Document:

Exhibit
10.9

RETENTION
AGREEMENT

	
  DATE:

  	
   

  	
  October 9, 2006

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PARTIES:

  	
   

  	
  Golf Galaxy, Inc.

  	
  (“Company”)

  	
   

  
	
   

  	
   

  	
  7275 Flying Cloud Drive

  	
   

  	
   

  
	
   

  	
   

  	
  Eden Prairie, MN 55344

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Ronald G. Hornbaker   (“Employee”)

  	
   

  	
   

  
	
   

  	
   

  	
  2994 Aldine Street

  	
   

  	
   

  
	
   

  	
   

  	
  Roseville, MN 55113

  	
   

  	
   

  
						

 

RECITALS

A.           Employee
is employed by the Company;

B.             The
Board of Directors wishes to plan for the possibility of a change in control
and to ensure Employee’s continued dedication and efforts in such event without
undue concern for personal financial and employment security; and

C.             The
parties hereto desire to fulfill the above purpose according to the terms set
forth in this Agreement.

AGREEMENT

In consideration for the
mutual covenants set forth in this Agreement and other good and valuable
consideration, the sufficiency of which is hereby acknowledged, the parties to
this Agreement agree as follows:

1.                                       Definitions.
The following words and phrases as used in this Agreement shall have the
following respective meanings.

a)                                      a
termination of employment for Cause is a
termination precipitated by Employee’s:

i)                                         The
Employee shall commit any breach or violation of any of the Employee’s
representations or covenants under this Agreement or under any employment
agreement with the Company, which breach continues for a period of ten (10)
days following notice thereof from the Company (except in the event of a breach
of any provisions of this Agreement or of any employment agreement or other
agreement relating to confidentiality, loyalty, noncompetition or
noninducement, which shall require no notice to Employee prior to termination;

 1
 

 

ii)                                      The
Employee shall willfully and continually fail to substantially perform Employee’s
duties with the Company (other than due to incapacity resulting from physical
or mental illness) which failure has continued for at least 30 days following
receipt by Employee of written notice specifying the failure to substantially
perform;

iii)                                   The
Employee shall willfully engage in conduct that is demonstrably and materially
injurious to the Company, monetarily or otherwise, which injurious conduct has
continued for at least 30 days following Employee’s receipt of written notice
specifying the injurious conduct and offering Employee the opportunity to
explain the conduct to the Board.

iv)                                  The
Employee shall, in the performance of the Employee’s duties under any
employment agreement, engage in any act of misconduct, including misconduct
involving moral turpitude, which is injurious to the Company;

v)                                     The
Employee shall violate or willfully refuse to obey the lawful and reasonable
instructions of the Board of the Company, provided that such
instructions are not in violation of this Agreement or any employment agreement
between the Employee and the Company.

vi)                                  The
Employee shall become disabled during the Term (the Employee shall be deemed to
be disabled if the Employee is unable to perform the material functions of
Employee’s position with the Company, with or without reasonable accommodation,
by reason of a physical or mental infirmity, for a period of ninety (90)
consecutive days within any 180-day period).

vii)                               The
Employee shall die during the Term of this Agreement.

b)            A Change
in Control shall be deemed to occur:

i)                                         if
any person other than persons owning more than five percent of the Company’s
securities on July 28, 2005 is or becomes the “beneficial owner” (as defined in
Rule 13d-3 of the Securities Exchange Act of 1934), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company’s then outstanding securities;

ii)                                      upon
the approval by the Company’s stockholders and the consummation of a
Transaction; or

iii)                                   if,
during any period, members of the Incumbent Board cease for any reason to
constitute at least a majority of the Board.

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Notwithstanding the foregoing, a Change in Control
pursuant to subparagraphs (ii) and (iii) above shall not be deemed to occur if
immediately following the consummation of a Transaction or other event approved
by the Incumbent Board, holders of the Company’s voting securities immediately
prior to a Transaction either continue to own at least 50% of the combined
voting power of the Company’s then outstanding voting securities representing
at least 50% of the combined voting power of each surviving entity after a
Transaction.

c)                                      Code means the Internal Revenue Code
of 1986, as amended.

d)                                     Termination
of employment by Employee for Good Reason is
a termination of employment due to the occurrence of any one of the following
events or conditions:

i)                                         a
material change in Employee’s title, position or responsibilities which
represents a substantial reduction of the title, position or responsibilities
in effect immediately prior to the change; the assignment of Employee to a
position which requires Employee to relocate permanently to a site outside of
the Minneapolis-St. Paul metropolitan area; the assignment to Employee of any
duties or responsibilities (other than due to a promotion) which are
inconsistent with such title, position or responsibilities; or any removal of
Employee from or failure to reappoint or reelect Employee to any of such
positions, except in connection with the termination of employment for Cause,
as a result of permanent disability (as determined by Employee’s eligibility to
receive disability benefits under any long-term disability plan the Company may
then have in effect), as a result of Employee’s death, or by Employee other
than for Good Reason; or

ii)                                      any
material breach by the Company of any provision of this Agreement.

e)                                      The
Incumbent Board consists of the
members of the Board of Directors of the Company as of the date of this
Agreement, to the extent they continue to serve as Board members and any
individual who becomes a Board member after the date of this Agreement if (i)
his or her election or nomination as a director was approved by a vote of at
least two thirds of the then incumbent Board and such person does not own more
than 20% of the Company’s securities, or (ii) such individual is a
representative of an institutional investor that either owns less than 20% of
the Company’s securities or was represented on the Board as of the date of this
Agreement.

f)                                        The
Severance Period is the twelve (12)
- month period beginning on the date of termination of Employee’s employment.

g)                                     A
Transaction means a merger or
consolidation, reorganization, distribution of assets to stockholders by
spin-off, split-up or otherwise, a sale or disposition of all

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or substantially all of the Company’s assets or a liquidation or dissolution
of the Company.

2.                                       Severance.

a)                                      Employee
shall be entitled to receive from the Company severance benefits in the amount
provided in subsection (b) below, if (x) in connection with a Change in
Control, (y) within 90 days prior to a Change in Control, or (z) within one
year after a Change in Control, Employee’s employment with the Company is
terminated; provided, however, that Employee will not be entitled to any
severance benefit if Employee’s termination of employment is (i) for Cause, or
(ii) initiated by Employee for other than Good Reason. Notwithstanding any
other provision of this Agreement, the consummation of a Transaction in itself
shall not be deemed a termination of employment entitling Employee to severance
benefits hereunder even if such event results in Employee being employed by a
different entity which assumes the Company’s obligations under this Agreement.

b)                                     If
Employee’s services are terminated, entitling Employee to severance benefits
pursuant to subsection a. above, Employee shall be entitled to the following
benefits:

i)                                         During
the Severance Period, the Company shall continue to pay to Employee the annual
base salary payable to Employee at the rate and according to the payment
schedule in place immediately prior to the termination of employment, subject
to federal and state withholding, FICA, FUTA and withholding for all other
applicable taxes;

ii)                                      During
the Severance Period, the Company shall continue on behalf of Employee (and
Employee’s dependents and beneficiaries), life insurance, disability insurance,
medical and dental benefits and any/all other benefits which were being
provided to Employee at the time of termination of employment and the expense
shall be allocated between the Company and Employee on the same basis as prior
to the date of termination of employment. The benefits provided pursuant to
this subsection (ii) shall be no less favorable to Employee than the coverage
provided to Employee under the plans providing such benefits at the time notice
of termination was given to Employee. The obligation of the Company under this
subsection (ii) shall be limited to the extent that Employee obtains any such
benefits pursuant to a subsequent employee’s benefit plans, in which case the
Company may reduce the coverage of any benefit it is required to provide
Employee under this subsection (ii) as long as the aggregate coverage of the
combined benefit plans is no less favorable to Employee, in terms of amounts
and deductibles and costs to Employee,

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than the coverage required to be provided under this
subsection (ii) as long as the aggregate coverage of the combined benefit plans
is no less favorable to Employee, in terms of amounts and deductibles and costs
to Employee, than the coverage required to be provided under this subsection
(ii). This subsection (ii) shall not be interpreted so as to limit any benefits
to which Employee (or Employee’s dependents or beneficiaries) are entitled
under any of the Company’s employee benefit plans, programs or practices
following Employee’s date of termination of employment. The provision of
continued benefits to Employee under this subsection (ii) shall not deprive
Employee of any independent statutory right to continue benefits coverage
pursuant to Sections 601 through 606 of the Employee Retirement Income Security
Act of 1974, as amended; and

iii)                                   For
the Company’s fiscal year in which Employee’s employment is terminated, the
Company shall pay Employee such bonus, if any, equal to the amount found by
multiplying (x) the lesser of (i) such amounts as Employee would have received
based on the Company’s actual results pursuant to any bonus plan in effect
during such fiscal year and (ii) such amounts as Employee would have received
based on the Company’s achieving 100% of its financial targets as reflected in
such bonus plan (in each case as though Employee had been employed the full
fiscal year) by (y) a fraction, the numerator of which is the number of days in
the applicable fiscal year through the date of Employee’s termination and the
denominator of which is 365.  All bonuses
payable pursuant to this subsection (iii) shall be payable to Employee at such
time as bonuses for such period are paid to Company employees under such bonus
plan generally.

iv)                                  In
the event the Employee is employed under any employment agreement with the
Company which also provides for severance payments upon termination of Employee’s
employment under certain circumstances, and if Employee is entitled to receive
severance payments and/or benefits thereunder, then the severance payments
and/or benefits provided hereunder shall be reduced on a dollar-for-dollar
basis by the severance payments and/or benefits provided under the employment
agreement; it being the intention of the parties hereto that the Employee shall
only be entitled to receive “one” set of severance payments and benefits under
any circumstances.

(c)                                  Notwithstanding
anything in this Agreement or elsewhere to the contrary:

(a)           If
payment or provision of any amount or other benefit that is “deferred
compensation” subject to Section 409A of the Code at the time otherwise
specified in this Agreement or elsewhere would subject such amount or benefit
to additional tax pursuant to Section 409A(a)(1)(B) of the Code, and if payment
or provision thereof at a later date would avoid any such additional tax, then
the payment or provision thereof shall be postponed to the earliest date on
which such amount or benefit can be paid or provided without incurring any such
additional tax.  In the event this
Section 2 requires a deferral of any payment, such payment shall be accumulated
and paid in a single lump sum on

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such earliest date together with interest for the period of delay,
compounded annually, equal to the prime rate (as published in The Wall Street
Journal), and in effect as of the date the payment should otherwise have been
provided.

(b)           If
any payment or benefit permitted or required under this Agreement, or
otherwise, is reasonably determined by either party to be subject for any
reason to a material risk of additional tax pursuant to Section 409A(a)(1)(B)
of the Code, then the parties shall promptly agree in good faith on appropriate
provisions to avoid such risk without materially changing the economic value of
this Agreement to either party.

3.                                       Acceleration
of Options. In the event the Employee is entitled to severance benefits
following the occurrence of a Change in Control, all of Employee’s rights to
exercise option(s) granted under Company’s stock option plan and held by
Employee at the time of the Change in Control shall immediately vest resulting
in these option(s) becoming immediately exerciseable for the period specified
in the section of the respective option(s) relating to vesting of options in
the event of termination of employment, or, if no period is so specified, then
for six (6) months, after which time the option(s) shall expire.

