exv4w17



 





EXECUTION COPY




 

 








ITC Holdings Corp.




$50,000,000 6.04% Senior Notes, Series A, due September 20, 2014

$50,000,000 6.23% Senior Notes, Series B, due September 20, 2017




 



Note Purchase Agreement

 






Dated as of September 20, 2007




 

 








 









 












TABLE OF CONTENTS




(Not a part of the Agreement)




	 	 	 	 	 	 	 
	Section	 	Heading	 	Page
	 
	 	 	 	 	 	 
	Section 1. Authorization of Notes	 	 	1	 
	Section 2. Sale and Purchase of Notes	 	 	1	 
	Section 3. Closing	 	 	2	 
	Section 4. Conditions to Closing	 	 	2	 
	     Section 4.1

	 	Representations and Warranties
	 	 	2	 
	     Section 4.2

	 	Performance; No Default
	 	 	2	 
	     Section 4.3

	 	Compliance Certificates
	 	 	2	 
	     Section 4.4

	 	Opinions of Counsel
	 	 	3	 
	     Section 4.5

	 	Purchase Permitted by Applicable Law, Etc.
	 	 	3	 
	     Section 4.6

	 	Sale of Other Notes
	 	 	3	 
	     Section 4.7

	 	Payment of Special Counsel Fees
	 	 	3	 
	     Section 4.8

	 	Private Placement Number
	 	 	3	 
	     Section 4.9

	 	Changes in Corporate Structure
	 	 	3	 
	     Section 4.10

	 	Funding Instructions
	 	 	3	 
	     Section 4.11

	 	Proceedings and Documents
	 	 	4	 
	Section 5. Representations and Warranties of the Company	 	 	4	 
	     Section 5.1

	 	Organization; Power and Authority
	 	 	4	 
	     Section 5.2

	 	Authorization, Etc.
	 	 	4	 
	     Section 5.3

	 	Disclosure
	 	 	4	 
	     Section 5.4

	 	Organization and Ownership of Shares of Subsidiaries; Affiliates
	 	 	5	 
	     Section 5.5

	 	Financial Statements
	 	 	5	 
	     Section 5.6

	 	Compliance with Laws, Other Instruments, Etc.
	 	 	6	 
	     Section 5.7

	 	Governmental Authorizations, Etc.
	 	 	6	 
	     Section 5.8

	 	Litigation; Observance of Agreements, Statutes and Orders
	 	 	6	 
	     Section 5.9

	 	Taxes
	 	 	6	 
	     Section 5.10

	 	Title to Property; Leases
	 	 	7	 
	     Section 5.11

	 	Licenses, Permits, Etc.
	 	 	7	 






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	Section	 	Heading	 	Page
	 
	     Section 5.12

	 	Compliance with ERISA
	 	 	7	 
	     Section 5.13

	 	Private Offering by the Company
	 	 	8	 
	     Section 5.14

	 	Use of Proceeds; Margin Regulations
	 	 	8	 
	     Section 5.15

	 	Existing Indebtedness; Future Liens
	 	 	9	 
	     Section 5.16

	 	Foreign Assets Control Regulations, Etc.
	 	 	9	 
	     Section 5.17

	 	Status under Certain Statutes
	 	 	10	 
	     Section 5.18

	 	Environmental Matters
	 	 	10	 
	     Section 5.19

	 	Notes Rank Pari Passu
	 	 	11	 
	Section 6. Representations of the Purchasers	 	 	11	 
	     Section 6.1

	 	Purchase for Investment
	 	 	11	 
	     Section 6.2

	 	Source of Funds
	 	 	11	 
	Section 7. Information as to Company

	 	 	13	 
	     Section 7.1

	 	Financial and Business Information
	 	 	13	 
	     Section 7.2

	 	Officer’s Certificate
	 	 	15	 
	     Section 7.3

	 	Visitation
	 	 	16	 
	Section 8. Payment and Prepayment of the Notes	 	 	16	 
	     Section 8.1

	 	Maturity
	 	 	16	 
	     Section 8.2

	 	Optional Prepayments with Make-Whole Amount
	 	 	16	 
	     Section 8.3

	 	Allocation of Partial Prepayments
	 	 	17	 
	     Section 8.4

	 	Maturity; Surrender, Etc.
	 	 	17	 
	     Section 8.5

	 	Purchase of Notes
	 	 	17	 
	     Section 8.6

	 	Make-Whole Amount
	 	 	17	 
	Section 9. Affirmative Covenants	 	 	19	 
	     Section 9.1

	 	Compliance with Law
	 	 	19	 
	     Section 9.2

	 	Insurance
	 	 	19	 
	     Section 9.3

	 	Maintenance of Properties
	 	 	19	 
	     Section 9.4

	 	Payment of Taxes and Claims
	 	 	19	 
	     Section 9.5

	 	Corporate Existence, Etc.
	 	 	20	 
	     Section 9.6

	 	Books and Records
	 	 	20	 
	     Section 9.7

	 	Notes to Rank Pari Passu
	 	 	20	 
	Section 10. Negative Covenants	 	 	20	 
	     Section 10.1

	 	Debt to Capitalization Ratio
	 	 	20	 
	     Section 10.2

	 	Limitation on Liens
	 	 	20	 






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	Section	 	Heading	 	Page
	 
	     Section 10.3

	 	Limitation on Dividends
	 	 	22	 
	     Section 10.4

	 	Limitation on Sale and Leaseback Transactions
	 	 	22	 
	     Section 10.5

	 	Merger, Consolidation, Etc.
	 	 	23	 
	     Section 10.6

	 	Transactions with Affiliates
	 	 	23	 
	     Section 10.7

	 	Line of Business
	 	 	23	 
	     Section 10.8

	 	Terrorism Sanctions Regulations
	 	 	23	 
	     Section 10.9

	 	Material Subsidiaries
	 	 	24	 
	Section 11. Events of Default	 	 	24	 
	Section 12. Remedies on Default, Etc.	 	 	26	 
	     Section 12.1

	 	Acceleration
	 	 	26	 
	     Section 12.2

	 	Other Remedies
	 	 	27	 
	     Section 12.3

	 	Rescission
	 	 	27	 
	     Section 12.4

	 	No Waivers or Election of Remedies, Expenses, Etc.
	 	 	27	 
	Section 13. Registration; Exchange; Substitution of Notes	 	 	27	 
	     Section 13.1

	 	Registration of Notes
	 	 	27	 
	     Section 13.2

	 	Transfer and Exchange of Notes
	 	 	28	 
	     Section 13.3

	 	Replacement of Notes
	 	 	28	 
	Section 14. Payments on Notes	 	 	28	 
	     Section 14.1

	 	Place of Payment
	 	 	28	 
	     Section 14.2

	 	Home Office Payment
	 	 	29	 
	Section 15. Expenses, Etc.	 	 	29	 
	     Section 15.1

	 	Transaction Expenses
	 	 	29	 
	     Section 15.2

	 	Survival
	 	 	29	 
	Section 16. Survival of Representations and Warranties; Entire Agreement	 	 	30	 
	Section 17. Amendment and Waiver	 	 	30	 
	     Section 17.1

	 	Requirements
	 	 	30	 
	     Section 17.2

	 	Solicitation of Holders of Notes
	 	 	30	 
	     Section 17.3

	 	Binding Effect, Etc.
	 	 	31	 
	     Section 17.4

	 	Notes Held by Company, Etc.
	 	 	31	 
	Section 18. Notices	 	 	31	 
	Section 19. Reproduction of Documents	 	 	32	 
	Section 20. Confidential Information	 	 	32	 
	Section 21. Substitution of Purchaser	 	 	33	 






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	Section	 	Heading	 	Page
	 
	Section 22. Miscellaneous	 	 	33	 
	     Section 22.1

	 	Successors and Assigns
	 	 	33	 
	     Section 22.2

	 	Payments Due on Non-Business Days
	 	 	33	 
	     Section 22.3

	 	Accounting Terms
	 	 	34	 
	     Section 22.4

	 	Severability
	 	 	34	 
	     Section 22.5

	 	Construction, Etc.
	 	 	34	 
	     Section 22.6

	 	Counterparts
	 	 	34	 
	     Section 22.7

	 	Governing Law
	 	 	34	 
	     Section 22.8

	 	Jurisdiction and Process; Waiver of Jury Trial
	 	 	35	 






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Attachments to Note Purchase Agreement:




	 	 	 	 	 
	Schedule A

	 	—
	 	Information Relating to Purchasers
	Schedule B

	 	—
	 	Defined Terms
	Schedule 5.3

	 	—
	 	Disclosure Materials
	Schedule 5.4

	 	—
	 	Subsidiaries of the Company and Ownership of Subsidiary Stock
	Schedule 5.5

	 	—
	 	Financial Statements
	Schedule 5.15

	 	—
	 	Existing Indebtedness
	Schedule 10.2

	 	—
	 	Existing Liens
	Exhibit1(a)

	 	—
	 	Form of 6.04% Senior Note, Series A, due September 20, 2014
	Exhibit1(b)

	 	—
	 	Form of 6.23% Senior Note, Series B, due September 20, 2017
	Exhibit 4.4(a)

	 	—
	 	Form of Opinion of Special Counsel for the Company
	Exhibit 4.4(b)

	 	—
	 	Form of Opinion of Special Counsel for the Purchasers







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ITC Holdings Corp.

39500 Orchard Hill Place

Suite 200

Novi, Michigan 48375




6.04% Senior Notes, Series A, due September 20, 2014

6.23% Senior Notes, Series B, due September 20, 2017




Dated as of September 20, 2007




To the Purchasers listed in

the attached Schedule A:




Ladies and Gentlemen:




     ITC Holdings Corp., a Michigan corporation (the “Company”), agrees with each of the
purchasers listed in the attached Schedule A (each, a “Purchaser” and collectively, the
“Purchasers”) as follows:



SECTION 1. Authorization of Notes.




     The Company will authorize the issue and sale of $100,000,000 aggregate principal amount of
its Senior Notes consisting of (a) $50,000,000 aggregate principal amount of its 6.04% Senior
Notes, Series A, due September 20, 2014 (the “Series A Notes”) and (b) $50,000,000 aggregate
principal amount of its 6.23% Senior Notes, Series B, due September 20, 2017 (the “Series B
Notes”). The Series A Notes and the Series B Notes are herein collectively referred to as the
“Notes.” As used herein, the term “Notes” shall mean all notes (irrespective of series unless
otherwise specified) originally delivered pursuant to this Agreement and any such notes issued in
substitution therefor pursuant to Section 13. The Series A Notes and the Series B Notes shall be
substantially in the forms set out in Exhibit 1(a) and Exhibit 1(b), respectively. Certain
capitalized and other terms used in this Agreement are defined in Schedule B; and references to a
“Schedule” or an “Exhibit” are, unless otherwise specified, to a Schedule or an Exhibit attached to
this Agreement.



SECTION 2. Sale and Purchase of Notes.




     Subject to the terms and conditions of this Agreement, the Company will issue and sell to each
Purchaser and each Purchaser will purchase from the Company, at the Closing provided for in Section
3, Notes of the series and in the principal amount specified opposite such Purchaser’s name in
Schedule A at the purchase price of 100% of the principal amount thereof. Each Purchaser’s
obligations hereunder are several and not joint obligations and no Purchaser shall



 









 







have any liability to any Person for the performance or non-performance of any obligation by
any other Purchaser hereunder.



SECTION 3. Closing.




     The sale and purchase of the Notes to be purchased by each Purchaser shall occur at the
offices of Schiff Hardin LLP, 900 Third Avenue, New York, New York 10022, at 11:00 a.m., New York,
New York time, at a closing (the “Closing”) on September 20, 2007 or on such other Business Day
thereafter as may be agreed upon by the Company and the Purchasers. At the Closing, the Company
will deliver to each Purchaser the Notes of each series to be purchased by such Purchaser in the
form of a single Note of such series (or such greater number of Notes of such series in
denominations of at least $100,000 as such Purchaser may request) dated the date of the Closing and
registered in such Purchaser’s name (or in the name of its nominee), against delivery by such
Purchaser to the Company or its order of immediately available funds in the amount of the purchase
price therefor by wire transfer of immediately available funds for the account of the Company in
accordance with the funding instructions described in Section 4.10. If at the Closing the Company
shall fail to tender such Notes to any Purchaser as provided above in this Section 3, or any of the
conditions specified in Section 4 shall not have been fulfilled to such Purchaser’s satisfaction,
such Purchaser shall, at its election, be relieved of all further obligations under this Agreement,
without thereby waiving any rights such Purchaser may have by reason of such failure or such
nonfulfilment.



SECTION 4. Conditions to Closing.



     Each Purchaser’s obligation to purchase and pay for the Notes to be sold to such Purchaser at
the Closing is subject to the fulfillment to such Purchaser’s satisfaction, prior to or at the
Closing, of the following conditions:



     Section 4.1 Representations and Warranties. The representations and warranties of the Company
in this Agreement shall be correct when made and at the time of the Closing.



     Section 4.2 Performance; No Default. The Company shall have performed and complied with all
agreements and conditions contained in this Agreement required to be performed or complied with by
it prior to or at the Closing, and after giving effect to the issue and sale of the Notes (and the
application of the proceeds thereof as contemplated by Section 5.14), no Default or Event of
Default shall have occurred and be continuing. Neither the Company nor any Subsidiary shall have
entered into any transaction since the date of the Memorandum that would have been prohibited by
Section 10 had such Section applied since such date.



     Section 4.3 Compliance Certificates.




     (a) Officer’s Certificate. The Company shall have delivered to such Purchaser an
Officer’s Certificate, dated the date of the Closing, certifying that the conditions
specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.




     (b) Secretary’s Certificate. The Company shall have delivered to such Purchaser a
certificate of its Secretary or Assistant Secretary, dated the date of Closing,



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certifying as to the resolutions attached thereto and other corporate proceedings
relating to the authorization, execution and delivery of the Notes and this Agreement.



     Section 4.4 Opinions of Counsel. Such Purchaser shall have received opinions in form and
substance satisfactory to such Purchaser, dated the date of the Closing (a) from Dykema Gossett
PLLC, special counsel for the Company, covering the matters set forth in Exhibit 4.4(a) and
covering such other matters incident to the transactions contemplated hereby as such Purchaser or
special counsel to the Purchasers may reasonably request (and the Company hereby instructs its
special counsel to deliver its opinion to such Purchaser) and (b) from Schiff Hardin LLP, special
counsel to the Purchasers in connection with such transactions, substantially in the form set forth
in Exhibit 4.4(b) and covering such other matters incident to such transactions as such Purchaser
may reasonably request.



     Section 4.5 Purchase Permitted by Applicable Law, Etc. On the date of the Closing such
Purchaser’s purchase of Notes shall (a) be permitted by the laws and regulations of each
jurisdiction to which such Purchaser is subject, without recourse to provisions (such as Section
1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies
without restriction as to the character of the particular investment, (b) not violate any
applicable law or regulation (including, without limitation, Regulation T, U or X of the Board of
Governors of the Federal Reserve System) and (c) not subject such Purchaser to any tax, penalty or
liability under or pursuant to any applicable law or regulation. If requested by any Purchaser,
such Purchaser shall have received an Officer’s Certificate certifying as to such matters of fact
as such Purchaser may reasonably specify to enable such Purchaser to determine whether such
purchase is so permitted.



     Section 4.6 Sale of Other Notes. Contemporaneously with the Closing, the Company shall sell
to each other Purchaser and each other Purchaser shall purchase the Notes to be purchased by it at
the Closing as specified in Schedule A.



     Section 4.7 Payment of Special Counsel Fees. Without limiting the provisions of Section 15.1,
the Company shall have paid on or before the Closing the fees, charges and disbursements of special
counsel to the Purchasers referred to in Section 4.4(c) to the extent reflected in a statement of
such counsel rendered to the Company at least one Business Day prior to the Closing.



     Section 4.8 Private Placement Number. A Private Placement Number issued by Standard & Poor’s
CUSIP Service Bureau (in cooperation with the SVO) shall have been obtained for each series of the
Notes.



