Document:

Exhibit
10.7

 

EXECUTION COPY

 

FORM OF

MANAGEMENT
STOCKHOLDER’S AGREEMENT

(Purchased Stock and Options Only)

 

This Management Stockholder’s Agreement (this
“Agreement”) is entered into as of [DATE], 2003 (the “Effective Date”)
between ITC Holdings Corp., a Michigan corporation (the “Company”), and
the undersigned person (the “Management Stockholder”) (the Company and
the Management Stockholder being hereinafter collectively referred to as the “Parties”).  All capitalized terms not immediately defined
are hereinafter defined in Section 7(b) of this Agreement.

 

WHEREAS, on December 3, 2002, DTE Energy
Company, a Michigan corporation and the Company entered into a Stock Purchase
Agreement (the “Acquisition Agreement”). 
Pursuant to the Acquisition Agreement, the Company acquired all of the
issued and outstanding shares in the capital of International Transmission
Company, a Michigan corporation (“ITC”), as further specified in the
Acquisition Agreement (the “Acquisition”) (the date of such Acquisition,
the “Closing Date”).

 

WHEREAS, in connection with the Acquisition,
Management Stockholder has been selected by the Company to be permitted to
contribute to the Company cash in exchange for shares of common stock of the
Company (such common stock, together with any securities issued in respect
thereof or in substitution therefor, in connection with any stock split,
dividend or combination, or any reclassification, reorganization, merger,
consolidation, exchange or other similar reorganization, the “Common Stock”);

 

WHEREAS, Management Stockholder has been
selected by the Company, as of the date hereof, to receive an option to
purchase shares of Common Stock (the “Option”) pursuant to the terms set
forth below and the terms of the 2003 Stock Purchase and Option Plan for Key
Employees of the Company and Its Subsidiaries (the “Option Plan”) and
the Stock Option Agreement dated as of even date herewith, entered into by and
between the Company and the Management Stockholder (the “Stock Option
Agreement”); and

 

WHEREAS, this Agreement is one of several
other agreements (“Other Management Stockholders’ Agreements”) which
have been, or which in the future will be, entered into between the Company and
other individuals who are or will be key employees of the Company or one of its
subsidiaries (collectively, the “Other Management Stockholders”).

 

NOW THEREFORE, to implement the foregoing and
in consideration of the grant of Options and of the mutual agreements contained
herein, the Parties agree as follows:

 

1.             Purchased
Shares; Issuance of Options.

 

(a)           The
Management Stockholder hereby subscribes for and shall purchase, as of the
Effective Date, and the Company shall issue and deliver to the Management
Stockholder as of the Effective Date, [NUMBER] shares of Common Stock, at a per
share purchase price of $25.00 (the “Base Price”), which price is equal
to the effective per share purchase price paid by the Company for the shares of
ITC in the Acquisition (all such shares acquired by the Management Stockholder,
the “Purchased Stock”).  The
aggregate purchase price for all shares of the Purchased Stock is $[AMOUNT].

 

 

(b)           Subject
to the terms and conditions hereinafter set forth and as set forth in the
Option Plan, and upon receipt by the Company of the Management Stockholder’s
subscription price set forth in Section 1(a), as of the Effective Date the
Company shall issue to the Management Stockholder an Option to acquire [NUMBER] shares of Common Stock, at an exercise
price of $25.00 per share, and the Parties shall execute and deliver to each
other copies of the Stock Option Agreement concurrently with the issuance of
the Option.

 

(c)           The
Company shall have no obligation to sell any Purchased Stock to any person who
(i) is a resident or citizen of a state or other jurisdiction in which the sale
of the Common Stock to him or her would constitute a violation of the
securities or “blue sky” laws of such jurisdiction or (ii) is not an employee
of the Company or any of its subsidiaries on the date hereof.

 

2.             Management
Stockholder’s Representations, Warranties and Agreements.

 

(a) 
The Management Stockholder agrees and acknowledges that he will not,
except to the extent necessary in connection with any loan to the Management
Stockholder to purchases of the Purchased Stock, directly or indirectly, offer,
transfer, sell, assign, pledge, hypothecate or otherwise dispose of (except, if
applicable, in favor of CIBC, INC. pursuant to that certain Pledge Agreement
entered into by the Management Stockholder and the CIBC, INC. dated as of
[DATE], 2003 in respect of the Promissory Note executed by the Management
Stockholder in favor of CIBC, INC. dated [DATE], 2003) (any of the foregoing
acts being referred to herein as a “transfer”) any shares of Purchased Stock
and, at the time of exercise, the Common Stock issuable upon exercise of the
Options (“Option Stock”; together with all Purchased Stock and any other
Common Stock otherwise acquired and/or held by the Management Stockholder
Entities, “Stock”), except as otherwise provided for herein.  If the Management Stockholder is a Rule 405
Affiliate, the Management Stockholder also agrees and acknowledges that he will
not transfer any shares of the Stock unless:

 

(i)  the
transfer is pursuant to an effective registration statement under the
Securities Act of 1933, as amended, and the rules and regulations in effect
thereunder (the “Act”), and in compliance with applicable provisions of
state securities laws or

 

(ii)  (A)
counsel for the Management Stockholder (which counsel shall be reasonably
acceptable to the Company) shall have furnished the Company with an opinion,
satisfactory in form and substance to the Company, that no such registration is
required because of the availability of an exemption from registration under
the Act and (B) if the Management Stockholder is a citizen or resident of any
country other than the United States, or the Management Stockholder desires to
effect any transfer in any such country, counsel for the Management Stockholder
(which counsel shall be reasonably satisfactory to the Company) shall have
furnished the Company with an opinion or other advice reasonably satisfactory
in form and substance to the Company to the effect that such transfer will
comply with the securities laws of such jurisdiction.

 

Notwithstanding the foregoing, the Company acknowledges and agrees that
any of the following transfers are deemed to be in compliance with the Act and
this Agreement and no opinion of counsel is required in connection therewith:
(x) a transfer made pursuant to Sections 3, 4, 5 or 6 hereof, (y) a transfer
upon the death or Permanent Disability of the Management Stockholder to the
Management Stockholder’s Estate or a transfer to the 

 

 

executors, administrators, testamentary trustees, legatees or
beneficiaries of a person who has become a holder of Stock in accordance with
the terms of this Agreement, provided that it is expressly understood
that any such transferee shall be bound by the provisions of this Agreement,
and (z) a transfer made after the Effective Date in compliance with the federal
securities laws to a Management Stockholder’s Trust, provided that such
transfer is made expressly subject to this Agreement and that the transferee
agrees in writing to be bound by the terms and conditions hereof.

 

(b)           The
certificate (or certificates) representing the Stock shall bear the following
legend:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THE MANAGEMENT STOCKHOLDER’S
AGREEMENT DATED AS OF [DATE], 2003 BETWEEN ITC HOLDINGS CORP. (THE “COMPANY”)
AND THE MANAGEMENT STOCKHOLDER NAMED ON THE FACE HEREOF (A COPY OF WHICH IS ON
FILE WITH THE SECRETARY OF THE COMPANY).”

 

(c)           The
Management Stockholder acknowledges that he has been advised that (i) a
restrictive legend in the form heretofore set forth shall be placed on the
certificates representing the Stock and (ii) a notation shall be made in the
appropriate records of the Company indicating that the Stock is subject to
restrictions on transfer and appropriate stop transfer restrictions will be
issued to the Company’s transfer agent with respect to the Stock.  If the Management Stockholder is a Rule 405
Affiliate, the Management Stockholder also acknowledges that (1) the Stock must
be held indefinitely and the Management Stockholder must continue to bear the
economic risk of the investment in the Stock unless it is subsequently
registered under the Act or an exemption from such registration is available,
(2) when and if shares of the Stock may be disposed of without registration in
reliance on Rule 144 of the rules and regulations promulgated under the Act,
such disposition can be made only in limited amounts in accordance with the
terms and conditions of such Rule and (3) if the Rule 144 exemption is not
available, public sale without registration will require compliance with some
other exemption under the Act.

 

(d)           If
any shares of the Stock are to be disposed of in accordance with Rule 144 under
the Act or otherwise, the Management Stockholder shall promptly notify the
Company of such intended disposition and shall deliver to the Company at or
prior to the time of such disposition such documentation as the Company may
reasonably request in connection with such sale and, in the case of a
disposition pursuant to Rule 144, shall deliver to the Company an executed copy
of any notice on Form 144 required to be filed with the SEC.

 

(e)           The
Management Stockholder agrees that, if any shares of the Stock are offered to
the public pursuant to an effective registration statement under the Act (other
than registration of securities issued under an employee plan), the Management
Stockholder will not effect any public sale or distribution of any shares of
the Stock not covered by such registration statement from the time of the
receipt of a notice from the Company that the 

 

 

Company has filed or imminently intends to file such registration
statement to, or within 180 days after, the effective date of such registration
statement, unless otherwise agreed to in writing by the Company.

 

(f)            The
Management Stockholder represents and warrants that (i) with respect to the
Stock he has received and reviewed the available information relating to the
Stock and (ii) he has been given the opportunity to obtain any additional
information or documents and to ask questions and receive answers about such
information, the Company and the business and prospects of the Company which he
deems necessary to evaluate the merits and risks related to his investment in
the Stock and to verify the information contained in the information received
as indicated in this Section 2(f), and he has relied solely on such
information.  In addition, if the
Management Stockholder is an Ontario, Canada resident, the Management
Stockholder represents and warrants that he (A) is entitled under Ontario
securities laws to purchase the shares of Stock without the benefit of a
prospectus qualified under the securities laws; (B) is basing his investment
decision solely on the Private Placement Memorandum and not on any other
information concerning the Company and its subsidiaries; (C) has reviewed Section 6
of this Agreement containing resale restrictions and acknowledges and agrees
that the shares of Stock purchased under this Agreement are subject to resale
restrictions under applicable securities legislation as well as under Section 6
of this Agreement containing resale restrictions; (D) is an officer or employee
of the Company or a subsidiary of the Company; and (E) is purchasing shares of
Stock as principal for its own account.

 

(g)           The
Management Stockholder further represents and warrants that (i) his financial
condition is such that he can afford to bear the economic risk of holding the
Stock for an indefinite period of time and has adequate means for providing for
his current needs and personal contingencies, (ii) he can afford to suffer a
complete loss of his or her investment in the Stock, (iii) he understands and
has taken cognizance of all risk factors related to the purchase of the Stock
and (iv) his knowledge and experience in financial and business matters are
such that he is capable of evaluating the merits and risks of his purchase of
the Stock as contemplated by this Agreement.

 

3.             Transferability
of Stock.  The Management Stockholder
agrees that he will not transfer any shares of the Stock at any time during the
period commencing on the Effective Date and ending on the fifth anniversary of
the Effective Date; provided, however, that the Management
Stockholder may transfer shares of Stock during such time pursuant to one of
the following exceptions: (a) transfers permitted by clauses (x), (y) and (z)
of Section 2(a); and/or (b) a sale of shares of Common Stock pursuant to
an effective registration statement under the Act filed by the Company
(excluding any registration on Form S-8, S-4 or any successor or similar form)
pursuant to Section 10 of this Agreement; and/or (c) transfers permitted
pursuant to the Sale Participation Agreement (as defined in Section 7).  No transfer of any such shares in violation
hereof shall be made or recorded on the books of the Company and any such
transfer shall be void ab initio and of no effect.  Notwithstanding anything in this Agreement to
the contrary, this Section 3 shall terminate and be of no further force or
effect upon the occurrence of a Change of Ownership.

 

4.             Right
of First Refusal.  (a)  If, at any time after the fifth anniversary
of the Effective Date and prior to the date of consummation of a Qualified
Public Offering, the Management Stockholder receives a bona fide offer to
purchase any or all of his Stock (the “Third Party Offer”) from a third
party (the “Offeror”), which the Management Stockholder wishes to
accept, the Management Stockholder shall cause the Third Party Offer to be 

 

 

reduced to writing and shall notify the Company in writing of his wish
to accept the Third Party Offer.  The
Management Stockholder’s notice to the Company shall contain an irrevocable
offer to sell such Stock to the Company (in the manner set forth below) at a
purchase price equal to the price contained in, and on the same terms and
conditions of, the Third Party Offer, and shall be accompanied by a copy of the
Third Party Offer (which shall identify the Offeror).  At any time within 30 days after the
date of the receipt by the Company of the Management Stockholder’s notice,  the Company shall have the right and option
to purchase, or to arrange for a third party to purchase, all of the shares of
Stock covered by the Offer, pursuant to Section 4(b).

 

(b)           The
Company shall have the right and option to purchase, or to arrange for a third
party to purchase, all of the shares of Stock covered by the Third Party Offer
at the same price and on substantially the same terms and conditions as the
Third Party Offer (or, if the Third Party Offer includes any consideration
other than cash, then at the sole option of the Company, at the equivalent all
cash price, determined in good faith by the Company’s Board), by delivering a
certified bank check or checks in the appropriate amount (or by wire transfer
of immediately available funds, if the Management Stockholder Entities provide
to the Company wire transfer instructions) (and any such non-cash consideration
to be paid) to the Management Stockholder at the principal office of the
Company against delivery of certificates or other instruments representing the
shares of Stock so purchased, appropriately endorsed by the Management Stockholder.  If at the end of the 30-day period, the
Company has not tendered the purchase price for such shares in the manner set
forth above, the Management Stockholder may, during the succeeding 60-day
period, sell not less than all of the shares of Stock covered by the Third
Party Offer, to the Offeror on terms no less favorable to the Management
Stockholder than those contained in the Third Party Offer.  Promptly after such sale, the Management
Stockholder shall notify the Company of the consummation thereof and shall
furnish such evidence of the completion and time of completion of such sale and
of the terms thereof as may reasonably be requested by the Company.  If, at the end of 60 days following the
expiration of the 30-day period during which the Company is entitled hereunder
to purchase the Stock, the Management Stockholder has not completed the sale of
such shares of the Stock as aforesaid, all of the restrictions on sale,
transfer or assignment contained in this Agreement shall again be in effect
with respect to such shares of the Stock.

 

(c)           Notwithstanding
anything in this Agreement to the contrary, this Section 4 shall terminate
and be of no further force or effect upon the occurrence of a Change of
Ownership.

 

5.             The
Management Stockholder’s Right to Resell Stock and Options to the Company.

 

(a)           Except
as otherwise provided herein, if, prior to the fifth anniversary of the
Effective Date, the Management Stockholder is still in the employ of the
Company (and/or, if applicable, its subsidiaries)  and the Management Stockholder’s employment
is terminated as a result of the death or Permanent Disability of the
Management Stockholder, then the applicable Management Stockholder Entity,
shall, for sixty (60) days (the “Put Period”) following the date of such
death or Permanent Disability, have the right to:

 

(i)  With respect to the Stock, sell to the
Company, and the Company shall be required to purchase, on one occasion, all of
the shares of Stock then held by the 

 

 

applicable Management Stockholder Entities,
at a per share price equal to the Fair Market Value Per Share (the “Section 5
Repurchase Price”); and

 

(ii)  With respect to any outstanding Options, sell
to the Company, and the Company shall be required to purchase, on one occasion,
all of the exercisable Options then held by the applicable Management
Stockholder Entities, at a price equal to the product of (x) the excess, if
any, of the Section 5 Repurchase Price over the Option Exercise Price and
(y) the number of Exercisable Option Shares in respect of the termination of
all or any portion of the outstanding exercisable Options held by the
applicable Management Stockholder Entity. In the event the foregoing Option
Excess Price is zero or a negative number, all outstanding exercisable stock
options granted to the Management Stockholder under the Option Plan shall be
automatically terminated without any payment in respect thereof.  In the event that the Management Stockholder
Entities do not exercise the foregoing rights, all exercisable but unexercised
Options shall terminate pursuant to the terms of Section 3.2(b) of the
Stock Option Agreement.  All
unexercisable Options held by the applicable Management Stockholder Entities
shall terminate without payment immediately upon termination of employment.

 

(b)           In
the event the applicable Management Stockholder Entities intend to exercise
their rights pursuant to Section 5(a), such Entities shall send written
notice to the Company, at any time during the Put Period, of their intention to
sell shares of Stock in exchange for the payment referred in Section 5(a)(i)
and/or to terminate such Options in exchange for the payment referred to in Section 5(a)(ii)
and shall indicate the number of shares of Stock to be sold and the number of
Options to be terminated with payment in respect thereof (the “Redemption
Notice”).  The completion of the
purchases shall take place at the principal office of the Company on the tenth
business day after the giving of the Redemption Notice.  The applicable Repurchase Price and any payment
with respect to the Options as described above shall be paid by delivery to the
applicable Management Stockholder Entities, of a certified bank check or checks
in the appropriate amount payable to the order of each of the applicable
Management Stockholder Entities (or by wire transfer of immediately available
funds, if the Management Stockholder Entities provide to the Company wire
transfer instructions), against delivery of certificates or other instruments
representing the Stock so purchased and appropriate documents cancelling the
Options so terminated appropriately endorsed or executed by the applicable
Management Stockholder Entities or any duly authorized representative.

 

(c)           Notwithstanding
anything in Section 5(a) to the contrary and subject to Section 11(a),
if there exists and is continuing a default or an event of default on the part
of the Company or any subsidiary of the Company under any loan, guarantee or
other agreement under which the Company or any subsidiary of the Company has
borrowed money or if the repurchase referred to in Section 5(a) would
result in a default or an event of default on the part of the Company or any
subsidiary of the Company under any such agreement or if a repurchase would not
be permitted under the Michigan Business Corporation Act (the “MBCA”) or
would otherwise violate the MBCA (or if the Company reincorporates in another
state, the business corporation law of such state) (each such occurrence being
an “Event”), the Company shall not be obligated to repurchase any of the
Stock or the Options from the applicable Management Stockholder Entities, until
the first business day which is 10 calendar days after all of the foregoing
Events have ceased to exist (the “Repurchase Eligibility Date”); provided,
however, that (i) the number of shares of Stock subject to

 

 

repurchase under this Section 5(c) shall be that number of shares
of Stock, and (ii) in the case of a repurchase pursuant to Section 5(a)(ii),
the number of Exercisable Option Shares for purposes of calculating the Option
Excess Price payable under this Section 5(c) shall be the number of
Exercisable Option Shares, specified in the Redemption Notice and held by the
applicable Management Stockholder Entities, at the time of delivery of a
Redemption Notice in accordance with Section 5(b) hereof.  All Options exercisable as of the date of a
Redemption Notice, in the case of a repurchase pursuant to Section 5(a),
shall continue to be exercisable until the repurchase of such Options pursuant
to such Redemption Notice, provided that to the extent any Options are
exercised after the date of such Redemption Notice, the number of Exercisable
Option Shares for purposes of calculating the Option Excess Price shall be
reduced accordingly.

 

(d)           Effect
of Change of Ownership. 
Notwithstanding anything in this Agreement to the contrary, except for
any payment obligation of the Company, which has arisen prior to such
termination pursuant to this Agreement, this Section 5 shall terminate and
be of no further force or effect upon the occurrence of a Change of Ownership.

 

6.             The
Company’s Option to Purchase Stock and Options of Management Stockholder Upon
Certain Terminations of Employment.

 

(a)           Termination
for Cause by the Company, Termination without Good Reason by the Management
Stockholder and other Call Events. 
Except as otherwise provided herein, if, prior to the fifth anniversary
of the Effective Date, (i) the Management Stockholder’s active employment with
the Company (and/or, if applicable, its subsidiaries) is terminated by the
Company (and/or, if applicable, its subsidiaries) for Cause, (ii) the
Management Stockholder’s active employment with the Company (and/or, if
applicable, its subsidiaries) is terminated by the Management Stockholder
without Good Reason, (iii) the beneficiaries of a Management Stockholder’s
Trust shall include any person or entity other than the Management Stockholder,
his spouse (or ex-spouse) or his lineal descendants (including adopted
children), (iv) the Management Stockholder shall otherwise effect a transfer of
any of the Stock other than as permitted in this Agreement (other than as may
be required by applicable law or an order of a court having competent
jurisdiction) after notice from the Company of such impermissible transfer and
a reasonable opportunity to cure such transfer (each, a “Section 6(a)
Call Event”):

 

(A)          With
respect to the Stock, the Company may purchase all or any portion of the shares
of the Stock then held by the applicable Management Stockholder Entities at a
per share purchase price equal to the lesser of (x) the Base Price and (y) the
Book Value Per Share before a Public Offering (after a Public Offering, the
Fair Market Value Per Share) (any such applicable repurchase price, the “Section 6(a)
Repurchase Price”); and

 

(B)           With
respect to the Options, all Options (whether or not then exercisable) held by
the applicable Management Stockholder Entities will terminate immediately
without payment in respect thereof.

 

(b)           Termination
for Good Reason by Management Stockholder or without Cause by the Company.  Except as otherwise provided herein, if,
prior to the fifth anniversary of the Effective Date, the Management
Stockholder’s employment is terminated as a result of a termination (i) by the
Management Stockholder with Good Reason or (ii) by the Company (and/or, if
applicable, its subsidiaries) without Cause (each, a “Section 6(b) Call
Event”), then the Company may:

 

 

(A)          With
respect to the Stock, purchase all or any portion of the shares of Stock then
held by the applicable Management Stockholder Entities at a per share purchase
price equal to: (x) before a Public Offering, (I) in the event of the
Management Stockholder’s termination for Good Reason, the Book Value Per Share
and (II) in the event of the Management Stockholder’s termination by the
Company (and/or, if applicable, any Subsidiary) without Cause, the Fair Market
Value Per Share or (y) after a Public Offering, the Fair Market Value Per Share
(any such applicable repurchase price, the “Section 6(b) Repurchase
Price”); and

 

(B)           With
respect to the Options, purchase all or any portion of the exercisable Options
held by the applicable Management Stockholder Entities for an amount equal to
the product of (x) the excess, if any, of the Section 6(b) Repurchase
Price over the Option Exercise Price and (y) the number of Exercisable Option
Shares in respect of the termination of all or any portion of the outstanding
exercisable Options held by the applicable Management Stockholder Entity.  In the event the foregoing Option Excess
Price is zero or a negative number, all outstanding exercisable stock options
granted to the Management Stockholder under the Option Plan shall be
automatically terminated without any payment in respect thereof.  In the event that the Company does not exercise
the foregoing rights all exercisable but unexercised Options shall terminate
pursuant to the terms of Section 3.2(d) of the Stock Option Agreement. All
unexercisable Options held by the applicable Management Stockholder Entities
shall also terminate without payment immediately upon termination of
employment, pursuant to the Stock Option Agreement.

 

(c)           Termination
for Death or Disability.  Except as
otherwise provided herein, if, prior to the fifth anniversary of the Effective
Date, the Management Stockholder’s employment with the Company (and/or, if
applicable, its subsidiaries) is terminated as a result of the death or
Permanent Disability of the Management Stockholder (each a “Section 6(c)
Call Event”), then the Company may:

 

(A)          With
respect to the Stock, purchase all or any portion of the shares of Stock then
held by the applicable Management Stockholder Entities, at a per share price
equal the Section 5 Repurchase Price; and

 

(B)           With
respect to the Options, purchase all or any portion of the exercisable Options
for an amount equal to the product of (x) the excess, if any, of the Section 5
Repurchase Price over the Option Exercise Price and (y) the number of
Exercisable Option Shares in respect of the termination of all or any portion
of the outstanding exercisable Options held by the applicable Management
Stockholder Entity.  In the event the
foregoing Option Excess Price is zero or a negative number, all outstanding
exercisable stock options granted to the Management Stockholder under the
Option Plan shall be automatically terminated without any payment in respect
thereof.  In the event that the Company
does not exercise the foregoing rights all exercisable but unexercised Options
shall terminate pursuant to the terms of Section 3.2(b) of the Stock
Option Agreement. All unexercisable Options held by the applicable Management
Stockholder Entities shall also terminate without payment immediately upon
termination of employment, pursuant to the Stock Option Agreement.