4.                                       Term
of Agreement (the “Term”). This Agreement shall continue in full force and
effect until terminated as provided in this section. This Agreement shall
terminate on the earlier of:

a)                                      the
April 1st of any year after 2007, if the Board by the affirmative vote of a
majority of its members prior to January 1 of such year and prior to the
occurrence or active consideration of a specific Change in Control has voted to
terminate this Agreement; or

b)                                     if
Employee’s services are terminated more than 90 days prior to the occurrence of
a Change in Control or after the first anniversary of a Change in Control, the
date of such termination of services; or

c)                                      if
Employee’s services are terminated upon or within the first year following a
Change in Control under circumstances where Employee would not be entitled to
severance benefits pursuant to this Agreement, the date of such termination of
services; or

d)                                     after
a Change in Control, the date on which any successor to the Company has
performed all of its obligations under Section 2 of this Agreement and Employee
has performed all of Employee’s obligations under Section 5 of this Agreement.

5.                                       Agreement
not to Compete and not to Solicit.

a)              In further
consideration of the compensation to be paid to Employee hereunder, Executive
acknowledges that during the course of his employment with the Company he has
become familiar with the Company’s trade secrets and with other Confidential

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Information (as defined herein) concerning the Company
and that his services have been and shall be of special, unique and
extraordinary value to the Company, and therefore, Employee agrees that, during
the period of his employment with the Company and for a period of twelve (12)
months thereafter (the “Noncompete Period”), he shall not, without the Company’s
prior written consent, directly or indirectly, own, manage, operate, join,
control or participate in the ownership, management, operation or control of,
or be connected as a director, officer, employee, partner, consultant or
otherwise with, any business or organization in the United States, Canada or
Mexico that sells or markets golf equipment, apparel, accessories or services
directly to consumers, whether through retail or direct marketing channels,
including, but not limited to catalogs and the internet (a “Competitive
Business”); provided, however, that nothing herein shall prohibit Employee from
(i) being a passive owner of not more than 2% of the outstanding stock of any
class of a corporation which is publicly traded, so long as Executive has no
active participation in the business of such corporation; or (ii) becoming
involved with a business or organization for which activities comprising a
Competitive Business do not represent 
more than $10 million in revenues or more than 10% of such business or
organization’s total revenues. If, at the time of enforcement of this paragraph
5, a court shall hold that the duration, scope or area restrictions stated
herein are unreasonable under circumstances then existing, the parties agree
that the maximum duration, scope or area reasonable under such circumstances
shall be substituted for the stated duration, scope or area and that the court
shall be allowed to revise the restrictions contained herein to cover the
maximum period, scope and area permitted by law.  Employee acknowledges that the restrictions
contained in this paragraph 5 are reasonable and that he has reviewed the provisions
of this Agreement with his legal counsel

b)             During the period of Employee’s employment with the Company and for a
period of two (2) years thereafter (the “Non-Solicit Period”), Employee shall
not directly or indirectly through another person or entity (i) induce or
attempt to induce any employee of the Company to leave the employ of the
Company, or in any way interfere with the relationship between the Company and
any employee thereof, (ii) hire any person who was an employee of the Company
at any time during the period of Employee’s employment with the Company or
(iii) induce or attempt to induce any customer, supplier, licensee, licensor,
franchisee or other business relation of the Company to cease doing business
with the Company, or in any way interfere with the relationship between any such
customer, supplier, licensee or business relation and the Company (including,
without limitation, making any negative or disparaging statements or
communications regarding the Company).

c)              In the event of the breach or a threatened breach by Employee of any of
the provisions of this paragraph 5, the Company would suffer irreparable harm,
and in addition and supplementary to other rights and remedies existing in its
favor, the Company shall be entitled to specific performance and/or injunctive
or other equitable relief from a court of competent jurisdiction in order to
enforce or prevent any violations of the provisions hereof (without posting a
bond or other security).  In addition, in
the event of an alleged breach or violation by Employee of this paragraph

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5, the Noncompete Period and the Non-Solicit Period
shall be tolled until such breach or violation has been duly cured.

6.                                       Confidentiality
and Loyalty. Employee acknowledges that, during the course of Employee’s
employment Employee will produce and have access to materials, records, data
and information not generally available to the public regarding the Company,
its customers and affiliates (collectively “Confidential Information”).
Accordingly, during and subsequent to the termination of this Agreement,
Employee shall hold in confidence and not directly or indirectly disclose, use,
copy or make lists of any Confidential Information, except to the extent
authorized in writing by the Company, or as required by law or any competent
administrative agency or as otherwise is reasonably necessary or appropriate in
connection with the performance by Employee of his duties pursuant to this
Agreement. Upon termination of Employee’s employment under this Agreement,
Employee shall promptly deliver to the Company (i) all records, manuals, books,
documents, client lists, letters, reports, data, tables, calculations and all
copies of any of the foregoing which are the property of the Company or which
relate in any way to the business or practices of the Company, and (ii) all
other property of the Company and Confidential Information which in any of
these cases are in his possession or under his control.

7.                                       Remedies.
Employee agrees and understands that any breach of any of the covenants or
agreements set forth in Sections 5 or 6 of this Agreement will cause the
Company irreparable harm for which there is no adequate remedy at law, and,
without limiting whatever other rights and remedies the Company may have under
this Agreement, Employee consents to the issuance of an injunction in favor of
the Company enjoining the breach of any of the aforesaid covenants or
agreements by any court of competent jurisdiction. If any or all of the
aforesaid covenants or agreements are held to be unenforceable because of the
scope or duration of such covenant or agreement, the parties agree that the
court making such determination shall have the power to reduce or modify the
scope and/or duration of such covenant to the extent that allows the maximum
scope and/or duration permitted by applicable law.

8.                                       Successors.
This Agreement shall bind, and may be enforced by, any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, in the same manner
and to the same extent that the Company would be obligated under or entitled to
enforce this Agreement if no succession had taken place. In the case of any
Transaction in which a successor would not by the foregoing provision or by
operation of law be bound by this Agreement, the Company shall use its best
efforts to require such successor expressly and unconditionally to assume and
agree to perform the Company’s obligations under this Agreement, in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place unless the Company previously arranged to
establish an escrow to satisfy its obligations hereunder.

9.                                       Entire
Agreement. This Agreement contains the entire understanding of the parties
hereto in respect of the subject matter hereof and supersedes all prior
agreements and

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understandings between the parties with respect to such subject matter;
provided, that the parties acknowledge that they have also entered into an
employment agreement of even date herewith which also provides for severance
payments and/or benefits upon termination of Employee’s employment for certain
circumstances and that pursuant to Section 2.(b)(iv) of this Agreement, the
severance payments and/or benefits provided hereunder shall be reduced on a
dollar for dollar basis by the severance payments and/or benefits provided
under such Employment Agreement, it being the intention of the parties hereto
that they Employee shall only be entitled to receive “one” set of severance
payments and benefits under any circumstances.

10.                                 Assignment.
This Agreement shall not be assignable by Employee. Any and all assignments of
this Agreement or any interest therein not made in accordance with this
paragraph shall be void.

11.                                 No
Waiver. Any waiver of any term or condition of this Agreement by either
party shall not operate as a waiver of any continued breach of such term or
condition, or any other term or condition, nor shall any failure to enforce a
provision of this Agreement operate as a waiver of such provision or of any
other provision of this Agreement.

12.                                 Captions.
The captions and headings of this Agreement are for convenience only and shall
in no way limit or otherwise effect any of the terms or provisions contained
herein.

13.                                 Severability.
Should any provision of this Agreement, or its application, to any extent by
held invalid or unenforceable, the remainder of this Agreement and its
application, excluding such invalid or unenforceable provisions shall not be
affected by such exclusion and shall continue valid and enforceable to the
fullest extent permitted by law or equity.

14.                                 Governing
Law. This Agreement shall for all purposes be governed and interpreted in
accordance with the laws of the State of Minnesota, without regard to its
principles of conflicts of laws.

15.                                 Arbitration.
The Company and Employee agree that any claim or controversy that arises out of
or relates to this Agreement, or the breach of it by either party, will be
settled by arbitration in the City of Minneapolis, Minnesota, in accordance
with the rules then obtaining of the American Arbitration Association, and the
award rendered pursuant to such arbitration shall be final, binding and
conclusive as to the Company and Employee, and judgment upon such award may be
entered without notice and enforced in any court having jurisdiction. Costs of
arbitration (excluding the costs of each party’s own counsel or advisors) shall
be borne equally by the Company and Employee. Notwithstanding the foregoing,
the Company shall have the right to submit any claim against Employee arising
out of any provision of Section 5 and 6 hereof to any court of competent
jurisdiction in Hennepin County, Minnesota, in lieu of seeking arbitration
pursuant to this Section.

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Each of the parties
hereto have executed this Agreement in the manner appropriate to each, all as
of the date first above written.

	
  GOLF GALAXY, INC.

  	
   

  	
  EMPLOYEE

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ RANDALL K. ZANATTA

  	
   

  	
  /s/ RONALD G. HORNBAKER

  
	
  Its:

  	
  President and Chief Executive Officer

  	
   

  	
  Ronald G. Hornbaker

  
						

 

 10Exhibit 4.12

EXECUTION COPY

ITC HOLDINGS CORP.

to

THE BANK OF NEW YORK TRUST COMPANY, N.A. 

(as successor to BNY Midwest Trust Company),

as Trustee

 

Second Supplemental Indenture

Dated as of October 10, 2006

Supplemental to the Indenture

dated as of July 16, 2003

Establishing two series of Securities designated 

5.875% Senior Notes due 2016

6.375% Senior Notes due 2036

SECOND
SUPPLEMENTAL INDENTURE, dated as of October 10, 2006 (herein called the “Second Supplemental Indenture”), between
ITC Holdings Corp., a corporation duly organized and existing under the laws of
the State of Michigan (hereinafter called the “Company”), and The Bank of New York Trust Company, N.A. (as
successor to BNY Midwest Trust Company), as Trustee under the Original
Indenture referred to below (hereinafter called the “Trustee”).

WITNESSETH:

WHEREAS,
the Company has heretofore executed and delivered to the Trustee an indenture
dated as of July 16, 2003 (herein called the “Original
Indenture”), to provide for the issuance from time to time in one or
more series of its debentures, notes, bonds or other evidences of indebtedness
(herein called the “Securities”),
the form and terms of which are to be established as set forth in Sections 2.1
and 3.1 of the Original Indenture;

WHEREAS, the Company has heretofore executed and delivered the First
Supplemental Indenture on July 16, 2003 and has issued $267,000,000 aggregate
principal amount of 5.25% Senior Notes due July 15, 2013 thereunder;

WHEREAS,
Section 9.1 of the Original Indenture provides, among other things, that the
Company and the Trustee may enter into indentures supplemental to the Original
Indenture to, among other things, establish the form and terms of the
Securities of any series as permitted in Sections 2.1 and 3.1 of the Original
Indenture;

WHEREAS,
the Company desires to create a series of the Securities in an aggregate
principal amount of $255,000,000 to be designated the “5.875% Senior Notes due 2016,” and all
action on the part of the Company necessary to authorize the issuance of the
5.875% Senior Notes due 2016 under the Original Indenture and this Second
Supplemental Indenture has been duly taken

WHEREAS,
the Company desires to create a series of the Securities in an aggregate
principal amount of $255,000,000 to be designated the “6.375% Senior Notes due 2036,” (the 6.375% Senior Notes due 2016
together with the 5.875% Senior Notes due 2036 are herein called the “Senior Notes”) and all action on the part of the Company
necessary to authorize the issuance of the 6.375% Senior Notes due 2036 under
the Original Indenture and this Second Supplemental Indenture has been duly
taken; and

WHEREAS,
the Company desires to issue the Senior Notes in accordance with
Section 2.3 of this Second Supplemental Indenture and treat each series as
a single series of Securities for all purposes, as amended or supplemented from
time to time in accordance with the terms of this Second Supplemental Indenture
and the Original Indenture; and

WHEREAS,
all acts and things necessary to make the Senior Notes, when executed by the
Company and completed, authenticated and delivered by the Trustee as provided
in the Original Indenture and this Second Supplemental Indenture, the valid and
binding obligations of the Company and to constitute these presents a valid and
binding supplemental indenture and agreement according to its terms, have been
done and performed.