     Section 4.9 Changes in Corporate Structure. The Company shall not have changed its
jurisdiction of incorporation or been a party to any merger or consolidation or succeeded to all or
any substantial part of the liabilities of any other entity, at any time following the date of the
most recent financial statements referred to in Schedule 5.5.



     Section 4.10 Funding Instructions. At least three Business Days prior to the date of the
Closing, each Purchaser shall have received written instructions signed by a Responsible Officer of
the Company on letterhead of the Company directing the manner of the payment of funds and



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setting forth (a) the name and address of the transferee bank, (b) such transferee bank’s ABA
number, (c) the account name and number into which the purchase price for the Notes is to be
deposited and (d) the name and telephone number of the account representative responsible for
verifying receipt of such funds.



     Section 4.11 Proceedings and Documents. All corporate and other proceedings in connection
with the transactions contemplated by this Agreement and all documents and instruments incident to
such transactions shall be satisfactory to such Purchaser and special counsel to the Purchasers,
and such Purchaser and special counsel to the Purchasers shall have received all such counterpart
originals or certified or other copies of such documents as such Purchaser or special counsel to
the Purchasers may reasonably request.



SECTION 5. Representations and Warranties of the Company.




     The Company represents and warrants to each Purchaser that:



     Section 5.1 Organization; Power and Authority. The Company is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of incorporation, and is
duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the failure to be so
qualified or in good standing could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. The Company has the corporate power and authority to own or
hold under lease the properties it purports to own or hold under lease, to transact the business it
transacts and proposes to transact, to execute and deliver this Agreement and the Notes and to
perform the provisions hereof and thereof.



     Section 5.2 Authorization, Etc. This Agreement and the Notes have been duly authorized by all
necessary corporate action on the part of the Company, and this Agreement constitutes, and upon
execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors’ rights generally and (b) general
principles of equity (regardless of whether such enforceability is considered in a proceeding in
equity or at law).



     Section 5.3 Disclosure. The Company, through its agent, J.P. Morgan Securities Inc., has
delivered to each Purchaser a copy of a Private Placement Memorandum, dated August 2007 (the
“Memorandum”), relating to the transactions contemplated hereby. The Memorandum fairly describes,
in all material respects, the general nature of the business and principal properties of the
Company and its Material Subsidiaries. This Agreement, the Memorandum and the documents,
certificates or other writings delivered to the Purchasers by or on behalf of the Company in
connection with the transactions contemplated hereby and identified in Schedule 5.3 and the
financial statements listed in Schedule 5.5 (this Agreement, the Memorandum and such documents,
certificates or other writings and such financial statements delivered to each Purchaser prior to
August 15, 2007 being referred to, collectively, as the “Disclosure Documents”), taken as a whole,
do not contain any untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not misleading in light of the



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circumstances under which they were made. Except as disclosed in the Disclosure Documents,
since December 31, 2006, there has been no change in the financial condition, operations, business,
properties or prospects of the Company or any Material Subsidiary except changes that, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. No
representation and warranty is made, however, as to any projections included within the foregoing
other than that such projections are based on information the Company believes to be accurate and
were prepared in a manner the Company believes to be reasonable.



     Section 5.4 Organization and Ownership of Shares of Subsidiaries; Affiliates.




     (a) Schedule 5.4 contains (except as noted therein) complete and correct lists (1) of
the Company’s Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the
jurisdiction of its organization, the percentage of shares of each class of its capital
stock or similar equity interests outstanding owned by the Company and each other Subsidiary
and whether such Subsidiary is a Material Subsidiary, (2) of the Company’s Affiliates, other
than Subsidiaries and (3) of the Company’s directors and executive officers.




     (b) All of the outstanding shares of capital stock or similar equity interests of each
Material Subsidiary shown in Schedule 5.4 as being owned by the Company and its Subsidiaries
have been validly issued, are fully paid and nonassessable and are owned by the Company or
another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule
5.4).




     (c) Each Material Subsidiary identified in Schedule 5.4 is a corporation or other legal
entity duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and is duly qualified as a foreign corporation or other legal
entity and is in good standing in each jurisdiction in which such qualification is required
by law, other than those jurisdictions as to which the failure to be so qualified or in good
standing could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Each Material Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold under lease
and to transact the business it transacts and proposes to transact.




     (d) No Material Subsidiary is a party to, or otherwise subject to any legal,
regulatory, contractual or other restriction (other than this Agreement, the agreements
listed on Schedule 5.4 and customary limitations imposed by corporate law or similar
statutes) restricting the ability of such Material Subsidiary to pay dividends out of
profits or make any other similar distributions of profits to the Company or any of its
Subsidiaries that owns outstanding shares of capital stock or similar equity interests of
such Material Subsidiary.



     Section 5.5 Financial Statements. The Company has delivered to each Purchaser copies of the
financial statements of the Company and its Subsidiaries listed on Schedule 5.5. All of said
financial statements (including in each case the related schedules and notes) fairly present in all
material respects the consolidated financial position of the Company and its Subsidiaries as of the
respective dates specified in such Schedule and the consolidated results of



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their operations and cash flows for the respective periods so specified and have been prepared
in accordance with GAAP consistently applied throughout the periods involved except as set forth in
the notes thereto (subject, in the case of any interim financial statements, to normal year-end
adjustments).



     Section 5.6 Compliance with Laws, Other Instruments, Etc. The execution, delivery and
performance by the Company of this Agreement and the Notes will not (a) contravene, result in any
breach of, or constitute a default under, or result in the creation of any Lien in respect of any
property of the Company or any Material Subsidiary under, any indenture, mortgage, deed of trust,
loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other material
agreement or instrument to which the Company or any Material Subsidiary is bound or by which the
Company or any Material Subsidiary or any of their respective properties may be bound or affected,
(b) conflict with or result in a breach of any of the terms, conditions or provisions of any order,
judgment, decree or ruling of any court, arbitrator or Governmental Authority applicable to the
Company or any Material Subsidiary or (c) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the Company or any Material Subsidiary.



     Section 5.7 Governmental Authorizations, Etc. No consent, approval or authorization of, or
registration, filing or declaration with, any Governmental Authority is required in connection with
the execution, delivery or performance by the Company of this Agreement or the Notes.



     Section 5.8 Litigation; Observance of Agreements, Statutes and Orders.




     (a) There are no actions, suits, investigations or proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company or any Subsidiary or
any property of the Company or any Subsidiary in any court or before any arbitrator of any
kind or before or by any Governmental Authority that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.




     (b) Neither the Company nor any Subsidiary is in default under any term of any
agreement or instrument to which it is a party or by which it is bound, or any order,
judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in
violation of any applicable law, ordinance, rule or regulation (including, without
limitation, Environmental Laws or the USA Patriot Act) of any Governmental Authority, which
default or violation, individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect.



     Section 5.9 Taxes. The Company and its Subsidiaries have filed all income tax and other
material tax returns that are required to have been filed in any jurisdiction, and have paid all
taxes shown to be due and payable on such returns and all other taxes and assessments levied upon
them or their properties, assets, income or franchises, to the extent such taxes and assessments
have become due and payable and before they have become delinquent, except for any taxes and
assessments (a) the amount of which is not, individually or in the aggregate, Material or (b) the
amount, applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Company or a Subsidiary, as the



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case may be, has established adequate reserves in accordance with GAAP. The federal income
tax liabilities of the Company and its Subsidiaries have been finally determined (whether by reason
of completed audits or the statute of limitations having run) for all fiscal years up to and
including the fiscal year ended December 31, 2003.



     Section 5.10 Title to Property; Leases. The Company and its Material Subsidiaries have good
and sufficient title to their respective properties that, individually or in the aggregate, are
Material, including all such properties reflected in the most recent audited balance sheet referred
to in Section 5.5 or purported to have been acquired by the Company or any Material Subsidiary
after said date (except as sold or otherwise disposed of in the ordinary course of business), in
each case free and clear of Liens prohibited by this Agreement. All leases that, individually or
in the aggregate, are Material are valid and subsisting and are in full force and effect in all
material respects.



     Section 5.11 Licenses, Permits, Etc.




     (a) The Company and its Material Subsidiaries own or possess all licenses, permits,
franchises, authorizations, patents, copyrights, proprietary software, service marks,
trademarks, trade names and domain names or rights thereto without known conflict with the
rights of others except for those conflicts that, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.




     (b) To the best knowledge of the Company, no product of the Company or any of its
Material Subsidiaries infringes in any material respect any license, permit, franchise,
authorization, patent, copyright, proprietary software, service mark, trademark, trade name,
domain name or other right owned by any other Person.




     (c) To the best knowledge of the Company, there is no Material violation by any Person
of any right of the Company or any of its Material Subsidiaries with respect to any patent,
copyright, proprietary software, service mark, trademark, trade name, domain name or other
right owned or used by the Company or any of its Material Subsidiaries.



     Section 5.12 Compliance with ERISA.




     (a) The Company and each ERISA Affiliate have operated and administered each Plan in
compliance with all applicable laws except for such instances of noncompliance as have not
resulted in and could not reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I
or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans (as defined in Section 3 of ERISA), and no event, transaction or condition has
occurred or exists that could reasonably be expected to result in the incurrence of any such
liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of
the rights, properties or assets of the Company or any ERISA Affiliate, in either case
pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to Section
401(a)(29) or 412 of the Code or Section 4068 of ERISA, other than such liabilities or Liens
as would not be, individually or in the aggregate, Material.



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     (b) The present value of the aggregate benefit liabilities under each of the Plans
(other than Multi-employer Plans), determined as of the end of such Plan’s most recently
ended plan year on the basis of the actuarial assumptions specified for funding purposes in
such Plan’s most recent actuarial valuation report, did not exceed the aggregate current
value of the assets of such Plan allocable to such benefit liabilities. The term “benefit
liabilities” has the meaning specified in Section 4001 of ERISA and the terms “current
value” and “present value” have the meanings specified in Section 3 of ERISA.




     (c) The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and
are not subject to contingent withdrawal liabilities) under Section 4201 or 4204 of ERISA in
respect of Multi-employer Plans that, individually or in the aggregate, are Material.




     (d) The expected postretirement benefit obligation (determined as of the last day of
the Company’s most recently ended fiscal year in accordance with Financial Accounting
Standards Board Statement No. 106, without regard to liabilities attributable to
continuation coverage mandated by Section 4980B of the Code) of the Company and its
Subsidiaries is not Material.




     (e) The execution and delivery of this Agreement and the issuance and sale of the Notes
hereunder will not involve any transaction that is subject to the prohibitions of Section
406 of ERISA or in connection with which a tax could be imposed pursuant to Section
4975(c)(1)(A)-(D) of the Code. The representation by the Company to each Purchaser in the
first sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy
of such Purchaser’s representation in Section 6.2 as to the sources of the funds used to pay
the purchase price of the Notes to be purchased by such Purchaser.



     Section 5.13 Private Offering by the Company. Neither the Company nor anyone acting on its
behalf has offered the Notes or any similar securities for sale to, or solicited any offer to buy
any of the same from, or otherwise approached or negotiated in respect thereof with, any Person
other than not more than 50 Institutional Investors of the type described in clause (c) of the
definition thereof (including the Purchasers), each of which has been offered the Notes at a
private sale for investment. Neither the Company nor anyone acting on its behalf has taken, or
will take, any action that would subject the issuance or sale of the Notes to the registration
requirements of Section 5 of the Securities Act or to the registration requirements of any
securities or blue sky laws of any applicable jurisdiction.



     Section 5.14 Use of Proceeds; Margin Regulations. The Company will apply the proceeds of the
sale of the Notes as set forth in the “Summary of Terms and Conditions” of the Memorandum. No part
of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the
purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve the Company in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of
Regulation T of said Board (12 CFR 220). Margin stock does not constitute more than 1% of the
value of the consolidated assets of the Company and its



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Subsidiaries and the Company does not have any present intention that margin stock will
constitute more than 1% of the value of such assets. As used in this Section, the terms “margin
stock” and “purpose of buying or carrying” shall have the meanings assigned to them in said
Regulation U.



     Section 5.15 Existing Indebtedness; Future Liens.




     (a) Except as described therein, Schedule 5.15 sets forth a complete and correct list
of all outstanding Indebtedness of the Company and its Subsidiaries as of June 30, 2007
(including a description of the obligors and obligees, principal amount outstanding and
collateral therefor, if any, and guaranty thereof, if any), since which date there has been
no Material change in the amounts, interest rates, sinking funds, installment payments or
maturities of the Indebtedness of the Company or its Subsidiaries. Neither the Company nor
any Subsidiary is in default and no waiver of default is currently in effect, in the payment
of any principal or interest on any Indebtedness of the Company or such Subsidiary and no
event or condition exists with respect to any Indebtedness of the Company or any Subsidiary
that would permit (or that with notice or the lapse of time, or both, would permit) one or
more Persons to cause such Indebtedness to become due and payable before its stated maturity
or before its regularly scheduled dates of payment.




     (b) Neither the Company nor any Subsidiary has agreed or consented to cause or permit
in the future (upon the happening of a contingency or otherwise) any of its property,
whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section
10.2.




     (c) Neither the Company nor any Subsidiary is a party to, or otherwise subject to any
provision contained in, any instrument evidencing Indebtedness of the Company or such
Subsidiary, any agreement relating thereto or any other agreement (including, but not
limited to, its charter or other organizational document) which limits the amount of, or
otherwise imposes restrictions on the incurring of, Indebtedness of the Company, except as
specifically indicated in Schedule 5.15.



     Section 5.16 Foreign Assets Control Regulations, Etc.




     (a) Neither the sale of the Notes by the Company hereunder nor its use of the proceeds
thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign
assets control regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) or any enabling legislation or executive order relating thereto.




     (b) Neither the Company nor any Subsidiary (1) is a Person described or designated in
the Specially Designated Nationals and Blocked Persons List of the Office of Foreign Assets
Control or in Section 1 of the Anti-Terrorism Order or (2) engages in any dealings or
transactions with any such Person. The Company and its Subsidiaries are in compliance, in
all material respects, with the USA Patriot Act.



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     (c) No part of the proceeds from the sale of the Notes hereunder will be used, directly
or indirectly, for any payments to any governmental official or employee, political party,
official of a political party, candidate for political office, or anyone else acting in an
official capacity, in order to obtain, retain or direct business or obtain any improper
advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as
amended, assuming in all cases that such Act applies to the Company.



     Section 5.17 Status under Certain Statutes. Neither the Company nor any Subsidiary is subject
to regulation under the Investment Company Act of 1940, as amended, or the ICC Termination Act of
1995, as amended. The Company is not subject to the Federal Power Act, as amended. Certain
Subsidiaries of the Company are subject to the Federal Power Act, as amended, and subject to the
jurisdiction of the Federal Energy Regulatory Commission. The Company is a “holding company”
within the meaning of the Public Utility Holding Company Act of 2005 (“PUHCA 2005”). Pursuant to
PUHCA 2005, the Company is subject to the limited jurisdiction of the Federal Energy Regulatory
Commission, and any state commission with jurisdiction to regulate a public utility company in the
Company’s holding company system, with respect to access to the books and records of the Company
and its Subsidiaries and Affiliates.



     Section 5.18 Environmental Matters.




     (a) Neither the Company nor any Subsidiary has knowledge of any claim or has received
any notice of any claim, and no proceeding has been instituted raising any claim against the
Company or any of its Subsidiaries or any of their respective real properties now or
formerly owned, leased or operated by any of them or other assets, alleging any damage to
the environment or violation of any Environmental Laws, except, in each case, such as could
not reasonably be expected to result in a Material Adverse Effect.




     (b) Neither the Company nor any Subsidiary has knowledge of any facts which would give
rise to any claim, public or private, of violation of Environmental Laws or damage to the
environment emanating from, occurring on or in any way related to real properties now or
formerly owned, leased or operated by any of them or to other assets or their use, except,
in each case, such as could not reasonably be expected to result in a Material Adverse
Effect.