 

(d)           Call
Notice.  The Company shall have a
period of sixty (60) days from the date of any Call Event (or, if later, with
respect to a Section 6(a) Call Event, the date after discovery of, and the
applicable cure period for, an impermissible transfer constituting a Section 6(a)
Call Event), in which to give notice in writing to the Management Stockholder
of its election to exercise its rights and obligations pursuant to this Section 6
(“Repurchase 

 

 

Notice”). 
The completion of the purchases pursuant to the foregoing shall take
place at the principal office of the Company on the tenth business day after
the giving of the Call Notice.  The
applicable Repurchase Price and any payment with respect to the Options as
described in this Section 6 shall be paid by delivery to the applicable
Management Stockholder Entities of a certified bank check or checks in the
appropriate amount payable to the order of each of the applicable Management
Stockholder Entities (or by wire transfer of immediately available funds, if
the Management Stockholder Entities provide to the Company wire transfer
instructions) against delivery of certificates or other instruments
representing the Stock so purchased and appropriate documents cancelling the
Options so terminated, appropriately endorsed or executed by the applicable
Management Stockholder Entities or its authorized representative.

 

(e)           Delay
of Call.  Notwithstanding any other
provision of this Section 6 to the contrary and subject to Section 11(a),
if there exists and is continuing any Event, the Company shall delay the
repurchase of any of the Stock or the Options (pursuant to a Call Notice timely
given in accordance with Section 6(d) hereof) from the applicable
Management Stockholder Entities until the Repurchase Eligibility Date; provided,
however, that (i) the number of shares of Stock subject to repurchase
under this Section 6 shall be that number of shares of Stock, and (ii) in
the case of a repurchase pursuant to Section 6(b) or Section 6(c),
the number of Exercisable Option Shares for purposes of calculating the Option
Excess Price payable under this Section 6 shall be the number of
Exercisable Option Shares, held by the applicable Management Stockholder
Entities at the time of delivery of a Call Notice in accordance with Section 6(d)
hereof.  All Options exercisable as of
the date of a Repurchase Notice, in the case of a repurchase pursuant to Section 6(b)
or 6(c), shall continue to be exercisable until the repurchase of such Options
pursuant to such Call Notice, provided that to the extent that any Options are
exercised after the date of such Call Notice, the number of Exercisable Option
Shares for purposes of calculating the Option Excess Price shall be reduced
accordingly.

 

(f)            Effect
of Change of Ownership. 
Notwithstanding anything in this Agreement to the contrary, this Section 6
shall terminate and be of no further force or effect upon the occurrence of a
Change of Ownership.

 

7.             Adjustment
of Repurchase Price; Definitions.

 

(a)           Adjustment
of Repurchase Price.  In determining
the applicable repurchase price of the Stock and Options, as provided for in
Sections 5 and 6, above, appropriate adjustments shall be made for any stock
dividends, splits, combinations, recapitalizations or any other adjustment in
the number of outstanding shares of Stock in order to maintain, as nearly as
practicable, the intended operation of the provisions of Sections 5 and 6.

 

(b)           Definitions.  All capitalized terms used in this Agreement
and not defined herein shall have such meaning as such terms are defined in the
Option Plan. Terms used herein and as listed below shall be defined as follows:

 

“Act” shall have the meaning set forth in Section 2(a)(i)
hereof.

 

“Agreement” shall have the meaning set forth
in the introductory paragraph.

 

“Base Price” shall have the meaning set forth
in Section 1(a) hereof.

 

 

“Board” shall mean the board of directors of
the Company.

 

“Book Value Per Share” shall mean the
quotient of (a) (i) $25.00 plus (ii) the aggregate net income of the
Company from and after the Closing Date (as decreased by any net losses from
and after the Closing Date) excluding any one time costs and expenses charged
to income associated with the Acquisition and any related transactions plus
(iii) the aggregate dollar amount contributed to (or credited to common
stockholders’ equity of) the Company after the Closing Date as equity of the
Company (including consideration that would be received upon the exercise of
all outstanding stock options and other rights to acquire Common Stock and the
conversion of all securities convertible into Common Stock and other stock
equivalents) plus (iv) to the extent reflected as deductions to Book
Value Per Share in clause (ii) above, unusual or other items recognized by the
Company (including, without limitation, extraordinary charges, and one time or
accelerated write-offs of good will, net of the related impact on the provision
for income taxes), in each case, if and to the extent determined in good faith
by the Board, plus (v) the amortization of purchase accounting adjustments
occurring as a result of the Acquisition, minus (vi) to the extent
reflected as additions to Book Value Per Share in clause (ii) above, unusual or
other items recognized by the Company, in each case, if and to the extent
determined in good faith by the Board, minus (vii) the aggregate dollar
amount of any dividends paid by the Company after the Closing Date, divided
by (b) the sum of the number of shares of Common Stock then outstanding and
the number of shares of Common Stock issuable upon the exercise of all outstanding
stock options and other rights to acquire Common Stock.  The items referred to in the calculations set
forth in clauses (a)(ii) through (vii) of the immediately preceding sentence
shall be determined in good faith, and to the extent possible, in accordance
with generally accepted accounting principles applied on a basis consistent
with any prior periods as reflected in the consolidated financial statements of
the Company,

 

“Call Events” shall mean, collectively, Section 6(a)
Call Events, Section 6(b) Call Events, and Section 6(c) Call Events.

 

“Call Notice” shall have the meaning set
forth in Section 6(d) hereof.

 

“Cause” shall mean “Cause” as such term may
be defined in any employment agreement between the Management Stockholder and
the Company or any of its Subsidiaries or Affiliates, or, if there is no such
employment agreement, “Cause” shall mean (i) the Management Stockholder’s
continued failure substantially to perform Management Stockholder’s duties with
the Company (or any Subsidiary of the Company) (other than as a result of total
or partial incapacity due to physical or mental illness) for a period of 10
days following written notice by the Company (or any Subsidiary of the Company)
to the Management Stockholder of such failure, (ii) dishonesty in the
performance of the Management Stockholder’s duties with the Company (or any
Subsidiary of the Company), (iii) the Management Stockholder’s conviction of,
or plea of nolo  contendere to a crime constituting (x) a felony
under the laws of the United States or any state thereof or (y) a misdemeanor
involving moral turpitude, (iv) the Management Stockholder’s willful
malfeasance or willful misconduct in connection with the Management Stockholder’s
duties with the Company (or any Subsidiary of the Company) or any act or
omission which is injurious to the financial condition or business reputation
of the Company or its Affiliates or (v) the Management Stockholder’s breach of
the provisions of Section 25 of this Agreement.

 

“Change of Ownership” means (i) the sale of
all or substantially all of the assets of the Company or ITC to an Unaffiliated
Person; (ii) a sale resulting in more than 50% of the 

 

 

voting stock of the Company or ITC being held by an Unaffiliated
Person; (iii) a merger, consolidation, recapitalization or reorganization of
the Company or ITC with or into another Unaffiliated Person; if and only if any such event listed in
clauses (i) through (iii) above results in the inability of ITH LP, Ironhill,
the Limited Partner Group, or any member or members of the Limited Partner
Group, to designate or elect a majority of the Board (or the board of directors
of the resulting entity or its parent company). 
For purposes of this definition, the term “Unaffiliated Person”
means any Person or Group who is not (x) ITH LP, Ironhill, the Limited Partner
Group or any member of the Limited Partner Group, (y) an Affiliate of ITH LP,
Ironhill, the Limited Partner Group or any member of the Limited Partner Group,
or (z) an entity in which ITH LP, Ironhill, the Limited Partner Group, or any
member of the Limited Partner Group holds, directly or indirectly, a majority
of the economic interests in such entity.

 

“Closing Date” shall have the meaning set
forth in the first “whereas” paragraph.

 

“Common Stock” shall have the meaning set
forth in the second “whereas” paragraph.

 

“Company” shall have the meaning set forth in
the introductory paragraph.

 

“Confidential Information” shall mean all
non-public information concerning trade secret, know-how, software, developments,
inventions, processes, technology, designs, the financial data, strategic
business plans or any proprietary or confidential information, documents or
materials in any form or media, including any of the foregoing relating to
research, operations, finances, current and proposed products and services,
vendors, customers, advertising and marketing, and other non-public,
proprietary, and confidential information of the Restricted Group.

 

“Custody Agreement and Power of Attorney”
shall have the meaning set forth in Section 10 hereof.

 

 “Event”
shall have the meaning set forth in Section 5(c) hereof.

 

“Exchange Act” shall mean the Securities
Exchange Act of 1934, as amended (or any successor section thereto).

 

“Exercisable Option Shares” shall mean the
shares of Common Stock that, at the Repurchase Calculation Date, could be
purchased by the Management Stockholder upon exercise of his or her outstanding
and exercisable Options.

 

“Fair Market Value Per Share” shall mean, on
the Repurchase Calculation Date, the price per share equal to (i) the average
of the last sale price of the Common Stock for the five trading days ending on
the Repurchase Calculation Date on each stock exchange on which the Common
Stock may at the time be listed or, (ii) if there shall have been no sales on
any such exchanges on the Repurchase Calculation Date on any given day, the
average of the closing bid and asked prices on each such exchange for the five
trading days ending on the Repurchase Calculation Date or, (iii) if there is no
such bid and asked price on the Repurchase Calculation Date, on the next
preceding date when such bid and asked price occurred or, (iv) if the Common
Stock shall not be so listed, the average of the closing sales prices as
reported by NASDAQ for the five trading days ending on the Repurchase
Calculation Date in the over-the-counter market or, (v) if there have been no
such sales, bid 

 

 

or asked prices, or if there has been no Public Offering, the fair
market value of the Common Stock as determined in the good faith discretion of
the Board.

 

“Good Reason” shall mean “Good Reason” as
defined in any employment agreement between the Management Stockholder and the
Company or any of its Subsidiaries or Affiliates, or, if there is no such
employment agreement, “Good Reason” shall mean (i) a substantial reduction in
the total value of the Management Stockholder’s rate of annual base salary,
target annual bonus, and the aggregate employee benefits provided to the
Management Stockholder by the Company or its Subsidiaries; (ii) the Management
Stockholder’s job responsibility and authority are substantially diminished;
and (iii) the Management Stockholder’s work location is relocated to more than
fifty (50) miles from Detroit, Michigan or Ann Arbor, Michigan; and provided,
further, that “Good Reason” shall cease to exist for an event on the 60th
day following the later of its occurrence or the Management Stockholder’s
knowledge thereof, unless the Management Stockholder has given the Company
written notice thereof prior to such date.

 

“Group” shall mean “group,” as such term is
used for purposes of Section 13(d) or 14(d) of the Exchange Act.

 

“Ironhill” means Ironhill Transmission LLC,
which is the general partner of ITH LP, of which the Company is a
majority-owned Subsidiary.

 

“ITH LP” means International Transmission
Holdings Limited Partnership, a Michigan limited partnership.

 

“Limited Partner Group” shall mean the KKR
Millennium Fund L.P., KKR Partners III, L.P. and Trimaran Capital Partners,
collectively.

 

“Management Stockholder” shall have the
meaning set forth in the introductory paragraph.

 

“Management Stockholder Entities” shall mean
the Management Stockholder’s Trust, the Management Stockholder and the
Management Stockholder’s Estate, collectively.

 

“Management Stockholder’s Estate” shall mean
the conservators, guardians, executors, administrators, testamentary trustees,
legatees or beneficiaries of the Management Stockholder.

 

“Management Stockholder’s Trust” shall mean a
limited partnership, limited liability company, trust or custodianship, the
beneficiaries of which may include only the Management Stockholder, his spouse
(or ex-spouse) or his lineal descendants (including adopted) or, if at any time
after any such transfer there shall be no then living spouse or lineal
descendants, then to the ultimate beneficiaries of any such trust or to the
estate of a deceased beneficiary.

 

“Maximum Repurchase Amount” shall have the
meaning set forth in Section 11(a) hereof.

 

“MBCA” shall have the meaning set forth in Section 5(c)
hereof.

 

“Notice” shall have the meaning set forth in Section 10(b)
hereof.

 

 

“Offeror” shall have the meaning set forth in
Section 4 hereof.

 

“Option Excess Price” shall mean the
aggregate amount paid by the Company in respect of Exercisable Option Shares
pursuant to Section 5 or 6, as applicable.

 

“Option Exercise Price” shall mean the
exercise price of the shares of Common Stock covered by the applicable Option.

 

“Option” shall have the meaning set forth in
the third “whereas” paragraph.

 

“Option Plan” shall have the meaning set
forth in the third “whereas” paragraph.

 

“Option Stock” shall have the meaning set
forth in Section 2(a) hereof.

 

“Other Management Stockholders” shall have
the meaning set forth in the fourth “whereas” paragraph.

 

“Other Management Stockholders’ Agreements”
shall have the meaning set forth in the fourth “whereas” paragraph.

 

“Parties” shall have the meaning set forth in
the introductory paragraph.

 

“Permanent Disability” shall mean the
Management Stockholder becomes physically or mentally incapacitated and is
therefore unable for a period of six (6) consecutive months or for an aggregate
of nine (9) months in any twenty-four (24) consecutive month period, to perform
the Management Stockholder’s duties with the Company or any Subsidiary or
Affiliate thereof.  Any question as to
the existence of the Permanent Disability of the Management Stockholder as to
which the Management Stockholder and the Company cannot agree shall be
determined in writing by a qualified independent physician mutually acceptable
to the Management Stockholder and the Company. 
If the Management Stockholder and the Company cannot agree as to a
qualified independent physician, each shall appoint such a physician and those
two physicians shall select a third who shall make such determination in
writing.  The determination of Permanent
Disability made in writing to the Company and the Management Stockholder shall
be final and conclusive for all purposes of this Agreement (such inability is
hereinafter referred to as “Permanent Disability”).

 

“Person” shall mean “person,” as such term is
used for purposes of Section 13(d) or 14(d) of the Exchange Act.

 

“Proposed Registration” shall have the
meaning set forth in Section 10(b) hereof.

 

“Public Offering” shall mean the sale of
shares of Common Stock to the public subsequent to the date hereof pursuant to
a registration statement under the Act which has been declared effective by the
SEC (other than a registration statement on Form S-4, Form S-8 or any other
similar form).

 

“Purchased Stock” shall have the meaning set
forth in Section 1(a) hereof.

 

“Qualified Public Offering” shall mean a
Public Offering, which results in an active trading market of 25% or more of
the Common Stock.

 

 

“Repurchase Calculation Date” shall mean the
last day of the month preceding the later of (i) the month in which the event
giving rise to the right to repurchase occurs and (ii) the month in which the
Repurchase Eligibility Date occurs.

 

“Repurchase Eligibility Date” shall have the
meaning set forth in Section 5(c) hereof.

 

“Repurchase Price” shall mean the amount to
be paid in respect of the Stock and Options to be purchased by the Company
pursuant to Section 5(a), Section 6(a), 6(b), or 6(c), as applicable.

 

“Request” shall have the meaning set forth in
Section 10(b) hereof.

 

“Restricted Group” shall mean, collectively,
the Company, its Subsidiaries, the members of the Limited Partner Group and
their respective Affiliates.

 

“Rule 405 Affiliate” shall mean an affiliate
of the Company as defined under Rule 405 of the rules and regulations
promulgated under the Act, and as interpreted by the Board.

 

“Sale Participation Agreement” shall mean
that certain sale participation agreement entered into by and between the
Management Stockholder and ITH L.P. dated as of the date hereof.

 

“SEC” shall mean the Securities and Exchange
Commission.

 

“Stock” shall have the meaning set forth in Section 2(a)
hereof.

 

“Stock Option Agreement” shall have the
meaning set forth in the third “whereas” paragraph.

 

 “Third
Party Offer” shall have the meaning set forth in Section 4(a) hereof.

 

“Trimaran Capital Partners” means,
collectively, Trimaran Fund II, L.L.C., Trimaran Parallel Fund II, L.P.,
Trimaran Capital, L.L.C., CIBC Employee Private Equity Fund (Trimaran) Partners
and CIBC World Markets Ireland Limited.

 

8.             The
Company’s Representations and Warranties.

 

(a)           The
Company represents and warrants to the Management Stockholder that (i) this
Agreement has been duly authorized, executed and delivered by the Company and
is enforceable against the Company in accordance with its terms and (ii) the
Stock, when issued and delivered in accordance with the terms hereof, will be
duly and validly issued, fully paid and nonassessable.

 

(b)           If
the Company becomes subject to the reporting requirements of Section 12 of
the Exchange Act, the Company will file the reports required to be filed by it
under the Act and the Exchange Act and the rules and regulations adopted by the
SEC thereunder, to the extent required from time to time to enable the
Management Stockholder to sell shares of Stock without registration under the
Exchange Act within the limitations of the exemptions provided by (A) Rule 144
under the Act, as such Rule may be amended from time to time, or (B) any
similar rule or regulation hereafter adopted by the SEC, subject to the
transfer restrictions set forth in Section 3.  Notwithstanding anything contained in this Section 9(b),
the Company may de-register under Section 12 of the Exchange Act if it is
then 

 

 

permitted to do so pursuant to the Exchange Act and the rules and
regulations thereunder and, in such circumstances, shall not be required hereby
to file any reports which may be necessary in order for Rule 144 or any similar
rule or regulation under the Act to be available.  Nothing in this Section 8(b) shall be
deemed to limit in any manner the restrictions on sales of Stock contained in
this Agreement.

 

9.             “Piggyback”
Registration Rights.  Until the later
of (i) the first occurrence of a Qualified Public Offering and (ii) the fifth
anniversary of the Effective Date:

 

(a)           The
Management Stockholder hereby agrees to be bound by all of the terms,
conditions and obligations of the Registration Rights Agreement entered into by
and among the Company and International Transmission Holdings Limited
Partnership (the “Registration Rights Agreement”), as in effect on the
date hereof (subject to any amendments thereto to which the Management
Stockholder has agreed to be bound), and shall have all of the rights and
privileges of the Registration Rights Agreement, in each case as if the
Management Stockholder were an original party (other than the Company) thereto,
subject to applicable and customary underwriter restrictions; provided, however,
that at no time shall the Management Stockholder have any rights to request
registration under Section 3 of the Registration Rights Agreement; and provided
further, that the Management Stockholder shall not be bound by any
amendments to the Registration Rights Agreement unless the Management
Stockholder consents thereto provided that such consent will not be
unreasonably withheld.  All Stock
purchased or held by the applicable Management Stockholder Entities pursuant to
this Agreement shall be deemed to be “Registrable Securities” as defined in the
Registration Rights Agreement.

 

(b)           In
the event of a sale of Common Stock by the Limited Partner Group in accordance
with the terms of the Registration Rights Agreement, the Company will promptly
notify the Management Stockholder in writing (a “Notice”) of any
proposed registration (a “Proposed Registration”).  If within 15 days of the receipt by the
Management Stockholder of such Notice, the Company receives from the applicable
Management Stockholder Entities a written request (a “Request”) to
register shares of Stock held by the applicable Management Stockholder Entities
(which Request will be irrevocable unless otherwise mutually agreed to in
writing by the Management Stockholder and the Company), shares of Stock will be
so registered as provided in this Section 10; provided, however,
that for each such registration statement only one Request, which shall be
executed by the applicable Management Stockholder Entities, may be submitted
for all Registrable Securities held by the applicable Management Stockholder
Entities.

 

(c)           The
maximum number of shares of Stock which will be registered pursuant to a
Request will be the lowest of (i) the number of shares of Stock then held by
the Management Stockholder Entities, including all shares of Stock which the
Management Stockholder Entities are then entitled to acquire under an
unexercised Option to the extent then exercisable, multiplied by a fraction,
the numerator of which is the number of shares of Stock being sold by the
Limited Partner Group and any investment partnerships and investment limited
liability companies affiliated with the Limited Partner Group and the
denominator of which is the aggregate number of shares of Stock owned by the
Limited Partner Group and any investment partnerships and investment limited
liability companies affiliated with the Limited Partner Group or (ii) the
maximum number of shares of Stock which the Company can register in the
Proposed Registration without adverse effect on the offering in the view of the
managing underwriters (reduced pro rata with all Other Management Stockholders)
as more fully described in subsection (d) of this Section 10 or 

 

 

(iii) the maximum number of shares which the Management Stockholder
(pro rata based upon the aggregate number of shares of Stock the Management
Stockholder and all Other Management Stockholders have requested to be
registered) is permitted to register under the Registration Rights Agreement.

 

(d)           If
a Proposed Registration involves an underwritten offering and the managing underwriter
advises the Company in writing that, in its opinion, the number of shares of
Stock requested to be included in the Proposed Registration exceeds the number
which can be sold in such offering, so as to be likely to have an adverse
effect on the price, timing or distribution of the shares of Stock offered in
such Public Offering as contemplated by the Company, then the Company will
include in the Proposed Registration (i) first, 100% of the shares of Stock the
Company proposes to sell and (ii) second, to the extent of the number of shares
of Stock requested to be included in such registration which, in the opinion of
such managing underwriter, can be sold without having the adverse effect
referred to above, the number of shares of Stock which the “Holders” (as
defined in the Registration Rights Agreement), including, without limitation,
the Management Stockholder, and all Other Management Stockholders have
requested to be included in the Proposed Registration, such amount to be
allocated pro rata among all requesting Holders on the basis of the relative
number of shares of Stock then held by each such Holder (including the
exercisable Options) (provided that any shares thereby allocated to any such
Holder that exceed such Holder’s request will be reallocated among the
remaining requesting Holders in like manner).

 

(e)           Upon
delivering a Request the Management Stockholder will, if requested by the
Company, execute and deliver a custody agreement and power of attorney in form
and substance satisfactory to the Company with respect to the shares of Stock
to be registered pursuant to this Section 10 (a “Custody Agreement and
Power of Attorney”).  The Custody
Agreement and Power of Attorney will provide, among other things, that the
Management Stockholder will deliver to and deposit in custody with the
custodian and attorney-in-fact named therein a certificate or certificates
representing such shares of Stock (duly endorsed in blank by the registered
owner or owners thereof or accompanied by duly executed stock powers in blank)
and irrevocably appoint said custodian and attorney-in-fact as the Management
Stockholder’s agent and attorney-in-fact with full power and authority to act
under the Custody Agreement and Power of Attorney on the Management Stockholder’s
behalf with respect to the matters specified therein.

 

(f)            The
Management Stockholder agrees that he or she will execute such other agreements
as the Company may reasonably request to further evidence the provisions of
this Section.

 

10.           Pro
Rata Repurchases; Dividends. 
(a)  Notwithstanding anything to
the contrary contained in Section 4, 5 or 6, if at any time consummation
of any purchase or payment to be made by the Company pursuant to this Agreement
and the Other Management Stockholders Agreements would result in an Event, then
the Company shall make purchases from, and payments to, the Management
Stockholder and Other Management Stockholders pro rata (on the basis of the
proportion of the number of shares of Stock each such Management Stockholder
and all Other Management Stockholders have elected or are required to sell to
the Company) for the maximum number of shares of Stock permitted without
resulting in an Event (the “Maximum Repurchase Amount”).  The provisions of Section 5(c) and 6(e)
shall apply in their entirety to payments and repurchases with respect to
shares of Stock which may not be made due to the limits imposed by the Maximum
Repurchase Amount under this Section 11(a).  Until all of such Stock is purchased and paid

 

 

for by the Company, the Management Stockholder and the Other Management
Stockholders whose Stock is not purchased in accordance with this Section 11(a)
shall have priority, on a pro rata basis, over other purchases of Stock by the
Company pursuant to this Agreement and Other Management Stockholders’
Agreements.