 

NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE
WITNESSETH:

That
in consideration of the premises and of the acceptance and purchase of the Senior
Notes by the holders thereof and of the acceptance of this trust by the
Trustee, the Company covenants and agrees with the Trustee, for the equal
benefit of holders of the Senior Notes, as follows:

ARTICLE ONE

DEFINITIONS

Except
to the extent such terms are otherwise defined in this Second Supplemental
Indenture or the context clearly requires otherwise, all terms used in this
Second Supplemental Indenture which are defined in the Original Indenture or
the form of each Senior Note attached hereto as Exhibit A and Exhibit
B, have the meanings assigned to them therein.

In addition, as used in this Second Supplemental
Indenture, the following terms have the following meanings:

“5.875% Senior Notes due
2016” has the meaning given to such term in the preamble hereof.

“6.375% Senior Notes due
2036” has the meaning given to such term in the preamble hereof.

“Adjusted Treasury Rate”
means, with respect to any redemption date, the rate per annum equal to the
semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date, plus 0.25% in the case of the 5.875% Senior Notes due 2016
and 0.30% in the case of the 6.375% Senior Notes due 2036.

“Agent Member”
has the meaning given to such term in Section 2.8(a) hereof.

“Clearstream”
has the meaning given to such term in Section 2.2(d) hereof.

“Comparable Treasury Issue”
means the United States Treasury security selected by an Independent Investment
Banker as having a maturity comparable to the remaining term of the Senior
Notes to be redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of
corporate debt securities having a maturity comparable to the remaining term of
such Senior Notes.

“Comparable Treasury Price”
means, with respect to any redemption date (i) the average of the bid and
asked prices for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) on the third business day preceding such
redemption date, as set forth in the daily statistical release (or any
successor release) published by the Federal Reserve Bank of New York and
designated “Composite 3:30 p.m. Quotations for U.S. Government 

 2
 

 

Securities,” or (ii) if such release (or any
successor release) is not published or does not contain such prices on such
business day, (A) the average of the Reference Treasury Dealer Quotations
for such redemption date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations or (B) if the Company obtains fewer than three
such Reference Treasury Dealer Quotations, the average of all such Reference
Treasury Dealer Quotations.

“Definitive
Securities” has the meaning given to such term in Section 2.2(e)
hereof.

“Depositary”
means DTC, together with any Person succeeding thereto by merger, consolidation
or acquisition of all or substantially all of its assets, including
substantially all of its securities payment and transfer operations.

“Distribution
Compliance Period” has the meaning given to such term in Section
2.2(d) hereof.

“DTC” means The Depository Trust Company, a
New York corporation, having a principal office at 55 Water Street, New York,
New York 10041-0099.

“Euroclear” has the meaning given to such
term in Section 2.2(d) hereof.

“Global Securities” has the meaning given to
such term in Section 2.2(d) hereof.

“Independent Investment
Banker” means one of the Reference Treasury Dealers appointed by the
Company.

“Initial Purchasers” means Credit Suisse
Securities (USA) LLC and Lehman Brothers Inc.

“Issue Date” means October 10, 2006, the
date on which the Senior Notes are originally issued under this Second
Supplemental Indenture.

“Make-Whole Price” has the meaning given to
such term in Article Three hereof.

“Non-U.S. Person” has the meaning
assigned to such term in Regulation S.

“QIBs”
has the meaning given to such term in Section 2.2(b) hereof.

“Reference Treasury Dealer”
means each of Credit Suisse Securities (USA) LLC and Lehman Brothers Inc., and
their respective successors; provided, however, that if any of the foregoing is
not a primary U.S. Government securities dealer in New York City (a “Primary Treasury Dealer”), the Company will appoint another
Primary Treasury Dealer as a substitute.

“Reference Treasury Dealer Quotations” means, with respect to
each Reference Treasury Dealer and any redemption date, the average, as
determined by the Company, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Company by such Reference Treasury Dealer at 5:00 p.m.
on the third business day next preceding such redemption date.

 3
 

 

“Regulation S” means Regulation S
promulgated under the Securities Act, as amended.

“Regulation S Definitive Security” has the
meaning given to such term in Section 2.8(g) hereof.

“Regulation S Global Security” has the
meaning given to such term in Section 2.2(d) hereof.

“Regulation S Securities” means Securities
offered and sold as part of their initial distribution to persons outside the
United States in accordance with Regulation S under the Securities Act.

“Restricted Global Security” has the meaning
given to such term in Section 2.2(c) hereof.

“Restricted Legend” has the meaning given to
such term in Section 2.6(a) hereof.

“Restricted Securities” has the meaning
given to such term in Section 2.6(a) hereof.

“Revolving Credit Agreement” means the First Amended and
Restated Revolving Credit Agreement, dated as of January 12, 2005, among ITC
Holdings Corp., as the borrower, various financial institutions and other
persons from time to time parties thereto, as the lenders, Canadian Imperial Bank
of Commerce, as the administrative agent, Credit Suisse First Boston, Cayman
Islands Branch and CIBC World Markets, as the joint lead arrangers, and
Comerica Bank, as the documentation agent, as amended by Amendment No. 1
thereto, dated as of March 24, 2006, as may be further amended, supplemented or
otherwise modified in effect from time to time including any successor or
replacement agreement whether by the same or any other agent, lender or group
of lenders.

“Rule 144A” means Rule 144A under the Securities
Act, as may be amended.

“Rule 144A Definitive Securities” has the
meaning given to such term in Section 2.8(b) hereof.

ARTICLE TWO

TERMS AND ISSUANCE OF THE SENIOR NOTES DUE

Section
2.1.  Issue of Senior Notes.  (a) A series of Securities which shall be
designated the “5.875% Senior Notes due 2016” shall be executed, authenticated
and delivered in accordance with the provisions of, and shall in all respects
be subject to, the terms, conditions and covenants of, the Original Indenture
and this Second Supplemental Indenture (including the form of 5.875% Senior
Notes due 2016 set forth hereto as Exhibit A). The aggregate
principal amount of the 5.875% Senior Notes due 2016 which may be authenticated
and delivered under this Second Supplemental Indenture shall not, except as
permitted by the provisions of the Original Indenture, initially exceed
$255,000,000; provided that the Company may from time to time or at any time,
without the consent of the Holders of the Senior Notes, issue additional 

 4
 

 

Senior Notes,
which additional Senior Notes shall increase the aggregate principal amount of,
and shall be consolidated and form a single series with, the 5.875% Senior
Notes due 2016.

(b) A
series of Securities which shall be designated the “6.375% Senior Notes due 2036”
shall be executed, authenticated and delivered in accordance with the
provisions of, and shall in all respects be subject to, the terms, conditions
and covenants of, the Original Indenture and this Second Supplemental Indenture
(including the form of 6.375% Senior Notes due 2036 set forth hereto as Exhibit B).
The aggregate principal amount of the 6.375% Senior Notes due 2036 which may be
authenticated and delivered under this Second Supplemental Indenture shall not,
except as permitted by the provisions of the Original Indenture, initially
exceed $255,000,000; provided that the Company may from time to time or at any
time, without the consent of the Holders of the Senior Notes, issue additional
Senior Notes, which additional Senior Notes shall increase the aggregate
principal amount of, and shall be consolidated and form a single series with,
the 6.375% Senior Notes due 2036.

Section
2.2.  Form of Senior Notes;
Incorporation of Terms.  (a)
The Senior Notes issued in transactions exempt from registration under the
Securities Act shall be substantially in the forms of Exhibit A and
Exhibit B attached hereto, as applicable.  The Senior Notes may have such notations,
legends or endorsements approved as to form by the Company and required, as
applicable, by law, stock exchange or depository rule, agreements to which the
Company is subject and/or usage.  The
terms of the Senior Notes set forth in each of Exhibit A and Exhibit
B are herein incorporated by reference and are part of the terms of this
Second Supplemental Indenture.

(b)  The Senior Notes will be offered and sold by
the Company pursuant to the terms of a purchase agreement and will be resold
initially only to (i) qualified institutional buyers as defined in Rule 144A
under the Securities Act (“QIBs”) in
reliance on Rule 144A and (ii) Non-U.S. Persons in reliance on Regulation
S.  Each such purchaser of the Senior
Notes so initially resold will be deemed by their acceptance of the Senior
Notes to have represented and agreed as follows:  it (A) (i) is a QIB, (ii) is aware that the
sale to it is being made in reliance on Rule 144A and (iii) is acquiring the
Senior Notes for its own account or for the account of a QIB or (B) is not a
U.S. person and is purchasing the Senior Notes in an offshore transaction pursuant
to Regulation S.

(c)  The Senior Notes offered and sold in reliance
on Rule 144A shall be issued, and will only be available, in the form of one or
more Global Securities substantially in the forms of Exhibit A and Exhibit
B attached hereto, as applicable, with such applicable legends as are
provided for in Sections 2.6  and 2.8
(each, a “Restricted Global Security”)
duly executed by the Company and duly authenticated by the Trustee as herein
provided.  The Restricted Global Security
shall be in definitive, fully registered form without coupons and be registered
in the name of the Depositary or a nominee of the Depositary and deposited with
the Trustee, at its corporate trust office, as custodian for the
Depositary.  The aggregate principal
amount of any Restricted Global Security may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as provided in
Section 2.9 hereof, which adjustments shall be conclusive as to the aggregate
principal amount of any such Global Security.

 5
 

 

(d)  The Senior
Notes offered and sold outside the United States in reliance on
Regulation S shall be issued, and will only be available, initially in the
form of one or more global Securities substantially in the forms of Exhibit A
and Exhibit B hereto, as applicable,
with such applicable legends as are provided for in Section 2.6 (each, a “Regulation S Global Security”) duly
executed by the Company and duly authenticated by the Trustee as herein
provided.  The Regulation S Global
Securities shall be in definitive, fully registered form without coupons and be
registered in the name of the Depositary or a nominee of the Depositary and
deposited with the Trustee, at its corporate trust office, as custodian for the
Depositary, for credit initially and during the Distribution Compliance Period
to the respective accounts of beneficial owners of such Securities (or to such
other accounts as they may direct) at Euroclear System S.A./N.V. (“Euroclear”) or Clearstream Banking, société
anonyme (“Clearstream”).  As used
herein, the term “Distribution Compliance
Period”, with respect to the Regulation S Global Securities
offered and sold in reliance on Regulation S, means the period of 40
consecutive days beginning on and including the later of (i) the day on which
the Securities are first offered to persons other than distributors (as defined
in Regulation S) in reliance on Regulation S and (ii) the Closing
Date.  The aggregate principal amount of
any Regulation S Global Security may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as provided in
Section 2.9 hereof, which adjustments shall be conclusive as to the
aggregate principal amount of any such Global Security.  The Restricted Global Security and Regulation S
Global Security are sometimes collectively referred to herein as the “Global Securities”.

