Incentive Plan (“Plan”), rules and administrative guidelines adopted pursuant to such Plan and an Agreement dated May 19, 2015. A copy of the Plan, such rules and such Agreement may be obtained from the Secretary of ITC Holdings Corp.
Such certificates shall also be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission or any stock exchange upon which such Common Stock is listed, any applicable Federal or state laws and the Company’s Articles of Incorporation and Bylaws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. If issued in book entry form, a notation shall be made therewith to the same restrictive effect as set forth above. The Employee shall be entitled to removal of the legend in accordance with Section 10.3(c) of the Plan.
6. Transferability. The Restricted Stock Award may not, at any time prior to becoming vested pursuant to Section 2 or thereafter, be transferred, sold, assigned, pledged, hypothecated or otherwise alienated; provided, however, that in accordance with Section 10.3 of the Plan, the Restricted Stock granted pursuant to the Restricted Stock Award may be transferred, sold, assigned, pledged, hypothecated or otherwise alienated when vested in accordance with Section 2 hereof.
7. Employee’s Employment by the Company. Nothing contained in this Agreement (i) obligates the Company or any Subsidiary to employ the Employee in any capacity whatsoever or (ii) prohibits or restricts the Company or any Subsidiary from terminating the employment, if any, of the Employee at any time or for any reason whatsoever, with or without cause, and the Employee hereby acknowledges and agrees that neither the Company nor any other person or entity has made any representations or promises whatsoever to the Employee concerning the Employee’s employment or continued employment by the Company or any Subsidiary thereof.




8. Change in Capitalization. In the event of a merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property), stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting the Common Stock or the value thereof, prior to the time the restrictions imposed by Section 2 on the Restricted Stock granted hereunder lapse, such adjustments and other substitutions shall be made to the Restricted Stock Awards as the Committee, in its sole discretion, deems equitable or appropriate. Any stock, securities or other property exchangeable for Restricted Stock pursuant to such transaction shall be deposited with the Company and shall become subject to the restrictions and conditions of this Agreement to the same extent as if it had been the original property granted hereby, all pursuant to the Plan.
9. Withholding. The Company shall have the right to withhold from Employee’s compensation or to require Employee to remit sufficient funds to satisfy applicable withholding for income and employment taxes upon the vesting of Restricted Stock pursuant to Section 2. Subject to limitations in the Plan, Employee may, in order to fulfill the withholding obligation, tender previously-acquired shares of Common Stock that have been held at least six months (including vested shares subject to this Restricted Stock Award), provided that the shares have an aggregate Fair Market Value sufficient to satisfy in whole or in part the applicable withholding taxes. The Company shall be authorized to take such action as may be necessary, in the opinion of the Company’s counsel (including, without limitation, withholding vested Common Stock otherwise deliverable to the Employee and/or withholding amounts from any compensation or other amount owing from the Company to the Employee), to satisfy the obligations for payment of the minimum amount of any such taxes.
10. Limitation on Obligations. The Company’s obligation with respect to the Restricted Stock granted hereunder is limited solely to the delivery to the Employee of shares of Common Stock on the date when such shares are due to be delivered hereunder, and in no way shall the Company become obligated to pay cash in respect of such obligation. This Restricted Stock Award shall not be secured by any specific assets of the Company or any of its Subsidiaries, nor shall any assets of the Company or any of its subsidiaries be designated as attributable or allocated to the satisfaction of the Company’s obligations under this Agreement. In addition, the Company shall not be liable to the Employee for damages relating to any delay in issuing the share certificates, any loss of the certificates, or any mistakes or errors in the issuance of the certificates or in the certificates themselves.
11. Securities Laws. Upon the vesting of any Restricted Stock, the Company may require the Employee to make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement. The granting of the Restricted Stock hereunder shall be subject to all applicable laws, rules and regulations and to such approvals of any governmental agencies as may be required.
12. Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary, and any notice to be given to the Employee shall be addressed to him or her at the address stated in the Company’s employee records. By a notice given pursuant to this Section 12, either party may hereafter designate a different address for notices to be given to the party. Any notice that is required to be given to the Employee shall, if the Employee is then deceased, be given to the Employee’s personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 12. Any notice shall have been deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.




13. Governing Law. The laws of the State of Michigan shall govern the interpretation, validity and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.
14. Amendment. Subject to Section 2(b) of this Agreement and Sections 9.1 and 10.6 of the Plan, this Agreement may be amended only by a writing executed by the parties hereto if such amendment would adversely affect Employee. Any such amendment shall specifically state that it is amending this Agreement.
15. Recoupment Policy. This Agreement, the Restricted Stock Award and any economic benefits recognized by Employee in connection with the Restricted Stock Award (including, without limitation, the proceeds from the sale of shares subject to the Restricted Stock Award) are subject to forfeiture and/or recoupment pursuant to the Company’s Recoupment Policy adopted November 26, 2013, as amended from to time.
16. Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
[Signatures on next page]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Grant Date.
EMPLOYEE
___First Name/Last Name_______________________

ITC HOLDINGS CORP.
By: /s/ Christine Mason Soneral___________
Name: Christine Mason Soneral
Title: Senior Vice President and General Counsel







Exhibit 10.147
PERFORMANCE SHARE AWARD AGREEMENT
THIS AGREEMENT (the “Agreement”) is made effective as of (____) (the “Grant Date”), between ITC Holdings Corp., a Michigan corporation (hereinafter called the “Company”), and the individual whose name is set forth on the signature page hereof, who is an employee of the Company or a Subsidiary of the Company, hereinafter referred to as the “Employee”. Capitalized terms not otherwise defined herein shall have the same meanings as in the Second Amended and Restated 2006 Long Term Incentive Plan, as may be further amended from time to time (the “Plan”).
WHEREAS, the Committee desires to grant the Employee shares of Common Stock, pursuant to the terms and conditions of this Agreement (the “Award”) and the Plan (the terms of which are hereby incorporated by reference and made a part of this Agreement);
WHEREAS, this Agreement and the grants made pursuant to this Agreement are not otherwise subject to and shall not be governed by any Management Stockholder’s Agreement between Company and Employee; and
WHEREAS, the Committee has determined that it would be in the best interest of the Company and its shareholders to grant the shares of Common Stock provided for herein to the Employee as an incentive for increased efforts during his or her employment, has approved the grant of the Award on the Grant Date and has advised the Company thereof and instructed the undersigned officer to grant said Award.
NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:
1. Grant of the Award. Subject to the terms and conditions of the Plan and the additional terms and conditions set forth in this Agreement, the Company hereby grants to the Employee ________ shares (the “Target Number”) of Common Stock (hereinafter called the “Performance Shares”). The maximum number of Performance Shares that may be received by Employee pursuant to this Award shall be 200% of the Target Number, plus any Vested Equivalent Performance Shares (as defined in Section 4) received pursuant to Section 4. The Performance Shares shall Vest and become freely transferable and nonforfeitable in accordance with Section 2. The Award is designated as a Code Section 162(m) Award in accordance with Section 7.1 of the Plan. In the event of any conflict between the Plan and this Agreement, the terms of the Plan shall control, it being understood that variations in this Agreement from terms set forth in the Plan shall not be considered to be in conflict if the Plan, whether explicitly or implicitly, permits such variations.
2. Vesting and Forfeiture.
(a) The Performance Shares shall become Vested as follows: (i) in accordance with the provisions of Exhibit A and so long as the Employee continues to be employed by the Company or its Subsidiaries through the “Vesting Date” (as defined in Exhibit A), to the extent one or more of the performance goals set forth in Exhibit A hereto are satisfied during the Performance Period (as defined in Exhibit A), (ii) in accordance with Section 2(c) if the Employee ceases to be employed by the Company and its Subsidiaries before the Vesting Date due to Employee’s death or Disability, or (iii) in accordance with Section 2(d) if