     (c) Neither the Company nor any Subsidiary has stored any Hazardous Materials on real
properties now or formerly owned, leased or operated by any of them or has disposed of any
Hazardous Materials in a manner contrary to any Environmental Laws in each case in any
manner that could reasonably be expected to result in a Material Adverse Effect.




     (d) All buildings on all real properties now owned, leased or operated by the Company
or any Subsidiary are in compliance with applicable Environmental Laws, except where failure
to comply could not reasonably be expected to result in a Material Adverse Effect.



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     Section 5.19 Notes Rank Pari Passu. The obligations of the Company under this Agreement and
the Notes rank at least pari passu in right of payment with all other unsecured Indebtedness
(actual or contingent) of the Company that is not expressed to be subordinate or junior in rank to
any other unsecured Indebtedness of the Company, including, without limitation, all such
Indebtedness of the Company described in Schedule 5.15 (except for any such Indebtedness which is
mandatorily preferred by law and not by contract).



SECTION 6. Representations of the Purchasers.




     Section 6.1 Purchase for Investment. Each Purchaser severally represents that it is
purchasing the Notes for its own account or for one or more separate accounts maintained by such
Purchaser or for the account of one or more pension or trust funds and not with a view to the
distribution thereof, provided that the disposition of such Purchaser’s or such pension or trust
fund’s property shall at all times be within such Purchaser’s or such pension or trust fund’s
control. Each Purchaser understands that the Notes have not been registered under the Securities
Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is not required to
register the Notes.



     Section 6.2 Source of Funds. Each Purchaser severally represents that at least one of the
following statements is an accurate representation as to each source of funds (a “Source”) to be
used by such Purchaser to pay the purchase price of the Notes to be purchased by such Purchaser
hereunder:




     (a) the Source is an “insurance company general account” (as the term is defined in the
United States Department of Labor’s Prohibited Transaction Exemption (“PTE”) 95-60) in
respect of which the reserves and liabilities (as defined by the annual statement for life
insurance companies approved by the NAIC (the “NAIC Annual Statement”)) for the general
account contract(s) held by or on behalf of any employee benefit plan together with the
amount of the reserves and liabilities for the general account contract(s) held by or on
behalf of any other employee benefit plans maintained by the same employer (or affiliate
thereof as defined in PTE 95-60) or by the same employee organization in the general account
do not exceed 10% of the total reserves and liabilities of the general account (exclusive of
separate account liabilities) plus surplus as set forth in the NAIC Annual Statement filed
with such Purchaser’s state of domicile; or




     (b) the Source is a separate account that is maintained solely in connection with such
Purchaser’s fixed contractual obligations under which the amounts payable, or credited, to
any employee benefit plan (or its related trust) that has any interest in such separate
account (or to any participant or beneficiary of such plan (including any annuitant)) are
not affected in any manner by the investment performance of the separate account; or




     (c) the Source is either (1) an insurance company pooled separate account, within the
meaning of PTE 90-1 or (2) a bank collective investment fund, within the meaning of PTE
91-38 and, except as disclosed by such Purchaser to the Company in



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writing pursuant to this clause (c), no employee benefit plan or group of plans
maintained by the same employer or employee organization beneficially owns more than 10% of
all assets allocated to such pooled separate account or collective investment fund; or




     (d) the Source constitutes assets of an “investment fund” (within the meaning of Part V
of PTE 84-14 (the “QPAM Exemption”) managed by a “qualified professional asset manager” or
“QPAM” (within the meaning of Part V of the QPAM Exemption), no employee benefit plan’s
assets that are included in such investment fund, when combined with the assets of all other
employee benefit plans established or maintained by the same employer or by an affiliate
(within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the
same employee organization and managed by such QPAM, exceed 20% of the total client assets
managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a Person controlling or controlled by the QPAM (applying the
definition of “control” in Section V(e) of the QPAM Exemption) owns a 5% or more interest in
the Company and (1) the identity of such QPAM and (2) the names of all employee benefit
plans whose assets are included in such investment fund have been disclosed to the Company
in writing pursuant to this clause (d); or




     (e) the Source constitutes assets of a “plan(s)” (within the meaning of Section IV of
PTE 96-23 (the “INHAM Exemption”)) managed by an “in-house asset manager” or “INHAM” (within
the meaning of Part IV of the INHAM Exemption), the conditions of Part I(a), (g) and (h) of
the INHAM Exemption are satisfied, neither the INHAM nor a Person controlling or controlled
by the INHAM (applying the definition of “control” in Section IV(d) of the INHAM Exemption)
owns a 5% or more interest in the Company and (1) the identity of such INHAM and (2) the
name(s) of the employee benefit plan(s) whose assets constitute the Source have been
disclosed to the Company in writing pursuant to this clause (e); or




     (f) the Source is a governmental plan; or




     (g) the Source is one or more employee benefit plans, or a separate account or trust
fund comprised of one or more employee benefit plans, each of which has been identified to
the Company in writing pursuant to this clause (g); or




     (h) the Source does not include assets of any employee benefit plan, other than a plan
exempt from the coverage of ERISA.



     As used in this Section 6.2, the terms “employee benefit plan,” “governmental plan” and
“separate account” shall have the respective meanings assigned to such terms in Section 3 of ERISA.



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SECTION 7. Information as to Company.




     Section 7.1 Financial and Business Information. The Company shall deliver to each holder of
Notes that is an Institutional Investor:




     (a) Quarterly Statements — within 60 days after the end of each quarterly fiscal
period in each fiscal year of the Company (other than the last quarterly fiscal period of
each such fiscal year), duplicate copies of,




     (1) a consolidated balance sheet of the Company and its Subsidiaries as at the
end of such quarter, and




     (2) consolidated statements of operations, changes in shareholders’ equity, if
prepared for such period, and cash flows of the Company and its Subsidiaries for
such quarter and (in the case of the second and third quarters) for the portion of
the fiscal year ending with such quarter,




setting forth in each case in comparative form the figures for the corresponding periods in
the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP
applicable to quarterly financial statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects, the financial position of the
companies being reported on and their results of operations and cash flows, subject to
changes resulting from year-end adjustments, provided that delivery within the time period
specified above of copies of the Company’s Quarterly Report on Form 10-Q (the “Form 10-Q”)
prepared in compliance with the requirements therefor and filed with the SEC shall be deemed
to satisfy the requirements of this Section 7.1(a), provided, further, that the Company
shall be deemed to have made such delivery of such Form 10-Q if it shall have timely made
such Form 10-Q available on “EDGAR” and on its home page on the worldwide web (at the date
of this Agreement located at: http//www.itc-holdings.com) and shall have given each
Purchaser prior notice of such availability on EDGAR and on its home page in connection with
each delivery (such availability and notice thereof being referred to as “Electronic
Delivery”);




     (b) Annual Statements — within 120 days after the end of each fiscal year of the
Company, duplicate copies of,




     (1) a consolidated balance sheet of the Company and its Subsidiaries, as at the
end of such year, and




     (2) consolidated statements of operations, changes in shareholders’ equity and
cash flows of the Company and its Subsidiaries, for such year,




setting forth in each case in comparative form the figures for the previous fiscal year, all
in reasonable detail, prepared in accordance with GAAP, and accompanied by an opinion
thereon of independent certified public accountants of recognized national standing,
which opinion shall state that such financial statements present fairly, in all
material respects, the financial position of the companies being reported upon and
their results of operations and cash flows and have been prepared in conformity with
GAAP, and that



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the examination of such accountants in connection with such financial statements has been
made in accordance with generally accepted auditing standards, and that such audit provides
a reasonable basis for such opinion in the circumstances; provided that the delivery within
the time period specified above of the Company’s Annual Report on Form 10-K (the “Form
10-K”) for such fiscal year (together with the Company’s annual report to shareholders, if
any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with
the requirements therefor and filed with the SEC shall be deemed to satisfy the
requirements of this Section 7.1(b), provided, further, that the Company shall be deemed to
have made such delivery of such Form 10-K if it shall have timely made Electronic Delivery
thereof;




     (c) SEC and Other Reports — promptly upon their becoming available, one copy of (1)
each financial statement, report, notice or proxy statement sent by the Company or any
Subsidiary to its principal lending banks as a whole (excluding information sent to such
banks in the ordinary course of administration of a bank facility, such as information
relating to pricing and borrowing availability) or to its public securities holders
generally and (2) each regular or periodic report, each registration statement (without
exhibits except as expressly requested by such holder), and each prospectus and all
amendments thereto filed by the Company or any Subsidiary with the SEC and of all press
releases and other statements made available generally by the Company or any Subsidiary to
the public concerning developments that are Material; provided, that the Company shall be
deemed to have made delivery of any such item if it shall have timely made Electronic
Delivery thereof;




     (d) Notice of Default or Event of Default — promptly, and in any event within five
days after a Responsible Officer becoming aware of the existence of any Default or Event of
Default or that any Person has given any notice or taken any action with respect to a
claimed default hereunder or that any Person has given any notice or taken any action with
respect to a claimed default of the type referred to in Section 11(f), a written notice
specifying the nature and period of existence thereof and what action the Company is taking
or proposes to take with respect thereto;




     (e) ERISA Matters — promptly, and in any event within five days after a Responsible
Officer becoming aware of any of the following, a written notice setting forth the nature
thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with
respect thereto:




     (1) with respect to any Plan, any reportable event, as defined in Section
4043(c) of ERISA and the regulations thereunder, for which notice thereof has not
been waived pursuant to such regulations as in effect on the date hereof; or




     (2) the taking by the PBGC of steps to institute, or the threatening by the
PBGC of the institution of, proceedings under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, or the
receipt by the Company or any ERISA Affiliate of a notice from a Multi-



-14-









 







employer Plan that such action has been taken by the PBGC with respect to such
Multi-employer Plan; or




     (3) any event, transaction or condition that could result in the incurrence of
any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans, or in the imposition of any Lien on any of the rights, properties or
assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or
such penalty or excise tax provisions, if such liability or Lien, taken together
with any other such liabilities or Liens then existing, could reasonably be expected
to have a Material Adverse Effect;




     (f) Notices from Governmental Authority — promptly, and in any event within 30 days of
receipt thereof, copies of any notice to the Company or any Subsidiary from any federal or
state Governmental Authority relating to any order, ruling, statute or other law or
regulation that could reasonably be expected to have a Material Adverse Effect; and




     (g) Requested Information — with reasonable promptness, such other data and
information relating to the business, operations, affairs, financial condition, assets or
properties of the Company or any of its Subsidiaries (including, but without limitation,
actual copies of the Company’s Form 10-Q and Form 10-K) or relating to the ability of the
Company to perform its obligations hereunder and under the Notes as from time to time may be
reasonably requested by any such holder of Notes.



     Section 7.2 Officer’s Certificate. Each set of financial statements delivered to a holder of
Notes pursuant to Section 7.1(a) or Section 7.1(b) shall be accompanied by a certificate of a
Senior Financial Officer setting forth (which, in the case of Electronic Delivery of any such
financial statements, shall be by separate concurrent delivery of such certificate to each holder
of Notes):




     (a) Covenant Compliance — the information (including detailed calculations) required
in order to establish whether the Company was in compliance with the requirements of Section
10.1 and Section 10.2 during the quarterly or annual period covered by the statements then
being furnished (including with respect to each such Section, where applicable, the
calculations of the maximum or minimum amount, ratio or percentage, as the case may be,
permissible under the terms of such Sections, and the calculation of the amount, ratio or
percentage then in existence); and




     (b) Event of Default — a statement that such Senior Financial Officer has reviewed the
relevant terms hereof and has made, or caused to be made, under his or her supervision, a
review of the transactions and conditions of the Company and its Subsidiaries from the
beginning of the quarterly or annual period covered by the statements then being furnished
to the date of the certificate and that such review shall not have disclosed the existence
during such period of any condition or event that constitutes a Default or an Event of
Default or, if any such condition or event existed or exists (including, without limitation,
any such event or condition resulting from the



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failure of the Company or any Subsidiary to comply with any Environmental Law),
specifying the nature and period of existence thereof and what action the Company shall have
taken or proposes to take with respect thereto.



     Section 7.3 Visitation. The Company shall permit the representatives of each holder of Notes
that is an Institutional Investor:




     (a) No Default — if no Default or Event of Default then exists, at the expense of such
holder and upon reasonable prior notice to the Company, to visit the principal executive
office of the Company, to discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company’s officers, and (with the consent of the Company, which
consent will not be unreasonably withheld) to visit the other offices and properties of the
Company and each Subsidiary, all at such reasonable times and as often as may be reasonably
requested in writing; and




     (b) Default — if a Default or Event of Default then exists, at the expense of the
Company to visit and inspect any of the offices or properties of the Company or any
Subsidiary, to examine all their respective books of account, records, reports and other
papers, to make copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers and independent public accountants (and
by this provision the Company authorizes said accountants to discuss the affairs, finances
and accounts of the Company and its Subsidiaries), all at such times and as often as may be
requested.



SECTION 8. Payment and Prepayment of the Notes.




     Section 8.1 Maturity. As provided therein, the entire unpaid principal balance of the Notes
shall be due and payable on the stated maturity date thereof.



     Section 8.2 Optional Prepayments with Make-Whole Amount. The Company may, at its option, upon
notice as provided below, prepay at any time all, or from time to time any part of, the Notes, in
an amount not less than $5,000,000 in aggregate principal amount of the Notes then outstanding in
the case of a partial prepayment, at 100% of the principal amount so prepaid, plus accrued and
unpaid interest, plus the Make-Whole Amount, if any, determined for the prepayment date with
respect to such principal amount. The Company will give each holder of Notes written notice of
each optional prepayment under this Section 8.2 not less than 30 days and not more than 60 days
prior to the date fixed for such prepayment. Each such notice shall specify such date (which shall
be a Business Day), the aggregate principal amount of the Notes to be prepaid on such date, the
principal amount of each Note held by such holder to be prepaid (determined in accordance with
Section 8.3), and the interest to be paid on the prepayment date with respect to such principal
amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to
the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date
of such notice were the date of the prepayment), setting forth the details of such computation.
Two Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a
certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as
of the specified prepayment date.



-16-









 





     Section 8.3 Allocation of Partial Prepayments. In the case of each partial prepayment of the
Notes pursuant to Section 8.2, the principal amount of the Notes to be prepaid shall be allocated
among all of the Notes at the time outstanding in proportion, as nearly as practicable, to the
respective unpaid principal amounts thereof not theretofore called for prepayment.



     Section 8.4 Maturity; Surrender, Etc. In the case of each prepayment of Notes pursuant to
this Section 8, the principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment (which shall be a Business Day), together with
interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such principal amount when so
due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest
on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be
surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.



     Section 8.5 Purchase of Notes. The Company will not, and will not permit any Affiliate to,
purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes
except (a) upon the payment or prepayment of the Notes in accordance with the terms of this
Agreement and the Notes or (b) pursuant to an offer to purchase made by the Company or an Affiliate
pro rata to the holders of all Notes at the time outstanding upon the same terms and conditions.
Any such offer shall provide each holder with sufficient information to enable it to make an
informed decision with respect to such offer, and shall remain open for at least 15 Business Days.
If the holders of more than 10% of the principal amount of the Notes then outstanding accept such
offer, the Company shall promptly notify the remaining holders of such fact and the expiration date
for the acceptance by holders of Notes of such offer shall be extended by the number of days
necessary to give each such remaining holder at least 10 Business Days from its receipt of such
notice to accept such offer. The Company will promptly cancel all Notes acquired by it or any
Affiliate pursuant to any payment or prepayment of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such Notes.



     Section 8.6 Make-Whole Amount. “Make-Whole Amount” shall mean, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments
with respect to the Called Principal of such Note over the amount of such Called Principal,
provided that the Make-Whole Amount may in no event be less than zero. For the purposes of
determining the Make-Whole Amount, the following terms have the following meanings:




     “Called Principal” shall mean, with respect to any Note, the principal of such Note
that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately
due and payable pursuant to Section 12.1, as the context requires.