(e)  Senior
Notes issued pursuant to Section 2.8(d) in exchange for interests in a Global
Security shall be issued substantially in the forms of Exhibit A
and Exhibit B attached hereto, as applicable, in definitive, fully
registered form without interest coupons, but shall not bear the legend for
Global Securities in Section 2.8(b) (the “Definitive Securities”).  Except as provided herein, owners of
beneficial interests in Global Securities shall not be entitled to physical
delivery of Definitive Securities.

Section
2.3.  Execution
and Authentication.  The
Trustee, upon a Company Order and pursuant to the terms of the Original
Indenture and this Second Supplemental Indenture, shall authenticate and
deliver Senior Notes for original issue in an initial aggregate principal
amount of $510,000,000 (consisting of $255,000,000 aggregate principal amount
of 5.875% Senior Notes due 2016 and $255,000,000 aggregate principal amount of
6.375% Senior Notes due 2036).  Such
Company Order shall specify the amount of the Senior Notes to be authenticated,
the date on which the original issue of Senior Notes is to be authenticated and
the aggregate principal amount of Senior Notes outstanding on the date of
authentication.  All of the 5.875% Senior
Notes due 2016 issued under this Second Supplemental Indenture shall be treated
as a single series for all purposes under the Original Indenture and this
Second Supplemental Indenture, including, without limitation, waivers,
amendments and offers to purchase.  All
of the 6.375% Senior Notes due 2036 issued under this Second Supplemental
Indenture shall be treated as a single series for all purposes under the
Original Indenture and this Second Supplemental Indenture, including, without
limitation, waivers, amendments and offers to purchase.

Section
2.4.  Depositary for Global
Securities.  The Depositary
for the Senior Notes issued under this Second Supplemental Indenture shall be
DTC in the City of New York.

 6
 

 

Section
2.5.  Place of Payment.  The Place of Payment in respect of the Senior
Notes will be at the principal office or agency of the Company in The City of
New York, State of New York or at the office or agency of the Trustee in  The City of New York, State of New York,
which, at the date hereof, is located at 101 Barclay Street, New York, New York
10286.

Section 2.6.  Legends.

(a)           All Senior Notes issued pursuant to
this Second Supplemental Indenture shall be “Restricted
Securities” and shall bear a legend to the following effect (the “Restricted Legend”) except as permitted by
the following paragraphs (b) and (c), as appropriate:

“THIS SECURITY (OR ITS
PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.  EACH PURCHASER OF THIS SECURITY IS HEREBY
NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER.

THE HOLDER OF THIS
SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY
BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE
UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (IV) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY IF
THE COMPANY SO REQUESTS) OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (V) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE.”

Each Definitive Security shall bear the following
legend on the face thereof:

“IN
CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE SECURITY REGISTRAR
AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER
AGENT MAY 

 7
 

 

REASONABLY REQUIRE TO
CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.”

(b)           Upon any sale or
transfer of a Restricted Security pursuant to Rule 144 under the Securities
Act, the Depositary shall, subject to approval by the Company and the
provisions of Section 3.5 of the Original Indenture, permit the Holder thereof
to request the issuance of a global Senior Note that does not bear one or more
of the legends set forth above and rescind any restrictions on the transfer of
such Restricted Security, if the sale or exchange was made in reliance on Rule
144 and the Holder certifies to that effect in writing to the Depositary.

(c)  Upon a sale or transfer
after the expiration of the Distribution Compliance Period of any Senior Notes
acquired pursuant to Regulation S, all requirements that such Senior Notes bear
the Restricted Legend shall cease to apply (but requirements requiring such
Senior Notes to be in global form and bear the global legend in Section 2.8 shall
continue to apply).

Section
2.7.  Restrictions
on Transfer and Exchange of Senior Notes.

(a)           All 5.875% Senior Notes
due 2016 issued upon any registration of transfer or exchange of 5.875% Senior
Notes due 2016 shall be valid obligations of the Company, evidencing the same
interest therein, and entitled to the same benefits under the Original
Indenture and this Second Supplemental Indenture, as the 5.875% Senior Notes
due 2016 surrendered upon such registration of transfer or exchange.

A Holder may transfer a 5.875% Senior Note due 2016, or request that a
5.875% Senior Note due 2016 be exchanged for 5.875% Senior Notes due 2016 in
authorized denominations and in an aggregate principal amount equal to the
principal amount of such 5.875% Senior Note due 2016 surrendered for exchange
of other authorized denominations, by surrender of such 5.875% Senior Note due
2016 to the Trustee with the form of transfer notice thereon duly completed and
executed, and otherwise complying with the terms of the Original Indenture and
this Second Supplemental Indenture, including providing evidence of compliance
with any restrictions on transfer, in form satisfactory to the Company, the
Trustee and the Security Registrar.  No
such transfer shall be effected until, and such transferee shall succeed to the
rights of a Holder only upon, final acceptance and registration of the transfer
by the Security Registrar in the Register. 
Prior to the registration of any transfer of a 5.875% Senior Note due
2016 by a Holder as provided herein, the Company, the Security Registrar, the
Paying Agent and the Trustee shall deem and treat the person in whose name the
Security is registered on the Register as the absolute owner and holder thereof
for the purpose of receiving payment of all amounts payable with respect to
such Security and for all other purposes, and none of the Company, the Security
Registrar, the Paying Agent or the Trustee shall be affected by any notice to
the contrary.  Furthermore, the Depositary
shall, by acceptance of a Global Security, agree that transfers of beneficial
interests in such Global Security may be effected only through a book-entry
system maintained by the Depositary (or its agent) and that ownership of a
beneficial interest in the 5.875% Senior Notes due 2016 shall be required to be
reflected in a book-entry.  When 5.875%
Senior Notes due 2016 are presented to the Security Registrar with a request to
register the transfer thereof or to exchange them for other authorized denominations
of a 5.875% Senior Note due 2016 in a principal amount equal to the aggregate
principal amount of 5.875% 

 8
 

 

Senior
Notes due 2016 surrendered for exchange, the Security Registrar shall register
the transfer or make the exchange as requested if its requirements for such
transactions are met.

To permit registrations of transfers and exchanges in accordance with the
terms, conditions and restrictions hereof, the Company shall execute, and the
Trustee shall authenticate, 5.875% Senior Notes due 2016 at the Security
Registrar’s request.  No service charge
shall be made to a Holder for any registration of transfer or exchange of
5.875% Senior Notes due 2016, but the Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of 5.875% Senior Notes due 2016.  All 5.875% Senior Notes due 2016 surrendered
for registration of transfer or exchange shall be cancelled by the Trustee in
accordance with its then customary procedures.

(b)           All 6.375% Senior Notes due
2036 issued upon any registration of transfer or exchange of 6.375% Senior
Notes due 2036 shall be valid obligations of the Company, evidencing the same
interest therein, and entitled to the same benefits under the Original
Indenture and this Second Supplemental Indenture, as the 6.375% Senior Notes
due 2036 surrendered upon such registration of transfer or exchange.

A Holder may transfer a 6.375% Senior Note due 2036, or request that a
6.375% Senior Note due 2036 be exchanged for 6.375% Senior Notes due 2036 in
authorized denominations and in an aggregate principal amount equal to the
principal amount of such 6.375% Senior Note due 2036 surrendered for exchange
of other authorized denominations, by surrender of such 6.375% Senior Note due
2036 to the Trustee with the form of transfer notice thereon duly completed and
executed, and otherwise complying with the terms of the Original Indenture and
this Second Supplemental Indenture, including providing evidence of compliance
with any restrictions on transfer, in form satisfactory to the Company, the
Trustee and the Security Registrar.  No
such transfer shall be effected until, and such transferee shall succeed to the
rights of a Holder only upon, final acceptance and registration of the transfer
by the Security Registrar in the Register. 
Prior to the registration of any transfer of a 6.375% Senior Note due
2036 by a Holder as provided herein, the Company, the Security Registrar, the
Paying Agent and the Trustee shall deem and treat the person in whose name the
Security is registered on the Register as the absolute owner and holder thereof
for the purpose of receiving payment of all amounts payable with respect to
such Security and for all other purposes, and none of the Company, the Security
Registrar, the Paying Agent or the Trustee shall be affected by any notice to
the contrary.  Furthermore, the
Depositary shall, by acceptance of a Global Security, agree that transfers of
beneficial interests in such Global Security may be effected only through a
book-entry system maintained by the Depositary (or its agent) and that
ownership of a beneficial interest in the 6.375% Senior Notes due 2036 shall be
required to be reflected in a book-entry. 
When 6.375% Senior Notes due 2036 are presented to the Security Registrar
with a request to register the transfer thereof or to exchange them for other
authorized denominations of a 6.375% Senior Note due 2036 in a principal amount
equal to the aggregate principal amount of 6.375% Senior Notes due 2036
surrendered for exchange, the Security Registrar shall register the transfer or
make the exchange as requested if its requirements for such transactions are
met.

To permit registrations of transfers and exchanges in accordance with the
terms, conditions and restrictions hereof, the Company shall execute, and the
Trustee shall authenticate, 6.375% Senior Notes due 2036 at the Security
Registrar’s request.  No service charge
shall be 

 9
 

 

made to
a Holder for any registration of transfer or exchange of 6.375% Senior Notes
due 2036, but the Company may require payment of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any transfer
or exchange of 6.375% Senior Notes due 2036. 
All 6.375% Senior Notes due 2036 surrendered for registration of
transfer or exchange shall be cancelled by the Trustee in accordance with its
then customary procedures.

Section 2.8             Book-Entry Provisions for Restricted Global Securities and
Regulation S Global Securities.

(a)           Members of, or
participants in, DTC (“Agent Members”)
shall have no rights under the Original Indenture, this Second Supplemental
Indenture and the Senior Notes with respect to any Global Security held on
their behalf by DTC, or the Trustee, as its custodian, and DTC may be treated
by the Company, the Trustee and any agent of the Trustee as the absolute owner
of such Global Security for all purposes whatsoever.  Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
DTC or shall impair, as between DTC and its Agent Members, the operation of
customary practices governing the exercise of the rights of a holder of any
Security.  Upon the issuance of any Global
Security, the Security Registrar or its duly appointed agent shall record DTC
as the registered holder of such Global Security.

(b)           Transfers of any Global
Security shall be limited to transfers of such Restricted Global Security or
Regulation S Global Security in whole, but not in part, to DTC.  Beneficial interests in the Restricted Global
Security and any Regulation S Global Security may be transferred in
accordance with the rules and procedures of DTC and the provisions of
Section 2.9.  Beneficial interests
in a Restricted Global Security or a Regulation S Global Security shall be
delivered to all beneficial owners thereof in the form of Rule 144A Definitive
Securities (“Rule 144A Definitive
Securities”) or Regulation S
Definitive Securities (“Regulation S Definitive
Securities”), as the case may be, if
(i) DTC notifies the Trustee that it is unwilling or unable to continue as
depositary for such Restricted Global Security or Regulation S Global
Security, as the case may be, and a successor depositary is not appointed by
the Trustee within 90 days of such notice and (ii) after the occurrence and
during the continuance of an Event of Default, owners of beneficial interests
in a Global Security with a principal amount aggregating not less than a majority
of the outstanding principal amount of the Global Security advise the Trustee,
the Company and DTC through Agent Members in writing that the continuation of a
book-entry system through DTC is no longer in their best interests.