the Employee ceases to be employed by the Company and its Subsidiaries before the Vesting Date due to Retirement or a Change in Control Termination (each as defined below).
(b) If Employee’s employment is terminated prior to the Vesting Date for any reason other than Employee’s death, Disability, Retirement or a Change in Control Termination, Employee’s right to shares of Common Stock subject to the Award automatically shall terminate and be forfeited by Employee. The Committee shall have no discretion to waive all or part of the conditions, goals and restrictions applicable to the receipt of full or partial payment of an Award except in the case of the death, Disability or Change in Control Termination of the Employee.
(c) If Employee’s employment is terminated prior to the Vesting Date due to Employee’s death or Disability, then the Target Number of Performance Shares, together with the number of Equivalent Performance Shares to be issued pursuant to Section 4 that are held in Employee’s notional account on the date of termination, shall Vest on the date of such termination. Such shares shall be issued pursuant to Section 3(b) not later than 15 business days after the later of (i) the Employee’s date of termination of employment and (ii) if termination is due to death, receipt by the Company of written notice of the administrator’s or executor’s status and evidence satisfactory to the Company to establish the validity of the transfer of the Vested shares and compliance with any laws or regulations pertaining to said transfer.
[FOR ALL GRANTEES OTHER THAN JOSEPH WELCH:]
(d) If Employee’s employment is terminated prior to the Vesting Date due to a Change in Control Termination or Retirement, then Employee shall be entitled to a pro rata portion (determined in increments of 33-1/3% of such shares as of each one year anniversary of the Grant Date that has occurred on or before the date of termination) of the Performance Shares that would otherwise have become Vested in accordance with Exhibit A if the Employee had not terminated employment prior to the Vesting Date, together with the corresponding number of Equivalent Performance Shares to be issued pursuant to Section 4. Such shares shall Vest on the Vesting Date and shall be issued pursuant to Section 3(b) following Vesting, in accordance with the procedures described in Exhibit A.
[FOR JOSEPH WELCH ONLY:]
(d) If Employee’s employment is terminated on or before the one year anniversary of the Grant Date due to a Change in Control Termination or Retirement, then Employee shall be entitled to a pro rata portion (calculated based on the number of days Employee was employed by the Company from and after the Grant Date through the date of termination relative to the full number of days from the Grant Date through the Vesting Date) of the Performance Shares that would otherwise have become Vested in accordance with Exhibit A if the Employee had not terminated employment prior to the Vesting Date, together with the corresponding number of Equivalent Performance Shares to be issued pursuant to Section 4. If Employee’s employment is terminated after the one year anniversary of the Grant Date due to a Retirement, then Employee shall be entitled to the Performance Shares that would otherwise have become Vested in accordance with Exhibit A if the Employee had not terminated employment prior to the Vesting Date, together with the corresponding number of Equivalent Performance Shares to be issued pursuant to Section 4. Such shares shall Vest on the Vesting Date and shall be issued pursuant to Section 3(b) following Vesting, in accordance with the procedures described in Exhibit A.
(e) A “Change in Control Termination” shall mean a termination of the Employee’s employment by the Company without “Cause” or, if the Employee is a party to a written employment agreement with the Company, by the Employee for “Good Reason” (as defined in such agreement as in effect from time to time), which termination occurs after:




(i)    the execution of an agreement to which the Company is a party pursuant to which a Change in Control has occurred or will occur (upon consummation of the transactions contemplated by such agreement) but, if a Change in Control has occurred pursuant thereto, not more than two years after such Change in Control, and if a Change in Control has not yet occurred pursuant thereto, while such agreement remains executory; or
(ii)    the occurrence of a Change in Control not pursuant to an agreement with the Company, but not more than two years thereafter.
(f) “Cause” shall mean (i) if Employee is a party to a written employment agreement with the Company or a Subsidiary, “Cause” as defined in such agreement, as in effect from time to time, and (ii) in all other cases, (A) Employee’s continued failure substantially to perform the Employee’s duties to the Company or its affiliates (other than as a result of total or partial incapacity due to physical or mental illness) for a period of 10 days following written notice by the Company to the Employee of such failure, (B) dishonesty in the performance of the Employee’s duties, (C) the Employee’s conviction of, or plea of nolo contendere to a crime constituting (x) a felony under the laws of the United States or any state thereof, or (y) a misdemeanor involving moral turpitude, (D) the Employee’s willful malfeasance or willful misconduct in connection with the Employee’s duties or any act or omission which is injurious to the financial condition or business reputation of the Company or its affiliates, or (E) the Employee’s breach of any non-compete or confidentiality obligations to the Company or its affiliates.
(g) “Retirement” shall mean termination of Employee’s employment by Employee or the Company for any reason other than death or Disability after Employee’s Normal Retirement Age (as defined in the International Transmission Company Retirement Plan).
3. Certificates.
(a) Certificates evidencing the Target Number of Performance Shares shall be issued by the Company and shall be registered in the Employee’s name on the stock transfer books of the Company promptly after the Grant Date, but shall remain in the physical custody of the Company or its designee at all times prior to Vesting pursuant to Section 2. The Employee hereby acknowledges and agrees that the Company shall retain custody of such certificate or certificates until the restrictions imposed by Section 2 on the Common Stock granted hereunder lapse. As a condition to the receipt of this Award, the Employee shall deliver to the Company a stock power, duly endorsed in blank, relating to the Performance Shares. Alternatively, instead of issuing a stock certificate, the shares may be issued in book entry form. No certificates shall be issued for fractional shares.
(b) As soon as practicable following Vesting pursuant to Section 2, certificates for the Performance Shares that have Vested shall be delivered to the Employee or to the Employee’s legal guardian or representative, along with the stock powers relating thereto. If the shares have been issued in book entry form, any restrictive notation made pursuant to Section 5 of this Agreement shall be removed.
4. Rights as a Shareholder. The Employee shall have no rights as a shareholder of the Company with respect to any of the Performance Shares until such shares are issued. Once issued, the Employee shall be the record owner of such issued Performance Shares unless or until such Performance Shares are forfeited pursuant to Section 2 or are otherwise sold, and as record owner shall be entitled to all rights of a common shareholder of the Company (including, without limitation, the right to vote and to receive dividends and other distributions on the Target Number of Performance Shares). Dividends and other distributions paid on the Target Number of Performance Shares prior to the Vesting Date (or any earlier termination date under Section 2(c)) shall be retained by the Company and converted into equivalent




additional Performance Shares based on the Fair Market Value per share on the stated dividend payment date (“Equivalent Performance Shares”) so that, to the extent the underlying Performance Shares are later Vested or forfeited, the Equivalent Performance Shares shall be Vested or forfeited in the same proportion. Such Equivalent Performance Shares (including fractional Equivalent Performance Shares) shall be accumulated by the Company in a notional account for Employee, shall not accrue interest and, until they are issued by the Company and outstanding, shall not be entitled to vote or receive dividends or distributions. To the extent the proportion of the Target Number of Performance Shares deemed “earned” pursuant to Exhibit A (following determination by the Committee and any permitted downward adjustment) exceeds 100%, additional Equivalent Performance Shares shall be credited to Employee’s notional account so that the number of Equivalent Performance Shares held in Employee’s account is equal to the number that would have been held in Employee’s account if the number of “earned” Performance Shares pursuant to Exhibit A had been issued as of the Grant Date rather than the Target Number. The Vested Equivalent Performance Shares to Employee shall be issued at the time the underlying Vested Performance Shares are delivered pursuant to Section 3(b) (together with a check for the Fair Market Value (as of the Vesting Date) of any fractional share to which Employee would otherwise be entitled) and any remaining Equivalent Performance Shares in such notional account shall be forfeited at such time.
5. Legend on Certificates. The certificates representing the Vested Performance Shares delivered to the Employee shall bear the following legend:
The sale or other transfer of the shares of stock represented by this certificate, whether voluntary, involuntary or by operation of law, is subject to certain restrictions on transfer set forth in the ITC Holdings Corp. Second Amended and Restated 2006 Long Term Incentive Plan (“Plan”), rules and administrative guidelines adopted pursuant to such Plan and an Agreement dated [date of grant agreement]. A copy of the Plan, such rules and such Agreement may be obtained from the Secretary of ITC Holdings Corp.
Such certificates shall also be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission or any stock exchange upon which such Common Stock is listed, any applicable Federal or state laws and the Company’s Articles of Incorporation and Bylaws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. If issued in book entry form, a notation shall be made therewith to the same restrictive effect as set forth above. The Employee shall be entitled to removal of the legend in accordance with Section 10.3(c) of the Plan.
6. Transferability. The Award may not, at any time prior to becoming Vested pursuant to Section 2, be transferred, sold, assigned, pledged, hypothecated or otherwise alienated; provided, however, that in accordance with Section 10.3 of the Plan, the Performance Shares granted pursuant to the Award may be transferred, sold, assigned, pledged, hypothecated or otherwise alienated when Vested in accordance with Section 2.
7. Employee’s Employment. Nothing contained in this Agreement (i) obligates the Company or any Subsidiary to employ the Employee in any capacity whatsoever or (ii) prohibits or restricts the Company or any Subsidiary from terminating the employment, if any, of the Employee at any time or for any reason whatsoever, with or without cause, and the Employee hereby acknowledges and agrees that neither the Company nor any other person or entity has made any representations or promises whatsoever