     “Discounted Value” shall mean, with respect to the Called Principal of any Note of a
series, the amount obtained by discounting all Remaining Scheduled Payments with respect to
such Called Principal from their respective scheduled due dates to the Settlement Date with
respect to such Called Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on



-17-









 







which interest on the Notes of such series is payable) equal to the Reinvestment Yield
with respect to such Called Principal.




     “Reinvestment Yield” shall mean, with respect to the Called Principal of any Note,
0.50% over the yield to maturity implied by (a) the yields reported as of 10:00 a.m. (New
York, New York time) on the second Business Day preceding the Settlement Date with respect
to such Called Principal, on the display designated as “Page PX1” (or such other display as
may replace Page PX1) on Bloomberg Financial Markets for the most recently issued actively
traded on the run U.S. Treasury securities having a maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date or (b) if such yields are
not reported as of such time or the yields reported as of such time are not ascertainable
(including by way of interpolation), the Treasury Constant Maturity Series Yields reported,
for the latest day for which such yields have been so reported as of the second Business Day
preceding the Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (or any comparable successor publication) for U.S. Treasury
securities having a constant maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date.




     In the case of each determination under clause (a) or clause (b), as the case may be,
of the preceding paragraph, such implied yield will be determined, if necessary, by (1)
converting U.S. Treasury bill quotations to bond equivalent yields in accordance with
accepted financial practice and (2) interpolating linearly between (i) the applicable U.S.
Treasury security with the maturity closest to and greater than such Remaining Average Life
and (ii) the applicable U.S. Treasury security with the maturity closest to and less than
such Remaining Average Life. The Reinvestment Yield shall be rounded to the number of
decimal places as appears in the interest rate of the applicable Note.




     “Remaining Average Life” shall mean, with respect to any Called Principal, the number
of years (calculated to the nearest one-twelfth year) obtained by dividing (a) such Called
Principal into (b) the sum of the products obtained by multiplying (1) the principal
component of each Remaining Scheduled Payment with respect to such Called Principal by (2)
the number of years (calculated to the nearest one-twelfth year) that will elapse between
the Settlement Date with respect to such Called Principal and the scheduled due date of such
Remaining Scheduled Payment.




     “Remaining Scheduled Payments” shall mean, with respect to the Called Principal of any
Note of a series, all payments of such Called Principal and interest thereon that would be
due after the Settlement Date with respect to such Called Principal if no payment of such
Called Principal were made prior to its scheduled due date, provided that if such Settlement
Date is not a date on which interest payments are due to be made under the terms of the
Notes of such series, then the amount of the next succeeding scheduled interest payment will
be reduced by the amount of interest accrued to such Settlement Date and required to be paid
on such Settlement Date pursuant to Section 8.2 or Section 12.1.




     “Settlement Date” shall mean, with respect to the Called Principal of any Note, the
date on which such Called Principal is to be prepaid pursuant to Section 8.2 or has



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become or is declared to be immediately due and payable pursuant to Section 12.1, as
the context requires.



SECTION 9. Affirmative Covenants.




     The Company covenants that so long as any of the Notes are outstanding:



     Section 9.1 Compliance with Law. Without limiting Section 10.8, the Company will, and will
cause each of its Subsidiaries to, comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation, Environmental Laws,
ERISA and the USA Patriot Act, and will obtain and maintain in effect all licenses, certificates,
permits, franchises and other governmental authorizations necessary to the ownership of their
respective properties or to the conduct of their respective businesses, in each case to the extent
necessary to ensure that non-compliance with such laws, ordinances or governmental rules or
regulations or failures to obtain or maintain in effect such licenses, certificates, permits,
franchises and other governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.



     Section 9.2 Insurance. The Company will, and will cause each of its Material Subsidiaries to,
maintain, with financially sound and reputable insurers, insurance with respect to their respective
properties and businesses against such casualties and contingencies, of such types, on such terms
and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves
are maintained with respect thereto) as is customary in the case of entities of established
reputations engaged in the same or a similar business and similarly situated.



     Section 9.3 Maintenance of Properties. The Company will, and will cause each of its
Subsidiaries to, maintain and keep, or cause to be maintained and kept, their respective properties
in good repair, working order and condition (other than ordinary wear and tear), so that the
business carried on in connection therewith may be properly conducted at all times, provided that
this Section shall not prevent the Company or any Subsidiary from discontinuing the operation and
the maintenance of any of its properties if such discontinuance is desirable in the conduct of its
business and the Company has concluded that such discontinuance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.



     Section 9.4 Payment of Taxes and Claims. The Company will, and will cause each of its
Subsidiaries to, file all tax returns required to be filed in any jurisdiction and to pay and
discharge all taxes shown to be due and payable on such returns and all other taxes, assessments,
governmental charges or levies imposed on them or any of their properties, assets, income or
franchises, to the extent such taxes, assessments, governmental charges or levies have become due
and payable and before they have become delinquent and all claims for which sums have become due
and payable that have or might become a Lien on properties or assets of the Company or any
Subsidiary, provided that neither the Company nor any Subsidiary need pay any such taxes,
assessments, governmental charges, levies or claims if (1) the amount, applicability or validity
thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor
in accordance with GAAP on the books of the Company or such Subsidiary or



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(2) the nonpayment of all such taxes, assessments, governmental charges, levies and claims in
the aggregate could not reasonably be expected to have a Material Adverse Effect.



     Section 9.5 Corporate Existence, Etc. Subject to Section 10.5, the Company will at all times
preserve and keep in full force and effect its corporate existence. The Company will at all times
preserve and keep in full force and effect the corporate existence of each of its Material
Subsidiaries (unless merged into the Company or a Wholly-Owned Subsidiary) and all rights and
franchises of the Company and its Material Subsidiaries unless, in the good faith judgment of the
Company, the termination of or failure to preserve and keep in full force and effect such corporate
existence, right or franchise could not, individually or in the aggregate, have a Material Adverse
Effect.



     Section 9.6 Books and Records. The Company will, and will cause each of its Subsidiaries to,
maintain proper books of record and account in conformity with GAAP and all applicable requirements
of any Governmental Authority having legal or regulatory jurisdiction over the Company or such
Subsidiary, as the case may be.



     Section 9.7 Notes to Rank Pari Passu. The Notes and all other obligations of the Company
under this Agreement shall rank at least pari passu with all other present and future unsecured
Indebtedness (actual or contingent) of the Company that is not expressed to be subordinate or
junior in rank to any other unsecured Indebtedness of the Company (except for such Indebtedness
which is mandatorily preferred by law and not by contract).



SECTION 10. Negative Covenants.




     The Company covenants that so long as any of the Notes are outstanding:



     Section 10.1 Debt to Capitalization Ratio. The Company will not, at any time, permit the Debt
to Capitalization Ratio to exceed 0.75 to 1.00; provided that if the Company delivers to each
holder of Notes a Notice of Election to Increase Debt to Capitalization Ratio, a maximum Debt to
Capitalization Ratio of up to 0.85 to 1.00 will be permitted from the date that such Notice of
Election to Increase Debt to Capitalization Ratio is delivered to the holders of Notes until the
earlier of (a) the date falling 90 days after the date of the incurrence of the Indebtedness
referred to in the Notice of Election to Increase Debt to Capitalization Ratio and (b) the issuance
of equity in the Company resulting in proceeds in an amount sufficient to result in compliance with
this Section 10.1 (without giving effect to this proviso).



     Section 10.2 Limitation on Liens. The Company will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any property or assets of
any kind (real or personal, tangible or intangible) of the Company or any of its Subsidiaries,
whether now owned or hereafter acquired, except:




     (a) Permitted Liens;




     (b) Liens (1) on assets of ITC (of the same type as constitute collateral under the ITC
First Mortgage Indenture on the date of the Closing) to secure Indebtedness of ITC under the
ITC First Mortgage Indenture, (2) on assets of METC (of the same type as constitute
collateral under the METC First Mortgage Indenture on the date of the



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Closing) to secure Indebtedness of METC under the METC First Mortgage Indenture and (3)
on assets of any other Subsidiary (of the same type that constitute collateral under the ITC
First Mortgage Indenture and/or the METC First Mortgage Indenture on the date of the
Closing) to secure Indebtedness of any Subsidiary under any similar mortgage bond indenture;




     (c) Liens existing on the date of the Closing and reflected in Schedule 10.2;




     (d) Liens existing on the assets or Capital Stock of any Person that becomes a
Subsidiary, or existing on assets acquired; provided that such Liens attach at all times
only to the same assets that such Liens attached to and secure only the same Indebtedness
that such Liens secured, immediately prior to such acquisition;




     (e) Liens in favor of the Company or any Subsidiary;




     (f) Liens in favor of the United States of America or any State thereof, or any
department, agency or instrumentality or political subdivision of the United States of
America or any State thereof or political entity affiliated therewith, to secure partial,
progress, advance or other payments, or other obligations, pursuant to any contract or
statute to secure any Indebtedness incurred for the purpose of financing all or any part of
the cost of acquiring, constructing or improving property subject to such Liens (including
Liens incurred in connection with pollution control, industrial revenue or similar
financings);




     (g) Liens on any property created, assumed or otherwise brought into existence in
contemplation of the sale or other disposition of the underlying property, whether directly
or indirectly, by way of share disposition or otherwise; provided that 180 days from the
creation of such Liens the Company or the relevant Subsidiary shall have disposed of such
property and any Indebtedness secured by such Liens shall be without recourse to the Company
or any Subsidiary;




     (h) rights of other Persons to take minerals, timber, gas, water or other products
produced by the Company or by other Persons on the property of the Company;




     (i) Liens created by or resulting from any litigation or other proceeding which is
being contested in good faith by appropriate proceedings, including Liens arising out of
judgments or awards against the Company or any Subsidiary with respect to which the Company
or such Subsidiary is in good faith prosecuting an appeal or proceedings for review; or
Liens that the Company or any Subsidiary incurs for the purpose of obtaining a stay or
discharge in the course of any litigation or other proceeding to which the Company or such
Subsidiary is a party;




     (j) Liens which have been bonded for the full amount in dispute;




     (k) Liens on any property acquired, constructed or improved by the Company or any
Subsidiary after the date hereof which are created or assumed contemporaneously with such
acquisition, construction or improvement, or within 270 days after the completion thereof,
to secure or provide for the payment of all or any part of the cost of



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such acquisition, construction or improvement (including related expenditures
capitalized for federal income tax purposes in connection therewith) incurred after the date
hereof;




     (l) the replacement, extension or renewal of any Lien permitted by paragraphs (a)
through (k) above upon or in the same assets theretofore subject to such Lien or the
replacement, extension or renewal (without increase in the amount or change in any direct or
contingent obligor except to the extent otherwise permitted hereunder) of the Indebtedness
secured thereby; and




     (m) other Liens not otherwise permitted by paragraphs (a) through (l), inclusive, of
this Section 10.2 securing Indebtedness; provided that (1) on the date the Indebtedness
secured by such Liens is incurred or such Liens are granted and after giving effect thereto,
the aggregate principal amount of all Indebtedness secured by such Liens shall not exceed
the greater of (i) 10% of Net Tangible Assets at such time and (ii) 10% of Consolidated
Capitalization at such time and (2) at the time of such incurrence and after giving effect
thereto, no Default or Event of Default shall have occurred or be continuing; provided,
further, that any Lien permitted to be granted pursuant to this paragraph (m) may be
replaced, extended or renewed upon or in the same assets theretofore subject to such Lien or
the Indebtedness secured thereby may be replaced, extended or renewed (without increase in
the amount or change in any direct or contingent obligor except to the extent otherwise
permitted hereunder).



     Section 10.3 Limitation on Dividends. If any Default or Event of Default then exists or would
result therefrom, the Company will not declare or pay any distributions (other than dividends
payable solely in its capital stock) or return any capital to its shareholders or make any other
distribution, payment or delivery of property or cash to its shareholders as such, or redeem,
retire, purchase or otherwise acquire, directly or indirectly, for consideration, any of its
capital stock or the capital stock of any direct or indirect shareholder of the Company now or
hereafter outstanding (or any warrants for or options or stock appreciation rights in respect of
any of its capital stock), or set aside any funds for any of the foregoing purposes, or permit any
of its Subsidiaries to purchase or otherwise acquire for consideration any capital stock of the
Company, now or hereafter outstanding (or any options or warrants or stock appreciation rights
issued by such Person with respect to its capital stock), provided that the Company may take any of
the actions in this Section 10.3 so long as after giving effect to such action the Company shall be
Investment Grade.



     Section 10.4 Limitation on Sale and Leaseback Transactions. The Company will not enter into
any sale-leaseback transaction (a “Sale and Leaseback Transaction”) involving any of its property
or assets whether now owned or hereafter acquired, whereby the Company sells or otherwise transfers
such property or assets and thereafter leases or subleases such property or assets or any part
thereof or any other property or assets that the Company intends to use for substantially the same
purpose or purposes as the property or assets sold or otherwise transferred unless (a) the Company
would be entitled to incur Indebtedness secured by a Lien on such property or assets pursuant to
Sections 10.1 or (b) the Attributable Value of all Sale and Leaseback Transactions entered into
pursuant to this Section 10.4 does not exceed $20,000,000. A Sale and Leaseback Transaction shall
not be deemed to result in the creation of a Lien.



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     Section 10.5 Merger, Consolidation, Etc. The Company will not consolidate with or merge with
any other Person or convey, transfer or lease all or substantially all of its assets in a single
transaction or series of transactions to any Person unless:




     (a) the successor formed by such consolidation or the survivor of such merger or the
Person that acquires by conveyance, transfer or lease all or substantially all of the assets
of the Company as an entirety, as the case may be, shall be a solvent corporation or limited
liability company organized and existing under the laws of the United States or any State
thereof (including the District of Columbia), and, if the Company is not such corporation or
limited liability company, (1) such corporation or limited liability company shall have
executed and delivered to each holder of any Notes its assumption of the due and punctual
performance and observance of each covenant and condition of this Agreement and the Notes,
(2) such corporation or limited liability company shall be Investment Grade and (3) such
corporation or limited liability company shall have caused to be delivered to each holder of
any Notes an opinion of nationally recognized independent counsel, or other independent
counsel reasonably satisfactory to the Required Holders, to the effect that all agreements
or instruments effecting such assumption are enforceable in accordance with their terms and
comply with the terms hereof; and




     (b) immediately before and after giving effect to such transaction, no Default or Event
of Default shall have occurred and be continuing.



No such conveyance, transfer or lease of substantially all of the assets of the Company shall have
the effect of releasing the Company or any successor corporation or limited liability company that
shall theretofore have become such in the manner prescribed in this Section 10.5 from its liability
under this Agreement or the Notes.



     Section 10.6 Transactions with Affiliates. The Company will not, and will not permit any
Subsidiary to, enter into directly or indirectly any transaction or group of related transactions
(including without limitation the purchase, lease, sale or exchange of properties of any kind or
the rendering of any service) with any Affiliate (other than the Company or another Subsidiary),
except in the ordinary course and pursuant to the reasonable requirements of the Company’s or such
Subsidiary’s business and upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would be obtainable in a comparable arm’s-length transaction with a Person not an
Affiliate.



     Section 10.7 Line of Business. The Company will not, and will not permit any Subsidiary to,
engage in any business if, as a result, the general nature of the business in which the Company and
its Subsidiaries, taken as a whole, would then be engaged would be substantially changed from the
general nature of the business in which the Company and its Subsidiaries, taken as a whole, are
engaged on the date of this Agreement as described in the Memorandum.



     Section 10.8 Terrorism Sanctions Regulations. The Company will not and will not permit any
Subsidiary to (a) become a Person described or designated in the Specially Designated Nationals and
Blocked Persons List of the Office of Foreign Assets Control or in



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Section 1 of the Anti-Terrorism Order or (b) engage in any dealings or transactions with any
such Person.



     Section 10.9 Material Subsidiaries. The Company will not, at any time, permit (a) the total
assets of all Subsidiaries that are not Material Subsidiaries to constitute more than 10% of the
consolidated total assets of the Company and its Subsidiaries or (b) the gross revenues of all
Subsidiaries that are not Material Subsidiaries to account for more than 10% of the consolidated
gross revenues of the Company and its Subsidiaries, determined in each case in accordance with
GAAP.