(d)           Any beneficial interest in
one of the Global Securities that is transferred to a Person who takes delivery
in the form of an interest in another Global Security will, upon such transfer,
cease to be an interest in such Global Security and become an interest in the
other Global Security and, accordingly, will thereafter be subject to all
transfer restrictions, if any, and other procedures applicable to beneficial
interests in such other Global Security for as long as it remains such an
interest.

(e)           In connection with the
transfer of an entire Restricted Global Security or an entire Regulation S
Global Security to the beneficial owners thereof pursuant to paragraph (b) of
this Section 2.8, such Restricted Global Security or Regulation S
Global Security, as the case may be, 

 10
 

 

shall be
deemed to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate, to each beneficial owner
identified by DTC in exchange for its beneficial interest in such Restricted
Global Security or Regulation S Global Security, as the case may be, an
equal aggregate principal amount of Rule 144A Definitive Securities or
Regulation S Definitive Securities, as the case may be, of authorized
denominations.  None of the Company, the
Security Registrar, the Paying Agent or the Trustee shall be liable for any
delay in delivery of such instructions and may conclusively rely on, and shall
be protected in relying on, such registration instructions.  Upon the issuance of Rule 144A Definitive
Securities or Regulation S Definitive Securities, as the case may be, the
Company and the Trustee shall recognize the Person in whose name the Rule 144A
Definitive Securities or Regulation S Definitive Securities, as the case
may be, are registered in the Register as Holders hereunder.

(f)            Any Rule 144A
Definitive Securities or Regulation S Definitive Securities, as the case
may be, delivered in exchange for an interest in the Restricted Global Security
pursuant to paragraph (b) of this Section 2.8 shall, except as otherwise
provided by paragraph (d) of Section 2.9, bear the Restricted Legend.

(g)           Prior to the expiration
of the Distribution Compliance Period, any interests in a Regulation S
Global Security issued in definitive, fully registered form without interests
coupons (“Regulation S Definitive Security”)
delivered in exchange for an interest in a Regulation S Global Security
pursuant to paragraph (b) of this Section 2.8 shall bear the Restricted
Legend.

(h)           The registered holder of
any Restricted Global Security or Regulation S Global Security may grant
proxies and otherwise authorize any Person, including Agent Members and Persons
that may hold interests through Agent Members, to take any action which a
Holder is entitled to take under the Original Indenture or this Second Supplemental
Indenture or the Securities.

(i)            Neither
the Company nor the Trustee shall be liable if the Trustee or the Company is
unable to locate a qualified successor clearing agency.

Section 2.9             Special Transfer
Provisions.

The following provisions shall also apply to the Senior Notes:

(a)           Transfers to QIBs.  The following provisions shall apply with
respect to the registration of any proposed transfer of a Senior Note required
to bear the Restricted Legend to a QIB (excluding Non-U.S. Persons):

(i)            If the Senior Note to
be transferred consists of an interest in any Regulation S Global Security
during the Distribution Compliance Period, the Security Registrar shall
register the transfer if such transfer is being made by a proposed transferor
who has checked the box provided for on the form of Senior Note stating, or has
otherwise advised the Company, the Trustee and the Security Registrar in
writing, that the sale has been made in compliance with the provisions of Rule
144A to a transferee who has signed the certification provided for on the form
of Senior Note stating, or has otherwise advised the Company, the Trustee and
the Security Registrar in writing, that it 

 11
 

 

is
purchasing the Senior Note for its own account or an account with respect to
which it exercises sole investment discretion and that it, or the Person on
whose behalf it is acting with respect to any such account, is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A.

(ii)           Upon receipt by the
Security Registrar of the documents required by clause (i) above and
instructions given in accordance with DTC’s and the Security Registrar’s
procedures therefor, the Security Registrar shall reflect on its books and
records the date of such transfer and an increase in the principal amount of a
Restricted Global Security in an amount equal to the principal amount of the
interests in such Regulation S Global Security and the Trustee shall
decrease the amount of such Regulation S Global Security so transferred.

(b)           Transfers of
Interests in the Regulation S Global Security.

(i)            After
the expiration of the Distribution Compliance Period, the Security Registrar
shall register any transfer of interests in any Regulation S Global
Security without requiring any additional certification.

(ii)           Until
the expiration of the Distribution Compliance Period, interests in the
Regulation S Global Security may only be sold, pledged or transferred through
Euroclear S.A./N.V. or Clearstream Banking, société anonyme (as indirect
participants in the Depositary) or Agent
Members acting for and on behalf of Euroclear and Clearstream only (x) for
interests in a Regulation S Global Security and then only upon certification in
form reasonably satisfactory to the Trustee that interests in such Regulation S
Global Security are owned by either Non-U.S. Persons or U.S. Persons who
purchased such interests in a transaction that did not require registration
under the Securities Act or (y) for interests in the Restricted Global Security
or if the transferor first delivers to the Trustee a written transfer notice to
the effect that the Securities are being transferred to a person (A) who the
transferor reasonably believes to be a QIB; (B) purchasing for its own account
or the account of a QIB in a transaction meeting the requirements of Rule 144A;
and (C) in accordance with all applicable securities laws of the states of the
United States and other jurisdictions.

(c)           Transfers
to Non-U.S. Persons at Any Time.  The
following provisions shall apply with respect to any registration of any
transfer of a Senior Note to a Non-U.S. Person:

(i)            Prior to the expiration
of the Distribution Compliance Period, the Security Registrar shall register
any proposed transfer of a Senior Note to a Non-U.S. Person upon receipt of a
certificate substantially in the form set forth as Exhibit C or Exhibit
D, as applicable, hereto from the proposed transferor.

 12
 

 

(ii)           After
the expiration of the Distribution Compliance Period, the Security Registrar
shall register any proposed transfer to any Non-U.S. Person if the Senior Note
to be transferred is an interest in a Restricted Global Security, upon receipt
of a certificate substantially in the form of Exhibit C or Exhibit D,
as applicable, from the proposed transferor. 
The Security Registrar shall promptly send a copy of such certificate to
the Company.

(iii)          Upon receipt by the
Security Registrar of (x) the documents, if any, required by clause (ii) and
(y) instructions in accordance with DTC’s and the Security Registrar’s
procedures, the Security Registrar shall reflect on its books and records the
date of such transfer and a decrease in the principal amount of such Restricted
Global Security in an amount equal to the principal amount of the beneficial
interest in such Restricted Global Security to be transferred, and, upon
receipt by the Security Registrar of instructions given in accordance with DTC’s
and the Security Registrar’s procedures, the Security Registrar shall reflect
on its books and records the date and an increase in the principal amount of
the Regulation S Global Security in an amount equal to the principal
amount of the Restricted Global Security to be transferred, and the Trustee
shall decrease the amount of such Restricted Global Security.

(d)           Restricted Legend.  Upon the transfer, exchange or replacement of
Senior Notes not bearing the Restricted Legend, the Security Registrar shall
deliver Senior Notes that do not bear the Restricted Legend.  Upon the transfer, exchange or replacement of
Senior Notes bearing the Restricted Legend, the Security Registrar shall
deliver only Senior Notes that bear the Restricted Legend unless either (i) the
circumstances contemplated by paragraph (c)(ii) of this Section 2.9 exist or
(ii) there is delivered to the Security Registrar an opinion of counsel to the
effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.

(e)           General.  By acceptance of any Senior Note bearing the
Restricted Legend, each Holder of such Senior Note acknowledges the
restrictions on transfer of such Senior Note set forth in such Restricted
Legend and otherwise in this Second Supplemental Indenture and agrees that it
will transfer such Senior Note only as provided in such Restricted Legend and
otherwise in this Second Supplemental Indenture.  In connection with any transfer of Senior
Notes, each Holder agrees by its acceptance of the Senior Notes to furnish the
Security Registrar or the Trustee such certifications, legal opinions or other
information as either of them may reasonably require to confirm that such
transfer is being made pursuant to an exemption from, or a transaction not
subject to, the registration requirements of the Securities Act and in
accordance with the terms and provisions of this Article 2; provided
that the Security Registrar shall not be required to determine the sufficiency
of any such certifications, legal opinions or other information.

Until such time as no Senior Notes remain
Outstanding, the Security Registrar shall retain copies of all letters, notices
and other written communications received pursuant to Section 2.8 or this
Section 2.9.  The Trustee, if not
the Security Registrar at such time, shall have the right to inspect and make
copies of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to the Security
Registrar.

 13
 

 

In the event that any Global Security or any portion thereof is
exchanged for Definitive Securities, such other Definitive Securities may be
exchanged (by transfer or otherwise) for Definitive Securities or for
beneficial interests in a Global Security (if any is then outstanding) only in
accordance with procedures substantially consistent with this Article Two
(including any certification requirements) and applicable procedures adopted by
the Company and the Trustee.

Until Definitive Securities are ready for delivery, the Company may use
temporary Securities.  Temporary
Securities shall be substantially in the form of Definitive Securities but may
have variations that the Company considers appropriate for temporary
Securities.  Without unreasonable delay,
the Company shall deliver Definitive Securities in exchange for temporary
Securities.

The Company may issue some or all of the Securities in temporary or
permanent global form.  The Company may
issue a Global Security only to the Depositary. 
A Depositary may transfer a Global Security only to its nominee or to a
successor Depositary.  A Global Security
shall represent the amount of Senior Notes specified in the Global
Security.  A Global Security may have
variations that the Depositary requires or that the Company considers
appropriate for such a security.

Beneficial owners of part or all of a Global Security are subject to
the rules of the Depository as in effect from time to time.

The Company, the Trustee and their agents shall not be responsible for
any acts or omissions of a Depositary, for any Depositary records of beneficial
ownership interests or for any transactions between or among the Depositary,
Agent Members and beneficial owners.

The Company at any time may deliver Senior Notes to the Trustee for
cancellation.  The Paying Agent, if not
the Trustee, shall forward to the Trustee any Senior Notes surrendered to them
for payment or conversion.  The Trustee
shall cancel all Senior Notes surrendered for registration of transfer,
exchange, payment or cancellation and shall dispose of cancelled Senior Notes
according to its then customary practices. 
The Company may not issue new Senior Notes to replace Senior Notes that
it has paid or which have been delivered to the Trustee for cancellation.

Section
2.10.  Restrictions
on Liens.  The covenant
provided by Section 10.9 of the Original Indenture shall be applicable to the
Senior Notes; provided, however, that the dollar amount set forth in paragraph
(b) of Section 10.9 shall be $100,000,000 with respect to the Senior Notes.

Section
2.11.  Restrictions
on Sale and Leaseback Transactions. 
The covenant provided by Section 10.10 of the Original Indenture shall
be applicable to the Senior Notes.

Section
2.12.  Limitation
on Incurrence of Debt.  The
covenant provided by Section 10.8 of the Original Indenture shall not be
applicable to the Senior Notes.