 

(b)           In
the event any dividends are paid with respect to the Stock, the Management
Stockholder will be treated pari  passu with all Other Management
Stockholders with respect to shares of Stock then owned by the Management
Stockholder, and, with respect to any Options held by the Management
Stockholder, in accordance, as applicable, with Section 2.4 of the Stock
Option Agreement.

 

11.           Rights
to Negotiate Repurchase Price. 
Nothing in this Agreement shall be deemed to restrict or prohibit the
Company from purchasing, redeeming or otherwise acquiring for value shares of
Stock or Options from the Management Stockholder, at any time, upon such terms
and conditions, and for such price, as may be mutually agreed upon between the
Parties, whether or not at the time of such purchase, redemption or acquisition
circumstances exist which specifically grant the Company the right to purchase
shares of Stock or any Options under the terms of this Agreement, provided
that no such purchase, redemption or acquisition shall be consummated, and no
agreement with respect to any such purchase, redemption or acquisition shall be
entered into, without the prior written consent of the Board.

 

12.           Covenant
Regarding 83(b) Election.  Except as
the Company may otherwise agree in writing, the Management Stockholder hereby
covenants and agrees that he will make an election provided pursuant to
Treasury Regulation 1.83-2 with respect to the Stock, including without
limitation, the Stock to be acquired pursuant to Section 1(a), the Stock
to be acquired upon each exercise of the Management Stockholder’s Options and
any grant of restricted Stock; and Management Stockholder further covenants and
agrees that he will furnish the Company with copies of the forms of election
the Management Stockholder files within 30 days after the date hereof, and
within 30 days after each exercise of Management Stockholder’s Options and with
evidence that each such election has been filed in a timely manner.

 

13.           Notice
of Change of Beneficiary. 
Immediately prior to any transfer of Stock to a Management Stockholder’s
Trust, the Management Stockholder shall provide the Company with a copy of the
instruments creating the Management Stockholder’s Trust and with the identity
of the beneficiaries of the Management Stockholder’s Trust.  The Management Stockholder shall notify the
Company as soon as practicable prior to any change in the identity of any
beneficiary of the Management Stockholder’s Trust.

 

14.           Recapitalizations,
etc.  The provisions of this
Agreement shall apply, to the full extent set forth herein with respect to the
Stock or the Options, to any and all shares of capital stock of the Company or
any capital stock, partnership units or any other security evidencing ownership
interests in any successor or assign of the Company (whether by merger,
consolidation, sale of assets or otherwise) which may be issued in respect of,
in exchange for, or substitution of the Stock or the Option, by reason of any
stock dividend, split, reverse split, combination, recapitalization,
liquidation, reclassification, merger, consolidation or otherwise.

 

15.           Management
Stockholder’s Employment by the Company.  
Nothing contained in this Agreement or in any other agreement entered
into by the Company and the 

 

 

Management Stockholder contemporaneously with the execution of this
Agreement (subject to the applicable provisions of any offer letter or letter
of employment provided to the Management Stockholder by the Company or any
employment agreement entered by and between the Management Stockholder and the
Company) (i) obligates the Company or any subsidiary of the Company to employ
the Management Stockholder in any capacity whatsoever or (ii) prohibits or
restricts the Company (or any such subsidiary) from terminating the employment
of the Management Stockholder at any time or for any reason whatsoever, with or
without Cause, and the Management Stockholder hereby acknowledges and agrees
that neither the Company nor any other person has made any representations or
promises whatsoever to the Management Stockholder concerning the Management
Stockholder’s employment or continued employment by the Company or any
subsidiary of the Company.

 

16.           State
Securities Laws.  The Company hereby
agrees to use its reasonable best efforts to comply with all state securities
or “blue sky” laws that might be applicable to the sale of the Stock and the
issuance of the Option to the Management Stockholder.

 

17.           Binding
Effect.  The provisions of this
Agreement shall be binding upon and accrue to the benefit of the parties hereto
and their respective heirs, legal representatives, successors and assigns.  In the case of a transferee permitted under Section 2(a)
or Section 3 hereof, such transferee shall be deemed the Management
Stockholder hereunder; provided, however, that no transferee
(including without limitation, transferees referred to in Section 2(a) or Section 3
hereof) shall derive any rights under this Agreement unless and until such
transferee has delivered to the Company a valid undertaking and becomes bound
by the terms of this Agreement.

 

18.           Amendment.  This Agreement may be amended only by a
written instrument signed by the Parties hereto.

 

19.           Closing.  Except as otherwise provided herein, the
closing of each purchase and sale of shares of Stock, pursuant to this
Agreement shall take place at the principal office of the Company on the tenth
business day following delivery of the notice by either Party to the other of
its exercise of the right to purchase or sell such Stock hereunder.

 

20.           Applicable
Law; Jurisdiction; Arbitration; Legal Fees.

 

(a)           The
laws of the State of Michigan shall govern the interpretation, validity and
performance of the terms of this Agreement, regardless of the law that might be
applied under principles of conflicts of law.

 

(b)           In
the event of any controversy among the parties hereto arising out of, or
relating to, this Agreement which cannot be settled amicably by the parties,
such controversy shall be finally, exclusively and conclusively settled by
mandatory arbitration conducted expeditiously in accordance with the American
Arbitration Association rules, by a single independent arbitrator.  Such arbitration process shall take place
within 100 miles of the Detroit, Michigan metropolitan area.  The decision of the arbitrator shall be final
and binding upon all parties hereto and shall be rendered pursuant to a written
decision, which contains a detailed recital of the arbitrator’s reasoning.  Judgment upon the award rendered may be entered
in any court having jurisdiction thereof.

 

 

(c)           Notwithstanding
the foregoing, the Management Stockholder acknowledges and agrees that the
Company, its Subsidiaries, any member of the Limited Partner Group and any of
their respective Affiliates shall be entitled to injunctive or other relief in
order to enforce the covenant not to compete, covenant not to solicit and/or
confidentiality covenants as set forth in Section 25(a) of this Agreement.

 

(d)           In
the event of any arbitration or other disputes with regard to this Agreement or
any other document or agreement referred to herein, each Party that shall pay
its own legal fees and expenses, unless otherwise determined by the arbitrator.

 

21.           Assignability
of Certain Rights by the Company. 
The Company shall have the right to assign any or all of its rights or
obligations to purchase shares of Stock pursuant to Sections 4, 5 and 6 hereof.

 

22.           Miscellaneous.

 

(a)           In
this Agreement all references to “dollars” or “$” are to United States dollars
and the masculine pronoun shall include the feminine and neuter, and the
singular the plural, where the context so indicates

 

(b)           If
any provision of this Agreement shall be declared illegal, void or
unenforceable by any court of competent jurisdiction, the other provisions
shall not be affected, but shall remain in full force and effect.

 

23.           Withholding.  The Company or its Subsidiaries shall have
the right to deduct from any cash payment made under this Agreement to the
applicable Management Stockholder Entities any minimum federal, state or local
income or other taxes required by law to be withheld with respect to such
payment.

 

24.           Notices.  All notices and other communications provided
for herein shall be in writing and shall be deemed to have been duly given if delivered
by hand (whether by overnight courier or otherwise) or sent by registered or
certified mail, return receipt requested, postage prepaid, or by overnight
delivery or telecopy, to the Party to whom it is directed:

 

(a)           If
to the Company, to it at the following address:

 

	
   

  	
  ITC Holdings
  Corp.

  	
   

  	
   

  
	
   

  	
  1901 South
  Wagner

  	
   

  	
   

  
	
   

  	
  Ann Arbor,
  Michigan 48105

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  John Flynn,
  Esq.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Simpson
  Thacher & Bartlett

  	
   

  	
   

  
	
   

  	
  425
  Lexington Avenue

  	
   

  	
   

  
	
   

  	
  New York,
  New York 10017

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  David J.
  Sorkin, Esq.

  	
   

  
	
   

  	
   

  	
  Alvin H.
  Brown, Esq.

  	
   

  
	
   

  	
  Telecopy:

  	
  (212)
  455-2502

  	
   

  
						

 

 

(b)           If
to the Management Stockholder, to him at the address set forth below under his
signature;

 

or at such other address as either party shall have specified by notice
in writing to the other.

 

25.           Confidential
Information; Covenant Not to Compete.

 

(a)           In
consideration of the Company entering into this Agreement with the Management
Stockholder, the Management Stockholder hereby agrees effective as of the date
of the Management Stockholder’s commencement of employment with the Company or
its Subsidiaries, without the Company’s prior written consent, the Management
Stockholder shall not, directly or indirectly, (i) at any time during or after
the Management Stockholder’s employment with the Company or its Subsidiaries,
disclose any Confidential Information pertaining to the business of the Company
or any of its Subsidiaries, except when required to perform his or her duties
to the Company or one of its Subsidiaries, by law or judicial process; or (ii)
at any time during the Management Stockholder’s employment with the Company or
its Subsidiaries and for one year thereafter, directly or indirectly (A) be
engaged in or have financial interest (other than an ownership position of less
than 5% in any company whose shares are publicly traded or any non-voting
non-convertible debt securities in any company) in any business which competes
with any business of the Company or any of its Subsidiaries,  (B) solicit customers or clients of the
Company or any of its Subsidiaries to terminate their relationship with the
Company or any of its Subsidiaries or otherwise solicit such customers or
clients to compete with any business of the Company or any of its Subsidiaries
or (C) solicit or offer employment to any person who has been employed by the
Company or any of its Subsidiaries at any time during the twelve months
immediately preceding the termination of the Management Stockholder’s
employment.  If the Management
Stockholder is bound by any other agreement with the Company regarding the use
or disclosure of confidential information, the provisions of this Agreement
shall be read in such a way as to further restrict and not to permit any more
extensive use or disclosure of confidential information.

 

(b)           Notwithstanding
clause (a) above, if at any time a court holds that the restrictions stated in
such clause (a) are unreasonable or otherwise unenforceable under circumstances
then existing, the parties hereto agree that the maximum period, scope or
geographic area determined to be reasonable under such circumstances by such
court will be substituted for the stated period, scope or area.  Because the Management Stockholder’s services
are unique and because the Management Stockholder has had access to
Confidential Information, the parties hereto agree that money damages will be
an inadequate remedy for any breach of this Agreement.  In the event of a breach or threatened breach
of this Agreement, the Company or its successors or assigns may, in addition to
other rights and remedies existing in their favor, apply to any court of
competent jurisdiction for specific performance and/or injunctive relief in
order to enforce, or prevent any violations of, the provisions hereof (without
the posting of a bond or other security).

 

[Signatures on next page.]

 

 

IN WITNESS
WHEREOF, the Parties have executed this Agreement as of the date first above
written.

 

	
   

  	
  ITC HOLDINGS CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MANAGEMENT STOCKHOLDER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [NAME]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ADDRESS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
						

 

 

 

EXECUTION COPY

 

FORM OF

MANAGEMENT
STOCKHOLDER’S AGREEMENT

 

This Management Stockholder’s Agreement (this
“Agreement”) is entered into as of [DATE], 2003 (the “Effective Date”)
between ITC Holdings Corp., a Michigan corporation (the “Company”), and
the undersigned person (the “Management Stockholder”) (the Company and
the Management Stockholder being hereinafter collectively referred to as the “Parties”).  All capitalized terms not immediately defined
are hereinafter defined in Section 7(b) of this Agreement.

 

WHEREAS, on December 3, 2002, DTE Energy
Company, a Michigan corporation and the Company entered into a Stock Purchase
Agreement (the “Acquisition Agreement”). 
Pursuant to the Acquisition Agreement, the Company acquired all of the
issued and outstanding shares in the capital of International Transmission
Company, a Michigan corporation (“ITC”), as further specified in the
Acquisition Agreement (the “Acquisition”) (the date of such Acquisition,
the “Closing Date”).

 

WHEREAS, in connection with the Acquisition,
Management Stockholder has been selected by the Company to be permitted to
contribute to the Company cash in exchange for shares of common stock of the
Company (such common stock, together with any securities issued in respect
thereof or in substitution therefor, in connection with any stock split,
dividend or combination, or any reclassification, reorganization, merger,
consolidation, exchange or other similar reorganization, the “Common Stock”);

 

WHEREAS, Management Stockholder has been
selected by the Company, as of the date hereof, to receive an option to
purchase shares of Common Stock (the “Option”) pursuant to the terms set
forth below and the terms of the 2003 Stock Purchase and Option Plan for Key
Employees of the Company and Its Subsidiaries (the “Option Plan”) and
the Stock Option Agreement dated as of even date herewith, entered into by and
between the Company and the Management Stockholder (the “Stock Option
Agreement”); and

 

WHEREAS, Management Stockholder has been
selected by the Company, as of the date hereof, to receive a grant of
restricted shares of Common Stock (the “Restricted Stock”) pursuant to
the terms set forth below, the terms of the Option Plan, and the terms of the
Restricted Stock Award Agreement dated as of even date herewith, entered into
by and between the Company and the Management Stockholder (the “Restricted
Stock Agreement”); and

 

WHEREAS, this Agreement is one of several
other agreements (“Other Management Stockholders’ Agreements”) which
have been, or which in the future will be, entered into between the Company and
other individuals who are or will be key employees of the Company or one of its
subsidiaries (collectively, the “Other Management Stockholders”).

 

NOW THEREFORE, to implement the foregoing and
in consideration of the grant of Options and of the mutual agreements contained
herein, the Parties agree as follows:

 

1.             Purchased
Shares; Issuance of Options.

 

(a)           The
Management Stockholder hereby subscribes for and shall purchase, as of the
Effective Date, and the Company shall issue and deliver to the 

 

 

Management Stockholder as of the Effective
Date, FIELD 4 shares of Common Stock, at a
per share purchase price of $25.00 (the “Base Price”), which price is
equal to the effective per share purchase price paid by the Company for the
shares of ITC in the Acquisition (all such shares acquired by the Management
Stockholder, the “Purchased Stock”). 
The aggregate purchase price for all shares of the Purchased Stock is $FIELD 3.

 

(b)           Subject
to the terms and conditions hereinafter set forth and as set forth in the
Option Plan, and upon receipt by the Company of the Management Stockholder’s
subscription price set forth in Section 1(a), as of the Effective Date the
Company shall issue to the Management Stockholder an Option to acquire FIELD 5 shares of Common Stock, at an
exercise price of $25.00 per share, and the Parties shall execute and deliver
to each other copies of the Stock Option Agreement concurrently with the
issuance of the Option.

 

(c)           Subject
to the terms and conditions hereinafter set forth and as set forth in the
Option Plan, and upon receipt by the Company of the Management Stockholder’s
subscription price set forth in Section 1(a), as of the Effective Date the
Company shall issue to the Management Stockholder FIELD 2 shares of Restricted Stock, and the Parties shall
execute and deliver to each other copies of the Restricted Stock Award
Agreement concurrently with the issuance of the Restricted Stock.

 

(d)           The
Company shall have no obligation to sell any Purchased Stock to any person who
(i) is a resident or citizen of a state or other jurisdiction in which the sale
of the Common Stock to him or her would constitute a violation of the
securities or “blue sky” laws of such jurisdiction or (ii) is not an employee
of the Company or any of its subsidiaries on the date hereof.

 

2.             Management
Stockholder’s Representations, Warranties and Agreements.

 

(a)  The Management Stockholder agrees and
acknowledges that he will not, except to the extent necessary in connection
with any loan to the Management Stockholder to purchases of the Purchased
Stock, directly or indirectly, offer, transfer, sell, assign, pledge,
hypothecate or otherwise dispose of (except, if applicable, in favor of CIBC,
INC. pursuant to that certain Pledge Agreement entered into by the Management
Stockholder and the CIBC, INC. dated as of [DATE], 2003 in respect of the
Promissory Note executed by the Management Stockholder in favor of CIBC, INC.
dated [DATE], 2003) (any of the foregoing acts being referred to herein as a “transfer”)
any shares of Purchased Stock, Restricted Stock and, at the time of exercise,
the Common Stock issuable upon exercise of the Options (“Option Stock”;
together with all Purchased Stock, Restricted Stock and any other Common Stock
otherwise acquired and/or held by the Management Stockholder Entities, “Stock”),
except as otherwise provided for herein. 
If the Management Stockholder is a Rule 405 Affiliate, the Management
Stockholder also agrees and acknowledges that he will not transfer any shares
of the Stock unless:

 

(i)            the
transfer is pursuant to an effective registration statement under the
Securities Act of 1933, as amended, and the rules and regulations in effect
thereunder (the “Act”), and in compliance with applicable provisions of
state securities laws or

 

(ii)           (A)
counsel for the Management Stockholder (which counsel shall be reasonably
acceptable to the Company) shall have furnished the Company with an opinion,
satisfactory in form and substance to the Company, that no such registration 

 

 

is required because of the availability of an
exemption from registration under the Act and (B) if the Management Stockholder
is a citizen or resident of any country other than the United States, or the
Management Stockholder desires to effect any transfer in any such country,
counsel for the Management Stockholder (which counsel shall be reasonably
satisfactory to the Company) shall have furnished the Company with an opinion
or other advice reasonably satisfactory in form and substance to the Company to
the effect that such transfer will comply with the securities laws of such
jurisdiction.

 

Notwithstanding the foregoing, the Company acknowledges and agrees that
any of the following transfers are deemed to be in compliance with the Act and
this Agreement and no opinion of counsel is required in connection therewith:
(x) a transfer made pursuant to Sections 3, 4, 5 or 6 hereof, (y) a transfer
upon the death or Permanent Disability of the Management Stockholder to the
Management Stockholder’s Estate or a transfer to the executors, administrators,
testamentary trustees, legatees or beneficiaries of a person who has become a
holder of Stock in accordance with the terms of this Agreement, provided
that it is expressly understood that any such transferee shall be bound by the
provisions of this Agreement, and (z) a transfer made after the Effective Date
in compliance with the federal securities laws to a Management Stockholder’s
Trust, provided that such transfer is made expressly subject to this Agreement
and that the transferee agrees in writing to be bound by the terms and
conditions hereof.

 

(b)           The
certificate (or certificates) representing the Stock shall bear the following
legend:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THE MANAGEMENT STOCKHOLDER’S
AGREEMENT DATED AS OF [DATE], 2003 BETWEEN ITC HOLDINGS CORP. (THE “COMPANY”)
AND THE MANAGEMENT STOCKHOLDER NAMED ON THE FACE HEREOF (A COPY OF WHICH IS ON
FILE WITH THE SECRETARY OF THE COMPANY).”

 

(c)            The
Management Stockholder acknowledges that he has been advised that (i) a
restrictive legend in the form heretofore set forth shall be placed on the
certificates representing the Stock and (ii) a notation shall be made in the
appropriate records of the Company indicating that the Stock is subject to
restrictions on transfer and appropriate stop transfer restrictions will be
issued to the Company’s transfer agent with respect to the Stock.  If the Management Stockholder is a Rule 405
Affiliate, the Management Stockholder also acknowledges that (1) the Stock must
be held indefinitely and the Management Stockholder must continue to bear the
economic risk of the investment in the Stock unless it is subsequently
registered under the Act or an exemption from such registration is available,
(2) when and if shares of the Stock may be disposed of without registration in
reliance on Rule 144 of the rules and regulations promulgated under the Act,
such disposition can be made only in limited amounts in accordance with the
terms and conditions of such Rule and (3) if 

 

 

the Rule 144 exemption is not available,
public sale without registration will require compliance with some other
exemption under the Act.

 

(d)           If
any shares of the Stock are to be disposed of in accordance with Rule 144 under
the Act or otherwise, the Management Stockholder shall promptly notify the
Company of such intended disposition and shall deliver to the Company at or
prior to the time of such disposition such documentation as the Company may
reasonably request in connection with such sale and, in the case of a
disposition pursuant to Rule 144, shall deliver to the Company an executed copy
of any notice on Form 144 required to be filed with the SEC.

 

(e)            The
Management Stockholder agrees that, if any shares of the Stock are offered to
the public pursuant to an effective registration statement under the Act (other
than registration of securities issued under an employee plan), the Management
Stockholder will not effect any public sale or distribution of any shares of
the Stock not covered by such registration statement from the time of the
receipt of a notice from the Company that the Company has filed or imminently
intends to file such registration statement to, or within 180 days after, the
effective date of such registration statement, unless otherwise agreed to in
writing by the Company.

 

(f)            The
Management Stockholder represents and warrants that (i) with respect to the
Stock he has received and reviewed the available information relating to the
Stock and (ii) he has been given the opportunity to obtain any additional
information or documents and to ask questions and receive answers about such
information, the Company and the business and prospects of the Company which he
deems necessary to evaluate the merits and risks related to his investment in
the Stock and to verify the information contained in the information received
as indicated in this Section 2(f), and he has relied solely on such
information.  In addition, if the
Management Stockholder is an Ontario, Canada resident, the Management
Stockholder represents and warrants that he (A) is entitled under Ontario
securities laws to purchase the shares of Stock without the benefit of a
prospectus qualified under the securities laws; (B) is basing his investment
decision solely on the Private Placement Memorandum and not on any other
information concerning the Company and its subsidiaries; (C) has reviewed Section 6
of this Agreement containing resale restrictions and acknowledges and agrees
that the shares of Stock purchased under this Agreement are subject to resale
restrictions under applicable securities legislation as well as under Section 6
of this Agreement containing resale restrictions; (D) is an officer or employee
of the Company or a subsidiary of the Company; and (E) is purchasing shares of
Stock as principal for its own account.

 

(g)           The
Management Stockholder further represents and warrants that (i) his financial
condition is such that he can afford to bear the economic risk of holding the
Stock for an indefinite period of time and has adequate means for providing for
his current needs and personal contingencies, (ii) he can afford to suffer a
complete loss of his or her investment in the Stock, (iii) he understands and
has taken cognizance of all risk factors related to the purchase of the Stock
and (iv) his knowledge and experience in financial and business matters are
such that he is capable of evaluating the merits and risks of his purchase of
the Stock as contemplated by this Agreement.

 

3.             Transferability
of Stock.  The Management Stockholder
agrees that he will not transfer any shares of the Stock at any time during the
period commencing on the Effective Date and ending on the fifth anniversary of
the Effective Date; provided, however, 

 

 

that the Management Stockholder may transfer
shares of Stock during such time pursuant to one of the following exceptions:
(a) transfers permitted by clauses (x), (y) and (z) of Section 2(a);
and/or (b) a sale of shares of Common Stock pursuant to an effective
registration statement under the Act filed by the Company (excluding any registration
on Form S-8, S-4 or any successor or similar form) pursuant to Section 10
of this Agreement; and/or (c) transfers permitted pursuant to the Sale
Participation Agreement (as defined in Section 7).  No transfer of any such shares in violation
hereof shall be made or recorded on the books of the Company and any such
transfer shall be void ab initio and of no effect.  Notwithstanding anything in this Agreement to
the contrary, this Section 3 shall terminate and be of no further force or
effect upon the occurrence of a Change of Ownership.