SECTION 11. Events of Default.




     An “Event of Default” shall exist if any of the following conditions or events shall occur and
be continuing:




     (a) the Company defaults in the payment of any principal or Make-Whole Amount on any
Note when the same becomes due and payable, whether at maturity or at a date fixed for
prepayment or by declaration or otherwise; or




     (b) the Company defaults in the payment of any interest on any Note for more than five
Business Days after the same becomes due and payable; or




     (c) the Company defaults in the performance of or compliance with any term contained in
Section 7.1(d), Sections 10.1 through 10.5, inclusive, Section 10.7 or Section 10.8; or




     (d) the Company defaults in the performance of or compliance with any term contained
herein (other than those referred to in Sections 11(a), (b) and (c)) and such default is not
remedied within 30 days after the earlier of (1) a Responsible Officer obtaining actual
knowledge of such default and (2) the Company receiving written notice of such default from
any holder of a Note (any such written notice to be identified as a “notice of default” and
to refer specifically to this Section 11(d)); or




     (e) any representation or warranty made in writing by or on behalf of the Company or by
any officer of the Company in this Agreement or in any writing furnished in connection with
the transactions contemplated hereby proves to have been false or incorrect in any material
respect on the date as of which made; or




     (f) (1) the Company or any Subsidiary is in default (as principal or as guarantor or
other surety) in the payment of any principal of or premium or make-whole amount or interest
on any Indebtedness that is outstanding in an aggregate principal amount of at least the
Threshold Amount beyond any period of grace provided with respect thereto, or (2) the
Company or any Subsidiary is in default in the performance of or compliance with any term of
any evidence of any Indebtedness in an aggregate outstanding principal amount of at least
the Threshold Amount or of any mortgage, indenture or other agreement relating thereto or
any other condition exists, and as a consequence of such default or condition such
Indebtedness has become, or has been declared (or one or more Persons are entitled to
declare such Indebtedness to be), due and



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payable before its stated maturity or before its regularly scheduled dates of payment
or (3) as a consequence of the occurrence or continuation of any event or condition (other
than the passage of time or the right of the holder of Indebtedness to convert such
Indebtedness into equity interests), (i) the Company or any Subsidiary has become obligated
to purchase or repay Indebtedness before its regular maturity or before its regularly
scheduled dates of payment in an aggregate outstanding principal amount of at least the
Threshold Amount or (ii) one or more Persons have the right to require the Company or any
Subsidiary so to purchase or repay such Indebtedness; or




     (g) the Company or any Material Subsidiary (1) is generally not paying, or admits in
writing its inability to pay, its debts as they become due, (2) files, or consents by answer
or otherwise to the filing against it of, a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction,
(3) makes an assignment for the benefit of its creditors, (4) consents to the appointment of
a custodian, receiver, trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its property, (5) is adjudicated as insolvent or to
be liquidated or (6) takes corporate action for the purpose of any of the foregoing; or




     (h) a court or Governmental Authority of competent jurisdiction enters an order
appointing, without consent by the Company or any of its Material Subsidiaries, a custodian,
receiver, trustee or other officer with similar powers with respect to it or with respect to
any substantial part of its property, or constituting an order for relief or approving a
petition for relief or reorganization or any other petition in bankruptcy or for liquidation
or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of the Company or any of its Material
Subsidiaries, or any such petition shall be filed against the Company or any of its Material
Subsidiaries and such petition shall not be dismissed within 60 days; or




     (i) a final judgment or judgments for the payment of money aggregating in excess of the
Threshold Amount are rendered against one or more of the Company and its Subsidiaries and
which judgments are not, within 60 days after entry thereof, bonded, discharged or stayed
pending appeal, or are not discharged within 60 days after the expiration of such stay; or




     (j) the Company on any date is not the direct or (through its Subsidiaries) indirect
owner of (1) 100% of the capital stock of ITC or METC or (2) at least 51% of the capital
stock of any of its other Material Subsidiaries; or




     (k) if (1) any Plan shall fail to satisfy the minimum funding standards of ERISA or the
Code for any plan year or part thereof or a waiver of such standards or extension of any
amortization period is sought or granted under Section 412 of the Code, (2) a notice of
intent to terminate any Plan shall have been or is reasonably expected to be filed with the
PBGC or the PBGC shall have instituted proceedings under ERISA Section 4042 to terminate or
appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any
ERISA Affiliate that a Plan may become a subject of any



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such proceedings, (3) the aggregate “amount of unfunded benefit liabilities” (within
the meaning of Section 4001(a)(18) of ERISA) under all Plans, determined in accordance with
Title IV of ERISA, shall exceed $25,000,000, (4) the Company or any ERISA Affiliate shall
have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to employee benefit
plans, (5) the Company or any ERISA Affiliate withdraws from any Multi-employer Plan or (6)
the Company or any Subsidiary establishes or amends any employee welfare benefit plan that
provides post-employment welfare benefits in a manner that would increase the liability of
the Company or any Subsidiary thereunder; and any such event or events described in clauses
(1) through (6) above, either individually or together with any other such event or events,
could reasonably be expected to have a Material Adverse Effect.


As used in Section 11(k), the terms “employee benefit plan” and “employee welfare benefit plan”
shall have the respective meanings assigned to such terms in Section 3 of ERISA.




SECTION
12. Remedies on Default, Etc.




     Section 12.1 Acceleration.




     (a) If an Event of Default with respect to the Company described in Section 11(g) or
(h) (other than an Event of Default described in clause (1) of Section 11(g) or described in
clause (6) of Section 11(g) by virtue of the fact that such clause encompasses clause (1) of
Section 11(g)) has occurred, all the Notes then outstanding shall automatically become
immediately due and payable.




     (b) If any other Event of Default has occurred and is continuing, the Required Holders
may at any time at its or their option, by notice or notices to the Company, declare all the
Notes then outstanding to be immediately due and payable.




     (c) If any Event of Default described in Section 11(a) or (b) has occurred and is
continuing, any holder or holders of Notes at the time outstanding affected by such Event of
Default may at any time, at its or their option, by notice or notices to the Company,
declare all the Notes held by it or them to be immediately due and payable.



     Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by
declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes,
plus (1) all accrued and unpaid interest thereon (including, but not limited to, interest accrued
thereon at the Default Rate) and (2) the Make-Whole Amount, if any, determined in respect of such
principal amount (to the full extent permitted by applicable law), shall all be immediately due and
payable, in each and every case without presentment, demand, protest or further notice, all of
which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder
of a Note has the right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for), and that the provision for payment of a Make-Whole
Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an
Event of Default, is intended to provide compensation for the deprivation of such right under such
circumstances.



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     Section 12.2 Other Remedies. If any Default or Event of Default has occurred and is
continuing, and irrespective of whether any Notes have become or have been declared immediately due
and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to
protect and enforce the rights of such holder by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any agreement contained herein or
in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in
aid of the exercise of any power granted hereby or thereby or by law or otherwise.



     Section 12.3 Rescission. At any time after any Notes have been declared due and payable
pursuant to Section 12.1(b) or (c), the Required Holders, by written notice to the Company, may
rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue
interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due
and payable and are unpaid other than by reason of such declaration, and all interest on such
overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law)
any overdue interest in respect of the Notes, at the Default Rate, (b) neither the Company nor any
other Person shall have paid any amounts which have become due solely by reason of such
declaration, (c) all Events of Default and Defaults, other than non-payment of amounts that have
become due solely by reason of such declaration, have been cured or have been waived pursuant to
Section 17 and (d) no judgment or decree has been entered for the payment of any monies due
pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend
to or affect any subsequent Event of Default or Default or impair any right consequent thereon.



     Section 12.4 No Waivers or Election of Remedies, Expenses, Etc. No course of dealing and no
delay on the part of any holder of any Note in exercising any right, power or remedy shall operate
as a waiver thereof or otherwise prejudice such holder’s rights, powers or remedies. No right,
power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be
exclusive of any other right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. Without limiting the obligations of the
Company under Section 15, the Company will pay to the holder of each Note on demand such further
amount as shall be sufficient to cover all costs and expenses of such holder incurred in any
enforcement or collection under this Section 12, including, without limitation, reasonable
attorneys’ fees, expenses and disbursements.



SECTION 13. Registration; Exchange; Substitution of Notes.




     Section 13.1 Registration of Notes. The Company shall keep at its principal executive office
a register for the registration and registration of transfers of Notes. The name and address of
each holder of one or more Notes, each transfer thereof and the name and address of each transferee
of one or more Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered shall be deemed and
treated as the owner and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary. The Company shall give to any holder of a
Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy
of the names and addresses of all registered holders of Notes.



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     Section 13.2 Transfer and Exchange of Notes. Upon surrender of any Note to the Company at the
address and to the attention of the designated officer (all as specified in Section 18(3)), for
registration of transfer or exchange (and in the case of a surrender for registration of transfer
or accompanied by a written instrument of transfer duly executed by the registered holder of such
Note or such holder’s attorney duly authorized in writing and accompanied by the relevant name,
address and other information for notices of each transferee of such Note or part thereof), within
10 Business Days thereafter, the Company shall execute and deliver, at the Company’s expense
(except as provided below), one or more new Notes of the same series (as requested by the holder
thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal
amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder
may request and shall be substantially in the form of Exhibit 1(a) or Exhibit 1(b), as applicable.
Each such new Note shall be dated and bear interest from the date to which interest shall have been
paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have
been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or
governmental charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $100,000, provided that if necessary to enable the
registration of transfer by a holder of its entire holding of Notes of a series, one Note of such
series may be in a denomination of less than $100,000. Any transferee, by its acceptance of a Note
registered in its name (or the name of its nominee), shall be deemed to have made the
representation set forth in Section 6.2.



     Section 13.3 Replacement of Notes. Upon receipt by the Company at the address and to the
attention of the designated officer (all as specified in Section 18(3)) of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from such Institutional
Investor of such ownership and such loss, theft, destruction or mutilation), and




     (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to
it (provided that if the holder of such Note is, or is a nominee for, an original Purchaser
or another holder of a Note with a minimum net worth of at least $50,000,000 or that is a
Qualified Institutional Buyer, such Person’s own unsecured agreement of indemnity shall be
deemed to be satisfactory), or




     (b) in the case of mutilation, upon surrender and cancellation thereof,


within 10 Business Days thereafter, the Company at its own expense shall execute and deliver, in
lieu thereof, a new Note of the same series, dated and bearing interest from the date to which
interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date
of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon.




SECTION 14. Payments on Notes.




     Section 14.1 Place of Payment. Subject to Section 14.2, payments of principal, Make-Whole
Amount, if any, and interest becoming due and payable on the Notes shall be made in New York, New
York at the principal office of JPMorgan Chase Bank, N.A., in such jurisdiction. The Company may
at any time, by notice to each holder of a Note, change the place of payment of the Notes so long
as such place of payment shall be either the principal office of



-28-









 







the Company in such jurisdiction or the principal office of a bank or trust company in such
jurisdiction.



     Section 14.2 Home Office Payment. So long as any Purchaser or its nominee shall be the holder
of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount,
if any, and interest by the method and at the address specified for such purpose below such
Purchaser’s name in Schedule A, or by such other method or at such other address as such Purchaser
shall have from time to time specified to the Company in writing for such purpose, without the
presentation or surrender of such Note or the making of any notation thereon, except that upon
written request of the Company made concurrently with or reasonably promptly after payment or
prepayment in full of any Note, such Purchaser shall surrender such Note for cancellation,
reasonably promptly after any such request, to the Company at its principal executive office or at
the place of payment most recently designated by the Company pursuant to Section 14.1. Prior to
any sale or other disposition of any Note held by any Purchaser or its nominee such Purchaser will,
at its election, either endorse thereon the amount of principal paid thereon and the last date to
which interest has been paid thereon or surrender such Note to the Company in exchange for a new
Note or Notes pursuant to Section 13.2. The Company will afford the benefits of this Section 14.2
to any Institutional Investor that is the direct or indirect transferee of any Note purchased by a
Purchaser under this Agreement and that has made the same agreement relating to such Note as the
Purchasers have made in this Section 14.2.



SECTION 15. Expenses, Etc.




     Section 15.1 Transaction Expenses. Whether or not the transactions contemplated hereby are
consummated, the Company will pay all costs and expenses (including reasonable attorneys’ fees of a
special counsel and, if reasonably required by the Required Holders, local or other counsel)
incurred by the Purchasers and each other holder of a Note in connection with such transactions and
in connection with any amendments, waivers or consents under or in respect of this Agreement or the
Notes (whether or not such amendment, waiver or consent becomes effective), including, without
limitation: (a) the costs and expenses incurred in enforcing or defending (or determining whether
or how to enforce or defend) any rights under this Agreement or the Notes or in responding to any
subpoena or other legal process or informal investigative demand issued in connection with this
Agreement or the Notes, or by reason of being a holder of any Note and (b) the costs and expenses,
including financial advisors’ fees, incurred in connection with the insolvency or bankruptcy of the
Company or any Subsidiary or in connection with any work-out or restructuring of the transactions
contemplated hereby and by the Notes. The Company will pay, and will save each Purchaser and each
other holder of a Note harmless from, all claims in respect of any fees, costs or expenses, if any,
of brokers and finders (other than those, if any, retained by a Purchaser or other holder in
connection with its purchase of the Notes).



     Section 15.2 Survival. The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this
Agreement or the Notes, and the termination of this Agreement.



-29-









 





SECTION 16. Survival of Representations and Warranties; Entire Agreement.




     All representations and warranties contained herein shall survive the execution and delivery
of this Agreement and the Notes, the purchase or transfer by any Purchaser of any Note or portion
thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent
holder of a Note, regardless of any investigation made at any time by or on behalf of such
Purchaser or any other holder of a Note. All statements contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant to this Agreement shall be deemed
representations and warranties of the Company under this Agreement. Subject to the preceding
sentence, this Agreement and the Notes embody the entire agreement and understanding between each
Purchaser and the Company and supersede all prior agreements and understandings relating to the
subject matter hereof.



SECTION 17. Amendment and Waiver.




     Section 17.1 Requirements. This Agreement and the Notes may be amended, and the observance of
any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and
only with) the written consent of the Company and the Required Holders, except that (a) no
amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any
defined term (as it is used therein), will be effective as to any holder of a Note unless consented
to by such holder in writing and (b) no such amendment or waiver may, without the written consent
of the holder of each Note at the time outstanding affected thereby, (1) subject to the provisions
of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment
or payment of principal of, or reduce the rate or change the time of payment or method of
computation of interest or of the Make-Whole Amount on, the Notes, (2) change the percentage of the
principal amount of the Notes the holders of which are required to consent to any such amendment or
waiver or (3) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20.



     Section 17.2 Solicitation of Holders of Notes.




     (a) Solicitation. The Company will provide each holder of the Notes (irrespective of
the amount of Notes then owned by it) with sufficient information, sufficiently far in
advance of the date a decision is required, to enable such holder to make an informed and
considered decision with respect to any proposed amendment, waiver or consent in respect of
any of the provisions hereof or of the Notes. The Company will deliver executed or true and
correct copies of each amendment, waiver or consent effected pursuant to the provisions of
this Section 17 to each holder of outstanding Notes promptly following the date on which it
is executed and delivered by, or receives the consent or approval of, the requisite holders
of Notes.




     (b) Payment. The Company will not, directly or indirectly, pay or cause to be paid any
remuneration, whether by way of supplemental or additional interest, fee or otherwise, or
grant any security or provide other credit support, to any holder of Notes as consideration
for or as an inducement to the entering into by any holder of Notes of any waiver or
amendment of any of the terms and provisions hereof unless such remuneration is concurrently
paid, or security is concurrently granted or other credit support



-30-









 







concurrently provided, on the same terms, ratably to each holder of Notes then
outstanding even if such holder did not consent to such waiver or amendment.