 14

 

ARTICLE THREE

REDEMPTION

The Senior Notes may be
redeemed, in accordance with the procedures set forth in the Original
Indenture, on not less than 30 nor more than 60 days’ notice given as provided
in the Original Indenture, as a whole or in part, at any time at the option of
the Company, at a redemption price equal to the greater of (i) 100% of the
principal amount of the Senior Notes being redeemed and (ii) as determined
by an Independent Investment Banker, the sum of the present values of the
remaining scheduled payments of principal and interest thereon (not including
any portion of such payments of interest accrued as of the redemption date)
discounted to the redemption date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus,
in each case, accrued and unpaid interest thereon to, but excluding, the
redemption date (the “Make-Whole Price”);
provided, however, that installments of interest on the Senior Notes that are
due and payable on an interest payment date falling on or prior to the relevant
redemption date will be payable to the holders of such Senior Notes, registered
as such at the close of business on the relevant record date according to the
terms and provisions of the Indenture.

In
the event of a partial redemption of the Senior Notes, the Company will issue
new Senior Notes for the unredeemed portion in the name of each Holder of the
partially redeemed Senior Notes.

If less than all of the
Senior Notes are to be redeemed, the Senior Notes will be redeemed by lot, pro
rata by the Trustee or by such method of selection as the Trustee shall deem
fair and appropriate and which may, in any case, provide for the selection for
redemption of Senior Notes and portions of Senior Notes in amounts of $2,000 or
any integral multiples of $1,000 in excess thereof from the outstanding Senior
Notes, in accordance with Section 11.3 of the Original Indenture.

Unless the Company defaults in payment of the
redemption price, the portion of Senior Notes called for redemption will no
longer accrue interest on and after the redemption date.

ARTICLE
FOUR

MISCELLANEOUS

Section
4.1.  Execution as Supplemental
Indenture.  This Second
Supplemental Indenture is executed and shall be construed as an indenture supplemental
to the Original Indenture and, as provided in the Original Indenture, this
Second Supplemental Indenture forms a part thereof.

Section
4.2.  Conflict with Trust
Indenture Act.  This Second
Supplemental Indenture may, but is not, as of the date first written above,
required to be, qualified under and subject to the Trust Indenture Act.  If this Second Supplemental Indenture shall
become qualified under and subject to the Trust Indenture Act, then if any
provision hereof limits, qualifies or conflicts with another provision hereof,
or with a provision of the Original Indenture, which is required to be included
in this Second Supplemental Indenture, or in the Original Indenture,
respectively, by any of the provisions of the Trust Indenture Act, such required
provision shall control to the 

 15
 

 

extent it is
applicable.  Except as expressly provided
otherwise herein, any reference herein to a requirement under the Trust
Indenture Act shall apply only upon and so long as this Second Supplemental
Indenture shall become qualified under and subject to the Trust Indenture Act.

Section
4.3.  Effect of Headings.  The Article and Section headings herein are
for convenience only and shall not affect the construction hereof.

Section
4.4.  Successors and Assigns.  All covenants and agreements by the Company
and the Trustee in this Second Supplemental Indenture shall bind its successors
and assigns, whether so expressed or not.

Section
4.5.  Separability Clause.  In case any provision in this Second
Supplemental Indenture or in the Senior Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

Section
4.6.  Benefits
of Second Supplemental Indenture.  Nothing in this Second
Supplemental Indenture or in the Senior Notes, express or implied, shall give
to any Person, other than the parties hereto and their successors hereunder and
the Holders, any benefit or any legal or equitable right, remedy or claim under
this Second Supplemental Indenture.

Section
4.7.  Execution and
Counterparts.  This Second
Supplemental Indenture may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.

Section
4.8.  Governing
Law.  This Second Supplemental
Indenture and the Senior Notes shall be governed by and construed in accordance
with the laws of the State of New York except that if this Second Supplemental
Indenture shall become qualified under and subject to the Trust Indenture Act,
this Second Supplemental Indenture and Senior Notes shall be governed by the
Trust Indenture Act to the extent that the Trust Indenture Act shall be
applicable.

 16

 

IN
WITNESS WHEREOF, the parties hereto have caused this Second Supplemental
Indenture to be duly executed as of the day and year first above written.

	
  

  	
  ITC HOLDINGS CORP.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK TRUST

  COMPANY, N.A.,

  
	
   

  	
  as Trustee

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

 

	
  STATE OF MICHIGAN

  	
  )

  	
   

  
	
   

  	
  ) ss.:

  	
   

  
	
  COUNTY OF                            

  	
  )

  	
   

  

 

On this                          
day of October 2006, before me personally appeared                                                   ,
to me known to be                                                                            
of ITC Holdings Corp., one of the corporations that executed the within and
foregoing instrument, and acknowledged said instrument to be the free and
voluntary act and deed of said Corporation, for the uses and purposes therein
mentioned, and on oath stated that he was authorized to execute said instrument
and that the seal affixed, if any, is the corporate seal of said Corporation.

IN WITNESS WHEREOF, I
have hereunto set my hand and affixed my official seal the day and year first
above written.

                                                       

                                         ,
Notary Public

                                         
County, Michigan

 

My Commission expires:                                   

 

Acting in the County of:                                    

 

 

	
  STATE OF ILLINOIS

  	
  )

  
	
   

  	
  ) ss.:

  
	
  COUNTY OF COOK

  	
  )

  

 

On the
[     ] day of October in the year 2006 before me, the
undersigned, personally  appeared
[              ],
[Assistant Vice President] of The Bank of New York Trust Company, N.A.,
personally known to me or proved to me on the basis of satisfactory evidence to
be the  individual whose name is
subscribed to the within instrument and acknowledged to me that she executed
the same in her capacity, and that by her signature on the instrument, the
individual, or the person upon behalf of which the individual acted, executed
the instrument.

 

	
  

  	
   

  	
   

  	
   

  	
   

  
	
  Print Name:

  
	
   

  
	
  Notary Public,
  State of Illinois

  
	
  Commission
  expires:

  	
   

  	
   

  	
   

  
							

 

 

EXHIBIT A

[FORM OF FACE OF 5.875% SENIOR NOTES DUE 2016]

[UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND
ANY PAYMENT HEREON MADE TO CEDE & CO.), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.  TRANSFERS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS IN WHOLE BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY
TRUST COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO
ON THE REVERSE HEREOF.]*

[THIS
SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM.  EACH PURCHASER OF THIS
SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER.

THE HOLDER OF THIS
SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY
BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED
STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE),
(IV) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (BASED UPON AN OPINION OF COUNSEL ACCEPTABLE
TO THE COMPANY IF THE COMPANY SO REQUESTS) OR (V) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH
(V) IN

*  To be included on the face of
each Global Security.

 A-1
 

 

ACCORDANCE WITH
ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND
(B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN
(A) ABOVE.]**

[IN CONNECTION WITH ANY TRANSFER, THE HOLDER
WILL DELIVER TO THE SECURITY REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND
OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT
THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.]***

ITC HOLDINGS CORP.

5.875% SENIOR NOTES DUE 2016

	
  

  	
  $

  	
                       

  
	
   

  	
   

  	
   

  
	
  No.                     

  	
  CUSIP

  	
                       

  
	
   

  	
   

  	
   

  
	
   

  	
  ISIN

  	
                       

  

 

ITC HOLDINGS CORP., a corporation duly organized and
existing under the laws of the State of Michigan (herein called the “Company,” which term includes any successor
under the Indenture hereinafter referred to), for value received, hereby
promises to pay to                                       
or registered assigns, the principal sum of $                            
on September 30, 2016 and to pay interest thereon from October 10, 2006,
or from the most recent Interest Payment Date to which interest has been paid
or duly provided for, semi-annually in arrears on March 30 and September
30 in each year, commencing March 30, 2007, at the rate per annum provided in
the title hereof, until the principal hereof is paid or made available for
payment, and, subject to the terms of the Indenture hereinafter referenced, at
the rate of 5.875% per annum on any overdue principal and premium and (to the
extent that the payment of such interest shall be legally enforceable) on any
overdue installment of interest, from the dates such amounts are due until they
are paid or made available for payment, and such interest shall be payable on
demand. The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security is registered at the close of business on
the Regular Record Date for such interest, which shall be the March 15 or
September 15 (whether or not a Business Day), as the case may be, immediately
preceding such Interest Payment Date. Any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security is registered at the close of business on a Special Record Date 

**          To be included on the
face of each Restricted Security and Rule 144A Definitive Security.

***   To be included on the face of
each Definitive Security.

 A-2
 

 

for the payment of such Defaulted Interest to be fixed by the Trustee,
notice whereof shall be given as provided in said Indenture.  Interest will be computed on the basis of a
360-day year of twelve 30-day months.

Payment of the principal of (and premium, if any) and
interest on the Securities of this series will be made at the office or agency of
the Company maintained for that purpose in the City of New York, State
of New York or at the office or place of business of the Trustee or its
successor in trust under the Original Indenture hereinafter referenced, in such coin or currency of the United States of
America as at the time of payment is legal tender for the payment of public and
private debts; [if this Security is not a Global Security, insert — provided,
however, that at the option of the Company payment of interest may be made by
check mailed to the address of the Person entitled thereto as such address
shall appear in the Security Register] [if this Security is a Global
Security, insert—provided, however, that except with respect to payments of
principal, payments shall be made by wire transfer of immediately available
funds with respect to payments in respect of Global Securities if the Holders
thereof have provided wire instructions in respect of such payments to the
Company or the Paying Agent].  Holders
must surrender Securities to a Paying Agent to collect principal payments.

Reference is hereby made to the further provisions of the
Securities of this series set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set forth at this
place.

Unless the certificate of
authentication hereon has been manually executed by or on behalf of the Trustee
under the Indenture (hereinafter referenced), this Security shall not be
entitled to any benefits under the Indenture (hereinafter referenced), or be
valid or obligatory for any purpose.

IN WITNESS WHEREOF, ITC HOLDINGS
CORP. has caused this Security to be duly executed.

	
  Dated:

  	
  ITC HOLDINGS CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BY

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 A-3
 

 

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

This is one of the Securities of the series designated
therein referred to in the within-mentioned Indenture.

	
  Date:

  	
  The Bank of New
  York Trust Company, N.A.,

  as Trustee,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized Signatory

  

 

 A-4
 

 

[FORM OF REVERSE OF 5.875% SENIOR
NOTES DUE 2016]

This Security is one of the duly authorized issue of debentures, notes,
bonds or other evidences of indebtedness of the Company (herein sometimes
referred to as the “Securities”),
of the series hereinafter specified, all issued or to be issued under and
pursuant to the Original Indenture dated as of July 16, 2003, as supplemented
by the Second Supplemental Indenture, dated as of October 10, 2006 (as so
supplemented, the “Indenture”),
duly executed and delivered by the Company and The Bank of New York Trust
Company, N.A., as Trustee (herein called the “Trustee”,
which term includes any successor trustee under the Indenture), to which
Indenture and any other indentures supplemental thereto reference is hereby
made for a statement of the respective rights, obligations, duties and
immunities thereunder of the Trustee and any agent of the Trustee, any Paying
Agent, the Company and the Holders of
the Securities of this series and of the terms upon which the Securities of
this series are issued and are to be authenticated and delivered. This Security
is one of the series designated on the face hereof, which series is initially
limited in aggregate principal amount to $255,000,000; provided that the
Company may from time to time or at any time, without the consent of the
Holders of the Securities of this series,
issue additional Senior Notes, which additional Senior Notes shall increase the
aggregate principal amount of, and shall be consolidated and form a single
series with, the Senior Notes.  By the terms of the Indenture, additional
Securities of other separate series, which may vary as to date, aggregate
principal amount, Stated Maturity, interest rate or method of calculating the
interest rate, redemption provisions and in other respects as therein provided,
may be issued in an unlimited amount.