 

4.             Right
of First Refusal.  (a)  If, at any time after the fifth anniversary
of the Effective Date and prior to the date of consummation of a Qualified
Public Offering, the Management Stockholder receives a bona fide offer to
purchase any or all of his Stock (the “Third Party Offer”) from a third
party (the “Offeror”), which the Management Stockholder wishes to
accept, the Management Stockholder shall cause the Third Party Offer to be
reduced to writing and shall notify the Company in writing of his wish to
accept the Third Party Offer.  The
Management Stockholder’s notice to the Company shall contain an irrevocable
offer to sell such Stock to the Company (in the manner set forth below) at a
purchase price equal to the price contained in, and on the same terms and
conditions of, the Third Party Offer, and shall be accompanied by a copy of the
Third Party Offer (which shall identify the Offeror).  At any time within 30 days after the
date of the receipt by the Company of the Management Stockholder’s notice,  the Company shall have the right and option
to purchase, or to arrange for a third party to purchase, all of the shares of
Stock covered by the Offer, pursuant to Section 4(b).

 

(b)           The
Company shall have the right and option to purchase, or to arrange for a third
party to purchase, all of the shares of Stock covered by the Third Party Offer
at the same price and on substantially the same terms and conditions as the
Third Party Offer (or, if the Third Party Offer includes any consideration
other than cash, then at the sole option of the Company, at the equivalent all
cash price, determined in good faith by the Company’s Board), by delivering a
certified bank check or checks in the appropriate amount (or by wire transfer
of immediately available funds, if the Management Stockholder Entities provide
to the Company wire transfer instructions) (and any such non-cash consideration
to be paid) to the Management Stockholder at the principal office of the
Company against delivery of certificates or other instruments representing the
shares of Stock so purchased, appropriately endorsed by the Management
Stockholder.  If at the end of the 30-day
period, the Company has not tendered the purchase price for such shares in the
manner set forth above, the Management Stockholder may, during the succeeding
60-day period, sell not less than all of the shares of Stock covered by the
Third Party Offer, to the Offeror on terms no less favorable to the Management
Stockholder than those contained in the Third Party Offer.  Promptly after such sale, the Management
Stockholder shall notify the Company of the consummation thereof and shall
furnish such evidence of the completion and time of completion of such sale and
of the terms thereof as may reasonably be requested by the Company.  If, at the end of 60 days following the
expiration of the 30-day period during which the Company is entitled hereunder
to purchase the Stock, the Management Stockholder has not completed the sale of
such shares of the Stock as aforesaid, all of the restrictions on sale,
transfer or assignment contained in this Agreement shall again be in effect
with respect to such shares of the Stock.

 

 

(c)           Notwithstanding
anything in this Agreement to the contrary, this Section 4 shall terminate
and be of no further force or effect upon the occurrence of a Change of
Ownership.

 

5.             The
Management Stockholder’s Right to Resell Stock and Options to the Company.

 

(a)           Except
as otherwise provided herein, if, prior to the fifth anniversary of the
Effective Date, the Management Stockholder is still in the employ of the
Company (and/or, if applicable, its subsidiaries)  and the Management Stockholder’s employment
is terminated as a result of the death or Permanent Disability of the Management
Stockholder, then the applicable Management Stockholder Entity, shall, for
sixty (60) days (the “Put Period”) following the date of such death or
Permanent Disability, have the right to:

 

(i)  With respect to the Stock, sell to the
Company, and the Company shall be required to purchase, on one occasion, all of
the shares of Stock then held by the applicable Management Stockholder
Entities, at a per share price equal to the Fair Market Value Per Share (the “Section 5
Repurchase Price”); and

 

(ii)  With respect to any outstanding Options, sell
to the Company, and the Company shall be required to purchase, on one occasion,
all of the exercisable Options then held by the applicable Management
Stockholder Entities, at a price equal to the product of (x) the excess, if
any, of the Section 5 Repurchase Price over the Option Exercise Price and
(y) the number of Exercisable Option Shares in respect of the termination of
all or any portion of the outstanding exercisable Options held by the
applicable Management Stockholder Entity. In the event the foregoing Option
Excess Price is zero or a negative number, all outstanding exercisable stock
options granted to the Management Stockholder under the Option Plan shall be
automatically terminated without any payment in respect thereof.  In the event that the Management Stockholder
Entities do not exercise the foregoing rights, all exercisable but unexercised
Options shall terminate pursuant to the terms of Section 3.2(b) of the
Stock Option Agreement.  All
unexercisable Options held by the applicable Management Stockholder Entities
shall terminate without payment immediately upon termination of employment.

 

(b)           In
the event the applicable Management Stockholder Entities intend to exercise
their rights pursuant to Section 5(a), such Entities shall send written
notice to the Company, at any time during the Put Period, of their intention to
sell shares of Stock in exchange for the payment referred in Section 5(a)(i)
and/or to terminate such Options in exchange for the payment referred to in Section 5(a)(ii)
and shall indicate the number of shares of Stock to be sold and the number of
Options to be terminated with payment in respect thereof (the “Redemption
Notice”).  The completion of the
purchases shall take place at the principal office of the Company on the tenth
business day after the giving of the Redemption Notice.  The applicable Repurchase Price and any
payment with respect to the Options as described above shall be paid by
delivery to the applicable Management Stockholder Entities, of a certified bank
check or checks in the appropriate amount payable to the order of each of the
applicable Management Stockholder Entities (or by wire transfer of immediately
available funds, if the Management Stockholder Entities provide to the Company
wire transfer instructions), against delivery of certificates or other
instruments representing the Stock so purchased and appropriate documents
cancelling the Options so 

 

 

terminated appropriately endorsed or executed
by the applicable Management Stockholder Entities or any duly authorized
representative.

 

(c)           Notwithstanding
anything in Section 5(a) to the contrary and subject to Section 11(a),
if there exists and is continuing a default or an event of default on the part
of the Company or any subsidiary of the Company under any loan, guarantee or
other agreement under which the Company or any subsidiary of the Company has
borrowed money or if the repurchase referred to in Section 5(a) would
result in a default or an event of default on the part of the Company or any
subsidiary of the Company under any such agreement or if a repurchase would not
be permitted under the Michigan Business Corporation Act (the “MBCA”) or
would otherwise violate the MBCA (or if the Company reincorporates in another
state, the business corporation law of such state) (each such occurrence being
an “Event”), the Company shall not be obligated to repurchase any of the
Stock or the Options from the applicable Management Stockholder Entities, until
the first business day which is 10 calendar days after all of the foregoing
Events have ceased to exist (the “Repurchase Eligibility Date”); provided,
however, that (i) the number of shares of Stock subject to repurchase
under this Section 5(c) shall be that number of shares of Stock, and (ii)
in the case of a repurchase pursuant to Section 5(a)(ii), the number of
Exercisable Option Shares for purposes of calculating the Option Excess Price
payable under this Section 5(c) shall be the number of Exercisable Option
Shares, specified in the Redemption Notice and held by the applicable
Management Stockholder Entities, at the time of delivery of a Redemption Notice
in accordance with Section 5(b) hereof. 
All Options exercisable as of the date of a Redemption Notice, in the
case of a repurchase pursuant to Section 5(a), shall continue to be
exercisable until the repurchase of such Options pursuant to such Redemption
Notice, provided that to the extent any Options are exercised after the date of
such Redemption Notice, the number of Exercisable Option Shares for purposes of
calculating the Option Excess Price shall be reduced accordingly.

 

(d)           Effect
of Change of Ownership. 
Notwithstanding anything in this Agreement to the contrary, except for
any payment obligation of the Company, which has arisen prior to such
termination pursuant to this Agreement, this Section 5 shall terminate and
be of no further force or effect upon the occurrence of a Change of Ownership.

 

6.             The
Company’s Option to Purchase Stock and Options of Management Stockholder Upon
Certain Terminations of Employment.

 

(a)           Termination
for Cause by the Company, Termination without Good Reason by the Management
Stockholder and other Call Events. 
Except as otherwise provided herein or in the Restricted Stock
Agreement, if, prior to the fifth anniversary of the Effective Date, (i) the
Management Stockholder’s active employment with the Company (and/or, if
applicable, its subsidiaries) is terminated by the Company (and/or, if
applicable, its subsidiaries) for Cause, (ii) the Management Stockholder’s
active employment with the Company (and/or, if applicable, its subsidiaries) is
terminated by the Management Stockholder without Good Reason, (iii) the
beneficiaries of a Management Stockholder’s Trust shall include any person or
entity other than the Management Stockholder, his spouse (or ex-spouse) or his
lineal descendants (including adopted children), (iv) the Management
Stockholder shall otherwise effect a transfer of any of the Stock other than as
permitted in this Agreement (other than as may be required by applicable law or
an order of a court having competent jurisdiction) after notice from the
Company of such impermissible transfer and a reasonable opportunity to cure
such transfer (each, a “Section 6(a) Call Event”):

 

 

(A)          With
respect to the Stock, the Company may purchase all or any portion of the shares
of the Stock then held by the applicable Management Stockholder Entities at a
per share purchase price equal to the lesser of (x) the Base Price and (y) the
Book Value Per Share before a Public Offering (after a Public Offering, the
Fair Market Value Per Share) (any such applicable repurchase price, the “Section 6(a)
Repurchase Price”); and

 

(B)           With
respect to the Options, all Options (whether or not then exercisable) held by
the applicable Management Stockholder Entities will terminate immediately
without payment in respect thereof.

 

(b)           Termination
for Good Reason by Management Stockholder or without Cause by the Company.  Except as otherwise provided herein, if,
prior to the fifth anniversary of the Effective Date, the Management
Stockholder’s employment is terminated as a result of a termination (i) by the
Management Stockholder with Good Reason or (ii) by the Company (and/or, if
applicable, its subsidiaries) without Cause (each, a “Section 6(b) Call
Event”), then the Company may:

 

(A)          With
respect to the Stock, purchase all or any portion of the shares of Stock then
held by the applicable Management Stockholder Entities at a per share purchase
price equal to: (x) before a Public Offering, (I) in the event of the
Management Stockholder’s termination for Good Reason, the Book Value Per Share
and (II) in the event of the Management Stockholder’s termination by the
Company (and/or, if applicable, any Subsidiary) without Cause, the Fair Market
Value Per Share or (y) after a Public Offering, the Fair Market Value Per Share
(any such applicable repurchase price, the “Section 6(b) Repurchase
Price”); and

 

(B)           With
respect to the Options, purchase all or any portion of the exercisable Options
held by the applicable Management Stockholder Entities for an amount equal to
the product of (x) the excess, if any, of the Section 6(b) Repurchase
Price over the Option Exercise Price and (y) the number of Exercisable Option
Shares in respect of the termination of all or any portion of the outstanding
exercisable Options held by the applicable Management Stockholder Entity.  In the event the foregoing Option Excess
Price is zero or a negative number, all outstanding exercisable stock options
granted to the Management Stockholder under the Option Plan shall be
automatically terminated without any payment in respect thereof.  In the event that the Company does not
exercise the foregoing rights all exercisable but unexercised Options shall
terminate pursuant to the terms of Section 3.2(d) of the Stock Option
Agreement. All unexercisable Options held by the applicable Management
Stockholder Entities shall also terminate without payment immediately upon
termination of employment, pursuant to the Stock Option Agreement.

 

(c)           Termination
for Death or Disability.  Except as
otherwise provided herein, if, prior to the fifth anniversary of the Effective
Date, the Management Stockholder’s employment with the Company (and/or, if
applicable, its subsidiaries) is terminated as a result of the death or
Permanent Disability of the Management Stockholder (each a “Section 6(c)
Call Event”), then the Company may:

 

(A)          With
respect to the Stock, purchase all or any portion of the shares of Stock then
held by the applicable Management Stockholder Entities, at a per share price
equal the Section 5 Repurchase Price; and

 

 

(B)           With
respect to the Options, purchase all or any portion of the exercisable Options
for an amount equal to the product of (x) the excess, if any, of the Section 5
Repurchase Price over the Option Exercise Price and (y) the number of
Exercisable Option Shares in respect of the termination of all or any portion
of the outstanding exercisable Options held by the applicable Management
Stockholder Entity.  In the event the
foregoing Option Excess Price is zero or a negative number, all outstanding
exercisable stock options granted to the Management Stockholder under the
Option Plan shall be automatically terminated without any payment in respect
thereof.  In the event that the Company
does not exercise the foregoing rights all exercisable but unexercised Options
shall terminate pursuant to the terms of Section 3.2(b) of the Stock
Option Agreement. All unexercisable Options held by the applicable Management Stockholder
Entities shall also terminate without payment immediately upon termination of
employment, pursuant to the Stock Option Agreement.

 

(d)           Call
Notice.  The Company shall have a
period of sixty (60) days from the date of any Call Event (or, if later, with
respect to a Section 6(a) Call Event, the date after discovery of, and the
applicable cure period for, an impermissible transfer constituting a Section 6(a)
Call Event), in which to give notice in writing to the Management Stockholder
of its election to exercise its rights and obligations pursuant to this Section 6
(“Repurchase Notice”).  The
completion of the purchases pursuant to the foregoing shall take place at the
principal office of the Company on the tenth business day after the giving of
the Call Notice.  The applicable
Repurchase Price and any payment with respect to the Options as described in
this Section 6 shall be paid by delivery to the applicable Management
Stockholder Entities of a certified bank check or checks in the appropriate amount
payable to the order of each of the applicable Management Stockholder Entities
(or by wire transfer of immediately available funds, if the Management
Stockholder Entities provide to the Company wire transfer instructions) against
delivery of certificates or other instruments representing the Stock so
purchased and appropriate documents cancelling the Options so terminated,
appropriately endorsed or executed by the applicable Management Stockholder
Entities or its authorized representative.

 

(e)           Delay
of Call.  Notwithstanding any other
provision of this Section 6 to the contrary and subject to Section 11(a),
if there exists and is continuing any Event, the Company shall delay the
repurchase of any of the Stock or the Options (pursuant to a Call Notice timely
given in accordance with Section 6(d) hereof) from the applicable
Management Stockholder Entities until the Repurchase Eligibility Date; provided,
however, that (i) the number of shares of Stock subject to repurchase
under this Section 6 shall be that number of shares of Stock, and (ii) in
the case of a repurchase pursuant to Section 6(b) or Section 6(c),
the number of Exercisable Option Shares for purposes of calculating the Option
Excess Price payable under this Section 6 shall be the number of Exercisable
Option Shares, held by the applicable Management Stockholder Entities at the
time of delivery of a Call Notice in accordance with Section 6(d)
hereof.  All Options exercisable as of
the date of a Repurchase Notice, in the case of a repurchase pursuant to Section 6(b)
or 6(c), shall continue to be exercisable until the repurchase of such Options
pursuant to such Call Notice, provided that to the extent that any Options are
exercised after the date of such Call Notice, the number of Exercisable Option Shares
for purposes of calculating the Option Excess Price shall be reduced
accordingly.

 

(f)            Effect
of Change of Ownership. 
Notwithstanding anything in this Agreement to the contrary, this Section 6
shall terminate and be of no further force or effect upon the occurrence of a
Change of Ownership.

 

 

7.             Adjustment
of Repurchase Price; Definitions.

 

(a)           Adjustment
of Repurchase Price.  In determining
the applicable repurchase price of the Stock and Options, as provided for in
Sections 5 and 6, above, appropriate adjustments shall be made for any stock
dividends, splits, combinations, recapitalizations or any other adjustment in
the number of outstanding shares of Stock in order to maintain, as nearly as
practicable, the intended operation of the provisions of Sections 5 and 6.

 

(b)           Definitions.  All capitalized terms used in this Agreement
and not defined herein shall have such meaning as such terms are defined in the
Option Plan. Terms used herein and as listed below shall be defined as follows:

 

“Act” shall have the meaning set forth in Section 2(a)(i)
hereof.

 

“Agreement” shall have the meaning set forth
in the introductory paragraph.

 

“Base Price” shall have the meaning set forth
in Section 1(a) hereof.

 

“Board” shall mean the board of directors of
the Company.

 

“Book Value Per Share” shall mean the
quotient of (a) (i) $25.00 plus (ii) the aggregate net income of the
Company from and after the Closing Date (as decreased by any net losses from
and after the Closing Date) excluding any one time costs and expenses charged
to income associated with the Acquisition and any related transactions plus
(iii) the aggregate dollar amount contributed to (or credited to common
stockholders’ equity of) the Company after the Closing Date as equity of the
Company (including consideration that would be received upon the exercise of
all outstanding stock options and other rights to acquire Common Stock and the
conversion of all securities convertible into Common Stock and other stock
equivalents) plus (iv) to the extent reflected as deductions to Book
Value Per Share in clause (ii) above, unusual or other items recognized by the
Company (including, without limitation, extraordinary charges, and one time or
accelerated write-offs of good will, net of the related impact on the provision
for income taxes), in each case, if and to the extent determined in good faith
by the Board, plus (v) the amortization of purchase accounting adjustments
occurring as a result of the Acquisition, minus (vi) to the extent
reflected as additions to Book Value Per Share in clause (ii) above, unusual or
other items recognized by the Company, in each case, if and to the extent
determined in good faith by the Board, minus (vii) the aggregate dollar
amount of any dividends paid by the Company after the Closing Date, divided
by (b) the sum of the number of shares of Common Stock then outstanding and
the number of shares of Common Stock issuable upon the exercise of all
outstanding stock options and other rights to acquire Common Stock.  The items referred to in the calculations set
forth in clauses (a)(ii) through (vii) of the immediately preceding sentence
shall be determined in good faith, and to the extent possible, in accordance
with generally accepted accounting principles applied on a basis consistent with
any prior periods as reflected in the consolidated financial statements of the
Company,

 

“Call Events” shall mean, collectively, Section 6(a)
Call Events, Section 6(b) Call Events, and Section 6(c) Call Events.

 

“Call Notice” shall have the meaning set
forth in Section 6(d) hereof.

 

 

“Cause” shall mean “Cause” as such term may
be defined in any employment agreement between the Management Stockholder and
the Company or any of its Subsidiaries or Affiliates, or, if there is no such
employment agreement, “Cause” shall mean (i) the Management Stockholder’s
continued failure substantially to perform Management Stockholder’s duties with
the Company (or any Subsidiary of the Company) (other than as a result of total
or partial incapacity due to physical or mental illness) for a period of 10
days following written notice by the Company (or any Subsidiary of the Company)
to the Management Stockholder of such failure, (ii) dishonesty in the
performance of the Management Stockholder’s duties with the Company (or any
Subsidiary of the Company), (iii) the Management Stockholder’s conviction of,
or plea of nolo  contendere to a crime constituting (x) a felony
under the laws of the United States or any state thereof or (y) a misdemeanor
involving moral turpitude, (iv) the Management Stockholder’s willful
malfeasance or willful misconduct in connection with the Management Stockholder’s
duties with the Company (or any Subsidiary of the Company) or any act or
omission which is injurious to the financial condition or business reputation
of the Company or its Affiliates or (v) the Management Stockholder’s breach of
the provisions of Section 25 of this Agreement.

 

“Change of Ownership” means (i) the sale of
all or substantially all of the assets of the Company or ITC to an Unaffiliated
Person; (ii) a sale resulting in more than 50% of the voting stock of the
Company or ITC being held by an Unaffiliated Person; (iii) a merger,
consolidation, recapitalization or reorganization of the Company or ITC with or
into another Unaffiliated Person; if and
only if any such event listed in clauses (i) through (iii) above
results in the inability of ITH LP, Ironhill, the Limited Partner Group, or any
member or members of the Limited Partner Group, to designate or elect a
majority of the Board (or the board of directors of the resulting entity or its
parent company).  For purposes of this
definition, the term “Unaffiliated Person” means any Person or Group who
is not (x) ITH LP, Ironhill, the Limited Partner Group or any member of the
Limited Partner Group, (y) an Affiliate of ITH LP, Ironhill, the Limited
Partner Group or any member of the Limited Partner Group, or (z) an entity in
which ITH LP, Ironhill, the Limited Partner Group, or any member of the Limited
Partner Group holds, directly or indirectly, a majority of the economic
interests in such entity.

 

“Closing Date” shall have the meaning set
forth in the first “whereas” paragraph.

 

“Common Stock” shall have the meaning set
forth in the second “whereas” paragraph.

 

“Company” shall have the meaning set forth in
the introductory paragraph.

 

“Confidential Information” shall mean all
non-public information concerning trade secret, know-how, software,
developments, inventions, processes, technology, designs, the financial data,
strategic business plans or any proprietary or confidential information,
documents or materials in any form or media, including any of the foregoing
relating to research, operations, finances, current and proposed products and
services, vendors, customers, advertising and marketing, and other non-public,
proprietary, and confidential information of the Restricted Group.

 

“Custody Agreement and Power of Attorney”
shall have the meaning set forth in Section 10 hereof.

 

 “Event”
shall have the meaning set forth in Section 5(c) hereof.

 

 

“Exchange Act” shall mean the Securities
Exchange Act of 1934, as amended (or any successor section thereto).

 

“Exercisable Option Shares” shall mean the
shares of Common Stock that, at the Repurchase Calculation Date, could be
purchased by the Management Stockholder upon exercise of his or her outstanding
and exercisable Options.

 

“Fair Market Value Per Share” shall mean, on
the Repurchase Calculation Date, the price per share equal to (i) the average
of the last sale price of the Common Stock for the five trading days ending on
the Repurchase Calculation Date on each stock exchange on which the Common
Stock may at the time be listed or, (ii) if there shall have been no sales on
any such exchanges on the Repurchase Calculation Date on any given day, the
average of the closing bid and asked prices on each such exchange for the five
trading days ending on the Repurchase Calculation Date or, (iii) if there is no
such bid and asked price on the Repurchase Calculation Date, on the next
preceding date when such bid and asked price occurred or, (iv) if the Common
Stock shall not be so listed, the average of the closing sales prices as
reported by NASDAQ for the five trading days ending on the Repurchase
Calculation Date in the over-the-counter market or, (v) if there have been no
such sales, bid or asked prices, or if there has been no Public Offering, the
fair market value of the Common Stock as determined in the good faith
discretion of the Board.

 

“Good Reason” shall mean “Good Reason” as
defined in any employment agreement between the Management Stockholder and the
Company or any of its Subsidiaries or Affiliates, or, if there is no such
employment agreement, “Good Reason” shall mean (i) a substantial reduction in
the total value of the Management Stockholder’s rate of annual base salary,
target annual bonus, and the aggregate employee benefits provided to the
Management Stockholder by the Company or its Subsidiaries; (ii) the Management
Stockholder’s job responsibility and authority are substantially diminished;
and (iii) the Management Stockholder’s work location is relocated to more than
fifty (50) miles from Detroit, Michigan or Ann Arbor, Michigan; and provided,
further, that “Good Reason” shall cease to exist for an event on the 60th
day following the later of its occurrence or the Management Stockholder’s
knowledge thereof, unless the Management Stockholder has given the Company
written notice thereof prior to such date.

 

“Group” shall mean “group,” as such term is
used for purposes of Section 13(d) or 14(d) of the Exchange Act.

 

“Ironhill” means Ironhill Transmission LLC,
which is the general partner of ITH LP, of which the Company is a
majority-owned Subsidiary.

 

“ITH LP” means International Transmission
Holdings Limited Partnership, a Michigan limited partnership.

 

“Limited Partner Group” shall mean the KKR
Millennium Fund L.P., KKR Partners III, L.P. and Trimaran Capital Partners,
collectively.

 

“Management Stockholder” shall have the
meaning set forth in the introductory paragraph.

 

“Management Stockholder Entities” shall mean
the Management Stockholder’s Trust, the Management Stockholder and the
Management Stockholder’s Estate, collectively.