     (c) Consent in Contemplation of Transfer. Any consent made pursuant to this Section
17.2 by the holder of any Note that has transferred or has agreed to transfer such Note to
the Company, any Subsidiary or any Affiliate of the Company and has provided or has agreed
to provide such written consent as a condition to such transfer shall be void and of no
force or effect except solely as to such holder, and any amendments effected or waivers
granted or to be effected or granted that would not have been or would not be so effected or
granted but for such consent (and the consents of all other holders of Notes that were
acquired under the same or similar conditions) shall be void and of no force or effect
except solely as to such transferring holder.



     Section 17.3 Binding Effect, Etc. Any amendment or waiver consented to as provided in this
Section 17 applies equally to all holders of Notes and is binding upon them and upon each future
holder of any Note and upon the Company without regard to whether such Note has been marked to
indicate such amendment or waiver. No such amendment or waiver will extend to or affect any
obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or
impair any right consequent thereon. No course of dealing between the Company and the holder of
any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a
waiver of any rights of any holder of such Note. As used herein, the term “this Agreement” and
references thereto shall mean this Agreement as it may from time to time be amended or
supplemented.



     Section 17.4 Notes Held by Company, Etc. Solely for the purpose of determining whether the
holders of the requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this Agreement or the
Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon
the direction of the holders of a specified percentage of the aggregate principal amount of Notes
then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall
be deemed not to be outstanding.



SECTION 18. Notices.




     All notices and communications provided for hereunder shall be in writing and sent (a) by
telecopy if the sender on the same day sends a confirming copy of such notice by a recognized
overnight delivery service (charges prepaid), (b) by registered or certified mail with return
receipt requested (postage prepaid) or (c) by a recognized overnight delivery service (charges
prepaid). Any such notice must be sent:




     (1) if to any Purchaser or its nominee, to such Purchaser or nominee at the
address specified for such communications in Schedule A, or at such other address as
such Purchaser or its nominee shall have specified to the Company in writing,




     (2) if to any other holder of any Note, to such holder at such address as such
other holder shall have specified to the Company in writing, or



-31-









 






     (3) if to the Company, to the Company at its address set forth at the beginning
hereof to the attention of Edward Rahill, Chief Financial Officer, or at such other
address as the Company shall have specified to the holder of each Note in writing.


Notices under this Section 18 will be deemed given only when actually received.




SECTION 19. Reproduction of Documents.




     This Agreement and all documents relating hereto, including, without limitation, (a) consents,
waivers and modifications that may hereafter be executed, (b) documents received by any Purchaser
at the Closing (except the Notes themselves) and (c) financial statements, certificates and other
information previously or hereafter furnished to any holder of Notes, may be reproduced by such
holder by any photographic, photostatic, electronic, digital or other similar process and such
holder may destroy any original document so reproduced. The Company agrees and stipulates that, to
the extent permitted by applicable law, any such reproduction shall be admissible in evidence as
the original itself in any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by such holder of Notes in the regular
course of business) and any enlargement, facsimile or further reproduction of such reproduction
shall likewise be admissible in evidence. This Section 19 shall not prohibit the Company or any
other holder of Notes from contesting any such reproduction to the same extent that it could
contest the original, or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.



SECTION 20. Confidential Information.




     For the purposes of this Section 20, “Confidential Information” shall mean information
delivered to any Purchaser by or on behalf of the Company or any Subsidiary in connection with the
transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature
and that was clearly marked or labeled or otherwise adequately identified when received by such
Purchaser as being confidential information of the Company or such Subsidiary, provided that such
term does not include information that (a) was publicly known or otherwise known to such Purchaser
prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or
omission by such Purchaser or any Person acting on such Purchaser’s behalf, (c) otherwise becomes
known to such Purchaser other than through disclosure by the Company or any Subsidiary or (d)
constitutes financial statements delivered to such Purchaser under Section 7.1 that are otherwise
publicly available. Each Purchaser will maintain the confidentiality of such Confidential
Information in accordance with procedures adopted by such Purchaser in good faith to protect
confidential information of third parties delivered to such Purchaser, provided that such Purchaser
may deliver or disclose Confidential Information to (1) its directors, officers, employees, agents,
attorneys, trustees and affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by its Notes), (2) its financial advisors and other
professional advisors who agree to hold confidential the Confidential Information substantially in
accordance with the terms of this Section 20, (3) any other holder of any Note, (4) any
Institutional Investor to which such Purchaser sells or offers to sell such Note or any part
thereof or any participation therein (if such Person has agreed in writing prior to its receipt of
such Confidential Information to be bound by the provisions of this



-32-









 







Section 20), (5) any Person from which such Purchaser offers to purchase any security of the
Company (if such Person has agreed in writing prior to its receipt of such Confidential Information
to be bound by the provisions of this Section 20), (6) any federal or state regulatory authority
having jurisdiction over such Purchaser, (7) the NAIC or the SVO or, in each case, any similar
organization, or any nationally recognized rating agency that requires access to information about
such Purchaser’s investment portfolio or (8) any other Person to which such delivery or disclosure
may be necessary or appropriate (i) to effect compliance with any law, rule, regulation or order
applicable to such Purchaser, (ii) in response to any subpoena or other legal process, (iii) in
connection with any litigation to which such Purchaser is a party or (iv) if an Event of Default
has occurred and is continuing, to the extent such Purchaser may reasonably determine such delivery
and disclosure to be necessary or appropriate in the enforcement or for the protection of the
rights and remedies under such Purchaser’s Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the
benefits of this Section 20 as though it were a party to this Agreement. On reasonable request by
the Company in connection with the delivery to any holder of a Note of information required to be
delivered to such holder under this Agreement or requested by such holder (other than a holder that
is a party to this Agreement or its nominee), such holder will enter into an agreement with the
Company embodying the provisions of this Section 20.



SECTION 21. Substitution of Purchaser.




     Each Purchaser shall have the right to substitute any one of its Affiliates as the purchaser
of the Notes that such Purchaser has agreed to purchase hereunder, by written notice to the
Company, which notice shall be signed by both such Purchaser and such Affiliate, shall contain such
Affiliate’s agreement to be bound by this Agreement and shall contain a confirmation by such
Affiliate of the accuracy with respect to it of the representations set forth in Section 6. Upon
receipt of such notice, any reference to such Purchaser in this Agreement (other than in this
Section 21), shall be deemed to refer to such Affiliate in lieu of such original Purchaser. In the
event that such Affiliate is so substituted as a Purchaser hereunder and such Affiliate thereafter
transfers to such original Purchaser all of the Notes then held by such Affiliate, upon receipt by
the Company of notice of such transfer, any reference to such Affiliate as a “Purchaser” in this
Agreement (other than in this Section 21), shall no longer be deemed to refer to such Affiliate,
but shall refer to such original Purchaser, and such original Purchaser shall again have all the
rights of an original holder of Notes under this Agreement.



SECTION 22. Miscellaneous.




     Section 22.1 Successors and Assigns. All covenants and other agreements contained in this
Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent holder of a Note)
whether so expressed or not.



     Section 22.2 Payments Due on Non-Business Days. Anything in this Agreement or the Notes to
the contrary notwithstanding (but without limiting the requirement in Section 8.4 that the notice
of any optional prepayment specify a Business Day as the date fixed for such prepayment), any
payment of principal of or Make-Whole Amount, if any, or interest on any Note that is due on a date
other than a Business Day shall be made on the next succeeding



-33-









 







Business Day without including the additional days elapsed in the computation of the interest
payable on such next succeeding Business Day; provided that if the maturity date of any Note is a
date other than a Business Day, the payment otherwise due on such maturity date shall be made on
the next succeeding Business Day and shall include the additional days elapsed in the computation
of interest payable on such next succeeding Business Day.



     Section 22.3 Accounting Terms. All accounting terms used herein which are not expressly
defined in this Agreement have the meanings respectively given to them in accordance with GAAP.
Except as otherwise specifically provided herein, (a) all computations made pursuant to this
Agreement shall be made in accordance with GAAP and (b) all financial statements shall be prepared
in accordance with GAAP; provided that, for any change occurring after the Closing Date in GAAP or
in the application thereof on the operation of any provisions hereof, if the Company notifies the
holders of Notes that the Company requests an amendment to any such provision to eliminate the
effect of any such change (or if the Required Holders notify the Company that the Required Holders
request an amendment to any provision hereof for such purpose), regardless of whether any such
notice is given before or after such change in GAAP or in the application thereof, then such
provision shall be interpreted on the basis of GAAP as in effect and applied immediately before
such change shall have become effective until such notice shall have been withdrawn or such
provision amended in accordance herewith.



     Section 22.4 Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by
law) not invalidate or render unenforceable such provision in any other jurisdiction.



     Section 22.5 Construction, Etc. Each covenant contained herein shall be construed (absent
express provision to the contrary) as being independent of each other covenant contained herein, so
that compliance with any one covenant shall not (absent such an express contrary provision) be
deemed to excuse compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.



     For the avoidance of doubt, all Schedules and Exhibits attached to this Agreement shall be
deemed a part hereof.



     Section 22.6 Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be an original but all of which together shall constitute one instrument. Each
counterpart may consist of a number of copies hereof, each signed by less than all, but together
signed by all, of the parties hereto.



     Section 22.7 Governing Law. This Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the law of the State of New York
excluding choice-of-law principles of the law of such State that would require the application of
the laws of a jurisdiction other than such State.



-34-









 





     Section 22.8 Jurisdiction and Process; Waiver of Jury Trial.




     (a) The Company irrevocably submits to the non-exclusive jurisdiction of any New York
State or federal court sitting in the Borough of Manhattan, The City of New York, over any
suit, action or proceeding arising out of or relating to this Agreement or the Notes. To
the fullest extent permitted by applicable law, the Company irrevocably waives and agrees
not to assert, by way of motion, as a defense or otherwise, any claim that it is not subject
to the jurisdiction of any such court, any objection that it may now or hereafter have to
the laying of the venue of any such suit, action or proceeding brought in any such court and
any claim that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum.




     (b) The Company consents to process being served by or on behalf of any holder of Notes
in any suit, action or proceeding of the nature referred to in Section 22.8(a) by mailing a
copy thereof by registered or certified mail (or any substantially similar form of mail),
postage prepaid, return receipt requested, to it at its address specified in Section 18 or
at such other address of which such holder shall then have been notified pursuant to said
Section. The Company agrees that such service upon receipt (1) shall be deemed in every
respect effective service of process upon it in any such suit, action or proceeding and (2)
shall, to the fullest extent permitted by applicable law, be taken and held to be valid
personal service upon and personal delivery to it. Notices hereunder shall be conclusively
presumed received as evidenced by a delivery receipt furnished by the United States Postal
Service or any reputable commercial delivery service.




     (c) Nothing in this Section 22.8 shall affect the right of any holder of a Note to
serve process in any manner permitted by law, or limit any right that the holders of any of
the Notes may have to bring proceedings against the Company in the courts of any appropriate
jurisdiction or to enforce in any lawful manner a judgment obtained in one jurisdiction in
any other jurisdiction.




     (d) The parties hereto hereby waive trial by jury in any action brought on
or with respect to this Agreement, the Notes or any other document executed in connection
herewith or therewith.



* * * * *





-35-












 




The execution hereof by the Purchasers shall constitute a contract among the Company and the
Purchasers for the use and purposes hereinabove set forth.




	 	 	 	 	 
	 	Very truly yours,


ITC Holdings Corp.

 	 
	 	By  	/s/ Edward M. Rahill
 	 
	 	 	Title: Senior Vice President & CFO 	 



 









 






	 	 	 	 	 
	This Agreement is hereby accepted and agreed
 to as of the date thereof.
	 	 	 	 	 
	 	
Metropolitan Life Insurance Company
 	 
	 	By:  	/s/ Judith A. Gulotta
 	 
	 	 	Title: Director 	 
	 	 	 	 
	 
	 	The Northwestern Mutual Life Insurance Company

 	 
	 	By:  	/s/ Howard Stern
 	 
	 	 	Title: Authorized Representative 	 
	 	 	 	 
	 
	 	The Prudential Insurance Company of America

 	 
	 	By:  	/s/ Ric E. Abel
 	 
	 	 	Title: Vice President 	 
	 	 	 	 
	 
	 	Prudential Retirement Insurance and Annuity Company

 	 
	 	By:  	Prudential Investment Management, Inc., as investment manager
 	 
	 	 	 
	 	By:  	        /s/ Ric E. Abel
 	 
	 	 	Title: Vice President 	 
	 	 	 	 
	 
	 	Universal Prudential Arizona Reinsurance Company

 	 
	 	By:  	Prudential Investment Management, Inc., as investment manager
 	 
	 	 	 
	 	By:  	       /s/ Ric E. Abel
 	 
	 	 	Title: Vice President 	 
	 	 	 	 



 









 







	 	 	 	 	 
	This Agreement is hereby accepted and agreed
  to as of the date thereof.

 	 
	 	Jackson National Life Insurance Company

 	 
	 	By:  	PPM America, Inc., as attorney in fact, on behalf of Jackson National Life Insurance Company
 	 
	 	 	 
	 	By:  	        /s/ Craig Radis
 	 
	 	 	Title: Vice President 	 
	 	 	 	 
	 
	 	The Guardian Life Insurance Company of America

 	 
	 	By:  	/s/ Brian Keating
 	 
	 	 	Title: Managing Director 	 
	 	 	 	 
	 
	 	Connecticut General Life Insurance Company

 	 
	 	By:  	CIGNA Investments, Inc. (authorized agent)
 	 
	 	 	 
	 	By:  	       /s/ Deborah B. Wiacek
 	 
	 	 	Title: Managing Director 	 
	 	 	 	 
	 
	 	Life Insurance Company of North America

 	 
	 	By:  	CIGNA Investments, Inc. (authorized agent)
 	 
	 	 	 
	 	By:  	       /s/ Deborah B. Wiacek
 	 
	 	 	Title: Managing Director 	 
	 	 	 	 



 









 







	 	 	 	 	 
	This Agreement is hereby accepted and agreed
 to as of the date thereof.
 	 
	 	The United of Omaha Life Insurance Company

 	 
	 	By:  	/s/ Curtis R. Caldwell
 	 
	 	 	Title: Vice President 	 
	 	 	 	 
	 
	 	Fort Dearborn Life Insurance Company

 	 
	 	By:  	Advantus Capital Management, Inc.
 	 
	 	 	 
	 	By:  	       /s/ E.A. Bergsland
 	 
	 	 	Title: Vice President 	 
	 	 	 	 
	 
	 	Colorado Bankers Life Insurance Company

 	 
	 	By:  	Advantus Capital Management, Inc.
 	 
	 	 	 
	 	By:  	       /s/ James F. Geiger
 	 
	 	 	Title: Vice President 	 
	 	 	 	 
	 
	 	Great Western Insurance Company

 	 
	 	By:  	Advantus Capital Management, Inc.
 	 
	 	 	 
	 	By:  	       /s/ James W. Tobin
 	 
	 	 	Title: Vice President 	 
	 	 	 	 
	 
	 	The Catholic Aid Association

 	 
	 	By:  	Advantus Capital Management, Inc.
 	 
	 	 	 
	 	By:  	       /s/ Robert W. Thompson
 	 
	 	 	Title: Vice President 	 
	 	 	 	 



 









 






	 	 	 	 	 
	This Agreement is hereby accepted and agreed
 to as of the date thereof.

 	 
	 	
American Republic Insurance Company

 	 
	 	By:  	Advantus Capital Management, Inc.
 	 
	 	 	 
	 	By:  	       /s/ Joseph Gogola
 	 
	 	 	Title: Vice President 	 
	 	 	 	 
	 
	 	Blue Cross and Blue Shield of Florida, Inc.

 	 
	 	By:  	Advantus Capital Management, Inc.
 	 
	 	 	 
	 	By:  	       /s/ Theodore R. Hoxmeier
 	 
	 	 	Title: Vice President 	 
	 	 	 	 
	 
	 	American Public Life Insurance Company.

 	 
	 	By:  	Advantus Capital Management, Inc.
 	 