to the Employee concerning the Employee’s employment or continued employment by the Company or any Subsidiary thereof.
8. Change in Capitalization. In the event of a merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property), stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting the Common Stock or the value thereof, prior to the time the restrictions imposed by Section 2 on the Performance Shares granted hereunder lapse, such adjustments and other substitutions shall be made to the Award as the Committee, in its sole discretion, deems equitable or appropriate. Any stock, securities or other property exchangeable for Performance Shares pursuant to such transaction shall be deposited with the Company and shall become subject to the restrictions and conditions of this Agreement to the same extent as if it had been the original property granted hereby, all pursuant to the Plan.
9. Withholding. The Company shall have the right to withhold from Employee’s compensation or to require Employee to remit sufficient funds to satisfy applicable withholding for income and employment taxes upon the Vesting of Performance Shares pursuant to Section 2. Subject to limitations in the Plan, Employee may, in order to fulfill the withholding obligation, tender previously-acquired shares of Common Stock (including Vested Performance Shares), provided that the shares have an aggregate Fair Market Value sufficient to satisfy in whole or in part the applicable withholding taxes. The Company shall be authorized to take such action as may be necessary, in the opinion of the Company’s counsel (including, without limitation, withholding Vested Common Stock or Performance Shares otherwise deliverable to the Employee and/or withholding amounts from any compensation or other amount owing from the Company to the Employee), to satisfy the obligations for payment of the minimum amount of any such taxes.
10. Limitation on Obligations. The Company’s obligation with respect to the Performance Shares granted hereunder is limited solely to the delivery to the Employee of shares of Common Stock on the date when such shares are due to be delivered hereunder, and in no way shall the Company become obligated to pay cash in respect of such obligation. This Award shall not be secured by any specific assets of the Company or any of its Subsidiaries, nor shall any assets of the Company or any of its Subsidiaries be designated as attributable or allocated to the satisfaction of the Company’s obligations under this Agreement. In addition, the Company shall not be liable to the Employee for damages relating to any delay in issuing the share certificates, any loss of the certificates, or any mistakes or errors in the issuance of the certificates or in the certificates themselves.
11. Securities Laws. Upon the Vesting of any Performance Shares, the Company may require the Employee to make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement. The granting of the Award hereunder shall be subject to all applicable laws, rules and regulations and to such approvals of any governmental agencies as may be required.
12. Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary, and any notice to be given to the Employee shall be addressed to him or her at the address stated in the Company’s employee records. By a notice given pursuant to this Section 12, either party may hereafter designate a different address for notices to be given to the party. Any notice that is required to be given to the Employee shall, if the Employee is then deceased, be given to the Employee’s personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 12. Any notice shall have been deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as




aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
13. Governing Law. The laws of the State of Michigan shall govern the interpretation, validity and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.
14. Amendment. Subject to Sections 9.1 and 10.6 of the Plan, this Agreement may be amended only by a writing executed by the parties hereto if such amendment would adversely affect the Employee. Any such amendment shall specifically state that it is amending this Agreement.
15. Recoupment Policy. This Agreement, the Award and any economic benefits recognized by Employee in connection with the Award (including, without limitation, the proceeds from the sale of shares subject to the Award) are subject to forfeiture and/or recoupment pursuant to the Company’s Recoupment Policy adopted November 26, 2013, as amended from to time.
16. Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
[Signatures on next page]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Grant Date.
EMPLOYEE
(signature) ______________________
(Print name) _____________________

ITC HOLDINGS CORP.
By: ______________________________
Name: Christine Mason Soneral
Title: Senior Vice President and General Counsel


EXHIBIT A TO PERFORMANCE SHARE AWARD AGREEMENT

The performance period for the Award shall be January 1, 2015 through December 31, 2017 (the “Performance Period”). The performance measures shall be (1) cumulative Total Shareholder Return for the Company in comparison to the published Total Shareholder Return during the Performance Period for each of the companies that comprise the Dow Jones Utilities Index, excluding any company that is no longer traded on a “national securities exchange” (as defined in the Exchange Act) at the end of the Performance Period (the “DJUI Companies”) and (2) average compound annual growth rate of Diluted GPS Growth during the Performance Period. The performance measures are independent of each other; that is, if the threshold level of one performance measure is attained, Performance Shares relating to that




measure will Vest (assuming employment continues through the Vesting Date or termination is due to death, disability, Change in Control Termination or Retirement) even if the threshold level of the other performance measure is not attained. One-half of the Target Number of shares shall be related to the Total Shareholder Return goal (the “TSR Target Shares”) and one-half of the Target Number of shares shall be related to the Diluted EPS Growth goal (the “EPS Target Shares”). The “Vesting Date” shall be the three year anniversary of the Grant Date (May 19, 2018).

Total Shareholder Return

The Total Shareholder Return of the Company and the DJUI Companies shall be computed as follows:

A: Calculate the average of the closing prices per share on the relevant securities exchange for its common stock (or equivalent security) from December 1, 2014 to December 31, 2014

B: Calculate the average of the closing prices per share on the relevant stock exchange for its common stock (or equivalent security) from December 1, 2017 to December 31, 2017

C: Calculate the total dividends paid per share of its common stock (or equivalent security) during the Performance Period

Total Shareholder Return = ((B - A) + C)/A

In no event shall the number of Performance Shares earned for the Total Shareholder Return measurement (excluding Equivalent Performance Shares) exceed the TSR Target Shares if Total Shareholder Return for the Performance Period is less than 0%.

Diluted EPS Growth

Diluted EPS Growth shall be equal to the average compound annual growth rate of “Diluted EPS” for the Company during the Performance Period calculated by comparing “Diluted EPS” for the Company for 2017 to “Diluted EPS” for the Company for 2014.

“Diluted EPS” shall be equal to earnings per share as reflected on the Company’s audited financial statements for the relevant year as adjusted for the following items (including the related tax effects):

•
Asset impairments;
•
Gains or losses associated with debt extinguishment;
•
Expenses related to merger and acquisition activity (for transactions for which a binding agreement has been executed) and corporate structuring (for transactions that have received board authorization to enact the corporate change);
•
Expenses recognized for actual or probable payment of development fees (as may be required pursuant to the Membership Interest Purchase Agreement at ITC Lake Erie Holdings LLC dated June 4, 2014 or future development initiatives);
•
Amounts recognized for actual or probable rate refunds as a result of Section 205 or 206 proceedings at FERC (including the prospective effects of any items requiring refunds when not included in establishing the targets);
•
Changes in tax laws;
•
Changes in accounting standards; and
•
Additionally, net income to be used will be before any Unusual or Infrequently Occurring Items as defined by ASC 225-20 and Discontinued Operations as defined by ASC 205-20.





Performance Goals Table
Measurement Category
Goal at Threshold
Shares at Threshold
Goal at Target
Shares at Target
Goal at Maximum
Shares at Maximum
Total Shareholder Return
30th percentile
50% of TSR Target Shares
50th percentile
100% of TSR Target Shares
90th percentile
200% of TSR Target Shares
Diluted EPS Growth
10% growth
50% of EPS Target Shares
11% growth
100% of EPS Target Shares
13% growth
200% of EPS Target Shares

The number of Performance Shares “earned” with respect to each measurement category (subject to Vesting as otherwise provided in this Agreement) shall be prorated between levels based on performance.