 

 

“Management Stockholder’s Estate” shall mean
the conservators, guardians, executors, administrators, testamentary trustees,
legatees or beneficiaries of the Management Stockholder.

 

“Management Stockholder’s Trust” shall mean a
limited partnership, limited liability company, trust or custodianship, the
beneficiaries of which may include only the Management Stockholder, his spouse
(or ex-spouse) or his lineal descendants (including adopted) or, if at any time
after any such transfer there shall be no then living spouse or lineal
descendants, then to the ultimate beneficiaries of any such trust or to the estate
of a deceased beneficiary.

 

“Maximum Repurchase Amount” shall have the
meaning set forth in Section 11(a) hereof.

 

“MBCA” shall have the meaning set forth in Section 5(c)
hereof.

 

“Notice” shall have the meaning set forth in Section 10(b)
hereof.

 

“Offeror” shall have the meaning set forth in
Section 4 hereof.

 

“Option Excess Price” shall mean the
aggregate amount paid by the Company in respect of Exercisable Option Shares
pursuant to Section 5 or 6, as applicable.

 

“Option Exercise Price” shall mean the
exercise price of the shares of Common Stock covered by the applicable Option.

 

“Option” shall have the meaning set forth in
the third “whereas” paragraph.

 

“Option Plan” shall have the meaning set
forth in the third “whereas” paragraph.

 

“Option Stock” shall have the meaning set
forth in Section 2(a) hereof.

 

“Other Management Stockholders” shall have
the meaning set forth in the fourth “whereas” paragraph.

 

“Other Management Stockholders’ Agreements”
shall have the meaning set forth in the fourth “whereas” paragraph.

 

“Parties” shall have the meaning set forth in
the introductory paragraph.

 

“Permanent Disability” shall mean the
Management Stockholder becomes physically or mentally incapacitated and is
therefore unable for a period of six (6) consecutive months or for an aggregate
of nine (9) months in any twenty-four (24) consecutive month period, to perform
the Management Stockholder’s duties with the Company or any Subsidiary or
Affiliate thereof.  Any question as to
the existence of the Permanent Disability of the Management Stockholder as to
which the Management Stockholder and the Company cannot agree shall be
determined in writing by a qualified independent physician mutually acceptable
to the Management Stockholder and the Company. 
If the Management Stockholder and the Company cannot agree as to a
qualified independent physician, each shall appoint such a physician and those
two physicians shall select a third who shall make such determination in
writing.  The determination of Permanent
Disability made in writing to 

 

 

the Company and the Management
Stockholder shall be final and conclusive for all purposes of this Agreement
(such inability is hereinafter referred to as “Permanent Disability”).

 

“Person” shall mean “person,” as such term is
used for purposes of Section 13(d) or 14(d) of the Exchange Act.

 

“Proposed Registration” shall have the
meaning set forth in Section 10(b) hereof.

 

“Public Offering” shall mean the sale of
shares of Common Stock to the public subsequent to the date hereof pursuant to
a registration statement under the Act which has been declared effective by the
SEC (other than a registration statement on Form S-4, Form S-8 or any other
similar form).

 

“Purchased Stock” shall have the meaning set
forth in Section 1(a) hereof.

 

“Qualified Public Offering” shall mean a
Public Offering, which results in an active trading market of 25% or more of
the Common Stock.

 

“Repurchase Calculation Date” shall mean the
last day of the month preceding the later of (i) the month in which the event
giving rise to the right to repurchase occurs and (ii) the month in which the
Repurchase Eligibility Date occurs.

 

“Repurchase Eligibility Date” shall have the
meaning set forth in Section 5(c) hereof.

 

“Repurchase Price” shall mean the amount to
be paid in respect of the Stock and Options to be purchased by the Company
pursuant to Section 5(a), Section 6(a), 6(b), or 6(c), as applicable.

 

“Request” shall have the meaning set forth in
Section 10(b) hereof.

 

“Restricted Group” shall mean, collectively,
the Company, its Subsidiaries, the members of the Limited Partner Group and
their respective Affiliates.

 

“Rule 405 Affiliate” shall mean an affiliate
of the Company as defined under Rule 405 of the rules and regulations
promulgated under the Act, and as interpreted by the Board.

 

“Sale Participation Agreement” shall mean
that certain sale participation agreement entered into by and between the
Management Stockholder and ITH L.P. dated as of the date hereof.

 

“SEC” shall mean the Securities and Exchange
Commission.

 

“Stock” shall have the meaning set forth in Section 2(a)
hereof.

 

“Stock Option Agreement” shall have the
meaning set forth in the third “whereas” paragraph.

 

 “Third
Party Offer” shall have the meaning set forth in Section 4(a) hereof.

 

“Trimaran Capital Partners” means,
collectively, Trimaran Fund II, L.L.C., Trimaran Parallel Fund II, L.P.,
Trimaran Capital, L.L.C., CIBC Employee Private Equity Fund (Trimaran) Partners
and CIBC World Markets Ireland Limited.

 

 

8.             The
Company’s Representations and Warranties.

 

(a)           The
Company represents and warrants to the Management Stockholder that (i) this
Agreement has been duly authorized, executed and delivered by the Company and
is enforceable against the Company in accordance with its terms and (ii) the Stock,
when issued and delivered in accordance with the terms hereof, will be duly and
validly issued, fully paid and nonassessable.

 

(b)           If
the Company becomes subject to the reporting requirements of Section 12 of
the Exchange Act, the Company will file the reports required to be filed by it
under the Act and the Exchange Act and the rules and regulations adopted by the
SEC thereunder, to the extent required from time to time to enable the
Management Stockholder to sell shares of Stock without registration under the
Exchange Act within the limitations of the exemptions provided by (A) Rule 144
under the Act, as such Rule may be amended from time to time, or (B) any
similar rule or regulation hereafter adopted by the SEC, subject to the
transfer restrictions set forth in Section 3.  Notwithstanding anything contained in this Section 9(b),
the Company may de-register under Section 12 of the Exchange Act if it is
then permitted to do so pursuant to the Exchange Act and the rules and
regulations thereunder and, in such circumstances, shall not be required hereby
to file any reports which may be necessary in order for Rule 144 or any similar
rule or regulation under the Act to be available.  Nothing in this Section 8(b) shall be
deemed to limit in any manner the restrictions on sales of Stock contained in
this Agreement.

 

9.             “Piggyback”
Registration Rights.  Until the later
of (i) the first occurrence of a Qualified Public Offering and (ii) the fifth
anniversary of the Effective Date:

 

(a)           The
Management Stockholder hereby agrees to be bound by all of the terms,
conditions and obligations of the Registration Rights Agreement entered into by
and among the Company and International Transmission Holdings Limited
Partnership (the “Registration Rights Agreement”), as in effect on the
date hereof (subject to any amendments thereto to which the Management
Stockholder has agreed to be bound), and shall have all of the rights and
privileges of the Registration Rights Agreement, in each case as if the
Management Stockholder were an original party (other than the Company) thereto,
subject to applicable and customary underwriter restrictions; provided, however,
that at no time shall the Management Stockholder have any rights to request
registration under Section 3 of the Registration Rights Agreement; and provided
further, that the Management Stockholder shall not be bound by any
amendments to the Registration Rights Agreement unless the Management
Stockholder consents thereto provided that such consent will not be
unreasonably withheld.  All Stock
purchased or held by the applicable Management Stockholder Entities pursuant to
this Agreement shall be deemed to be “Registrable Securities” as defined in the
Registration Rights Agreement.

 

(b)           In
the event of a sale of Common Stock by the Limited Partner Group in accordance
with the terms of the Registration Rights Agreement, the Company will promptly
notify the Management Stockholder in writing (a “Notice”) of any
proposed registration (a “Proposed Registration”).  If within 15 days of the receipt by the
Management Stockholder of such Notice, the Company receives from the applicable
Management Stockholder Entities a written request (a “Request”) to
register shares of Stock held by the applicable Management Stockholder Entities
(which Request will be irrevocable unless otherwise mutually agreed to in
writing by the Management Stockholder and the Company), shares of Stock will be
so registered as provided in this Section 10; provided, however,
that 

 

 

for each such registration statement only one
Request, which shall be executed by the applicable Management Stockholder
Entities, may be submitted for all Registrable Securities held by the
applicable Management Stockholder Entities.

 

(c)           The
maximum number of shares of Stock which will be registered pursuant to a
Request will be the lowest of (i) the number of shares of Stock then held by
the Management Stockholder Entities, including all shares of Stock which the
Management Stockholder Entities are then entitled to acquire under an unexercised
Option to the extent then exercisable, multiplied by a fraction, the numerator
of which is the number of shares of Stock being sold by the Limited Partner
Group and any investment partnerships and investment limited liability
companies affiliated with the Limited Partner Group and the denominator of
which is the aggregate number of shares of Stock owned by the Limited Partner
Group and any investment partnerships and investment limited liability
companies affiliated with the Limited Partner Group or (ii) the maximum number
of shares of Stock which the Company can register in the Proposed Registration
without adverse effect on the offering in the view of the managing underwriters
(reduced pro rata with all Other Management Stockholders) as more fully described
in subsection (d) of this Section 10 or (iii) the maximum number of
shares which the Management Stockholder (pro rata based upon the aggregate
number of shares of Stock the Management Stockholder and all Other Management
Stockholders have requested to be registered) is permitted to register under
the Registration Rights Agreement.

 

(d)           If
a Proposed Registration involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the number of
shares of Stock requested to be included in the Proposed Registration exceeds
the number which can be sold in such offering, so as to be likely to have an
adverse effect on the price, timing or distribution of the shares of Stock
offered in such Public Offering as contemplated by the Company, then the
Company will include in the Proposed Registration (i) first, 100% of the shares
of Stock the Company proposes to sell and (ii) second, to the extent of the
number of shares of Stock requested to be included in such registration which,
in the opinion of such managing underwriter, can be sold without having the
adverse effect referred to above, the number of shares of Stock which the “Holders”
(as defined in the Registration Rights Agreement), including, without limitation,
the Management Stockholder, and all Other Management Stockholders have
requested to be included in the Proposed Registration, such amount to be
allocated pro rata among all requesting Holders on the basis of the relative
number of shares of Stock then held by each such Holder (including the
exercisable Options) (provided that any shares thereby allocated to any such
Holder that exceed such Holder’s request will be reallocated among the
remaining requesting Holders in like manner).

 

(e)           Upon
delivering a Request the Management Stockholder will, if requested by the
Company, execute and deliver a custody agreement and power of attorney in form
and substance satisfactory to the Company with respect to the shares of Stock
to be registered pursuant to this Section 10 (a “Custody Agreement and
Power of Attorney”).  The Custody
Agreement and Power of Attorney will provide, among other things, that the
Management Stockholder will deliver to and deposit in custody with the
custodian and attorney-in-fact named therein a certificate or certificates
representing such shares of Stock (duly endorsed in blank by the registered
owner or owners thereof or accompanied by duly executed stock powers in blank)
and irrevocably appoint said custodian and attorney-in-fact as the Management
Stockholder’s agent and attorney-in-fact with full power and authority to 

 

 

act under the Custody Agreement and Power of
Attorney on the Management Stockholder’s behalf with respect to the matters
specified therein.

 

(f)            The
Management Stockholder agrees that he or she will execute such other agreements
as the Company may reasonably request to further evidence the provisions of
this Section.

 

10.           Pro
Rata Repurchases; Dividends. 
(a)  Notwithstanding anything to
the contrary contained in Section 4, 5 or 6, if at any time consummation
of any purchase or payment to be made by the Company pursuant to this Agreement
and the Other Management Stockholders Agreements would result in an Event, then
the Company shall make purchases from, and payments to, the Management
Stockholder and Other Management Stockholders pro rata (on the basis of the
proportion of the number of shares of Stock each such Management Stockholder
and all Other Management Stockholders have elected or are required to sell to
the Company) for the maximum number of shares of Stock permitted without
resulting in an Event (the “Maximum Repurchase Amount”).  The provisions of Section 5(c) and 6(e)
shall apply in their entirety to payments and repurchases with respect to
shares of Stock which may not be made due to the limits imposed by the Maximum
Repurchase Amount under this Section 11(a).  Until all of such Stock is purchased and paid
for by the Company, the Management Stockholder and the Other Management
Stockholders whose Stock is not purchased in accordance with this Section 11(a)
shall have priority, on a pro rata basis, over other purchases of Stock by the
Company pursuant to this Agreement and Other Management Stockholders’
Agreements.

 

(b)           In
the event any dividends are paid with respect to the Stock, the Management
Stockholder will be treated pari  passu with all Other Management
Stockholders with respect to shares of Stock then owned by the Management
Stockholder, and, with respect to any Options held by the Management
Stockholder, in accordance, as applicable, with Section 2.4 of the Stock
Option Agreement.

 

11.           Rights
to Negotiate Repurchase Price. 
Nothing in this Agreement shall be deemed to restrict or prohibit the
Company from purchasing, redeeming or otherwise acquiring for value shares of
Stock or Options from the Management Stockholder, at any time, upon such terms
and conditions, and for such price, as may be mutually agreed upon between the
Parties, whether or not at the time of such purchase, redemption or acquisition
circumstances exist which specifically grant the Company the right to purchase
shares of Stock or any Options under the terms of this Agreement, provided
that no such purchase, redemption or acquisition shall be consummated, and no
agreement with respect to any such purchase, redemption or acquisition shall be
entered into, without the prior written consent of the Board.

 

12.           Covenant
Regarding 83(b) Election.  Except as
set forth in the Restricted Stock Agreement or as the Company may otherwise
agree in writing, the Management Stockholder hereby covenants and agrees that
he will make an election provided pursuant to Treasury Regulation 1.83-2 with
respect to the Stock, including without limitation, the Stock to be acquired
pursuant to Section 1(a), the Stock to be acquired upon each exercise of
the Management Stockholder’s Options and any grant of restricted Stock; and
Management Stockholder further covenants and agrees that he will furnish the
Company with copies of the forms of election the Management Stockholder files
within 30 days after the date hereof, and within 30 days after each exercise of
Management Stockholder’s Options and with evidence that each such election has
been filed in a timely manner.

 

 

13.           Notice
of Change of Beneficiary. 
Immediately prior to any transfer of Stock to a Management Stockholder’s
Trust, the Management Stockholder shall provide the Company with a copy of the
instruments creating the Management Stockholder’s Trust and with the identity
of the beneficiaries of the Management Stockholder’s Trust.  The Management Stockholder shall notify the
Company as soon as practicable prior to any change in the identity of any
beneficiary of the Management Stockholder’s Trust.

 

14.           Recapitalizations,
etc.  The provisions of this
Agreement shall apply, to the full extent set forth herein with respect to the
Stock or the Options, to any and all shares of capital stock of the Company or
any capital stock, partnership units or any other security evidencing ownership
interests in any successor or assign of the Company (whether by merger,
consolidation, sale of assets or otherwise) which may be issued in respect of,
in exchange for, or substitution of the Stock or the Option, by reason of any
stock dividend, split, reverse split, combination, recapitalization,
liquidation, reclassification, merger, consolidation or otherwise.

 

15.           Management
Stockholder’s Employment by the Company.  
Nothing contained in this Agreement or in any other agreement entered
into by the Company and the Management Stockholder contemporaneously with the
execution of this Agreement (subject to the applicable provisions of any offer
letter or letter of employment provided to the Management Stockholder by the
Company or any employment agreement entered by and between the Management
Stockholder and the Company) (i) obligates the Company or any subsidiary of the
Company to employ the Management Stockholder in any capacity whatsoever or (ii)
prohibits or restricts the Company (or any such subsidiary) from terminating
the employment of the Management Stockholder at any time or for any reason
whatsoever, with or without Cause, and the Management Stockholder hereby
acknowledges and agrees that neither the Company nor any other person has made
any representations or promises whatsoever to the Management Stockholder
concerning the Management Stockholder’s employment or continued employment by
the Company or any subsidiary of the Company.

 

16.           State
Securities Laws.  The Company hereby
agrees to use its reasonable best efforts to comply with all state securities
or “blue sky” laws that might be applicable to the sale of the Stock and the
issuance of the Option to the Management Stockholder.

 

17.           Binding
Effect.  The provisions of this
Agreement shall be binding upon and accrue to the benefit of the parties hereto
and their respective heirs, legal representatives, successors and assigns.  In the case of a transferee permitted under Section 2(a)
or Section 3 hereof, such transferee shall be deemed the Management
Stockholder hereunder; provided, however, that no transferee
(including without limitation, transferees referred to in Section 2(a) or Section 3
hereof) shall derive any rights under this Agreement unless and until such
transferee has delivered to the Company a valid undertaking and becomes bound
by the terms of this Agreement.

 

18.           Amendment.  This Agreement may be amended only by a
written instrument signed by the Parties hereto.

 

19.           Closing.  Except as otherwise provided herein, the
closing of each purchase and sale of shares of Stock, pursuant to this
Agreement shall take place at the 

 

 

principal office of the Company on the tenth
business day following delivery of the notice by either Party to the other of
its exercise of the right to purchase or sell such Stock hereunder.

 

20.           Applicable
Law; Jurisdiction; Arbitration; Legal Fees.

 

(a)           The
laws of the State of Michigan shall govern the interpretation, validity and
performance of the terms of this Agreement, regardless of the law that might be
applied under principles of conflicts of law.

 

(b)           In
the event of any controversy among the parties hereto arising out of, or
relating to, this Agreement which cannot be settled amicably by the parties,
such controversy shall be finally, exclusively and conclusively settled by
mandatory arbitration conducted expeditiously in accordance with the American
Arbitration Association rules, by a single independent arbitrator.  Such arbitration process shall take place
within 100 miles of the Detroit, Michigan metropolitan area.  The decision of the arbitrator shall be final
and binding upon all parties hereto and shall be rendered pursuant to a written
decision, which contains a detailed recital of the arbitrator’s reasoning.  Judgment upon the award rendered may be
entered in any court having jurisdiction thereof.

 

(c)           Notwithstanding
the foregoing, the Management Stockholder acknowledges and agrees that the
Company, its Subsidiaries, any member of the Limited Partner Group and any of
their respective Affiliates shall be entitled to injunctive or other relief in
order to enforce the covenant not to compete, covenant not to solicit and/or
confidentiality covenants as set forth in Section 25(a) of this Agreement.

 

(d)           In
the event of any arbitration or other disputes with regard to this Agreement or
any other document or agreement referred to herein, each Party that shall pay
its own legal fees and expenses, unless otherwise determined by the arbitrator.

 

21.           Assignability
of Certain Rights by the Company. 
The Company shall have the right to assign any or all of its rights or
obligations to purchase shares of Stock pursuant to Sections 4, 5 and 6 hereof.

 

22.           Miscellaneous.

 

(a)           In
this Agreement all references to “dollars” or “$” are to United States dollars
and the masculine pronoun shall include the feminine and neuter, and the
singular the plural, where the context so indicates

 

(b)           If
any provision of this Agreement shall be declared illegal, void or
unenforceable by any court of competent jurisdiction, the other provisions
shall not be affected, but shall remain in full force and effect.

 

23.           Withholding.  The Company or its Subsidiaries shall have
the right to deduct from any cash payment made under this Agreement to the
applicable Management Stockholder Entities any minimum federal, state or local
income or other taxes required by law to be withheld with respect to such
payment.

 

24.           Notices.  All notices and other communications provided
for herein shall be in writing and shall be deemed to have been duly given if
delivered by hand (whether by overnight courier or otherwise) or sent by
registered or certified mail, return receipt 

 

 

requested, postage prepaid, or by overnight
delivery or telecopy, to the Party to whom it is directed:

 

(a)           If
to the Company, to it at the following address:

 

	
   

  	
  ITC Holdings
  Corp.

  	
   

  
	
   

  	
  1901 South
  Wagner

  	
   

  
	
   

  	
  Ann Arbor,
  Michigan 48105

  	
   

  
	
   

  	
  Attention:

  	
  John Flynn,
  Esq.

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Simpson
  Thacher & Bartlett

  	
   

  
	
   

  	
  425
  Lexington Avenue

  	
   

  
	
   

  	
  New York,
  New York 10017

  	
   

  
	
   

  	
  Attention:

  	
  David J.
  Sorkin, Esq.

  
	
   

  	
   

  	
  Alvin H.
  Brown, Esq.

  
	
   

  	
  Telecopy:

  	
  (212)
  455-2502

  
					

 

(b)           If
to the Management Stockholder, to him at the address set forth below under his
signature;

 

or at such other address as either party shall have specified by notice
in writing to the other.

 

25.           Confidential
Information; Covenant Not to Compete.

 

(a)           In
consideration of the Company entering into this Agreement with the Management
Stockholder, the Management Stockholder hereby agrees effective as of the date
of the Management Stockholder’s commencement of employment with the Company or
its Subsidiaries, without the Company’s prior written consent, the Management
Stockholder shall not, directly or indirectly, (i) at any time during or after
the Management Stockholder’s employment with the Company or its Subsidiaries,
disclose any Confidential Information pertaining to the business of the Company
or any of its Subsidiaries, except when required to perform his or her duties
to the Company or one of its Subsidiaries, by law or judicial process; or (ii)
at any time during the Management Stockholder’s employment with the Company or
its Subsidiaries and for one year thereafter, directly or indirectly (A) be
engaged in or have financial interest (other than an ownership position of less
than 5% in any company whose shares are publicly traded or any non-voting
non-convertible debt securities in any company) in any business which competes
with any business of the Company or any of its Subsidiaries,  (B) solicit customers or clients of the
Company or any of its Subsidiaries to terminate their relationship with the
Company or any of its Subsidiaries or otherwise solicit such customers or
clients to compete with any business of the Company or any of its Subsidiaries
or (C) solicit or offer employment to any person who has been employed by the
Company or any of its Subsidiaries at any time during the twelve months
immediately preceding the termination of the Management Stockholder’s
employment.  If the Management
Stockholder is bound by any other agreement with the Company regarding the use
or disclosure of confidential information, the provisions of this Agreement
shall be read in such a way as to further restrict and not to permit any more
extensive use or disclosure of confidential information.

 

 

(b)           Notwithstanding
clause (a) above, if at any time a court holds that the restrictions stated in
such clause (a) are unreasonable or otherwise unenforceable under circumstances
then existing, the parties hereto agree that the maximum period, scope or
geographic area determined to be reasonable under such circumstances by such
court will be substituted for the stated period, scope or area.  Because the Management Stockholder’s services
are unique and because the Management Stockholder has had access to
Confidential Information, the parties hereto agree that money damages will be
an inadequate remedy for any breach of this Agreement.  In the event of a breach or threatened breach
of this Agreement, the Company or its successors or assigns may, in addition to
other rights and remedies existing in their favor, apply to any court of
competent jurisdiction for specific performance and/or injunctive relief in
order to enforce, or prevent any violations of, the provisions hereof (without
the posting of a bond or other security).

 

[Signatures on next page.]

 

 

IN WITNESS
WHEREOF, the Parties have executed this Agreement as of the date first above
written.

 

	
   

  	
  ITC HOLDINGS CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
						

 

 

	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MANAGEMENT STOCKHOLDER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FIELD 1

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ADDRESS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

 

 

EXECUTION COPY

 

FORM OF

MANAGEMENT
STOCKHOLDER’S AGREEMENT

(Restricted Stock Only)

 

This Management Stockholder’s Agreement (this
“Agreement”) is entered into as of [DATE], 2003 (the “Effective Date”)
between ITC Holdings Corp., a Michigan corporation (the “Company”), and
the undersigned person (the “Management Stockholder”) (the Company and
the Management Stockholder being hereinafter collectively referred to as the “Parties”).  All capitalized terms not immediately defined
are hereinafter defined in Section 7(b) of this Agreement.