	 	 	 
	 	By:  	       /s/ Kathleen H. Parker
 	 
	 	 	Title: Vice President 	 
	 	 	 	 
	 




 











 





Information Relating To Purchasers




	 	 	 	 	 
	 	 	 	 	Principal Amount of Notes
	Name and Address of Purchaser	 	Series	 	to be Purchased
	 
	[Name of Purchaser]

	 	 	 	$
	 
	 	 	 	 
	(1) All payments by wire transfer of
immediately available funds to:
	 	 	 	 
	 
	 	 	 	 
	 With sufficient
information to identify
the source and
application of such
funds.
	 	 	 	 
	 
	 	 	 	 
	(2) All notices of payments and
written confirmations of such wire
transfers:
	 	 	 	 
	 
	 	 	 	 
	(3) All other communications:
	 	 	 	 






Schedule A

(to Note Purchase Agreement)





 







 








Defined Terms




     As used herein, the following terms have the respective meanings set forth below or set forth
in the Section hereof following such term:



     “Acquisition” shall mean any transaction or series of related transactions for the purpose of
or resulting, directly or indirectly, in (a) the acquisition by the Company or a Subsidiary of all
or substantially all of the assets of a Person, or of a business unit or division of a Person, (b)
the acquisition by the Company or a Subsidiary of in excess of 50% of the capital stock,
partnership interests, membership interests or other equity of any Person (other than a Person that
is a Subsidiary), or otherwise causing any Person to become a Subsidiary or (c) a merger or
consolidation or any other combination with another Person (other than a Person that is a
Subsidiary), provided that the Company or a Subsidiary is the surviving entity.



     “Affiliate” shall mean, at any time, and with respect to any Person, any other Person that at
such time directly or indirectly through one or more intermediaries Controls, or is Controlled by,
or is under common Control with, such first Person, and, with respect to the Company, shall include
any Person beneficially owning or holding, directly or indirectly, 10% or more of any class of
voting or equity interests of the Company or any Subsidiary or any Person of which the Company and
its Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of
any class of voting or equity interests. As used in this definition, “Control” means the
possession, directly or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by contract or
otherwise. Unless the context otherwise clearly requires, any reference to an “Affiliate” is a
reference to an Affiliate of the Company.



     “Anti-Terrorism Order” shall mean Executive Order No. 13,224 of September 24, 2001, Blocking
Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit or Support
Terrorism, 66 U.S. Fed. Reg. 49, 079 (2001), as amended.



     “Attributable Value” shall mean, with respect to any Sale and Leaseback Transaction, as of the
time of determination, the lesser of (a) the sale price of the property or assets so leased
multiplied by a fraction the numerator of which is the remaining portion of the base term of the
lease included in such Sale and Leaseback Transaction and the denominator of which is the base term
of such lease, and (b) the total obligation (discounted to present value at the rate of interest
specified by the terms of such lease) of the lessee for rental payments (other than amounts
required to be paid on account of property taxes as well as maintenance, repairs, insurance, water
rates and other items which do not constitute payments for property rights) during the remaining
portion of the base term of the lease included in such Sale and Leaseback Transaction.



     “Business Day” shall mean (a) for the purposes of Section 8.6 only, any day other than a
Saturday, a Sunday or a day on which commercial banks in New York, New York are required or
authorized to be closed, and (b) for the purposes of any other provision of this Agreement, any day
other than a Saturday, a Sunday or a day on which commercial banks in Detroit, Michigan or New
York, New York are required or authorized to be closed.



Schedule B

(to Note Purchase Agreement)




 









 








     “Capital Lease” as applied to any Person, shall mean any lease of any property (whether real,
personal or mixed) by that Person as lessee that, in conformity with GAAP, is, or is required to
be, accounted for as a finance lease obligation on the balance sheet of that Person.



     “Capital Stock” shall mean common shares, preferred shares or other equivalent equity
interests (howsoever designated) of capital stock of a corporation, equity preferred or common
interests or membership interests in a limited liability company, limited or general partnership
interests in a partnership or any other equivalent of such ownership interest.



     “Capitalized Lease Obligations” shall mean, as applied to any Person, all obligations under
Capital Leases of such Person and its Subsidiaries, in each case taken at the amount thereof
accounted for as liabilities in accordance with GAAP.



     “Closing” is defined in Section 3.



     “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the
rules and regulations promulgated thereunder from time to time.



     “Company” shall mean ITC Holdings Corp., a Michigan corporation or any successor that becomes
such in the manner prescribed in Section 10.5.



     “Confidential Information” is defined in Section 20.



     “Consolidated Capitalization” shall mean consolidated total assets less consolidated
non-interest bearing current liabilities, all as shown on the Company’s most recent audited
consolidated balance sheet prepared in accordance with GAAP.



     “Debt to Capitalization Ratio” shall mean, as of any date of determination, the ratio of (a)
Total Debt at such time to (b) Total Capitalization as of the end of the most recently ended fiscal
quarter of the Company.



     “Default” shall mean an event or condition the occurrence or existence of which would, with
the lapse of time or the giving of notice or both, become an Event of Default.



     “Default Rate” shall, with respect to the Notes of a series, that rate of interest that is the
greater of (a) 2.00% per annum above the rate of interest stated in clause (a) of the first
paragraph of the Notes of such series or (b) 2.00% over the rate of interest publicly announced by
JPMorgan Chase Bank, N.A., in New York, New York as its “base” or “prime” rate.



     “Electronic Delivery” is defined in Section 7.1(a).



     “Environmental Laws” shall mean any and all federal, state, local, and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or governmental restrictions relating to pollution and the
protection of the environment or the release of any materials into the environment, including but
not limited to those related to Hazardous Materials.



B-2









 





     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time
to time, and the rules and regulations promulgated thereunder from time to time in effect.



     “ERISA Affiliate” shall mean any trade or business (whether or not incorporated) that is
treated as a single employer together with the Company under Section 414 of the Code.



     “Event of Default” is defined in Section 11.



     “Form 10-K” is defined in Section 7.1(b).



     “Form 10-Q” is defined in Section 7.1(a).



     “GAAP” shall mean generally accepted accounting principles as in effect from time to time in
the United States of America.



     “Governmental Authority” shall mean




     (a) the government of




     (1) the United States of America or any State or other political subdivision
thereof, or




     (2) any other jurisdiction in which the Company or any Subsidiary conducts all
or any part of its business, or which asserts jurisdiction over any properties of
the Company or any Subsidiary, or




     (b) any entity exercising executive, legislative, judicial, regulatory or
administrative functions of, or pertaining to, any such government.



     “Guarantee Obligations” shall mean, as to any Person, any obligation of such Person
guaranteeing or intended to guarantee any Indebtedness of any other Person (the “primary obligor")
in any manner, whether directly or indirectly, including any obligation of such Person, whether or
not contingent, (a) to purchase any such Indebtedness or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (1) for the purchase or payment of any
such Indebtedness or (2) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any such Indebtedness of
the ability of the primary obligor to make payment of such Indebtedness or (d) otherwise to assure
or hold harmless the owner of such Indebtedness against loss in respect thereof; provided that, the
term “Guarantee Obligations” shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Guarantee Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the Indebtedness in respect of
which such Guarantee Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to perform thereunder)
as determined by such Person in good faith or, if the Guarantee Obligation is expressly limited to
a specified amount, such specified amount.



B-3









 





     “Hazardous Material” shall mean any and all pollutants, toxic or hazardous wastes or other
substances that might pose a hazard to health and safety, the removal of which may be required or
the generation, manufacture, refining, production, processing, treatment, storage, handling,
transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of
which is or shall be restricted, prohibited or penalized by any applicable law including, but not
limited to, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum,
petroleum products, lead based paint, radon gas or similar restricted, prohibited or penalized
substances.



     “holder” shall mean, with respect to any Note, the Person in whose name such Note is
registered in the register maintained by the Company pursuant to Section 13.1.



     “Indebtedness” with respect to any Person shall mean (a) all indebtedness of such Person for
borrowed money, (b) the deferred purchase price of assets or services that in accordance with GAAP
would be classified as a liability on the balance sheet of such Person, (c) the face amount of all
letters of credit issued for the account of such Person and, without duplication, all drafts drawn
thereunder, (d) all Indebtedness of a second Person secured by any Lien on any property owned by
such first Person, whether or not such Indebtedness has been assumed, (e) all Capitalized Lease
Obligations of such Person, (f) all existing payment obligations of such Person under interest rate
swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements,
currency future or option contracts and other similar agreements, (g) all existing payment
obligations of such Person under commodity future contracts and other similar agreements and (h)
without duplication, all Guarantee Obligations of such Person; provided that, Indebtedness shall
not include current payables and accrued expenses, in each case arising in the ordinary course of
business.



     “INHAM Exemption” is defined in Section 6.2(e).



     “Institutional Investor” shall mean (a) any Purchaser of a Note, (b) any holder of a Note
holding (together with one or more of its affiliates) more than $2,000,000 in aggregate principal
amount of the Notes then outstanding, (c) any bank, trust company, savings and loan association or
other financial institution, any pension plan, any investment company, any insurance company, any
broker or dealer, or any other similar financial institution or entity, regardless of legal form
and (d) any Related Fund of any holder of any Note.



     “Investment Grade” shall mean having a non-credit-enhanced long term senior unsecured debt
rating of “BBB-” or better from S&P or “Baa3” or better from Moody’s.



     “ITC” shall mean International Transmission Company, a Michigan corporation.



     “ITC First Mortgage Indenture” shall mean the First Mortgage and Deed of Trust, dated as of
July 15, 2003, between ITC and BNY Midwest Trust Company, as trustee thereunder, as the same may be
amended, supplemented or otherwise modified and in effect from time to time.



     “Lien” shall mean any mortgage, pledge, security interest, hypothecation, assignment by way of
security, lien (statutory or other) or similar encumbrance (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement or any lease in the nature
thereof).



B-4









 





     “Make-Whole Amount” is defined in Section 8.6.



     “Material” shall mean material in relation to the business, operations, affairs, financial
condition, assets, properties, or prospects of the Company and its Subsidiaries, taken as a whole.



     “Material Adverse Effect” shall mean a material adverse effect on (a) the business,
operations, affairs, financial condition, assets or properties of the Company and its Subsidiaries,
taken as a whole, (b) the ability of the Company to perform its obligations under this Agreement
and the Notes or (c) the validity or enforceability of this Agreement or the Notes.



     “Material Subsidiary” shall mean, as at any date, a Subsidiary (the “Subject Subsidiary"),
including its Subsidiaries, which meet any of the following conditions:




     (a) the Company’s and its other Subsidiaries’ investments in and advances to the
Subject Subsidiary and its Subsidiaries exceeds 10% of the total assets of the Company and
its Subsidiaries consolidated as of the end of the then most recently completed fiscal year;




     (b) the Company’s and its other Subsidiaries’ proportionate share of the total assets
(after intercompany eliminations) of the Subject Subsidiary exceeds 10% of the total assets
of the Company and its Subsidiaries as of the end of the then most recently completed fiscal
year;




     (c) the Company’s and its other Subsidiaries’ equity in the income from continuing
operations before income taxes, extraordinary items and cumulative effect of a change in
accounting principles of the Subject Subsidiary and its Subsidiaries exceeds 10% of such
income of the Company and its Subsidiaries consolidated for the then most recently completed
fiscal year; or




     (d) which is designated by the Company as a “Material Subsidiary” by notice in writing
given to the holders of Notes.



     “Memorandum” is defined in Section 5.3.



     “METC” shall mean Michigan Electric Transmission Company, LLC, a Michigan limited liability
company.



     “METC First Mortgage Indenture” shall mean the First Mortgage Indenture, dated as of December
10, 2003, between METC and JPMorgan Chase Bank, N.A., as Trustee, as the same may be amended,
supplemented or otherwise modified from time to time.



     “Moody’s” shall mean Moody’s Investors Service, Inc.



     “Multi-employer Plan” shall mean any Plan that is a “multiemployer plan” (as such term is
defined in Section 4001(a)(3) of ERISA).



     “NAIC” shall mean the National Association of Insurance Commissioners or any successor
thereto.



B-5









 





     “NAIC Annual Statement” is defined in Section 6.2(a).



     “Net Tangible Assets” shall mean the amount shown as consolidated total assets on the
Company’s most recently delivered audited consolidated balance sheet prepared in accordance with
GAAP, less the following: (a) intangible assets including, without limitation, such items as
goodwill, trademarks, tradenames, patents and unamortized debt discount and expense and other
regulatory assets carried as an asset on such balance sheet and (b) appropriate adjustments, if
any, on account of minority interests.



     “Notes” is defined in Section 1.



     “Notice of Election to Increase Debt to Capitalization Ratio” shall mean a notice, dated not
more than 10 Business Days after the date of completion of the Acquisition described therein,
signed by a Senior Financial Officer, which shall state (a) that the Company or a Subsidiary has
completed an Acquisition, (b) a description of such Acquisition, (c) the date of completion of such
Acquisition, (d) the fair market value of the assets acquired or contributed in such Acquisition,
(e) the aggregate principal amount of Indebtedness incurred or to be incurred in connection with
such Acquisition, (f) that immediately before giving effect to such Acquisition no Default or Event
of Default shall have occurred and be continuing, (g) that immediately after giving effect to such
Acquisition, the Debt to Capitalization Ratio would equal or exceed 0.75 to 1.00, (h) that
immediately after giving effect to such increase in the maximum permitted Debt to Capitalization
Ratio, no Default or Event of Default shall have occurred and be continuing and (i) that by such
notice the Company has elected to increase the maximum permitted Debt to Capitalization Ratio as
described in Section 10.1.



     “Officer’s Certificate” shall mean a certificate of a Senior Financial Officer or of any other
officer of the Company whose responsibilities extend to the subject matter of such certificate.



     “PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA or
any successor thereto.



     “Person” shall mean an individual, partnership, corporation, limited liability company,
association, trust, unincorporated organization, business entity or Governmental Authority.



     “Permitted Liens” shall mean (a) Liens for taxes, assessments, customs duties or governmental
charges or claims not yet due or which are being contested in good faith and by appropriate
proceedings for which appropriate provisions have been established in accordance with GAAP; (b)
Liens in respect of property or assets of the Company or any of its Subsidiaries imposed by law,
such as carriers’, warehousemen’s and or mechanics’ Liens, and other similar Liens arising in the
ordinary course of business and Liens arising under zoning laws and ordinances and municipal bylaws
and regulations, in each case so long as such Liens arise in the ordinary course of business and do
not individually or in the aggregate have a Material Adverse Effect; (c) Liens arising out of
pledges or deposits under workmen’s compensation laws or similar legislation and Liens of judgments
thereunder which are not currently dischargeable, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of money) or leases to which the Company or any
Subsidiary is a party, or deposits to secure public



B-6









 







or statutory obligations of the Company or any Subsidiary, or deposits in connection with
obtaining or maintaining self-insurance or to obtain the benefits of any law, regulation or
arrangement pertaining to unemployment insurance, old age pensions, social security or similar
matters, or deposits of cash or obligations of the United States of America to secure surety,
appeal or customs bonds to which the Company or any Subsidiary is a party, or deposits in
litigation or other proceedings such as, but not limited to, interpleader proceedings, and, to the
extent not securing Indebtedness, other similar obligations incurred in the ordinary course of
business; (d) easements, rights-of-way, restrictive covenants or agreements, minor defects or
irregularities in title and other similar charges or encumbrances not interfering in any material
respect with the business of the Company and its Subsidiaries taken as a whole; and (e) to the
extent not securing Indebtedness, (1) Liens arising from judgments or decrees in circumstances not
constituting an Event of Default under Section 11(i); (2) ground leases in respect of real property
on which facilities owned or leased by the Company or any of its Subsidiaries are located; (3) any
interest or title of a lessor or secured by a lessor’s interest under any lease not prohibited by
this Agreement; (4) Liens incurred by the licensing of trademarks by the Company or any of its
Subsidiaries to others in the ordinary course of business; and (5) leases or subleases granted to
others, not interfering in any material respect with the business of the Company and its
Subsidiaries taken as a whole.