This Senior Note may be
redeemed in accordance with the procedures set forth in the Indenture on not
less than 30 nor more than 60 days’ notice given as provided in the Indenture,
as a whole or in part, at any time at the option of the Company, at a
redemption price equal to the greater of (i) 100% of the principal amount
of the Senior Notes being redeemed and (ii) as determined by an
Independent Investment Banker, the sum of the present values of the remaining
scheduled payments of principal and interest thereon (not including any portion
of such payments of interest accrued as of the redemption date) discounted to
the redemption date on a semi-annual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Adjusted Treasury Rate, plus, in each case,
accrued and unpaid interest thereon to, but excluding, the redemption date (the
“Make-Whole Price”); provided,
however, that installments of interest on the Senior Notes that are due and
payable on an interest payment date falling on or prior to the relevant
redemption date will be payable to the holders of such Senior Notes, registered
as such at the close of business on the relevant record date according to the
terms and provisions of the Indenture.

In the event of a partial
redemption of the Senior Notes, the Company will issue new Senior Notes for the
unredeemed portion in the name of each Holder of the partially redeemed Senior
Notes.

Unless the Company defaults in payment of the redemption
price, the portion of Senior Notes called for redemption will no longer accrue
interest on and after the redemption date.

 A-5
 

 

If less than all
of the Securities of this series are to be redeemed, the Securities of this
series will be redeemed on a pro rata basis by the Trustee from the Outstanding
Securities of this series.

The Securities are
subject to the further redemption provisions and procedures set forth in the
Indenture.

The
Indenture contains provisions for defeasance of (a) the entire indebtedness
of the Securities of this series and (b) certain restrictive covenants
upon compliance by the Company with certain conditions set forth in the
Indenture.

If
an Event of Default with respect to the Securities of this series shall occur
and be continuing, the unpaid principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.

The
Indenture permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Company and
the rights of the Holders of the Securities of each series to be affected under
the Indenture at any time by the Company and the Trustee with the consent of
the Holders of a majority in aggregate principal amount of the Securities at
the time Outstanding of all series to be affected (voting as a class). The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities of each series at the time
Outstanding, on behalf of the Holders of all Securities of such series, to
waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of the Securities of this series shall be
conclusive and binding upon such Holder and upon all future Holders of the
Securities of this series and of any Securities of this series issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon the Securities
of this series.

No
reference herein to the Indenture and no provision of the Securities of this
series or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of (and premium, if
any) and interest, if any, on the Securities of this series at the times, place
and rate, and in the coin or currency, herein prescribed.

As
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of the Securities of this series is registrable in the Security
Register, upon surrender of the Securities of this series for registration of
transfer at the office or agency of the Company in any place where the
principal of (and premium, if any) and interest, if any, on the Securities of
this series are payable, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security Registrar
duly executed by, the Holder hereof or his attorney duly authorized in writing,
and thereupon one or more new Securities of this series and of like tenor, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.

The
Securities of this series are issuable only in registered form without coupons
in denominations of $2,000 and any integral multiple thereof. As provided in
the Indenture and 

 A-6
 

 

subject to certain limitations
therein set forth, the Securities of this series are exchangeable for a like
aggregate principal amount of the Securities of this series and of like tenor
of a different authorized denomination, as requested by the Holder surrendering
the same.

No
service charge shall be made for any such registration of transfer or exchange,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.

Prior
to due presentment of the Securities of this series for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name the Securities of this series are registered
as the owner hereof for all purposes, whether or not the Securities of this
series be overdue, and neither the Company, the Trustee nor any such agent
shall be affected by notice to the contrary.

The
Securities of this series are not subject to any sinking fund.

Each
Holder, by accepting a Security, agrees to be bound by all the terms and
provisions of the Indenture, as the same may be amended from time to time in
accordance with its terms.

The
Securities of this series shall be governed by and construed in accordance with
the laws of the State of New York, except that if the Second Supplemental
Indenture shall become qualified under and subject to the Trust Indenture Act,
this Senior Note shall be governed by the Trust Indenture Act to the extent
that the Trust Indenture Act shall be applicable.

All
capitalized terms used but not defined in this Security shall have the meanings
assigned to them in the Indenture.

 A-7
 

 

FORM OF TRANSFER NOTICE

FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto

Insert Taxpayer Identification No.

                                  

                                  

please print or typewrite name and address including zip code of assignee

                                  

the within Security and all rights thereunder, hereby irrevocably
constituting and appointing

                                  

attorney to transfer said Security on the books of the Security Registrar
with full power of substitution in the premises.

[THE FOLLOWING PROVISION TO BE INCLUDED

ON ALL SECURITIES,

EXCEPT REGULATION S GLOBAL SECURITIES AND

REGULATION S DEFINITIVE SECURITIES]

In connection with any transfer of this Certificate
occurring prior to the date that is the earlier of the date of an effective
Registration Statement or the date two years after the later of the original
issuance of this Security or the last date on which this Security was held by
ITC Holdings Corp. or any affiliate of ITC Holdings Corp., the undersigned
confirms that without utilizing any general solicitation or general advertising
that:

[Check One]

[            ]
(a) the Securities are being transferred to a person whom we reasonably
believe is a “qualified institutional buyer” (as defined in Rule 144A under the
Securities Act of 1933) (a “QIB”) that purchases for its own account or for the
account of one or more QIBs to whom notice has been given that the resale,
pledge or transfer is being made in reliance on Rule 144A under the Securities
Act;

or

 A-8
 

 

[        ] (b) this Security is
being transferred other than in accordance with (a) above and documents are being
furnished that comply with the conditions of transfer set forth in this
Security and the Indenture.

If neither of the foregoing boxes is checked, the Security Registrar shall
not be obligated to register this Security in the name of any Person other than
the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.9 of the Second Supplemental
Indenture shall have been satisfied.

	
  Date:[          ,      ]

  	
  [Name of Transferor]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  NOTE: The signature must
  correspond with the name as written upon the face of the within-mentioned
  instrument in every particular, without alteration or any change whatsoever.

  
	
   

  	
   

  
	
  Signature Guarantee:

  	
   

  	
   

  
						

 

SIGNATURE GUARANTEE

Signatures must be guaranteed by an “eligible guarantor institution”
meeting the requirements of the Security Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program (“STAMP”)
or such other “signature guarantee program” as may be determined by the
Security Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.

 A-9

 

EXHIBIT B

[FORM OF FACE OF 6.375% SENIOR NOTES DUE 2036]

[UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND
ANY PAYMENT HEREON MADE TO CEDE & CO.), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.  TRANSFERS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS IN WHOLE BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY
TRUST COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO
ON THE REVERSE HEREOF.]*

[THIS
SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM.  EACH PURCHASER OF THIS
SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER.

THE HOLDER OF THIS
SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY
BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED
STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE),
(IV) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (BASED UPON AN OPINION OF COUNSEL ACCEPTABLE
TO THE COMPANY IF THE COMPANY SO REQUESTS) OR (V) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH
(V) IN 

*  To be included on the face of
each Global Security.

 B-1
 

 

ACCORDANCE WITH
ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND
(B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN
(A) ABOVE.]**

[IN CONNECTION WITH ANY TRANSFER, THE HOLDER
WILL DELIVER TO THE SECURITY REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND
OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT
THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.]***

ITC HOLDINGS CORP.

6.375% SENIOR NOTES DUE 2036

	
  

  	
  $

  	
                 

  
	
   

  	
   

  	
   

  
	
  No.               

  	
  CUSIP

  	
                 

  
	
   

  	
   

  	
   

  
	
   

  	
  ISIN

  	
                 

  

 

ITC HOLDINGS CORP., a corporation duly organized and existing
under the laws of the State of Michigan (herein called the “Company,” which term includes any successor
under the Indenture hereinafter referred to), for value received, hereby
promises to pay to                                 
or registered assigns, the principal sum of $                                   
on September 30, 2036, and to pay interest thereon from October 10, 2006, or
from the most recent Interest Payment Date to which interest has been paid or
duly provided for, semi-annually in arrears on March 30 and September 30
in each year, commencing March 30, 2007, at the rate per annum provided in the
title hereof, until the principal hereof is paid or made available for payment,
and, subject to the terms of the Indenture hereinafter referenced, at the rate
of 6.375% per annum on any overdue principal and premium and (to the extent
that the payment of such interest shall be legally enforceable) on any overdue
installment of interest, from the dates such amounts are due until they are
paid or made available for payment, and such interest shall be payable on
demand. The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security is registered at the close of business on
the Regular Record Date for such interest, which shall be March 15 or September
15 (whether or not a Business Day), as the case may be, immediately preceding
such Interest Payment Date. Any such interest not so punctually paid or duly
provided for will forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this Security is
registered at the close of business on a Special Record Date 

**          To be included on the
face of each Restricted Security and Rule 144A Definitive Security.

***   To be included on the face of
each Definitive Security.

 B-2
 

 

for the payment of such Defaulted Interest to be fixed by the Trustee,
notice whereof shall be given as provided in said Indenture.  Interest will be computed on the basis of a
360-day year of twelve 30-day months.

Payment of the principal of (and premium, if any) and
interest on the Securities of this series will be made at the office or agency
of the Company maintained for that purpose in the City of New York,
State of New York or at the office or place of business of the Trustee or its
successor in trust under the Original Indenture hereinafter referenced, in such coin or currency of the United States of
America as at the time of payment is legal tender for the payment of public and
private debts; [if this Security is not a Global Security, insert — provided,
however, that at the option of the Company payment of interest may be made by
check mailed to the address of the Person entitled thereto as such address
shall appear in the Security Register] [if this Security is a Global
Security, insert—provided, however, that except with respect to payments of
principal, payments shall be made by wire transfer of immediately available
funds with respect to payments in respect of Global Securities if the Holders
thereof have provided wire instructions in respect of such payments to the
Company or the Paying Agent].  Holders
must surrender Securities to a Paying Agent to collect principal payments.

Reference is hereby made to the further provisions of the
Securities of this series set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set forth at this
place.

Unless the certificate of
authentication hereon has been manually executed by or on behalf of the Trustee
under the Indenture (hereinafter referenced), this Security shall not be
entitled to any benefits under the Indenture (hereinafter referenced), or be
valid or obligatory for any purpose.

IN WITNESS WHEREOF, ITC HOLDINGS CORP. has caused this
Security to be duly executed.

	
  Dated:

  	
  ITC HOLDINGS CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BY

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 B-3
 

 

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

This is one of the Securities of the series designated
therein referred to in the within-mentioned Indenture.