 

WHEREAS, on December 3, 2002, DTE Energy
Company, a Michigan corporation, and the Company entered into a Stock Purchase
Agreement (the “Acquisition Agreement”). 
Pursuant to the Acquisition Agreement, the Company acquired all of the
issued and outstanding shares in the capital of International Transmission
Company, a Michigan corporation (“ITC”), as further specified in the
Acquisition Agreement (the “Acquisition”) (the date of such Acquisition,
the “Closing Date”).

 

WHEREAS, in connection with the Acquisition,
Management Stockholder has been selected by the Company to be permitted to
contribute to the Company cash in exchange for shares of common stock of the
Company (such common stock, together with any securities issued in respect
thereof or in substitution therefor, in connection with any stock split,
dividend or combination, or any reclassification, reorganization, merger,
consolidation, exchange or other similar reorganization, the “Common Stock”);

 

WHEREAS, Management Stockholder has been
selected by the Company, as of the date hereof, to receive a grant of 1,000
restricted shares of Common Stock (the “Restricted Stock”) pursuant to
the terms set forth below and the terms of the 2003 Stock Purchase and Option
Plan for Key Employees of the Company and Its Subsidiaries (the “Option Plan”)
and the Restricted Stock Award Agreement dated as of even date herewith,
entered into by and between the Company and the Management Stockholder (the “Restricted
Stock Agreement”); and

 

WHEREAS, this Agreement is one of several
other agreements (“Other Management Stockholders’ Agreements”) which
have been, or which in the future will be, entered into between the Company and
other individuals who are or will be key employees of the Company or one of its
subsidiaries (collectively, the “Other Management Stockholders”); and

 

WHEREAS, this Agreement is intended to apply
to any shares of Common Stock hereinafter acquired by the Management
Stockholder, whether by subscription (any such stock, “Purchased Stock”)
at $25.00 per share (the “Base Price”) or otherwise, whether shares of
Common Stock are acquired by the exercise of any stock option (any such stock, “Option
Stock”) that may hereinafter be granted to the Management Stockholder by
the Company (an “Option”) or otherwise.

 

NOW THEREFORE, to implement the foregoing and
in consideration of the grant of Options and of the mutual agreements contained
herein, the Parties agree as follows:

 

 

1.                                       Purchase of
Common Stock; Other Acquisition of Common Stock.

 

(a)                                  Any Purchased Stock
that the Management Stockholder subscribes for the Management Stockholder shall
purchase at such per share purchase price as the Company and the Management
Stockholder shall agree, and the Company shall issue and deliver to the Management
Stockholder, upon receipt by the Company from the Management Stockholder of the
aggregate purchase price of any such stock, such number of shares of Purchased
Stock for which the Management Stockholder has subscribed.

 

(b)                                 The Company shall have
no obligation to sell any Purchased Stock to any person who (i) is a resident
or citizen of a state or other jurisdiction in which the sale of the Common
Stock to him or her would constitute a violation of the securities or “blue sky”
laws of such jurisdiction or (ii) is not an employee of the Company or any of
its subsidiaries on the date hereof.

 

(c)                                  Any shares of Common
Stock that the Management Stockholder otherwise acquires, pursuant to the
Restricted Stock Award Agreement or otherwise, shall be issued to the
Management Stockholder by the Company after all conditions contained in the
Restricted Stock Award Agreement (or other agreement between the Company and
the Management Stockholder in respect of any such acquisition) have been
satisfied and otherwise in accordance with the terms of any such agreements,
and shall be subject to the terms of this Agreement as set forth below.

 

2.                                       Management
Stockholder’s Representations, Warranties and Agreements.

 

(a)                                  The Management
Stockholder agrees and acknowledges that he will not, except to the extent
necessary in connection with any loan to the Management Stockholder to
purchases of the Purchased Stock, directly or indirectly, offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of (any such act being
referred to herein as a “transfer”) any shares of Restricted Stock, Purchased
Stock and, at the time of exercise, (the Restricted Stock, together with any
Purchased Stock, Option Stock, and any other Common Stock otherwise acquired
and/or held by the Management Stockholder Entities, “Stock”), except as
otherwise provided for herein.  If the
Management Stockholder is a Rule 405 Affiliate, the Management Stockholder also
agrees and acknowledges that he will not transfer any shares of the Stock
unless:

 

(i)                                     the transfer is
pursuant to an effective registration statement under the Securities Act of
1933, as amended, and the rules and regulations in effect thereunder (the “Act”),
and in compliance with applicable provisions of state securities laws or

 

(ii)                                  (A) counsel for the
Management Stockholder (which counsel shall be reasonably acceptable to the
Company) shall have furnished the Company with an opinion, satisfactory in form
and substance to the Company, that no such registration is required because of
the availability of an exemption from registration under the Act and (B) if the
Management Stockholder is a citizen or resident of any country other than the
United States, or the Management Stockholder desires to effect any transfer in
any such country, counsel for the Management Stockholder (which counsel shall
be reasonably 

 

2

 

satisfactory to the Company) shall have
furnished the Company with an opinion or other advice reasonably satisfactory
in form and substance to the Company to the effect that such transfer will
comply with the securities laws of such jurisdiction.

 

Notwithstanding the foregoing, the Company acknowledges and agrees that
any of the following transfers are deemed to be in compliance with the Act and
this Agreement and no opinion of counsel is required in connection therewith:
(x) a transfer made pursuant to Sections 3, 4, 5 or 6 hereof, (y) a transfer
upon the death or Permanent Disability of the Management Stockholder to the
Management Stockholder’s Estate or a transfer to the executors, administrators,
testamentary trustees, legatees or beneficiaries of a person who has become a
holder of Stock in accordance with the terms of this Agreement, provided
that it is expressly understood that any such transferee shall be bound by the
provisions of this Agreement, and (z) a transfer made after the Effective Date
in compliance with the federal securities laws to a Management Stockholder’s
Trust, provided that such transfer is made expressly subject to this Agreement
and that the transferee agrees in writing to be bound by the terms and
conditions hereof.

 

(b)                                 The certificate (or
certificates) representing the Stock shall bear the following legend:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE MAY
NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION COMPLIES WITH THE PROVISIONS OF THE MANAGEMENT STOCKHOLDER’S
AGREEMENT DATED AS OF [DATE], 2003 BETWEEN ITC HOLDINGS CORP. (THE “COMPANY”)
AND THE MANAGEMENT STOCKHOLDER NAMED ON THE FACE HEREOF (A COPY OF WHICH IS ON
FILE WITH THE SECRETARY OF THE COMPANY).

 

(c)                                  The Management
Stockholder acknowledges that he has been advised that (i) a restrictive legend
in the form heretofore set forth shall be placed on the certificates
representing the Stock and (ii) a notation shall be made in the appropriate
records of the Company indicating that the Stock is subject to restrictions on
transfer and appropriate stop transfer restrictions will be issued to the
Company’s transfer agent with respect to the Stock.  If the Management Stockholder is a Rule 405
Affiliate, the Management Stockholder also acknowledges that (1) the Stock must
be held indefinitely and the Management Stockholder must continue to bear the
economic risk of the investment in the Stock unless it is subsequently
registered under the Act or an exemption from such registration is available,
(2) when and if shares of the Stock may be disposed of without registration in
reliance on Rule 144 of the rules and regulations promulgated under the Act,
such disposition can be made only in limited amounts in accordance with the
terms and conditions of such Rule and (3) if the Rule 144 exemption is not
available, public sale without registration will require compliance with some
other exemption under the Act.

 

(d)                                 If any shares of the
Stock are to be disposed of in accordance with Rule 144 under the Act or
otherwise, the Management Stockholder shall promptly notify the Company of such
intended disposition and shall deliver to the Company at or prior to the time
of such 

 

3

 

disposition such documentation as the Company may reasonably request in
connection with such sale and, in the case of a disposition pursuant to Rule
144, shall deliver to the Company an executed copy of any notice on Form 144
required to be filed with the SEC.

 

(e)                                  The Management
Stockholder agrees that, if any shares of the Stock are offered to the public
pursuant to an effective registration statement under the Act (other than
registration of securities issued under an employee plan), the Management
Stockholder will not effect any public sale or distribution of any shares of
the Stock not covered by such registration statement from the time of the
receipt of a notice from the Company that the Company has filed or imminently
intends to file such registration statement to, or within 180 days after, the
effective date of such registration statement, unless otherwise agreed to in
writing by the Company.

 

(f)                                    The Management
Stockholder represents and warrants that (i) with respect to the Stock he has
received and reviewed the available information relating to the Stock and (ii)
he has been given the opportunity to obtain any additional information or
documents and to ask questions and receive answers about such information, the
Company and the business and prospects of the Company which he deems necessary
to evaluate the merits and risks related to his investment in the Stock and to
verify the information contained in the information received as indicated in
this Section 2(f), and he has relied solely on such information.  In addition, if the Management Stockholder is
an Ontario, Canada resident, the Management Stockholder represents and warrants
that he (A) is entitled under Ontario securities laws to purchase the shares of
Stock without the benefit of a prospectus qualified under the securities laws;
(B) is basing his investment decision solely on the Private Placement
Memorandum and not on any other information concerning the Company and its
subsidiaries; (C) has reviewed Section 6 of this Agreement containing
resale restrictions and acknowledges and agrees that the shares of Stock
purchased under this Agreement are subject to resale restrictions under
applicable securities legislation as well as under Section 6 of this
Agreement containing resale restrictions; (D) is an officer or employee of the
Company or a subsidiary of the Company; and (E) is purchasing shares of Stock
as principal for its own account.

 

(g)                                 The Management
Stockholder further represents and warrants that (i) his financial condition is
such that he can afford to bear the economic risk of holding the Stock for an
indefinite period of time and has adequate means for providing for his current
needs and personal contingencies, (ii) he can afford to suffer a complete loss
of his or her investment in the Stock, (iii) he understands and has taken
cognizance of all risk factors related to the purchase of the Stock and (iv)
his knowledge and experience in financial and business matters are such that he
is capable of evaluating the merits and risks of his purchase of the Stock as
contemplated by this Agreement.

 

3.                                       Transferability
of Stock.  The Management Stockholder
agrees that he will not transfer any shares of the Stock at any time during the
period commencing on the Effective Date and ending on the fifth anniversary of
the Effective Date; provided, however, that the Management
Stockholder may transfer shares of Stock during such time pursuant to one of
the following exceptions: (a) transfers permitted by clauses (x), (y) and (z)
of Section 2(a); and/or (b) a sale of shares of Common Stock pursuant to
an effective registration statement under the Act filed by the Company
(excluding any registration on Form S-8, S-4 or any successor or similar form)
pursuant to Section 10 of this Agreement; and/or (c) transfers permitted
pursuant to 

 

4

 

the Sale Participation Agreement (as defined in Section 7).  No transfer of any such shares in violation
hereof shall be made or recorded on the books of the Company and any such
transfer shall be void ab initio and of no effect.  Notwithstanding anything in this Agreement to
the contrary, this Section 3 shall terminate and be of no further force or
effect upon the occurrence of a Change of Ownership.

 

4.                                       Right of
First Refusal.  (a)  If, at
any time after the fifth anniversary of the Effective Date and prior to the
date of consummation of a Qualified Public Offering, the Management Stockholder
receives a bona fide offer to purchase any or all of his Stock (the “Third
Party Offer”) from a third party (the “Offeror”), which the
Management Stockholder wishes to accept, the Management Stockholder shall cause
the Third Party Offer to be reduced to writing and shall notify the Company in
writing of his wish to accept the Third Party Offer.  The Management Stockholder’s notice to the
Company shall contain an irrevocable offer to sell such Stock to the Company
(in the manner set forth below) at a purchase price equal to the price
contained in, and on the same terms and conditions of, the Third Party Offer,
and shall be accompanied by a copy of the Third Party Offer (which shall
identify the Offeror).  At any time
within 30 days after the date of the receipt by the Company of the
Management Stockholder’s notice,  the
Company shall have the right and option to purchase, or to arrange for a third
party to purchase, all of the shares of Stock covered by the Offer, pursuant to
Section 4(b).

 

(b)                                 The Company shall have
the right and option to purchase, or to arrange for a third party to purchase,
all of the shares of Stock covered by the Third Party Offer at the same price
and on substantially the same terms and conditions as the Third Party Offer
(or, if the Third Party Offer includes any consideration other than cash, then
at the sole option of the Company, at the equivalent all cash price, determined
in good faith by the Company’s Board), by delivering a certified bank check or
checks in the appropriate amount (or by wire transfer of immediately available
funds, if the Management Stockholder Entities provide to the Company wire
transfer instructions) (and any such non-cash consideration to be paid) to the
Management Stockholder at the principal office of the Company against delivery
of certificates or other instruments representing the shares of Stock so
purchased, appropriately endorsed by the Management Stockholder.  If at the end of the 30-day period, the
Company has not tendered the purchase price for such shares in the manner set
forth above, the Management Stockholder may, during the succeeding 60-day
period, sell not less than all of the shares of Stock covered by the Third
Party Offer, to the Offeror on terms no less favorable to the Management
Stockholder than those contained in the Third Party Offer.  Promptly after such sale, the Management
Stockholder shall notify the Company of the consummation thereof and shall
furnish such evidence of the completion and time of completion of such sale and
of the terms thereof as may reasonably be requested by the Company.  If, at the end of 60 days following the
expiration of the 30-day period during which the Company is entitled hereunder
to purchase the Stock, the Management Stockholder has not completed the sale of
such shares of the Stock as aforesaid, all of the restrictions on sale,
transfer or assignment contained in this Agreement shall again be in effect
with respect to such shares of the Stock.

 

(c)                                  Notwithstanding
anything in this Agreement to the contrary, this Section 4 shall terminate
and be of no further force or effect upon the occurrence of a Change of
Ownership.

 

5

 

5.                                       The
Management Stockholder’s Right to Resell Stock and Options to the Company.

 

(a)                                  Except as otherwise
provided herein, if, prior to the fifth anniversary of the Effective Date, the
Management Stockholder is still in the employ of the Company (and/or, if applicable,
any Subsidiary) and the Management Stockholder’s employment is terminated as a
result of the death or Permanent Disability of the Management Stockholder, then
the applicable Management Stockholder Entity, shall, for sixty (60) days (the “Put
Period”) following the date of such death or Permanent Disability, have the
right to:

 

(i)                                     With respect to
the Stock, sell to the Company, and the Company shall be required to purchase,
on one occasion, all of the shares of Stock then held by the applicable Management
Stockholder Entities, at a per share price equal to the Fair Market Value Per
Share (the “Section 5 Repurchase Price”); and

 

(ii)                                  With respect to any
outstanding Options, sell to the Company, and the Company shall be required to
purchase, on one occasion, all of the exercisable Options then held by the
applicable Management Stockholder Entities, at a price equal to the product of
(x) the excess, if any, of the Section 5 Repurchase Price over the Option
Exercise Price and (y) the number of Exercisable Option Shares in respect of
the termination of all or any portion of the outstanding exercisable Options
held by the applicable Management Stockholder Entity. In the event the
foregoing Option Excess Price is zero or a negative number, all outstanding exercisable
stock options granted to the Management Stockholder under the Option Plan shall
be automatically terminated without any payment in respect thereof.  In the event that the Management Stockholder
Entities do not exercise the foregoing rights, all exercisable but unexercised
Options shall terminate pursuant to the terms of Section 3.2(b) of the
Stock Option Agreement.  All
unexercisable Options held by the applicable Management Stockholder Entities
shall terminate without payment immediately upon termination of employment.

 

(b)                                 In the event the
applicable Management Stockholder Entities intend to exercise their rights
pursuant to Section 5(a), such Entities shall send written notice to the
Company, at any time during the Put Period, of their intention to sell shares
of Stock in exchange for the payment referred in Section 5(a)(i) and/or to
terminate such Options in exchange for the payment referred to in Section 5(a)(ii)
and shall indicate the number of shares of Stock to be sold and the number of
Options to be terminated with payment in respect thereof (the “Redemption
Notice”).  The completion of the
purchases shall take place at the principal office of the Company on the tenth
business day after the giving of the Redemption Notice.  The applicable Repurchase Price and any
payment with respect to the Options as described above shall be paid by
delivery to the applicable Management Stockholder Entities, of a certified bank
check or checks in the appropriate amount payable to the order of each of the applicable
Management Stockholder Entities (or by wire transfer of immediately available
funds, if the Management Stockholder Entities provide to the Company wire
transfer instructions), against delivery of certificates or other instruments
representing the Stock so purchased and appropriate documents cancelling the
Options so terminated appropriately endorsed or executed by the applicable
Management Stockholder Entities or any duly authorized representative.

 

6

 

(c)                                  Notwithstanding
anything in Section 5(a) to the contrary and subject to Section 11(a),
if there exists and is continuing a default or an event of default on the part
of the Company or any subsidiary of the Company under any loan, guarantee or
other agreement under which the Company or any subsidiary of the Company has
borrowed money or if the repurchase referred to in Section 5(a) would
result in a default or an event of default on the part of the Company or any
subsidiary of the Company under any such agreement or if a repurchase would not
be permitted under the Michigan Business Corporation Act (the “MBCA”) or
would otherwise violate the MBCA (or if the Company reincorporates in another
state, the business corporation law of such state) (each such occurrence being
an “Event”), the Company shall not be obligated to repurchase any of the
Stock or the Options from the applicable Management Stockholder Entities, until
the first business day which is 10 calendar days after all of the foregoing
Events have ceased to exist (the “Repurchase Eligibility Date”); provided,
however, that (i) the number of shares of Stock subject to repurchase
under this Section 5(c) shall be that number of shares of Stock, and (ii)
in the case of a repurchase pursuant to Section 5(a)(ii), the number of
Exercisable Option Shares for purposes of calculating the Option Excess Price
payable under this Section 5(c) shall be the number of Exercisable Option
Shares, specified in the Redemption Notice and held by the applicable
Management Stockholder Entities, at the time of delivery of a Redemption Notice
in accordance with Section 5(b) hereof. 
All Options exercisable as of the date of a Redemption Notice, in the
case of a repurchase pursuant to Section 5(a), shall continue to be
exercisable until the repurchase of such Options pursuant to such Redemption
Notice, provided that to the extent any Options are exercised after the date of
such Redemption Notice, the number of Exercisable Option Shares for purposes of
calculating the Option Excess Price shall be reduced accordingly.

 

(d)                                 Effect
of Change of Ownership. 
Notwithstanding anything in this Agreement to the contrary, except for
any payment obligation of the Company, which has arisen prior to such
termination pursuant to this Agreement, this Section 5 shall terminate and
be of no further force or effect upon the occurrence of a Change of Ownership.

 

6.                                       The Company’s
Option to Purchase Stock and Options of Management Stockholder Upon Certain
Terminations of Employment.

 

(a)                                  Termination
for Cause by the Company, Termination without Good Reason by the Management
Stockholder and other Call Events. 
Except as otherwise provided herein or in the Restricted Stock
Agreement, if, prior to the fifth anniversary of the Effective Date, (i) the
Management Stockholder’s active employment with the Company (and/or, if
applicable, its subsidiaries) is terminated by the Company (or any subsidiary)
for Cause, (ii) the Management Stockholder’s active employment with the Company
(and/or, if applicable, its subsidiaries) is terminated by the Management
Stockholder without Good Reason, (iii) the beneficiaries of a Management
Stockholder’s Trust shall include any person or entity other than the
Management Stockholder, his spouse (or ex-spouse) or his lineal descendants
(including adopted children), (iv) the Management Stockholder shall otherwise
effect a transfer of any of the Stock other than as permitted in this Agreement
(other than as may be required by applicable law or an order of a court having
competent jurisdiction) after notice from the Company of such impermissible
transfer and a reasonable opportunity to cure such transfer (each, a “Section 6(a)
Call Event”):

 

7

 

(A)                              With respect to the
Stock, the Company may purchase all or any portion of the shares of the Stock
then held by the applicable Management Stockholder Entities at a per share
purchase price equal to the lesser of (x) the Base Price and (y) the Book Value
Per Share before a Public Offering (after a Public Offering, the Fair Market
Value Per Share) (any such applicable repurchase price, the “Section 6(a)
Repurchase Price”); and

 

(B)                                With respect to the
Options, all Options (whether or not then exercisable) held by the applicable
Management Stockholder Entities will terminate immediately without payment in
respect thereof.

 

(b)                                 Termination
for Good Reason by Management Stockholder or without Cause by the Company.  Except as otherwise provided herein, if,
prior to the fifth anniversary of the Effective Date, the Management
Stockholder’s employment is terminated as a result of a termination (i) by the
Management Stockholder for Good Reason or (ii) by the Company (and/or, if
applicable, any Subsidiary) without Cause (each, a “Section 6(b) Call
Event”), then the Company may:

 

(A)                              With respect to the
Stock, purchase all or any portion of the shares of Stock then held by the
applicable Management Stockholder Entities at a per share purchase price equal
to: (x) before a Public Offering, (I) in the event of the Management
Stockholder’s termination for Good Reason, the Book Value Per Share and (II) in
the event of the Management Stockholder’s termination by the Company (and/or,
if applicable, any Subsidiary) without Cause, the Fair Market Value Per Share
or (y) after a Public Offering, the Fair Market Value Per Share (any such
applicable repurchase price, the “Section 6(b) Repurchase Price”);
and

 

(B)                                With respect to the
Options, purchase all or any portion of the exercisable Options held by the
applicable Management Stockholder Entities for an amount equal to the product
of (x) the excess, if any, of the Section 6(b) Repurchase Price over the
Option Exercise Price and (y) the number of Exercisable Option Shares in
respect of the termination of all or any portion of the outstanding exercisable
Options held by the applicable Management Stockholder Entity.  In the event the foregoing Option Excess
Price is zero or a negative number, all outstanding exercisable stock options
granted to the Management Stockholder under the Option Plan shall be
automatically terminated without any payment in respect thereof.  In the event that the Company does not
exercise the foregoing rights all exercisable but unexercised Options shall
terminate pursuant to the terms of Section 3.2(d) of the Stock Option
Agreement. All unexercisable Options held by the applicable Management
Stockholder Entities shall also terminate without payment immediately upon
termination of employment, pursuant to the Stock Option Agreement.

 

(c)                                  Termination
for Death or Disability.  Except as
otherwise provided herein, if, prior to the fifth anniversary of the Effective
Date, the Management Stockholder’s employment with the Company (and/or, if
applicable, any Subsidiary) is terminated as a result of the death or Permanent
Disability of the Management Stockholder (each a “Section 6(c) Call
Event”), then the Company may:

 

8

 

(A)                              With respect to the
Stock, purchase all or any portion of the shares of Stock then held by the
applicable Management Stockholder Entities, at a per share price equal the Section 5
Repurchase Price; and

 

(B)                                With respect to the
Options, purchase all or any portion of the exercisable Options for an amount
equal to the product of (x) the excess, if any, of the Section 5
Repurchase Price over the Option Exercise Price and (y) the number of
Exercisable Option Shares in respect of the termination of all or any portion
of the outstanding exercisable Options held by the applicable Management
Stockholder Entity.  In the event the
foregoing Option Excess Price is zero or a negative number, all outstanding
exercisable stock options granted to the Management Stockholder under the
Option Plan shall be automatically terminated without any payment in respect
thereof.  In the event that the Company
does not exercise the foregoing rights all exercisable but unexercised Options
shall terminate pursuant to the terms of Section 3.2(b) of the Stock
Option Agreement. All unexercisable Options held by the applicable Management
Stockholder Entities shall also terminate without payment immediately upon
termination of employment, pursuant to the Stock Option Agreement.