Promptly after the end of the Performance Period, the Committee shall cause to be made the necessary calculations to determine the extent to which the performance goals have been attained and certify in writing (which writing may include the minutes for any meeting of the Committee): (i) whether and the extent to which the Company has attained one or both of the performance goals, and (ii) if so, the percentage of the TSR Target Shares and EPS Target Shares eligible to become Vested on the Vesting Date. Calculations relating to the Diluted EPS Growth goal shall be based on the Company’s audited financial statements to the extent practicable. Except as provided in Section 2(c), the Performance Shares, along with the corresponding number of Equivalent Performance Shares to be issued pursuant to Section 4, shall Vest and become freely transferable and nonforfeitable on the Vesting Date to the extent determined in the Committee’s certification; provided that at or before the date of its written certification, the Committee may, in its discretion, reduce the number of Performance Shares that are otherwise to become Vested (which shall also reduce the corresponding number of Equivalent Performance Shares) based on such factors as may be determined appropriate by the Committee under prevailing circumstances, including, without limitation, a determination by the Committee that such a reduction is appropriate in light of pay practices of competitors prevailing at the time, or the performance of the Company, a Subsidiary or the Employee relative to the performance of competitors or performance with respect to the Company’s strategic business goals.







Exhibit 10.148
NOTICE TO OPTION HOLDERS UNDER
THE SECOND AMENDED AND RESTATED 2006 LONG TERM INCENTIVE PLAN
The Compensation Committee, in accordance with the terms of the Second Amended and Restated 2006 Long Term Incentive Plan (the “Plan”), has determined to amend stock option awards granted in 2014 under the Plan to modify the definition of “Change in Control Termination”. This change is for the benefit of holders and does not adversely affect your rights. Therefore, no signature is necessary to make this amendment effective. Please retain a copy of this notice and amendment for your records.
AMENDMENT TO STOCK OPTION AGREEMENTS UNDER 2006 LTIP
This Amendment, dated as of (_____), between ITC Holdings Corp. (the “Company”) and the Optionee. The Stock Option Agreement granted to Employee in May 2014 under the Second Amended and Restated 2006 Long Term Incentive Plan is hereby amended as set forth below.
Section 3.1(c) is amended and restated in its entirety as follows:
(c) A “Change in Control Termination” shall mean a termination of the Employee’s employment by the Company without “Cause” or, if the Employee is a party to a written employment agreement with the Company, by the Employee for “Good Reason” (as defined in such agreement as in effect from time to time), which termination occurs after:
(i)    the execution of an agreement to which the Company is a party pursuant to which a Change in Control has occurred or will occur (upon consummation of the transactions contemplated by such agreement) but, if a Change in Control has occurred pursuant thereto, not more than two years after such Change in Control, and if a Change in Control has not yet occurred pursuant thereto, while such agreement remains executory; or
(ii)    the occurrence of a Change in Control not pursuant to an agreement with the Company, but not more than two years thereafter.







Exhibit 10.149

NOTICE TO 2014 and 2015 RESTRICTED STOCK AWARD HOLDERS UNDER
THE SECOND AMENDED AND RESTATED 2006 LONG TERM INCENTIVE PLAN
The Compensation Committee, in accordance with the terms of the Second Amended and Restated 2006 Long Term Incentive Plan (the “Plan”), has determined to amend restricted stock awards granted under the Plan to modify the definition of “Change in Control Termination” and to clarify certain other language in the award agreement. These changes are for the benefit of holders and do not adversely affect your rights. Therefore, no signature is necessary to make this amendment effective. Please retain a copy of this notice and amendment for your records.
AMENDMENT TO RESTRICTED STOCK AWARD AGREEMENT UNDER 2006 LTIP
This Amendment, dated as of (____), between ITC Holdings Corp. (the “Company”) and the Employee. Each Restricted Stock Award Agreement granted to Employee in 2014 and 2015 under the Second Amended and Restated 2006 Long Term Incentive Plan is hereby amended as set forth below.
1.    Section 2(b) is amended by adding the word “Termination” after the words “Change in Control”.
2.    Section 2(d) is amended and restated in its entirety as follows:
(d) A “Change in Control Termination” shall mean a termination of the Employee’s employment by the Company without “Cause” or, if the Employee is a party to a written employment agreement with the Company, by the Employee for “Good Reason” (as defined in such agreement as in effect from time to time), which termination occurs after:
(i)    the execution of an agreement to which the Company is a party pursuant to which a Change in Control has occurred or will occur (upon consummation of the transactions contemplated by such agreement) but, if a Change in Control has occurred pursuant thereto, not more than two years after such Change in Control, and if a Change in Control has not yet occurred pursuant thereto, while such agreement remains executory; or
(ii)    the occurrence of a Change in Control not pursuant to an agreement with the Company, but not more than two years thereafter.
3.    Section 6 is amended by adding the word “Award” after the words “Restricted Stock” in the first line and by adding the following at the end of Section 6:
; provided, however, that in accordance with Section 10.3 of the Plan, the Restricted Stock granted pursuant to the Restricted Stock Award may be transferred, sold, assigned, pledged, hypothecated or otherwise alienated when vested in accordance with Section 2 hereof.







Exhibit 10.150


EMPLOYMENT AGREEMENT
Christine Mason Soneral

This EMPLOYMENT AGREEMENT (the “Agreement”) is dated as of February 3, 2015 (the “Effective Date”) by and between ITC Holdings Corp. (the “Company”) and Christine Mason Soneral (the “Executive”).
WHEREAS, the Executive and the Company currently are parties to an employment agreement dated as of December 21, 2012 governing the terms of the Executive’s employment with the Company (the “Prior Employment Agreement”);
WHEREAS, the Company and the Executive desire to modify certain provisions of the Prior Employment Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein and for other good and valuable consideration, and intending to be legally bound hereby, the parties agree as follows:
1.Term of Employment. Subject to the provisions of Section 7 of this Agreement, Executive shall be employed by the Company, International Transmission Company and any of their subsidiaries and/or affiliates that the Board of Directors of the Company (the “Board”) shall designate (collectively, the “Employer”) for an initial period commencing on the Effective Date and ending on February 3, 2017 on the terms and subject to the conditions set forth in this Agreement; provided, however, that such period of employment shall automatically be extended for successive one‑year periods unless the Employer or Executive, at least thirty (30) days prior to the end of any such period, provides written notice to the other party of the intent not to extend such period of employment for any additional one-year period. For purposes of this Agreement, the term “Employment Term” shall mean the period of time during which Executive is employed by Employer under this Agreement.
2.Position.
a.During the Employment Term, Executive shall serve as the Employer’s Senior Vice President. In such position, Executive shall have such duties and authority as the Chief Executive Officer of the Employer (the “Chief Executive Officer”) determines from time to time. If requested, Executive shall also serve as a member of the Board without additional compensation.
b.During the Employment Term, Executive will devote Executive’s full business time and best efforts to the performance of Executive’s duties hereunder and will not engage in any other business, profession or occupation for compensation or otherwise which would conflict or interfere with the rendition of such services either directly or indirectly, without the prior written consent of the Chief Executive Officer; provided that nothing herein shall preclude Executive, subject to the prior approval of the Chief Executive Officer, from accepting appointment to or continue to serve on any board of directors or trustees of any business corporation or any charitable organization; provided in each case, and in the aggregate, that such activities do not conflict or interfere with the performance of Executive’s duties hereunder or conflict with Section 8 of this Agreement.