     “Plan” shall mean an “employee benefit plan” (as defined in Section 3(3) of ERISA) subject to
Title I of ERISA that is or, within the preceding five years, has been established or maintained,
or to which contributions are or, within the preceding five years, have been made or required to be
made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA
Affiliate may have any liability.



     “property” or “properties” shall mean, unless otherwise specifically limited, real or personal
property of any kind, tangible or intangible, choate or inchoate.



     “PTE” is defined in Section 6.2(a).



     “Purchaser” is defined in the first paragraph of this Agreement.



     “QPAM Exemption” is defined in Section 6.2(d).



     “Qualified Institutional Buyer” shall mean any Person who is a “qualified institutional buyer”
within the meaning of such term as set forth in Rule 144A(a)(1) under the Securities Act.



     “Related Fund” shall mean, with respect to any holder of any Note, any fund or entity that (a)
invests in Securities or bank loans and (b) is advised or managed by such holder, the same
investment advisor as such holder or by an affiliate of such holder or such investment advisor.



     “Required Holders” shall mean, at any time, the holders of more than 50% in principal amount
of the Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its
Affiliates).



     “Responsible Officer” shall mean any Senior Financial Officer and any other officer of the
Company with responsibility for the administration of the relevant portion of this Agreement.



B-7









 





     “S&P” shall mean Standard & Poor’s Ratings Group, a division of The McGraw Hill Companies,
Inc.



     “Sale and Leaseback Transaction” is defined in Section 10.4.



     “SEC” shall mean the Securities and Exchange Commission of the United States, or any successor
thereto.



     “Securities” or “Security” shall have the meaning specified in Section 2(1) of the Securities
Act.



     “Securities Act” shall mean the Securities Act of 1933, as amended from time to time, and the
rules and regulations promulgated thereunder from time to time in effect.



     “Senior Financial Officer” shall mean the chief financial officer, principal accounting
officer, treasurer or comptroller of the Company.



     “Series A Notes” is defined in Section 1.



     “Series B Notes” is defined in Section 1.



     “Source” is defined in Section 6.2.



     “Subsidiary” shall mean, as to any Person, any other Person in which such first Person or one
or more of its Subsidiaries or such first Person and one or more of its Subsidiaries owns
sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence
of contingencies, to elect a majority of the directors (or Persons performing similar functions) of
such second Person, and any partnership or joint venture if more than a 50% interest in the profits
or capital thereof is owned by such first Person or one or more of its Subsidiaries or such first
Person and one or more of its Subsidiaries (unless such partnership can and does ordinarily take
major business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a “Subsidiary” is a
reference to a Subsidiary of the Company.



     “SVO” shall mean the Securities Valuation Office of the NAIC or any successor to such Office.



     “Threshold Amount” shall mean, at any time, the greater of (a) $25,000,000 and (b) an amount
equal to 1.00% of Net Tangible Assets as of the end of the most recently ended fiscal quarter of
the Company.



     “Total Capitalization” shall mean, as of any date of determination, the sum, without
duplication, of (a) Total Debt and (b) the total stockholder’s equity of the Company as determined
in accordance with GAAP; provided that the term “Total Capitalization” shall exclude the non-cash
effects of the March 31, 2006 FAS Statement titled “Employers’ Accounting for Defined Pension and
Postretirement Plans.”



B-8









 





     “Total Debt” shall mean, as of any date of determination, (a) the sum, without duplication, of
(a) all Indebtedness of the Company and its Subsidiaries for borrowed money outstanding on such
date, (b) all Capitalized Lease Obligations of the Company and its Subsidiaries outstanding on such
date and (c) all Indebtedness of the Company and its Subsidiaries of the types described in clauses
(b) and (d) of the definition of Indebtedness (but in the case of clause (d), only to the extent
such Indebtedness is assumed by the Company or any Subsidiary), all calculated on a consolidated
basis in accordance with GAAP and to the extent reflected as Indebtedness on the consolidated
balance sheet of the Company in accordance with GAAP minus (b) the aggregate amount of cash held by
the Company and its Subsidiaries as at such date and included in the cash accounts listed on the
consolidated balance sheet of the Company and its Subsidiaries to the extent the use thereof for
application to payment of Indebtedness of the Company and its Subsidiaries is not prohibited by law
or any contract to which the Company or any of its Subsidiaries is a party (but in each case
excluding equity securities that are mandatorily redeemable 91 or more days after September 20,
2017 and that are classified as hybrid securities by Moody’s and/or S&P).



     “USA Patriot Act” shall mean United States Public Law 107-56, Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT
ACT) Act of 2001, as amended from time to time, and the rules and regulations promulgated
thereunder from time to time in effect.



     “Wholly-Owned Subsidiary” shall mean, at any time, any Subsidiary 100% of all of the equity
interests (except directors’ qualifying shares) and voting interests of which are owned by any one
or more of the Company and the Company’s other Wholly-Owned Subsidiaries at such time.



B-9









 





Form of Series A Note




ITC Holdings Corp.




6.04% Senior Note, Series A, due September 20, 2014




			
	No. RA-          
       
	 	                     
      , 20     
	$
                              
	 	PPN 45031# AB0






     For value received, the undersigned, ITC Holdings Corp. (herein called the
“Company”), a corporation organized and existing under the laws of the State of Michigan, hereby
promises to pay to                     , or registered assigns, the principal sum of                     
Dollars (or so much thereof as shall not have been prepaid) on September 20, 2014, with
interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid
balance hereof at the rate of 6.04% per annum from the date hereof, payable semiannually, on the
                     day of                      and                      in each year, commencing with the
                    
or                      next succeeding the date hereof, until the principal hereof shall have become
due and payable, and (b) to the extent permitted by law, at a rate per annum from time to time
equal to the greater of (1) 8.04% or (2) 2.00% over the rate of interest publicly announced by
JPMorgan Chase Bank, N.A., from time to time in New York, New York as its “base” or “prime” rate,
on any overdue payment of interest and, during the continuance of an Event of Default, on the
unpaid balance hereof and on any overdue payment of any Make-Whole Amount, payable semiannually as
aforesaid (or, at the option of the registered holder hereof, on demand).



     Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are
to be made in lawful money of the United States of America at the principal office of JPMorgan
Chase Bank, N.A., in New York, New York or at such other place as the Company shall have designated
by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to
below.



     This Note is one of a series of Series A Senior Notes (herein called the “Notes”) issued
pursuant to the Note Purchase Agreement dated as of September 20, 2007 (as from time to time
amended, the “Note Purchase Agreement”), between the Company and the respective Purchasers named
therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its
acceptance hereof, to have (i) agreed to the confidentiality provisions set forth in Section 20 of
the Note Purchase Agreement and (ii) made the representation set forth in Section 6.2 of the Note
Purchase Agreement. Unless otherwise indicated, capitalized terms used in this Note shall have the
respective meanings ascribed to such terms in the Note Purchase Agreement.



     This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender
of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of
transfer duly executed, by the registered holder hereof or such holder’s attorney duly authorized
in writing, a new Note for a like principal amount will be issued to, and registered in the name
of, the transferee. Prior to due presentment for registration of transfer, the Company may treat
the person in whose name this Note is registered as the owner hereof for the



Exhibit 1(a)

(to Note Purchase Agreement)




 









 







purpose of receiving payment and for all other purposes, and the Company will not be affected
by any notice to the contrary.




     This Note is subject to prepayment, in whole or from time to time in part, at the times and on
the terms specified in the Note Purchase Agreement, but not otherwise.



     If an Event of Default occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any applicable Make-Whole
Amount) and with the effect provided in the Note Purchase Agreement.



     This Note shall be construed and enforced in accordance with, and the rights of the parties
shall be governed by, the law of the State of New York excluding choice of law principles of the
law of such State that would require the application of the laws of a jurisdiction other than such
State.



	 	 	 	 	 
	 	ITC Holdings Corp.

 	 
	 	By  	 	 
	 	 	Its 	 
	 	 	 	 
	 



E-1(a)-2




 









 








Form of Series B Note




ITC Holdings Corp.




6.23% Senior Note, Series B, due September 20, 2017




			
	No. RB-          
       
	 	         
               
     ,20     
	$
                              
	 	PPN 45031# AC8






     For value received, the undersigned, ITC Holdings Corp. (herein called the
“Company”), a corporation organized and existing under the laws of the State of Michigan, hereby
promises to pay to                     , or registered assigns, the principal sum of                                         
Dollars (or so much thereof as shall not have been prepaid) on September 20, 2017, with
interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid
balance hereof at the rate of 6.23% per annum from the date hereof, payable semiannually, on the
                     day of
                     and                      in each year, commencing with the              
       
or                      next succeeding the date hereof, until the principal hereof shall have become
due and payable, and (b) to the extent permitted by law, at a rate per annum from time to time
equal to the greater of (1) 8.23% or (2) 2.00% over the rate of interest publicly announced by
JPMorgan Chase Bank, N.A., from time to time in New York, New York as its “base” or “prime” rate,
on any overdue payment of interest and, during the continuance of an Event of Default, on the
unpaid balance hereof and on any overdue payment of any Make-Whole Amount, payable semiannually as
aforesaid (or, at the option of the registered holder hereof, on demand).



     Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are
to be made in lawful money of the United States of America at the principal office of JPMorgan
Chase Bank, N.A., in New York, New York or at such other place as the Company shall have designated
by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to
below.



     This
Note is one of a series of Series B Senior Notes (herein called the “Notes”) issued
pursuant to the Note Purchase Agreement dated as of September 20, 2007 (as from time to time
amended, the “Note Purchase Agreement”), between the Company and the respective Purchasers named
therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its
acceptance hereof, to have (i) agreed to the confidentiality provisions set forth in Section 20 of
the Note Purchase Agreement and (ii) made the representation set forth in Section 6.2 of the Note
Purchase Agreement. Unless otherwise indicated, capitalized terms used in this Note shall have the
respective meanings ascribed to such terms in the Note Purchase Agreement.



     This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender
of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of
transfer duly executed, by the registered holder hereof or such holder’s attorney duly authorized
in writing, a new Note for a like principal amount will be issued to, and registered in the name
of, the transferee. Prior to due presentment for registration of transfer, the Company may treat
the person in whose name this Note is registered as the owner hereof for the



Exhibit 1(b)

(to Note Purchase Agreement)




 









 







purpose of receiving payment and for all other purposes, and the Company will not be affected
by any notice to the contrary.




     This Note is subject to prepayment, in whole or from time to time in part, at the times and on
the terms specified in the Note Purchase Agreement, but not otherwise.



     If an Event of Default occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any applicable Make-Whole
Amount) and with the effect provided in the Note Purchase Agreement.



     This Note shall be construed and enforced in accordance with, and the rights of the parties
shall be governed by, the law of the State of New York excluding choice of law principles of the
law of such State that would require the application of the laws of a jurisdiction other than such
State.



	 	 	 	 	 
	 	ITC Holdings Corp.

 	 
	 	By  	 	 
	 	 	Its 	 
	 	 	 	 
	 



E-1(b)-2





 









 








Form of Opinion of Special Counsel

to the Company





     The closing opinion of Dykema Gossett PLLC, special counsel for the Company, which is called
for by Section 4.4(a) of the Agreement, shall be dated the date of the Closing and addressed to
each Purchaser, shall be satisfactory in scope and form to each Purchaser and shall be to the
effect that:




     1. The Company is a corporation validly existing and in good standing under the laws of
the State of Michigan, has the corporate power and the corporate authority to execute and
perform the Agreement and to issue the Notes and has the full corporate power and the
corporate authority to conduct the activities in which it is now engaged.




     2. Each Material Subsidiary is a corporation or other business entity validly existing
and in good standing under the laws of its jurisdiction of organization.




     3. The Agreement has been duly authorized by all necessary corporate action on the part
of the Company and has been duly executed and delivered by the Company.




     4. The Notes have been duly authorized by all necessary corporate action on the part of
the Company and have been duly executed and delivered by the Company.




     5. The Agreement constitutes the valid and binding contract of the Company enforceable
against the Company in accordance with its terms, except that the enforcement thereof may be
subject to (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or
other similar laws now or hereafter in effect relating to creditors’ rights generally and
(b) general principles of equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, and to limitations on availability of equitable
relief, including specific performance, and the discretion of the court before which any
proceeding therefor may be brought.




     6. The Notes constitute the valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except that the enforcement thereof may
be subject to (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance,
or other similar laws now or hereafter in effect relating to creditors’ rights generally and
(b) general principles of equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, and to limitations on availability of equitable
relief, including specific performance, and the discretion of the court before which any
proceeding therefor may be brought.




     7. No approval, consent or withholding of objection on the part of, or filing,
registration or qualification with, any Governmental Authority, federal or state, is
necessary in connection with the execution, delivery or performance by the Company of the
Agreement or the Notes.




     8. The issuance and sale of the Notes and the execution, delivery and performance by
the Company of the Agreement do not conflict with any law, rule or regulation of any
Governmental Authority or conflict with or result in any breach of any



Exhibit 4.4(a)

(to Note Purchase Agreement)




 









 







of the provisions of or constitute a default under or result in the creation or
imposition of any Lien upon any of the property of the Company pursuant to the provisions of
any Material Contract (will be defined as contracts filed by the Company with the SEC).





     9. The issuance, sale and delivery of the Notes under the circumstances contemplated by
the Agreement do not, under existing law, require the registration of the Notes under the
Securities Act or the qualification of an indenture under the Trust Indenture Act of 1939,
as amended.




     10. Neither the Company nor any Subsidiary is an “investment company” as such term is
defined in the Investment Company Act of 1940, as amended.




     11. The issuance of the Notes and the use of the proceeds of the sale of the Notes in
accordance with the provisions of and contemplated by the Agreement do not violate
Regulation T, U or X of the Board of Governors of the Federal Reserve System.



     The opinion of Dykema Gossett PLLC shall cover such other matters relating to the sale of the
Notes as any Purchaser may reasonably request and shall provide that (i) subsequent holders of the
Notes may rely upon such opinion and (ii) such opinion may be provided to Governmental Authorities
including, without limitation, the NAIC. With respect to matters of fact on which such opinion is
based, such counsel shall be entitled to rely on appropriate certificates of public officials and
officers of the Company.




E-4.4(a)-2




 









 





Form of Opinion of Special Counsel

to the Purchasers




     The closing opinion of Schiff Hardin LLP, special counsel to the Purchasers, called for by
Section 4.4(b) of the Agreement, shall be dated the date of the Closing and addressed to the
Purchasers, shall be satisfactory in form and substance to the Purchasers and shall be to the
effect that:




     1. The Company is a corporation validly existing and in good standing under the laws of
the State of Michigan.




     2. The Agreement and the Notes being delivered on the date hereof constitute the legal,
valid and binding contracts of the Company, enforceable against the Company in accordance
with its terms.




     3. The issuance, sale and delivery of the Notes being delivered on the date hereof
under the circumstances contemplated by this Agreement do not, under existing law, require
the registration of such Notes under the Securities Act or the qualification of an indenture
under the Trust Indenture Act of 1939, as amended.



     The opinion of Schiff Hardin LLP shall also state that the opinion of Dykema Gossett PLLC is
satisfactory in scope and form to Schiff Hardin LLP and that, in their opinion, the Purchasers are
justified in relying thereon.



     In rendering the opinion set forth in paragraph 1 above, Schiff Hardin LLP may rely, as to
matters referred to in paragraph 1, solely upon an examination of the Articles of Incorporation
certified by, and a certificate of good standing of the Company from, the Secretary of State of the
State of Michigan. The opinion of Schiff Hardin LLP is limited to the laws of the State of New
York and the federal laws of the United States.



     With respect to matters of fact upon which such opinion is based, Schiff Hardin LLP may rely
on appropriate certificates of public officials and officers of the Company and upon
representations of the Company and the Purchasers delivered in connection with the issuance and
sale of the Notes.



Exhibit 4.4(b)

(to Note Purchase Agreement)