 

(d)                                 Call
Notice.  The Company shall have a
period of sixty (60) days from the date of any Call Event (or, if later, with
respect to a Section 6(a) Call Event, the date after discovery of, and the
applicable cure period for, an impermissible transfer constituting a Section 6(a)
Call Event), in which to give notice in writing to the Management Stockholder
of its election to exercise its rights and obligations pursuant to this Section 6
(“Repurchase Notice”).  The
completion of the purchases pursuant to the foregoing shall take place at the
principal office of the Company on the tenth business day after the giving of
the Call Notice.  The applicable
Repurchase Price and any payment with respect to the Options as described in
this Section 6 shall be paid by delivery to the applicable Management
Stockholder Entities of a certified bank check or checks in the appropriate
amount payable to the order of each of the applicable Management Stockholder
Entities (or by wire transfer of immediately available funds, if the Management
Stockholder Entities provide to the Company wire transfer instructions) against
delivery of certificates or other instruments representing the Stock so
purchased and appropriate documents cancelling the Options so terminated,
appropriately endorsed or executed by the applicable Management Stockholder
Entities or its authorized representative.

 

(e)                                  Delay
of Call.  Notwithstanding any other
provision of this Section 6 to the contrary and subject to Section 11(a),
if there exists and is continuing any Event, the Company shall delay the
repurchase of any of the Stock or the Options (pursuant to a Call Notice timely
given in accordance with Section 6(d) hereof) from the applicable
Management Stockholder Entities until the Repurchase Eligibility Date; provided,
however, that (i) the number of shares of Stock subject to repurchase
under this Section 6 shall be that number of shares of Stock, and (ii) in
the case of a repurchase pursuant to Section 6(b) or Section 6(c),
the number of Exercisable Option Shares for purposes of calculating the Option
Excess Price payable under this Section 6 shall be the number of Exercisable
Option Shares, held by the applicable Management Stockholder Entities at the
time of delivery of a Call Notice in accordance with Section 6(d)
hereof.  All Options exercisable as of
the date of a Repurchase Notice, in the case of a repurchase pursuant to Section 6(b)
or 6(c), shall continue to be exercisable until the repurchase of such Options
pursuant to such Call Notice, provided that to the extent that any Options are
exercised after the date of such Call Notice, the number of 

 

9

 

Exercisable Option Shares for purposes of calculating the Option Excess
Price shall be reduced accordingly.

 

(f)                                    Effect
of Change of Ownership. 
Notwithstanding anything in this Agreement to the contrary, this Section 6
shall terminate and be of no further force or effect upon the occurrence of a
Change of Ownership.

 

7.                                       Adjustment of
Repurchase Price; Definitions.

 

(a)                                  Adjustment
of Repurchase Price.  In determining
the applicable repurchase price of the Stock and Options, as provided for in
Sections 5 and 6, above, appropriate adjustments shall be made for any stock
dividends, splits, combinations, recapitalizations or any other adjustment in
the number of outstanding shares of Stock in order to maintain, as nearly as
practicable, the intended operation of the provisions of Sections 5 and 6.

 

(b)                                 Definitions.  All capitalized terms used in this Agreement
and not defined herein shall have such meaning as such terms are defined in the
Option Plan. Terms used herein and as listed below shall be defined as follows:

 

“Act” shall have the meaning set forth in Section 2(a)(i)
hereof.

 

“Agreement” shall have the meaning set forth
in the introductory paragraph.

 

“Base Price” shall have the meaning set forth
in Section 1(a) hereof.

 

“Board” shall mean the board of directors of
the Company.

 

“Book Value Per Share” shall mean the
quotient of (a) (i) $25.00 plus (ii) the aggregate net income of the
Company from and after the Closing Date (as decreased by any net losses from
and after the Closing Date) excluding any one time costs and expenses charged
to income associated with the Acquisition and any related transactions plus
(iii) the aggregate dollar amount contributed to (or credited to common
stockholders’ equity of) the Company after the Closing Date as equity of the
Company (including consideration that would be received upon the exercise of
all outstanding stock options and other rights to acquire Common Stock and the
conversion of all securities convertible into Common Stock and other stock
equivalents) plus (iv) to the extent reflected as deductions to Book
Value Per Share in clause (ii) above, unusual or other items recognized by the
Company (including, without limitation, extraordinary charges, and one time or
accelerated write-offs of good will, net of the related impact on the provision
for income taxes), in each case, if and to the extent determined in good faith
by the Board, plus (v) the amortization of purchase accounting adjustments
occurring as a result of the Acquisition, minus (vi) to the extent
reflected as additions to Book Value Per Share in clause (ii) above, unusual or
other items recognized by the Company, in each case, if and to the extent
determined in good faith by the Board, minus (vii) the aggregate dollar
amount of any dividends paid by the Company after the Closing Date, divided
by (b) the sum of the number of shares of Common Stock then outstanding and
the number of shares of Common Stock issuable upon the exercise of all
outstanding stock options and other rights to acquire Common Stock.  The items referred to in the calculations set
forth in clauses (a)(ii) through (vii) of the immediately preceding sentence
shall be determined in good faith, and to the extent possible, in accordance
with generally 

 

10

 

accepted accounting principles applied on a basis consistent with any
prior periods as reflected in the consolidated financial statements of the
Company,

 

“Call Events” shall mean, collectively, Section 6(a)
Call Events, Section 6(b) Call Events, and Section 6(c) Call Events.

 

“Call Notice” shall have the meaning set
forth in Section 6(d) hereof.

 

“Cause” shall mean “Cause” as such term may
be defined in any employment agreement between the Management Stockholder and
the Company or any of its Subsidiaries or Affiliates, or, if there is no such
employment agreement, “Cause” shall mean (i) the Management Stockholder’s
continued failure substantially to perform Management Stockholder’s duties with
the Company (or any Subsidiary of the Company) (other than as a result of total
or partial incapacity due to physical or mental illness) for a period of 10
days following written notice by the Company (or any Subsidiary of the Company)
to the Management Stockholder of such failure, (ii) dishonesty in the
performance of the Management Stockholder’s duties with the Company (or any
Subsidiary of the Company), (iii) the Management Stockholder’s conviction of,
or plea of nolo  contendere to a crime constituting (x) a felony
under the laws of the United States or any state thereof or (y) a misdemeanor
involving moral turpitude, (iv) the Management Stockholder’s willful
malfeasance or willful misconduct in connection with the Management Stockholder’s
duties with the Company (or any Subsidiary of the Company) or any act or
omission which is injurious to the financial condition or business reputation
of the Company or its Affiliates or (v) the Management Stockholder’s breach of
the provisions of Section 25 of this Agreement.

 

“Change of Ownership” means (i) the sale of
all or substantially all of the assets of the Company or ITC to an Unaffiliated
Person; (ii) a sale resulting in more than 50% of the voting stock of the
Company or ITC being held by an Unaffiliated Person; (iii) a merger,
consolidation, recapitalization or reorganization of the Company or ITC with or
into another Unaffiliated Person; if and
only if any such event listed in clauses (i) through (iii) above
results in the inability of ITH LP, Ironhill, the Limited Partner Group, or any
member or members of the Limited Partner Group, to designate or elect a
majority of the Board (or the board of directors of the resulting entity or its
parent company).  For purposes of this
definition, the term “Unaffiliated Person” means any Person or Group who
is not (x) ITH LP, Ironhill, the Limited Partner Group or any member of the
Limited Partner Group, (y) an Affiliate of ITH LP, Ironhill, the Limited
Partner Group or any member of the Limited Partner Group, or (z) an entity in
which ITH LP, Ironhill, the Limited Partner Group, or any member of the Limited
Partner Group holds, directly or indirectly, a majority of the economic
interests in such entity.

 

“Closing Date” shall have the meaning set
forth in the first “whereas” paragraph.

 

“Common Stock” shall have the meaning set
forth in the second “whereas” paragraph.

 

“Company” shall have the meaning set forth in
the introductory paragraph.

 

“Confidential Information” shall mean all
non-public information concerning trade secret, know-how, software,
developments, inventions, processes, technology, designs, the financial data,
strategic business plans or any proprietary or confidential information,
documents 

 

11

 

or materials in any form or media, including any of the foregoing
relating to research, operations, finances, current and proposed products and
services, vendors, customers, advertising and marketing, and other non-public,
proprietary, and confidential information of the Restricted Group.

 

“Custody Agreement and Power of Attorney”
shall have the meaning set forth in Section 10 hereof.

 

“Event” shall have the meaning set forth in Section 5(c)
hereof.

 

“Exchange Act” shall mean the Securities
Exchange Act of 1934, as amended (or any successor section thereto).

 

“Exercisable Option Shares” shall mean the
shares of Common Stock that, at the Repurchase Calculation Date, could be
purchased by the Management Stockholder upon exercise of his or her outstanding
and exercisable Options.

 

“Fair Market Value Per Share” shall mean, on
the Repurchase Calculation Date, the price per share equal to (i) the average
of the last sale price of the Common Stock for the five trading days ending on
the Repurchase Calculation Date on each stock exchange on which the Common
Stock may at the time be listed or, (ii) if there shall have been no sales on
any such exchanges on the Repurchase Calculation Date on any given day, the
average of the closing bid and asked prices on each such exchange for the five
trading days ending on the Repurchase Calculation Date or, (iii) if there is no
such bid and asked price on the Repurchase Calculation Date, on the next
preceding date when such bid and asked price occurred or, (iv) if the Common
Stock shall not be so listed, the average of the closing sales prices as
reported by NASDAQ for the five trading days ending on the Repurchase
Calculation Date in the over-the-counter market or, (v) if there have been no
such sales, bid or asked prices, or if there has been no Public Offering, the
fair market value of the Common Stock as determined in the good faith
discretion of the Board.

 

“Good Reason” shall mean “Good Reason” as
defined in any employment agreement between the Management Stockholder and the
Company or any of its Subsidiaries or Affiliates, or, if there is no such
employment agreement, “Good Reason” shall mean (i) a substantial reduction in
the total value of the Management Stockholder’s rate of annual base salary,
target annual bonus, and the aggregate employee benefits provided to the
Management Stockholder by the Company or its Subsidiaries; (ii) the Management
Stockholder’s job responsibility and authority are substantially diminished;
and (iii) the Management Stockholder’s work location is relocated to more than
fifty (50) miles from Detroit, Michigan or Ann Arbor, Michigan; and provided,
further, that “Good Reason” shall cease to exist for an event on the 60th
day following the later of its occurrence or the Management Stockholder’s
knowledge thereof, unless the Management Stockholder has given the Company
written notice thereof prior to such date.

 

“Group” shall mean “group,” as such term is
used for purposes of Section 13(d) or 14(d) of the Exchange Act.

 

“Ironhill” means Ironhill Transmission LLC,
which is the general partner of ITH LP, of which the Company is a
majority-owned Subsidiary.

 

12

 

“ITH LP” means International Transmission
Holdings Limited Partnership, a Michigan limited partnership.

 

“Limited Partner Group” shall mean the KKR
Millennium Fund L.P., KKR Partners III, L.P. and Trimaran Capital Partners,
collectively.

 

“Management Stockholder” shall have the
meaning set forth in the introductory paragraph.

 

“Management Stockholder Entities” shall mean
the Management Stockholder’s Trust, the Management Stockholder and the
Management Stockholder’s Estate, collectively.

 

“Management Stockholder’s Estate” shall mean
the conservators, guardians, executors, administrators, testamentary trustees,
legatees or beneficiaries of the Management Stockholder.

 

“Management Stockholder’s Trust” shall mean a
limited partnership, limited liability company, trust or custodianship, the
beneficiaries of which may include only the Management Stockholder, his spouse
(or ex-spouse) or his lineal descendants (including adopted) or, if at any time
after any such transfer there shall be no then living spouse or lineal
descendants, then to the ultimate beneficiaries of any such trust or to the
estate of a deceased beneficiary.

 

“Maximum Repurchase Amount” shall have the
meaning set forth in Section 11(a) hereof.

 

“MBCA” shall have the meaning set forth in Section 5(c)
hereof.

 

“Notice” shall have the meaning set forth in Section 10(b)
hereof.

 

“Offeror” shall have the meaning set forth in
Section 4 hereof.

 

“Option Excess Price” shall mean the
aggregate amount paid by the Company in respect of Exercisable Option Shares
pursuant to Section 5 or 6, as applicable.

 

“Option Exercise Price” shall mean the
exercise price of the shares of Common Stock covered by the applicable Option.

 

“Option” shall have the meaning set forth in
the third “whereas” paragraph.

 

“Option Plan” shall have the meaning set
forth in the third “whereas” paragraph.

 

“Option Stock” shall have the meaning set
forth in Section 2(a) hereof.

 

“Other Management Stockholders” shall have
the meaning set forth in the fourth “whereas” paragraph.

 

“Other Management Stockholders’ Agreements”
shall have the meaning set forth in the fourth “whereas” paragraph.

 

“Parties” shall have the meaning set forth in
the introductory paragraph.

 

13

 

“Permanent Disability” shall mean the
Management Stockholder becomes physically or mentally incapacitated and is
therefore unable for a period of six (6) consecutive months or for an aggregate
of nine (9) months in any twenty-four (24) consecutive month period, to perform
the Management Stockholder’s duties with the Company (and/or, if applicable,
any Subsidiary) thereof.  Any question as
to the existence of the Permanent Disability of the Management Stockholder as
to which the Management Stockholder and the Company cannot agree shall be
determined in writing by a qualified independent physician mutually acceptable
to the Management Stockholder and the Company. 
If the Management Stockholder and the Company cannot agree as to a
qualified independent physician, each shall appoint such a physician and those
two physicians shall select a third who shall make such determination in
writing.  The determination of Permanent Disability
made in writing to the Company and the Management Stockholder shall be final
and conclusive for all purposes of this Agreement (such inability is
hereinafter referred to as “Permanent Disability”).

 

“Person” shall mean “person,” as such term is
used for purposes of Section 13(d) or 14(d) of the Exchange Act.

 

“Proposed Registration” shall have the
meaning set forth in Section 10(b) hereof.

 

“Public Offering” shall mean the sale of
shares of Common Stock to the public subsequent to the date hereof pursuant to
a registration statement under the Act which has been declared effective by the
SEC (other than a registration statement on Form S-4, Form S-8 or any other
similar form).

 

“Purchased Stock” shall have the meaning set
forth in Section 1(a) hereof.

 

“Qualified Public Offering” shall mean a
Public Offering, which results in an active trading market of 25% or more of
the Common Stock.

 

“Repurchase Calculation Date” shall mean the
last day of the month preceding the later of (i) the month in which the event
giving rise to the right to repurchase occurs and (ii) the month in which the
Repurchase Eligibility Date occurs.

 

“Repurchase Eligibility Date” shall have the
meaning set forth in Section 5(c) hereof.

 

“Repurchase Price” shall mean the amount to be
paid in respect of the Stock and Options to be purchased by the Company
pursuant to Section 5(a), Section 6(a), 6(b), or 6(c), as applicable.

 

“Request” shall have the meaning set forth in
Section 10(b) hereof.

 

“Restricted Group” shall mean, collectively,
the Company, its Subsidiaries, the members of the Limited Partner Group and
their respective Affiliates.

 

“Rule 405 Affiliate” shall mean an affiliate
of the Company as defined under Rule 405 of the rules and regulations
promulgated under the Act, and as interpreted by the Board.

 

14

 

“Sale Participation Agreement” shall mean
that certain sale participation agreement entered into by and between the
Management Stockholder and ITH L.P. dated the date hereof.

 

“SEC” shall mean the Securities and Exchange
Commission.

 

“Stock” shall have the meaning set forth in Section 2(a)
hereof.

 

“Stock Option Agreement” shall have the
meaning set forth in the third “whereas” paragraph.

 

“Third Party Offer” shall have the meaning
set forth in Section 4(a) hereof.

 

“Trimaran Capital Partners” means,
collectively, Trimaran Fund II, L.L.C., Trimaran Parallel Fund II, L.P.,
Trimaran Capital, L.L.C., CIBC Employee Private Equity Fund (Trimaran) Partners
and CIBC World Markets Ireland Limited.

 

8.                                       The Company’s
Representations and Warranties.

 

(a)                                  The Company
represents and warrants to the Management Stockholder that (i) this Agreement
has been duly authorized, executed and delivered by the Company and is
enforceable against the Company in accordance with its terms and (ii) the
Stock, when issued and delivered in accordance with the terms hereof, will be
duly and validly issued, fully paid and nonassessable.

 

(b)                                 If the Company becomes
subject to the reporting requirements of Section 12 of the Exchange Act,
the Company will file the reports required to be filed by it under the Act and
the Exchange Act and the rules and regulations adopted by the SEC thereunder,
to the extent required from time to time to enable the Management Stockholder
to sell shares of Stock without registration under the Exchange Act within the
limitations of the exemptions provided by (A) Rule 144 under the Act, as such
Rule may be amended from time to time, or (B) any similar rule or regulation
hereafter adopted by the SEC, subject to the transfer restrictions set forth in
Section 3.  Notwithstanding anything
contained in this Section 9(b), the Company may de-register under Section 12
of the Exchange Act if it is then permitted to do so pursuant to the Exchange
Act and the rules and regulations thereunder and, in such circumstances, shall
not be required hereby to file any reports which may be necessary in order for
Rule 144 or any similar rule or regulation under the Act to be available.  Nothing in this Section 8(b) shall be
deemed to limit in any manner the restrictions on sales of Stock contained in
this Agreement.

 

9.                                       “Piggyback”
Registration Rights.  Until the later
of (i) the first occurrence of a Qualified Public Offering and (ii) the fifth
anniversary of the Effective Date:

 

(a)                                  The Management
Stockholder hereby agrees to be bound by all of the terms, conditions and
obligations of the Registration Rights Agreement entered into by and among the
Company and International Transmission Holdings Limited Partnership (the “Registration
Rights Agreement”), as in effect on the date hereof (subject to any
amendments thereto to which the Management Stockholder has agreed to be bound),
and shall have all of the rights and privileges of the Registration Rights
Agreement, in each case as if the Management Stockholder were an original party
(other than the Company) thereto, subject to applicable and 

 

15

 

customary underwriter restrictions; provided, however,
that at no time shall the Management Stockholder have any rights to request
registration under Section 3 of the Registration Rights Agreement; and provided
further, that the Management Stockholder shall not be bound by any
amendments to the Registration Rights Agreement unless the Management
Stockholder consents thereto provided that such consent will not be
unreasonably withheld.  All Stock
purchased or held by the applicable Management Stockholder Entities pursuant to
this Agreement shall be deemed to be “Registrable Securities” as defined in the
Registration Rights Agreement.

 

(b)                                 In the event of a sale
of Common Stock by the Limited Partner Group in accordance with the terms of
the Registration Rights Agreement, the Company will promptly notify the
Management Stockholder in writing (a “Notice”) of any proposed
registration (a “Proposed Registration”).  If within 15 days of the receipt by the
Management Stockholder of such Notice, the Company receives from the applicable
Management Stockholder Entities a written request (a “Request”) to
register shares of Stock held by the applicable Management Stockholder Entities
(which Request will be irrevocable unless otherwise mutually agreed to in
writing by the Management Stockholder and the Company), shares of Stock will be
so registered as provided in this Section 10; provided, however,
that for each such registration statement only one Request, which shall be
executed by the applicable Management Stockholder Entities, may be submitted
for all Registrable Securities held by the applicable Management Stockholder
Entities.

 

(c)                                  The maximum number of
shares of Stock which will be registered pursuant to a Request will be the
lowest of (i) the number of shares of Stock then held by the Management
Stockholder Entities, including all shares of Stock which the Management
Stockholder Entities are then entitled to acquire under an unexercised Option
to the extent then exercisable, multiplied by a fraction, the numerator of
which is the number of shares of Stock being sold by the Limited Partner Group
and any investment partnerships and investment limited liability companies
affiliated with the Limited Partner Group and the denominator of which is the
aggregate number of shares of Stock owned by the Limited Partner Group and any
investment partnerships and investment limited liability companies affiliated
with the Limited Partner Group or (ii) the maximum number of shares of Stock
which the Company can register in the Proposed Registration without adverse
effect on the offering in the view of the managing underwriters (reduced pro
rata with all Other Management Stockholders) as more fully described in subsection (d)
of this Section 10 or (iii) the maximum number of shares which the
Management Stockholder (pro rata based upon the aggregate number of shares of
Stock the Management Stockholder and all Other Management Stockholders have
requested to be registered) is permitted to register under the Registration
Rights Agreement.

 

(d)                                 If a Proposed
Registration involves an underwritten offering and the managing underwriter
advises the Company in writing that, in its opinion, the number of shares of
Stock requested to be included in the Proposed Registration exceeds the number
which can be sold in such offering, so as to be likely to have an adverse effect
on the price, timing or distribution of the shares of Stock offered in such
Public Offering as contemplated by the Company, then the Company will include
in the Proposed Registration (i) first, 100% of the shares of Stock the Company
proposes to sell and (ii) second, to the extent of the number of shares of
Stock requested to be included in such registration which, in the opinion of
such managing underwriter, can be sold without having the adverse effect
referred to above, the 

 

16

 

number of shares of Stock which the “Holders” (as defined in the
Registration Rights Agreement), including, without limitation, the Management
Stockholder, and all Other Management Stockholders have requested to be
included in the Proposed Registration, such amount to be allocated pro rata
among all requesting Holders on the basis of the relative number of shares of
Stock then held by each such Holder (including the exercisable Options)
(provided that any shares thereby allocated to any such Holder that exceed such
Holder’s request will be reallocated among the remaining requesting Holders in
like manner).

 

(e)                                  Upon delivering a
Request the Management Stockholder will, if requested by the Company, execute
and deliver a custody agreement and power of attorney in form and substance
satisfactory to the Company with respect to the shares of Stock to be
registered pursuant to this Section 10 (a “Custody Agreement and Power
of Attorney”).  The Custody Agreement
and Power of Attorney will provide, among other things, that the Management
Stockholder will deliver to and deposit in custody with the custodian and
attorney-in-fact named therein a certificate or certificates representing such
shares of Stock (duly endorsed in blank by the registered owner or owners
thereof or accompanied by duly executed stock powers in blank) and irrevocably
appoint said custodian and attorney-in-fact as the Management Stockholder’s
agent and attorney-in-fact with full power and authority to act under the
Custody Agreement and Power of Attorney on the Management Stockholder’s behalf
with respect to the matters specified therein.

 

(f)                                    The Management
Stockholder agrees that he or she will execute such other agreements as the
Company may reasonably request to further evidence the provisions of this
Section.

 

10.                                 Pro Rata
Repurchases; Dividends.  (a)  Notwithstanding anything to the contrary
contained in Section 4, 5 or 6, if at any time consummation of any
purchase or payment to be made by the Company pursuant to this Agreement and
the Other Management Stockholders Agreements would result in an Event, then the
Company shall make purchases from, and payments to, the Management Stockholder
and Other Management Stockholders pro rata (on the basis of the proportion of
the number of shares of Stock each such Management Stockholder and all Other
Management Stockholders have elected or are required to sell to the Company)
for the maximum number of shares of Stock permitted without resulting in an
Event (the “Maximum Repurchase Amount”). 
The provisions of Section 5(c) and 6(e) shall apply in their
entirety to payments and repurchases with respect to shares of Stock which may
not be made due to the limits imposed by the Maximum Repurchase Amount under
this Section 11(a).  Until all of
such Stock is purchased and paid for by the Company, the Management Stockholder
and the Other Management Stockholders whose Stock is not purchased in
accordance with this Section 11(a) shall have priority, on a pro rata
basis, over other purchases of Stock by the Company pursuant to this Agreement
and Other Management Stockholders’ Agreements.