3.Base Salary. During the Employment Term, the Employer shall pay Executive a base salary at the annual rate of $350,000.00, payable in regular installments in accordance with the Employer’s normal payroll practices. Executive’s base salary shall be reviewed annually by the Board and Executive shall be entitled to such increases in Executive’s base salary, if any, as may be determined from time to time in the sole discretion of the Board. Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as the “Base Salary”.
4.Annual Bonus. During the Employment Term, Executive shall be eligible to earn an annual bonus award in respect of each fiscal year of Employer (an “Annual Bonus”), payable upon the Employer’s achievement of certain performance targets established by the Board and after application of any multipliers approved by the Board, pursuant to the terms of an incentive compensation plan established by the Board (the “Incentive Plan”). Executive’s target Annual Bonus for each fiscal year of Employer shall be that percentage of the Executive’s Base Salary as the Board may establish from time to time (the “Target Bonus”), but shall generally be one hundred percent (100%) of Executive’s Base Salary, plus any multipliers approved by the Board. The foregoing notwithstanding, any Annual Bonus to which Executive is entitled shall be paid no later than two and a half (2-1/2) months after the later of the end of the fiscal or calendar year in which such Annual Bonus is no longer subject to a substantial risk of forfeiture (as defined under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and Internal Revenue Service (“IRS”) guidance issued thereunder).
5.Employee Benefits and Perquisites; Business Expenses.
a.Employee Benefits. During the Employment Term, Executive shall be entitled to participate in the Employer’s employee benefit and retirement plans (the “ITC Plans”) as in effect from time to time as determined by the Board, which provide certain benefits (collectively the “Employee Benefits”) to Executive, including the following plans: (i) welfare benefit plans (including active medical, life, disability, flexible spending accounts and other related welfare plans); (ii) fringe benefit plans (including education assistance and adoption assistance); (iii) retiree welfare benefit plans (medical and life insurance); (iv) qualified and non-qualified defined benefit and defined contribution plans; and (v) vacation plans (except that there shall be limitations set on the amount of vacation that Executive may carry forward from any given calendar year to the next).
b.Perquisites. During the Employment Term, Executive shall also be entitled to receive such perquisites as are generally provided to executives of the Employer from time to time, as determined by the Board (or a compensation committee thereof).
c.Business Expenses. During the Employment Term, reasonable business expenses incurred by Executive in the performance of Executive’s duties hereunder shall be reimbursed by the Employer in accordance with the Employer’s policies; provided that such reimbursement shall in any event occur no later than ninety (90) days after the date on which an eligible business expense is incurred.
6.Equity Participation. Executive’s equity participation in the Company has been or will be documented pursuant to some or all of the 2003 Stock Purchase and Option Plan for Key Employees of the Company and its Subsidiaries and the associated Management Stockholder’s Agreement, the Second Amended and Restated ITC Holdings Corp. 2006 Long Term Incentive Plan and the associated Amendment to Management Stockholder’s Agreement, and in one or more Stock Option, Restricted Stock Award and Sale Participation Agreements associated therewith, each as executed by the Executive, the Company, and its shareholders, as applicable (such documents, collectively, the “Equity Documents”). The Company and Executive each acknowledges that the terms and conditions of the aforementioned documents govern Executive’s acquisition, vesting, holding, sale or other disposition of Executive’s equity in the Company, and Executive’s and the Company’s rights with respect thereto.
7.Termination. Executive’s employment hereunder may be terminated by either party at any time and for any reason, subject to the applicable provisions of this Section 7; provided that Executive will be required to give the Employer at least 30 days advance written notice of any resignation




of Executive’s employment; and provided, further, that the Employer will be required to give Executive at least ten (10) business days advance notice of a termination of Executive’s employment by the Employer without Cause (other than in the event of Executive’s Disability) (the “Employer Notice Period”), unless the Employer provides Executive with a payment equal to the Base Salary that would otherwise be payable in respect of any portion of the Employer Notice Period which the Employer elects to waive. Notwithstanding any other provision of this Agreement (and except as may otherwise be provided in the Equity Documents), the provisions of this Section 7 shall exclusively govern Executive’s rights upon termination of employment with the Employer.
a.By the Employer For Cause or By Executive Resignation Without Good Reason.
(i) Executive’s employment hereunder may be terminated by the Employer for Cause (as defined below) and shall terminate automatically upon Executive’s resignation without Good Reason.
(ii) For purposes of this Agreement, “Cause” shall mean (A) Executive’s continued failure substantially to perform Executive’s duties hereunder (other than as a result of total or partial incapacity due to physical or mental illness) for a period of 10 days following written notice by the Employer to Executive of such failure, (B) dishonesty in the performance of Executive’s duties hereunder, (C) Executive’s conviction of, or plea of nolo contendere to a crime constituting (x) a felony under the laws of the United States or any state thereof or (y) a misdemeanor involving moral turpitude, (D) Executive’s willful malfeasance or willful misconduct in connection with Executive’s duties hereunder or any act or omission which is injurious to the financial condition or business reputation of the Employer or affiliates or (E) Executive’s breach of the provisions of Sections 8 or 9 of this Agreement.
(iii) If Executive’s employment is terminated by the Employer for Cause or if Executive resigns without Good Reason (other than due to a Disability, as such term is defined below), Executive shall be entitled to receive:
(A)any Base Salary earned through the date of termination, payable at such time(s) as the Base Salary would otherwise be payable in accordance with the normal payroll practices of the Employer;
(B)any Annual Bonus earned but unpaid as of the date of termination for any previously completed fiscal year, payable in a lump sum at such time as such Annual Bonus would normally be paid under the Incentive Plan as provided in Section 4 hereof;
(C)reimbursement for any unreimbursed business expenses properly incurred by Executive through the date of termination, payable at such time(s) and in accordance with the Employer’s policy prior to the date of Executive’s termination; provided that such reimbursement shall in any event occur no later than ninety (90) days after the date on which an eligible business expense is incurred; and
(D)such Employee Benefits, if any, as to which Executive may be entitled under the applicable ITC Plans upon termination of employment hereunder.
The payments and benefits described in clauses (A) through (D) hereof are referred to, collectively, as the “Accrued Rights”.
Following such termination of Executive’s employment by the Employer for Cause or resignation by Executive without Good Reason, except as set forth in this Section 7(a)(iii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
b.Disability or Death.
(i) Executive’s employment hereunder shall terminate upon Executive’s death, and may be terminated by the Employer if Executive experiences a “Disability” (as such term shall be defined from time to time under Code Section 409A). Any question as to the existence of the Disability of




Executive as to which Executive and the Employer cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to Executive and the Employer. If Executive and the Employer cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Employer and Executive shall be final and conclusive for all purposes of the Agreement.
(ii) Upon termination of Executive’s employment hereunder for Disability or death, Executive, Executive’s then spouse, or Executive’s estate (as the case may be), shall be entitled to receive:
(A)    the Accrued Rights; and
(B)    a pro rata portion of the Target Bonus (calculated based on the number of days Executive was employed hereunder during the calendar year in which the date of such termination of employment occurs, relative to the applicable full calendar year), payable in a lump sum within fifteen (15) business days after the date of such termination of employment.
Following Executive’s termination of employment due to death or Disability, except as set forth in this Section 7(b)(ii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
c.By the Employer Without Cause or by Executive Resignation for Good Reason.
(i) Executive’s employment hereunder may be terminated (A) by the Employer without Cause (which shall not include Executive’s termination of employment due to death or Disability), or (B) or by Executive for Good Reason (as defined below).
(ii) For purposes of this Agreement, “Good Reason” shall mean (A) a greater than 10% reduction in the total value of Executive’s Base Salary, Target Bonus, and Employee Benefits, or (B) Executive’s job responsibility and authority are substantially diminished; and provided, further, that “Good Reason” shall cease to exist for an event unless:
(C)    no later than the 60th day following the initial existence of such Good Reason condition, Executive has given the Employer written notice thereof ;
(D)    the Employer is afforded a period of thirty (30) days to remedy the condition; and
(E)    in the absence of any such remedy, the Executive terminates employment within one hundred eighty (180) days following the end of the cure period described in (D) above.
(iii) If Executive’s employment is terminated by the Employer without Cause (other than by reason of Executive’s death or Disability) or by Executive for Good Reason, subject to Executive’s execution of a release of all claims against Employer as provided in Section 7(e)(ii), Executive shall be entitled to receive:
(A)the Accrued Rights;
(B)a pro rata portion of the Target Bonus (calculated based on the number of days Executive was employed hereunder during the calendar year in which the date of such termination of employment occurs, relative to the applicable full calendar year), payable based upon the Employer’s actual achievement of the performance targets for such year as determined under and at the time that such an Annual Bonus (if any) would normally be paid as set forth in Section 4 hereof;
(C)one or both of the following series of payments:




(I) continued payment in substantially equal installments and in accordance with the normal payroll practices of Employer, for a period of two (2) years following the date of termination of Executive’s employment hereunder (the “Severance Period”), of Executive’s annual rate of Base Salary as in effect immediately prior to such termination; and
(II) in the event that Executive’s employment is terminated hereunder within a period beginning six (6) months before and ending two (2) years after a Change in Control occurs, Executive shall receive the following additional amount: an amount equal to two (2) times the average of each of the Annual Bonuses that were payable to Executive (including any portion of any such Annual Bonus the receipt of which Executive elected to defer) for the three fiscal years immediately preceding the fiscal year in which Executive’s employment terminates, payable in substantially equal installments and in accordance with the normal payroll practices of Employer, over the period during which the Executive’s Base Salary will continue to be paid pursuant to the foregoing provisions of this Section 7(c)(iii)(C) (or, if applicable, over the remaining period during which such Base Salary payments will be made, in the event the Executive’s termination occurs within the six (6) month period before any such Change in Control occurs, beginning with the first payment due thirty (30) days after the Change in Control occurs);
(D)    continued provision of those applicable Employee Benefits that are medical, dental and vision benefits which are required to be made available by the Employer pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”); provided that all applicable COBRA coverage rules must be followed by Executive in order to continue such coverage(s) (including Executive’s timely payment of the entire applicable COBRA premium to the Plan Administrator), or the coverage(s) will be terminated. The Employer agrees to reimburse Executive for a portion of his applicable COBRA premium costs during that period ending on the earlier of (I) the date Executive is eligible (even if he does not enroll) for coverage under another employer-sponsored group health plan in connection with other employment obtained after Executive’s termination hereunder; or (II) eighteen (18) months after the date of termination of Executive’s employment hereunder. The Employer’s COBRA reimbursement amount shall be paid to Executive each payroll period (in accordance with the normal payroll practices of Employer, but subject to any applicable limitations on payments to a “specified employee” within the meaning of Code Section 409A, as set forth below) as a taxable amount equal to the sum of (III) the Employer’s portion of the premium payments due with respect to other executives with the same coverage(s) for such payroll period, plus (IV) such additional amount as is required to pay any income and/or payroll taxes due on the sum of the premium payment and the additional tax gross-up payment (as determined by the Employer’s independent accountants, assuming that the Executive pays income taxes at the highest applicable marginal rates for the calendar year in which such payments are to be made); and
(E)outplacement services of a duration of up to two (2) years from the date of termination (or until such earlier date on which Executive obtains other




employment), and at a level commensurate with Executive’s former position with the Employer, and by a provider as determined by the Employer in good faith.
The foregoing notwithstanding, in the event Executive is a “specified employee” within the meaning of Code Section 409A and in accordance with the involuntary “separation pay plan” exception under the Code Section 409A regulations, the total of all amounts paid to Executive pursuant to Sections 7(c)(iii)(C) and (D) hereof (and any other amount payable pursuant to this Section 7(c)(iii) that constitutes a payment under a “nonqualified deferred compensation plan” within the meaning of Code Section 409A) within the first six (6) months following such termination pursuant to this subsection shall not exceed two times the lesser of (I) the sum of the Executive’s annualized compensation based upon the annual rate of pay for services provided to the Employer for the calendar year preceding the calendar year in which the termination occurs (adjusted for any increase during that year that was expected to continue indefinitely, if the Executive had not terminated), or (II) the Code Section 401(a)(17) limit on compensation for the calendar year in which the Executive terminates. To the extent a portion of any such amount exceeds such limitation, the payment shall not commence until the first business day following the date that is six months after the date of termination of Executive’s employment hereunder (the period during which such payments may be limited under Code Section 409A, the “409A Period”), at which time Employer shall (III) pay to Executive, in one lump sum, an amount equal to all such amounts that would otherwise have been payable during the 409A Period, and (IV) thereafter continue to pay the remaining unpaid portion of any such amounts in accordance with the normal payroll practices of Employer, at the time or through the end of the period(s) otherwise provided above in this subsection.
Following Executive’s termination of employment by the Employer without Cause (other than by reason of Executive’s death or Disability) or by Executive for Good Reason, except as set forth in this Section 7(c)(iii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
d.Notice of Termination. Any purported termination of employment by the Employer or by Executive (other than due to Executive’s death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 12(h) hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated.
e.Board/Committee Resignation; Execution of Release of all Claims.
(i) Upon termination of Executive’s employment for any reason, Executive agrees to resign, as of the date of such termination and to the extent applicable, from the Board (and any committees thereof) and the board of directors (and any committees thereof) of any of the Company’s affiliates.
(ii) Upon termination of Executive’s employment for any reason, Executive agrees to execute a release (the “Release”) of all claims against the Company, its subsidiaries, affiliates, shareholders, directors, officers, employees, and agents, substantially in a form to be provided to Executive by Employer at such time. Notwithstanding anything set forth in this Agreement to the contrary, upon termination of Executive’s employment for any reason, Executive shall not receive any payments or benefits to which Executive may be entitled hereunder (other than those which by law cannot be subject to the execution of a release): (A) if Executive does not execute or otherwise revokes such Release; or (B) in the event Executive does execute the Release, until eight (8) days after the date Executive executes such Release (or until such other later date after which applicable law may provide that Executive cannot revoke such Release). Subject to the foregoing, if by no later than forty-five (45) days after the date of termination of Executive’s employment for any reason hereunder, Executive has (C)




not executed or has otherwise revoked such Release, or (D) Executive has executed the Release but the applicable revocation period referred to in the preceding sentence has not lapsed, then Executive shall in either case totally forfeit all payments and benefits to which Executive may be entitled under this Agreement (other than those which by law cannot be subject to the execution of a release), but this Agreement shall otherwise remain in full force and effect. In the event that prior to the end of such forty-five (45) day period, Executive has properly executed such Release, has not revoked the Release, and the applicable revocation period for the Release has lapsed, the payments and benefits due to Executive hereunder shall commence being paid or provided with the next scheduled payment date following the end of such revocation period; provided all payments that would otherwise have become due prior to such date shall be accumulated and paid when the first payment is made hereunder. The foregoing notwithstanding, in the event the forty-five (45) day period referred to in this subsection begins in one taxable year of the Executive and ends in a second taxable year, any payments and benefits due to Executive hereunder (to the extent required to be restricted under Code Section 409A and IRS guidance issued thereunder) shall commence being paid or provided with the first scheduled payment date on or after the beginning of such second taxable year.
8.Non-Competition.
a.Executive acknowledges and recognizes the highly competitive nature of the businesses of the Employer and its affiliates and accordingly agrees as follows:
(i) During the Employment Term and (x) in the event of a termination of Executive’s employment without Cause by Employer (other than due to Executive’s Disability) or for Good Reason by Executive, at all times during the Severance Period, or (y) in the event of any termination of Executive’s employment for Cause by Employer, due to Executive’s Disability or otherwise without Good Reason by Executive, for a period of one year following the date Executive ceases to be employed by the Employer (in either case, the “Restricted Period”), Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever (“Person”), directly or indirectly solicit or assist in soliciting in competition with the Employer, the business of any customer or prospective customer:
(A)    with whom Executive had personal contact or dealings on behalf of the Employer during the one-year period preceding Executive’s termination of employment;
(B)    with whom employees reporting to Executive have had personal contact or dealings on behalf of the Employer during the one year immediately preceding Executive’s termination of employment; or
(C)    for whom Executive had direct or indirect responsibility during the one year immediately preceding Executive’s termination of employment.
(ii) During the Restricted Period, Executive will not directly or indirectly:
(A)    engage in any business that competes with the business of the Employer or its affiliates (including, without limitation, businesses which the Employer or its affiliates have specific plans to conduct in the future and as to which Executive is aware of such planning) in any geographical area that is within 100 miles of any geographical area where the Employer or its affiliates manufactures, produces, sells, leases, rents, licenses or otherwise provides its products or services (a “Competitive Business”);
(B)    enter the employ of, or render any services to, any Person (or any division or controlled or controlling affiliate of any Person) who or which engages in a Competitive Business;