	
  Date:

  	
   

  	
  The Bank of New York Trust Company, N.A.,

  
	
   

  	
   

  	
  as Trustee,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized
  Signatory

  

 

 B-4
 

 

[FORM OF REVERSE OF 6.375% SENIOR
NOTES DUE 2036]

This Security is one of the duly authorized issue of debentures, notes,
bonds or other evidences of indebtedness of the Company (herein sometimes
referred to as the “Securities”),
of the series hereinafter specified, all issued or to be issued under and
pursuant to the Original Indenture dated as of July 16, 2003, as supplemented
by the Second Supplemental Indenture, dated as of October 10, 2006 (as so
supplemented, the “Indenture”),
duly executed and delivered by the Company and The Bank of New York Trust
Company, N.A., as Trustee (herein called the “Trustee”,
which term includes any successor trustee under the Indenture), to which
Indenture and any other indentures supplemental thereto reference is hereby
made for a statement of the respective rights, obligations, duties and
immunities thereunder of the Trustee and any agent of the Trustee, any Paying
Agent, the Company and the Holders of
the Securities of this series and of the terms upon which the Securities of
this series are issued and are to be authenticated and delivered. This Security
is one of the series designated on the face hereof, which series is initially
limited in aggregate principal amount to $255,000,000; provided that the
Company may from time to time or at any time, without the consent of the
Holders of the Securities of this series,
issue additional Senior Notes, which additional Senior Notes shall increase the
aggregate principal amount of, and shall be consolidated and form a single
series with, the Senior Notes.  By the terms of the Indenture, additional
Securities of other separate series, which may vary as to date, aggregate
principal amount, Stated Maturity, interest rate or method of calculating the
interest rate, redemption provisions and in other respects as therein provided,
may be issued in an unlimited amount.

This Senior Note may be
redeemed in accordance with the procedures set forth in the Indenture on not
less than 30 nor more than 60 days’ notice given as provided in the Indenture,
as a whole or in part, at any time at the option of the Company, at a
redemption price equal to the greater of (i) 100% of the principal amount
of the Senior Notes being redeemed and (ii) as determined by an
Independent Investment Banker, the sum of the present values of the remaining
scheduled payments of principal and interest thereon (not including any portion
of such payments of interest accrued as of the redemption date) discounted to
the redemption date on a semi-annual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Adjusted Treasury Rate, plus, in each case,
accrued and unpaid interest thereon to, but excluding, the redemption date (the
“Make-Whole Price”); provided,
however, that installments of interest on the Senior Notes that are due and
payable on an interest payment date falling on or prior to the relevant
redemption date will be payable to the holders of such Senior Notes, registered
as such at the close of business on the relevant record date according to the
terms and provisions of the Indenture.

In the event of a partial
redemption of the Senior Notes, the Company will issue new Senior Notes for the
unredeemed portion in the name of each Holder of the partially redeemed Senior
Notes.

Unless the Company defaults in payment of the
redemption price, the portion of Senior Notes called for redemption will no
longer accrue interest on and after the redemption date.

 B-5
 

 

If less than all
of the Securities of this series are to be redeemed, the Securities of this
series will be redeemed on a pro rata basis by the Trustee from the Outstanding
Securities of this series.

The Securities are
subject to the further redemption provisions and procedures set forth in the
Indenture.

The
Indenture contains provisions for defeasance of (a) the entire
indebtedness of the Securities of this series and (b) certain restrictive
covenants upon compliance by the Company with certain conditions set forth in
the Indenture.

If
an Event of Default with respect to the Securities of this series shall occur
and be continuing, the unpaid principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.

The
Indenture permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Company and
the rights of the Holders of the Securities of each series to be affected under
the Indenture at any time by the Company and the Trustee with the consent of
the Holders of a majority in aggregate principal amount of the Securities at
the time Outstanding of all series to be affected (voting as a class). The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities of each series at the time
Outstanding, on behalf of the Holders of all Securities of such series, to
waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of the Securities of this series shall be
conclusive and binding upon such Holder and upon all future Holders of the
Securities of this series and of any Securities of this series issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof, whether
or not notation of such consent or waiver is made upon the Securities of this
series.

No
reference herein to the Indenture and no provision of the Securities of this
series or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of (and premium, if
any) and interest, if any, on the Securities of this series at the times, place
and rate, and in the coin or currency, herein prescribed.

As
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of the Securities of this series is registrable in the Security
Register, upon surrender of the Securities of this series for registration of
transfer at the office or agency of the Company in any place where the
principal of (and premium, if any) and interest, if any, on the Securities of
this series are payable, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or his attorney duly authorized
in writing, and thereupon one or more new Securities of this series and of like
tenor, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.

The
Securities of this series are issuable only in registered form without coupons
in denominations of $2,000 and any integral multiple thereof. As provided in
the Indenture and 

 B-6
 

 

subject to certain limitations
therein set forth, the Securities of this series are exchangeable for a like
aggregate principal amount of the Securities of this series and of like tenor
of a different authorized denomination, as requested by the Holder surrendering
the same.

No
service charge shall be made for any such registration of transfer or exchange,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.

Prior
to due presentment of the Securities of this series for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name the Securities of this series are registered
as the owner hereof for all purposes, whether or not the Securities of this
series be overdue, and neither the Company, the Trustee nor any such agent
shall be affected by notice to the contrary.

The
Securities of this series are not subject to any sinking fund.

Each
Holder, by accepting a Security, agrees to be bound by all the terms and
provisions of the Indenture, as the same may be amended from time to time in
accordance with its terms.

The
Securities of this series shall be governed by and construed in accordance with
the laws of the State of New York, except that if the Second Supplemental
Indenture shall become qualified under and subject to the Trust Indenture Act,
this Senior Note shall be governed by the Trust Indenture Act to the extent
that the Trust Indenture Act shall be applicable.

All
capitalized terms used but not defined in this Security shall have the meanings
assigned to them in the Indenture.

 B-7
 

 

FORM OF TRANSFER NOTICE

FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto

Insert Taxpayer Identification No.

                                  

                                  

please print or typewrite name and address including zip code of assignee

                                  

the within Security and all rights thereunder, hereby irrevocably
constituting and appointing

                                  

attorney to transfer said Security on the books of the Security Registrar
with full power of substitution in the premises.

[THE FOLLOWING PROVISION TO BE INCLUDED

ON ALL SECURITIES,

EXCEPT REGULATION S GLOBAL SECURITIES AND

REGULATION S DEFINITIVE SECURITIES]

In connection with any transfer of this Certificate
occurring prior to the date that is the earlier of the date of an effective
Registration Statement or the date two years after the later of the original
issuance of this Security or the last date on which this Security was held by
ITC Holdings Corp. or any affiliate of ITC Holdings Corp., the undersigned
confirms that without utilizing any general solicitation or general advertising
that:

[Check One]

[          ] (a) the
Securities are being transferred to a person whom we reasonably believe is a “qualified
institutional buyer” (as defined in Rule 144A under the Securities Act of 1933)
(a “QIB”) that purchases for its own account or for the account of one or more
QIBs to whom notice has been given that the resale, pledge or transfer is being
made in reliance on Rule 144A under the Securities Act;

or

 B-8
 

 

[          ] (b) this
Security is being transferred other than in accordance with (a) above and
documents are being furnished that comply with the conditions of transfer set
forth in this Security and the Indenture.

If neither of the foregoing boxes is checked, the Security Registrar shall
not be obligated to register this Security in the name of any Person other than
the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.9 of the Second Supplemental
Indenture shall have been satisfied.

	
  Date:[              ,       ]

  	
  [Name of Transferor]

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NOTE: The signature must
  correspond with the name as written upon the face of the within-mentioned
  instrument in every particular, without alteration or any change whatsoever.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature Guarantee:

  	
   

  	
   

  	
   

  
							

 

SIGNATURE GUARANTEE

Signatures must be guaranteed by an “eligible guarantor institution”
meeting the requirements of the Security Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program (“STAMP”)
or such other “signature guarantee program” as may be determined by the
Security Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.

 B-9

 

EXHIBIT C

[Form of
Regulation S Transfer Certificate]

[Date]

ITC Holdings Corp. (the “Company”)

39500 Orchard Hill Place, Suite 200

Novi, Michigan, 48375

Attention:  General Counsel

The Bank of New York Trust Company, N.A. (the “Trustee”)

2 N. LaSalle Street

Suite 1020

Chicago, Illinois 60630

Attention:  Corporate Trust
Administration

Ladies and Gentlemen:

In connection with our proposed transfer of $                               aggregate
principal amount of 5.875% Senior
Notes due 2016 (the “Notes”) of the Company, we confirm that:

(a)                                  the
offer of the Notes was not made to a person in the United States;

(b)                                 either
(i) at the time the buy order was originated, the transferee was outside the
United States or we and any person acting on our behalf reasonably believed
that the transferee was outside the United States or (ii) the transaction was
executed in, on or through the facilities of a designated off-shore
securities market and neither we nor any person acting on our behalf knows that
the transaction has been pre-arranged with a buyer in the United States;

(c)                                  no
directed selling efforts have been made in the United States in contravention
of the requirements of Rule 903(a) or Rule 904(a) of Regulation S, as
applicable; and

(d)                                 the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act.

In addition, if the sale is made during the
Distribution Compliance Period and the provisions of Rule 903(b)(2) or Rule
904(b)(1) of Regulation S are applicable thereto, we confirm that such sale has
been made in accordance with the applicable provisions of Rule 903(b)(2)
or Rule 904(b)(1), as the case may be.

 C-1
 

 

The Company and the Trustee are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby.  Terms used in this certificate have the
meanings set forth in Regulation S.

	
  Very truly yours,

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [Name of
  Transferor]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Authorized Signature

  	
   

  	
   

  
							

 

 C-2

 

EXHIBIT D

[Form of
Regulation S Transfer Certificate]

[Date]

ITC Holdings Corp. (the “Company”)

39500 Orchard Hill Place, Suite 200

Novi, Michigan, 48375

Attention:  General Counsel

The Bank of New York Trust Company, N.A. (the “Trustee”)

2 N. LaSalle Street

Suite 1020

Chicago, Illinois 60630

Attention:  Corporate Trust
Administration

Ladies and Gentlemen:

In connection with our proposed transfer of $                         aggregate
principal amount of 6.375% Senior
Notes due 2036 (the “Notes”) of the Company, we confirm that:

(a)                                  the
offer of the Notes was not made to a person in the United States;

(b)                                 either
(i) at the time the buy order was originated, the transferee was outside the
United States or we and any person acting on our behalf reasonably believed
that the transferee was outside the United States or (ii) the transaction was
executed in, on or through the facilities of a designated off-shore
securities market and neither we nor any person acting on our behalf knows that
the transaction has been pre-arranged with a buyer in the United States;

(c)                                  no
directed selling efforts have been made in the United States in contravention
of the requirements of Rule 903(a) or Rule 904(a) of Regulation S, as
applicable; and

(d)                                 the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act.

In addition, if the sale is made during the
Distribution Compliance Period and the provisions of Rule 903(b)(2) or Rule
904(b)(1) of Regulation S are applicable thereto, we confirm that such sale has
been made in accordance with the applicable provisions of Rule 903(b)(2)
or Rule 904(b)(1), as the case may be.

 D-1
 

 

The Company and the Trustee are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby.  Terms used in this certificate have the
meanings set forth in Regulation S.

	
  Very truly yours,

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [Name of
  Transferor]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
  Authorized Signature

  	
   

  	
   

  
					

 

 D-2

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