 

(b)                                 In the event any
dividends are paid with respect to the Stock, the Management Stockholder will
be treated pari  passu with all Other Management Stockholders with
respect to shares of Stock then owned by the Management Stockholder, and, with
respect to any Options held by the Management Stockholder, in accordance, as
applicable, with Section 2.4 of the Stock Option Agreement.

 

17

 

11.                                 Rights to Negotiate
Repurchase Price.  Nothing in this
Agreement shall be deemed to restrict or prohibit the Company from purchasing,
redeeming or otherwise acquiring for value shares of Stock or Options from the
Management Stockholder, at any time, upon such terms and conditions, and for
such price, as may be mutually agreed upon between the Parties, whether or not
at the time of such purchase, redemption or acquisition circumstances exist
which specifically grant the Company the right to purchase shares of Stock or
any Options under the terms of this Agreement, provided that no such
purchase, redemption or acquisition shall be consummated, and no agreement with
respect to any such purchase, redemption or acquisition shall be entered into,
without the prior written consent of the Board.

 

12.                                 Covenant Regarding
83(b) Election.  Except as set forth
in the Restricted Stock Agreement or as the Company may otherwise agree in
writing, the Management Stockholder hereby covenants and agrees that he will
make an election provided pursuant to Treasury Regulation 1.83-2 with respect
to the Stock, including without limitation, the Stock to be acquired pursuant
to Section 1(a), the Stock to be acquired upon each exercise of the
Management Stockholder’s Options and any grant of restricted Stock; and
Management Stockholder further covenants and agrees that he will furnish the
Company with copies of the forms of election the Management Stockholder files
within 30 days after the date hereof, and within 30 days after each exercise of
Management Stockholder’s Options and with evidence that each such election has
been filed in a timely manner.

 

13.                                 Notice of Change of
Beneficiary.  Immediately prior to
any transfer of Stock to a Management Stockholder’s Trust, the Management
Stockholder shall provide the Company with a copy of the instruments creating
the Management Stockholder’s Trust and with the identity of the beneficiaries
of the Management Stockholder’s Trust. 
The Management Stockholder shall notify the Company as soon as
practicable prior to any change in the identity of any beneficiary of the
Management Stockholder’s Trust.

 

14.                                 Recapitalizations,
etc.  The provisions of this
Agreement shall apply, to the full extent set forth herein with respect to the
Stock or the Options, to any and all shares of capital stock of the Company or
any capital stock, partnership units or any other security evidencing ownership
interests in any successor or assign of the Company (whether by merger,
consolidation, sale of assets or otherwise) which may be issued in respect of,
in exchange for, or substitution of the Stock or the Option, by reason of any
stock dividend, split, reverse split, combination, recapitalization,
liquidation, reclassification, merger, consolidation or otherwise.

 

15.                                 Management
Stockholder’s Employment by the Company.  
Nothing contained in this Agreement or in any other agreement entered
into by the Company and the Management Stockholder contemporaneously with the
execution of this Agreement (subject to the applicable provisions of any offer
letter or letter of employment provided to the Management Stockholder by the
Company or any employment agreement entered by and between the Management
Stockholder and the Company) (i) obligates the Company or any subsidiary of the
Company to employ the Management Stockholder in any capacity whatsoever or (ii)
prohibits or restricts the Company (or any such subsidiary) from terminating
the employment of the Management Stockholder at any time or for any reason whatsoever,
with or without Cause, and the Management Stockholder hereby acknowledges and
agrees that neither the Company nor any other person has made any
representations or promises whatsoever to the Management 

 

18

 

Stockholder concerning the Management Stockholder’s employment or
continued employment by the Company or any subsidiary of the Company.

 

16.                                 State Securities
Laws.  The Company hereby agrees to
use its reasonable best efforts to comply with all state securities or “blue
sky” laws that might be applicable to the sale of the Stock and the issuance of
an Option to the Management Stockholder.

 

17.                                 Binding Effect.  The provisions of this Agreement shall be
binding upon and accrue to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and assigns.  In the case of a transferee permitted under Section 2(a)
or Section 3 hereof, such transferee shall be deemed the Management
Stockholder hereunder; provided, however, that no transferee
(including without limitation, transferees referred to in Section 2(a) or Section 3
hereof) shall derive any rights under this Agreement unless and until such
transferee has delivered to the Company a valid undertaking and becomes bound
by the terms of this Agreement.

 

18.                                 Amendment.  This Agreement may be amended only by a
written instrument signed by the Parties hereto.

 

19.                                 Closing.  Except as otherwise provided herein, the
closing of each purchase and sale of shares of Stock, pursuant to this
Agreement shall take place at the principal office of the Company on the tenth
business day following delivery of the notice by either Party to the other of
its exercise of the right to purchase or sell such Stock hereunder.

 

20.                                 Applicable Law; Jurisdiction;
Arbitration; Legal Fees.

 

(a)                                  The laws of the State
of Michigan shall govern the interpretation, validity and performance of the
terms of this Agreement, regardless of the law that might be applied under
principles of conflicts of law.

 

(b)                                 In the event of any
controversy among the parties hereto arising out of, or relating to, this
Agreement which cannot be settled amicably by the parties, such controversy
shall be finally, exclusively and conclusively settled by mandatory arbitration
conducted expeditiously in accordance with the American Arbitration Association
rules, by a single independent arbitrator. 
Such arbitration process shall take place within 100 miles of the
Detroit, Michigan metropolitan area.  The
decision of the arbitrator shall be final and binding upon all parties hereto
and shall be rendered pursuant to a written decision, which contains a detailed
recital of the arbitrator’s reasoning. 
Judgment upon the award rendered may be entered in any court having
jurisdiction thereof.

 

(c)                                  Notwithstanding the
foregoing, the Management Stockholder acknowledges and agrees that the Company,
its Subsidiaries, any member of the Limited Partner Group and any of their
respective Affiliates shall be entitled to injunctive or other relief in order
to enforce the covenant not to compete, covenant not to solicit and/or
confidentiality covenants as set forth in Section 25(a) of this Agreement.

 

19

 

(d)                                 In the event of any
arbitration or other disputes with regard to this Agreement or any other
document or agreement referred to herein, each Party that shall pay its own
legal fees and expenses, unless otherwise determined by the arbitrator.

 

21.                                 Assignability of
Certain Rights by the Company.  The
Company shall have the right to assign any or all of its rights or obligations
to purchase shares of Stock pursuant to Sections 4, 5 and 6 hereof.

 

22.                                 Miscellaneous.

 

(a)                                  In this Agreement all
references to “dollars” or “$” are to United States dollars and the masculine
pronoun shall include the feminine and neuter, and the singular the plural,
where the context so indicates

 

(b)                                 If any provision of
this Agreement shall be declared illegal, void or unenforceable by any court of
competent jurisdiction, the other provisions shall not be affected, but shall
remain in full force and effect.

 

23.                                 Withholding.  The Company or its Subsidiaries shall have
the right to deduct from any cash payment made under this Agreement to the
applicable Management Stockholder Entities any minimum federal, state or local
income or other taxes required by law to be withheld with respect to such
payment.

 

24.                                 Notices.  All notices and other communications provided
for herein shall be in writing and shall be deemed to have been duly given if delivered
by hand (whether by overnight courier or otherwise) or sent by registered or
certified mail, return receipt requested, postage prepaid, or by overnight
delivery or telecopy, to the Party to whom it is directed:

 

(a)                                  If to the Company, to
it at the following address:

 

	
   

  	
  ITC Holdings Corp.

  	
   

  
	
   

  	
  1901 South Wagner

  	
   

  
	
   

  	
  Ann Arbor, Michigan 48105

  	
   

  
	
   

  	
  Attention:

  	
  John Flynn, Esq.

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Simpson Thacher & Bartlett

  	
   

  
	
   

  	
  425 Lexington Avenue

  	
   

  
	
   

  	
  New York, New York 10017

  	
   

  
	
   

  	
  Attention:

  	
  David J. Sorkin, Esq.

  
	
   

  	
   

  	
  Alvin H. Brown, Esq.

  
	
   

  	
  Telecopy:

  	
  (212) 455-2502

  
				

 

(b)                                 If to the Management
Stockholder, to him at the address set forth below under his signature;

 

or at such other address as either party shall have specified by notice
in writing to the other.

 

20

 

25.                                 Confidential
Information; Covenant Not to Compete.

 

(a)                                  In consideration of
the Company entering into this Agreement with the Management Stockholder, the
Management Stockholder hereby agrees effective as of the date of the date of
this Agreement, without the Company’s prior written consent, the Management
Stockholder shall not, directly or indirectly, (i) at any time during or after
the Management Stockholder’s employment with the Company or its Subsidiaries,
disclose any Confidential Information pertaining to the business of the Company
or any of its Subsidiaries, except when required to perform his or her duties
to the Company or one of its Subsidiaries, by law or judicial process; or (ii)
at any time during the Management Stockholder’s employment with the Company or
its Subsidiaries and for one year thereafter, directly or indirectly (A) be
engaged in or have financial interest (other than an ownership position of less
than 5% in any company whose shares are publicly traded or any non-voting
non-convertible debt securities in any company) in any business which competes
with any business of the Company or any of its Subsidiaries,  (B) solicit customers or clients of the
Company or any of its Subsidiaries to terminate their relationship with the
Company or any of its Subsidiaries or otherwise solicit such customers or
clients to compete with any business of the Company or any of its Subsidiaries
or (C) solicit or offer employment to any person who has been employed by the
Company or any of its Subsidiaries at any time during the twelve months
immediately preceding the termination of the Management Stockholder’s
employment.  If the Management
Stockholder is bound by any other agreement with the Company regarding the use
or disclosure of confidential information, the provisions of this Agreement
shall be read in such a way as to further restrict and not to permit any more
extensive use or disclosure of confidential information.

 

(b)                                 Notwithstanding clause
(a) above, if at any time a court holds that the restrictions stated in such
clause (a) are unreasonable or otherwise unenforceable under circumstances then
existing, the parties hereto agree that the maximum period, scope or geographic
area determined to be reasonable under such circumstances by such court will be
substituted for the stated period, scope or area.  Because the Management Stockholder’s services
are unique and because the Management Stockholder has had access to
Confidential Information, the parties hereto agree that money damages will be
an inadequate remedy for any breach of this Agreement.  In the event of a breach or threatened breach
of this Agreement, the Company or its successors or assigns may, in addition to
other rights and remedies existing in their favor, apply to any court of
competent jurisdiction for specific performance and/or injunctive relief in
order to enforce, or prevent any violations of, the provisions hereof (without
the posting of a bond or other security).

 

[Signatures on next page.]

 

21

 

IN WITNESS WHEREOF, the Parties have executed
this Agreement as of the date first above written.

 

	
   

  	
  ITC HOLDINGS CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MANAGEMENT STOCKHOLDER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FIELD 1

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ADDRESS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
						

 

22Exhibit 10.15

 

ITC HOLDINGS CORP.

SHORT-TERM INCENTIVE PLAN

 

                1.
PURPOSE. The purpose of the Short-Term Incentive Plan (the “Plan”)
is to advance the interests of ITC Holdings Corp., a Michigan corporation (the
“Company”), and its stockholders by providing incentives in the form of
periodic bonus awards to certain employees of the Company and any of its
subsidiaries or other related business units or entities (“Affiliates”)
including those who contribute significantly to the strategic and long-term
performance objectives and growth of the Company and its Affiliates.

 

2. ADMINISTRATION.  (a) 
Unless otherwise determined by the Board of
Directors of the Company (the “Board”), the Plan shall be administered
by the Compensation Committee of the Board (the “Committee”), as such
committee is from time to time constituted. The Committee may delegate its
duties and powers in whole or in part (i) to any subcommittee thereof
consisting solely of at least two “outside directors,” as defined under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”),
or (ii) to the extent consistent with Section 162(m) of the Code, to any
other individual or individuals.

 

(b)           The Committee has all the powers
vested in it by the terms of the Plan set forth herein, such powers to include
the exclusive authority to select the employees to be granted bonus awards (“Bonuses”)
under the Plan, to determine the size and terms of the Bonus to be made to each
individual selected (subject to the limitation imposed on “Special Bonuses,” as
defined below), to modify the terms of any Bonus that has been granted (except
with respect to any modification which would increase the amount of
compensation payable to a “Covered Employee,” as such term is defined in
Section 162(m) of the Code, following the expiration of the Reliance
Period (as such term is hereinafter defined)), to determine the time when
Bonuses will be awarded, to establish performance objectives in respect to
Bonuses and to certify, where applicable, that such performance objectives were
attained. The Committee is authorized to interpret the Plan, to establish,
amend and rescind any rules and regulations relating to the Plan, and to make
any other determinations that it deems necessary or desirable for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan in the manner and to the
extent the Committee deems necessary or desirable to carry it into effect. Any
decision of the Committee in the interpretation and administration of the Plan,
as described herein, shall lie within its sole and absolute discretion and
shall be final, conclusive and binding on all parties concerned. No member of
the Committee and no officer of the Company shall be liable for anything done
or omitted to be done by him or her, by any other member of the Committee or by
any officer of the Company in connection with the performance of duties under
the Plan, except for his or her own willful misconduct or as expressly provided
by statute.

 

(c)           Notwithstanding anything set forth in
this Plan to the contrary, until such time as the Company is no longer within
the “reliance period” (as such term is defined in Treasury Regulation
1.162-27(f)(2)) (the “Reliance Period”), the Company may, but is not required,
to administer and maintain this Plan, and grant and pay Bonuses under this
Plan, to those employees who are Covered Employees in compliance with the
provisions of Section 162(m) of the Code as the same would apply upon expiration
of the Reliance Period.

                3.
PARTICIPATION. The Committee shall
have exclusive power (except as may be delegated as permitted herein) to select
the employees of the Company and its Affiliates who may participate in the Plan
and be granted Bonuses under the Plan (“Participants”).

 

4. BONUSES UNDER THE
PLAN.

 

(a)           In General. The Committee shall
determine the amount of a Bonus to be granted to each Participant in accordance
with subsections (b) and (c) below.

(b)            Standard Bonuses. The Committee
may in its discretion grant to a Participant a cash Bonus (a “Standard Bonus”)
in the amount, and payable at the time, determined by the Committee or its
delegate in its discretion. The amount of a Participant’s Standard Bonus may be
based upon any criteria the Committee wishes to consider, including but not
limited to the objective or subjective performance of the Participant, the
Company or any subsidiary or division thereof.

(c)           Special Bonuses. (i) The Committee
may in its discretion award a Bonus (a “Special Bonus”) to any
Participant, including any Participant who it reasonably believes may be a
Covered Employee for the taxable year of the Company in which such Bonus would
be tax deductible, under the terms and conditions of this subsection (c).  Subject to clause (iii) of this
Section 4(c), for Special Bonuses payable after the expiration of the
Reliance Period, the amount of a Participant’s Special Bonus shall be an amount
determinable from written performance goals approved by the Committee while the
outcome is substantially uncertain and no more than 90 days after the
commencement of the period to which the performance goal relates or, if less,
the number of days which is equal to 25 percent of the relevant period. The
maximum amount of any Special Bonus that may be granted in any given fiscal
year shall be $500,000.  Notwithstanding
anything else contained in Section 4(c) to the contrary, for Special Bonuses
payable after the expiration of the Reliance Period, the Committee shall have
the right, in its absolute discretion, (i) to reduce or eliminate the amount
otherwise payable to any Participant under Section 4(c) based on individual
performance or any other factors that the Committee, in its discretion, shall
deem appropriate and (ii) to establish rules or procedures that have the effect
of limiting the amount payable to each Participant to an amount that is less
than the maximum amount otherwise authorized under Section 4(c).

 (ii)
The amount of any Special Bonus will be based on objective performance goals established
by the Committee using one or more performance factors. The performance
criteria for Special Bonuses made under the Plan will be based upon one or more
of the following criteria: (A) earnings before or after taxes (including
earnings before interest, taxes, depreciation and amortization); (B) net
income; (C) operating income; (D) earnings per share; (E) book value per share;
(F) return on stockholders’ equity; (G) expense management; (H) return on
investment before or after the cost of capital; (I) improvements in capital
structure; (J) profitability of an identifiable business unit or product; (K)
maintenance or improvement of profit margins; (L) stock price; (xiii) market
share; (M) revenues or sales; (N) costs; (O) cash flow; (P) working capital;
(Q) changes in net assets (whether or not multiplied by a constant percentage
intended to represent the cost of capital); and (R) return on assets.  Participants who have primary responsibility
for a business unit of the Company may be measured on business unit operating
profit, business unit operating profit as a percent of revenue and/or measures
related to business 

 

2

unit profitability above its
cost of capital, in place of some or all of the corporate performance measures.

 

(iii)
The Committee shall determine whether the performance goals have been met with
respect to any affected Participant and, if they have, so certify and ascertain
the amount of the applicable Special Bonus. No Special Bonuses payable after
the expiration of the Reliance Period will be paid unless and until such
certification is made by the Committee.

 

(iv)  Commencing with the first fiscal year in
respect of which Special Bonuses may be paid following the expiration of the
Reliance Period, provisions of this Section 4(c) shall be administered and
interpreted in accordance with Section 162(m) of the Code to ensure the
full tax deductibility by the Company or its affiliates of the payment of all
Special Bonuses to any Covered Employees.

 

5. DESIGNATION OF BENEFICIARY BY PARTICIPANT. The Committee
or its delegate shall create a procedure whereby a Participant may file, on a
form to be provided by the Committee, a written election designating one or
more beneficiaries with respect to the amount, if any, payable in the event of
the Participant’s death. The Participant may amend such beneficiary designation
in writing at any time prior to the Participant’s death, without the consent of
any previously designated beneficiary. Such designation or amended designation,
as the case may be, shall not be effective unless and until received by the
duly authorized representatives of the Committee or its delegate prior to the
Participant’s death. In the absence of any such designation, the amount payable,
if any, shall be delivered to the legal representative of such Participant’s
estate.

 

6. MISCELLANEOUS PROVISIONS.

 

(a)
No employee or other person shall have any claim or right to be paid a Bonus
under the Plan. Determinations made by the Committee under the Plan need not be
uniform and may be made selectively among eligible individuals under the Plan,
whether or not such eligible individuals are similarly situated. Neither the
Plan nor any action taken hereunder shall be construed as giving any employee
or other person any right to continue to be employed by or perform services for
the Company or any Affiliate, and the right to terminate the employment of or
performance of services by any Participant at any time and for any reason is
specifically reserved to the Company and its Affiliates.

 

(b)
Except as may be approved by the Committee, a Participant’s rights and interest
under the Plan may not be assigned or transferred, hypothecated or encumbered
in whole or in part either directly or by operation by law or otherwise (except
in the event of a Participant’s death) including, but not by way
of limitation, execution, levy, garnishment, attachment, pledge,
bankruptcy or in any other manner; provided, however, that, subject to
applicable law, any amounts payable to any Participant hereunder are subject to
reduction to satisfy any liabilities owed to the Company or any of its
Affiliates by the Participant.

 

(c)
The Committee shall have the authority to determine in its sole discretion the
applicable performance period relating to any Bonus; provided, however, that,
commencing with 

 

 

3

the first fiscal year in
respect of which Special Bonuses may be paid following the expiration of the
Reliance Period, any such determination with respect to a Special Bonus shall
be subject to any applicable restrictions imposed by Section 162(m) of the
Code.

 

(d)
The Company and its Affiliates shall have the right to deduct from any payment
made under the Plan any federal, state, local or foreign income or other taxes
required by law to be withheld with respect to such payment.

 

(e)
The Company is the sponsor and legal obligor under the Plan, and shall make all
payments hereunder, other than any payments to be made by any of the
Affiliates, which shall be made by such Affiliate, as appropriate. Nothing
herein is intended to restrict the Company from charging an Affiliate that
employs a Participant for all or a portion of the payments made by the Company
hereunder. The Company shall not be required to establish any special or
separate fund or to make any other segregation of assets to assure the payment
of any amounts under the Plan, and rights to the payment hereunder shall be no
greater than the rights of the Company’s unsecured, subordinated creditors, and
shall be subordinated to the claims of the customers and clients of the
Company. All expenses involved in administering the Plan shall be borne by the
Company.

 

(f)
The validity, construction, interpretation, administration and effect of the
Plan and rights relating to the Plan and to Bonuses granted under the Plan,
shall be governed by the substantive laws, but not the choice of law rules, of
the State of Michigan.

 

(g)
The Plan shall be effective as of May 10, 2005.

 

7. PLAN AMENDMENT OR SUSPENSION. The Plan may be
amended or suspended in whole or in part at any time and from time to time by
the Committee.

 

8. PLAN TERMINATION. This Plan shall terminate
upon the adoption of a resolution of the Committee terminating the Plan.

 

9. ACTIONS AND
DECISION REGARDING THE BUSINESS OR OPERATIONS OF THE COMPANY AND/OR ITS
AFFILIATES.

 

(a)  Notwithstanding
anything in the Plan to the contrary, neither the Company nor any of its
Affiliates nor their respective officers, directors, employees or agents shall
have any liability to any Participant (or his or her beneficiaries or heirs)
under the Plan or otherwise on account of any action taken, or not taken, in
good faith by any of the foregoing persons with respect to the business or
operations of the Company or any Affiliates.  
Each member of the Committee and the Board shall be fully justified in
relying or acting in good faith upon any report made by to independent public
accountants of, or counsel for, the Company and upon any other information
furnished in connection with the Plan. In no event shall any person who is or
shall have been a member of the Committee or the Board be liable for any
determination made or other action taken or any failure to act in reliance upon
any such report or information or for any action taken, including without
limitation the furnishing of information, or failure to act, if in good faith.

 

 

4

(b)  Each person who is or at any time serves as a
member of the Committee or the Board shall be indemnified and held harmless by
the Company against and from: (i) any loss, cost, liability or expense that may
be imposed upon or reasonably incurred by such person in connection with or
resulting from any claim, action, suit or proceeding to which such person may
be a party or in which such person may be involved by reason of any action or
failure to act under the Plan; and (ii) any and all amounts paid by such person
in satisfaction of judgment in any such action, suit or proceeding relating to
the Plan. Each person covered by this indemnification shall give the Company an
opportunity, at its own expense, to handle and defend the same before such
person undertakes to handle and defend it on such person’s own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights
of indemnification to which such persons may be entitled under the bylaws of
the Company as a matter of law, or otherwise, or any power that the Company may
have to indemnify such person or hold such person harmless.

 

10. SUBORDINATED CAPITAL STATUS. Notwithstanding
any other provision of this Plan, any amounts due to Participants hereunder may
be treated, in the Committee’s sole discretion, to the extent that the Company
accrues a liability in respect thereof, as subordinated capital of the Company
in calculating the Company’s net capital for regulatory purposes, and the terms
of the Plan applicable to such amounts shall include (and, may be amended to
add) such provisions as the Committee determines are necessary or appropriate
in order to secure such treatment, including without limitation, provisions for
the suspension of any payment obligation under the Plan under certain
prescribed circumstances.

 

 

5

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