(C)    acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; or
(D)    interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Employer or any of its affiliates and customers, clients, suppliers, partners, members or investors of the Employer or its affiliates.
(iii) Notwithstanding anything to the contrary in this Agreement, Executive may, directly or indirectly own, solely as an investment, securities of any Person engaged in the business of the Employer or its affiliates which are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (A) is not a controlling person of, or a member of a group which controls, such person and (B) does not, directly or indirectly, own 5% or more of any class of securities of such Person.
(iv) During the Restricted Period, Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any Person, directly or indirectly:
(A)    solicit or encourage any employee of the Employer or its affiliates to leave the employment of the Employer or its affiliates; or
(B)    hire any such employee who was employed by the Employer or its affiliates as of the date of Executive’s termination of employment with the Employer or who left the employment of the Employer or its affiliates coincident with, or within one year prior to or after, the termination of Executive’s employment with the Employer.
(v) During the Restricted Period, Executive will not, directly or indirectly, solicit or encourage to cease to work with the Employer or its affiliates any consultant then under contract with the Employer or its affiliates.
b.It is expressly understood and agreed that although Executive and the Employer consider the restrictions contained in this Section 8 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.
9.Confidentiality.
a.Executive will not at any time (whether during or after Executive’s employment with the Employer) (i) retain or use for the benefit, purposes or account of Executive or any other Person; or (ii) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Employer (other than its professional advisers who are bound by confidentiality obligations), any non-public, proprietary or confidential information --including without limitation rates, trade secrets, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals -- concerning the past, current or future business, activities and operations of the Employer, its subsidiaries or affiliates and/or any third party that has disclosed or provided any of same to the Employer on a confidential basis (“Confidential Information”) without the prior written authorization of the Board.




b.“Confidential Information” shall not include any information that is (i) generally known to the industry or the public other than as a result of Executive’s breach of this covenant or any breach of other confidentiality obligations by third parties; (ii) made legitimately available to Executive by a third party without breach of any confidentiality obligation; or (iii) required by law to be disclosed; provided that Executive shall give prompt written notice to the Employer of such requirement, disclose no more information than is so required, and cooperate with any attempts by the Employer to obtain a protective order or similar treatment.
c.Except as required by law, Executive will not disclose to anyone, other than Executive’s immediate family and legal or financial advisors, the existence or contents of this Agreement; provided that Executive may disclose to any prospective future employer the provisions of Sections 8 and 9 of this Agreement provided they agree to maintain the confidentiality of such terms.
d.Upon termination of Executive’s employment with the Employer for any reason, Executive shall (i) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Employer, its subsidiaries or affiliates; (ii) immediately destroy, delete, or return to the Employer, at the Employer’s option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executive’s possession or control (including any of the foregoing stored or located in Executive’s office, home, laptop or other computer, whether or not the Employer’s property) that contain Confidential Information or otherwise relate to the business of the Employer, its affiliates and subsidiaries, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information; and (iii) notify and fully cooperate with the Employer regarding the delivery or destruction of any other Confidential Information of which Executive is or becomes aware.
e.Executive shall not improperly use for the benefit of, bring to any premises of, divulge, disclose, communicate, reveal, transfer or provide access to, or share with the Employer any confidential, proprietary or non-public information or intellectual property relating to a former employer or other third party without the prior written permission of such third party. Executive hereby indemnifies, holds harmless and agrees to defend the Employer and its officers, directors, partners, employees, agents and representatives from any breach of the foregoing covenant. Executive shall comply with all relevant policies and guidelines of the Employer, including regarding the protection of confidential information and intellectual property and potential conflicts of interest. Executive acknowledges that the Employer may amend any such policies and guidelines from time to time, and that Executive remains at all times bound by their most current version. Notwithstanding anything set forth herein, the Company hereby represents and warrants that the Company shall not employ the provisions of this Section 9 in a manner that would interfere with Executive’s ability to obtain or retain any future employment that would not or does not otherwise violate Section 8 of this Agreement.
f.The provisions of this Section 9 shall survive the termination of Executive’s employment for any reason.
10.Specific Performance. Executive acknowledges and agrees that the Employer’s remedies at law for a breach or threatened breach of any of the provisions of Section 8 or Section 9 would be inadequate and the Employer would suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Employer, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.




11.Arbitration. Except as provided in Section 10, any other dispute arising out of or asserting breach of this Agreement, or any statutory or common law claim by Executive relating to Executive’s employment under this Agreement or the termination thereof (including any tort or discrimination claim), shall be exclusively resolved by binding statutory arbitration in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association. Such arbitration process shall take place within 100 miles of the Detroit, Michigan metropolitan area. A court of competent jurisdiction may enter judgment upon the arbitrator’s award. In the event of any such dispute, all reasonable fees and disbursements of counsel incurred by Executive shall be reimbursed by Employer within a reasonable period of time following receipt from Executive (or Executive’s counsel) of a final bill invoicing all such fees and disbursements, so long as the arbitrator does not determine that such dispute was based on claims made by Executive that were frivolous or in bad faith.
12.Miscellaneous.
a.Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan, without regard to conflicts of laws principles thereof.
b.Entire Agreement/Amendments. Except with respect to the matters contained in the Equity Documents, this Agreement contains the entire understanding of the parties with respect to the employment of Executive by the Employer. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto.
c.No Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.
d.Severability. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.
e.Assignment. This Agreement, and all of Executive’s rights and duties hereunder, shall not be assignable or delegable by Executive. Any purported assignment or delegation by Executive in violation of the foregoing shall be null and void ab initio and of no force and effect. This Agreement may be assigned by the Employer to a person or entity that is an affiliate or a successor in interest to substantially all of the business operations of the Employer. Upon such assignment, the rights and obligations of the Employer hereunder shall become the rights and obligations of such affiliate or successor person or entity.
f.Set Off; No Mitigation. The Employer’s obligation to pay Executive the amounts provided and to make the arrangements provided hereunder shall be subject to set-off, counterclaim or recoupment of amounts owed by Executive to the Employer or its affiliates; provided, that no such set-off in excess of $5,000 shall be made against any amount payable to Executive pursuant to Sections 7(c)(iii)(C) or (D) hereof (or any other amount that constitutes a payment under a “nonqualified deferred compensation plan” within the meaning of Code Section 409A). Executive shall not be required to mitigate the amount of any payment provided for pursuant to this Agreement by seeking other employment or otherwise and the amount of any payment provided for pursuant to this Agreement shall not be reduced by any compensation earned as a result of Executive’s other employment or otherwise.
g.Successors; Binding Agreement. This Agreement shall inure to the benefit of and be binding upon the Company, its subsidiaries and affiliates, and the Executive and any personal or legal representatives, executors, administrators, successors, assigns, heirs, distributees, devisees and legatees. Further, the Company will require any successor (whether, direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of the Company




to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company and any successor to its business and/or assets which is required by this Section 12(g) to assume and agree to perform this Agreement or which otherwise assumes and agrees to perform this Agreement; provided, however, in the event that any successor, as described above, agrees to assume this Agreement in accordance with the preceding sentence, as of the date such successor so assumes this Agreement, the Company shall cease to be liable for any of the obligations contained in this Agreement.
h.Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three days after it has been mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below in this Agreement, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
If to the Employer:
ITC Holdings Corp.
27175 Energy Way
Novi, Michigan 48377
Attention: General Counsel
With a copy to:
Dykema Gossett PLLC
400 Renaissance Center
Suite 2300
Detroit, Michigan 48243-1668
Attention: Mark A. Metz, Esq.

If to Executive:
To the most recent address of Executive set forth in the personnel records of the Employer.
i.Executive Representation. Executive hereby represents to the Employer that the execution and delivery of this Agreement by Executive and the Employer and the performance by Executive of Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any employment agreement or other agreement or policy to which Executive is a party or otherwise bound.
j.Prior Agreements. This Agreement supercedes all prior agreements and understandings (including, without limitation, any verbal agreements, offer letters or summaries of principal terms pertaining to the employment of Executive by the Employer, and the Prior Employment Agreement) between Executive and the Employer and/or its affiliates regarding the terms and conditions of Executive’s employment with the Employer and/or its affiliates; provided, however, that the Equity Documents shall govern the terms and conditions of Executive’s equity holdings in the Company.
k.Cooperation. Executive shall provide Executive’s reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) that relates to events occurring during Executive’s employment hereunder. This provision shall survive any termination of this Agreement.
l.Taxes.




(i) Withholding Taxes. The Employer may withhold from any amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation, with respect to any compensation or benefits payable or provided to Executive by Employer pursuant to this Agreement or any other plan, arrangement or agreement with the Employer.
(ii) 409A Compliance and Penalties. All payments under this Agreement are intended to be exempt from or in compliance with Code Section 409A, and the provisions of this Agreement are to be construed and administered accordingly. Further, for all purposes under this Agreement: (A) references to “termination” of employment (or variations thereof), shall be synonymous with the meaning given to the term “separation from service” as provided under Code Section 409A, and IRS guidance issued thereunder; (B) no payment, reimbursement or benefit provided to Executive in one calendar year hereunder shall affect the provision of any such payment, reimbursement or benefit in any other calendar year; and (C) the timing of payments and the provision of benefits under this Agreement that are contingent on Executive executing and not revoking the Release as provided in Section 7(e)(ii), are intended to satisfy the requirements of IRS Notices 2010-6 and 2010-80.
Notwithstanding any other provision of this Agreement (other than Section 12(l)(iii) below), while Executive acknowledges that Employer may take actions hereunder as are required to comply with or to minimize any potential interest charges and/or additional taxes as may be imposed by Code Section 409A (the “409A Penalties”) with respect to any payment or benefit due to Executive under this Agreement (including a delay in payment until the first business day following the end of the 409A Period, in the event Executive is a “specified employee” within the meaning of Code Section 409A, as described in and consistent with the provisions of Section 7(c)(iii)), the parties hereby confirm that all such payments and benefits due to Executive will in fact be made or provided (except as provided in Section 12(l)(iii) below) at the earliest time at which it is determined either that no 409A Penalties are applicable, or that such 409A Penalties will apply without exception. Further, if at any time it is determined that any payment or benefit due to Executive under this Agreement may be subject to any 409A Penalties, the Employer shall (D) be permitted to modify the provision of such payment or benefit if such modification would reasonably be expected to eliminate or minimize such 409A Penalties, so long as such modification does not adversely affect, in any material respect, the economic benefit to Executive of such payment or benefit (or otherwise result in additional 409A Penalties), or (E) to the extent that the course of action proposed in clause (D) cannot be effected, within fifteen (15) days after the date of such determination (but no later than the end of the calendar year following the year in which the Executive remits the 409A Penalties involved; or such other earliest date on which such amount can be paid as may be permitted under Code Section 409A) pay to Executive an additional amount equal to such 409A Penalties, along with such additional amount as is required to pay any income and/or payroll taxes due on the 409A Penalties and the additional tax gross-up payment (as determined by the Employer’s independent accountants, assuming that the Executive pays income taxes at the highest applicable marginal rates for the calendar year in which the tax gross-up payment is to be made).
(iii) Parachute Taxes.    In the event that the Executive shall become entitled to payments and/or benefits provided by this Agreement or any other amounts in the “nature of compensation” (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Employer, any person whose actions result in a change of ownership or effective control covered by Code Section 280G(b)(2) or any person affiliated with any Employer or such person) as a result of such change in ownership or effective control (collectively the “Employer Payments”), and such Employer Payments would be subject to the tax (the “Excise Tax”) imposed by Code Section 4999 (and any similar tax that may hereafter be imposed by any taxing authority), then notwithstanding any other provision of this Agreement or any other plan, arrangement or agreement with the Employer, the Employer shall pay and/or




provide to the Executive only that portion of the Employer Payments which are in total equal to one dollar less than the amount of the Employer Payments that would subject the Executive to the Excise Tax. If the Employer Payments must be reduced pursuant to the preceding sentence, Employer Payments shall be reduced in the following order: (A) any amounts payable to the Executive pursuant to Section 7(c)(iii)(C); (B) any other cash amounts payable to the Executive; (C) the value as parachute payments of the acceleration of vesting of any stock options; (D) the value as parachute payments of the acceleration of vesting of any restricted stock; (E) the value as parachute payments of the acceleration of vesting of any equity interest not covered by (C) or (D) above; and (F) the value as parachute payments of any other benefits received.
The Employer’s independent accountants, at the Employer’s expense, shall determine whether any of the Employer Payments are “parachute payments” within the meaning of Code Section 280G(b)(2) that would be subject to the Excise Tax, the projected amount of such Excise Tax and any other determinations required in the preceding paragraph. The determination of the accountants shall be final and binding upon the Employer and the Executive; provided, that in the event any initial determination under this subsection is subsequently modified by the Employer’s accountants or the IRS, Executive and Employer agree to reasonably cooperate to resolve any matter related thereto.
In all cases, Executive shall be solely responsible for timely payment of any Excise Tax finally determined by the IRS to be due and payable with respect to the Employer Payments (as reduced, if applicable). Executive shall also promptly deliver to the Company copies of any written communications, and summaries of any verbal communications, with any taxing authority regarding the Excise Tax covered by this subsection.
m.Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
n.Definition of “Change in Control.” For purposes of this Agreement, “Change in Control” means the occurrence of any of the following events:
(i) If any one person, or more than one person acting as a group (as defined in Code Section 409A and IRS guidance issued thereunder), acquires ownership of common stock of the Company that, together with stock held by such person or group, constitutes more than fifty (50) percent of the total fair market value or total voting power of the common stock of the Company. However, if any one person or more than one person acting as a group, is considered to own more than fifty (50) percent of the total fair market value or total voting power of the common stock of the Company, the acquisition of additional stock by the same person or persons is not considered to cause a Change in Control, or to cause a change in the effective control of the Company (within the meaning of Code Section 409A and IRS guidance issued thereunder). An increase in the percentage of common stock of the Company owned by any one person, or persons acting as a group, as a result of a transaction in which the Company acquires its stock in exchange for property shall be treated as an acquisition of stock for purposes of this subsection. This paragraph applies only when there is a transfer of stock of the Company (or issuance of stock of the Company) and stock in the Company remains outstanding after the transaction;
(ii) If any one person, or more than one person acting as a group (as determined in accordance with Code Section 409A and IRS guidance thereunder), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of common stock of the Company possessing thirty-five (35) percent or more of the total voting power of the common stock of the Company;
(iii) If a majority of members on the Company’s Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board prior to the date of the appointment or election (provided that for purposes of this




paragraph, the term Company refers solely to the “relevant corporation,” as defined in Code Section 409A and IRS guidance issued thereunder, for which no other corporation is a majority shareholder); or
(iv) If there is a change in the ownership of a substantial portion of the Company’s assets, which shall occur on the date that any one person, or more than one person acting as a group (within the meaning of Code Section 409A and IRS guidance issued thereunder) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than forty (40) percent of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

[Signatures on next page]
Signature Page to Employment Agreement


IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of this 2nd day of June, 2015, effective as of February 3, 2015.

ITC HOLDINGS CORP.:                EXECUTIVE:
By: /s/ Joseph L. Welch                /s/ Christine Mason Soneral
Name: Christine Mason Soneral
Its: Chairman, President & CEO










EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 13a-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Joseph L. Welch, certify that:
1.
I have reviewed this report on Form 10-Q for the quarterly period ended June 30, 2015 of ITC Holdings Corp.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Dated: July 30, 2015

/s/ Joseph L. Welch
 
Joseph L. Welch
President and Chief Executive Officer







EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 13a-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Rejji P. Hayes, certify that:
1.
I have reviewed this report on Form 10-Q for the quarterly period ended June 30, 2015 of ITC Holdings Corp.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Dated: July 30, 2015

/s/ Rejji P. Hayes
 
Rejji P. Hayes
Senior Vice President, Chief Financial Officer and Treasurer








EXHIBIT 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of ITC Holdings Corp. (the “Registrant”) on Form 10-Q for the quarterly period ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Joseph L. Welch, President and Chief Executive Officer of the Registrant, and Rejji P. Hayes, Senior Vice President, Chief Financial Officer and Treasurer of the Registrant, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated: July 30, 2015

/s/ Joseph L. Welch
 
Joseph L. Welch
President and Chief Executive Officer
 
/s/ Rejji P. Hayes
 
 
Rejji P. Hayes
Senior Vice President, Chief Financial Officer and Treasurer



Itc (NYSE:ITC)
Historical Stock Chart
From Mar 2024 to Apr 2024 Click Here for more Itc Charts.
Itc (NYSE:ITC)
Historical Stock Chart
From Apr 2023 to Apr 2024 Click Here for more Itc Charts.